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single-engined aircraft. One DC-3 and three Super C-46's maintain regular schedules between the territory's major cities, flying an average 2,395 route miles daily. Excepting the government-owned railroad which connects Seward, Anchorage and Fairbanks, these twin-engined "Starliners" are the only regularly scheduled and certificated freight and passenger carriers linking major Alaskan cities. At International Airport, Anchorage, complete service facilities are located for all maintenance work up to and including major overhauls of multi-engined aircraft. Auxiliary repair stations are maintained at Fairbanks, Nome, McGrath and Bethel.

3. Trunk Line

The Trunk service provides the final link connecting the most remote sections of the Alaskan bush with supplies, communications and other services from outside the Territory. There will be three DC-6's employed in this service - passenger, freight, mail and long-haul contract flights - between Nome, Anchorage and Fairbanks, and the continental United States. One or more daily flights are to be scheduled between the Territory and Seattle and Portland when the DC-6's are in service. Also, direct cargo hauls are made from the Mid-West and the Pacific Coast to Alaska on charter and non-scheduled flights. Passengers include a growing number of tourists for whom ALASKA AIRLINES operates several tour plans.

On January 2, 1958 the Company applied to the C.A.B for permission to institute commercial air service from Seattle and Alaska to Irkutsk, the principal city in Southeastern Siberia. If authorization should be granted, this service would become the first regular air transportation available between the United States and the Soviet Union and obviously would be an important step in promoting better understanding between the peoples of the United States and the U.S.S.R.

Near Seattle, Washington, the Company operates the new hangar at Paine Field. As part of the Modernization and Expansion Program described elsewhere, ALASKA is planning to purchase this installation. It is the largest and best equipped aircraft and engine maintenance facility west of Chicago and north of San Francisco. Contract maintenance and overhaul work is performed for other carriers here as well as for the Company's "Starliners." Recently, this facility was approved for Air Force, Army and Navy servicing and overhaul contract projects. The management of ALASKA believes that important earnings may develop in the future from its contract maintenance operations at Paine Field.

ALASKA AIRLINES' competitive status will be improved considerably by the modernization of its fleet as outlined below under Modernization and Expansion Program. There are at present four certificated carriers providing air service between the Pacific Northwest and Alaska-Pan American World Airways, Inc., Northwest Airlines, Inc., and Pacific Northern Airlines, Inc., in addition to ALASKA AIRLINES. There are five certificated air carriers, including ALASKA, operating completely within the Territory.

The Company has been at a disadvantage on its United States-Alaska route in that its direct competitor, Pan American, has been operating pressurized and faster equipment. Pan American announced its intention to reduce its service on the Seattle-Fairbanks route from seven to three flights weekly after ALASKA received its permanent certificate and announced the intended purchase of three DC-6's.

Within the Territory, the Company's competitive situation has been excellent since its equipment is the most modern in this service, and it is the only carrier with scheduled service between all major cities, This position will be strengthened further by the availability of DC-4's which, when released from United States-Alaska service, are to be used in intra-Alaska flights and for contract carrying operations.

Among the decision-making functions of the C.A.B. are the authority to decide which carriers are to operate specified routes and which carriers need subsidy. ALASKA AIRLINES receives subsidy payments, as segregated in the accompanying financial tables. It is impossible to calculate the estimated final subsidy until it is announced several months after the closing date for the year. As mentioned elsewhere, an award sufficient to permit a 7-10 per cent return on capital generally has been allowed in the past.

The aircraft to be owned, leased and operated consist of:

[[3 column table]]
| Number | Description | Type of Service |
|---|---|---|
| 3 | DC-6C | United Sates-Alaska | 
| 3 | DC-4* | United States-Alaska and Intra-Alaska, Cargo and Contract |
| 3 | C-46T | United States-Alaska, Intra-Alaska |
| 1 | DC-3 | Intra-Alaska |
| 20 | Norsemen, Cessnas | Intra-Alaska |

* One of these DC-4's has been sold and leased back.

The equipment, together with spare parts, engines and other property, was  carried on the Company's books at $968,957 on October 31, 1957. This depreciated cost, however, reflects neither the true worth of the flight equipment owned on that date nor the new DC-6's. A more realistic figure for the equipment owned on October 31, 1957, would be the estimated market value of about $1,900,000. An additional $5,000,000 is expected to be expended in 1958 for the three DC-6's.