TNAG-0778-FCO40-982-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 6

GR 490

PRIGRITY

CYPHER/CAT A

HONG KONG 260841Z

CONFIDENTIAL

AKK 184

1842A.

297

INDEX

CONFIDENTIAL

- но

TO PRIORITY F.C.O TELNO.661 OF 26 MAY 78,

INFO PRIORITY OSLO (FOR ROGERS),

OF

PA

ROUTINE SINGAPORE, HONG KONG GOVERNMENT OFFICE LONDON

U.K/SINGAPORE AIR SERVICES.

See 317

>

NR.1. REF STABLES LETTER TO NYUK-HO! LIAU ON SIA PACKAGE DATED

10 MAY 78.

1(A) INITIAL STAGE COVERING THE PERIOD FROM MID-1978 TO

TWO FEBRUARY 1979: DEPENDENT ON WHICH ALTERNATIVE SIA ADOPTS, B747 OR THREE DC-10'S PER WEEK ON THE SIN/BKK/HKG/OSA ROUTE, IT IS ESTIMATED THAT THIS WILL INCREASE SIA'S FIFTH FREEDOM EARNINGS BY BETWEEN U.S DOLLARS FIVE MILLION AND SEVEN MILLION. HOWEVER, AGAINST THIS THERE WILL BE A REDUCTION OF APPROXIMATELY U.S DOLLARS SIX MILLION BY THE WITHDRAWAL OF SIA'S THREE WEEKLY SERVICES SIN/BKK/HKG/TPE/SEL. THUS, IN BROAD TERMS, THE TOTAL EFFECT IS ONE OF NO CHANGE"".

(B) THE LONGER TERM ARRANGEMENTS COMMENCING IN FEBRUARY 1979, WHEN SIA BEGIN THEIR TRANS-PACIFIC SERVICES: AS SEEN HERE, THIS PROPOSAL WILL RESULT IN A FIRST YEAR DECREASE OF EXISTING FIFTH FREEDOM EARNINGS TO SIA OF U.S DOLLARS FIFTEEN POINT FIVE MILLION. HOWEVER, SIA'S OWN ESTIMATE OF EARNINGS RECENTLY PROVIDED TO CPA SHOW AN EXPECTED INCREASE IN THEIR FIFTH FREEDOM EARNINGS FROM THE TRANS-PACIFIC SERVICES OF APPROXIMATELY U.S DOLLARS SEVENTEEN MILLION. THE END RESULT THEREFORE IS A NET INCREASE IN SIA'S FIFTH FREEDOM EARNINGS THROUGH HONG KONG, DESPITE OUR OBJECTIVE TO ACHIEVE THE OPPOSITE. IN GENERAL THEREFORE, ALTHOUGH THE PACKAGE IS CONSIDERED A GOOD STEP IN THE RIGHT DIRECTION, IT DOES NOT REDRESS THE BALANCE OF EARNINGS WHICH FOR SO LONG HAS

BEEN IN SIA'S FAVOUR.

2. IN VIEW OF THIS, IT IS CONSIDERED APPROPRIATE TO PRESS FOR

SOME ADDITIONAL MEANS WHEREBY CPA CAN IMPROVE ON THIS UNSATISFACTORY EARNINGS SITUATION. TO THIS END WE WOULD LIKE TO SEE THE FOLLOWING INCLUDED IN THE PACKAGE.

CONFIDENTIAL

jo