TNAG-0871-FCO40-1081-Air-services-between-Hong-Kong-and-the-UK-1979 — Page 5

partly to ascertain for the Hong Kong side what the consequences in terms of the attitude of the British Government might be towards a second carrier, which might possibly be a Hong Kong based airline, on the route. The intention was then to seek Members' advice on what the Hong Kong Government's policy should be.

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Efforts to proceed down this path were frustrated by Laker and British Caledonian Airways (BCAL) putting in formal applications to the CAA in London to provide services on the Hong Kong/London route. Cathay Pacific Airways (CPA) subsequently filed an application. All three have also put in applications to the Air Transport Licensing Authority (ATLA) in Hong Kong. The hearings before the ATLA and the CAA must now take their course. The former is due to start in Hong

Kong on 12th November, and the latter in London on 13th December. To operate on the Hong Kong/London route an applicant must be in possession of a licence from both the ATLA and the CAA.

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The ATLA and the CAA operate under different statutory criteria (see below) and the result of this, together with the need for separate hearings, makes it possible, and indeed likely that a different? applicant will succeed before each tribunal.

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(a)

(b)

The legal position is considered to be as follows:

"the

The ATLA is bound by statutory regulations made under the (UK) Air Navigation Act 1936. The se provide that the overriding object is to ensure most effective service to the public while avoiding uneconomical overlapping". Hence all the applicants have an equal chance and that best able to serve the public need should succeed. There is no provision for the Hong Kong Government to give directions to the ATLA though the Government may appear at the public hearing and make their representations.

In contrast, the CAA is bound by the (UK) Civil Aviation Act 1971, which includes provision for the UK Secretary of State for Trade to issue statutory policy guidances to the CAA. The se guidances are binding upon the CAA. The most recent guidance to the CAA by the Secretary of State for Trade (in the previous government) was issued in February 1976. Section 3 of the Act contains a built-in preference for "British airlines"; CPA does not fall within the definition for the se.

CONFIDENTIAL