TNAG-1962-FCO40-2794-Aviation-rights-in-Hong-Kong-for-Federal-Express-1989 — Page 7

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Moss Meter

R+P.A.

NC

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22/11

TARY OF STATE

OF TRANSPORT

CONFIDENTIAL

FROM THE SECRETARY OF STATE

OR

TRANSPOR

MAED

PS(14

PS/Lord Braha

PS/Mr Maude

Mr Slater

McLaren

MARSHAM STREET LONDON SWIP SEB

TELEPHONE 01-2763010 HKD

The Rt Hon Malcolm Rifkind MP Secretary of State for Scotland Scottish Office

4.

My Ref:

Your Ref:

C/PSO/15046/89 SAK

SAIS

22/11.

Whitehall

London SW1A 2AU

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HKC 184

20

21 NO

NH 12/1

FEDERAL EXPRESS: PRESTWICK AIRPORT PROJECT

Your letter of 9 November emphasised the importance you attach to securing the establishment of a major cargo operation by Federal Express at Prestwick Airport.

I share your desire to secure this business for Prestwick. I agree that a project of this kind would bring benefits to the UK which cannot be measured simply by reference to an exchange of air traffic rights. I therefore agree that we should go as far as we reasonably can in meeting Federal Express's requirements.

However, as you also recognise, there are other considerations. UK all- cargo carriers already face strong competition in Europe and this is likely to intensify in the next year or so. A number of these companies have expressed their firm opposition to any further expansion of rights for US operators. I cannot ignore that. But these British carriers have not shown much interest in developing cargo services from Prestwick (or from Abbotsinch) and it is not clear from what the UK cargo airlines have said that development of a Federal Express hub at Prestwick would do them direct and significant damage. (There are two parcels services from Prestwick to European points, but we understand that these are operated on a contract from TNT.)

But I do think that we should, in next week's negotiations, seek to tie any expansion of US cargo opportunities firmly to Prestwick, for two

reasons:

(i) we want to see new business at Prestwick and the US knows this. It may be seeking to use our interest in Prestwick as a lever to secure a general increase in its cargo opportunities in the UK, with the intention of actually using those opportunities from Stansted or Heathrow. Our objective is better secured if new rights are available only from Prestwick.

(ii) UK cargo carriers interests at other UK airports would be