GAS 295
RESTRICTED
RESTRICTED
FM HONG KONG 110922Z DEC 78
TO ROUTINE F C O
TELEGRAM NUMBER 1420 OF 11 DECEMBER
INFO WASHINGTON
wle YOUR TELNO 878: GUAM-HONG KONG FARES.
1. PLEASE PASS FOLLOWING TO CAA.
PA
HKK184/1
Y
727
RECEIVED TRY NO. 51
IND
No
OFFICER
Sed 138
PA
1978
REGISTRY Action Taxon
2. AIR NAURU'S PROPOSALS HAVE BEEN DISCUSSED WITH CPA, WHO ARE
FAIRLY RELAXED ABOUT THEM BUT POINT OUT THEY ARE MUCH LOWER THAN
PRESENT FARES ALTHOUGH DISCOUNTS ARE LESS GENEROUS THAN THOSE
AIR NAURU ADVERTISE IN AIRLINE ABC. FROM CALCULATIONS HERE IT
SEEMS THESE PROPOSALS WOULD ALLOW THEM TO UNDERCUT BY AROUND 10-15
PERCENT PRESENT ECONOMY FARES BETWEEN HONG KONG AND MELBOURNE, TO WHERE THEY OPERATE ALBEIT ON A VERY INDIRECT ROUTE.
3. IN RECOMMENDING THAT AIR NAURU BE GRANTED A FOREIGN AIR CARRIER
PERMIT THE CAB'S ADMINISTRATIVE LAW JUDGE NOTED THAT AIR NAURU ''FLIES WITH ALMOST COMPLETE DISREGARD OF THE FINANCIAL RESULTS OF ITS OPERATIONS'' BECAUSE IT IS HEAVILY SUBSIDISED, AND HE PROPOSED TO THE CAB
FARE CONDITION PREVENTING THE GUAM-HONG KONG FARE (AMONG OTHERS) BEING USED TO CONSTRUCT A THROUGH FARE TO A US POINT BEYOND GUAM.
4. AIR NAURU ARE MOST UNLIKELY TO BE ABLE TO PROVIDE ANY COST
JUSTIFICATION FOR THESE FARES, WHICH ARE NO DOUBT DESIGNED ARTIFICIALLY TO STIMULATE AIR NAURU'S CARRYINGS AND TRAFFIC THROUGH
NAURU AS PART OF A GENERAL ECONOMIC DEVELOPMENT. IF APPLIED
WIDELY AT THESE SORT OF LEVELS IT IS JUST POSSIBLE THAT THEY COULD
UPSET TRAFFIC PATTERNS IN THE REGION AND HARM CPA'S INTERESTS. HOWEVER, WE THINK THE FARE CONDITION PROPOSED TO THE CAB IS ONLY
FEASIBLE AT A POINT WHERE THE RANGE OF TARIFFS AND ROUTINGS IS
VERY LIMITED, AND WE BELIEVE THAT ANYTHING LIKE IT IN HONG KONG
WOULD BE UNENFORCEABLE AND ALSO CAUSE MORE PROBLEMS THAN IT WOULD
SOLVE. THE CAB APPARENTLY THINK SIMILARLY SINCE THEY HAVE FOUND
THE CONDITION UNNECESSARY AT THIS TIME.
RESTRICTED
15. IT WOUL()