CONFIDENTIAL
(You should not, however, make a direct
conditional link between our continued
agreement to non-scheduled flights and Chinese agreement to our proposals for an ASA).
3: In view of Hong Kong's reservations about the final fall back position in paragraph 5 of your TUR, which DOT share, we are not prepared to go this far. We realise that this means our final position (paragraph 4 of TUR)
falls well short of what the Chinese have
indicated they would like (Sung's remarks
to you in paragraph 1 of TUR, and to Cortazzi, FCO Telno 630 of 16 October), But DOT's
assessment is that taking the best possible case, the value of an ASA to British Airways would be about' £2 million per annum, whereas Cathay Pacific's business which would be put
at risk is £4 million at a conservative
estimate. On balance therefore the risk is
too great in commercial terms, and there are no political arguments in favour of an ASA which over-ride the commercial equation.
CONFIDENTIAL
NOTHING TO BE WRITTEN IN THIS MARGIN