TNAG-0964-FCO40-1183-Air-services-between-the-UK-and-Hong-Kong-1980 — Page 205

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CONFIDENTIAL

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1. I have just spoken to Mr Bray about this. He has had a discussion with the officer in the Department of Trade who has been dealing with appeals against the CAA's decisions for many years. The first point he made was that such appeals are administrative rather than semi-judicial. The second was that the Secretary of State for Trade may consult anybody who has an interest in the appeal but the initiative has invariably come from those parties rather than from the Secretary of State.

The two best-known cases concern the Channel Islands and the Isle of Man, where their governments have taken the initiative and not waited for the Secretary of State to consult them. In making representations to the Secretary of State they have used, as they are entitled to, any arguments they can think of, parti- cularly political ones. DOT therefore see no problem in the Foreign Secretary making political representations to Mr Nott.

2. Mr Bray also informed me that he is lobbying MPs on this issue using the following arguments:

(i) If this was a normal airline route, CPA as the Hong Kong

carrier would have been given the second service;

(ii) The CAA in their judgement misunderstood the history of

economic growth in Hong Kong. Whilst a small plane such as a DC10 might be appropriate today, in two years such a small plane will be full;

(iii) A daily DC10 service cannot cope with existing seasonal

and weekend peaks;

(iv) Travel between London and Hong Kong is much more important

at the Hong Kong end. Because Hong Kong's GDP is growing faster than the UK's, the travel demand from Hong Kong is likely to be much more price elastic. It is therefore logical and important that the head office of the second airline flying the London/Hong Kong route should be in Hong Kong;

(v) British Caledonian cannot start their operation until

August: CPA could start in May;

(vi) The arguments we have already seen about CPA having bought

Rolls-Royce engines etc.

3. Mr Bray also confirmed that by the end of 1980, CPA will have spent £70 million on UK engines and other equipment and are committed to recurrent expenditure on British goods of £10 million per annum thereafter. They are also, incidentally, the only airline in the world which only uses Rolls-Royce engines.

28 March 1980

Эйлигами

P J Williamson

Hong Kong and General Department

CODE 18-77

SS 8/78

CONFIDENTIAL