OUR INITIAL REACTION IS THAT BA HAVE MADE A GENUINE ATTEMPT TO IMPROVE THE SITUATION. THEIR LONG HAUL COSTS GENERALLY HAVE N- CREASED BY ABOUT 7% OVER THE LAST YEAR. IT WOULD SEEM THEREFORE THAT MOVEMENT IS GENERALLLY IN THE RIGHT DIRECTION IN REAL TERMS. WORK ON OUR LONGER TERM DETAILED KEY ROUTE STUDY OF LONDON-HONG KONG HAS STARTED TO MOVE AGAIN AFTER DELAYS CAUSED BY HEAVY WORKLOAD AND STAFF SHORTAGES IN BOTH BA AND CAA. WE SHALL BE ASSESSING ECONOMIC JUSTIFICATION OF BA'S NEW PROPOSALS AS SOON AS THEY CAN GIVE US MORE DETAILS ON COSTS ETC. OVERALL WILL KEEP YOU INFORMED OF PROGRESS.
OTHER MATTERS.
1) HONG KONG TICKET PURCHASE IN STERLING AT STERLING (UK) SELLING LEVELS.
BA SEE NO CASE FOR INTRODUCING THIS FACILITY. IN SO FAR AS IT COULD BE REGARDED AS ANOTHER FORM OF DISCOUNTING RESULTING IN REDUCED YIELD IT IS LIKELY TO MAKE IT MORE DIFFICULT TO REDUCE SPECIFIED FARE LEVELS.
2) IATA IUV/SDR PROPOSALS.
THESE HAVE RUN INTO DIFFICULTIES BECAUSE THEY PROVIDED FOR TARIFFS TO BE ADJUSTED AUTOMATICALLY (WITHOUT REFERENCE TO GOVERNMENTS) TO FOLLOW CURRENCY MOVEMENTS AND SEVERAL GOVERNMENTS, INCLUDING THE UK, CONDITIONED THEIR APPROVAL OF THE PROPOSALS TO REMOVE THAT AUTOMATICALLY. WE CANNOT SEE THAT THIS WILL PROVIDE A SHORT TERM SOLUTION.
3) SELLING LEVEL DISPARITY U SHONG KONG.
AS YOU KNOW THIS IS ON THE AGENDA FOR THE TALKS IN WASHINGTON NEXT WEEK.
I THINK PROGRESS IS GRADUALLY BEING MADE IN SORTING OUT THESE VARIOUS FARES PROBLEMS. HOWEVER THE PACE OF CHANGE WILL INEVITABLY BE IN-
FLUENCED TO SOME EXTENT BY SELLING LEVEL RELATIONSHIPS BETWEEN
HONG KONG AND OTHER POINTS IN THE FAR EAST. STRONG ACTION ON LEVELS
IN HONG KONG OR ANY OTHER KEY POINT COULD HAVE THE RISK OF CAUSING
A DOMINO EFFECT WHICH COULD SERIOUSLY UNDERMINE AIRLINE REVENUES. ON THE OTHER HAND WE DO SEE CERTAIN ADVANTAGES IN THE WIDER CONTEXT
IN FORCING THE PACE ON THE CABOTAGE FARES.
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