TNAG-0868-FCO40-1078-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 221

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Background Notes

We negotiated an Air Services Agreement with the PRC in 1973 but before it could be signed the FRC concluded an Agreement with Japan and induced the Japanese to make certain public statements about Taiwan and the Taiwanese airline. The Taiwanese re-acted to this by bunning all flights by Japanese airlines to and over Taiwan. The FC made it a condition of signing our draft Agreement that we made a similar public statement to the one made by the Japanese. Since Cathay Pacific Airways, the Hong Kong based airline, earns a sizable slice of its revenue out of services to and through faiwan we refused; so the draft Agreement lay fallow over the years. From time to time we tried to get the PRC to relax on these political conditions but without avail.

In practice we were not unduly concerned because British Airways reckoned that for most of the time pince 1975, any services would have been hard put to it to break even. It is only with the recent thawing of relations and the general up-surge of interest in the FRC that BA's interest has ré-awakened.

It has taken several months for us to arrive at a formula that dispocos of the political problem without jeopardising CPA's services and a negotiating team has now gone to Peking. The intention is to bring the 1973 draft up to date; to try and improve it slightly from our point of view. The negotiations are expected to be completed by 25 Kay and an agreement concluded,

One of the trickiest problems in the negotiations is how to deal with Hong Kong. UK as the metropolitan pover negotiates for Hone Kong as well as the UK. The FRC takes the view that Hong Kong is a part of China and they have said they are not prepraed to incluce in the Air Services Agreement between the FRC and the UN provision for services to and from the PRC which start and finish in Hong Kong thus giving Hong Kong an extra-IRC territorial status. le cannot o. accept the Chinese stand point but it seems likely that we shal have to settle for an Air Services Agreement which does not make provision for services to and from Hong Kong and hope to come to come confidential understanding concerning thesc. It is not possible ac this store to predice with certainty what form this will take. is a matter which requires the most careful and delicate handling.

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The Chinese thencelves are quite keen to have air services between points in mainland China and Hong Kong and have in fact been operating regular services between Canton and Hong Kong over the past few months. under an informal understanding pending Government to Government discussions. The Hong Kong Government is also keen to see services between Hong Kong and the PRC. We shall look for some pragmatic solution that skirts round the political problem.

BA will start services between London and Feking as soon as is