TNAG-0514-FCO40-579-Purchase-of-wide-bodied-aircraft-by-Cathy-Pacific-Airlines-1974 — Page 51

CONFIDENTIAL

RECEIVED 144

REGISTRY No.52

GRPS 452

PRIORITY

CYPHER/CAT A

1 MAR1974

FM HONG KONG 010855Z

CONFIDENTIAL

HKK2/12

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TO PRIORITY FCO TELNO 273 OF 1ST MARCH, 1974. INFO ROUTINE BTC

HONG KONG AND BCARFE.

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CHOICE OF WIDE BODIED AIRCRAFT BY CATHAY PACIFIC.

WE HAVE BEEN KEEPING IN CLOSE TOUCH WITH BLUCK OVER THIS

ISSUE. FOLLOWING FURTHER DISCUSSIONS ON PRICE WITH BOTH LOCKHEED

AND DOUGLAS, CPA'S LATEST CALCULATIONS OF THE NETTED DOWN COST, INCLUDING SPARES, ARE

TRISTAR

DC 10

2 AIRCRAFT US DOLLARS 47.62 MILLION US DOOOLLARS 53,68 MILLION

PURCHASE

4 AIRCRAFT US DOLLARS 96.67 MILLION US DOLLARS 103.33 MILLION

PURCHASE

THE DIFFERENCE IN COST PER AIRCRAFT IS

US DOLLARS 3,030,000 FOR A TWO AIRCRAFT PURCHASE AND

US DOLLARS 1,664,000 FOR A FOUR AIRCRAFT PURCHASE,

2, ON THIS BASIS CPA'S CALCULATIONS, ON THE BASIS OF THE INCREASED

OPERATING COSTS AND LOWER EARNINGS POTENTIAL OF THE TRISTAR,

ARE THAT IT WOULD TAKE 15 YEARS TO RECOUP THE INCREASED CAPITAL

COST OF THE DC 10 ON THE BASIS OF A TWO AIRCRAFT PURCHASE AND

EIGHT YEARS ON THE BASIS OF A FOUR AIRCRAFT PURCHASE, PURELY ON PRICE ALONE, THEREFORE, BLUCK CONSIDERS THAT THE DEAL NOW FAVOURS

LOCKHEED.

3. BLUCK CONFIRMED, HOWEVER, WHAT THE SWIRES AND JOHN BROWNE INDICATED TO THORNTON, NAMELY THAT CPA'S MAJOR WORRY CONCERNS LOCKHEED 'S FINANCIAL MUSCLE AND, INDEED, THE WHOLE FUTURE OF THE COMPANY, INCLUDING THE TRISTAR PROGRAMME. IN PARTICULAR, CPA

ARE AFRAID THAT LOCKHEED WILL BE EITHER UNABLE OR UNWILLING TO

CONFIDENTIAL.

/ DEVELOP