(d) New Zealand
We may need to consider with New Zealand the possibilities for introducing a new low fare between New Zealand and the UK to complement the UK-Australia low fare. Otherwise much of the New Zealand-UK traffic will filter through Australia to take advantage of the low fare there and this will react to Air New Zealand's disadvantage. Air New Zealand does not in fact operate, all the way to the UK but she does carry traffic to the three gateway points of Singapore, Hong Kong and Los Angeles at specially structured fares.
Hong Kong
9 The Australians wish to introduce the same scheme on the route between Australia and Hong Kong. This would have implications for CPA's services between Hong Kong on the one hand and East and West Australia on the other. The Hong Kong Government and CPA need time to examine the implications in greater depth. Their initial reaction when brought into the discussions with the Australians was as follows: they supported the aim of achieving cheaper fares, which would have the effect of increasing tourist revenue in Hong Kong. They thought the service to East Australia would probably not be much affected but the West Australia service would become unviable, unless the Australians agreed to intermediate traffic stops (with or without fifth freedom rights). The Australians undertook to consider this. Hong Kong were especially concerned at the possibility of other countries, especially Japan, following the Australian precedent, thus jeopardising the carriage of the considerable intermediate traffic which is in Hong Kong hands between Taiwan and Japan. (One third of CPA's total earnings comes from intermediate traffic such as this.) The UK has appreciable leverage with Japan, however, on the UK-Japan trunk routes and we could probably protect Hong Kong's position, as we have done for the last four years. until the Hong Kong Government and CPA have completed their examination, it is not possible to give the Australians a definitive answer in respect of the Australia/HK routes.
Alternatives to Australian Proposal
10 In theory these could be:
(a)
the status quo
(b) one of the options in paragraph 3 above
Nevertheless
(c) a deal with say, the Dutch in which Amsterdam rather
than London would become the focal point for Australian traffic to and from Europe.
(d) some modification of the current proposal to make it
more palatable to Singapore and others.
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