Appendix — Hughes Tool Co. v. Trans World Airlines, Inc.

INDEX

Volume AX-I

Irem

TWA Ex. 2 (Statement of Robert W. Rummel) ..

TWA Ex. R-3 (Toolco-Convair Amended Agree-

ment—Model 22, 6/4/56)

TWA Ex. R-5 (TWA-Toolco Purchase Agree-

ment—May 9, 1960)

TWA Ex. R-8(80) (FAA Registration Docu-

ments—B707-331, No. N771TW) -.0......-:10---0. ra

TWA Ex. R-8(81) (FAA Registration Docu-

ments—B707-331, No. N772TW)

TWA Ex. 3 (Affidavit of J. B. Connelly) 0...

TWA Ex. 4(b) (C. & C. Report—Comparative

Profit Study)

TWA Ex. 4(c)(1) (C. & C. Report—Financial

Results from Reconstructed Jet Fleet) ...........

TWA Ex. 4(c)(4) (Exhibits B-J to C. & C. Re-

port—Financial Results from Reconstructed

Jet Fleet)

Volume AX-li

TWA Ex. 5(a) (Drexel Harriman Ripley, Inc.

Report—Parts I & II)

TWA Ex. 5(b) (Exhibits to Drexel Harriman

Ripley, Inc. Report)

AX-1

. ee

hes

Ire

TWA Ex. 7(b) (1) (Price hs braneceocees Study—

Volume One)

TWA Ex. 7(b)(2) (Price Waterhouse Study—

Volume Two)

- Velume AX-III

TWA Ex. 10 (Letter—Boeing to TWA re 707

Negotiations—12/29/54)

TWA Ex. 12 (Toolco-Convair CV-990 Purchase

Agreement—11/10/60)

TWA Ex. 13 (Holliday Call Sheet—Feb. 20-27,

1961)

TWA Ex. 14 (CV-990 Purchase a

Amendment of 2/22/61)

TWA Ex. 22 (Rummel Call Sheets) 2...

TWA Ex. 23 (Letter Agreement—Sale of Six

Boeings to Pan American)

TWA Ex. 39 (Affidavit of Joseph P. Ripley) ..

‘TWA Ex. 42 (C. & C. Report—Revision of

63, 64, 71 & 72)

TWA Ex. 43 (C. & C. Report—Revision of

Page 51)

TWA Ex. 46 (Jet and Turboprop Aircraft of

TWA and Principal Competitors—1958-66) ....

TWA Ex. 47 (Boeing Aircraft Employed on

Routes Formerly Served by B-720Bs) —........

AX-452

beg.

Irem

TWA Ex. 50 (Price Waterhouse Report—Sum-

mary of Application of Assumptions) AX-744

TWA Ex. 72 (TWA Annual Report—1939) _... AX-745

TWA Ex. 73 (TWA Annual Report—1940) _.._ AX-752

TWA Ex. 74 (TWA Annual Report—1941) .. AX-758

TWA Ex. 75 (TWA Annual Report—1942) .. AX-760

TWA Ex. 76 (TWA Annual Report—1943)

TWA Ex. 77 (TWA Annual Report—1944) .... AX-766

TWA Ex. 83 (TWA Annual Report—1950)

TWA Ex. 84 (TWA Annual Report—1951)

’ TWA Ex. 86 (TWA Annual Report—1953) ........

TWA Ex. 87 (TWA Annual Report—1954)

TWA Ex. 88 (TWA Annual Report—1955) ...... AX-814

TWA Ex. 89 (TWA Annual Report—1956)

TWA Ex. 90 (TWA Annual Report—1957)

TWA Ex. 91 (TWA Annual Report—1958) .....

TWA Ex. 92 (TWA Annual Report—1959) ......

TWA Ex. 93 (TWA Annual Report—1960)

iv

Irex

TWA Ex. 94(‘TWA Annual Report—1961)

TWA Ex. 96 (TWA Annual Report—1963) ___

TWA Ex. 128 (Pan American Annual Report—

fog

TWA Ex. 132 (Pan American Annual Report—

1963) e .

TWA Ex. 155 (AAL Annual Report—1958) _..

TWA Ex. 158 (AAL Annual Report—1961) .......

TWA Ex. 159 (AAL Annual Report—1962) ........

TWA Ex. 184 (UAL Annual Report—1959) ....

TWA Ex. 186 (UAL Annual Report—1961) ...

TWA Ex. 187 (UAL Annual Report—1962) ....

TWA Ex. 192 (TWA Prospectus, vavel & Sup-

plement, 6/20/61)

TWA Ex. 194 (TWA Prospectus—6/17/57) ........

TWA Ex. 223 (Pan American Prospectus—

7/8/45—Supplement—7 /24/45)

TWA Ex. 249 (American Airlines Prospectus—

6/11/46—Supplement—6/24/46) ....-..---.

TWA Bx. 257 (TWA-Tooleo Lease Agreements

—Boeing Jets)

TWA Ex. 264 (Toolco-Lockheed Purchase

Agreement—L-1449A—12/23/54) ....................

TWA Ex. 266 (Toolco-Lockheed Purchase

Agreement—L-1049G—9/26/55)

PAGE

AX-862

AX-866

AX-868

AX-869

AX-870

AX-871

AX-873

AX-874

AX-875

AX-876

AX-877

AX-883

AX-889

AX-891

AX-893

AX-901

AX-908

Trem

TWA Ex. 267A (Letter, TWA to Tooleo—1957

Common Stock Offering)

TWA Ex. 267B (Letter, TWA to N.Y. Trust

Co.—1957 Common Stock Offering) .............. a

TWA Ex. 271 (Letter, Tooleo to SEC—1957

Common Stock Offering)

TWA Ex. 275 (TWA Board Minutes—April 26,

1945)

TWA Ex. 276 (TWA Finance Committee Min-

utes—September 12, 1945)

TWA Ex. 277 (Page from Banking Quotation

Record)

TWA Ex. 278 (TWA Board Minutes—November

8, 1946)

TWA Ex. 279 (Special TWA Stockholders Meet-

ing—December 23, 1946—Judges’ Report) ......

_ TWA Ex. 280A (Minutes—Adjourned Special

TWA Stockholders Meeting—December 28,

1946)

TWA Ex. 280B (Adjourned Special TWA Stock-

holders Meeting—December 28, 1946—Judges’

Report)

TWA Ex. 281A (Minutes—Adjourned Special

TWA Stockholders Meeting—December 31,

1946)

TWA Ex. 281B (Adjourned Special TWA Stock-

holders Meeting—December, 31, 1946—Judges’

Report) :

\ Trem

TWA Ex. 282 (Minutes & Judges’ Report—Ad-

journed Special TWA Stockholders Meeting

—January 6, 1947)

TWA Ex. 283 (TWA Board Minutes—December

18, 1946)

TWA Ex, 284 (TWA Board Minutes—December

27, 1946)

TWA Ex. 285 (TWA Board Minutes—December

28, 1946)

TWA Ex. 287 (TWA Board Minutes—January

9, 1947) ,

TWA Ex. 288 (Minutes—Adjourned Special

TWA Stockholders Meeting—January 13,

1947)

TWA Ex. 290 (TWA Board Minutes—June 15,

1948)

TWA Ex. 292 (TWA Proxy Statement—July

15, 1948)

TWA Ex. 293 (TWA Prospectus—2/18/49 &

Amendments—3/8/49)

TWA Ex. 313 (Debt Outstanding & Available to

TWA & Competitors—1961-63)

TWA Ex. 314 (Weighted Average Interest—

TWA & Competitors—1960-63)

TWA Ex. 319 (Least Squares Analysis—S.H.E.

Avg. Stage Length—B-331s)

PAGE

AX-945

AX-950

AX-956

AX-962

AX-966

AX-974

AX-980

AX-991

AX-993

AX-1051

AX-1060

AX-1065

- Trem

TWA Ex. 320 (Least Squares Analysis—S.H.E.

Avg. Stage Length—CV-880s)

TWA Ex. 321 (Least Squares Analysis—S.H.E.

Avg. Stage Length—B-131s)

TWA Ex. 322 (Least Squares Analysis—S.H.E.

Avg. Stage Length—B-131Bs)

TWA Ex. 328 (S.H.E.—Passengers Added/

Deleted—Reconstructed TWA)

TWA Ex. 331 (TWA Historical Load Factors—

CV-880s—1962-1963)

TWA Ex. 336 (Comparison TWA Int'l vs. PAA-

Atl.—1959)

TWA Ex. 345A (Price Waterhouse Comparison

—C. & C. and S.H.E. (Revised) )

TWA Ex. 351 (1965 CAB Handbook of Airline

Statistics )

TWA Ex. 355 (Comparative Profit Study—

TWA with AAL & UAL)

TWA Ex. 356 (Comparative Profit Study—

TWA with All Other Domestic Trunks)

TWA Ex. 399 (Comparison, TWA Actual Jet

Load Factors vs. S.H.E. Marginal Passenger

Mile Factors) AX-1112

TWA Ex. 401 (TWA B-131 Load Factors—

April-July 1959) AX-1113

TWA Ex. 420 (Price Waterhouse Comparison—

C. & C. (Revised) and S.H=.) AX-1114

iy

Trem

TWA Ex. 423 (Late mrning Flights—TWA

1961-1963)

TWA Ex. 424 (Cargo v. Passenger Revenue—

TWA Late Evening Flights)

TWA Ex. 426 (Comparison of Selected A/C

Numbers from S.H.E. Appendix A)

TWA Ex. 431 (Profitability of TWA A/C by

Month—Computer Print-out)

TWA Ex. 432 (Profitability of TWA A/C by

Month—Chart) .

TWA Ex. 435 (Regression —cqcguibommaes

Numbers)

TWA Ex. 486A (Regression nog oerna

Numbers)

TWA Ex. 436B (Regression ENED

Numbers)

TWA Ex. 436C (Regression Analysis—Random

Numbers) .

TWA Ex. 440 (Graph Illustrating Testimony of

Prof. Hare)

TWA Ex. 441 (Regression ages

3/23/68) esssseue

TWA Ex. 444 (C. & C. Tabulation—Additional

TWA Domestic Seat-Miles)

. a

AX-1129

AX-1133

AX-1134

AX-1135

AX-1145

AX-1146

AX-1154

AX-1157

AX-1160

AX-1163

AX-1164

AX-1177

ix

Volume AX-IV

ITEM

DX4 (Tooleo Order—30 P.&W. JT3C4 Engines,

2/14/56)

DX5 (Letter—Tooleo to P.&W. re Jet Engine

Orders, 2/14/56)

DX6 (Tooleo Order—90 Additional P.&W.

JT4A-3 Engines, 2/15/56)

DX7 (Amendment—Toolco Order for 300 P.&W.

Jet Engines, 9/7/56)

DX8 (Letter—P.&W. to Rummel re 300 Jet

Engines, 9/7/56)

DX10 (Letter—Rummel to Collings re Boeing

707, 1/12/55)

DX11 (Notes of Convair Negotiations—March

24, 1955)

DX15 (Draft C.&C. Report—TWA Financial

Forecast 1959-61)

DX19 (Page from Aviation Week, Jan. 10,

1955)

DX22 (American Aviation, June 20, 1955, pages

21-23)

DX26 (American Aviation, Sept. 12, 1955, pp.

