CONFIDENTIAL
Class and Normal Economy. Some arrangements would need to be made for CPA to compensate British Airways for whatever concession they were obliged to make 'to Qantas in respect of CPA's through carriage, This would, however, be an internal matter to be resolved either between the two airlines or, failing that, by HMG in consultation with the Government of Hong Kong. It seems at present unlikely that there would therefore be any significant repercussions on our relations with Australia.
7.
It also seems unlikely that our relations with Australia would be significantly affected if competition on the London-Hong Kong route were provided by BCAL, Skytrain, or whole-plane charters.
New Zealand
8.
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There were
two inconclusive rounds of air service talks with New Zealand in 1978. The most difficult issue was our wish to get an opportunity for CPA to operate the Hong Kong-Auckland route, which Air New Zealand at present operate an unreciprocated service. Much of the traffic on this service is destined for London. Air New Zealand would clearly stand to lose a good part of it if faced with competition from CPA on the Hong Kong-Auckland sector; but they would lose much more if CPA were also to operate between Hong Kong and London. In answer to their questions, we gave an oral assurance during the second round of talks (May 1978) that there was no Government or airline intention for CPA to come on line to London. This assurance was given in good faith and accurately reflected the position at that time.
9. The question of a CPA service to Auckland remains unresolved. Subsequent to the last round of discussions there were
indications that the New Zealand Government might be prepared to concede the point; but other matters intervened and it has not yet been opportune to hold further negotiations affecting this topic. If it were decided to authorise a CPA service between Hong Kong and London, would be essential to inform the New Zealand government in good time. They would then almost certainly refuse to entertain a service hy CPA and might well be prepared to break the air link between New Zealand and Hong Kong rather than give in.
it
10. It is unlikely that our relations with New Zealand would be significantly affected if competition on the London-Hong Kong route were provided by CAL, Skytrain, or whole-plane charters.
Philippines
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11. AS a result of the negotiations which were started earlier this year, it is likely that BA and PAL will introduce services between danila and London in 1979 or 1980 at a frequency of two ą, week each. CPA already operate between Hong Kong and Manila at frequency of 18 flights a week, PAL have 19 flights. If CPA started to operate
the route between London and Hong Kong, the Filipinos would suspect 'that CPA would carry sixth freedom traffic from Manila to London and that PAL would thus be competing against two UK carriers on the trunk
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