TNAG-0964-FCO40-1183-Air-services-between-the-UK-and-Hong-Kong-1980 — Page 21

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Copies of these representations and of the speech of Mr. O.V. Cheung, QC are in Annex D.

The diversity and size of the reaction preclude any possibility that it was engineered or orchestrated by Cathay. These comments on the Authority's decision will be mild in comparison to those on a final decision taken by a Minister if adverse. It is most unhappy that those particularly outraged are those who have done their best under Government prompting to buy British and promote the British Government connection.

LIKELY EFFECTS ON TRADE RELATIONS

The public reaction leads us to fear that unless the CAA's decision is reversed there will be hardening of public opinion which will make it difficult to tip decisions on tenders in Britain's favour as has so successfully been done in the past.

The Secretary of State himself on his recent visit to. Hong Kong publicly spoke of trade reciprocity between Britain and Hong Kong. He will be aware of the value of recent con- tracts placed by British firms for projects in Hong Kong. The Secretary of State will also be aware of the excellent prospects in respect of future projects provided the right climate prevails.

CATHAY'S PURCHASE OF AIRCRAFT AT DOT'S REQUEST

It is ironic that whilst the decision of the CAA is founded on an expressed preference for 240 seat DC10 aircraft rather than the 415 seat Boeing 747, it was as a direct result of the intervention of Mr. Heseltine when a Minister in February 1974 that Cathay changed the decision of their board so as to buy Rolls Royce engined planes rather than the American engined aircraft manufactured by Douglas.

A summary of this episode is at Annexure E.

It is clear that Cathay, out of loyalty to Britain, agreed to change a finalised decision at the request of the Minister and officials at the DTI who also asked Cathay to delay any announcement adverse to Rolls Royce until after the general election which was imminent. It is in HMG's interests that nothing should emerge about this but no-one is in a position to control what others may choose to reveal.

In any event it would appear totally unjust that Cathay should be prevented from flying upon the HongKong/London route as a direct result of a decision taken at the express request not only of the British Government but of the very department which controls air licensing. It is an odd irony that in 1974 BCAL resisted similar pressure and in fact bought DC10s.

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