Bad News for American

The second biggest & richest of all U.S. airlines--American Airlines, Inc.--was knocked into a tail spin last week.

The Civil Aeronautics Board's decision on American's mail subsidies was much tougher than anyone expected. Ever since CAB started its investigation in the tail end of 1939, dopesters had figured the company might have to return $1-2,000,000 to the Government. But CAB bypassed such estimates, ruled instead that American had received $3,815,856 "excessive" mail pay in the two years ended Nov. 30, 1941, should return all of it (with allowance for $1,100,000 Federal taxes paid).* It further ruled that, beginning April 1, American will get mail pay of only 12-c- a mile for routes up to 35,000 miles daily, even less for longer runs. The old rates (set by ICC): 25 to 33 1/3-c- a mile.

The new pay rates, CAB announced, will net American 9.86% on its investment. But Wall Streeters grabbed telephones, told customers the new rates would cut American's profits up to 50%. The stock nose-dived 4 1/2 points to 32 1/2, a three-year low.

This week American Airlines pointed out that total net income from all sources between May 13, 1934 (the day it started flying) and Nov. 30, 1941 was $3,993,272 -only $177,416 more than the "excessive" mail pay charged by CAB. Snapped the airline: "The rates ordered by CAB are . . . unfair, unreasonable and unjust . . . [they] stifle opportunity . . .penalize initiative and enterprise."

*CAB itself cannot collect, but the ruling cleared the way for a Post Office suit.

This file is automatically generated by a robot program, so reader's discretion is required.