XN000022-1987-02-18 — Page 5

WEDNESDAY, FEBRUARY 18, 1987

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MR JACOBS SAID THAT THE TIMING OF THE NEGOTIATIONS DEPENDED UPON THE WILLINGNESS OF THE GOVERNMENT CONCERNED, AND THERE MIGHT BE OTHER COMMITMENTS IN AIR SERVICES NEGOTIATIONS THAT COULD CAUSE DELAY.

+IF IT IS A ROUTE INVOLVING MORE THAN ONE COUNTRY, OBVIOUSLY MORE THAN ONE SET OF NEGOTIATIONS HAVE TO BE UNDERTAKEN, AND THIS TAKES EVEN MORE TIME,+ HE ADDED.

MR JACOBS THEN EXPLAINED THE FACTORS THAT HAD TO BE BORNE IN MIND IF CHANGES TO THE EXISTING AIR SERVICES ARRANGEMENTS WERE SOUGHT

+FIRST, IF THE OTHER GOVERNMENT CONCERNED IS WILLING TO CONSIDER CHANGES, IT WILL NORMALLY, AND QUITE UNDERSTANDABLY, SEEK ADDITIONAL RIGHTS, FOR WHICH IT MAY DESIGNATE ITS OWN AIRLINE.

+ IT MAY SEEK THOSE RIGHTS AT A PRICE.+

MR JACOBS POINTED OUT THAT EFFORTS TO OBTAIN THE RIGHT TO DESIGNATE A SECOND HONG KONG AIRLINE FOR A PARTICULAR ROUTE COULD WELL RESULT IN THE FIRST HONG KONG AIRLINE HAVING TO REDUCE THE LEVEL OF ITS SERVICES ON THAT ROUTE, OR ON ANOTHER ROUTE WHICH IT OPERATED UNDER THE SAME AIR SERVICES ARRANGEMENTS.

ALTERNATIVELY, THE FOREIGN AIRLINE OPERATING ON THE ROUTE, THROUGH ITS GOVERNMENT, COULD SEEK ADDITIONAL SERVICES FOR ITSELF ON ANOTHER ROUTE, HE SAID.

MR JACOBS SAID THAT THE PRICE FOR THE INTRODUCTION OF A SECOND HONG KONG AIRLINE ONTO A ROUTE COULD BE AT THE EXPENSE OF THE INCUMBENT HONG KONG AIRLINE, WHICH HAD INVESTED HEAVILY IN AIRCRAFT, PERSONNEL, SUPPORT SERVICES AND PROMOTION IN ORDER TO DEVELOP THE ROUTE.

+IN PRACTICE, IF THE SECOND AIRLINE DOES NOT MATCH THE INCUMBENT'S ALREADY ESTABLISHED STANDARDS, THE OUTCOME COULD BE A LOSS OF HONG KONG'S SHARE OF THE PASSENGER AND CARGO TRAFFIC ON THAT ROUTE,+ HE SAID.

ANOT HER FACTOR, HE ADDED, WAS THAT ANY POSSIBILITY OF A REDUCTION OF AN INCUMBENT AIRLINE'S RIGHTS ON A ROUTE WAS NOT GOING TO GIVE IT THE NECESSARY INCENTIVE AND CONFIDENCE TO INVEST PROPERLY IN DEVELOPING THAT ROUTE TO THE BENEFIT OF HONG KONG AND THE TRAVELLING PUBLIC, AND IN COMPETING FULLY AND PROPERLY WITH OTHER AIRLINES ALREADY OPERATING ON IT.

/MR JACOBS