TNAG-0514-FCO40-579-Purchase-of-wide-bodied-aircraft-by-Cathy-Pacific-Airlines-1974 — Page 71

HOFO023/15

PP F C O

GRPS 310

REQISTRY No. 51

2 8 FEB 1974

HKK 21/12

被

CYPHER/CAT A

Mr Dixido

FM HONG KONG 15064BZ

Mr Capri

Muty

Хл

CONFIDENTIAL

TO PRIORITY F C O TELMO 213 OF 15TH FEBRUARY,

DTI (CADIV)

Ad MKLODT Md M+TB

lor.

(14)

15

Ma Tay! HK90,6 Grafton Stw! 1740 ROUTINE

BCARFE.

STD shi here copy

опл

? this

bouk

deal

FOR D.T.l.

YOUR TELEGRAM NUMBER ALLOT 24.

12)

RE

CHOICE OF WIDE-BODIED AIRCRAFT BY CPA.

10X1

imoiing greater traffic rights for CPA

LOCKHEED REPRESENTATIVES CALLED ON CPA ON 12 FEBRUARY TO MAKE WHAT THEY STATED TO BE THE JOINT ROLLS ROYCE/LOCKHEED FINAL PROPOSAL. THIS WAS CONFIRMED IN WRITING NEXT DAY.

2.

COMPARED WITH THEIR PREVIOUS PROPOSAL THIS OFFER IN EFFECT REDUCES THE PRICE OF THE FIRST TWO 1011 AIRCRAFT BY US DOLLARS 200,000 PER AIRGRAFT AND THE THIRD AND FOURTH AIRCRAFT, IF THE OPTION FOR THESE WAS TAKEN UP, BY US DOLLARS 500,000 EACH. FOR A TWO AIRCRAFT BUY THIS REPRESENTS A REDUCTION IN CAPOTAL COST OVER THE PREVIOUS OFFER OF 1 PER CENT. HOWEVER, OPERATING COST DIFFERENTIALS BETWEEN THE 1011 AND DC10 KOULD EXCEED THIS CAPTIAL COST REDUCTION IN 10 MONTHS. IN EVENT OF A FOUR AIRCRAFT BUY, THE IMPROVEMENT IS APPROXIMATELY 1.4 PER CENT OVER THE PREVIOUS PROPOSAL BUT THIS WOULD BE COUNTER-BALANCED BY INCREASED OPERATING COSTS IN APPROXIMATELY 24 MONTHS.

3.

CPA STATE THAT MODEST VARIATION IN CAPITAL COSTS CANNOT

POSSIBLY INFLUENCE A DECISION INVOLVING TOTAL CAPITAL COSTS IN EXCESS OF US DOLLARS 100 MILLION, PARTICULARLY AS THE SAVING WOULD BE WIPED OUT IN A VERY SHORT TIME BY INCREASED OPERATING COSTS. THEY THEREFORE CONSIDER THAT THE REVISED OFFEN CANNOT AFFECT THE CPA BOARD'S DECISION.

YOUR ALLOT 21 GAVE RISE TO DELIEF THAT THE OFFER OF 12 FEBRUARY WOULD BE FOLLOWED BY A FURTHER OFFER SUBSEQUENT TO KOCHIAN/ ROLLS ROYCE MEETING, BUT PARA, 1 OF YOUR ALLOT PA KOV INDICATES THAT NO FURTHER OFFIEN IS LIKELY TO RESULT FROM THIS MEETING. CPA HAVE BEEN SO INFORMED.

5.

MEANWHILE, IN VIEW OF NOTIFIED DEFERMENT OF CPA'S DECISION, DOUGLAS REPRESENTATIVES PLAN TO ARRIVE HONG KONG ON 19 FEBRUARY TO PRESENT IMPROVED OFFER OVER THAT MADE AGAINST PREVIOUS DEADLINE.

6. THE GIST OF YOUR ALLOT NA HAS BEEN CONVEYED TO BLUCK, WHO ADVISES THAT HE WILL BE TALKING TO DROWNG THIS EVENING

(15 FEBRUARY) AND WILL REPORT TO US THEREAFTER,

FCO PASS COPY TO HONGAID.

MACLEHOBE

INNN

SENT AT 07267//15 EJM