TNAG-0777-FCO40-981-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 234

IN WELLINGTON ON 16 FEBRUARY.

CONFIDENTIAL

5. ONE IMPORTANT CONSEQUENCE OF BA'S, WITHDRAWAL. FROM HONG KONG- EAST AUSTRALIA ROUTE IS THAT IN ACCORDANCE WITH THE TERMS OF THE CMU NEGOTIATED WITH AUSTRALIA IN 1974 CATHAY PACIFIC ARE NOW ENABLED TO TAKE UP THE WHOLE OF THE BRITISH ENTITLEMENT TO CAPACITY ON THAT

ROUTE.

THIS PROVIDES FOR A FURTHER SUBSTANTIAL EXPANSION IN CPA'S ACTIVITIES AND MEANS THAT IN THE 3.5 YEARS SINCE THE CMU WAS NEGOTIATED WE HAVE BROUGHT THEM UP FROM A POSITION IN WHICH THEY . WERE EFFECTIVELY EXCLUDED FROM THE HONG KONG-EAST AUSTRALIA MARKET TO ONE IN WHICH THEY HAVE THE RIGHT TO PROVIDE HALF THE CAPACITY IN FULL PARITY WITH QANTAS. OVER THE SAME PERIOD THE VALUE OF THIS MARKET TO THE THIRD/FOURTH. FREEDOM CARRIERS HAS OF COURSE BEEN ENHANCED BY SQUEEZING OUT THE FIFTH FREEDOM CARRIERS.

6. AGAINST THIS BACKGROUND WE ARE CURPRISED AT CPA'S INTENTION TO MOUNT ONLY 3 TIMES 3707 SERVICES PER WEEK ON THIS ROUTE UNTIL AUTUMN 1979 (YOUR TELNO 1203) MORE ESPECIALLY SINCE BA AND CPA COMBINED HAVE BEEN MOUNTING THE EQUIVALENT OF 10 TIMES B 707 SERVICES FOR SOME TIME, WHILE QANTAS HAVE WITH THEIR AGREEMENT DEEN MOUNTING 3 TIMES 747 PLUS 4 TIMES 707 PER WEEK SINCE 1 DECEMBER 1977. THIS IS THE EQUIVALENT OF 11.5 TIMES B707 UNITS. IF THIS INTENTION WERE FULFILLED THE AUSTRALIAN AIRLINE WOULD ENJOY ALMOST A 50 PERCENT CAPACITY ADVANTAGE OVER THE UK AIRLINE DURING THE NEXT YEAR AND A HALF. THIS WOULD BE CONTRARY TO THE CMU WHICH CONVEYS AN· ENTITLEMENT OF 50 PERCENT OF THE TOTAL AGREED CAPACITY IN TERMS OF B707 EQUIVALENTS TO EACH SIDE. (WE UNDERSTAND THAT FOR POOL PURPOSES THE CAPACITY OF QANTAS' SERVICES ROUTED VIA MANILA IS DERATED: BUT THIS DOES NOT AFFECT THE INTER-COVERNMENTAL AGREEMENT) WHILE WE ARE CONTENT TO ACCEPT MODEST IMBALANCES FOR SHORT PERIODS THIS WOULD APPEAR TO BE TOO BIG AND TOO LONG.

7. WE GATHER THAT ALTHOUGH CPA WOULD BE HARD PUT TO IT TO MOUNT MORE THAN 9 SERVICES PER WEEK, THEIR INTENTION TO MOUNT NO MORE THAN 8 SERVICES STEMS MAINLY FROM THEIR BELIEF THAT CONTRARY TO THEIR PREVIOUS ESTIMATES, DURING THE PERIOD UP TO THE AUTUMN OF 1979 THE MARKET WILL NOT JUSTIFY MORE THAN THE 19.5 UNITS OF CAPACITY THAT THEY AND QANTAS JOINTLY WILL BE PROVIDING. IF THIS BE THE CASE, WE WONDER WHETHER A FRESH REVIEW OF TRAFFIC -

2.m CONFIDENTIAL

/DEMAND

MAND