84-85)

DX27 (American Aviation, Oct. 10, 1955, p. 68)

DX28 (Pages from American Aviation, Oct. 24,

1955)

“

Trem | _. * PAGE

DX29 (Aviation Week, Oct. 17, 1955, p. 7) ——. AX-1218

DX31 (American Aviation, Nov. 7, 1955, pp.

23-25, 27-28) AX-1219

DX40 (TWA Board Minutes—June 21, 1961)... AX-1224

DX43 (Excerpts from Deposition of Robert W.

Rummel) - AX-1229

DX44 (Letter of Damon, Dec. 6, 1955) -............ AX-1369

DX45 (Letter—Leslie to Dietrich, Dee. 19, 1955) AX-1378

DX46 (Letter—Dietrich to Ayers, Dec. 21, 1955) AX-1382

‘DX47 (Boeing-Tooleo Purchase Agreement—

8 B-131s, 1/10/56) AX-1385

DX48 (Teletype—Boeing to Toolco re B707-

131s, 11/11/56) , AX-1390

DX51 (Boeing Offer of B707-320s to Toolco,

1/6/56) AX-1391

DX53 (Transcript of Telephone Conversation—

Rummel & Connelly, 12/20/57) AX-1393

DX54 (TWA Board Minutee—June 26, 1959) ae AX-1402

DX57 (The Huntington Report—1960) ............. AX-1410

DX62 (TWA Fleet Requirements 1961-70, dated

3/1/61) ,

DX63 (TWA Financial Forecast 1959-61, dated

5/15/59) - AX-1433

DX64 (Letter to Thomas, dated 5/6/59) .......... AX-1438

AX-1420

Irem

DX65 (TWA Staff Engineering Report re Jets

& Turboprops—4/19/56)

DX66 (Toolco-Boeing Contracts—B707-131s,

3/2/56)

DX67 (Toolco-Boeing Contracts—B707-331s,

3/19/56)

- DX68 (Toolco-Convair Contracts—CV-880s,

9/10/56)

DX71 (Rummel Memo re TWA Equipment Pro-

gram, 3/15/61)

DX72 (Telegram—Bew to Rummel—2/27/61) ....

DX73 (Letter—Leslie to Holliday—3/20/61) ....

DX74 (Letter—Leslie to Holliday—4/3/61)

DX77 (Letters—Tooleo to TWA re Financing

Additional Jets, 6/9-10/61)

DX78 (Letter—TWA to Holliday re Financing

Proposals, 6/16/61)

DX79 (Pan American-Boeing Purchase Agree-

ment—B707-120s, 10/13/55)

DX81 (Pan American-Boeing Purchase Agree-

ment—B707-321s, 12/19/55)

DX85 (Boeing-AAL Purchase Agreement—

B707-123s, 3/1/56)

DX95 (Allen Letter Announcing Boeing Jet,

Nov. 19, 1954)

DX96 (Boeing Offer to Sell Pan American 25

B-120s, 6/23/55)

Irem

DX97 (Boeing Offer to Sell American 15 B-120s,

6/24/55)

DX98 (Boeing Offer to Sell United 15 B-120s,

6/24/55)

DX101 (Boeing 707 Delivery Positions) ..........

Volume AX-V

DX102 (Boeing Memorandum re 707 Over-Ocean

Configuration, 11/2/55)

DX103 (Boeing Memorandum re TWA Delivery

Positions, 12/23/55)

DX105 (Boeing Memorandum re Negotiations

with TWA, 7/24/56)

DX106 (Letter—Rummel to Cook re Boeing

Deliveries, 1/28/58)

DX107 (Letter—Rummel to Cook re Boeing

Deliveries, 3/17/58)

DX108 (Letter—Price to Allen re Boeing

Deliveries, 3/30/58)

DX109 (Letter—Tooleo to Allen re Boeing

Deliveries, 5/8/58)

DX116 (Rourke Memo to Rummel re CV-880

Deliveries, 1/15/60)

DX120 (TWA Memorandum re CV-880 Deliv-

eries, 10/2/59)

DX122 (Bew Memorandum to Cannady re CV-

880 Deliveries, 12/18/59)

Irem

DX124 (Parmet Memorandum to Rourke re CV-

880 Deliveries, 1/13/60)

DX125 (TWA Memorandum re CV-880 Deliv-

eries, 1/22/60)

DX127 (Rummel Memorandum to Rourke re —

Integration of CV-880s, 2/8/60)

DX128 (Letter—Rourke to Digges re Specifica-

tion Modifications, 4/7/60)

DX130 (Bew Wire to Rourke re Convair Delays,

5/27/60)

DX135 (Letter—Convair to Bew re CV-880 De-

livery, 1/6/61)

DX137 (Telegram—Bew to Rummel re Convair

Delays, 2/16/61)

DX139 (Letter—Convair to Bew re Convair

Delays, 3/16/61)

DX142 (Letter—Convair to Rourke re CV-880

Deliveries, 7/11/61)

DX143 (Letter—Rourke to Convair re CV-880

Deliveries, 8/2/61)

DX146 (Letter—Convair to Toolco re Model 30

Delivery Positions, 5/6/60)

DX148 (Tooleo—General Dynamics Letter

Agreement re 6 Model 30s, 7/14/60) ................

DX152 (Toolco—General Dynamics Letter

Agreement re Additional Model 308, 9/6/60)

PAGE

AX-1627

AX-1629

AX-1630

AX-1638

AX-1640

AX-1641

AX-1643

AX-1644

AX-1647

AX-1650

AX-1652

AX-1654) |

AX-1655

xiv

Trem

DX156 (Telegram—Beall to Allen, et al. re

PAA Negotiations, 9/28/55)

DX168 (Boeing Memorandum re Conversations

with Howard R. Hughes, 9/23/55)

DX169 (Boeing Memorandum re Conversation

with Howard R. Hughes, 10/31/55)

DX170 (‘Telegram—Boeing to Tooleo re B707-

331s, 7/21/59)

DX218 (C.&C. Letter to Leslie re TWA Finan-

cial Forecast, March 13, 1959)

DX219 (TWA Financial Forecast 1958-1962,

dated 12/1/58)

DX237 (Aviation Week & Space Technology,

11/13/61, pages 42-43)

DX239 (Airlift, May 1962, p. 46)

DX254 (TWA Board Meeting, Aug. 16, 1961—

Report of System General Manager)

DX255 (Statement of CAB Chairman Boyd,

Jan. 29, 1960)

DX257 (Aviation Week, 1/30/61, pp. 36-37)

DX258 (Report to Directors of TWA—Oct. 13,

1961)

DX259 (CAB Order of Investigation—Dec. ‘28,

1961)

DX260 (Letter—Tillinghast to CAB, Jan. 29,

1962)

_ PAGE

AX-1657

AX-1658

AX-1660

AX-1661

AX-1664

AX-1666

AX-1671

AX-1673

AX-1674

AX-1677

AX-1681

AX-1683 |

AX-1694

AX-1703

Irem

DX262 (Revised Pages 70-73 of TWA Ex. _

4(c)(1)) AX-1708

DX270 (Report of Loeb, Rhoades & Co.) ............ AX-1712

DX271A (S.H.E. Report (Revised)—Volume

One) AX-1789

DX271B (8.H.E. Report (Revised)—Volume

Two) AX-1859

DX284 (TWA ‘Prospectus—Nov. 20, 1952) ........ AX-1961

DX286 (TWA Board Minutes—Jan. 13, 1955) ..... AX-1967

DX287 (TWA Board Minutes—Dec. 13, 1955) .... AX-1970

DX289 (TWA Board Minutes—April 26, 1956) .. AX-1974

DX290 (Tooleco-TWA Conditional Sale Con-

__tract—L-1049Gs, 6/6/56)

| V4 . Volume AX-VI

/ DX292 (Toolco-TWA Conditional Sale Con-

\ tract—L-1649As, 4/19/57) AX-1995

DX321 id. (CAB Orders & Documents) .............. AX-2012

DX322 id. (CAB Orders & Documents) .............. AX-2191

DX323 id. (CAB Orders & Documents) ..............

Volume AX-VII

DX334 (Correlation Coefficients—Substituted

S.H.E. Table G-VII) AX-2427

DX339 (B-120s Available to AAL, Actual vs.

~ Reconstructed—1959)

Irem

DX341 (Domestic Carriers—Jets Assigned to

Service, 1959-63)

DX342 (TWA’s Share of Jets Assigned to Do-

mestic Service, 1959-63)

DX348 (Revised Summary—Categories of Dif-

ferences—Wemple vs. Simat)

DX358B id. (CAB Form 41 Reports—Northeast

Airlines, 1957-1966)

DX358C id. (CAB Form 41 Reports—PAA,

1957-1966)

DX359A (Supplemental S.H.E. Report—Volume

A)

DX364 id. (Excerpts from Deposition of Emmett

0. Cocke)

DX367 (Combined Non-Stop Scheduled Fre-

quencies Per Week—Aug. 1958-63) —...........

DX368 (Combined Non-Stop Scheduled Fre-

quencies Per Week—Aug. 1958-63)

DX371 (Summary—Categories of Differences—

Wemple vs. Simat (Supplemental)) —.........

DX379 (Domestic Jet Seat Miles—Wemple vs.

Historical)

AX-2429

AX-2430

AX-2431

AX-2452

AX-2454

AX-2458

AX-2843

AX-2851

AX-2853

AX-2856

AX-2867

i DX 334 —

pepelation Coefficients-Substituted S.H.E. Table G-VII) /

c

fable G--VII

: CORRELATTON COLFFICIENTS PRODUCED BY TESi's

TO DETERMINE THE PROPER COSTING UNT'T

FOR ‘MIE AIRCRAPY SERVICING EXPENSE

Wergitved ~~ AVaLTebie pf wa‘ ~~

Aircraft Ton Miles Costing

Source of. Information Departures Flown |:

(+) . (2) (3)

Domestic Cross-Section

Experience - All Carriers

2959

_ £950

1951

1863

Domestic Time..Series

Experience - All Carriers

International Cross-Section

Experience - All Carricrs °

59

1960

Va

Internetional Time Series

Experience ~ Al}. Carriers

Leeesdmeti U

“—~

TWA Domestic Time Series

Expericnce

ow

MA Internationel Tine

Series Experj.ence

AX-2428

Tabuliction:

DX 339 3

(B-120s Available to AAL, Actual vs. Reconstructed-1959)

Awerican AirJines Boeing 707-120 aircraft

available, actual versus reconstructed dolivery - 1959

Aircraft

Actual Days Avail-.

