TNAG-0865-FCO40-1075-Involvement-of-Hong-Kong-in-air-services-agreements-1979 — Page 171

Mr D T Wong

20 July 1979

You ask what we should do instead. Cliff tells me he has offered informally to Hong Kong that the CAA will look at justifications put in for trans-Pacific routes by US carriers, and we can always try this. Certainly I do not believe this is a matter for the Tariff Working Group, which is designed to discuss problems of principle. If you wish, we can certainly approach one of the US carriers to see what we can get out of them in the way of information enabling us to look at the airlines' costs and you may care to think about this.

If, however, we follow this line, I think we should be under no illusions as to where this is going to lead us. So far, our general attitude to fares from Hong Kong to other parts of the Far East and to the West Coast of the US has been that we are heavily influenced by the views which Hong Kong expresses.

We have not

sought to meddle in TC3 passenger fares which are, from any regulatory stand point, a shambles as I am sure we all agree. I note that in your letter you refer to looking to see whethe· proposed increases are justified "in the light of both airline economics and consumer interests". If we do undertake a detailed economic appraisal with a carrier, and the carrier can then justify an increase in its own terms we are in all real senses obliged to approve the increase. I think it is fair to say that the Shippers' Council has had a significant effect on cargo rates from Hong Kong over the last few years - witness the fact that rates were not increased for a 5-year period. Further,

I would not be surprised if some carriers would wish to extend the principle of economic evaluation of cargo rates to passenger fares, and as I have already indicated we are reluctant in the extreme to be drawn into the fares imbroglio, where the approved fares are merely a basis for discussion. I recognise your difficulties in this, but it does seem to us at this distance from Hong Kong, that people such as the Shippers' Council want it both ways, namely regulation where it suits them and no regulation where that suits them. This is not always easily achievable.

I am not sure any of the above qualifies as the bright idea you asked for. I hope, however, it is a constructive part of what will need to be a continuing discussion.

I am sending copies of this letter to John Steele and Robin McLaren.

Jons

མིན ནཱ ག ༼

Ray Co.

R COLEGATE