TNAG-0779-FCO40-983-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 178

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CPA/JAL FIXED FORMULA.

6. THIS SYSTEM IS BASED ON THE ASSUMPTION THAT CAPACITY IS

MOUNTED TO MEET DEMAND AND IN SO DOING ACHIEVE A 10 PERCENT PROFIT MARGIN ON TURNOVER. THIS CAN BE CONSIDERABLY SIMPLIFIED, BY CONCENTRATING ON PASSENGERS ONLY, INTO EITHER:

(1) (NO OF SEATS FLOWN) X (BREAKEVEN LOAD FACTOR) X (AVERAGE NET FARE) X 5 PERCENT, WHICH FIGURE IS PAID TO ANG REGARDLESS, OR (11) ((ACTUAL REV. PAX CARRIED) - (NO. OF SEATS FLOWN X BREAK EVEN LOAD FACTOR)) X AVERAGE NET FARE, WHICH FIGURE IS SPLIT 50/50 WITH ANG, UNLESS RESULT IS A MINUS QUANTITY WHEN ANG PAY CPA.

7. (1) ABOVE WOULD MEAN THAT CPA WOULD BE PAYING ANG US DOLLARS 2,816 PER ROUND TRIP, WHICH IS APPROXIMATELY EQUIVALENT TO THE VALUE OF 10 PASSENGERS. (11) WOULD INVOLVE ANG IN PAYING 50 PERCENT

OF CPA LOSSES, IF ANY.

8. CPA ARE PREPARED TO TAKE THE RISK OF LOSING SOME MONEY ON THIS

ROUTE, BUT THINK THIS IS UNLIKELY TO HAPPEN PROVIDED ANG COME OFF THE ROUTE. OF THE ABOVE ALTERNATIVES, WE AND CPA FAVOUR (1), BUT WITH THE ADDED REFINEMENT OF USING THE ACTUAL NUMBER OF REVENUE PASSENGERS INSTEAD OF A FIXED FIGURE.

9. FROM THE TIME ANG RETURN TO THE ROUTE, CPA WOULD WISH TO SEE THE SITUATION COVERED BY A NORMAL POOLING AGREEMENT. CPA HAVE SUBMITTED A DRAFT AGREEMENT WHICH THEY CONSIDER TO BE SUITABLE AND

WE ARE STUDYING THIS. WE ARE FORWARDING A COPY BY BAG FOR YOUR CONSIDERATION AND COMMENTS.

MACLEHOSE

[COPIES SENT TO CAD/DOT]

FILES

MAED

SWPD

HKɣqD MISS BROWN

MR MURRAY

COPIES

То

HONG KONG GOVERNMENT OFFICE

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