B 707-120 Receipt able - 1959

Aircraft Dates (Actual

(I) (2) (3)

# 1 10-23-58 365

2 12-31-58 365

; 1-23-59 343

1-31-59 335

5 2-13-59 322

“ee 2-27-59 308

is -27-59 280

-9-59 267

9 4-23-59 253

10 5-4-59 eke

il 5-12-59 234

12 5-21-59 22

1 5-28-59 21

1 6-5-59 210

15 6-24-59 191

16 6-29-59 186

1 7-27-59 158

1 £3272? 1

19 -12-59 142

20 8-24-59 130

21 9-15-59 108

22 10-5-59

2 10-14-59 79

2 10-28-59 65

25 11-20-59 he

Total Aircraft

Days Available 2310

5310 days + 365 days = 14.55

aircrart available

(actual - 1959)

Aircraft

Rummel 's Days Avai)

Reconstructed able - 19

Receipt Dates ( reconstru

(4) (5)

10-23-58 365

10-30-58 365

1-29-59 337

2-13-59 322

p727 299 280

-9-59 267

4-23-59 253

4-29-59 247

5-44-59 eho

5-12-59 234

5-21-59 22

5-28-59 21

6-5-59 210

6-24-58 191

7-1-59 1

7-14-59 171

-31-59 1

-1-59 153

8-12-59 142

8-24-59 130

9-15-59 108

10-5-59 »

10-14-59 9

10-28-59 5

11-20-59 ho

Total Aircraft

- Days Available 2072

5072 days + 365 days = yi.

13.90 aircraft available

(reconstructed - 1959)

. Difference between B 707-120 availability to |

American of ual versus reconstructed, 1959) = 14.55

A/c - 13. ve = .65 A/C

pees A EA |

Sourceh: Coln. 2 end 4, TWA

-Cols. 3 and 5, by'c

Ex. 2, Annex D.

onpu ation.

ook 4

DX 341 dahl

(Domestic Carriers-Jets Assigned to Service, 1959-63)

r

a

$ 2

qnes

tr © i 9 ree)

Wester:

Northwest

Northeast

Braniff Continental Delta National

TILES AND

-

'.

WS PASSEXGER F

C.A.3. - Air Carrier Analytical Chorts 2:7 fice

Ymo nw

or

AGRE

.

se

Ye WMO %

ORR RS

g

&

8

g

-

E

=

8

3

iy

8

(beck

JET AIRCSAFT ASSIGNED TO SERVICE

—_9

if

Weeee | Bornma

agave 4agasa

¢

,

. q Ehioss ”~¢

Wages Dio mt

S835 OnaS h

AVERAGE NUMBER OF

TAA

4

af

PERCE? OF DOMESTIC SCiISDULFI HE

AVAILASLE SEAT MILES

Mer DO

“ide

Eastern

Ro e102 ™

AD A a

IVSRS

tod

Azerican

Sage, Cord, J die le

Ww i-

sizned to

se Suxtcr- of Jet

cratt A

-

corvice

ATA - Comsarative Staterent of Air Carricrs' Aircraft Oner

+1959 and 1960 figures exclude Capital Airlines

alse

air

eyenue Pacscaver Miles

ources:

D

{ee

Se il

"a? “2

SS eae

AX-2430 os

“N

4 We

(TWA's Share of Jets seasened’ ta Domestic Service, 1959-63)

TWA's SHARE OF BIG THREE JET AIRCRAFT ASSIGNED TO SERVICE

Domestic Division - Carrier's Equipment

Years 1959 - 1963

_ Number of Jet Aircraft Assiaqned to Service

Carrier 1959 1960 1961 1962 1963

TWA $0: ite 34.7 48.3 57.4

American 13.7 26.6 39.1 56.8 62.3

United 1.8 26.0 52.7 80.3 82.1

Total Big Three 24.5 76.3 -126:5 185.4 201.8

- Percent of

Big Three Jet Aircraft Assigned to Service

~-_---

TWA 36.7% 25.1% 27.4% 26.1% 28.4%

American 55.9 37.9. 30.9 30.6 30.9

‘United 7.4 37.0 41.7 43.3 40.7

100.0% 100.0% 100.0% 100.0% 100.0%

Source: Air Carrier Analytical Charts and Summaries, C.A.B.

Pea

ae

ee AX-2431

Be: DX 348, page 1

“(Revised Summary-Categories of Differences-Wemple vs. Simat)

‘REVISED SUMMARY OF CATEGORIES OF

DIFFERENCE BETWEEN ESTIMATES OF

MR, WEMPLI: AND MR. SIMAT

This revised memorandum is submitted by

defendants in response to the wish expressed by the

Special Master (Tr. 7898) for a summary of the

"categories of difference" between the estimates made by

plaintiff's expert, Mr. Wemple, and defendants‘ expert,

Mr, Simat, of the changes in plaintiff's operating profits

that would have resulted from certain assumed changes in

plaintiff's jet aircraft fleet during the period 1959-1963.

It is intended as an objective comparison.

Mr. Simat's estimates in this memorandum have

been revised to reflect (1) the deletion of B-331B costs

and (2) the application of revised marginal load factors

based upon Mr. Simat's corrected method of adjusting for

economic growth.

1. Overall Comparisons , ¥

The overall difference in the estimate of changes

in operating profits (excluding changes related to the issue

oft leasing versus ownership of B-13ls and B-331s in 1959 and

1960) is, approximately $91.8 million. Mr.’ Wemple has estimated

ear t

that operating profits would have been imp) oved by $51.5 million,

¥ have deteriorated

Lite Mr. Simat has estimated that they wo

a 0.3 million.

AX-2432 sais ae ae 7 DX 348, page 2 a

(Revised Summary-Categories of Differences-Wemple vs. § at)

These figures are not entirely comparable, howeve:

Although Mr. Wemple's figures provide for an increase in é

preciation costs of jet aircraft of $44.1 million, a figure

supplied to him by Price Waterhouse, and an increase in ip.

surance costs of $5.5 million, both of which figures are

adopted by Mr. Simat 2 they make no provision for reductiog

in the costs of depreciation and insurance attributable to

piston aircraft removed from operations. The latter are

estimated by Mr. Simat at $14.6 ussei If the savings

in piston aircraft depreciation and insurance expense are

not considered, the difference between the two estimates

would be increased by $14.6 million to $106.4 million.

Each of these estimates represents a combination

of estimates, by year and by Division, for increased jet

operations and for decreased piston operations. The yearly

estimates for the entire period, arranged in these cate-

gories, are as follows:

ane

1/ TWA -4-C(4), Items A. of Ex. F, pp. 12, 20, 27, 35, 42,

6, 64; Ex. G, pp. 11, 19, 27, 353 Ex. H, pp. 10, 1935

J, pp. 10, 19, 27, 36. DX 331, as amended by Mr. Simat

letter of November 16, 1967, to Mr. Hayes, enclosed in

Mr. Perkins' letter to Mr. Tenney of November 16, 1967,

to reflect the correction of the 1963 marginal load

factor in DX 330. All further references to DX 331 ar

intended to incorporate this amendment.

2/ DX 331.

| | ey

DX 348, page 3 nee

_ (Revised Summary-Categories of Differences-Wemple vs. Simat)

Comparison of Changes in Jet and Piston Operating

Results by Division and Year (millions of dollars).

1959 1960 1961 1962 = -1963 1959-1963

i” “yo ' ae W S W s W S W

Y 10.5 - GA.7 « M8 -4 2 - 43.8 = «59.3

Ss * Oe AS! he ee a +27.6

“1.8 +10.8 -17.8+8.6 -20.3 41.1 + 2.8 45.1 45.4 429.2 -31.7

4 ;

6.6" - fa 4+ Ma. - wp.

+2.6 - 19.9 - +444.5 ~- NC a NC - +17.0

+2.0 415.2 +7.6 41.8 -4.7 42.5 -10.0 -.3 -3.1 +22.3 8.4

a 94 te

‘

“Weck — ead ~—“T-Tew Mat Te): rsa ‘

+0.3 ~ @26.0 « 449.5 - +6.9 - +1.6 - +44.6

46.7 +0.2 +26.0 -10.2 #04 “25.0 +3.6 -7.4 +4.8 4#2.3 451.5 -li0.1)

Source: TWA Ex. TC-I, PP: ef, 30, 37-38, 48, 49, 50, 64, 72; as amended

WA Exs. 42, 42(a), 43, 3(a). For Chapters II and IIT of c's C Report,

. Cargo revenues allocated between Domestic and International Divisions in

proportion to passenger revenues. Incidental revenues o1 $.2 million fo

1959, Chapter III (p. 49), allocated entirely to Domestic Division.

DX 331.

Mr. Wemple computes only the net changes in jet and piston operations.

The difference between this and the prior estimated change in DX 327 ("no

ver, printing out seven (12,44998). ‘This difference in rounding practi

_, Can eeeteent e of IATA seats throuch percentage of IATA passenge

absolute number of sengers, percentare increase in |IATA passenger

yanereased International Division revenues, leads to the ultimate difr-

ference of $0.6 million here noted. ‘| .

\-\

ference o 0.2 {1l40n between amount. dere nerd au on DX 1 d

‘

a

"

AX-2434 DX 348, page 4

(Revised Summary-Categories of Differences-Wemple vs. Simat), “iat

ee

Comparison of the estimates could also be made

in terms of each of the four Chapters in the C & C Report

(Chapters II-V) which deal with different equipment pren-

ises, but we do not believe this would serve the Master's

present pargoee 2’ What we propose here is a comparison

| of the basic equipment and operational assumptions,

followed by a comparison of the procedures used in estimatin

the revenue and cost changes resulting therefrom, together

with an assessment of the separate significance of the dif-

ferent procedures for the overall estimates in so far as it

_is possible to do so.

2. Equipment and Operating Assumptions

Mr.Simat accepts Mr. Wemple's assumptions as to

the number of jets to be added and as to the dates at which

they would be added. Overall Mr. Wemple assumed that the

additional jets end the earlier deliveries of such jets,

when placed in operation, would displace then existing

piston services. Mr. Simat accepts and follows this assump-

tion. They differ in their assumptions 88 to what pistons

The detailed results of Mr. Simat's estimates corre-

sponding to each of the four tbe & C a are set

forth in DX 331.

, DX 348, page 5 AX-2435

ied Summary-Categories of Differences-Wemple vs. Simat)

eae!

" ae Be

would be deleted in the Domestic Division, although Mr.

Simat accepts Mr. Wemple's assumption that the pistons

deleted in the International Division would be 1649As.

a. Jet

For the purposes of this report, Mr. Simat has used

the assumptions made by Mr. Wemple as to the additional annual

availabilities of jet aircraft and their allocation between

the Domestic and International Divisions (SHE Report, Vol. I,

Table II-A at II-5). He has also used Mr. Wemple's estimate,

based on these additional availabilities, of the number of

additional jet: plane miles which would have been flown each

year in each Division (Tables II-B and II-C at II-6).

“In addition, Mr Simat has estimated. with respect

to domestic operations only, the average length of hop at

which services with each type of jet would have been added

in each year (marginal stage length of added jet services).

Mr, Wemple does not discuss length of hop as a factor in his

estimates. It is Mr. Simat's opinion, however, that Mr.

Wemple's methods of estimating domestic yields on the basis

of annual averages and direct operating costs on the basis

of plane miles flown inherently assume that jet services

would have been added at the average existing stage lengths

for the year in question. )

ee.

-2436 DX 348, page 6 |

(Revised Summary-Categories of Differences-Wemple vs

Mr. Simat's method of estimating marginal stage

lengths is treated in Vol. II (DX 271B), Part A of his

report. The formulas for deriving marginal stage lengths

of added jet services are stated at A-7. Their principal

significance is in the estimation of yields and direct

operating costs for added domestic jet operations.

b. Piston

“For the International Division, Mr. Simat has

assumed, as Mr. Wemple did, that all of the piston aircraft

miles deleted would have been those flown with L-1649As

and that such plane miles would have been deleted in the

same annual amounts as those estimated by Mr. Wemple.

