TNAG-0643-FCO40-791-Involvement-of-Hong-Kong-in-air-services-agreements-1977 — Page 69

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4. ROGERS EXPRESSED DEEP CONCERN THAT THE LUFTHANSA MANAGEMENT

APPEARED TO BE TAKING STEPS AWAY FROM THE COMPROMISE WHICH HAD

ON THE VERGE OF AGREEMENT AT THE CLOSE OF THE LAST ROUND. THE U K

HAD DONE ITS BEST TO MOVE TOWARDS A REASONABLE SOLUTION WHICH

WOULD BE SATISFACTORY TO BOTH SIDES. GIVEN THE VERY LARGE INDALANCE

OF EARNINGS AND THE EXCESSIVE CAPACITY MOUNTED BY LUFTHANSA TO HONG KONG, IT WOULD BE QUITE UNACCEPTABLE TO LEAVE MATTERS AS THEY STOOD. IF LUFTHANSA AND THE IR GOVERNMENT PERSISTED IN THIS VIEW THEN

CONFRONTATION SEEMED INEVITABLE, THIS WOULD BE A MATTER OF GREAT

DISAPPOINTMENT AND REGRET TO THE U K.

5. LENGHTY DISCUSSIONS FOLLOWED IN WHICH PAAS REPEATED MANY OF

THE ARGUMENTS PUT FORWARD IN EARLIER TALKS CONCERNING

IITERPRETATION OF THE CAPACITY CLAUSES, EQUALITY OF OPPORTUNITY AND HINTED AT THE POSSIBILITY OF REFERRING THE MATTER TO ARBITRATION.

ROGERS STRESSED HOWEVER THAT WHILST THE UK WOULD BE READY TO GO TO

ARBITRATION AND IF NECESSARY TO TERUJNATE THE AGREEMENT, HE WOULD MUCH PREFER TO SEEK A SOLUTION WITHIN THE FRAMEWORK OF THE PRESENT

BILATERAL IN THE SPIRIT OF THE GOOD RELATIONS WHICH HAD EXISTED

BETWEEN THE TWO SIDES FOR SO MANY YEARS.

6. DISCUSSION THEN RANGED OVER DETAILED 1SSUES CONNECTED WITH SHORT

HAUL SERVICES TOUCHED ON IN EARLIER ROUNDS, PRIMARILY BA'S NEW SERVICES FROM GATWICK AND THE CAPACITY PLANNED BY LUFTHANSA

FOR DUSSELDORF - LONDON. WHEN PRESSED TO COMMENT ON HIS AIRLINE'S LONGER-TERM PLANS FOR ITS FAR EAST SERVICES, THE JACOB SAID THAT WHILE NO FIRM DECISIONS HAD BEEN TAKEN, IT SEEMED PROBABLE THAT LUFTHANSA WOULD VOLUNTARILY REDUCE ITS SIX FREQUENCIES TO HONG KONG

BY ONE OR TWO A WEEK OVER THE NEXT TWO OR THREE YEARS. HE ALSO

CONFIRMED THAT ALTHOUGH HIS BOARD HAD RULED AGAINST THE PROPOSAL

FOR CASH TRANSFERS IN RESPECT OF SERVICES TO HONG KONG, THEY WOULD

NEVERTHELESS BE READY TO ENTER INTO A MARKETING AGREEMENT WITH

BA JOINTLY TO PROMOTE THEIR COMBINED SERVICES ON THE ROUTE.

7. AFTER THE FRG DELEGATION HAD CONSULTED BONN AND MADE PROPOSALS

WHICH VENT PART OF THE WAY TOWARDS ACCEPTING OUR VIEW THAT THE

GATWICK SERVICES SHOULD BE EXCLUDED FROM THE PRESENT 50:50 SHARING

AGREEMENT BETWEEN B A AND LUFTHANSA IN RESPECT OF THE SHORT-HAUL

SERVICES, AND WHICH MET OUR POINT ABOUT THE LEVEL OF LUFTHANSA FREQUENCIES BETWEEN DUSSELDORF AND LONDON, ROGERS SAID THAT IN ALL

THE CIRCUMSTANCES HE WOULD BE PREPARED TO ACCEPT FOR A TRIAL PERIOD

OF ONE YEAR FROM 1 APRIL 1978 AN ARRANGEMENT UNDER WHICH LUFTHANSA

WOULD DE ALLOWED TO CONTINUE ITS SIX FREQUENCIES A WEEK TO HONG KONG

QN THE FOLLOWING UNDERSTANDING:

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