TNAG-0864-FCO40-1074-Involvement-of-Hong-Kong-in-air-services-agreements-1980 — Page 26

122. The Authority should choose only one carrier. BA had not argued that

any one was operationally better than any other but had maintained that there was a danger of licensing a carrier that was likely to provide excess capacity in the market at the outset. He asked the Authority to decide the case on the basis of the evidence before it and to disregard any argument not consistent with or supported by evidence.

123. Mr Bowsher said that if the reasons why paragraph 7 and the provisos

to paragraph 8 of the Guidance were found to be ultra vires in the Laker case were accepted because they were inconsistent with the statute in that case then the same reasons had to be applicable elsewhere. In the Dallas/Fort Worth appeal decision the Secretary of State had said that the decision of the Court of Appeal in the Laker case had made both paragraphs 7 and 8 (b) of the guidance ultra vires and the Authority should therefore approach this case on the basis, of the remainder of the guidance and more importantly on the basis of the statute.

124.

The Authority had three options under the statute to either grant as applied for, grant as modified or refuse to grant any application. It also had a general discretion to refuse rather than grant a licence, which was consistent with paragraph 1 of the Guidance the effect of which was that the Authority should impose as few restraints as possible.

125. The wording of Section 3 required flexibility of interpretation and

application which allowed and required a measure of choice in selecting the objective to be pursued as well as giving the Authority discretion as to the manner in which it was pursued in relation to establishing the categories of demand and whether or not they were substantial. It was plain from the Laker appeal decision that a British independent airline did not have to be licenced on every route and that the Act had not meant that preference should be given to a British airline. By a combination of sections 2, 3 and 22 the application from Cathay had to be treated on its merits within the objectives of Section 3 and the Guidance.

126.

127.

It was clear from the evidence that there was a substantial category of public demand for a service between London and Hong Kong which could not reasonably be satisfied by a Section 3 British Airline and that the applications from BCAL and Laker when viewed individually in accordance with Section 3 and without reference to Cathay should be rejected and the Authority's discretion exercised favourably towards Cathay.

It was essential to have competition on the route and Cathay was the best airline to provide the competitive spur that was needed by BA. Hong Kong was a difficult and demanding market and Cathay was the only airline with the relevant depth of experience of serving that market and of coping with the particular needs of Asian passengers. Their application had included a mid-point, and the figures for revenue had not taken account of the probability of revenue from that mid-point to London and therefore their revenue figures were conservative. They would be able to feed traffic on to the route from various points in the Far East and had no aspirations for the development of a route network into Europe.

123