TNAG-1176-FCO40-1478-Air-services-between-the-UK--China-and-Hong-Kong-1982 — Page 2

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RR CMU

(i) CAAC to fly 5 x B707 a week Peking to

Hong Kong

(ii) CAAC and Hong Kong-based UK designated

airline to fly Hong Kong to Shanghai with capacity ratio 2:1

(footnote 3). pattern

The UK designated airline must not operate between Hong Kong and London (but see next sub-paragraph).

(iii) CAAC to fly unlimited capacity from four

other cities to Hong Kong (plus a sub- sequent understanding that there can

be two or three more as part payment for a continuation of an arrangement which provides for, inter alia, CPA being allowed to operate Hong Kong to Shanghai as well as Hong Kong to London).

(iv) The Hong Kong-based UK designated airline

may operate Hong Kong to Peking when BA omit Hong Kong as a point on the trunk route (26 July 1983 by agreement between Hong Kong and FCO). Nine months notice

change is required.

of such

Basically the unfavourable RR CMU for Hong Kong was the price for BA's extension of their London to Hong Kong service to Peking, in spite of both Hong Kong's and China's wish to divorce the negotiations on the trunk routes from those on the regional routes.

Subsequent Review

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While the trunk route has no traffic worth speaking of, the regional routes are popular. In particular, Shanghai and Peking services are fully booked well ahead, largely with traffic originating outside China. The regional routes to- gether with the Peking/Tokyo route are probably CAAC's only profitable international routes. The CMUS require the traffic to be reviewed on both the trunk and regional routes 18 months after the start of trunk services. An attempt was made to undertake this review in March.

Footnote 3:

In other words for every 200 seats a week for CAAC, CPA can use 100.

SECRET