Viewing page 82 of 507

This transcription has been completed. Contact us with corrections.

74   HELICOPTER AIR SERVICE PROGRAM

Mr. Giles. Let me give you our information on that. I don't believe, offhand, there should be. At the present time I believe the only one of these carriers that has a loan outstanding guaranteed by the Government is Los Angeles, and according to our information, as of March 1, the outstanding balance was $1,997,000.
The original loan which the Government guaranteed was $2,891,637, made the latter part of 1961.
I believe, if my penciled notes are correct, that the monthly payments on principal on that loan are $25,000-$25,000 a month, which is $300,000 a year.
That means that as of December 31, 1965, the principal outstanding on that, assuming the present current payments, will be something like $1,747,000. This is on four helicopters. The original purchase was $3,212,930.
The Federal Government guarantees 90 percent of what the banks have loaned. We certainly don't assume, on the basis of the Los Angeles operation, that even if the subsidy were terminated, the carrier would default on these four helicopters.
Even if they defaulted on one, we think it very apparent from the figures that the Federal Government would not lose. They would be paid down to about two-thirds of the original cost, which we think is going to be very close to what we could get on the market for the helicopter if it had to be sold.
The Federal Government loan is backed up, of course, by a mortgage on the equipment itself. And then the Federal Government would have a general lien, I am assuming, on other property of the carrier.
So, in answer to your question, it looks to be, on a strict, cold, banker's analysis, not a vulnerable situation from the standpoint of the Government's loan.
In making that observation I want to be clearly understood, Senator, that the Commerce Department and the Administration is not suggesting, nor do we think that the termination of the subsidy in accordance with the President's recommendations would result in a default on these loans.
Mr. BEEKS. On page 5, you say to date the experiment has cost the U.S. Government $48 million. Does this mean that we really haven't received any benefits from the helicopter carriers at all in pecuniary terms? Hasn't the military testified we saved millions of dollars? 
Mr. GILES. We are certainly not arguing that there are no benefits, and we are not raising any questions today about the judgement, the decision of the Government, all the people involved in 1947, 1949, 1952, and right on up, to continuing this subsidy program.
The only question as we see it is-has the time come to stop? So we are not arguing that a wrong decision was made in the past, and certainly we don't suggest that some benefit has not been obtained from this experiment. I think it very clearly has been beneficial.
When you undertake something like this as an experiment, when you find out that the operation cannot get along, at that time or in the foreseeable future, with a Government subsidy, then that knowledge is beneficial.
It is not suggested at all that this has not been a beneficial program. I am sure there have been some benefits. Mr Halaby suggested some of them.