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COLONIAL AIRLINES, INC.
630 FIFTH AVENUE * NEW YORK 20, N.Y.

OFFICE OF THE PRESIDENT

TO THE STOCKHOLDERS:

During recent months the newspapers and magazines of the country have carried many pessimistic articles concerning the critical financial condition of the airlines. This fact prompts me to issue this mid-year report to you in the hope that I may set the record straight insofar as it relates to the situation of your company.

Make no mistake, the years 1946, 1947, and 1948 to date embrace the transition period in air transportation from wartime operations to highly competitive and strictly commercial pursuits. This had been a critical period in the development of a new and rapidly expanding industry beset with equipment, labor, and inflationary cost problems much more severe than experienced in most fields of endeavor. The airlines of the nation of course have all been under a sever financial strain during this period of decreasing traffic volume and unfavorable markets for both equity and temporary financing. Some of the airlines have fared better than others and fortunately your company better than most, due to the adoption of a timely and drastic retrenchment program.

Our operating results for the first six months of 1948, as reported to the Civil Aeronautics Board, in spite of abnormal traffic volume due largely to unsettled business and world conditions, give promise of early return to satisfactory earnings. The operating losses experienced this year over our domestic system were reduced nearly $400,000 from those for the same period of 1947 and were only $155,500 as against $548,000 the previous year. The loss sustained on our foreign routes for six months of 1948 amounted to only $40,000 and these routes had been in operation less than one year. Indicative of the improving trend of earnings in our business, is the fact that the results for the month of June reflect a profit from domestic operations of $29,629 which after deducting a loss of $13,118 sustained from our international operations to Bermuda resulted in a net overall profit of $16,511 for the month of June. July and August give promise of even better results.