Viewing page 33 of 57

This transcription has been completed. Contact us with corrections.

SUMMARY AND RECOMMENDATIONS  31

For example, more than half of the indicated cash balance required ($109 million) was for six of the smaller trunklines. In 1960 these six carriers had a net loss of approximately $9 million. 

Several other factors will affect the financial capabilities of the carriers in the 1961-65 period. Substantial lease burdens have been assumed by several of the carriers. The debt created by the airlines has generated substantial interest charges, which have now become a built-in and inelastic feature of airline capitalizations. 

Any projections of capital expenditures and supporting factors for the 1966-70 period, under these circumstances, must, by their very nature, be both speculative and tenuous. However, for the purpose of this study, such a forecast is required. 

With this and other qualifications arising from normally anticipated changes in debt structure over the intervening years, the forecast of the consolidated cash requirements for those 13 airlines, as previously defined, is projected as follows: 

1966-70 PERIOD
[Amounts in millions]

For equipment acquisitions ...... $795
For debt retirement .............  825
[[line]]
Total cash requirement .......... 1,620

To satisfy these projected requirements during the second half of this decade, cash to be generated is estimated as follows: 

From depreciation and amortization ....... $1,570
From sale of surplus aircraft ............     15
[[line]]
Subtotal .................................  1,585
Balance required .........................     35

The airlines obtained their credit based on a prospective cash generation from one or more of the following sources: Net earnings; depreciation and amortization charges; sale of surplus equipment; issuance of equity securities; issuance of debt securities. 

607206 O-61-4