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New York Airways, Inc.
Confidential
To: R. L. Cummings J. E. Gallagher L. H. Arps 
Date: October 19, 1967
From: W. W. Hogan
Reference: 
Subject: TWA's PROPOSAL OF OCTOBER 13th

First of all the premises on the first page of TWA's Proposal seem to me to be looking at the problem in the wrong way, for these reasons:

 a) I do not think that the question of our achieving self-sufficiency is necessarily relevant to our arrangements with them since these arrangements in themselves are self-sufficient insofar as TWA is concerned. By that I mean the incremental revenue based on the Boeing survey far exceeds the cost to TWA.

 b) The notion that part of the funds provided by TWA should be paid back to them, or converted to a stock ownership, also ignores the benefits TWA is reaping from services.

My comments as to each specific numbered proposal in Russ. Rourke's draft are:

 1. The $400,000 per year to be paid in addition to the fee should be increased to $1,000,000.

 2. This section should be eliminated entirely as any coverage of the deficit other than by irrevocable payments would mean that NYA would be reporting substantial losses.

 3. No comment.

 4. Our present stockholders equity per share (as at August 31, 1967) is $5.31. If we were, in fact, to agree to sell to TWA the same number of shares as are now held by Pan Am, i.e., 116,589 (recognizing that this requires an increase in the authorized shares) at the current book value, we would realize about $619,000, which coupled with the $60,000 to be raised as part of the sale and lease-back of ground equipment would be just enough to extinguish the entire amount of the Demand Notes. This would then give to Pan Am and TWA 22.1% each of the present outstanding shares adn 18.1% each of the authorized shares. If we limit their purchase to then 73,442 shares available we would need to charge them $8.44 per share to accomplish the same thing.