TNAG-0869-FCO40-1079-Air-services-between-China--Hong-Kong-and-the-UK-1979 — Page 150

CONFIDENTIAL

We had had to screw Hong Kong over the question of "beyond' points in the agreement with Malaysia: Hong Kong did not feel that they had done well out of the Peking deal. We were concerned that their position over Cathay's application for routes to London might be prejudiced by the way in which the Civil Aviation Authority operated. I thought it very important that our relations with Hong Kong which had to

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be looked at in a much broader context should not be prejudiced by too narrow and nationalistic an approach on civil aviation matters. Stressing that I was speaking personally, I wondered whether British Airways' and Cathay's relations could not be made closer. It would be very unfortunate if Cathay thought that British Airways' objections in the CAAA scheduled hearings over the Hong Kong route should appear to be directed especially against Cathay. Had British Airways ever thought of increasing their stake in Cathay? Mr Wilson said that British Airways had indeed thought of this but understood that the Hong Kong Government would be opposed to any increase in their shareholding. Horeover if the were to double their shareholding from 15% to 30% it would be pretty costly, perhaps £7 to £9 million. As 1 probed about this he indicated that they had had this line from Mr Adrian Svire and thought it originated with M: Hadden Cave. 1 commented that I could well understand Hong kong wanting to ensure that British Airways did not have a majority holding in Cathay, but

but I did not see why the Hong Kong Government should object to an increase in British Airway's shareh ›lding. We both agreed that there could be no question of a Bitish Airways' majority. Swire would never permit it. I wondered whether it wouldn't be a good idea if, when the Governor comes to Lonfion next, he could have a very informal chat with Mr Ross Stainton, the Chairman of British Airway. about this. We also agreed that the worst situation woul be if Cathay were excluded from the Hong Kong,' London route but either B Cal or Laker were allowed in. We mi them have a conflict because the Hong Kong civil aviation authorities mi,ht refuse to licence another British carrier i the absence of a licence for Cathay. If that happened I said that it was likely that the FCO would support Hong Kong. ir Wilson thou hit it would be particularly awkward if, say, Laker and Cathey were licenced. I merely commented that from our point of view it would be best if the two carriers were British ...irways and Cathay.

Hey Zenland

4. When I aul cd about the British Airways/Air New Zealand talks Mr Wilson maid that British Airways, who had a "love- hate relationship" with Air New Zealand, did understand lev Zealand's present concerns. They thought that if agreement could be reached on a cheap fare between London and Australia via hos Angelos this same fare should apply on the

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