XN000022-1996-05-29 — Page 30

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Reply:

Mr President,

China National Aviation Corporation (Hong Kong) Limited (CNAC(HK)) has applied for an Air Operators Certificate (AOC), not a licence. An AOC may be granted if Government is satisfied that the company is competent to secure the safe operation of aircraft for the flights intended. It is essentially a mark of technical competence to operate a public transport service.

By itself, an AOC will not enable a company to operate air services to and from Hong Kong. To operate a scheduled service, a company would further require:

(a)

(b)

a licence for a specific route granted by the Air Transport Licensing Authority (ATLA), an independent body established under the Air Transport (Licensing of Air Services) Regulations; and

designation by the Government as a Hong Kong airline which can operate on the route under the relevant air services agreement.

The processing of CNAC(HK)'s application for an AOC has no direct bearing on Government's "one airline one route" policy which concerns designation of airline for a specific route under the relevant air services agreement. An AOC and an ATLA licence are pre-requisites to designation but designation of an airline by the Government is not automatic.

International air transport is highly regulated. Hong Kong airlines can only operate in the international arena and unlike many of their competitors do not enjoy the financial benefits of a large domestic market. Furthermore, they face keen competition. Our bilateral agreements with other governments normally permit their airlines to exercise reciprocal traffic rights on the same routes as our airlines. Moreover on the major international routes, such as those between Asia and North America, there is frequently additional competition from other third country airlines. Therefore, the most heavily travelled routes to and from Hong Kong have long been well served by several established operators.

In these circumstances, the Government has decided that as a general rule, and subject to the existing arrangements, in any given case, designation in respect of routes available to Hong Kong will be limited to one airline per route. The airline first licensed by ATLA for a route will normally be the one to be designated for that route.

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