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![handle is hein.gao/gaobacxpt0001 and id is 1 raw text is:
DOCUMENT RESUME
03667 - [A26!3836]
(response to Civil Aeronautics Board Request for Information in
Relaticn to Investigation of Possible Influence by Financial
Institutions on anagement of Air Carriers]. September 2, 1977.
3 pp.
Report to Stephan P. Carrier, Bureau Counsel, Civil Aeronautics
Board: Eureau of Operating Rights; by Dean K. Crowther (for
Harry S. Havens, Director, Program Analysis Div.).
Issue Area: Transportation Systems and Policies (2400).
Contact: Program Analysis Div.
Budget Function: Commerce and Transportation: Air Transportation
(405).
General informaticn was supplied relevant to a Civil
Aerunautics Board investigation of the manner ia which financial
institutions may influence the management of air carriers.
Recent GAO wcrk has dealt with some aspects of airline
regulation and finance. A current review of capital markets will
deal with the issue of free and sufficient accessibility of
airlines to financial markets. The concern is with the effect of
loan agreements between airlines and their lenders on the
economic standing of the firm and on the efficiency of the
capital markets. Findings/Conclusions: An investigation of
possible control cf airlines by financial institutions should
seek an understanding of causes of such situations. The airline
industries' large capital needs, with a large proportion
financed externally, has resulted in a large outstanding long
term debt ard a highly leveraged capital structure. The
volatility of airline industry pLofi-s has limited access to
open credit markets and created reliance on insurance companies
and banks. The financing methods used entail contractual
relationships which facilitate the ability of lenders to extract
conditions involving certain constraints from the borrower.
Other factors such as State laws contribute to conditiona
leading tc invclvement of financihl institutions i- airline
management decisicns. (HTV)](ViewImageLocal?handle=hein.gao/gaobacxpt0001&div=1&collection=&method=preview&ext=.png&size=3)