TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 119

CONFIDENTIAL

4. AS PART AND PARCEL OF THIS ARRANGEMENT LU WANTED AN INCREASE

IN THE NUMBER OF FREQUENCIES THAT CAAC COULD OPERATE BETWEEN

PEKING AND HONG KONG FROM FIVE TO SEVEN (SUBSEQUENTLY REDUCED TO

SIX) PER WEEK. THIS POINT WAS NOT RESOLVED: BUT IT WAS LEFT THAT

ROGERS WOULD REFLECT ON IT AND LET LU HAVE A MORE CONSIDERED VIEW

TOMORROW.

5. IN SEEKING TO ENSURE THAT THERE WAS NOW NO MISUNDERSTANDING AS TO WHAT OFFERS WERE ON THE TABLE, ROGERS UNCOVERED A PROBLEM REGARDING CANTON UNDER OPTION 3 IN PARA 4 OF MY TELV0.526. LU SAID THERE WAS UNLIKELY TO BE SUFFIECIENT TRAFFIC IN THE FORESEEABLE FUTURE TO SUSTAIN THREE SERVICES A DAY BY CAAC AND

ONE BY A BRITISH CARRIER. HE THEREFORE SUGGESTED THAT INSTEAD

OF A DAILY SERVICE FOR A BRITSH CARRIER AND THREE SERVICES A DAY FOR CAAC WE SHOULD ADOPT AN OVERALL RATIO OF 3:1. ROGERS SAID THIS WOULD MAKE IT IMPOSSIBLE FOR A UK CARRIER TO OPERATE (SEMI- COLON) AND AFTER A LONG HAGGLE LU ALLOWED THE OFFER OF A DAILY SERVICE BY A BRITISH CARRIER TO STAND ON THE UNDERSTANDING THAT THERE WOULD BE NO RESTRICTIONS ON THE NUMBERS OF SERVICES TO BE

OPERATED BY CAAC.

6. ROGERS ALSO GOT LU TO CONFIRM THAT A FURTHER VARIANT OF THIS OPTION WOULD BE TO OMIT CANTON FROM THE ARRANGEMENT ALTOGETHER.

7. ROGERS TOLD LU THAT HE WOULD NOW BE SUBMITTING THE ALTERNATIVES TO YOU AND MADE IT PLAIN HE WAS IN NO POSITION TO FORECAST WHAT

YOUR DECISION WOULD BE.

LU APPRECIATES THAT IT MAY WELL BE TWO DAYS BEFORE HE GETS A DEFINITE REPLY. MEANTIME, IN ORDERHGO EXPEDITE PROCEEDINGS IF THE THE WIDER ARRANGEMENT EMBRACING BOTH THE TRUNK AND REGIONAL ROUTES WERE APPROVED, ROGERS UNDERTOOK TO LET LU HAVE A DRAFT CMU WITHOUT COMMITMENT. WORK ON THIS HAS PROCEEDED WITHIN THE TEAM IN STEP

WITH THE TWISTS AND TURNS OF THE NEGOTIATIONS.

2. AS FORESHADOWED IN PARA 4 OF FIRST TUR WE WILL SUMMARISE ALTERNATIVE PACKAGES AS THEY NOW STAND AND ADD RECOMMENDATIONS

TOMORROW.

CRADDOCK

[COPIES SENT TO CADIDOT]

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FILES

MAED

FED

HKOGD LEG ADV

MRBUTLER

MR CORTAZZI

MR MURRAY

MISS BROWN

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CONFIDENTIAL