TNAG-0778-FCO40-982-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 41

Hkk 18411.

RECEIVER

1 7 MAY 1978

PS/Lord Garonwy Roberts

INDEX

No

•

CONFIDENTIAL

40.21

Ihr Thom bond.r.

the

270

No Goodenough cleared this witlure draft. He assured me that the DOT Refine is acceptable to CPA.

Action Teken

UK/NEW ZEALAND AIR SERVICES NEGOTIATIONS

1.

813/5

Air Services negotiations are taking place this week in London between DOT and New Zealand officials. Ministers may wish to know of one aspect which could cause political trouble later on.

2.

The New Zealand side want a monopoly for Air New Zealand on the Hong Kong/Auckland route until they are in a position to mount three DC 10 services themselves each week, Only after Air New Zealand has operated 3 DC 10's for a year would they let the Hong Kong airline, CPA, compete. This would give New Zealand complete control over the timing of the introduction of a CPA service and indeed could mean that CPA might never get on the route. This is not in accordance with the terms of the 1962 Confidential Memorandum of Understanding, which sets out the arrangements under which UK/New Zealand civil aviation relations operate and the ANZ temporary operating permit, both of which renuire New Zealand to share the route with a UK airline. The furthest DOT are prepared to go is to give ANZ a monopoly until early 1980 after which the phased introduction of CPA services would be allowed.

3. At a first round of talks in Wellington in February, the DOT leader of the UK Delegation (Mr Rogers) made it clear that if no agreement was reached for operations beyond 30 September 1978 ANZ services between Auckland and Hong Kong would have to cease on that date. If this warning was ever made good, there would be a risk that New Zealand would retaliate by preventing BA from operating on the trunk route from London to Auckland. There would then be no direct air services between the UK and New Zealand (ANZ are not in a position to operate all the way on the trunk route themselves). We agreed that Mr Rogers could repeat, if necessary, his February warning, which he did, in a low key this afternoon after the New Zealand side had stated that

It they could see no prospect of agreement at this round. was agreed that talks would resume when both sides had had time to reflect.

^. Any interruption of the direct UK/New Zealand air services would provoke a major political row. But the crunch has not yet come. There is time for a further round

of talks before 30 September at which we hope a compromise

can be found. We have made it clear that we would want to /to DOT consult Ministers again before ANZs Hong Kong/Auckland operating permit was actually revoked.

15.