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To the stockholders and employees of:

On March 30, 1962, final approval by the Civil Aeronautics Board was secured for the conversion of your Company's services to a new fleet of four Boeing V107 twin-turbine helicopters.

This approval by the Board represents the successful culmination of more than two years of effort by New York Airways. As set forth in greater detail in prior Annual Reports, in January, 1960 the Company entered into the initial V107 purchase contracts with Vertol Aircraft Corporation (now the Vertol Division of The Boeing Company). In January, 1961, New York Airways secured informal approval by the Board of the Company's then proposals for the replacement of its present fleet of five V44B single piston-engine helicopters with a fleet of five Boeing V107's. At that time it was anticipated that this conversation would be completed by the Fall of 1961.

However, two developments intervened to prevent the prompt and full implementation of this plan.

Delivery of the new aircraft was postponed because of a series of costly production delays and, as a result, operations are still being conducted with the smaller, less efficient, and less economical piston-engine fleet which has been in service since 1958.

Moreover, in the Summer of 1961, Congress reduced the funds available to the Civil Aeronautics Board for Federal subsidy payments to the three certificated helicopter carriers in New York, Chicago and Los Angeles substantially below the levels which the Board itself had endorsed as being necessary for the support of these carriers. In consequence of this action, it has been necessary for New York Airways and the other two carrier to conduct extended proceedings before the Board (which are still pending) with respect to the allocation of the reduced funds made available by Congress; and to effect retrenchments both in current and in prospective operations in order to adjust to the new subsidy levels.

Thus, New York Airways has been required to suspend operations with the present piston-engine helicopters at four suburban points (i.e., White Plains, Teterboro, Stamford and Bridgeport) and at the West 30th Street heliport on Manhattan. In addition, the Company's program for immediate conversion to twin-turbine operations has been modified to provide for the introduction (commencing this Spring) of four of the five new Boeing V107 helicopters on order. Delivery of the fifth V107 has been postponed to the Spring of 1963 and its use in subsidized operations will require further Board approval.