TNAG-0777-FCO40-981-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 84

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3. THE FORMULA THAT WE HAVE IN MIND WOULD NOT TIE OUR HANDS IN NEGOTIATION AND IT WOULD NOT, ON THE OTHER HAND, BE HELD AGAINST US BY THE MALAYSIANS LATER, AS EVIDENCE THAT WE HAD LED THEM DOWN THE GARDEN PATH WITH A PROSPECT OF A DEFINITE IMPROVEMENT IN ANY NEW ASA-WHICH WOULD BE UNLIKELY TO BE THE OUTCOME. THE RISK WOULD OF COURSE BE THAT THE MALAYSIANS WOULD NOT ACCEPT SOMETHING IN SUCH GENERAL TERMS. BUT A WRITTEN TEXT WOULD HAVE THE ADVANTAGE OF OBLIGING THE MALAYSIANS TO EXPLAIN WHY IT WAS UNACCEPTABLE. THEY WOULD THEN HAVE TO SPELL OUT THEIR DEMANDS IN MORE DETAIL AND WE COULD REASONABLY DECLINE TO TIE OUR HANDS TO THAT SORT OF DETAIL

IN ADVANCE OF THE ASA REVIEW.

4. GIVEN HOWEVER THAT OUR FORMULA WOULD NOT AMOUNT TO MUCH: WE THINK THAT THE BOEING 707 SUBSTITUTION SUGGESTED IN WELLINGTON MR. TEL NO 45 PRESENTS A VALUABLE OPPORTUNITY TO MAKE A CONSTRUCTIVE

MOVE, WHICH COULD HELP BREAK THE LOG JAM WITH THE MALAYSIANS EVEN THOUGH IT WILL BE IMPORTANT THAT THIS BE NOT PRESENTED AS AN OBVIOUS CONCESSION IN THE CONCORDE CONTEXT. THIS AGAIN WOULD BE AN ELEMENT FOR YOU TO USE AS REQUIRED WHEN YOU RETURN TO KUALA LUMPUR.

5. WE RECOGNISE THAT A B707 SUBSTITUTION WITHOUT A SEATING RESTRICTION WOULD INCREASE MAS CAPACITY (AND WE HAVE MADE WHAT WE CAN OF THE MENTION OF B 737S IN PARA 5(B) OF THE MALAYSIAN MEMORANDUM OF 19 APRIL 1977 - SEE STABLE S' LETTER OF

2 FEBRUARY, 1978 TO MAS - COPIED TO BHC KUALA LUMPUR). SOME KIND OF POOL ARRANGEMENT AS FAVOURED BY CPA MIGHT BE A SOLUTION (WE ARE NOT CLEAR WHY HONG KONG OPPOSE THIS AND HAVE SOUGHT TO CLARIFICATION IN DOT TEL NO ALLOT 38). THE PRESENT POOL ON THIS

SECTOR IS 50/50 BUT HAS A TRANSFER LIMITATION OF 1 PERCENT OF TOTAL POCL REVENUE. ONE POSSIBILITY WOULD BE TO REMOVE THE TRANSFER LIMITATION IN RESPECT OF THE FULL 727 CAPACITY. ALTERNATIVELY, THE PRESENT PROVISIONS COULD CONTINUE IN RESPECT OF 737 CAPACITY AND UNLIMITED TRANSFER COULD APPLY ABOVE. AS SEEN FROM HERE, SUCH AN ARRANGEMENT COULD MEET AT LEAST IN PART THE CONCERN EXPRESSED

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IN HONG KONG

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