CONFIDENTIAL
of Transport.
British Airways (BA) have tabled far-reaching
demands. It seems likely that at least one more round, and
probably two, will be needed after the present one.
6. An issue of particular contention is the service by BA from London to Peking over Hong Kong, which BA wish to maintain and possibly expand. BA had stated their intention of discontinuing the service after March 1987, then changed their minds. The Hong Kong Government regard this as a breach of faith. They also contend that continuation of the service could have an adverse effect on the development of Hong Kong-based airlines and send the wrong signals to the Chinese, with BA enjoying a privileged position over other
airlines.
THROUGH RUNNING
7. The BA service has however now been placed in a different perspective since CAAC have expressed their own interest in operating services from the mainland via Hong Kong to points beyond. In preparation for the next round of UK/PRC talks, HMG have indicated to the Chinese side, with Hong Kong's agreement, willingness to discuss this question.
8.
We believe this could well give rise to pressure from airlines of other countries to negotiate the opening of services through Hong Kong to points on the Chinese mainland. The Hong Kong Government are reluctant to begin steps in this direction yet, as they believe this could provide an unwelcome precedent of which China might take advantage after 1 July 1997. ASAS including points in China would fall to the Chinese authorities to negotiate or amend after 1997, taking account of Hong Kong's interests, rather than being within Hong Kong's area of autonomy. We see this development as inevitable, sooner or later: there could be advantages in begining it before 1997 when we could have a greater influence over the
process.
BA/BCAL MERGER
9. The merger took effect on 14 April. As far as Hong Kong is
CONFIDENTIAL