TNAG-1391-FCO40-1863-Future-of-Hong-Kong-briefing-for-meetings-and-visits-1985 — Page 62

CONFIDENTIAL

SIT OF THE PUS TO HONG KONG: CATHAY PACIFIC AIRLINES

BACKGROUND

a

1. We understand that Swires have told the PUS of Cathay Pacific

Airlines' (CPAs) wish to remain the only Hong Kong based airline.

Until recently CPA occupied this position. However in mid-April the

Air Transport Licensing Authority (ATLA) in Hong Kong received an

application to operate a number of services from Hong Kong to

Chinese cities from a company called "Cleverworld Limited",

subsidiary of the "Hong Kong Macau International Investment Company

Limited (HKMII)", whose Chairman is the Chairman of the Bank of

China in Hong Kong. HKMII was incorporated in Hong Kong on 28

September 1984 (ie 2 days after the initialling of the Sino-British

Joint Declaration) and it thus appears likely that "Cleverworld's"

incorporation is the result of a carefully organised Chinese effort

to establish an airline controlled by PRC interests with its

principal place of business in Hong Kong.

2. "Cleverworld"s application to ATLA was received too late to be

considered prior to Sino-British Air Service talks which were

scheduled for 14-20 June. These talks had as their aim the

development of air links between Hong Kong and regional cities in

China. The Chinese told us on 4 May that they would prefer to

postpone the talks until later in the year, probably September, no

doubt to allow time for "Cleverworld"s application to be processed.

Although "Cleverworld" have only so far leased one Boeing 737

aircraft, Hong Kong have informed us that their application for an

Airline Operating Certificate appears to be

to be in order and is likely

to be granted by the end of June.

3.

ATLA have separately received another application, from a firm

called "Oriental Pearl Limited", to operate Hong Kong to London and

Hong Kong to the USA routes. Investigations have revealed that the

financial backing for "Oriental Pearl" is unsure. We do not know

whether this company is backed by the Chinese.

4. While Cathay Pacific Airlines naturally enough wishes to remain

the only Hong Kong based airline we are not able to refuse licences

CONFIDENTIAL