reasons and price is not the major consideration. We could come in for some criticism from the Americans if we accepted the proposals, even if it is no business of theirs, but HM Embassy in Washington see no serious implications for bilateral UK/USA air service relations. The Embassy believe that the US's primary concern will probably be to use its own considerable bargaining power to resist the introduction of similar restrictive regimes in its own bilateral air services agreements.
(iv) We have considered with BA the possibility that
this kind of arrangement may spread elsewhere in the world. Having accepted it on one route, we could be faced with demands from other countries for similar arrangements. We doubt however whether this would happen on a significant scale. BA are content to take this risk, even though they earn 6% of their revenue (£40m) from 5th freedom non end-to-end traffic.
(v) The most serious possible disadvantage if we accept
the Australian scheme is if third countries react adversely. All the mid-point countries in S E Asia and India would be affected in varying degrees. Except for Singapore, the Australians argue that the scheme will bring compensating advantages to offset any loss of passengers, of tourist revenue and of frequency of flights to Australia and to the UK, which result from the exclusion of 5th/6th freedom traffic rights and reductions of services. Intermediate countries' reaction however will depend on how seriously they think they will be affected and how responsive they are to appeals eg to ASEAN solidarity, to North/South considerations from those genuinely affected above all, from Singapore.
7 Implications for third countries
(a) Air services/Tourism
Annex A describes the effect on air services/tourist interests of third countries. Australia would probably have to re-negotiate her Air Service Agreements with the UK, Singapore, Malaysia, Thailand, India and a number of European countries. The country most seriously affected would be Singapore. We would have to reduce SIA's air services between Singapore and London from 7 to probably 4-5 a week; Australia would have to cut them on the Singapore/Australia route from 13 to about 5 a week. Singapore's tourist trade would suffer immediately from fewer short stops by passengers However, en route Australia-Europe in both directions. calculations done by the Australians on the assumption