Beyond Lion Rock: The Story of Cathay Pacific Airways (25 page)

John Swire drove away from the meeting with his brain buzzing. For a Minister to take such a keen personal interest in these matters was most unusual. Cathay Pacific had been making its own decisions about buying aircraft for over twenty years, and this was the first time Her Majesty’s Government had intervened. Was Cathay being officially leaned on? John Swire had not been quite sure, but a further meeting with Sir Peter Thornton, Permanent Secretary at the Department of Trade and Industry, clarified things no end. Sir Peter spelled it out: the deteriorating British balance of payments; the need to keep workers working at Rolls-Royce; the
desirability of giving an encouraging lead to the other airlines in South East Asia (excluding China) at that very moment undecided whether to order the TriStar or the DC-10 – these were all pressing British concerns. Of course, Sir Peter hastened to add, HMG would not be putting pressure on Cathay Pacific if it did not believe the TriStar was a good aircraft, but as it was, the Government hoped – indeed expected – that Cathay ‘would take all these British concerns into account’.

Cathay’s interpretation of all this was that a ‘patriotic’ decision in favour of the TriStar and Rolls-Royce would ensure, for any plans Cathay Pacific might have in the future, a sympathetic attitude from the Department of Trade and Industry, the British Government’s aviation ‘overlord’. So Cathay and Lockheed went back into negotiation, and the upshot was that Lockheed undertook to provide an improved aircraft at a cheaper price, thus achieving a considerable edge over Douglas. For its part, Rolls-Royce promised to keep producing the excellent RB211-22B engine and to come up with an even better one very shortly.

A blatant appeal to patriotism on the one hand; a commercial need for the best plane on the other – that had been Cathay’s dilemma and it appeared to have been resolved. Slightly shaken but with a good conscience, the Company went ahead and ordered two long-range TriStars with an option on two more. The first Cathay TriStar, VR-HHK, arrived from Palmdale, California, at Kai Tak on 2 September 1975, flown in by Bernie Smith and Laurie King to be officially welcomed by Hong Kong’s Governor, Sir Murray Maclehose, and the Hong Kong police band. VR-HHK and
VR-HHL,
brought into service two months later, are flying with Cathay to this day. Both of them began their life on the Hong Kong–Taipei–Tokyo, Hong Kong–Singapore–Jakarta and Hong Kong–Manila routes, and were an instant triumph, hugely popular since passengers loved the new wide bodies, and therefore very profitable.

The TriStars’ arrival coincided very neatly with a boom in Asian air travel, and thus it was that at the end of 1978 John Bremridge was able to announce to the Board an operating profit six times larger than that of the year before. By May 1979 the Cathay fleet consisted of eight 300-seat TriStars and eight 707s, a tremendous increase in both traffic and capacity. TriStars have undoubtedly proved their worth despite the strange circumstances surrounding their acquisition, and with their sophisticated technology are set to survive alongside the magnificent 747s well into the 1990s.

Rolls-Royce kept its word. Few in aviation would deny that Rolls-Royce is producing the most advanced and most efficient commercial jet engine in
the world. Cathay flies them on every single one of its aircraft, 747s as well as TriStars, and intends to keep on flying them in all the aircraft (such as the ultra-long-range 747-400s) it has a mind to buy in the foreseeable future.

Is there a moral to this tale of two aircraft – the DC-10 and the TriStar? Perhaps it is that on its own, as Nurse Cavell said, patriotism is not enough, but that if it comes coupled with the best possible deal – well, that’s a different matter.

*

Quite aside from the ministerial goings-on in London, later in the year the Lockheed TriStar became the subject of a worldwide business scandal that touched Hong Kong and – for one sad and embarrassing moment – touched Cathay itself.

Captain Bernie Smith had been a member of the Cathay team that toured America to choose between the DC-10 and the TriStar and had brought Cathay’s first TriStar to Kai Tak. When the
South China Morning Post
reporter approached him he said, between sips of champagne, ‘It’s a beautiful plane to fly. It’s much nicer to handle than the Boeing 707 and it has the most modern navigation system in the world!’ Later Smith had appeared in Cathay advertisements for the new TriStar service, describing the aircraft as ‘the most intelligent aircraft I’ve ever flown’. It was an impressive testimonial because Bernie Smith, one of Cathay’s best-liked senior captains, had a long and distinguished record that went back beyond his twenty-two years with Cathay Pacific to service with RAF Fighter Command.

