CONFIDENTIAL
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10 JUL 970
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Mr Murray
jht McLover.
UK/MALAYSIA AIR SERVICES
no 1 gro.7
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1. You have, of course, seen Mr Roberts' letter of 5 July about the UK line in the air services negotiations which the Malaysians have proposed should be resumed at Ministerial level on 16 July. Mr Roberts will be holding a meeting to consider this at 11.15 am on 9 July. We therefore need an agreed FCO view on what, if any, concessions can be offered to the Malaysians.
2. Mr Blaker endorsed your submission of 31 May in which you gave your assessment that the Malaysians would not settle for anything less on the regional route through Hong Kong than the maintenance of the status quo, and implied that Hong Kong would have to be brought to accept this. I understand that it is SEAD's view that nothing has happened since then to affect this position.
3. As Mr Roberts points out in his letter the Hong Kong Government will squeal if this concession is made at CPA's expense. They have given no recent indication of their views, but it is clear from earlier telegrams that they see no case in aviation terms for maintaining MAS's existing fifth freedom rights. There was, however, an indication in one of the telegrams that CPA (as opposed to the Hong Kong Government) might be willing to contemplate the continuation of the status quo provided that the Malaysians gave an undertaking "not to permit MAS to undercut IATA or OAA fares" nor to seek margins on sectors beyond Hong Kong.
4. I hope we can agree not to go any further than this. Whatever position we adopt, it will be essential, as Mr Roberts recognises, to warn Hong Kong in advance and give them an opportunity to comment before anything is said to the Malaysians.
6 July 1979
R JT McLaren
Hong Kong & General Department
cc
Mr Flower, SEAD
Mr Northover, MAED
CONFIDENTIAL
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