TNAG-0864-FCO40-1074-Involvement-of-Hong-Kong-in-air-services-agreements-1980 — Page 29

- 25 -

They had said that load factors should be 75% but in 1978/9 they had only achieved 68.6%. They had said that even with 10 services per week they would only achieve a 45% load factor which was not viable, whereas in 1977/78 they had achieved only 33% but still made a profit.

137. The objections of the Hong Kong Government had been insubstantial and the

argument that BCal had discontinued services to Los Angeles was of no

several relevance as forty other carriers had discontinued similar transatlantic routes at the same time. They intended to take up all their outstanding licences during 1980 with one exception which would be taken up during 1981.

REASONS FOR DECISION

Section 3(1)(a) and (b) and the Spheres of Interest Policy

138. It was submitted to the Panel, and the Authority entirely agrees, that this

case must be decided on the basis of the law as it is today and that the Bill currently before Parliament must be ignored. The Authority also agrees that it must have regard only to the wording of the 1971 Act and not seek to interpret it by reference to its legislative history or the intentions of those who were involved in its enactment.

139. A number of ingenious arguments were put to the Panel on the interpretation

to be given to Section 3(1) (a) of the 1971 Act. The Authority considers that that paragraph does require it to give a preference to "British airlines" as defined in Section 3(1), but only to the extent that (i) British airlines are both able and willing to satisfy all substantial categories of demand at the lowest charges consistent with safety, an economic return and the sound development of the UK civil aviation industry and (ii) British airlines may reasonably be expected to provide such services. As regards the first, if the Authority were satisfied that Cathay's proposal would be in the best interests of users and was preferable in economic terms to those of the British airlines concerned in this case, it would not feel inhibited by Section 3(1)(a) from granting a licence to Cathay. As regards the second, the Authority's view is that the words "(so far as British airlines may reasonably be expected to provide such services)" in Section 3(1)(a) merely recognise that it is a fact of life that British airlines cannot reasonably be expected to provide all the air transport services which they may wish to provide. This is particularly true in respect of services to or from a foreign point, where the foreign Government would not give rights to British carriers unless its own carriers had reciprocal rights. However, the words "may reasonably be expected" are wide and flexible and require the Authority to look not only at what traffic rights British airlines can reasonably expect to be granted by foreign States, but also at what would be reasonable in other circumstances. In the circumstances of this case the Authority is satisfied that it would not be reasonable to expect that British airlines should necessarily provide all the services on the route to the exclusion of Cathay if Cathay were able to provide a service as good as or better than other applicants.

140. Section 3(1)(b) also requires the Authority to give a preference

in this

case to one major British airline other than BA and the Guidance indicates that BCal should be the preferred airline. However, as Roskill L J said in Laker Airways Limited -v- Department of Trade [1977] 2 All ER P200, this does not mean that the Authority has to license a British airline to compete with BA on every route. Nor, in the Authority's view, if it does license a second British airline on a particular route, does it necessarily have to be BCal in every case. Moreover, if the Authority does license BCal as a second carrier on a route, it does not follow that it would be inconsistent with Section 3(1)(b) for it to license other airlines (whether "British" in the sense of Section 3(1) or otherwise) on that route.

/26