TNAG-0864-FCO40-1074-Involvement-of-Hong-Kong-in-air-services-agreements-1980 — Page 106

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CONFIDENTIAL

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Mr Simons

Mr Morland MAED

Mr McLaren,

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you please find out how matter how stand on this: MAED told me last Wheels that the FCO stood fin i defence of CPA ANGLO-MALAYSIAN AIR SERVICES TALKS interests on this one

out by this inbuission 4/6.

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1. You should be aware that a crisis may be approaching in the current talks between the Malaysians and ourselves on air services.

2. The Malaysians, led by the Secretary-General of their Ministry of Communications, Haji Mohd Noor, have been asking for increased capacity on the London-Kuala Lumpur route (where they have a natural right, so to speak, to half the traffic) and for increased 5th freedom rights to pick up passengers at Hong Kong and carry them on to Taipeh and Tokyo. It was made clear in earlier rounds of negotiation that the Department of Trade was prepared to concede one extra weekly frequency on the 'trunk route, thereby giving MAS three DC10s per week on that route, and a daily Airbus service to Hong Kong. The question of rights beyond to pick up passengers at Hong Kong and take them on beyond was left for Later consideration. The Malaysians have now been told that, far from granting any increase, HMG (acting largely on behalf of Hong Kong and CPA) wishes to reduce MAS' 5th freedom rights, that is their right to pick up passengers and take them on beyond Hong Kong to Taipei and Tokyo.

·

3. The current negotiations have so far moved extremely slowly, concentrating on the general question of traffic forecasts and capacity planning, relevant to all routes, The leader of the UK delegation, Mr Steele (DOT) has done his best to reach a compromise on this, but the Malaysians have been elusive.

4. The Malaysian delegations have told us out of session that they are under firm political instructions to secure improvements in their rights beyond Hong Kong and have threatened "serious political repercussions" if these are not granted. Rather than allow the negotiations to drift on indefinitely, Mr Steele now considers it desirable, when the talks resume tomorrow, 1 June, to table a British compromise proposal in the form of a draft confidential memorandum of understanding. This would confirm the offer of a 3rd DC10 on the trunk route they now say they

/want

CONFIDENTIAL