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(ii) Air Services Agreements
Although Hong Kong is the home-base for a major international airline, Cathay-Pacific Airways, it cannot as a dependent territory enter into its own air services agreements. Instead, it is treated as a UK point (and a very valuable one for bargaining purposes) in the UK's air services agreements with foreign countries. Other things being equal, we do what we can in negotiating air services agreements to further the interests of CPA, but there are times when we have to choose between them and British Airways. In such cases, the best we can do is to try to ensure that, taken over the full range of such agreements, as fair a balance as possible is struck between the interests of the two airlines. Because it is so difficult to quantify the value of particular services, it is impossible to prove that the balance really is fair, and there is an under- lying feeling in Hong Kong, which I believe to be unjustified, that CPA does not really get a fair deal.
There may also be wider Hong Kong interests involved, as there were in the recent case concerning the extension of air services between Hong Kong and the Gulf. Gulf Air sought permission to introduce services between the Gulf and Hong Kong, in return for similar services introduced by the CPA last year. The CPA supported this request lest they should lose their permit to operate their own Hong Kong/Gulf service. The Hong Kong Government also favoured agreeing to the Gulf Air request because
But British of their plans to develop trade with the Middle East. Airways claimed that the service (for which there was no provision in any existing air services agreement) could lose them traffic worth up to £6 millions per annum. The Gulf Air request was
therefore turned down.
Talking Points
I recommend that Lord Goronwy-Roberts should not take the
If the Governor initiative in raising either of these subjects. should raise the subject of the MFA, I suggest that the Minister should repeat the assurance that we are doing all we can to get the best possible deal for Hong Kong in a situation where, as the
/Governor
CONFIDENTIAL