TNAG-1177-FCO40-1479-Air-services-between-Hong-Kong-and-South-East-Asia-1982 — Page 118

CONFIDENTIAL

GR 500

CONFIDENTIAL

FM KUALA LUMPUR 150550Z FEB 82

TO IMMEDIATE DOT

TELEGRAM NUMBER ALLOT 1 OF 15 FEBRUARY

AND TO IMMEDIATE HONG KONG AND FCO

UK/MALAYSIA AIR SERVICES

1. SECRETARY-GENERAL IN THE MINISTRY OF TRANSPORT CALLED IN MY COMMERCIAL COUNSELLOR URGENTLY ON 12 FEB FOR WHAT HE DESCRIBED AS AN UNOFFICIAL EXPLORATORY DISCUSSION ON AIR SERVICES.

2. DATUK ISHAK CLAIMED THAT DURING DURING PRELIMINARY TALKS ABOUT THE INTRODUCTION IN APRIL BY MAS OF DC10'S (CAPACITY 290 SEATS) ON THE KL- HONG KONG-TAIPEI AND JAPAN ROUTE, CATHAY PACIFIC HAD SAID THAT THEY HAD NO OBJECTION IN PRINCIPLE TO MAS UTILISING THEIR NEW GREATER CAPACITY (SIMILAR TO CATHAY'S OWN) FOR THE KL- HONG KONG LEG IN ACCORDANCE WITH THEIR 3RD/4TH FREEDOM RIGHTS. IT WAS UNDERSTOOD ALSO THAT ANY ADDITIONAL 5TH FREEDOM CAPACITY TO TAIPEI AND JAPAN WOULD BE SUBJECT TO GOVERNMENT AGREEMENT AS NECESSARY. CATHAY'S STANCE WAS OF COURSE, SUBJECT TO BRITISH GOVERNMENT AGREEMENT: THIS ISHAK IS NOW SEEKING.HONG KONG TEL TO YOU NO 130 MAKES THIS SEEM VERY UNLIKELY BUT IF ISHAK HAS IT WRONG SOMEONE SHOULD CLEARLY

PUT HIM RIGHT SOON.

wl

37 ON THE KL TO LONDON ROUTE ISHK WAS MORE CAUTIOUS. HE APPEARED

TO BE SEEKING AN UNOFFICIAL BRITISH GOVERNMENT VIEW ON MAS'S REQUEST TO RAISE THEIR CAPACITY WHEN THEY INTRODUCE THEIR 747'S. HE HAD PREDCCTABLY REFERRED TO THE EARLIER ASSURANCE OF QUOTE

SYMPATHETIC CONSIDERATION UNQUOTE IN THE CONTEXT OF THE ROLLS ROYCE ENGINE PURCHASE, BUT AGREED WITH VARCOE THAT THE QUESTION OF CAPACITY HAD TO BE RESOLVED IN ACCORDANCE WITH THE 1979

AGREEMENT AND SUBSTANTIATED TRAFFIC FIGURES FOR TH SECTOR.

ALTHOUGH HE SAW NO ROOM FOR FURTHER INTER-AIRLINE NEGOTIATIONS, HE SPECIFICALLY DID NOT WANT TO REQUEST IMMEDIATE INTER-

GOVERNMENTAL TALKS. HE HOPED THE MATTBR COULD BE AMICABLY

RESOLVED AND TALKS SHOULD ONLY BE ENTERED INTO IF THEY WERE LIKELY TO SUCCEED: FAILURE WOULD HAVE DAMAGING CONSEQUENCES

FOR OUR ALREADY SENSITIVE WIDER RELATIONS.

4. ALTHOUGH THE STANCE ATTRIBUTED TO CATHAY APPEARED UNLIKELY,

VARCOE DID NOT COMMENT BUT UNDERTOOK TO REPORT ISHAK'S REQUESTS.

ON THE LONDON ROUTE VARCOE POINTED OUT THAT IT WAS DIFFICULT

TO GIVE THE RESPONSE SOUGHT IN THE ABSENCE OF ANY FIRM PROPOSAL.

ISHAK ACCEPTED THIS AND SUGGESTED THAT MAS WERE NOT NECESSARILY EXPECTING TO BE ABLE TO OPERATE THEIR 747'S AT FULL CAPACITY ON

THE KL-LONDON SECTOR SINCE THERE WERE OTHER FACTORS INCLUDING

INTERMEDIATE SECTORS TO BE TAKEN INTO ACCOUNT.

CONFIDENTIAL

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