TNAG-0781-FCO40-985-Involvement-of-Hong-Kong-in-air-services-agreements-1978 — Page 129

CONFIDENTIAL

(You should not, however, make a direct

conditional link between our continued

agreement to non-scheduled flights and Chinese agreement to our proposals for an ASA).

3: In view of Hong Kong's reservations about the final fall back position in paragraph 5 of your TUR, which DOT share, we are not prepared to go this far. We realise that this means our final position (paragraph 4 of TUR)

falls well short of what the Chinese have

indicated they would like (Sung's remarks

to you in paragraph 1 of TUR, and to Cortazzi, FCO Telno 630 of 16 October), But DOT's

assessment is that taking the best possible case, the value of an ASA to British Airways would be about' £2 million per annum, whereas Cathay Pacific's business which would be put

at risk is £4 million at a conservative

estimate. On balance therefore the risk is

too great in commercial terms, and there are no political arguments in favour of an ASA which over-ride the commercial equation.

CONFIDENTIAL

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