Domestic Division, the estimates differ. Both Mr. Wemple

and Mr. Simat estimate additional deletions of piston

plane-miles by the use of experienced ratios of piston-miles

deleted to jet-miles added.2’ Mr. Wemple confines his de-

leted miles to those flown with the longest-range planes,

the L-1049Gs and L-1649As. Mr. Simat allocates the deleted

plane miles among all the various types of piston aircraft

1/ Mr. Simat uses the ratios of total plane-miles added and

= deleted in each year. Mr. Wemple uses these ratios in

connection with added B-131 and B-331 plane-miles (C&C

Report, pp. 29, 44) but uses ratios derived from certain

| pairs of cities in different time periods in connec-

{ tion with added CV-880) plane-miles (Id. pp. 61-62, 69-70).

|

f

: |

j

i

/

oP

oF) e

: ee Pa

‘sed Summary-Categories of Differences-Wemple vs. Simat)

being operated in proportion to the experienced deletion

of plane miles by each such type during the year in ques-

tion. Mr. Simat's discussion of his method is contained

in Volume II, Part B of his report.” His estimates of the

additional piston-miles deleted each year by type of plane

are set forth in Table B-XI (at B-je.

The differences in estimation of the number of

additional piston-plane miles deleted (with respect to

added CV-880 plane-miles) and in the allocation of the

deleted miles to the various types of pistons affect a number |

of aspects of the estimates, both of piston revenues lost and

piston expenses saved, particularly under Mr. Simat's pro-

SéUuseo. Lv would ve w very difficult task to assign a rigure

to their net impact on the overall estimates.

Mr. Simat has derived formulas for estimating the

stage-length of deleted piston services (Vol. II, Table A-I

‘at A-7), and theseaffect his estimates of the yields and

direct operating costs applicable to the deletion of domestic

piston operations.

Applying rates of utilization for 1958 to his

estimates of piston-plane miles deleted, Mr. Simat has

estimated the number of additional piston aircraft retired

each year (Vol. II, Tables B-XIII and B-XIV at B-22, 23,

ih thi

a we ay

——

AX288 tii DX 348, page 8 ag

a ee

(Revised Summary-Categories of Differences-Wemple vs. Simat}”

24, 25). This is for the purpose of estimating the deprecia-

tion costs ($14 million) and insurance costs ($.6 million)

saved. Mr. Wemple has not estimated the number of L-1049Gs

and L-1649As which would have been retired under his pro-

cedures, nor the associated savings in depreciation and

insurance.

3. Revenue Estimates - Domestic Division

The estimates of gain or loss in domestic passenger

revenues associated with the estimated addition or deletion

of jet and piston plane miles are based upon the estimation

of changes in traffic (added or deleted revenue passenger-

miles), to which estimated yields (cents per revenue

passenger-mile) are then applied. Mr. Simat has followed

Mr. Wemple in adding 5% to estimated changes in passenger

revenues in order to arrive at estimated changes in total

transportation revenues.

a. Traffic Estimates

Mr. Wemple has applied the average load factor

experience by plaintiff in a particule year with a particular

type of jet (B-131, B-331, CV-880) or piston (L-1049G, 1-104

to his estimate of the added or deleted seat-miles flown with

that type of plane in that year. Mr. Simat has applied the

one — load factdr at which all types of jets

| ou 3 ||

DX 348, page 9

4 Summary-Categories of Differences-Wemple vs. Simat)

were added by plaintiff in the subsequent year (marginal ~—

load factor) to his estimate of added jet seat-miles for

a particular year. He has likewise applied marginal load

factors for all types of pistons to his estimates of deleted

piston seat-miles. The marginal load factors are adjusted

to remove the influence of economic growth.

Marginal load factors are treated by Mr. Simat

in Vol. II, Part C. The adjusted marginal load factors

are set forth in Table C-IX at C-23.

Mr. Wemple's use of average load factors results

in the addition of 3,940 million jet revenue passenger

miles and the deletion of 1,760 million piston revenue

passenger miles, or a net increase of 2,150 million revenue

passenger miles (TWA 4C-1, pp. 30; 45, 63, 70, as amended

by TWA Ex. 42, 42(a), 43, 43(a)).. Mr. Simat's use of ad-

justed marginal load factors results in the addition of

2,366.0 million jet revenue passenger miles and the deletion

of 2,847.3 million piston revenue passenger miles, or a net.

decrease of 481.3 million revenue passenger miles.

Application to these figures of the average yields

| used by Mr. Wemple results in a difference of $98.3 million

in the estimates of added passenger revenues from additional

‘ jet operations and a difference of $63.7 million in the

ae estimat s of deleted passenger revenues from displaced piston

oe | \\\ | ro |

7 | ' 4

|

ean

a. Sag

(Revised Summary-Categories of Di erences-Wemple vs. Simat

_

operations (Vol. IT, C-27). This makes a total difference

of $162.0 million in the estimates of changes in domestic

passenger revenues » reflecting principally the difference :

in the estimates of load factors applicable to added and.

deleted domestic operations. 7 2

1/ In the case of deleted piston services, it also reflects

the difference in the estimates of plane miles deleted

for added CV-880 plane miles and the difference in the

estimates of seat-miles deleted flowing from Mr... -Simat's

rp te as of deleted plane miles among all types of ©

pis A spuracsyhene :

+

= : : DX 348, page 11

‘sed ‘Summary-Categories PP olitciemes-inente VB. —

be Yield Estimates

: Mr. Wemple computes added passenger reyenues by

"applying to his estimates of added revenue. passe ger miles

flown the average yield per passenger mile expe ienced by

qWA for all revenue ‘passenger miles flown in its Domestic.

Division.for the year in question (e.g., C & € Report, p. 30).

“Bince passenger yields per mile diminish as length of trip

increases, Mr, Simat estimates yields appropriate to the

average trip length at which, in his opinion, jet. passengers’

- would be added (longer than the average) and piston passen-

gers deleted (shorter than the average) in each year. ©

Mr. Simat's procedures for obtaining his yield “8

~

Syvisuiates ace uree.ved in Vu. qi, Puri. ee The Tormuias ror

~Yelating passenger revenue to trip length are set forth in

Tables D-III and D-V at D-8 and D-10.. The relationships

between the estimated ratios of trip length of passenger ‘

. to stage length of aircraft are stated separately for jets

and pistons at D-18. Mr .. Simat applies these ‘ratios to the

marginal stage lengths for added jet services and deleted

“ piston. services as estimated o- ‘him in accordance with the

- formas in Part A.

An indication of the relative ‘significance of the

_} difference an estimation of yields is provided by Table D-IX

at D-21, in which Mr. Simit. has applied to Mr. ‘Wemple's

estimates of net added passenger. miles the annual yields

axe | eae ‘pasenan’ e 12

(Reviaed aerg-catntoplon of. Re Eecee: Hermie vs. Sima

determined by his tobeia. as those realized by. the plain-

tiff for a trip length of 1,453 miles (the actual average

trip length of all passengers added by plaintiff during

the period 1959-1963) . The application of these yieras’/ :

“reduces Mr. Wemple 's estimates of net added passenger

: revenues from $127. o. million to $122.6 million, or $4, 4

million.

The combined. ‘effect of the differences in the

eetination of added and deleted traffic and in the yields

applied thereto result in an overall difference of $164.5

million in the estimtes of:.added passenger. revenues as

. follows: © :

Mr. Wemple : Mr. Simat Difference’

~ Aadea a ees :

Jet. $229 Million » $136. 5 Million. $92. 5 Million

Deleted oe ae he

Piston. (102) " Rr es

> Net ? Ee 3 ao

Change $127 Million. ($37.5): Million $164.5 Million

(TWA 4c-1, pp. 30, 45, 63, 70, as amended by TWA

"Exe. 42, 4a(a), 43, 43(a)3 DX 332.)

y These are, of course, only an approxitmtion of the yields

actually cg by Mr. Simat. which vary with his estimates

1 stage lengths at which different types of

of the marg

equipment . were adden and deleted.

‘ ‘Dx 348, page 13

“Summary- —!, of A vs. Simat)

Z “Comparison of this $164.5 million difference.

| ath the difference of $162.0 million obtained by appli-

cation of Mr. _ Wemple"s yields to Mr. Simat's estimates

of added traffic gives another indication of the relative

’ significance of the. varying yield estimates.

: . “a ;

' he Revenue Estimates - International Division

Plaintiff’ s vansenner revenues in its tatembtionel

Division are derived in part from scheduled transatlantic

services (IATA traffic) and in part from scheduled services

beyond the European gateway cities (beyond-the-gateway traffic)

and from non-scheduled (charter) services. The estimation of

: changes in international. passenger revenues requires, under

» Simat's procedures but not under Mr. Wemple's, separate

consideration of IATA traffic and non-IATA traffic. As in

bas case of domestic revenue estimates, Mr. Simat has again’

followed Mr. Wemp1e in adding 5% to estimated changes in

‘passenger revenues in order to arrive at estimated changes

in total transportation revenues. | | |

as Non-IATA Traffic - | k

‘Mr. Wemple has applied his estimated percentage

-incréases each year. in the ‘amount of plaintiff's IATA

ae

ek

ti ffic to. the passenger revenues. for .the entire Inter-

tional Division in order to obtain ‘his estimates of

AX-2444 DX 348, page 14

(Revised Sumary-Categories of ‘Differences-Wemple ve, Simat) -

added international passenger revenues (€.g., C & C Report,

pp. 26-27). This assumes that plaintiff's beyond-the-

gateway and charter traffic would have increased in the _

same proportion each year as that estimated by Mr. Wemple

‘for its’ IATA traffic.

In Mr, Simat's opinion, the assumed additions of

plane-miles in the International Division would not have been

accompanied by any increase in beyond-the-~gatewy. or charter

traffic, for the reasons stated in Vol. II, Part E at E-23

through B-45. He estimates that the resulting overstatement

of international Division passenger revenues by Mr. Wemple

“4s $11.2 ‘million in respect of beyond-the-gateway revenues

L PQ wwe P F.9 2 meme

femnt 7%. aan < ~——_- fe a

(seaun B-Avii Go B<55) ana $02 Madness 238 TOSPCS = chartes

ws ers Vs

revenues (Table XX at’E-5), or a total of $14.4 million. :

| b. IATA Traffic ia

: Both Mr. Wemple and Mr. Simat estimate that plain-

tiff's scheduled transatlantic pausenger traffic would have

. increased each year by the same percentage as that by which

“its share of total transatlantic capacity (IATA seats) would

have increased as a result of the assumed additional jet

(availabilities. — | ae

Aes Weuple 1 has assumed that the other IATA

: carriers would not have offered additional seats in the

1959-1963 period and, further, that in 1959 and 1960 the

ae DX 348, page 15 . A ated

umary-Categories of Differences-Wemple vs. Sima

added seats would have been "transferred" from Pan Am.

