TNAG-0643-FCO40-791-Involvement-of-Hong-Kong-in-air-services-agreements-1977 — Page 207

CONFIDENTIAL

HAND SAID THTAT THEY EXPECTED TOURISM TO INCREASE NOW THAT THERE WAS MORE STABILITY IN THE REGION (THIS WAS OF COURSE BEFORE THE COUP) AND THEY THOUGHT THAT THE ANNUAL INCREASE WOULD BE

BETWEEN 8 AND 10 PER CENT. THE TWO LEADERS AGREED THAT THIS DISPARITY WAS NOT IMPORTANT. THE IMPACT OF THIRD COUNTRY CARRIERS

ON THE THIRD-FOURTH FREEDOM TRAFFIC WAS DISCUSSED AND IT WAS AGREED

THAT THE APPEARANCE OF A LARGE NUMBER OF EUROPEAN AND MID-

TO

EAST SIXTH FREEDOM OPERATORS ON THE ROUTE WAS A MUCH MORE SIGNIFIC-

-ANT FACTOR THAT THE RECENT AND PLANNED REDUCTION IN CAPACITY BY

THE FIFTH FREEDOM OPERATORS, PAA, SQ AND QF, WE SAID WE UNDERSTOOD

THE REASONS WHY TG WANTED TO MOVE TO A WHOLLY DC10 OPERATION

LONDON: BUT IN THE LIGHT OF THE AGREED FIGURES OF 23/4TH

FREEDOM TRAFFIC EVEN THE EXISTING CAPACITY WAS NOT JUSTIFIED.

MOREOVER, THERE WAS A MAJOR PROBLEM OVER TG'S EXCESSIVE CARRIAGE

OF SIXTH FREEDOM TRAFFIC MAINLY BETWEEN UK AND AUSTRALIA. IF

THIS WAS TO CONTINUE SOME MEANS MUST BE FOUND WHEREBY BA COULD

BE COMPENSATED FOR THE LOSSES INFLICTED ON THEIR UK-AUSTRALIA

EARNINGS. IT WAS AGREED THAT THE AIRLINES SHOULD RESUME

THE DISCUSSIONS WHICH THEY STARTED IN LONDON LAST WEEK AND THIS

THEY HAVE DONE THOUGH TO DATE NOT A GREAT DEAL OF PROGRESS

HAS BEEN MADE.

5. AS REGARDS THE REGIONAL ROUTE, IT BECAME CLEAR FROM THE

DISCUSSION THAT THE THAIS HAVE ACCEPTED THAT THE CAPACITY MUST

BE REGULATED IN RELATION TO THE DEMAND AND THAT THERE SHOULD

BE AN EQUAL CAPACITY ENTITLEMENT ON BOTH SIDES. IN THIS CONNECTION THAI INTERNATIONAL SAID THAT BA'S SERVICES BETWEEN BKK AND HKG CARRIED LITTLE BKK-HKG TRAFFIC AND THATBA'S CAPACITY

ON THAT SECTOR WAS OF LITTLE SIGNIFICANCE. REGARDING THE MECHANISM

FOR CAPACITY CONTROL WHICH HAD BEEN TENTATIVELY DISCUSSED BY

CPA AND TG, ROGERS POINTED OUT THAT WHILE THIS MIGHT WELL BE SUITABLE FOR THE 3/4TH CAPACITY HKG-BKK, IT WOULD NOT BE ACCEPTABLE THAT AN ARRANGEMENT FOR DETERMINING 3/4TH CAPACITY SHOULD AUTO -

MATICALLY APPLY TO THE CAPACITY TO BE MOUNTED ON 5TH FREEDOM

SECTORS BEYONG HONG KONG AND BANGKOK. THE PROPOSED CPA AND TG

PLANS FOR THE NEXT EIGHTEEN MONTHS WOULD ALREADY PRODUCE AN

IMBALANCE OF STH FREEDOM EARNINGS ON THE REGIONAL ROUTES OF

THE ORDER OF DOLLARS 7.5 MILLIONS TO DOLLARS 5 MILLIONS IN THE

THAIS' FAVOUR. IF IN THE FUTURE TG WERE TO OPERATE TO THE USA

OVER HONG KONG THE EARNINGS IMBALANCE WOULD BECOME VERY PRONOUNCED.

IT SEEMED TO US THEREFORE THAT THERE WAS PROBABLY A NEED TO SUPER-

IMPOSE ON THE CX-TG PROPOSED CAPACITY CONTROL MECHANISM FOR 3-4TH

POR

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