RESTRICTED
A
GR 260
CYPHER CAT A
FM FCO 27185OZ
RESTRICTED
TO ROUTINE HONG KONG TELNO 336 OF 27 APRIL
INFO WASHINGTON
HONG KONG/US AIR FARES: CURRENCY PROBLEMS
HKK 184/1.50
RECEIVER 1
-2 MAY 197PA
DISK OFAN
INDEX
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234
See 235 £48 248
1.MIFT CONTAINS THE TEXT OF THE REPLY FROM ATWOOD DATED 14 APRIL
TO SHOVELTON'S LETTER OF 14 FEBRUARY (COPIED TO YOU) ABOUT THIS
ISSUE.
2. OUR ASSESSMENT IS THAT THE US REPLY IS INADEQUATE BECAUSE: (1)IT OVERLOOKS THE POINT THAT THE IATA SYSTEM OF SETTING AN ARTIFICIAL EXCHANGE RATE, SUBSTANTIALLY DIFFERENT FROM LOCAL BANKERS RATE, AT WHICH IATA FARE LEVELS ARE CONVERTED INTO LOCAL
CURRENCY, BUILDS INTO LOCAL PRICES A DIFFERENTIAL WHICH APPLIES
NOT ONLY IF PAYMENT IS MADE IN HONG KONG DOLLARS BUT ALSO US
DOLLARS. THIS IS BECAUSE THE US DOLLAR PRICE IS MERELY THE EQUIVALENT
OF THE LOCAL CURRENCY FARE CONVERTED BACK INTO US DOLLARS AT THE
LOCAL BANKERS RATE:
IT IGNORES THE FILINGS SOME US AIRLINES HAVE MADE MATCHING
THE NON-IATA PRACTICE OF ALLOWING PASSENGERS WHO PURCHASE
TICKETS WITH US DOLLARS IN HONG KONG TO PAY THE ORIGINAL US
DOLLAR PRICE. THIS HAS THE EFFECT OF PROVIDING A DISCOUNT TO THE
PASSENGER IN HONG KONG WHO PAYS IN US DOLLARS.
3. WE SHOULD BE GRATEFUL FOR ANY FURTHER FACTS AND ARGUMENT YOU
CAN PROVIDE ON THIS QUESTION AND FOR YOUR COMMENTS ON PARAGRAPH 2
ABOVE AS A LINE OF REPLY TO ATWOOD.
OWEN
门
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