He therefore measures plaintiff's increased share of

IATA seats against a base (total IATA seats) which is

unchanged from the historical in 1959 and 1960 and which

thereafter is <ineecah only by the amount of the assumed

addition to plaintiff's seats. |

In Mr. Simat's opinion, Pan Atk and the Ofer IATA

Mpetitors of plaintiff would have reacted to the assumed

increase in plaintiff's capacity: by offering additional

‘capacity of their own. He has, therefore, measured plain-

tiff's percentage gain against a lerger. base which reflects

his estimate of the greater number of ‘seats. which would

have been offered by nleintiff's commetitors. This rernults

in @ smaller estimate than Mr. Wemple'’s of the increase in

plaintiff's scheduled transatlantic passengers;

Mr. Simat's discussion of competitive reaction

by other carriers appears in vol. II, Part E at E-3 through

-E-18. His estimates of the percentage increases in plain-

tiff's share of IATA passengers are set forth in Tables

‘BX and E-XI at E-21 and E-22. These are t6 be, compared

with the estimates in the c & C Report at pages 26, 47 and

48 respectively. | 3

/ . ° Mr. Simat obtains his estimates of the resulting

ioe age

ag ya

Be: <i °¥6 ; a

ories of’ D ffosensed:Wenpre" vs. Samat

increase’ ih ‘passenger revenues by applying his estimated

percentage increases: “in: ‘the number of plaintiff's passen-

gers to the dollar amount of International Division

passenger revenues yealized in the corresponding your,

after subtracting ‘those revenues which he estimates to

be derived from beyond-the-gateway and charter eiivaticna: : <a

Mr. Wemp le uses total passenger. revenues of the Inter-

national Division ‘without segregating the non-IATA ‘portion

thereof. :

Sia , Wemple's estimate of net additional passen- .

ger revenues ° for the International Division is $85 million

(c & C Report,. ‘pp. 27; 48), of which Mr. Simat has eatinated

that $14.4 is attributable to non-IATA traffic, leaving

| $70.4 as the portion attributable to IATA traffic. ‘This:

is to be compared with Mr. 8 Simat's estimate of $45.1 milion

(SHE Report, Vol. I, pp. Iv-113, 114 ‘and. v-80, 81). The

- Qifterence is therefore ebout $25 million in the estimtes

of added revenues from additional scheduled transatlantic |

* passenger traffic. The difference in the estimates of 3

total International Division passenger revenues is.about.

— $39.5 million. 7

5, Cost Estimates. - Direct Operating Expenses

_ Mr. Wemple estimtes that direct operating expenses

es

: xcept insurance ‘ana 1 depreciation) would have changed

opinion, block hours rather ‘than aircraft miles. provide

the — costing unit for eotianting changes in.

oe ‘such expenses where aircraft are operated over yaeving

stage lengths. He has accordingly estimated changes in

these expenses for domestic Sperse sons in proportion to .

his estimated changes in the block tours flowm with the

various types of aircraft added and deleted. For inter-

. national operations, where there woul have been no

significant change in stage lengths, he has used Mr.

: Wemple's method of estimating in proportion to changes

4m plane miles flow. | |

a oF Simat's procedures for estimating changes in

) direct operating expenses in domestic operations are:

treated in Vol. II, Part F. His estimates of added and —

deleted block hours depend upon his estimates of the ;

* marginal stage lengths of added and deleted flights. .

With respect to displaced: piston operations, they also

. : depend upon his estimates of the allocation of, deleted

: Piston miles among the varioys types of pistons.

@ The tg has Ae tai estimates may be ranutes

J follows: |

| Summary-Categories of Differences-Wemple vse. Simat)

_ an proportion to aircraft miles flown. In Mr. Simat's aa

_ (Revised Summary-Categories*of Differences-Wemple vs, Simat)”

‘Estimates of Changes in Direct Operatin

fe (Less reciation and Insurance

Difference

; Mr. Wemple's

Mr. Wempled/ or. simat2/ Mr. Simst's)

Domestic | | | f

Jets 98.8 $99.88. - 1.08

‘Pistons = -71.5 “103.98 . —s-#32..48

Net 427.3 ece IO. 431.40—.

International ; r |

Jets St NBR 35 ae BO” “+ ho

Pistons 416.4 RO MOMO: Foe 38

«Net 59 OS wd + 0”

5 Jets 13h.5 vapas:. ®.. 68

Pistons 67.9 ~(120.38) 432.48

Net GLE $4.80 coe ee

‘As stated previously, there is no difference in: the

estimates of increases in costs of insurance ($5. 5. million) and

depreciation (4. 1 milion) attributable to added jet avedl-—

ability, but Mr. Bims. has included, as Mr. Wemple did not,

: estimated savings of: $14.6 million in wach costs as a result

of piston retirements.

2A Bt: a 4) 3-4, 6- g, "13-19, 21-23 28-30

” #e EW en ne Ex. ix. Pi 3-6, 12-15, a

7 + 11 > - 1li-

30) as aménded b by ‘na Bes 33 eres a a3." 43(a).

2/ pt: 331...

aun. AX -2449

ti ee page 19 oe

" 4: Summary~Categories of Differences-Wemple ve. Simat)

gts Cost Estimates - Ground and Indirect Expenses

_ Mr. Wemple divides indirect costs into two com-

=

"ponents: (1) fixed. components in which he estimates no

_ change for changes in the level of operations and (2)

variable components in Which he. estimtes that changes

would occur in direct’ proportion to changés in a costing

unit selected by him as appropriate to the particular

component under consideration;

Mr. Simat has selected costing units through

analysis of the historical cost experiénce, domestic and

| international, of plaintiff and of the industry in the

Period 1959-1963. Through the use of regression ptork ta .

ie ide cbtained Corwulas for estinating the auount of

change in the various categories of indirect expense that —

would accompany & unit change in the costing unit found by

him to be mare ene to the particular category under con-

sideration. ia :

Mr. Simat's procedures for estimting slid in.

"ground and. indirect expenses are treated in Vol. II, Part. a.

* Table G-VIII at Ga=42 compares the costing units used by Mr.

_ Simt with those used by. ‘Mr. Wemple . -Exhipit O-H displays

- the variable ‘unit costs derivea by the regression analysis

ue are to be applied to the appropriate costing units to

ts in the estimated change in. each category of indirect

pense. The same variable unit costs are applied each :

ar ae changes in oe% and piston operations 9 but different

tat costs. are applied | $e changes ‘in. domestic and inter-

(Revised: Sumary-Categories of Differences-Wemple vs. Sima

national operations.

,» The aifferences. in the estimates of indirect. and

ground expenses may. be tabulated as follows; gota:

Difference in Estimates of Ground and Indirect.

Difference

re ko pmeeee Mr. Wemple's

oi, wenpiel - ieee ae mater

Domestic |

Jet A/ + 67.48 :

Piston - - 95.45 -

Net +40.9 - 27.97 468.67

International |

Jet - + 35.93 -

. _° Piston - - 9.52 -

Wet ; 431.5 + 26.42 + 5.09”

Jet chee -och: |. nn’

Piston HOOT ES - ©104.97 ead iad

Se) iS $73.96

A summary of the overall estimates of changes

: in revenues and costs ad attached.

v a Be Ee pp. 37 37-38, 50, 6h, 71,. as amendéd ity 4

2/ DK 332. : :

‘ 3/ s wr. ple puadiates only the net changes in - — end 7a

indirect aameenes .

AG _. DX 348, page 21 ? AX-2451

~Summary-Categories of Differences-Wemple vs. Simat) —

Summary of the Dollar Differences

Between Mr. ie and Mr. Simat

ce Net Transportation Revenues - System —

(at 105% of Passenger Revenues) — ad

ents to Operating Profit ‘

Wepreciation & Amortization . :; :"

Mround Equipment, Item B; Develo es

reoperating Expense, Item C)1 -$ -2.6

sage in Operating Profit After |

= . _ $525 5

» B-C(4), Bx. F, pp. 12, 20, 27, 35, he, 30, 64; Ex. G, pp. 19, 27, 35.

' | 43fa), Ex. G, Pp. 3. s Enea,

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PAA, 1957-1966)

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AX-2458 |

-- "DX359A-..° ,

(Supplemental S.H.E. Report - Volume 4}

SUPPLEMENTAL REPORT OF

SIMAT, HELLIESEN & EICHNER, INC.

VOLUME A

PARTS. I & II

AX-2459

x "DX359A

TE OF NEW YORK ) i _ (Supplemental S.H.E. Report - Volume A)"

COUNTY OF NEW YORK ) °°:

NATHAN Ss. SIMAT, being duly sworn, deposes and says:

I am President of Simat, Helliesen & Eichner, Inc., and the

following report, consisting of Volume A, Part I and Part II with

its appendices was prepared under my direct supervision. I have

read the report, know the contents thereof, and all statements

' therein contained are true as stated to the best of my knowledge,

information, and belief. I hereby adopt the report as my direct

testimony in the proceeding before the Honorable Herbert Brownell,

Special Master, entitled Trans World Airlines Inc., v. Howard R.

_ Hughes, et al., 61 Civil 2324, United States District Court for

.

e uthern District of New York. ; y

Sworn to before me this

29th day of December 1967

Jnegaeg abit

ar Cc

MARZOT A. WARD

Certificate New Y 7 ‘

Commission Expires March 30, 1%, g

STATE OF NEW YORK ) ss

COUNTY OF NEW YORK ) °

L. JOHN EICHNER, being duly sworn, deposes and says:

I am a Vice President of Simat, Helliesen & Eichner, Inc., and

the following report, consisting of Volume A, Part I and Part II

with its appendices was prepared under my direct supervision. I

_have read the report, know the contents thereof, and all statements

therein contained are true as stated to the best of my knowledge,

information, and belief. 1 hereby adopt the report as my direct

testimony in the proceeding before the Honorable Herbert Brownell,

Special Master, entitled Trans World Airlines, Inc. v. Howard R.

Hughes, et al., 61 Civil 2324, United States: District Court for

the South

uthern District of New York.

- Sworn to before me this

. 29th day of December 1967 ere

AX-2460 oe ; - "DX359A .

(Supplemental S.H.E. Report - Volume 4”

_- INDEX |

Page

PART I: INTRODUCTION I-]

A. Our Request for Internal TWA Records I-]

B. Limitations on Our Use of the Materials

Furnished by TWA . I-2

_ €. Projects Undertaken in This Report I-6

. 1. Aircraft Scheduling | | I-7

2. Traffic Estimating I-7

- 3. Passenger Trip Lengths I-8

PART II: HISTORICAL PERFORMANCE OF TWA'S JET

AIRCRAFT 1959-1963 IT-1

A. Analysis of Individual Jet Aircraft Performance II-3

1. Aircraft Routing Charts . II-3

2. On-Board Reports | II-8

B. Stage Lengths Operated by TWA's Jets . II-11

C. Load Factors, Experienced by TWA's Jets | - [I-20

D. Profitability of TWA's Individual Jet Aircraft TI-33

1. Profit or Loss Under S.H.E. Procedures II-33

a. The B-131's II-37

b. The CV-880's II-40

ec. The B-131B's II-43

a. The Minor Domestic Jet Fleets:

B-331's, 720B's, B-331B's II-45

2. Profit or Loss Under Mr. Wemple's Procedures’ _ II-49

a. The B-131's II-51

b. The CV-880's ; II-52

c. The B-131B's II-53

ad. The Minor Domestic Jet Fleets:

B-331's, B-720B's, B-331B's II-53

3. General Conclusions as to the Historical

Profitability of TWA's Jet Aircraft II-60

APPENDIX A

APPENDIX B

_"DX359A, page I-1 oe

(Supplemental gs -H.E. Report - Volume A)"

PART I -

INTRODUCTION

A. Our Request for Internal TWA Records

In our earlier report, DX 271, we\noted that we

were handicapped, in estimating the consequences of adding

jet aircraft to TWA's available fleet, by a lack of de-

tailed information, concerning TWA operations and operating

results at levels less aggregated than the operating divi-

sion. We pointed out that » lacking finer grained informa- |

tion, we had to forego the use of estimating methods which

we would have preferred to use. Instead, we used an esti-

mating approach that was fashioned to the limitations of the

available data. While this approach led to estimates that

we believe are reasonable and in accord with historical

experience, we maintained that improved and more realistic

estimates could and would be made, if we had access to

certain detailed information concerning the actual usage

of aircraft during the period of jet inventory build-up

and the traffic and revenues resulting from actual aircraft

Usage. This was the reason for the request that TWA pro-

duce specified categories of internal records from its

‘files.

