TNAG-0864-FCO40-1074-Involvement-of-Hong-Kong-in-air-services-agreements-1980 — Page 21

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At the Hong Kong hearing The BCal version of BA's market share was inaccurate. BA had submitted figures of effective capacity available on the various services which for BA was 80% on one stop services, 65% on two stops and 50% on three stops. It was now clear that those estimates had been understated. It was not thought that BCal would achieve a higher proportion of first class and full fare economy traffic than BA was currently experiencing and BCal's

The 8% figure for estimate of traffic mix had been reduced accordingly. proration used by BCal was very low for the Far East where there was a large interline content. This was particularly important in looking at the economy full fare traffic because the economy standard fare would be used by many passengers who chose to travel point to point and the proration on the economy full fare was therefore expected to be higher than stated.

It was clear from BA's experience that the yield from traffic other than full fare traffic from points beyond Hong Kong was fairly low and would have a substantial effect on the average yield. The add-on fares that would have to be used by BCal and Cathay for points beyond Hong Kong or behind London in conjunction with low fare Hong Kong-London traffic would have to be very high. At present the total traffic carried by BA from behind London or going beyond If Hong Kong was 30% of which 80% was low fare or intermediate fare traffic. the BCal estimate of traffic mix was wrong then based on the BA experience the break-even seat factor on the fare levels proposed by BCal could rise into the mid-70's and there was a possibility that the total break-even seat factor could not be achieved.

Comparison with BA's figures and Laker's figures suggested that BCal's costs had been understated especially on fuel and that they had not used mid-1980 costs. Cathay's passenger yield was overstated and proration would have to be reduced. The volume of combined economy and economy point to point traffic would also have to be reduced as they had a resident point to point fare. view of the development of services to Saudi Arabia from points beyond Hong Kong it was unreasonable for Cathay to expect to maintain their share of the Hong Kong-Bahrain traffic and, as additional capacity was progressively introduced onto the route, Cathay's market share and revenue would be reduced.

As regards BCal's approach to available capacity the only derated seat factor that could be used for determining seat availability was the actual number of seats available which was derived for end to end passengers from the critical sector seat factor. The BCal end to end seat factor had not given a true indication of seat availability for London-Hong Kong passengers and the

The only test of the proportion of capacity capacity had not been allocated. made available to Hong Kong was what actually happened on flights which were full. BA's reservations policy had ensured that during the peak months of July, August and September the end to end traffic had a higher proportion of

Their experience in the available seats when the flights had been full. November had shown that eastbound the percentage of London-Hong Kong traffic compared to all traffic on the route eastbound was 75% and westbound was 79% which indicated that BAs figure of 80% for a one stop service was realistic as were the figures for two and three stop services.

In Eupo-Air passengers had amounted to 3,000 in each direction during the

The combined scheduled and charter peak months of July, August and September. growth rate from April to October 1979 had been 11% and the scheduled traffic alone had been 25% - 26%

26%. The total market growth from April 78 to September 79 had been 62% and this included the Dan Air charters in the earlier year.

The 88% critical sector seat factor had been derived from all flights with an excess of 85% in the critical sector. In November 1979 they had achieved

The objective was to overall figures of 71.3% Eastbound and 84.2% Westbound. develop a reservations policy that would achieve seat factors of 80% - 85% in the low fare category and 55% to 60% in the high fare category with an overall factor for London-Hong Kong of 70% - 80%.

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