Not Far Distant Future

As a newsmaker, aviation is No. 1 U. S. industry. Whether a planeful of prominent people smacks a mountain or Charles Augustus Lindbergh asks for bids for huge airliners, aviation crashes the front pages. This obscures in investors' minds the fact that as business the aviation industry is small potatoes. Last week a small, handsomely-printed volume summarized neatly and ably the striking characteristics of this diminutive industry. Its author was William Barclay Harding, who prepared it for the clients of his firm, the Wall Street house of Chas. D. Barney & Co.* Wall Street houses constantly prepare brochures on U. S. industries but for several years there has been no survey of aviation from a financial point of view of anywhere near such completeness. Its noteworthy facts and opinions on the two great divisions of the industry, manufacture and transport:

P: In 1936 the manufacturing gross of the industry was about $83,000,000--compared to $153,000,000 for office equipment, $328,000,000 for refrigerators. $2,448,925,000 for automobiles & trucks.

P: Division of the sales: $47,000,000 worth of planes, $26,000,000 worth of engines, $9,000,000 worth of parts (radios, propellers, instruments, etc.).

P: Expected 1937 sales: $110,000,000 (best in history). Reason: big U. S. purchases of Army & Navy planes.

P: Can the increase keep up? Probably through 1938 at least.

P: This does not mean that the securities of any manufacturer of military planes is a good buy, for military plane construction necessitates huge development expenses which may go for nothing if a competitor gets the contract.

P: Airlines grossed $36,700,000 in 1936--compared to $275,000,000 for busses, $4,052,000,000 for Class I railroads.

P: Airline business has more than quadrupled since 1929. but no airline in the U. S. has yet made a substantial profit (United Air Lines made only $367,000 last year).

P: Airmail rates have been drastically low ever since the notorious air mail contract cancelations of 1934 and the abortive Air Mail Act it produced. Airlines are generally considered a heavily subsidized industry, actually are barely so, since sales of stamps almost equal Post Office payments to the lines ($12,000,000 for domestic lines for the fiscal year 1936-37).

P: Best chance for an investor to share in airline progress: the growth of trans-ocean flying, now almost entirely concentrated, so far as concerns the U. S., in the hands of Pan American Airways.

P: Pan American is prosperous and will almost certainly be flying the Atlantic next summer on commercial schedule, but the company has been severely criticized as a monopoly; in 1939 its profitable South American mail contracts expire and are unlikely to be renewed at the present high rate. "Therefore the only present medium of investment in the promising foreign field is the stock of a company which is facing a major crisis in the not far distant future."

*Soon to become Smith, Barney & Co. by merging with Edward B. Smith & Co. (TIME, Dec. 20).

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