I-1

or >

AX2462 -

(Supplemental S.H.E. Report - Volume. A)"

In describing our needs for additional and more

detailed information, we specified date on the traffic and

financial performance of scheduled flight services, by

‘dndividual flight segments. We also specified routing chart

information which, together with the flight performance

data, would enable us on the basis of TWA's own experience

to make more accurate judgments regarding how additional

aircraft would have been used and how this usage would have

affected the operations of existing aircraft and the volume

of traffic carried. In addition we specified on-line,

on-flight, and passenger revenue yield information in

order to improve and add realism to our estimates of

passenger revenues .2/

B. Limitations on Our Use of the Material Furnished by TWA

In our report of progress, dated October 25, 1967

(DX 325 )o/ we reviewed the principal objectives of our sup-

: plemental report, described the status of the material

furnished to us by TWA and outlined the analysis program

: then underway or contemplated. We noted that the scope of

"DX359A, page 1-2 a

1/ gee affidavit of Nathan 8, Simat, dated June 29, 1967,

cnnexed to defendants’ motion filed June 30, 1967.

2/ status of lemental Report by Simat, Helliesen &

Richner, delivered to the Special Master and counsel

for plaintiff on October 25, 1967 and received in evidence

on October 26, 1967 (Tr. 8391-92 )

I-2

“"DX359A, page I-3 AX-2468

(Supplemental | S.H.E. “Report . - Volume A)"

that program was contingent upon a clarification of the data

made available to us and confirmed our previous estimate ~

that the analytical work would be completed by the end of

the year and that a written report would be ready for sub-

mission by the end of January or early in February.

Since the submission of DX 325, we have been com-

pelled to carry out some portions of our projected program

on a more limited’ basis than originally planned and to

shelve other parts entirely. This resulted, in part, from

difficulties in processing the materials received and, in

part, from inherent deficiencies in the information record-

ed. The decision of the Special Master to require submis-

sion of our supplemental report by January 1, 1968, even

though its scope was at the same time confined to TWA's

Domestic Division (Tr. 8606), was another factor that

obliged us to be selective in our analysis.

Unforeseen difficulties in processing materials

were especially pronounced in the case of flight traffic

performance data. In checks of the information keypunched

from the basic source records supplied to us, we found that

there were duplications in the data that required extensive

tracing and corrections of the keypunched data before the

_, accuracy could be established. Reuting chart information ,though

*

I-3

ax Me oh St "DX359A, page I-4 a

, Awieotamantas S.H.E. Report - Volume A)" ;

no less complete than was noted in our progress report, was

not entirely legible in ‘some instances and required time-

consuming cross-checking with flight performance data to

assure that flight information contained in the routing

charts was properly recorded.

The principal deficiencies in the information

were found in the passenger revenue yield data. We noted

in our progress report that the information supplied was

for a period subsequent to 1959-1963 and, furthermore, that

we were net certain that the information afforded an in-

provement over the relationships we had developed from

industry data and adjusted to TWA's average passenger

oe révenue yield levels. As a result of further examination

: of the information, it appears it was not developed from

analysis of tickets covering the transportation provided

by TWA over individual flight segments, but was estimated

from quoted fares between the terminals of flight segments

by applying average divisional percentage differences be-

. tween fares and revenue yields. Since there is much

evidence that the percentage differences between fares and

revenue yields ary from segment to segment, generally in

relation to segment distances, the yield information sup-

plied by TWA was not even as accurate or as realistic as

the relationships that we obtained from industry data.

"DX359A, page I-5 AX-2465

(Supplemental S.H.E. *Report - Volume. Ay".

| Sceordingly , we lacked the basis for undertaking a further

Scaiweia of revenue yields, as contemplated. Since no more

accurate basis for estimating passenger revenue yields was

derivable from the information at hand, we have’ relied on

the method of estimating passenger revenue yields developed

in our earlier report as the best available. We have,

however, been able to improve our estimates of the relation-

ship between length of hop and passenger trip length.

Finally, because of the other difficulties en-

Laiberen, we had to delay the recording and processing

of information on the competitive services operated by

other airlines in markets where TWA historically operated

nonstop flights with piston and jet aircraft. As a result,

our analyses of the influence of flight schedules of compet-

ing airlines on TWA's aircraft usage and share of avail-

able traffic are not as extensive as we had planned.

Notwithstanding our inability to undertake in ¢

full the analyses originally contemplated, we have been

able for the first time to ascertain the detailed usage

and operational results of the aircraft which TWA did

have available and, in consequence, to effect ‘signifi-

_ Cant improvements in our estimates of the usage, traffic.

and revenues which would most probably have ensued from

3 ~ ‘aaunea additional jet capacity.

a

AX-2466

"DX359A, page I-6 a

(Supplemental S.H.E. Report - Volume A)™

C. Projects Undertaken in This Report

This report has two major parts. Part II con-

tains our analysis of the domestic jet operations histori-

cally conducted by TWA in 1959-1963. Part III contains our

estimates of the traffic and revenues which TWA would have

obtained in 1959-1963 if it had operated the additional

capacity assumed by Mr. Wemple for the Domestic Division.

In Part II, using information from TWA's rout-

ing charts and on-board reports, we have determined the

average stage lengths and load factors in each month of

the 1959-1963 period for every one of the active jet air-

craft in TWA's domestic fleet. The results confirm the

conclusions as to the trends in stage lengths and load

factors expressed in our earlier report. Furthermore,

we have determined for each such aircraft, using both our

own estimating procedures and those of Mr. Wemple, the

operating profit or loss obtained in each month of the

period. This analysis of profitability by individual jet

aircraft reinforces our previous opinion that throughout

the greater part of this period TWA could not have added

jet capacity at a profit.

In Part III, we present our improved estimates

of the effect on operating profits of the assumed operation

by TWA of additional jet capacity in its Domestic Division.

"DX359A, page I-7 AD Set

(Supplemental S.H.E. Report - Volume A)"

The additional data have provided a firmer foundation

for estimating in three significant areas:

1. Aircraft scheduling. We have now been able

to make detailed estimates of the changes in aircraft usage

associated with the availability of additional jet aircraft

by flight segments, grounded on the scheduling policies of

TWA disclosed by actual aircraft usage. Rather than estimat-

ing the average stage length of added and deleted flight

operations by the use of divisional average relationships

between the stage lengths of existing and added and deleted

services, we were able to estimate directly the changes

in flight operations for each flight segment affected and

to derive the stage lengths of added and deleted flights

from the individual flight segment data.

2. Traffic estimating. The additional data

enabled us to effect major improvements in the traffic es-

timates. We have now been able to estimate the added and

deleted traffic resulting from changes in flight operations

on an individual segment basis, rather than on the basis of

average marginal load factors. We took into consideration

the characteristics of the flight segment (its length in

miles and whether it was competitive or noncompetitive)

and also the experienced relationships, among flight seg-

ments of like characteristics, between traffic volumes added

_ @nd deleted and changes in flight operations.

« ‘ ee

"DX359A, page I-8 ss

(Suppieneitai S.H.E, Report - Vdélume A)" ‘a

(3. Passenger trip lengths. As a result of a

comprehensive analysis of TWA's on-line traffic for indi-

vidual flights, we were able to improve the estimates of

the trip lengths of passengers added and deleted as a result

of the contemplated additions and deletions of jet and

piston aircraft services.

In addition to the foregoing improvements in

the estimates of changes in aircraft operations and traffic

which were anticipated to flow from the supplementary data

and studies, we further found that the analyses of histori-

cal aircraft usage and operating results, made possible by

the availability of routing chart and flight information,

disclosed characteristic patterns of differences among

aircraft of the same type, not only as to how individual

aircraft were used but also as to the profit or loss con-

tribution of the individual aircraft. We found that

the differences were so uniform among the individual air-

craft and varied so consistently among fleets of different

numbers of aircraft that it was possible from the data to

independently estimate the amount of operating profits and

losses that would be added and deleted by changes in the

number of aircraft available and used. ‘This afforded an

alternative basis for estimating the financial effects of

I-8

AX-2469

"DX359A, page I-9

(Supplemental S.H.E. Report - Volume A)"

4

“

fleet additions and deletions that was not not antici-

pated. |

The estimates detailed in Part III provide a

further substantiation for our opinion that operation of

the additional jet capacity assumed by Mr. Wemple would

have contributed significant operating losses to TWA's

Domestic Division.

AX.2470

Pes A]

PART

AX-2471

"DX359A, page II-1

| (Supplemental S.H.E. Report - Volume A)"

PART II

HISTORICAL PERFORMANCE OF TWA'S JET AIRCRAFT

1959 - 1963

Our analysis of TWA's domestic operations with jet air-

craft owned or leased in 1959-1963 confirms three of the major

conclusions stated in our prior report (DX 271):

1. As jets were added, they were flown on increasingly

shorter stage lengths with the result that the average

stage length over which each jet fleet was operated

suffered a progressive decline;

2. As jets were added, they were operated at increasingly

lower load factors with the result that the average

load factor achieved by each jet fleet suffered a pro-

gressive decline;

3. As jets were added, the lower stage lengths and load

factors at which they were operated produced lower

operating profits for the added jets. Operations con-

ducted at a marginal profit or at a loss, even before

deduction of interest and other costs of capital,

occurred at an early stage in the introduction of each

of the jet fleets.” |

The historical performance provides a backdrop for pro-

jecting the results that TWA would have obtained if it had

operated the additional capacity postulated by Mr. Wemple.

_ RK-2472

"DX359A, page II-2 Res.

(Supplemental S.H.E. Report - Volume a)" es

Analysis of TWA's records establishes definite trends to lower

stage lengths, lower load factors and consequently lower opera-

ting profits (or higher operating losses) as jets were added.

In our opinion, the operation of still more jets in any year

of the 1959-1963 period would necessarily have accelerated these

historical trends.

Airline managements attempt to employ their invested

capital and physical resources'as profitably as possible. An

airline does not use a multi-million dollar jet wprofitably.

if it has an opportunity to fly it profitably. If at any point

in time opportunities do not exist for profitable employment

of all the aircraft in a particular fleet, an airline may

nevertheless choose to operate them all even though some must be

flown on unprofitable routes. Various considerations may underlie

such a choice. The management may hope to cover some of the

operating costs which are incurred whether or not a plane is put

in the air - principally, depreciation and hull insurance, while

avoiding the expenses associated with any extended grounding.