But five months after his welcome from the Governor, Bernie Smith, in disgrace, boarded a late-night Pan American flight to Bangkok, making for his villa in the south of France, never to return. All that was known – it was spread across the front pages of the world’s best newspapers – was that a Senate Sub-Committee in Washington had heard evidence from Mr Carl Kotchian, the Vice-Chairman of Lockheed, of a campaign of bribery that was startling in its global scope.

With the aim of winning the sales war between Lockheed and Douglas, a struggle which had threatened to bankrupt one or even both of them, Lockheed had started handing out ‘monetary inducements’ and ‘kickbacks’ to helpful friends in high places from Sweden to Japan. The Prime Minister of Japan, Mr Kakuei Tanaka, for example, was alleged to have accepted US$7 million in bribes to ensure that All Nippon Airways bought TriStar. When the scandal broke, Mr Kotchian, coming clean, pointed his finger in all sorts of interesting directions, even at Cathay. ‘A British agent living in
France’, he said, had ‘received US$80,000 for payment to Cathay Pacific officials’.

Decisive as always, Duncan Bluck launched an immediate no-
names-spared
investigation. Who was this ‘agent’? Who were these ‘Cathay officials’? After a long talk with a chastened Kotchian, Bluck issued a terse statement.

For Bernie it was a pathetic come-uppance. The Hong Kong press printed sad pictures of him in happier times: a small, trim, fair-haired man, proudly wearing a captain’s four gold rings on each sleeve, posed smiling in front of the first TriStar at Kai Tak and before a fine company house in Kowloon Tong – the scene, friends remembered regretfully, of many swinging parties. Colleagues had had respect for Bernie, recalling his extraordinary services to Cathay. In June 1972, John Browne had circulated to everyone in the Company a letter welcoming Smith back from his hazardous investigations into the Convair disaster in Vietnam: ‘I would particularly like to record our appreciation for the extremely hard work in very unpleasant circumstances which has been carried out by Captain Ε. Β. Smith and his investigating team.’ The phrase ‘unpleasant circumstances’ was an understatement – the Vietnamese experience had not only involved more than one sortie into an active war zone amid acute danger and discomfort, but considerable frustration due to the rather less than all-out cooperation from the Vietnamese authorities in Saigon. For that Bernie Smith deserved a medal for valour and diplomacy. As it was, everything ended with a humiliating resignation, a handsome pension forfeited and a midnight flight into oblivion.

In the minds of some senior people in Cathay Pacific the fight for the London route and the name of Mr Leonard Bebchick will be for ever linked. It was the pursuit of licences to fly the Golden Route from Hong Kong to London that threw them together. The legal struggle, first before Hong Kong’s Air Transport Licensing Authority and then the United Kingdom’s Civil Aviation Authority, was grim, long drawn-out and for Cathay, at first, disastrous. But Mr Bebchick, although brilliantly representing British Caledonian, one of Cathay’s rivals, consciously or unconsciously brought to it a welcome degree of comic relief. Or so a reading of the transcripts seems to reveal.

The situation before the CAA hearings began was as follows. Further expansion for Cathay in the eighties could only lead in one direction: to London. To land there would be a crowning achievement, surely not the final extension of the Company’s network but certainly a very special one: it would be a sort of homecoming for the Hong Kong airline with the Union Jack on its tail. The airline already flew to Bahrain, a most valuable stopping-point almost halfway along the route from Hong Kong to Britain. Now it was time to go the whole hog and apply for the necessary licences from Hong Kong and London.

The important London–Hong Kong–London route had long been a British Airways monopoly: BA could operate as many flights as they liked, and they already flew ten a week. But it was universally agreed that lack of competition had spoilt BA; by taking the route for granted, the company had come to neglect it. Its punctuality record was appalling. Its aircraft regularly stopped at two or three points en route, including Bombay and Delhi, where time and again there were long delays with angry passengers stuck for hours in the dust and heat. In increasing numbers, businessmen, tourists and other travellers were fleeing the British flag-carrier for the better services
provided by foreigners – Lufthansa, Swissair or Singapore International Airlines. Why not another British carrier?

In December 1979 Cathay took the first step towards challenging BA’s monopoly by applying to the Hong Kong Air Transport Licensing Authority (ATLA) for a licence to fly to London. The Company did not apply alone. British Caledonian (BCal), an independently owned British airline with Scottish connections, was also energetically in the running, and so was the famous price-cutting boss of Laker Airways’ transatlantic Skytrain operation, the ebullient Sir Freddie Laker. Cathay, BCal, Laker – the three applications were to be considered together.

