CONFIDENTIAL
3.
All these points were reviewed in correspondence between FCO and DTp Ministers at the beginning of the year. The DTP
acknowledged that BA's change of plan was unfortunate, but argued that the service could be maintained and even increased without real detriment to Hong Kong's civil aviation interests. They did however accept that as part of our responsibility to ensure that Hong Kong is in the best possible position to benefit from the Joint Declaration's provisions on civil aviation (which envisage a significant measure of aviation autonomy for the SAR), we needed to move before 1997 towards a more balanced air services relationship between the UK and Hong Kong. They accordingly suggested that the dispute over BA's service should be looked at in the context of a wide-ranging review of UK/Hong Kong air services.
4.
Agreement to hold the review took some of the immediate heat out of the issue. There is nonetheless a readiness in Hong Kong to believe that aviation is one area where the UK may seek to further its own interests at Hong Kong's expense. But the question of BA's "through running" has now in part been subsumed in a wider problem. The Chinese airline CAAC themselves want to operate international services running through Hong Kong and will clearly seek to frustrate Cathay Pacific's objectives in China (most notably, additional capacity on the Hong Kong/Peking route where there is a great imbalance in favour of CAAC) until these services are granted. to them. It is thus necessary to re-think the whole question and consider whether in all the circumstances through running (whether by BA or CAAC) would really be against Hong Kong's interests.
5.
The review began with initial meetings in Hong Kong on 13 and 14 July between UK and Hong Kong teams, led respectively by Mr Handley Stevens, an Under Secretary at the DTP (who has had very wide experience of negotiating traffic rights on behalf of Hong Kong and is well known to the Hong Kong Government), and Mrs Anson Chan, Secretary for Economic Services in Hong Kong. The meetings were amicable and constructive, though no conclusions have yet been reached. It was agreed that the three airlines should analyse traffic and earnings on the Hong Kong/London route in preparation for negotiation of a package agreement on the route. agreed that both sides would reflect further on "through running".
It was also
CONFIDENTIAL
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