J.R. Steele Esq., Deputy Secretary, Department of Trade,
1, Victoria St., London, S.W.1.
Dear Mr. Steele,
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Mr Thompson
Miss Brown
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15th November, 1978
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Cathay Pacific Airways: China
I was in Hongkong all last week. One of the topics which was clearly exercising the top management of Cathay Pacific was possible adverse repercuss- ions from the conclusion of a new bilateral aviation agreement between H.M.G. and China.
I believe that the H.K. Government and the D.O.T. are well aware of C.P.A.'s views, but since it is an issue of such profound importance, I hope that you will not mind my writing to reiterate briefly the C.P.A. position:
(1) C.P.A. argue that in strictly aviation terms it would make no sense for H.H.G. to risk C.P.A.'s Taiwan earnings (in | axcass of 250 million per annum) in order to provide a service from the U.K. to Paking which will itself presumably lose money. No. These Taiwan earnings represent some 27% of C.P.A.'s total revenue.
(2) It seems right to record the effects on C.P.A. of a totally adverse reaction fron Taiwan. It is possible that not only might C.P.A.'s services to and from Taiwan be cancelled, but the airline could also be forced to fly round Taiwan air-space en route to and from Japan. A blow of this kind would of course not only be massive in revenue terms, but would also result in surplus staff and aircraft.
(3) Against this background C.P.A. have pleaded that, if an air agreement is to be concluded with Peking, it should be achieved in such a way as not to affect Cathay Pacific's operations to Taiwan. We have been assured on numerous occasions in the past that this point is understood and accepted by all the authorities concerned.