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The Company has been operating under a temporary rate established in the fall of 1952, at a time when no significant cost or operating experience with respect to the Company's service was available. In addition, as set forth above, since the establishment of this rate the Company's operations have undergone a marked expansion. As a result, it soon became apparent that this temporary rate was wholly inadequate, and in the early spring of 1953 the Company commenced proceedings looking toward the establishment of an adjusted temporary rate bearing a more reasonable relationship to the actual operations and costs. These proceedings are still pending. 

In the fall of 1953, however, the Company commenced proceedings for the determination of a retroactive final rate for all operations through December 31, 1953 so as to permit inclusion in this Annual Report of realistic financial statements with respect both to 1952 and 1953. These proceedings were brought to a conclusion in March 1954, with the result, discussed in greater detail below, of enabling the Company to report a profit for the entire operating period extending from October 15, 1952 through December 31, 1953. 

Current operations (i.e., those since January 1, 1954) are still being conducted under the inadequate temporary rate established in the fall of 1952. As stated above, the Company's petition for an adjusted temporary rate has not yet been acted upon. Thus, as in the case of the 1952-1953 operations, it will not be possible to provide realistic financial statements with respect to operations after January 1, 1954 until the Civil Aeronautics Board takes the necessary remedial action. 

EARNINGS 

The Civil Aeronautics Board's retroactive final mail pay decision of March, 1954 awarded the Company total mail pay of $1,348,464 for the operating period from October 15, 1952 through December 31, 1953 — or $699,784.88 in addition to the amounts previously accrued under the temporary rate referred to above. As disclosed in the financial statements included herein, the Company accordingly shows a net profit of $51,525.22 as a result of the first 14 1/2 months of its operations. Of this amount $3,284.07 has been determined to be applicable to 1952 (in place of a net loss as reported in last year's Annual Report) and the balance of $48,241.15 has been determined to be the net profit for 1953.

In its opinion of March 1954, the Board, while commenting favorably on New York Airways' accomplishments, makes clear its concern because of "the relatively high level" of your Company's mail pay requirements. The opinion states that the Board had

     ". . . carefully reviewed NYA's operations and 
mail pay need bearing in mind the problems faced by 
the carrier. It is the Board's view that NYA's 
accomplishments in this period are commendable.
     "However, NYA's subsidy requirements should be carefully controlled. In this regard, it is the Board's intention that a periodic re-evaluation will be made of the helicopter experiment, including the operations of all three certificated helicopter operators, to assess the subsidy requirements in terms of the benefits derived."

FINANCIAL POSITION

  The balance sheet included herein shows the strong financial position of New York Airways. 
Current assets total $1,468,558.12 and current liabilities only $112,310.99, or a ratio of approximately 13 to 1. Not all of the capital invested by the stockholders has yet been recognized in the investment base for mail pay purposes. As the Civil Aeronautics Board stated, in its March 1954 opinion:
    "Adjustments to reported investment result in a reduction thereof by $633,945. 
Accordingly, the investment base recognized for mail rate purposes for the review period amounts to $1,166,201.
    "The carrier's reported net working capital averaged $805,304 during the review