TNAG-1176-FCO40-1478-Air-services-between-the-UK--China-and-Hong-Kong-1982 — Page 168

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CONFIDENTIAL

CONFIDENTAL

DESKBY HONG KONG 180900Z

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FM PEKING 180358Z MAR 82

TO IMMEDIATE FCO

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TELEGRAM NUMBER 168 OF 18 MARCH

INFO IMMEDIATE HONG KONG (FOR JEAFFRESON, ŠÊS, PA)

UK/PRC AIR SERVICES REVIEW

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1. TALKS BETWEEN CAAC AND A BRITISH DELEGATION LED BY STEVENS (DOT) HAVE BEEN HELD HERE OVER THE PAST WEEK. LU RUI LING (CAAC) WAS CHARACTERISTICALLY OBSTINATE AND DIFFICULT, LEAVING IT TO THE UK SIDE TO MAKE ALL THE RUNNING, CALCULATING NO DOUBT THAT THE STATUS QUO WOULD SUIT CAAC VERY WELL AS THE OUTCOME OF THIS REVIEW. AFTER THREE SESSIONS OF FENCING STEVENS MADE IT CLEAR TO HIM ON 15 MARCH THAT WE WOULD NOT BE SATISFIED WITH THE STATUS QUO AND SAID HE WOULD NOT RENEW CHINESE RIGHTS TO THREE EXTRA CITIES IN VIEW OF THE USE MADE OF TIANJIN AND NANKING TO CARRY PASSENGERS TO PEKING AND SHANGHAI RESPECTIVELY. WHILE AFFECTING TO BE UNMOVED

BY THIS PROSPECT AND INSISTING DESPITE OUR FIGURES THAT NO MORE CAPACITY WAS NEEDED ON PEKING OR SHANGHAI LU NEVERTHELESS FINALLY AGREED TO GIVE CATHAY FULL CAPACITY FOR THE SUMMER SEASON ON THEIR EXISTING 2 B707, AND 140 EXTRA SEATS EACH WAY, A FACE- SAVING 14 LESS THAN FULL 8707 CAPACITY. CAAC WILL THUS HAVE 280 SEATS EXTRA TO SHANGHAI, WHICH LU CLAIMS WILL BE UNUSED, AND WILL RETAIN THEIR RIGHTS TO SERVE SEVEN OTHER CITIES, ALL UNTIL 31 OCTOBER 1982. STEVENS HAS SIGNED AN AGREED RECORD ON THIS BASIS.

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2. THE AGREED RECORD INCLUDES AN INVITATION TO A CHINESE DELEGATION TO COME TO LONDON WITHIN SIX MONTHS TO RESUME DISCUSSION OF OTHER ASPECTS OF THE REVIEW BUT LU REFUSED TO COMMIT HIMSELF

TO DOING SO.

3. THE EXTRA B707 OR EQUIVALENT CAPACITY ON SHANGHAI IS A USEFUL MINOR IMPROVEMENT BUT THIS SMALL CONCESSION IS TOTALLY UNSATIS- FACTORY AS AN OUTCOME OF THE REVIEW EVEN IF IT CAN BE RESUMED IN DUE COURSE. ALTHOUGH VARIOUS SUGGESTIONGS WERE FLOATED, SOME OF THEM BY THE CHINESE SIDE, FOR ADDITIONS OR MODIFICATIONS TO THE 1979 ARRANGEMENTS WHICH WOULD BE MUTUALLY BENEFICIAL, EVERYTHING RAN INTO THE SAND AND IN PARTICULAR THE CHINESE DREW BACK FROM ANY SUGGESTION THAT CATHAY MIGHT HAVE PERMANENT STATUS ON THE SHANGHAI ROUTE OR THAT BA OR CATHAY COULD HAVE ANY ADDITIONAL RIGHTS AT ALL BETWEEN HONG KONG AND PEKING.

4. STEVENS CONCLUDES FROM THIS THAT THERE IS NO PROSPECT OF NEGOTIATING OUR WAY TO INCREASED SERVICES WITHIN THE FORSEEABLE FUTURE EXCEPT UNDER DURESS. THE TEAM WILL THEREFORE BE RECOMMENDING ON RETURN TO LONDON AND HONG KONG THAT WE SHOULD GIVE ONE YEAR'S NOTICE OF WITHDRAWAL FROM THE CMU GOVERNING REGIONAL SERVICES NOT

CONFIDENTAL

/LATER

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