Cathay had hoped to be the sole new licensee in addition to BA: to the Company’s management it seemed that one British airline from each end of the route seemed a realistic proposition. BA had accepted the inevitable and started to make room for a competitor, lopping three flights off its weekly ten, so Cathay saw an opportunity to make up the complement with three of their own, building up in time to many more. BCal could not agree to that – to do so risked being squeezed out of the running completely, and furthermore the BCal Board, claiming to believe that BA had dropped the three flights expressly for Cathay to pick up, began to cry ‘Collusion!’ There would be no difficulty in all three airlines flying the route, BCal argued. But not Freddie Laker. None of them wanted Freddie Laker. Reality forbade any reciprocal attempt by BCal to press for Cathay’s total exclusion from the licence, for their investigations in the run-up to the ATLA hearings swiftly revealed the extraordinary pro-Cathay sentiment in Hong Kong. Ranging from the Governor to any Hong Kong Chinese with an interest in flying, it represented a popular and undeniable force that could not be ignored.

ATLA was an
ad hoc
group of individuals who – with the exception of the Chairman, Judge Ross Penlington – had little or no professional knowledge of aviation: they heard the evidence and deliberated, and the result of those first deliberations was an odd one. Perhaps partly to allay BCal’s loudly expressed suspicions of collusion, ATLA’s members decided to grant BCal a licence to operate four flights a week and a licence to Cathay for only three.

The lop-sided decision came as a shock to Cathay. The Company (and Hong Kong generally) genuinely believed that BA’s seven flights, BCal’s four and Cathay’s three, in addition to other carriers, would create a glut of air services even on a route on which extraordinary growth was expected. Nevertheless, ATLA was of the opinion that only the option of a new daily service would provide really testing competition for BA, and this was initially not going to be offered by Cathay’s own suggested three flights a
week. As for poor Sir Freddie, ATLA gave him the bum’s rush: he got no licence at all.

But this was not the end of the story. Application for any route was a twin hurdle, for licences had to come from both ends – in this case from Britain’s Civil Aviation Authority as well as from Hong Kong’s ATLA.

*

The Civil Aviation Authority – Mr R. Colegate (Chairman), Captain E. W. Lowden (Member) and Miss G. Μ. Ε. White (Adviser) – met on 13 December 1979 and on five subsequent days at Civil Aviation House near the Strand in London to hear the various applications and submissions. The hearings were suspended over the Christmas holiday period and resumed for three days towards the end of January 1980. It was going to be a long haul.

British Caledonian was, of course, represented by Mr L. N. Bebchick. A diminutive and bald-headed man with all the bounce of a brand-new tennis ball, Leonard Bebchick was a self-confident, voluble American lawyer, a Director and Joint Company Secretary of BCal. Briefed by Peter Martin, who led for Cathay, Peter Bowsher QC appeared for the Company. British Airways had retained the services of an immensely tall and sardonic counsel, J. T. C. Philipson, who used his golden locks, his spectacles and his haughty manner to the historic maximum. Sir Freddie Laker, an accomplished
self-advocate
and still in there fighting, had a second voice in another American lawyer, R. M. Beckman. Sir Freddie on his own account often introduced some welcome light relief.

It was for Mr Bebchick to kick off. For a start, and for the benefit of the Authority, he rehearsed a number of facts, including notably that the present BA service was totally inadequate, with 53 per cent of its flights on this route arriving three hours late. He also stressed that BCal continued to support a ‘three carrier regime’, a sharing of the route among the three British companies. Cathay would be incapable of going it alone, he maintained. Their proposed three services a week were inadequate, and anyway their recently acquired Boeing 747’s very high break-even
passenger
load factor would make it uneconomical. As for Laker, Mr Bebchick dismissed him briefly and completely – his proposal for cheap mass flying was utterly unrealistic.

Peter Bowsher reiterated Cathay’s suggestion in favour of two airlines, not three, with equality of opportunity from both ends of the route. Cathay already had one 747-200B and was expecting delivery of three others which would give them the capacity they needed. He pointed out that Cathay was
naturally supported by the government and people of Hong Kong because, as a local carrier, it would be extremely responsive to the demands of that market. The ‘eastern-ness’ of Cathay – the image of it as ‘Hong Kong’s airline’ – was again expounded by Duncan Bluck when he took the stand. Cathay, he emphasized, had a long history of profitable operation in and out of the Colony; it had a large network of routes in the Far East and from these it could feed traffic into the London–Hong Kong service. As for the 747 being the right, or wrong, aircraft, Bluck said that for one thing customers preferred the 747 over the DC-10 and ‘We certainly don’t accept that a smaller aircraft [the DC-10] with 270 seats is better suited for a long haul route than a 747 with 408 seats. After all, it is long-term development of the route that is important.’ Bob Dewar, a skilled accountant and Cathay’s doughty Director of Airline Operations, and Richard Stirland, the Company’s bright young Planning Manager, developed these arguments in their turn. As for Laker, Stirland pooh-poohed the notion that hordes of Chinese with itchy feet were lurking in the bushes, waiting impatiently for cheap tickets to romantic places like London. Hong Kong passengers were mostly businessmen, government servants, officials: there was no mass market there for Laker-style Skytrains. As for holiday group tours to Hong Kong – Hong Kong was not Miami.

