TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 13

CONFIDENTIAL.

3. THE SITUATION YOUR INSTRUCTIONS WERE DESIGNED TO COVER

RELATES TO A DOUBLE CONTINGENCY, NAMELY THAT

A CPA WOULD BE AUTHORISED TO OPERATE THE LONDON-HONG KONG ROUTE:

AND

3. CPA WOULD BE SELECTED AS THE OPERATOR OF THE REGIONAL ROUTES

INTO CHINA.

IF EITHER OF THESE WERE NOT REALISED, THE POINT AT ISSUE WOULD

BE OF NO CONSEQUENCE,

THE POINT IS ALSO OF SIGNIFICANCE ONLY TO ONE COMPANY IN

HONG KONG, NOT TO HONG KONG'S CIVIL AVIATION INTERESTS AS A WHOLE, WHICH MAY BE EQUALLY WELL SERVED BY THE DESIGNATION OF SOME OTHER

HONG KONG-BASED AIRLINE. AS REPORTED IN MY TELNO.610 OF 4

JULY JARDINESU AT LEAST ARE CONTENDERS FOR THIS.

1. IN OUR DEALINGS WITH CHINA, WE HAVE HAD PARTICULAR REGARD

TO THE INTERESTS OF CPA. THE 1973 AGREEMENT WAS HELD UP FOR SIX

YEARS PRIMARLILY IN ORDER TO PROTECT THEIR LARGE EARNINGS FROM

TAIWAN.

11. IF IT IS NOW DESIRED NOT MERELY TO MAINTAIN THOSE EARNINGS

EXT ALSO TO ADD REVENUE FROM TWO NEWPKOURCES, THIS COULD BE STILL ACHIEVED WITHIN THE FORM OF WORDS NOW ENVISAGED (PARA 4 OF TUR) BY A. HAVING THE CHINESE ROUTES OPERATED BY CPA AND THE LONDON- HONG KONG ROUTE OPERATED BY A SUBSIDIARY OF CPA (IE A SON-FATHER RELATIONSHIP):

B. HAVING THE LONDON-HONG KONG ROUTE OPERATED BY CPA AND THE CHIN-

ESE ROUTES OPERATED BY PARALLEL COMPANY ESTABLISHED BY THE SWIRE

GROUP (IE BROTHER-SISTER RELATIONSHIP): OR

C. HAVING THE LONDON-HONG KONG ROUTE OPERATED BY CPA AND THE CHINESE ROUTES OPERATED BY SOME FORM OF JOINT VENTURE (IE SOME FOR OF PARTIAL RELATIONSHIP).

O: THIS OCCASION, HOWEVER, WE WOULD PROPOSE NOT-REPEAT NOT TO DRAW

CANC'S ATTENTION TO THE POSSIBILITIES THAT THE DRAFTING LEFT OPEN.

12. IN SHORT, WE DO NOT BELIEVE IT WOULD DE RIGHT TO REJECT GTICNA, OVER A FINE POINT OF COMPANY ORGANISATION WHICH IS OF INTEREST TO ONLY ONE OF THE HONK KONG TRADING GROUPS. JF WE WERE TO DO SO, IT WOULD SOON BECOME KNOWN THAT DESPITE THESE LENGTHY

LEGOTIATIONS WE HAD FAILED TO REACH AGREEMENT WITH THE CHINESE

FOR SERVICES FROM HONG KONG AND THIS COULD WELL HAVE AN UNSETTLING

SPFECT.

/13. WE

CONFIDENTIAL