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the Department of Transport. British Airways (BA) have tabled
far-reaching demands.
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 concerned, the status quo has been maintained with BA operating the
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