CONFIDENTIAL
Continuation Sheet 1G
(CONTINUE. TYPING HIRE)
File No.
about it by one or other of the means proposed above,
we shall in effect have conceded to them the right to carry all Hong Kong/Peking traffic, which would be a
major reverse in air services terms and one which in my
view would also set a very bad precedent for other
:
matters involving our sovereignty in Hong Kong. By next
summer it is generally thought that there will be a need
for total capacity equivalent to at least 12 x B707
between Hong Kong and Peking, which is 7 more than CAAC's
current entitlement. If we do not insist on at least
one third of this additional capacity for Cathay or BA,
it is hard to see when we shall be able to recover the
position.
12 I would much prefer the first option which would have
a good chance of securing unqualified acceptance of Cathay
Pacific as the designated airline for local services
between Hong Kong and. both Shanghai and Peking, and might
even enable us either to release them from the obligation
to pay royalties or from the restriction to one third
capacity written into the 1979 arrangements. We might have to concede London/Hong Kong rights to CAAC on one or two services a week for so long as BA need to route their London/Peking services over Hong Kong, but this would be a tolerable price to pay for getting both BA and Cathay into Peking. If the Chinese are prepared to
allow Cathay to operate between Hong Kong and Peking but not BA as well, I would be prepared on the grounds
Fermi 36/AGA
DO NOT TYPE OM REVERSE..... USE A EUSTUKO CONTINUATION SHEET
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