Mr Morland
HER 184/1 Mr., keine
22...
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92
Please copy to Mr. Williamson,
HL+GD
UK/CANADA AIR SERVICES (TRANSFER TO GATWICK )
1.
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112179
You asked me whether the Canadians could take retaliatory action against our aviation interests without themselves getting hurt. There are three main sectors of UK/Canada aviation activity (a) charters, (b) scheduled services and (c) intergovernmental cooperation.
Air
CP
CP Air
We
2.
BA and Laker Airways are the only UK carriers currently serving Canada. BA provides all of the scheduled services, (they have ceased to operate charters), whilst Laker are solely involved with charter operations to Toronto Canada (AC), CP Air and Wardair are the main Canadian operators. AC provides scheduled services to the UK. Air provides the scheduled services to Hong Kong. and Wardair have large charter programmes to the UK. Quebecair and Ontario Worldair have small programmes. do not yet have up-to-date figures for 1978, but in 1977 Canadian carriers took 60% of the charter traffic, and this trend is increasing. We may safely assume that Canadian carriers took at least 60% of the charter market in 1978 and will take more in 1979, especially since the Canadian carriers have increased their programmes and Laker has tended to concentrate on US points near the border eg Detroit. Charter services are outside the terms of the ASA and it is unlikely that the Canadians would seek to involve them in any dispute. In any case since their charter operators have a bigger share of the market, the Canadians would have more to lose if there was a cut-back on charters, particularly since charter traffic could slip across the border into the US, where UK charter operators are relatively strong.
3.
Air
Scheduled services. Under the terms of the UK/Canda ASA, which has been the subject of negotiations between the two Governments since April 1978, BA's operations are restricted to Eastern Canada ie Toronto and Montreal. Canada serves Vancouver, Calgary, Edmonton, Winnipeg, Halifax, Gander as well as Toronto and Montreal. In the year ending April 1978, AC took 57% of the market. BA dominates the Eastern Canada (Toronto 63%, Montreal 68%) market, but now wishes to get into the (growing) Western Canada market. This could be of some long term benefit to BA particularly if it enabled them to combine Western Canada services with their West Coast USA services. However, there is a commercial agreement (a "pool") between BA and AC, which includes sharing the revenue from both Eastern and Western Canada services. AC contributes a proportion of the revenue they make on their Western services to the pool as well as the total they earn on their Eastern Canada services. A Canadian refusal to allow BA to serve Western Canada would not affect BA's earnings in the short to medium term. Any move to cut back their Eastern Canada services could quickly damage them, but would require the Canadians to break the terms of the commercial agreement. The Canadians might
/consider