TNAG-0862-FCO40-1072-Involvement-of-Hong-Kong-in-air-services-agreements-1979 — Page 67

CONFIDENTIAL

TAKE THIS VERY MUCH INTO CONSIDERATION AND HAD RESULTED

IN THE SCHEDULED CARRIERS BEING REQUIRED TO ACCEPT A PATTERN OPERATIONS WHICH ADDED TO

THEIR COSTS OF OPERATION AND THUS ADDED TO THE RISKS THAT THE NEW LOW FARES MIGHT NOT BE VIABLE. FOR REASONS OF INTERNATONAL POLITICS WE WERE NOW, IN ADDITION, PLANNING TO INTRODUCE CHANGES INTO THE PROPOSED NEW FARES REGIME IN ORDER TO CATER FOR THE

ASPIRATIONS OF THE ASEAN COUNTRIES TO MAINTAIN THE LEVEL OF

STOP-OVERS IN THEIR COUNTRIES. THIS WAS BOUND TO DAMAGE THE

ECONOMICS OF BA AND QANTAS OPERATIONS AND WOULD ADD TO THE RISKS

INHERENT IN THE NEW REGIME. TO INTRODUCE CHARTERS BEFORE THE

NEW REGIME HAD TIME TO SETTLE DOWN WOULD BRING ADDITIONAL

RISKS WHICH THE AUSTRALIAN GOVERNMENT COULD NOT ACCEPT.

4. ROWLAND EMPHASISED THAT THE AUSTRALIANS HAD BY NO MEANS CLOSED THEIR MINDS TO A COMPETİTİVE SPUR. THEY THEMSELVES INTENDED

TO REVIEW THE

POSITION IN 1981 AND MR NIXON HAD MADE THIS POINT WHEN HE

HAD ANNOUNCED THE PROPOSALS IN OCTOBER. HOWEVER, THEY FELT THAT IT WAS AN OPEN QUESTION WHETHER, IF THE TIME WAS THEN JUDGED APPROPRIATE FOR INTRODUCING A COMPETITIVE SPUR, IT SHOULD TAKE

THE FOR OF CHARTERS OR ANOTHR SCHEDULED CARRIER. IF IT WAS TO BE CHARTERS, THE TWO GOVERNMENTS WOULD NEED TO ENSUBLIJL THE CONDITIONS WERE SUCH THAT COMPETITION WITH THE SCHEDULED OPERATORS WAS ON A TRULY EQUITABLE BASIS. FOR EXAMPLE, EITHER THE SCHEDULED OPERATOS SHOULD BE RELIEVED OF THEIR OBLIGATION TO SERVE AJZ TVE AUSTRALIAN GATEWAY POINTS, AND TOAIJMIT STOPOVERS IN SOUTH EAST ASIA, OR ELSE SIMILAR OBLIG- ATIONS SHOULD BE LAID ON THE CHARTER OPERATORS,

5.

INDISCUSSION ABOUT THE TIMING, IT WAS AGREED THAT THERE WAS NO SCOPE FOR THE INTRODUCTION OF A CHARTER OFRATION AT THIS STAGE WITHOUT EITHER FURTHER REDUCINGM QBUURCRSENCY OF SCHEDULED SERVICES (WHICH WERE ALREADY TO BE REDUCED FROM 20 TO 18 AS PART OF THE EFFORT TO GET PRICES DOWN BY REDUCING THE NUMBER OF EMPTY SEATS). OR RENDERING THE NEW FARES UNVIABLE BY DILUTING SEAT FACTORS. THE GROWTH OF TRAFFIC EXPECTED FROM THE NEW LOW FARES HAD ALREADY BEEN TAKEN INTO ACCOUNT. WHEN FURTHER

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