CONFIDENTIAL
PA
184
joes
88
3
Mr Stewart
Hong Kong and General Department
HONG KONG AIR SERVICES
I am sorry we have sat for 3 weeks on your minute of
1 November.
2.
Hong Kong's theory that a psychological barrier exists to inhibit what would be a London-Hong Kong service by Gulf Air is not supported by the evidence. A change of flight number at Singapore and Kuala Lumpur has not discouraged London-Australia traffic from travelling by SIA and MAS respectively over those capitals. This is to BA's and Quantas' disadvantage.
3. The point about CPA possibly suffering reprisals by other Middle Eastern airlines is not clear. CPA do not operate to any Middle Eastern countries other than those which have a share in Gulf Air.
4. There is now very little likelihood that we will reduce Lufthansa's services to Hong Kong. The German warning in relation to the textile agreements was made by their Consul (Economic) in Hong Kong in August (Hong Kong telegram No 875), in very veiled terms, and looks like a piece of local initiative. I don't think it at all likely that the Germans would have done anything specific to link the issues.
5. I had lunch on Tuesday with Adrian Swire and another director of CPA, John Brown. They were generally relaxed about their treatment by the DOT, though they would no doubt be very glad to get more out of them. Adrian Swire said that George Rogers treated CPA fairly as compared with BA, which was not the case a few years ago. There was nothing like the tone of voice which Jeaffreson appears to have used, judging by your minute. Latest news on the Gulf/CPA front is that CPA may be able to slip in a fourth flight fairly soon without Gulf insisting on reciprocity.
6. All that said, there is a real conflict of interests over letting more flights into Hong Kong (not necessarily a CPA problem, this). Rights to Hong Kong are the DOT's biggest card in the bilateral Air Services Negotiations game. If they allowed expan- sion, or new lines to come in, without a quid pro quo within the sphere of air traffic, they would lose their msot valuable card. That (I think) is the DOT's main reason against giving in to Gulf
CONFIDENTIAL
/Air