CODE 18-77
To:
MR HALL
PEP
Reference
8/117.
CONFIDENTIAL
COMMERCIAL IN CONFIDENCE
cc Mr Nieduszynski AIR
Ms Anderson
Mr Murray
AIR1/2 O/R OT2/2d
From:
PETER LAMBERT
AIR1A
1/Green Zone
151 Buckingham Palace Road
215 1128
די
March 1993
IMPLICATION OF HONG KONG'S ECONOMIC AND FINANCIAL POSITION
Mr Meadway's minute of 4 March to Mr Nieduszynski asked for the implications of action by the Chinese on Rolls-Royce plc. I have only considered the aeroengine business assuming that PEP will cover the Industrial Power Group.
Hong Kong
2.
Rolls has a very important customer in the Swire Group, who effectively manage and control Cathay Pacific Airways (CPA). CPA in turn own 30% of Dragonair, Hong Kong's secondary, short-haul carrier. The entire CPA fleet is powered (or will be powered) by Rolls-Royce engines, a unique commitment by a major airline. CPA is a major customer for the UK aerospace industry as a whole, pursuing a deliberate "buy British" policy on equipment and fittings; so that c. $50m of an aircraft's total $120m cost goes to UK companies. CPA's purchases in the 1990s from Rolls-Royce and other UK manufacturers is estimated to be in the region of £2bn. CPA and Dragonair are also significant customers of Airbus Industrie with A330 and A320 aircraft. Through CPA, relationships have been developed with China Southern Airlines in a major effort for their forthcoming equipment orders, so that the two companies can set up a joint engine repair and maintenance centre in the region.
3. Dragonair operates mainly to the PRC and expects to expand these services in 1993 with the introduction of the Airbus A320 powered by the V2500 engine (made by a five-nation collaboration in which Rolls have a 30% share). The Swire Group are deeply concerned about the current discussions between PRC and HMG. implications for future fleet purchases are serious, as indeed they are over PRC clearance for the new airport project in which
3AIRTK.171
The