102.
The cargo yield estimated by BCal was higher than EA had experienced in the market and, although the forecast had been similar, BCal in order to achieve their estimates would either need to take a large share from the sixth freedom carriers at a low yield or to compete in the direct market for a higher yield.
103. None of the operations that had been proposed would result in viable operations for two or more carriers without intermediate traffic. The route could only be truly viable with one additional carrier provided that carrier tailored its capacity to demand, which BA considered should be three services per week combined with BA's daily 747 service. Even then it would be necessary for both
104.
carriers to carry some intermediate traffic.
The introduction of a second carrier into the market would suffice to create a more competitive regime and there would be some market stimulation because of the different fare levels. Cathay would be able to provide a stimulus to the market and would be able to feed traffic from Australia and New Zealand onto the London-Hong Kong services.
105. The traffic mix and market forecast by Laker were unrealistic as was their
estimate of Sector traffic. There would be difficulties in carrying worker traffic unless there was a direct service from Hong Kong to Saudia Arabia for which Laker did not have traffic rights. He considered that the forecast cargo revenue should be reduced by 50% due to Laker's lack of experience.
106.
107.
108.
HONG KONG GOVERNMENT'S REPRESENTATION
Mr Scott said that Section 3 of the Act as it stood did not per se prevent the licensing of any of the applicants either alone or with others. If there were a prejudice in favour of British airlines it was in 3(1) (b) and not in 3 (1) (a). Section 3 (1) (a) was essentially a policing provision. The words "so far as British airlines may reasonably be expected to provide such services" were there for the defence of the airlines. They enabled airlines to argue that it was unreasonable of the Authority to require them to perform certain services. If alternatively it was argued that the words introduced an element of prejudice, the Authority had to ask itself whether it was reasonable that the services in question be provided by British airlines. Section 3 (1) merely set out the Authority's general objectives and it was for the Authority to develop its own policy taking full account of the consumers and the operators.
If the London-Hong Kong route was not covered by the Authority's policy statement then services by either Laker or BCal would be ruled out since, if BCal were allowed to operate to Hong Kong, a whole range of arguments would develop between BA and BCal about rights in that part of the world, especially as BCal's intentions in that part of the world had now been stated. Laker had also made it clear that they wanted to fly round the world. The present case was the obverse of the Dallas/Fort Worth case where in the final paragraph of the decision the Authority had said that it was giving effect to the common sense of the spheres of interest policy. In this case to give effect to the common sense of the policy would be to refuse both BCal and Laker. As a result of the Laker case, the Authority had to ask itself if the Guidance was consistent with Section 3 and taken on that basis nothing in the Guidance prevented the granting of a licence solely to Cathay, as the Guidance was subordinate to the Act.
The Hong Kong Government considered that the correct decision was to grant a licence with unlimited frequency to Cathay Pacific and to reject both the BCal and Laker applications. It was the only solution which was right on the merits and met the statutory requirements. All the applicants except BA had agreed that there were physical advantages in serving the route from both ends. There was an intangible benefit of licensing a Hong Kong carrier susceptible to pressures from the Hong Kong community and there was an advantage to Hong Kong in fiscal and economic terms. Cathay had wide experience of operating from Hong Kong and had its own links with the Far East network and an ability to