TNAG-0965-FCO40-1184-Air-services-between-the-UK-and-Hong-Kong-1980 — Page 117

83

PRIME MINISTER

CONFIDENTIAL

UK-HONG KONG AIR SERVICES

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18416

RECEIVED IN REGISTRY NO. 51

16 JUN 1980

DESK OFFICER

INDEX

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PA

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MAED PS.

REGISTRY

Action Taken

PS MR. BLAMBR

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See 85

You will wish to be aware of a decision which I have reached on an air service licensing appeal for the London-Hong Kong route. It is likely to arouse controversy and an appeal to the Courts against my action cannot be ruled out. The decision will remain confidential until 17 June.

2. The route between Hong Kong and the United Kingdom is unique in the modern aviation scene in that it runs between two British points (a cabotage route) and is therefore reserved for British airlines. Until now only British Airways (BA) has been licensed to operate the route, but there has been increasing dissatisfaction with the standard of service and the lack of competition. I believel that substantial traffic between Hong Kong and Europe has been lost by Britain to other national airlines as a result of this situation. Last year applications to fly between London and Hong Kong were submitted to the Civil Aviation Authority (CAA) by three airlines British Caledonian (BCal), Laker and Cathay Pacific (CPA); the last of these is a Hong Kong based airline, a subsidiary of the Swire Group, in which, however, BA have a 15% stake.

3. The CAA concluded on 17 March that the forecast traffic on the route did not justify more than one additional carrier and decided that the BCal application for a daily service with DC10 aircraft was the most appropriate. BCal was therefore licensed to join BA on the route, and the applications by CPA and Laker were rejected.