TNAG-0965-FCO40-1184-Air-services-between-the-UK-and-Hong-Kong-1980 — Page 3

10.

At the CAA hearing in December 1979 and January 1980, the Hong Kong Government again made representations and appeared at the hearing. The Government maintained its support of the application by CPA but at the same time indicated that if the CAA licensed both CPA and BCal (that is to mirror the ATLA decision), this would not be unacceptable to the Hong Kong Government.

11.

The CAA decision (announced in March 1980) was to license BCal for 10 years, without restriction on frequency or capacity. The applications by CPA and Laker were refused, and both airlines promptly appealed to the Secretary of State for Trade (Mr. Nott). The Hong Kong Government supported CPA's appeal. As is provided for in the 1971 Act, the Government also made a submission to the secretary of State setting out the political considerations which it felt Mr. Nott should take into account in deciding (a) whether to uphold CPA's appeal or (b) whether to issue a political direction to the CAA to grant CPA a licence.

The outcome of the appeals by CPA and Laker

12.

The Secretary of State's decision, (announced on 17th June 1980) was (a) to uphold the CAA's decision to grant a licence to BCal and (b) to uphold the appeals by both CPA and Laker, and to direct the CAA to grant licences to both airlines on the same basis as BCal's, that is, for a period of 10 years and without restriction on frequency or capacity.

13.

In summary, the reasons given by Mr. Nott for his decision are:

(a)

(b)

he felt that the CAA had placed too much emphasis on the economics of the proposed additional services in the short term, and too little on the benefits to the development of the UK civil aviation industry generally of choice of service and competition on a route such as this, in particular competition with non-British airlines;

he also felt that it was in the interests of airline passengers that they be offered a wider choice of service than exists at present, that it would be unreasonable to expect UK-based airlines to be granted exclusive rights when CPA are based in Hong Kong, command much local loyalty and could expect to draw traffic from their network of regional services; and

CONFIDENTIAL