SECRET
A
4.
The balance of services is entirely on the Chinese side. In return for 2/3 CPA flights we allow more than 50 CAAC flights a week. CPA's entitlement to even 2/3 flights is vulnerable
and hemmed in with restrictions. And, in accordance with the CMU, only CAAC can carry normal traffic Hong Kong-Peking. (British Airways' flights are 'blinded' restricted to London-
Hong Kong-Peking passengers who are travelling London/Hong Kong on the weekly London-Peking through flights.)
5. We have a strong interest in securing a better deal for
British or Hong Kong airlines. Hong Kong's objective has been to achieve at least daily CPA services to both Peking and Shanghai. We are willing to offer some concessions in return
(eg extra routes for CAAC, from Chinese cities to Hong Kong or
through Hong Kong to the US, South East Asia and even probably London). But at the most recent review held in Peking in March, CAAC, except for a small concession on capacity of CPA flights to Shanghai, were entirely intransigent and obstructive. They
even refused to commit themselves to a further review in six
months.. They are well-satisfied with the status quo and no
significant progress can be made on the present basis. ·
J
6. To give a year's notice of termination of the CMU is a
standard negotiating tactic in air services discussions and the
CMU text specifically provides for it. It would forcefully remind CAAC of our dissatisfaction with current arrangements and concentrate their minds on devising with us more doceptable
formulae. A year provides good time to reach a solution.
The Civil Aviation and International Relations Division (CAIR)
of DOT consider that the financial benefit to CAAC of its
services to Hong Kong (some US$50 million this year) will
probably prevent their risking a complete breakdown of services,
particularly just at the beginning of the busy summer season. HM Ambassador Peking also doubts whether CAAC would be prepared to sacrifice the great benefits they enjoy from the Hong Kong
services. But the possibility of a suspension of air services,
lasting an uncertain period, cannot be entirely excluded.
trunk services might also be jeopardised.
And
SECRET
/ARGUMENT