7.
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D. LU ALSO ACCEPTED THE CONCEPT THAT WHEN BA ADOPTED
THE DIRECT ROUTEING TO PEKING, BY-PASSING HONG KONG, WE COULD INTRODUCE ANOTHER CARRIER ON TO THE HONG KONG-PEKING
SECTOR.
COMMENT. IT IS CLEAR THAT LU HAS HAD FESH INSTRUCTIONS, SINCE HE HAS MOVED TOWARDS US IN SEVERAL RESPECTS SINCE THE
END OF LAST WEEK.
8. THE DEAL NOW ON OFFER WOULD GIVE BA A VIABLE ROUTE BETWEEN LONDON AND PEKING VIA HONG KONG FOR AS LONG AS THEY NEEDED. IT WOULD ENABLE THEM TO START OFF WITH TWO SERVICES PER WEEK WITH WIDE-BODIED AIRCRAFT IN APRIL 1980, IRRESPECTIVE OF WHETHER CAAC MATCHED THEM WITH 8747'S AT THAT STAGE. THE SAME ROUTEING COULD CONTINUE TO BE USED WHEN THE FREQUENCY BUILT UP TO THREE PER WEEK ON EACH SIDE, THUS PROVIDING NEARLY A DAILY SERVICE BETWEEN LONDON AND PEKING EVEN WHILE THE END-TO-END TRAFFIC WAS RELAT-
IVELY SMALL.
9. IN THE REGION, SEGVICES WOULD ALSO BE ESTABLISHED IN THE NEAR FUTURE FROM HONG KONG TO PEKING AND SHANGHAI AS WELL AS
THE EXISTING SERVICE TO CANTON, THE POLITICAL AND ECONOMIC
BENEFITS OF THIS TO HONG KONG WOULD BE VERY CONSIDERABLE.
10. WHILE MOST OF THE REGIONAL TRAFFIC WOULD BE CARRIED BY CAAC, THERE WOULD ALSO BE SOME OPPORTUNITIES FOR A LOCALLY-BASED CARRIER (IF SO DECIDED) TO OPERATE BETWEEN HONG KONG AND POINTS IN THE PRC NOTABLY SHANGHAI. THESE OPPORTUNITIES WOULD BE
WIDENED WHEN BA WITHDREW FROM THE HONG KONG ROUTEING ON THE TRUNK ROUTE. THE TEAM ENVISAGE THAT THIS MIGHT WELL BE A PHASED WITHDRAWAL. THEY CALCULATE THAT, DEPENDING ON THE RATE OF TRAFFIC GROWTH, (WHICH IN TURN DEPENDS LARGELY ON THE RATE AT WHICH THE CHINESE BUILD NEW HOTELS), IT WOULD PROBABLY BE BETWEEN 5 AND 10 YEARS FROM NOW, IE ABOUT THE SAME PERIOD AS WE HAVE HELD BACK SERVICES ON THE TRUNK ROUTE MAINLY IN ORDER
TO PROTECT CPA'S LARGE PROFITS FROM TAIWAN.
11. ON THE OTHER HAND, WHILE THIS WOULD BE A GOOD AGREEMENT IN POLITICAL AND BGO AD ECONOMIC TERMS, IT WOULD NOT BE A GOOD ONE FROM THE AIR SERVICES POINT OF VIEW. CAAC WOULD ALMOST CERTAINLY OUTEARN NOT ONLY BRITISH AIRWAYS BUT ALSO WHATEVER CARRIER WE
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