[ LB1 ADG]
CONFIDENTIAL
SIR Y K PAO'S VISIT TO BRITAIN: JUNE 1986
(c) HONG KONG: CIVIL AVIATION:
BACKGROUND
DRAGONAIR AIRLINES (DAL)
1. DAL was incorporated in Hong Kong in September 1984, following the initialling of the Joint Declaration which
envisages special treatment for airlines incorporated in
and with their Head offices in Hong Kong. It met these
criteria but not the normal requirements in our Air Service Agreements (ASAs) that it should be owned and controlled by HKG or British Nationals, and was originally owned and
controlled by Chinese interests.
HMG,
2.
In October 1985 when Sir Y K acquired an interest in DAL, a radical restructuring of the airline's shareholding
took place,
the aim of meeting the Details provided
with apparently
necessary ownership and control criteria. by DAL now suggest that about 65% of the shares are owned by British Nationals, with Sir Y K and companies under his
control accounting for about 35% of the total. A final
view has yet to be reached on whether DAL meet the ASA ownership and control criteria. We await the views of the
HKG.
3.
Sir Y K Pao wrote to the Prime Minister about his
recently acquired interest in DAL on 25 October
last year
asking for the support of HMG for "This new Hong Kong
venture". The Prime Minister's reply was non-commital.
Since then DAL has been granted ATLA licences to mount scheduled services to eight regional cities. in the PRC;
CONFIDENTIAL