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to the company's founder; 5,000 shares of stock were issued for services. The first offering was purchased by a small group including founders, management and leading citizens in the Greater New York area. In 1953 the company sold in a registered public offering an additional 100,000 shares of $1 par capital stock at $12.50 a share. The total net proceeds of the various offerings have netted the company $2,207,425. The CAB in its March 15, 1954 mail pay decision commended NYA, stating that it viewed

"the carrier's financial program as an example of sound and timely financing which has been clearly basic to the carrier's financial stability."

Despite this laudatory statement, the CAB reduced the company's "investment base" for rate-making purposes by $633,945, stating:

"In accordance with settled Board policy, working capital in excess of . . . three months cash operating expenses has not been recognized."

Dollarwise, this decision may not be of great significance, even to the carrier concerned. Furthermore, the instances in which an air carrier has been found to have more capital than required are extremely rare, and this is likely to continue to be the case because of the difficulties involved in raising capital for subsidized regulated industries. But the decision is important to all those concerned with airline financing, in that it reveals a philosophy of regulation which, in our opinion, is not conducive to "sound and timely financing" of the air transportation industry, and will encourage carriers, in the future, to get along with the minimum of equity capital and resort to debt to meet capital requirements.

It seems apparent that the Board's rate-making philosophy is based on the procedures applied in public utility regulation. Certainly the non-competitive gas, electric power, telephone and telegraph companies, with their large capital facilities and the ability to obtain prompt collections from their customers, are unlikely to require sufficient funds to pay three months cash operating expenses. On the other hand, helicopter companies starting in a competitive business will undoubtedly have the problem of raising considerable amounts of money which it may not be practical to invest in capital facilities or flight equipment immediately as these funds are raised. In determining the carriers' need by an arbitrary rule which is based on standards of need