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tween profits and invested capital. The returns on invested capital in the aircraft manufacturing industry are generally far higher than anything experienced in the air transportation industry.

Finally, the aircraft manufacturer can refuse to undertake a contract, if not satisfied with the price offered him, whereas the air transport operator is obliged to give service whether or not the rates of pay are considered adequate.

The wide disparity in the treatment of these two industries, which are both doing essentially the same thing, i.e. rendering necessary service to the nation, seems to be unjustified.

PUBLIC APPRAISAL OF LOCAL SERVICE CARRIER SECURITIES
The earnings record of the local service carriers has not been such as to inspire public confidence in their securities. Published official figures (Exhibit G-I) show that the industry during its eight years of existence showed an aggregate loss of $1,425,069. Industry losses were reported in five out of the eight years. These figures are before taxes (if any) and other non-operating adjustments.
These figures suggest that the CAB has not lived up to the obligations imposed by Section 406(b) of the Civil Aeronautics Act. Actually, the are not final figures and are therefore misleading. Because of the complexities of the rate-making process described in earlier sections of this report, retroactive mail pay adjustments of considerable substance are frequently not reflected in officially reported operating income figures. (Exhibit G-2)
Total operating income figures are of interest to the financial community only as general background information. They do not reflect taxes and certain other corporate expenses. The net profits of individual companies, measured in terms of earnings per share, are probably the most important indices that would be studied by security analysts in determining security values. Schedule G-3 shows the earnings per share of leading local service carriers.
The earnings record of the local service group has been extremely poor. Not only have the earnings accruing to shareholders been marginal in almost ever case where