TNAG-1177-FCO40-1479-Air-services-between-Hong-Kong-and-South-East-Asia-1982 — Page 127

.Y

COFNDIENTIAL

and Kuala Lumpur is really London-Australia traffic not

even breaking the journey in Malaysia; another 11%

is fifth freedom traffic from intermediate points to

London.

(iii)

A concession to MAS on capacity will not be well received

in Singapore, since SIA are also suffering on their

Australia-Singapore-UK services from the levels of

capacity mounted, and discounting practices followed

by MAS.

Although the statistics justify some increase in capacity,

and this is not the moment to set aside agreements reached in good

faith on both sides, in reality MAS already has more than enough

capacity to obtain a fair share of the available traffic

to both London and Hong Kong. The negotiations, when they take

'place, will therefore be difficult. Mr Roy Watts (BA) and

Mr John Swire (Cathay Pacific) have already expressed their strong concern to Lord Trefgarne and Lord Carrington respectively.

A review of traffic under the terms of the present agreement may well result in some capacity increase on the trunk route, but there could be a case for a reduction on the regional route (subject o a closer examination of the facts with Cathay Pacific), and we could well be seeking more rational arrangements for

determining capacity increases in the future. These objectives may be attainable if the grant of 747 capacity on the trunk route has not been conceded in advance, but would certainly be

seriously prejudiced if any hint of this concession were made by

Ministers in advance of the air services negotiations.