Or management may misjudge the profit opportunities, hoping

for greater traffic and revenue production than proves, in actual-

ity, to be attainable. Managements are especially’ vulnerable

to this kind of overoptimism in periods of stagnant traffic

growth, such as that from 1959 to mid-1963.

When management becomes aware of loss operations it attempts

_TI-2

. AX-2473

"DX 359A, page II-3

(Supplemental S.H.E, Report -— Volume A)"

* solve the problem by rescheduling its equipment. This is one

of the reasons why changes in aircraft schedules and routings

‘occurred so frequently during the 1959-1963. period.

The fact that TwA operated many of its Jet aircraft at a

marginal profit level or at a loss throughout most of this

period, despite efforts to find profit opportunities through

equipment shifts and rerouting, does not suggest that TwA

stood in need of still more Jet equipment. on the contrary,

it 18 proof that, with more jets on its hands, TWA management

would have faced an even more difficult problem of profitable

deployment .

A. Analysis of Individual Jet Aircraft Performance

The new information upon which this part of our report

is based was obtained primarily from TWA aircraft routing

charts and TWA monthly on-board reports a We have now been

able to ascertain the historical usage, the passenger load

and the profitability of each Jet aircraft scheduled in the

1959-1963 routing charts furnished to us by Twa .2/

1. Aircraft Routing Charts

TWA, like other airlines, assigned operating routes

to the active aircrart in each of its fleets through the

| Furnished by Plaintiff upon defendants! motion filed June 30,

“ 41967 and granted by the Special Master July 13,1967 (Tr. 702i),

win has proved impossible for us to make a Similar anaylsis of

_* piston aircrart performance within the time limitation fixed

2 by the Special Master.

II-3

AX-2474

"DX359A, page II-4 ee:

(Supplemental S.H.E. Report - Volume aye ae

medium of routing charts. A routing chart displays the

flight patterns over a 24-hour period for each of the active

_aireraft of a particular type, such as the B-131 or the Cvy-88,

For one B-331, the daily pattern might be from Los Angeles

to Idlewild to Los Angeles. For another, it might be from

Idlewild to Indianapolis to Idlewild to Chicago. The suwm of

the daily flight patterns for each of the aircraft in @ par-

ticular fleet constitutes the overall scheduling of the fleet.

The routing chart does not purport to identify by license

frame numbers or otherwise the physical piece of equipment

which performs each daily pattern. What it does tell us is

that, during each day it is in effect, one of the active air-

craft in the fleet will perform one of the daily flight patter.

A flight pattern may or may not be performed day after day

with the identical piece of equipment. Typically it will

not be the identical piece of equipaens. The usual procedure

is to rotate all of the aircraft in a fleet in sequence

through each daily flight pattern so that each piece of equip-

ment may undergo the periodic maintenance checks built into

the scheduling. (Some routing charts assign an aircraft to

maintenance for an entire aircraft day.) But if there are,

say, 15 B-131s being operated, then the number of daily flight

patterns flown by B-131s will be exactly 15, no more - no less.

Fifteen "actives" produce 15 “aircraft days."

Ir-4

AX-24

| "DX359A, page II-5 ~

(Supplemental S.H.E. Report - Volume A)"

| ea Chart II-A on page II-6 reproduces a sample TWA routing

chart, issued October 18, 1963 and assigning the daily routing

“of 23 of TWA's 26 CV-880s effective October 27, 1963. Of

~~ other three 880s, one was assigned as a spare, one was

assigned to pilot training and one remained unassigned._/

The chart schedules 23 aircraft days, one day for each of

the 23 active Cv-880s. Te day for the aircraft performing ©

Flight 138 (upper left corner) begins at 12:30 A.M. with a

‘departure from San Francisco to Pittsburgh. It continues

with departures from Pittsburgh at 11:35 A.M. on Flight 142

|

|

for Boston, from Boston at 2:20 P.M. on Flight 193 for st.

louis, and from St. Louis at 6:45 P.M. on Flight 194 to Boston,

where it terminates upon a scheduled arrival at 11:19 P.M. Clear-

ly,the same piece of equipment could not repeat this. schedule on

the succeeding day,but would perform Flight 9l,as indicated (lower

‘left corner) ,departing from Boston at 8:15 A.M. for Chicago.Flight

138 would be performed on the succeeding day with the equipment

which had completed Flight 161 from Cincinnati to San Francisco

(upper right corner) as the last lap of its aircraft day. Thus

‘the chart moves each of the 23 active aircraft. through each

|

|

“

ef the 23 aircraft days.

An indication that management did not envisage any possib-

“7 adlity of profitable employment for this aircraft.

Bo.

errant

hee

"DX359A, page II-6

(Supplemental S.H.E. Report - Volume A)"

AX-2476

= Sr Soe oe se.

* :

. -_- - >- rs a ae — 2 coe, - 7 94 y- - —— -

" 7 oe |

= SS } ———F --¢

| eS ge

ae Le 8 ree

ae de te fT - =

¥ 7 > 3 cumpe o-« —@— - j - . ad - _— al

me ~~ bad sw

‘ * lento

D ".’-%

—- — -— ~~ -_s+ _—- Meet: S - em: eee — e -_-—4

oor hd

- “4 -—-—- - =

*, rey | wil

4 -—_— — -— ie ee —_ a oe 4 z 7

~ ee q

abenaans Wibiiedi ecblanile arn « | — ihe : — -

ST st :

: : ee Si - - ~4 - -

eA 7

Es > oa

oo -—--<- i _ 4 “

‘ Se s W

ee a -4> «| — 4 o- fe oe — — 4%

’ we

a v

| a - —>- -< 4

- al = - . - -

4 +> 3 — ‘ : ‘g

jes’ ase add .

— a ee 12S Orme: sam athe <2 + oe \- + <4 Settee besien ah ait. oe at

Fare pron a ~~—_— ds - —+> +

.

oe wo! Aa

| oom eS ae o - »-+—-- hoe initio 3 a

. ’

; x ”

Ei sf < f-4-- a + {dept

¢ ‘

re, 4 ‘oe

~ oS “ “ wo few | tm

+ _— ~ 7: — ~- a —_—_—- By i of

= 7 e n ‘ ‘ 4 & & 6 —

Be so ive er ae : see . Slee oe

~~ + pee ae - —+t- » - - — y ioe — ae omagon o a-<-

.

ae

—_ 8 sTwEDes 088-AD oe wos ae —

a= oe LUVHD OMLINOW ANGMEINOD ; cd’ Sie oe F |

SEIRIWIV GTIVOM SHVUL 62 Seen eeeaee

VeII ZuVHO

"DX359A, page II-7 a

(Supplemental S.H.E, Report - Volume A)"

the flight number attached to each pair of origin and

destination points on the routing chart is the same number

iy which the flight is designated in the TWA timetable effective

“during the same period of time and in the TWA on-board re-

Ports which record date on the flights as actually performed.

The flight numbers in the routing charts do not necessarily

designate non-stop flights. The number of scheduled segments

making up a given flight can be determined from the appropriate

timetable. The number of segments actually flown with that

type of equipment each month for a given flight is recorded

in the TWA on-board reports.

In analyzing the performance of individual jet aircraft,

we have used the aircraft routing charts as the basis for

individualizing aircraft performance. Each daily flight

pattern for each of the active aircraft is considered to be

the daily performance of one aircraft, - i.e., one "aircraft

day." An aircraft day performed iitsagie < month is con-

sidered to be the performance of orie aircraft for that month.

tis, of course, immaterial to our analysis that in the

esa of the month each piece of equipment in the fleet may

Se have been rotated through each of the daily flight patterns.

the Sum of the aircraft days is always equal to the number of

_ active aircraft in the fleet. tf there had been three fewer

ve jet aircraft in any fleet at any time, there would :

II-7

s

A-2ate P "DX359A, page II-8

(Supplemental S.H.E. "Report - Volume A)"

have to have been three fewer aircraft days scheduled in the

routing chart for that fleet .at that time. If there had been

five more active jets, there would have to have been five more

aircraft days scheduled.

Since the TWA on-board reports provide flight pevformnise

data on a monthly basis, it was necessary to combine routing

. Charts where two or more were effective during the same month.

Daily flight patterns assigned in the first routing chart

in a month were matched with those assigned in the succeeding

chart or charts in that month. In most instances the great

majority of flight patterns were preserved intact throughout

the month. Where a flight pattern was discontinued, an effort

was made to match it to a pattern with like characteristics.

2. Qn-Board Reports

The TWA on-board reports provide monthly summaries of

data by flight number, segment and type of equipment for all

revenue flights performed by TWA. From these ‘reports we

_ obtained the number of departures and the number of revenue

passengers carried each month by each type of jet over each

segment constituting part of a scheduled flight indentified

by a flight number. By combining these data for all segments |

comprising a flight and for all flights comprising an air-

craft day, as assigned in the routing chart, we obtained the

total number of flights performed and passengers carried in

rr-8

"DX359A, page II-9 AX-2479

(Supplemental S.H.E. Report - Volume A)"

ae ' From the origin and destination points of these flights

“ye obtained aircraft miles, block hours, and departures.

Z Multiplying the aircraft. miles by the seating configurations —

| gave us the seat miles flow by each aircraft on each segment

4 :

for each month.—/ From these statistics we computed, for each

aircraft in TWA's jet fleet, the average monthly stage length

(eireratt miles flown during the month divided by monthly

_ departures) and the average monthly load-factor (revenue

‘passenger miles operated during the month divided by available

seat miles offéred). We also computed, for each such air-

craft, the monthly operating profit or loss, according to

_ the methods described in Section D of this part of our report.

The number of flights actually performed and recorded

in the on-board reports is not in every instance the same

number of flights scheduled for a particular type of equip-

_ Ment in the aircraft routing charts. Weather conditions or

equipment failures sometimes caused flights to be cancelled

or operated with substitute aquignent../ In other instances,

y Aircraft miles were computed by multiplying the segment

distance (airport-to-airport ) Lt d the number of departures.

Seat miles were computed by multip the aircraft miles

by the average number of seats for month and aircraft

_ . type in question as set forth in the TWA monthly report on

"4 Operating statistics (TWA C&C-3).

_) E/ Te strike in February, 1961 also caused a number of

_ cancellations. sea esd

II-9

"DX359A, page II-10

(Supplemental S.H.E. Report - Volume A)"

flights departed as scheduled but landed at non-scheduled

destinations, usually because of weather. Our analysis

pertains, of course, only to flights actually operated. Ome

celled flights were not counted. Flights performed with

substitute equipment of another aircraft type, whether jet

or piston, were not counted. We did count scheduled flights

performed with the scheduled type of equipment where for

one reason or another a non-scheduled departure or landing

was made. For example, Flight 87, scheduled in November 1961 -

to be operated with a B-131 from Albuquerque to Los Angeles,

flew 25 departures as scheduled and one departure from

Albuquerque to Ontario, an airport some 50 miles east of

Los Angeles, also with a B-131. We included the statistics

for the Albuquerque-Ontario flight with the statistics for

the 25 Albuquerque-Los Angeles flights in determining the

performance of the B-131 aircraft performing Flight 87 in

November 1961.~/

We

at

:

additional expense of ferrying the

ang & Los. wee as a non-scheduled trip.

