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Given that it seems most unlikely that the Swiss will produce any convincing proposals on the short-haul services which will substantially reduce the outstanding deficit, we believe that we must press them for a reduction in their Switzerland-Hong Kong services. We have in mind to propose at the second round a maximum of three services per week, combined with substantial concessions in the short-haul area. Should the Swiss be unwilling to make such concessions, then we may be obliged to press them to reduce to even fewer services per week.
We are fully aware of the Hong Kong Government's attitude to proposals of this sort which have been made in the past, but I should nevertheless be grateful for your comments. In particular we consider the Swiss case to be much less valid than the German and your own objections to reducing the Lufthansa services do not appear to apply to Swissair.
There is one matter which you may wish to take into account in considering this. We are, as you know, in the process of re- negotiating the UK/Scandinavian Air Services Agreements, and the Scandinavians seem likely to revive their interest in the possibility of a route to Hong Kong. We are not at all certain, as yet, whether we will be willing to negotiate such a route which, if we were, would cost the Scandinavians dearly on their short-haul services, since the
Never- present Agreements are roughly in balance as regards earnings. theless, with the present very low load factors being experienced by other European airlines, we should be very unwilling to consider giving the Scandinavians a service without some cutback on existing services. Without in any way committing ourselves as regards the Scandinavians, a reduction in Swissair's services of two or three per week would give us the necessary leeway.
I look forward to hearing your comments and should like also to know whether you will be joining the UK Delegation in Berne.
Yours sincerely
LF STANDEN
Copied to Mr M Morland (MAED, FCO)