52.
53.
54.
55.
56.
57.
58.
59.
60.
Mr Dewar said that this figure, if proved correct, would not be acceptable; it illustrated the result of over-capacity on the route.
Mr Dewar accepted that Laker would have available 75,555 seats (30% of 251,851, the annual capacity of the aircraft) at the excursion fare, of which 60,000 would be sold to Intasun on a group basis with that company taking the load factor risk and 73% of the 15,555 seats remaining for sale at the excursion fare would be sold directly. The remaining 176,296 seats would be available for sale at the economy or standard economy fares.
Mr Dewar did not agree that Cathay had assumed too high a proportion of first class and full fare economy traffic; they had exercised their best judgement in establishing traffic mix. For passengers who wanted to travel through Hong Kong to some point further east they had used a higher pro-ration factor than either BA or BCal. He said that Cathay believed that their cargo carryings eastbound would be above average because of their feeder service ability to destinations throughout the Orient from Hong Kong.
He agreed that the end to end seat factors of 42% for 1979/80 and 55% for 1980/81 demonstrated clearly the need for some intermediate sector traffic to enable the route to be operated viably; when this was added it gave overall seat factors of 71% and 75% respectively.
Mr Stirland said that a large proportion of the cargo which came from Taipeh, Seoul, Japan and the Philippines now went onto BA, Cargolux and Martinair and would not divert to BCal, who would have great difficulty in realising their forecast cargo revenue. It would also be difficult for BCal to achieve a reasonable level of traffic to Kuwait as they would face severe competition from carriers such as Singapore Airlines and MAS.
It was unrealistic of BCal to expect that, given the present economic situation both in the UK and Hong Kong, they would achieve a year-on-year escalating growth rate since, in a recession, other countries would impose tariff restraints and quotas and Hong Kong as a free market would be very much affected by the imposition of such restraints.
The strictures applicable to BCal on Hong Kong Kuwait were even more applicable in the case of Laker on Hong Kong-Sharjah, as a large percentage of the traffic would be destined for Abu Dhabi, Dubai and Saudi Arabia to which there were no connecting services out of Sharjah.
1
Although there had been some two million visitors to Hong Kong last year a large proportion of them had been businessmen from South East Asia. There was at present a 90% Hotel occupancy rate over the full range of hotels and the possible addition of some 50,000 to 70,000 tourists as proposed by Intasun was totally unrealistic, the accommodation was just not available. Tourists on a 13 day Budget holiday could not possibly afford to spend 13 days shopping in Hong Kong and it was extremely doubtful as to whether any hotel would be willing to accommodate them for as little as £60 for a 13 day stay.
Mr Stirland said that, although BCal had de-rated their own penetration of the market by an initial growth factor of 8%, that figure had been based on BCal's experience on the Houston route on which they had a monopoly for three years apart from the indirect competition provided by Pan Ams' one stop service over New York. It had also been a route which operated into an English Speaking country where BCal was known, which would not be the case with services to the Far East. He therefore believed 8% to be too low.
Mr Stirland agreed that the existence of a third carrier on the route might to a limited degree provide an additional stimulus to the market. Cathay's estimate was a 30,000 to 35,000 passenger stimulus over and above the basic market but, if there were to be three carriers operating, this additional traffic would have to be divided three ways. The reduction in the critical seat factor between Hong Kong and Bahrain from 80% to 75% had resulted from a marginal change in the number of end to end passengers. Cathay had not changed its forecast of the market size when it was announced that BA were to reduce their frequencies, although he agreed that the figures for Cathay's share of the
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