TNAG-0514-FCO40-579-Purchase-of-wide-bodied-aircraft-by-Cathy-Pacific-Airlines-1974 — Page 25

Secretary of State

LAST

(3+)

REF.

NEXT

CONFIDENTIAL

REF

ORDERS FOR TRISTARS

PS/Lord Beswick Secretary

Mr Jones

Silent Copies: Mr Rogers CA2

CATHAY PACIFIC

Mr AC Stuart FCO Kr Farrow/file

You should know of a situation near to decision on possible orders for Lockheed L1011s (Tristars) in which this Department is involved.

Background

2 Cathay Pacific Airways (CPA), which is Hong Kong based but mainly British owned - 60% Cathay Holdings (Butterfield and Swire, China Navigation and P & 0), 25% Hong Kong and Shanghai Banking Corp., 15% British Airways, have been considering for months purchase of 4 wide- bodied aircraft from Boeing, McDonnell Douglas or Lockheed. At the end of January they let the DTI know in advance of announcement that their Board had decided to buy DC10-10 and that the L1011 powered by Rolls Royce RB211 engines was close second (with Boeing out of the running).

But CPA's relationship

3 This notification was in a sense a courtesy. with the civil aviation side of the Department of Trade (then in DTI) is close because HMG negotiate on traffic routes on their behalf. With this background we asked CPA to give further consideration to their choice, emphasising

4

i

the large British investment in the L1011's engine

ii the importance of CPA's decision to Lockheed, not only because of the Cathay order (which could lead to up to 12 aircraft over the years) but also because of other airlines in the area representing over 30 potential orders which could be strongly influenced.

CPA agreed to defer action initially until end February and subsequently at our suggestion until 18 March. Also they let us know the considerations underlying their Board's decision.

5 At our initiative Lockheed and Rolls Royce went into further negotiation in Hong Kong with CPA's managing director, Mr Bluck, whose advice mainly determined the choice. Also Sir Kenneth Keith met all the shareholders in London - in particular the Swire brothers, who in effect control over half CPA's shares; and the Swires have discussed the situation on various occasions with officials (including Sir Peter Thornton note of meeting attachment A).

35