TNAG-0864-FCO40-1074-Involvement-of-Hong-Kong-in-air-services-agreements-1980 — Page 16

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Mr Stirland agreed that in any negotiations with Hotels it was possible to obtain a discount in return for a cash payment in advance and he accepted that the £200 - £300 holidays proposed by Intasun were in fact introductory offers available only for the first few tours. He estimated that on the Hong Kong Sharjah sector Laker would only carry one or two passengers a flight in each direction and on London Sharjah possibly five or ten passengers. He accepted that Cathay's projected load factor in the economy section was 81.6% and that unless a passenger was willing to pay £501 for the full fare economy service and travel in the business section where the projected load factor was 50%, the passenger had less chance of getting an economy seat with Cathay than with Laker.

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Mr Stirland agreed that Cathay's true growth rate for 1980/81 on the London Hong Kong route of 22.4%, given competition and an element of recapture from sixth freedom, was perhaps optimistic, but said that in general terms Cathay had achieved an average of 20% over the last ten years so that he considered this to be justified optimism. The estimate of an untapped low fare market of between 30,000 and 50,000 passengers per year had been based on examination of the existing fares, what had been achieved in other markets principally Japan and Australia, an examination of competing fares across the Pacific, and the stimulative effect those fares had on traffic growth. The 12% growth that the figure represented on a current market of 180,000 was considered a reasonable figure to result from competition and tariff stimulation. figure of 15% for 6th freedom traffic had been obtained by ticket analysis at Kai Tak over a three month period averaged out for a year. It had been extremely difficult to obtain an accurate figure for 6th freedom traffic and CPA had merely attempted to establish a balance of probabilities based on the available infermation.

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Mr Stirland accepted that of the Gulf - Far East market only 12% of the traffic was true Hong Kong -Bahrein traffic, and that Cathay's market share would depend on their ability to funnel traffic over Hong Kong and Bahrein. He said that with the increased capacity resulting from the introduction of the 747 via Bahrein to London and with the majority of Gulf Air Traffic to Bahrein being Bangkok - Bahrein, the retention of Cathay's 60% market share of Hong Kong Bahrein traffic in the years 1980 to 1984 would not be difficult.

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Mr Stirland agreed that, based on the survey and statistics of hotel accommodation from the Hong Kong Tourist Association, by the end of 1982 only 418 rooms would be available for budget holidays, subject to the buildings actually having been completed.

Mr Stirland said that at present in the region of 30,000 to 40,000 passengers travelling from Hong Kong to London originated from places other than Hong Kong. A large percentage of that traffic had been from or to Australia and it remained to be seen what effect the new fares between Australia and the UK would have on that traffic. Cathay had assumed in forecasting future developments that there would be a decrease in the Australasian traffic which could be offset by an increase in traffic from Tai-pei, Manila, Seoul and the southern half of Japan; this traffic could be attracted by add-on packages Cathay intended to introduce to promote their services to those areas.

LAKER AIRWAYS CASE

Sir Freddie Laker said that there was a substantial category of demand in the Hong Kong market for a low fare service and Laker, unlike the other applicants, would cater to the bottom end of the market. They would offer an up-to-date one stop daily passenger and cargo service from the day the service was introduced and would be the only carrier to offer a service to and from Sharjah; indeed Laker was the only applicant with full traffic rights in the Middle East.

They proposed to offer a range of low fare services which would cater for all segments of the market and which could be booked at any time and there would not be any controls on the amount of low fare capacity to be offered.