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It is also anticipated that the accumulated losses for the first six months of 1948 as reported will be considerably minimized upon receipt from the Government of increased payments of mail compensation for the period. Your company is at present receiving mail payments computed on a temporary inadequate mail rate while awaiting action by the Civil Aeronautics Board on its application for a compensatory permanent rate applicable retroactively on April, 1946. The Civil Aeronautics Act provides that the Board in fixing and determining fair and reasonable rates of compensation for the carriage of mail shall take into considerations, among other factors, "the need of each carrier for compensation for the transportation of mail sufficient to insure the performance of such service, and, together with all other revenue of the carrier, to enable such carrier under honest, economical, and efficient management, to maintain and continue the development of air transportation to the extent and of the character and quality required for the commerce of the United States, the Postal Service, and the National Defense." Because of that statutory mandate we confidently expect to receive retroactive mail payments from the Government that will permit liquidation of most of the past operating losses reflected in the company's operating statements for 1946, 1947 and the first half of 1948.

There is very urgent need in the situation of the air transportation industry today for sources of long term financing under reasonably liberal terms. The airlines are facing the necessity for complete replacement of their fleets of outmoded and obsolete equipment with new design having greater efficiency and economy in operation. Such a transition will require tremendous outlays of capital by aircraft manufacturers and the air transportation industry. The Government and the Congress are cognizant of the importance to our nation well-being of providing the means for healthy advancement of aviation with Federal support. To that end the President of the United States, the Civil Aeronautics Board, the Reconstruction Finance Corporation and the Bureau of the Budget have recently launched a very timely and constructive program setting the machinery in motion for the establishment of a medium within the Government through which adequate financing may be made available. From that program both airline management and stockholders may take encouragement and look with greater optimism to what the future offers.

In our annual report to the stockholders for the years 1946 and 1947, we advised you of our pending application before Civil Aeronautics Board in the Middle Atlantic States case for a route between New York and Washington and a route between New York, Syracuse and Buffalo. There routes, if granted, would contribute very materially to the earning capacity of you company and permit us to achieve better integrated operations with greater efficiency and economy. The processing in which our application is under consideration still remains open before the Board on motions by Colonial and other carriers and we are hopeful that upon reconsideration the Board will follow the recommendation of its Examiners and award the routes to us.