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B.Cal had estimated the 1979 Hong Kong market at 191,600 the figure being based on Cathay's which had been considered the most accurate available at the time the forecast was made. If that figure was correct then the Laker estimate of 519,000 would represent a 171% growth in the market. Although there was scope for development of the market he considered that the forecasts given by Mr Goodman and Mr Chan were too optimistic and that their expectations of the market were unreasonable.
The Laker market forecasts on the North Atlantic had, in Mr Smith's view demonstrated that Laker had tended to assume load factors in relation to the capacity offered as the basis for its market forecasts, and these had differed significantly from the achieved load factors on the two routes which were comparable in length to London-Hong Kong. He accepted however that there were particular circumstances which had affected passenger carryings on both the London-Los Angeles and London- New York routes.
Mr Osborne said that the 63.9% load factor Forecast by Cathay on Hong Kong-London had been calculated excluding the Hong Kong-Bahrein sector traffic, but agreed that because Cathay had intermediate traffic rights it was in fact a relevant item that could be set against expenses; if the B.747 operated by Cathay was compared with the DC-10 there was for practical purposes no reason to deduct intermediate traffic revenue from the available seats as the number required to break even was still 209.
Mr Barron said that the correct historic growth rate that had to be
the considered was the rate in the total direct market. Concerning sixth freedom traffic he explained that the figure of 10% was that proportion of the total sixth freedom traffic which B. Cal believed could be attracted to direct services provided that frequencies, capacity and product alternatives were available.
He agreed that, although the method of forecasting growth rate was not as sophisticated as BA's due to the lack of statistical data which were available to BA, it was nevertheless considered essential that some estimate of B.Cal's market share should be made as their profitability load to a large degree predicated on market share as well as on the total market available. The figures supplied by BA at the Hong Kong hearing had led B.Cal to conclude that BA's case had not been proven and that B. Cal therefore felt justified in providing different figures based on their market share model as well as those based on BA's. The figures of 65% for a one stop service and 50% for a two stop had to be based on an assessment of the sorts of capacity effectively available to the Hong Kong market and they had concluded that if the number of seats BA had stated in their evidence.were to be made available it would result in relatively low load factors for the Hong Kong traffic.
He did not agree that BCAL had overestimated the high fare traffic at 26% as they typically achieved a higher than average share of first class business elsewhere on their route network.
First class traffic tended to be frequency sensitive rather than capacity sensitive and in terms of passengers per flight B.Cal expected to do better than BA in those segments of the market that were frequency related; they would therefore expect to carry a higher percentage of first and full fare economy traffic than the market as a whole, since they would be using a smaller aeroplane flying equivalent frequencies.
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