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B.Cal had given an undertaking to the ATLA and to Cathay that if a three carrier regime was licensed by them B.Cal would not argue against it at the present hearing. They still maintained that position to be a sound and sensible solution in spite of Cathays withdrawal of its support, but if the Authority decided that a three carrier regime should be rejected in favour of a sole carrier then B.Cal should be chosen in preference to Cathay.
Cathay was a good regional carrier, but operated primarily on the Asian routes in pool with 13 other carriers on 13 different routes. BA had a 15% shareholding in Cathay and because of that and their inexperience of the UK market they would look to BA, with whom they had a commercial agreement, for support. The proposed service by Cathay was unsatisfactory as regards frequency which started at three services per week and was uneconomic because the B.747 which they proposed to use had a very high break even load factor which would not be achieved.
The Laker proposal was unrealistic. It had assumed a first year market of at least 475,000 passengers whereas the current market stood at 200,000. The forecast market was possible, but only on a four to five year time scale and would not be achievable in the first year. A break even load factor of 73% would be required from a market that did not have an established charter component which was the usual source of Laker's traffic. If as Laker had proposed, all the carriers were licensed and they achieved their proportionate share of the market based on capacity, their projected profit of £3.5 million would become a loss of £14.5 million.
They were not proposing to offer a full range of services so that a substantial category of demand would remain unserved.
With a four carrier regime operative it would be difficult for BA, Cathay and B.Cal to satisfy the complete market economically, and the resultant competitive environment would be disruptive and counter productive.
B.Cal was proposing to offer a daily service using the DC-10-30 with an evening departure from each end. The range of fares proposed was simple and comprehensive and was based on the three cabin concept. The service would cater for all segments of the market and had been programmed at an actual load factor of 40%.
Mr Thompson said that B.Cal had attached considerable importance to securing a licence for the London-Hong Kong route. There was little scope for further expansion in Africa, the airline had reached the limits of developments in South America and additional growth opportunites were required if it was to prosper. Hong Kong had a con- siderable traffic generating potential which had not been effectively developed and, if licensed, it would give B.Cal a base from which they could develop routes beyond Hong Kong to points not at present served by a UK carrier. It was also essential for the future development of Gatwick as an international airport that there should be adequate links with the Middle East and Asia. They required a total fleet of seven DC-10 aircraft to meet all their commitments and it was planned to lease aircraft initially to enable services to start on the dates proposed.
B. Cal would be in a better position to develop
services at Gatwick were it to become the sole operator, and although it would be seeking to maximise its profitability there could be advantages in emphasising that there was a daily service to the Far East from Gatwick.
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