TNAG-0964-FCO40-1183-Air-services-between-the-UK-and-Hong-Kong-1980 — Page 129

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The Secretary of State for Trade.

9th April 1980

IV.

(ii) "the advantages arising from the route being developed by a carrier based at the Hong Kong end" where "Cathay is well placed to develop Asian traffic from its far eastern network" (paragraph 154), the evidence showed that much such traffic is currently carried to Europe from other Asian capitals by other airlines, and this could be diverted through Hong Kong because passenger preference, even where a change of aeroplane is required, is where possible to travel with the same carrier throughout a journey, especially a long one, the acquisition of such traffic would benefit the U.K. balance of payments and economy (see S. 3(1)(C) of the Statute) both by substituting a British-owned airline for a foreign one and by substituting London for other European cities as the termination of the route:

(iii) the acceptance even by BCAL of the political arguments favouring Cathay being permitted to fly the route, and their acceptance, despite the thinness of the route, of a three carrier regime of BA/BCAL/Cathay (which regime was licensed in Hong Kong by the Hong Kong Air Transport Licensing Authority ("ATLA") and, as explained later, is now acceptable to Cathay and HKG also), together with the stated preference of BA for having Cathay rather than BCAL on the route, partly because BA recognised that if a route is to be served by two airlines, it is both customary and fair to license one from each end and not two from one end and none from the other.

Conclusion

In paragraph 154 the CAA referred to its "unenviable task of choosing between Cathay and BCAL" and in paragraph 149 to having to "decide between a proposal which offers improved frequency against one which offers lower cost per seat kilometre".

It is beyond argument that the B747 has very considerable cost advantages, including the travelling public, over the DC10. Unfortunately the CAA fallaciously assumed that the overriding requirement was an additional competitive daily service to BA. In fact it is clear from the traffic pattern on the route that what is more important is to have a competing service provided by an aircraft which is sufficiently large to be capable of meeting the extra demand on the days on which that demand exists. This the B747 can do and the DC10 cannot. Either BCAL or Cathay could provide competition simpliciter to BA but once the greater flexibility arising from Cathay's Gulf rights is taken into account (which the CAA failed to do) it is the

Cont'd

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