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2 We believe that the favorable settlement of the two remaining matters, accompanied by continuation of the Company's growth, would greatly enhance the investment standing of the common stock. The present price of about 9 appears depressed in relatino to the Company's earning power under its current subsidy rates and should provide a buying opportunity for long term investors. Commercial Helicopter Transportation Helicopter transportation has been in an early stage of development but now seems likely to be recognized as a permanent part of the trasportation system. Service to the rapidly growing areas between and surrounding the large municipal centers offers possibilities for long term traffic growth. The development is likely to be particularly rapid in cities with a number of active airports because, with the advent of jet travel, time spent in making connections between air terminals where jets operate and outlying communities, and from one airport to another will appear increasingly wasteful. Helicopter transportation suffers now from the "growing pains" generally associated with new industries. Passenger equipment has grown from a capactiy of fiveseats to fifteen within the past five years. Despite these gains, equipment current available is not yet entirely suitable, and fares, while high relative to other forms of scheduled trasportation, are not sufficient to offset operating expenses. Within the next three or four years it is expected that the capacity of passenger equipment will nearly be doubled and that economic efficiency of equipment used will be greatly increased. As was the case with the fixed-wing transport industry in the early years, helicopter transportation is today heavily dependent on federal subsidy. In recognition of the national importance of this type of service, the Civil Aeronautics Board has authorized helicopter service under the subsidy provisions of the Civil Aeronautics Act of 1938 in three U.S. cities: New York, Chicago and Los Angeles. Federal subsidy is intended to assure the carriers of a fair return on their investment. Subsidy Rates The most favorable financial feature affecting NYA's operations today is that the Company is operating under "final" subsidy rates which allow it to operate at a profit. These rates went into effect on July 1, 1958 and replaced "temporary" rates which had prevailed since February 3, 1956. The current rates provide for an 8% return on invested capital but in view of the fact that the CAB has recently increased the rates for local service airlines (a subsidized group of carriers operating under conditions similar to those experienced by helicopter operators) to 9.5%, it may be presumed that NYA will in due time also qualify for the higher rates.
