CONFIDENTIAL
THIS IS SUBJECT TO FURTHER URGENT STUDY IN CANBERRA, BUT COULD BE EMBARRASSING TO THE AUSTRALIANS IN VIEW OF THEIR APPARENTLY FIRM COMMITMENT AT THE JAKARTA MEETING TO MAINTAIN SIA'S
CAPACITY AT ABOUT PRESENT LEVELS (PARAGRAPH 7(V) OF YOUR TELNO 182).
6. WE AGREED THAT THERE WAS SOME SCOPE FOR A BETTER OFFER TO ASEAN ON STOPOVER FARES. BOTH DELEGATIONS REALISED, HOWEVER, THAT ALTHOUGH THIS WOULD STIMULATE THE NUMBER OF PEOPLE TRAVELLING ON THE FARE AND THEREFORE ASEAN TOURISM EARNINGS, IT WOULD REDUCE THE NUMBER OF PASSENGERS TRAVELLING ON END-TO-END FARES AND THUS BA'S AND QANTAS REVENUE. CALCULATIONS DONE BY THE AIRLINES SHOWED THAT WITH A STOPOVER SURCHARGE OF A DOLLARS 225 THE LOSS OF REVENUE WAS SIGNIFICANT SOME A DOLLARS 13 MILLION. THE DELEGATIONS AGREED HOWEVER, THAT IT WOULD BE DIFFICULT FOR THE AUSTRALIANS NOT TO PROPOSE THIS, SUITABLY INCREASED TO COVER HIGHER FUEL COSTS, BECAUSE OF THE HALF-COMMITMENT WHICH THEY HAD MADE AT JAKARTA (PARAGRAPH 7 (111) OF YOUR TELNO 182). BUT THIS WAS AS FAR AS WE COULD GO ON STOPOVERS WITHOUT PUTTING THE ECONOMICS OF CHEAPER FARES AT RISK.
7. WE AGREED A FORMULA FOR SPREADING THE SURCHARGE OVER THE YEAR. THIS WOULD ALLOW FOR REDUCTIONS BELOW A DOLLARS 200 AT CERTAIN TIMES OF THE OFF-PEAK SEASONS, WITH OFF-SETTING INCREASES DURING THE REST OF THE YEAR. THE AUSTRALIANS COULD MAKE THIS OFFER AT THE KUALA LUMPUR MEETING IF THEY SAW FIT, EMPHASISING THE GROWTH IN TOURIST TRAFFIC WHICH THE STOPOVER PROVISIONS WOULD STIMULATE AND POINTING OUT THAT IT IN EFFECT PROVIDES ACCESS TO THE AUSTRALIAN-UK TRAFFIC.ROGERS CONFIRMED OUR AGREEMENT TO THIS FORMULA IN A CONFIDENTIAL LETTER TO ROWLAND. COPY FOLLOWS BY BAG.
8. ROWLAND WAS PRESSED HARD FOR AGREEMENT TO AN IMMEDIATE ANNOUNCEMENT OF THE INTRODUCTION OF THE NEW FARES PACKAGE BETWEEN AUSTRALIA AND HONG KONG. HE WAS OPPOSED TO AN ANNOUNCEMENT BEFORE THE KUALA LUMPUR MEETING BUT UNDERTOOK TO CONSULT MINISTERS URGENTLY. HOWEVER WE AGREED A DRAFT PRESS STATEMENT WITH HIM. LATHAM HAS COPY OF THE DRAFT PRESS NOTICE WHICH IS ATTACHED TO THE LETTER TO ROWLAND.
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