TNAG-0779-FCO40-983-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 169

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PRIORITY

CYPHER CAT A

CONFIDENTIAL

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- JUN 1978

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FM HONG KONG Ø807052

CONFIDENTIAL

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explain the one. conveniens

TO PRIORITY F C O TELNO 724 OF 8 JUNE 1978 INFO HONG KONG GOVERNMENT OFFICE LONDON.

fr

8/1

UK/PAPUA NEW GUINEA AIR SERVICES.

269

FURTHER TO MY TELNO' 622 OF 16 MAY, CPA HAVE SET CUT TWO POSSIBLE

FORMS OF PROFIT SHARING ARRANGEMENTS FOR CONSIDERATION:-

A. A PROFIT/LOSS SYSTEM.

B. THE CPA/JAL FIXED FORMULA.

PROFIT/LOSS SYSTEM.

2. LEVEL OF OPERATING COSTS, INCLUDING APPROPRIATE SHARE OF

DEPRECIATION AND OVERHEADS, WOULD BE AGREED BETWEEN THE AIRLINES

AT THE OUTSET. IN THE CASE OF THE HKG/MNL/POM VV ROUTE, CPA CALCUL TOTAL COST AT HK DOLLARS 282,500 PER ROUND TRIP. THIS FIGURE INCLUDES COSTS ASSOCIATED WITH CALLING AT MANILA: IF THESE ARE EXCLUDED THE TOTAL COSTS FOR THE HKG/POM VV ROUTE ARE HK DOLLARS 240,000 PER ROUND TRIP.

3. CUTTING ANG INTO THIS-TYPE OF POOL COULD TAKE THE FORM OF BOTH

CPA AND ANG SHARING 50/50 ANY REVENUE SURPLUS OR SHORTFALL IN ANY MONTH, COMPARED WITH THE AVERAGE COSTS PER ROUND TRIP OF HK DOLLARS 240,000. THIS WOULD LEAVE CPA TO RECOUP THE HK DOLLARS 42,500 FROM HKG/MNL VV TRAFFIC.

4: INCREASES IN ANY COST INGREDIENTS WOULD BE NOTIFIED BY CPA

TO ANG PRIOR TO TAKING EFFECT. REVENUE WOULD BE THE ACTUAL NET INCOME TO CPA FROM PASSENGERS, CARGO, MAIL AND EXCESS BAGGAGE.

5. TO ILLUSTRATE THE POINT, CPA WOULD NEED TO CARRY 205 ONE-WAY PASSENGERS (IGNORING OTHER LOAD) TO COVER THE TOTAL COSTS.

CONFIDENTIAL

| CPA/JAL