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earnings, which made it difficult to raise equity capital, important in reducing the financial vicissitudes that come with heavy debt obligations.

Recommendation: Although we elsewhere discuss, in depth, measures designed to enhance the profitability of local-service operations, this is an appropriate place to recommend that the local-service airlines be urged to obtain additional equity funds as soon as possible. The CAB's encouragement in its new class rate, which provides a greater return on equity than debt, is a healthful promotional approach. The circumstances and incentive to attract equity funds has rarely been more attractive, and should encourage the strong local-service airlines to seek such equity financing under present market conditions.

Helicopter Airlines

The helicopter airlines are the last group of carriers to have been accorded certificates of public convenience and necessity by the Civil Aeronautics Board. They may also represent a group with a dynamic growth potential in the air transport industry in the period immediately ahead.

As with the development of the local-service airlines, the helicopter group shows signs of eventually decreasing its relative dependence upon subsidy support.

They will soon introduce multiturbine helicopters, replacing the existing single-engine, piston-powered equipment. Although this conversion will require an initial subsidy increase, once the introductory period is completed the new equipment, assuming the development of satisfactory load factors, should permit subsidy reductions which could not be achieved in any other way.

Although the helicopter operators, as a group, have secured the bulk of their financing from equity sources, it appears that future proposed financing may unbalance the equity structure by the introduction of substantial debt.
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