CONFIDENTIAL
FREEDOM ASPIRATIONS
ON THE PENINSULAR MALAYSIA-HONG KONG ROUTE.
PARITY OF ENTITLEMENT WITH CPA TO 2 X B707 EQUIVALENTS ON THE
E. MALAYSIA-HONG KONG ROUTE WILL PROBABLY ALSO SATISFY THEM. ALL THIS REFLECTS NO, MORE THAN WAS DISCUSSED DURING THE MAY/JUNE ROUND. (OUR TELNOS 125, 129 AND 131 TO KUALA LUMPUR).
5. THE QUESTION OF MAS FIFTH FREEDOM RIGHTS BEYOND HONG KONG PRESENTS THE REAL DIFFICULTY. WE HAVE TAKEN NOTE OF YOUR TUR, BUT OUR ASSESSMENT IS THAT THE MINIMUM THE MALAYSIAN MINISTER WILLBE PREPARED TO ACCEPT IS THE RETENTION OF MAS'S EXISTING FIFTH FREEDOM RIGHTS. FURTHER ARGUMENT ON OUR SIDE ABOUT CURRENT (AND WORSENING)
IMBALANCE OF EARNINGS AND THE POTENTIAL LOSS BY CPA OF ITS ONLY WORTHWHILE RIGHTS BEYOND PENINSULAR MALAYSIA, IS LIKELY TO HAVE NO (REPEAT NO) MORE EFFECT ON HIM THAT IT DID ON OFFICIALS. WE UNDER-
STAND, AND HAVE HITHERTO BACKED, YOUR OPPOSITION TO MAS RETAINING ITS EXISTING RIGHTS BEYOND HONG KONG. BUT, WE BELIEVE IT WOULD BE
DIFFICICULT IN THE CIRCUMSTANCES TO BACK-TRACK ON THE OFFER MADE IN
MAY OF A CONTINUATION OF FIFTH FREEDOM RIGHTS TO TAIPEH ONLY, MOREOVER, WE THINK IT LIKELY THAT WE SHALL HAVE TO CONCEDE CONTINUATION OF RIGHTS TO TOKYO. IN PRACTICE, THE COST OF RETENTION OF THE LATTER IS COMPARATIVELY SMALL IN REAL TERMS, MAS EARNINGS
ON THE SECTOR DURING THE YEAR ENDING 31 OCTOBER WERE SLIGHTLY OVER
PDS. 1M. OF THE DIRECT AND CONNECTING SERVICES BETWEEN HONG KONG
AND TOKYO, CPA OPERATE APPROXIMATELY A QUARTER TO A FIFTH OF THE
TOTAL CAPACITY. ON THE REASONABLE ASSUMPTION THAT ANYTING GIVEN UP
BY MAS WOULD BE SHARED BETWEEN ALL CARRIERS, CPA'S QUOTE LOSS UNQUOTE WOULD BE APPROXIMATELY PDS. 1/4M PA. THIS COMPARES WITH CPA'S CURRENT
EARNINGS ON THE ROUTE OF AROUND PDS.20M. PA.
6. DOT MINISTERS HAVE DECIDED THEREFORE THAT WE SHOULD CONCEDE RETENTION OF MAS' FIFTH FREEDOM RIGHTS TO TOKYO AS WELL AS TAIPEH, IF THE MALAYSIAN MINISTER WILL NOT SETTLE FOR LESS. INITIALLY, WE SHALL CONTINUE TO TRY TO PERSUADE THE MALAYSIANS TO ACCEPT FIFTH
FREEDOM RIGHTS ON 5.X A300 (1230 SEATS) TO TAIPEH ONLY. BUT AT
THE END OF THE DAY, IF MR TEBBIT JUDGES IT NECESSARY, HE WILL OFFER THEM THAT CAPACITY WITH RIGHTS TO BOTH TAIPEH AND TOKYO. WE ACCEPT
THAT THIS IS MARGINALLY MORE THAN MAS'S CURRENT CAPACITY ON THOSE
SECTORS, WHICH EQUATES TO JUST OVER 4 X A300S, BUT FOR ALL
PRACTICAL PURPOSES, IT IS THE SAME. IT WOULD BE VIRTUALLY IMPOSSIBLE
AT ACCEPTABLE COST TO TRY AND EXERCISE CONTROL OF CAPACITY TO
1043 SEATS.
CONFIDENTIAL
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