Beyond Lion Rock

by Gavin Young

  At first three days weekly, Cathay’s Australian service eventually became a daily one. And there was a further expansion. Urged on by Duncan Bluck, Cathay introduced a three-day-a-week 707 service to the Arabian Gulf, first to Bahrain and later to Dubai as well. This too proved extremely profitable. The Gulf – thanks to oil – had become one of the world’s fastest growing trade areas. Even the poorest Arabs wore gold watches, rings and bracelets, many drove large cars and all of them shunned manual work like the plague. Asian labourers were thus much in demand and Cathay flew in thousands of them, mostly from Taiwan and Korea.

  *

  The 707s on their swept-back wings had sped Cathay into the wider world. Success fed ambition and in next to no time the Company’s thoughts turned towards a genuine wide-bodied, intercontinental aircraft – ideally, the eye-popping jumbo-sized Boeing 747, undoubtedly the Aircraft of the Age. The trouble was that the Jumbos were designed to carry about 450 passengers, and several airlines, including Cathay, were not sure that they could fill these monsters. There were, however, two other wide-bodied aircraft coming onto the market then with a 300-passenger capacity: the Douglas DC-10 and the Lockheed TriStar, both three-engined aircraft. The DC-10 was powered by engines made by the American firm, General Electric; the TriStar’s engines came from Rolls-Royce. There seemed little to choose between them, so a team from Cathay set out for America to investigate at close quarters. They arrived at a time of desperate competition between Douglas and Lockheed with the big, long-range DC-10 well out ahead – in fact, already flying. Lockheed had also produced a superb aircraft – indeed the TriStar was something of a technical miracle – but was lagging behind Douglas in production and therefore in sales.

  The Cathay team returned to Hong Kong with their recommendations and, in accordance with them, on 29 January 1974 John Bremridge and his directors unanimously agreed to go for the Douglas DC-10. And that normally would have been that.

  But something quite unexpected occurred.

  It had been agreed to defer for thirty-six hours any announcement of the Board’s decision in favour of the DC-10 to allow time for the British Government to be informed of it. This was an unusual procedure; but the involvement of Rolls-Royce with the TriStar had created a special circumstance. For Rolls-Royce just then was in crisis. Swires in London had an idea that the official reaction to their choice of the rival DC-10 with American engines might be … adverse. And adverse it was. So adverse in fact that the Minister responsible, Michael Heseltine, was moved to telephone in person to request the earliest possible meeting with John Swire, Adrian being away in Hong Kong. When they met, the handsome and youthful-looking Minister was plainly upset and made no attempt to hide it. He felt let down, he said, by Cathay’s decision – indeed he had been ‘flabbergasted’ by its suddenness. Why had he not been given a chance to bring pressure to bear on Lockheed to give Cathay a better deal? Or ‘to have a word’ with Rolls-Royce, who were admittedly going through rather a difficult patch but who could no doubt be prevailed upon by government to provide cast-iron guarantees of all-out technical support in the future? As John Swire later reported, there was no table-pounding at the meeting; there was more sorrow on the Minister’s part than anger. Actually, calmly fingering his Brigade of Guards tie, Mr Heseltine was all ‘urbanity and sweet reasonableness’. He simply made it very plain indeed that he and his advisers needed an answer to one question: ‘Why, oh why – with nothing to choose between the two aircraft – had Cathay come down unanimously in Douglas’s favour?’

  As everyone in Swires to do with aviation was in Hong Kong, John Swire was able to fall back on his genuine lack of technical knowledge, while admitting that, of course, all other things being equal, Cathay would have preferred an aircraft with a British component. At this Heseltine nodded and smiled. ‘Just so,’ he said, ‘yes.’ But, he went on, commercial decisions had to be made in their totality. Nevertheless, the British Government was very concerned to look after the interests of both Cathay Pacific and Rolls-Royce. ‘It would be much less embarrassing for me’ – he smiled again – ‘if those two interests had dovetailed.’ The Minister kept his most telling point to the last. Walking Swire to the lift, Heseltine gently slipped a final word into his ear: ‘I should perhaps tell you that one of my embarrassments is persuading other Asian airlines to buy British equipment at a time when one of the most successful operators in the area – British, at that – has gone elsewhere.’ He hoped Cathay would hold up their final decision to give him time to encourage Rolls-Royce to improve the package they and Lockheed were jointly offering.

  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? Pe
rhaps 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.

  It is now clear that a payment of US$80,000 was made by Lockheed Aircraft Corporation in November 1974 to Captain Ε. Β. Smith, Director of Flight Operations of Cathay Pacific Airways, as a payment to him in assisting Lockheed Aircraft Corporation in their efforts to sell Lockheed TriStar aircraft throughout this area, to airlines other than Cathay Pacific.

  There are no other payments involved.

  Captain Smith has resigned from Cathay Pacific with effect from 10th February.

  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.

  CHAPTER 23

  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.