TNAG-0643-FCO40-791-Involvement-of-Hong-Kong-in-air-services-agreements-1977 — Page 153

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R. Thompson HKTAD

DEPARTMENT OF TRADE

SHELL MEX HOUSE STRAND

7 NO. 51

2 8 NOV 9977

LONDON WC2R ODP Telephone Direct Line 01-217 5654

Switchboard 01 217 3000

3 November 1977

MacGoostenry for aft reply (reca 7/11)

Our Ref:

EB 22/45 INSL

F: STRY Acion Taken

M J Morland Esq

No

66

MAED

FCO

Gt George Street

Spher

London SW1

are reply up

Dear Martin

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UK/SWIZERLAND AIR SERVICES AGREEMENT

The earnings of UK and Swiss airlines respectively under the above Agreement are seriously out of balance and we are

considering calling for talks with the Swiss in the near future with a view to remedying the situation.

The Swiss are earning some £32m and the United Kingdom some £16m, or a neat 2:1

1 ratio, under the Agreement. Excluding pool earnings (which themselves are in need of some adjustment) the earnings are, respectively, £16.2m and £3.8m, or approximately a 4 1 ratio. We believe that we should be failing in our duty if we did not seek to bring the situation into an appreciably more acceptable shape. Although some of the problem arises in urope, the greatest cause of the imbalance by far are Swissair's earnings on the Hong Kong route. The airline's 3/4 freedom earnings alone (four air services weekly) amount to £9m, whilst fifth freedom earnings amount to £4m.

It is quite evident that, over the years, a situation has arisen under which the relative value of air service rights granted by Switzerland to the United Kingdom and vice versa have got seriously out of line.

In addition to our general aim to bring earnings under the Agreement into balance, we have looked specifically at Swissair's live weekl services to Hong Kong and this has revealed a most unsatisfactory situation. Our own figures indicate that the services achieved over the last year a load factor of only 15% on 3/4 freedom sectors rising to a mere 32% even with the addition of fifth freedom traffic. This provides a clear basis and justification for a review of the capacity being offered by Swissair under the Agreement.