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PAD-77-78 1 (1977-09-02)

handle is hein.gao/gaobabkvm0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 IN REPLY PROGRAM ANALYSIS REFER TO: DIVISION B-182682 September 2, 1977 Stephan P. Carrier Bureau Counsel 1 Bureau of Operating Rights Civil Aeronautics Board LM090184 Washington, D.C. 20428 Dear Mr. Carrier: This letter is in response to your inquiry (B-1-72) of March 10, 1977 to Comptroller General Staats. As you are aware, we were not able to respond within the time you requested. However, it is our under- standing that this information will reach you in time to be useful in your investigation into whether and in what manner financial institutions may influence the management of air carriers. Our work that is most directly related to your area of inquiry is still not as far along as we had hoped, so that at this time we are only able to make certain general comments. While the General Accounting Office has not been involved in a specific analysis of the market in which air carriers seek financing, we have studied several relevant aspects of the economics of the airline industry. One of our recent reports, entitled Lower Airline Costs Per Passenger are Possible in the United States and Could Result in Lower Fares, analyzed in considerable detail certain aspects of airline regulation and finance. We have also examined several private studies (especially, Air Transport Association of America, The Sixty Billion Dollar Question and Donaldson, Lufkin & Jenrette, Domestic Trunk Airlines: A Shortage Industry in the Making-Fleet and Capital Require- ments, 1976-90) as well as a CAB study that provided estimates for future capital requirements in the airline industry. Currently we are undertaking a study which in part will review certain aspects of the capital markets as they relate to the airline industry. At issue is the free and sufficient accessibility of airlines to the financial markets. In this study, we will be interested in deter- mining the conditions set forth in loan (lease) agreements between airlines and their lenders (lessors). Our concern is with the effects that these agreements may have on the economic standing of the firm and on the efficiency of the capital markets. Our main interest is not with regard to whether the loan agreement constitutes control in the legal sense, as is your stated interest. 5~/~2//~& J~ ~PAD- 77-78

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