Mr Bowsher weighed in again. Let it not be forgotten, he said, that Cathay had made a considerable and patriotic contribution to the British aerospace industry and would by 1982 be the only Rolls-Royce-powered airline of its size in the world. And of course the 747 was eminently suited to the route: its greater number of seats would also help relieve the expected overcrowding on the runway at Kai Tak Airport. But despite the projected extra demand for flights, he too dismissed the Laker application as unrealistic.

Naturally, Sir Freddie was not going to be swept under the rug like that. He stoutly maintained that Hong Kong might indeed become another Miami. He would offer a daily service – a comfortable, one-stop service. He would develop low-cost tours from both ends of the route. He would cater, above all, for ‘the many, many forgotten men and women at the bottom end of the market’.

The CAA hearings seemed set to last forever, frequently bogged down in tedious niggling over largely hypothetical figures. It was lucky for everybody present that their number included characters like the peekily abrasive Mr Bebchick and the ebullient Sir Freddie, both of whom demonstrated a public persona that, in another day and age, might have assured them a future in the music-halls. Laker’s confident predictions of a 
boom at the ‘bottom end of the market’ and his plans for cheap fares prompted Peter Bowsher to say that his rock-bottom fares would only appeal to those who didn’t mind what they sat on. He started to elaborate: ‘You could go on wooden seats’ – when an indignant interruption from Laker’s American counsel, Mr Beckman, silenced him. ‘This room,’ protested Mr Beckman, ‘is full of press writing down what Mr Bowsher is saying and the statement regarding wooden seats is untrue…. It is scandalous and very damaging to us.’ Presumably he feared the next day’s newspapers would come out with headlines like ‘Freddie Laker To Use Wooden Seats in Skytrain, QC alleges’. Mr Beckman was calmed by a word of support from Mr Colegate: ‘Let me say that I have sat in a seat in one of Laker’s DC-10s and it was quite comfortable.’ Not wood at all….

At one point Sir Freddie sought to draw a conclusion from his estimate of future passengers and revenue, excusing the vagueness of it by saying, ‘Surely we are entitled even in these rather formal proceedings to have a little bit of latitude and do a bit of generalizing?’ Mr Philipson, for ΒA, suavely reassured him: ‘Generalizing, Sir Freddie, is something which I would never seek to persuade you away from.’ On another occasion, Sir Freddie exploded with, ‘If you pull all the feathers out of a bird it will not fly!’ But Sir Freddie came over as a good sport. It was he who closed the proceedings for the Christmas recess by booming ‘A very happy Christmas and a healthy 1980’ to one and all.

BCal’s Mr Bebchick, adroit and very American, seems to have had a high old time of it. Even when flippantly referred to as ‘Mr Dabchick’ – an ornithological put-down which produced some laughter in court – he rose serenely above such mockery. At other times he engaged in exchanges reminiscent of those famous satires of courtroom proceedings chronicled by the late lamented J. B. Morton (‘Beachcomber’) in the old
Daily Express
of London – especially those proceedings that involved the imaginary Mr Justice Cocklecarrot and the fictional barrister, Prodnose.

Mr Beckman, the other American, fared no better than Philipson. He and
Bebchick complemented each other physically: Bebchick short almost to vanishing point, Beckman thin, tall and dark.

Bebchick: ‘I do not take Laker as serious. I am sure Sir Freddie takes himself very seriously.’

As time passed, the drama of the scene seemed to Richard Stirland to take possession of Messrs Bebchick and Beckman. Their gestures became sweepingly histrionic, the room filled with echoes reminiscent of Perry Mason exhorting invisible juries to dispatch wife-slayers to the hot seat. Bebchick strode up and down, dragging yards of wire behind him and declaiming into the sort of hand-held microphone favoured by nightclub entertainers. Sonorous phrases like ‘Let this court bear solemn witness’ and ‘May the record show….’ might have become the flamboyant rhetorical norm of these quite straightforward hearings had not Mr Colegate put a stop to it. When Mr Bebchick protested that Mr Beckman had produced an unexpected document with an unseemly lack of advance warning he got a brush-off which prompted the following exchange.