Additional Points
Trunk route
HKK 184!
RECEIVED
DESK
MADEX
303
مالا
8107
MAS like other S.E. Asian carriers has until now boosted its traffic between Kuala Lumpur and London by sixth freedoming UK-Australia traffic. The T.O.D. (True, Origin and Destination) traffic would barely justify 3 x DC10 per week on the most generous interpretation of traffic growth through lower fares (still to be agreed) and some straightening out of the traffic which presently finds its way over Singapore on SIA services. Under the ICAP proposals Cantas would cease to exercise fifth freedom rights between Kuala Lumpur and London and only if this came about would a fourth DC10 for MAS be justified in October 1980.
BA want a commercial agreement to remain in being principally as a disincentive to MAS's discounting activities and to partially compensate for Malaysian direction of traffic on to MAS services. They would be prepared to drop the requirement on MAS to pay a levy on its through Australia-UK traffic in exchange for a pooling agreement of the more conventional kind.
Regional routes
MAS out-earn CPA on the regional routes by 2:1. The Hong Kong Government has long maintained (with some justification) that MAS were given advantages, particularly fifth freedom beyond Hong Kong, to buy rights for BA beyond Malaysia to Australia. It is a favourite hobby horse of theirs when any BA versus CPA issue arises. Under the 10AP proposals CPA will lose their fifth freedom rights beyond Kuala Lumpur to Perth (the only ones available to them of any real value). They therefore see the present negotiations as presenting a golden opportunity to restrict MAS fifth freedom rights beyond Hong Kong to Taipeh only, matching rights for CPA to Singapore (or Jakarta) beyond Kuala Lumpur. Indeed their first preference is to exchange third/fourth freedom rights only. One of the contributory but important reasons for their wanting to get MAS off the Hong Kong-Tokyo sector is MAS's flagrant discounting and the under-mining of OAA (Orient Airlines Association) agreements on fares. The Hong Kong Government is strongly opposed to making concessions to MAS and is not likely to give in to persuasion to allow MAS to retain its existing fifth freedom rights which is the realistic minimum the Malaysian Minister is likely to be prepared to settle for.
They will probably therefore have to be over-ruled if we want to buy peace with the Malaysians. It would sugar the pill for them if we could obtain some cast-iron guarantee from Malaysaán Ministers that MAS would in future abide by OAA fare agreements. This should be in writing but probably the only way it could be done would be in a side-letter cince we do not officially recognise the CAA as a fares regulating body.
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