As you are already aware from my despatch No. 130 of the 2nd September last  (of which I had the honour to send a copy to the Prime Minister of Australia), the, Governor of Portuguese Timor  had then informed me of his desire for air communication with Timor, preferably by a British line. I spoke to Mr Hudson Fysh, Managing-Director of Qantas on the subject when he passed through Batavia on September 1st, and he then wrote both to his directors and to the Administrator of North Australia ' so I pressume that the matter has already recieved the attention of the Commonwealth authorities.
2. Mr Hudson Fysh duly consulted with the Air Ministry and Imperial Airways on reaching London, and I have been informed by the Foreign Office that the conclusion has been unanimously reached that 'Dilli is not suitable as an alternative to Koepang, and that it would not be justifiable at the present time even to survey it. The reasons are as follows:-
(a) It is very exposed from North-West to North-East.
(b) It is obstructed by very high mountains from the East, through South to the West.
(c) It increases the mileage of the Empire route by 75 miles as compared with going through Koepang'.
3. This conclusion seems definitely to rule Dilli out of the main route, and if I now merely pass the Air Ministry's view to the Governor of Portuguese Timor without further observations it may well seem to him to close the door on the possibility of any British air connection, and to leave only the alternatives of a Portuguese, Dutch, or possibly Japanese, service.
4. Of these alternatives the Portuguese themselves would no doubt prefer a Portuguese service, though it might be difficult for Portuguese Timor to establish it without the assistance of foreign capital. Unless such foreign capital is promptly forthcoming from British sources-which the economic prospects of such a service scarcely seem to render probable-the source from which capital would most easily be available is likely, to judge from recent developments in Timor, to be Japanese.
5. The second alternative, a Dutch service from Koepang, may seem the most practicable and desirable from our point of view. The Koninklijke Nederlandsch-Indische Luchtvaart Maatschappij (K.N.I.L.M.) have, moreover, already applied to the Governor of Portuguese Timor for permission to run such a service, but, as the Batavia representative of the Company informed me a few days ago, have not yet obtained a reply. It seems that the Koninklijke Luchtvaart Maatschappij (K.L.M.) have recently negotiated with the Portuguese Government for the use of a landing station in the Cape Verde Islands for their service to South America, and that in return the Netherlands Government have accorded permission for the Portuguese to run a service from Dilli to Koepang. This opening was, however, not made reciprocal, so no permission has yet been given for a Dutch line to Dilli. It is, I think, by no means certain that the Portuguese authorities will readily grant permission for such a service. During Mr Consul Lambert's recent tour to Portuguese Timor the Governor made no concealment of his mistrust of Dutch friendship, and that impecunious colony's experiences for many years of the exorbitant freights of the quasi-monopolist Koninklijke Paketvaart Maatschappij seem to have generated a certain aversion from dependence on Dutch facilities.
It is therefore possible (though this is of course only conjecture) that if a Dutch connection is the only alternative, the Portuguese authorities may be more disposed to consider admitting Japanese capital for an air service than they would if there were any prospect either of an Australian service or of Australian support for a line from Dilli.
6. In regard to the third alternative, a Japanese line, I am not aware that any overtures have yet been made to this end, and the present Governor of Timor is not likely to favour such a development. I have, however, already brought the growing Japanese interest in Timor to your attention, and it seems unlikely that Japan intends Palao to remain for all time the terminus of the recently arranged 'southern air service' from Tokyo to that island. If, therefore, she acquires in Timor an increasing ascendancy, as there is still some reason to fear, she might well become interested in an air service. On the whole, the establishment of a Japanese extension line from Palao to Timor seems less likely at the moment than Japanese investment, if opportunity offered, in a line from Dilli to Koepang or elsewhere.
7. In view of the obvious undesirability of any opening developing for Japan to interest herself in air communications in Timor, therefore, the Commonwealth Government may, despite the unfavourable decision in regard to Dilli as a port of call on the main air route, desire to give further consideration to the question of establishing or supporting an air connection with Dilli. I shall, therefore, be very grateful if you will kindly inform me at an early date whether I may, after now communicating the Air Ministry's views to the Governor of Portuguese Timor, hold out to him any prospect of further consideration being given in Australia to this question.
8. If Mr Peterson, the newly appointed Australian Government Commissioner to the Netherlands East Indies, finds it possible to visit Portuguese Timor in the course of his journey to Java it might be worth his while to discuss with the Governor of Portuguese Timor in a general way the question of air communications, as well as other matters in Timor which are of interest to the Commonwealth Government.
9. I am, of course, sending a copy of this letter to the Foreign Office.
H. FITZMAURICE