TI-10°

AX-2481

"QX359A, page II-11

(Supplemental S.II.E. Report - Volume A)"

B. Stage Lengths Operated by TWA's Jets

The historical deterioration of the stage lengths scheduled

for TWA's jets commenced as early as the second month of

service with its first jet fleet. When the B-131s were

scheduled in April 1959, the first full month of operation,

they were used upon transcontinental nonstops averaging 2hok

miles per trip.”/ As departures doubled in May from 143 to

286, the average scheduled stage length dropped by 96 miles

from 2404 to 2308. This drop in the average indicates that

the added Jets were scheduled at an average stage length

shorter than the pre-existing average. This distance, the

marginal stage length of the added operations was, in fact

only 2,211 miles.” tnsune, with a 48% increase in scheduled

departures, the marginal stage length fell to 1,570 miles aS

This was the start of a continuing process which applied

with equal force to every single one of TWA's jet fleets

during the whole of the 1959-1963 period, as shown in Table

II-A.

/ computer printout entitled "Domestic Schedule Average

Stage Length," table for "Aircraft Type B70," the code

designation for B-131 (workpaper) . '

2/ Ibid. TWA scheduled 316,236 additional aircraft miles in

Way. Dividing this figure by 143, the number of added de- -

partures, gives 2,211 miles per added departure. i

Visa. Departures increased from 286 to 424, and 216,594

tional aircraft miles were flown, an average of 1,570

'», Miles per added departure.

"DX359A, page II-12

(Supplemental S.H.E. *Report - Volume A)"

TABLE II-A

ANNUAL AVERAGE STAGE LENGTHS (ome)

BY JET AND PISTON AIR

(Q) 2) |

All fleets hho

oo oe

Piston Aircraft

Mee

aA

L-1049G

tiehoa

‘Jet Aircraft

~880

4 1,207 Se

eh seme 1,509

1,572 15907

1,010 967

oe mee Nero.

To obtain averages Soh 5 fleets combined,

Sevartare eee were divided by

g $5)! separate aver-

= te Bagger variaee "aire sn were obtained from

printout Domestic Schetule Ave Stage Length,

supra at II-11, fm. 1., and are the Figure s shown for

in each year | in the column vin og "Running

Average Stage Length."

Mhe average scheduled stage length of B-131 flights dropped

from 1,888 miles in 1959 to 648 miles in 1963, and that of B-331

flights from 2,027 miles in 1960 to 827 in 1963. ‘The decline

in average stage lengths of the later-introduced jet types,

"DX359A, page II-13

(Supplemental S.H.E. Report - Volume A)"

though not so dramatic, was equally definite. The progressive

decline in average stage lengths reflected, of course, a

_progressive decline in marginal stage lengths, as added jets

were scheduled on segments which were generally shorter than

the pre-existing average.

This deterioration in average jet stage lengths occurred

even though the average stage length for all TWA flights in-

creased each year from 1959 to 1963. The overall increase was

3 not occasioned by ein increase in average piston stage lengths

since these too fell continuously every year for every type.

‘he reason is that TWA eliminated a large number of trips from

“tts &chedules, most of them short haul, and dowgraded the

stage lengths of the individual aircraft types operated on

the remaining frequencies.

- Within any one year the downward trend of stage lengths

is partially obscured by seasonal fluctuations » caused prin-

cipally by the demand patterns of the California markets.

Te influence of these seasonal patterns can be removed through

the use of a 12-month moving average, which combines the

average dai length for a _ month with the averages

for the 11 preceding months oe Twelve-month moving averages of

te stage lengths scheduled eath month by each of the jet

_fypes in TWA's fleet during the 1959-1963 period (beginning

ach case with the twelfth full month of operation) are

i in Table II-B on page II-14.

a erg EEE

: eS t that month,since it is influenced by the generally higher

es of the preceding 11 months. vied

: DX359A, page II-14 ae

(Supplemental S.H.E. Report - Volume Ay" 7

4QaDMw 42a ©

12-MONTH MOVING AVERAGE STAGE LENGTHS AND

AVERAGE NUMBER OF JET AIRCRAFT AVAILABLE

; OF JR

_ Average Stage Lengths

ATIRMI

ran | womrn [SOI TEST 7 CVG | BD BD POY-15) BB POT-TT A

‘Q)_ | @ Q) (4 ad Gece + a me

1960 March 1843. 12.7

Apeil 1817. 13.8

May 1764.05 14.7

June 1755.22 15.3

July 1720.68 aid 15.8

August | 1691.87 16.1

Sept. | 1665.16 16.4

Oct. 1620.75 16.8

Bow. 1576.30 17.2

Dec. 1532.65 17.6

1961 Jen 2 18.4

Fed ° 15.73 :

baer Lae rH =i

April 1376.90 1814. 2.7

May 1348.27 1814.95 23.0

June | 1321.56 1815.12 oh

July bn 1796.82 25.8

Aug. 1272. 1772.14 27.5

Sept. 1250.46 1749.01 9.3

Oct. 1236.87 | 1720.41 31.2

Nov. 1222.32 | 1646.52 33.2

Dec. 1206. 7% 1572.08 820 T% 35.2

1962 Jan. . -2 | 816.62 %6.8

| Mer | iaksce8 | tkep 08 | 813-00 2.3

Mar. Le 1456.66 | 808.66 9.4

April 225 1426.12 | 805.03 40.5

te 1139.32 1364.92 | 603.76 41.5

June 1113.12 ° 800.27 42.5

duly 1087.27 oe es 797.95 966.3% 43.5

Aug. 1050. 15 | 796.05 | 961.21 bh.6

Sept. yt 1202.36 | 795.36 | 963.6% 45.7

Oct. 968. 1135.10 | 795.49 | 975.50 46.8

Nov. 10863 193.65 47.6

Dec. 789 .65 48.6

1963 Jan. 786.08 : 49.5

Fed. 807.42 | 762.62 : 30-5

nye 2 O- ° . : lb es 2

June : “* va ° e 8 1

Bov. % e < ‘> 0

Dec. : y e e 00

Sources: Cols. 3-8: cnputer printout at If-ll, fn. 1.

‘: ee

Col. 9: TWA 4c-4, Ex. B., Co

-month moving average.

II-14

AX-2485

"DX359A, page II-15

(Supplemental S.H.E. Report - Volume A)"

It is evident from Table II-B that month by month

. jets were being added to TWA's fleets, each fleet was

“being operated at progressively lower average stage lengths .

| ‘The downward trend was unremitting for the B-13ls throughout

the entire period, as it also was, with minor exceptions, for

the Cv-880s. Even the later-introduced B-131Bs show a con-

-stantly declining trend. The trend is equally marked for

the $-331s until May 1963, when an upturn occurs.

| The decline in average stage lengths was produced by

the operational requirements of scheduling the individual

aircraft within each fleet. The routing charts and the on-

“poard reports furnished by TWA permit an understanding of the

scheduling patterns which underly the averages. In Table II-C,

on page II-16, we have analyzed the stage lengths operated

“by each active jet in TWA's fleet?’ during the month of De-

“eember in each year of the 1959-1963 period.

Table II-C shows, for each type of jet and for the

fleet as a whole, the number of aircraft operating in four

distance ‘categories - over 2,000 miles, 1,000 to 1,999 miles,

“700 to 999 miles and under 700 miles. The pattern of scheduling

may be illustrated by tracing what happened to the B-13is.

a ,,With the exception of the B-331Bs, for which no domestic

| Spe routing charts were furnished us.

"DX359A, page II-16

(Supplemental S.H.E. Report - Volume A)"

TABLE II-C

NUMBER OF INDIVIDUAL AIRCRAFT WITHIN

EACH JET TYPE OPERATED AT D

STAGE LENGTHS FOR DECEMBER 1959-1963

Stage Lengths Year B-131 | B-331 | cv-880 B-720B B-131B

(1) (2) (3) (4) (5) (6) (7)

Over 2,000 miles} 1 4 sts iii iis ine

“ . 1960 1 3 een ——— a=

eerie hee Ts 7

1963 0 1 Cf re) one 4

1, 000-1 ? 10 aie pa Sous aie

= i320 10 0 eee @aoeoe ee

2 ES ee 3 an ey

1963 'e) —_— 4 on 9

00- 0 --- --- _ ---

100-099: Hie beg & ° = ee eS

Oe aS ee 3 eee (ts

1963 5 --- 9 oo= 4

tide 00 miles 0 -—- se —— = ee

rromm lige | 3 fs [= |= [=

1961 ) 0 3 re) —

1962 | 9 --- 5 --- 1

1963 a --- ll --- 0

1 .

peep odie eee Arig ng Be rout harts for the

=) ean that a B- ae eee oinenstop between New York ant Los

Angeles in Decesber 1963. ;

-~

i1-16

AX-2487

"DX359A, page II-17

(Supplemental S.H.E. Report - Volume A)"

In May 1959, with six active jets, TWA operated three

B-13ls at average stage lengths over 2,000 miles and — at

‘average stage lengths between 1,000 and 1,999 miles. 7 mt

following December, when TWA had received its full fleet of 15

B-13ls, four B-13ls were now being operated at average stage.

lengths over 2,000 miles, while the remaining ten active 131s

were operated at average stage lengths between 1,000 and 1,999

_ miles (Table II-C). Clearly, opportunities did not exist to

schedule the additional B-13ls on the longer hops.

By December 1960, only one B-131 was operating at an

average stage length over.2,000 miles. The first three B-33ls

added to the domestic fleet had now taken over the longer hops

. with the result that B-131 operations were downgraded. Ten

| B-131s still flewtops averaging between 1,000 and 1,999 miles,

<©and four were now flying average hops of 700 to 999 miles.

4 As more jets were added to TWA's other fleets, B-131 operations

? ‘wnderwent a progressive further downgrading. In December 1963,

‘none of the 14 active B-131s was operated at an average stage

-*Yength as long as 1,000 miles, and nine were flying average

hops under 700 miles, less than the distance from New York to

Chicago.

a

red Computer printout showing monthly average stage length,

average load factor and operating profit or loss by Mr.

Wemple's method for each scheduled jet aircraft operated

by TWA in 1959-1963. A copy of this etatees is annexed

- to this report as Appendix B.

11-17

AX-2488

"DX359A, page II-18

(Supplemental S.H.E. Keport - Volume A)"

Looking at TWA's jet fleet as a whole, ome can see

that, as additional jets came in, they were either assigned

to shorter stage lengths than the existing average for the

particular jet type or they compelled the downgrading of air-

craft of other jet types. af While the total number of

aircraft of all types operating at an average stage length of

2,000 miles or more remained fairly constant (4, 4, 3, 2, 5)

the number operating at stage lengths in each of the lower

categories increased from year to year. No jets are show

as operating at average hops below 700 miles until December

1961, when there were three .2/ In December 1963, the number

below 700 miles had grown to 20.

In Chart II-B on Page II-19 we present a graphic comparison.

of the average stage lengths operated by the four B-1l3ls having

the highest average with those of the four having the lowest

average within each month of the 1959-1963 period beginning in

July 1959. If TWA had operated additional jets in any year of

the 1959-2963 period,there can be no doubt, in our opinion, that

the trends shown in Chart II-B for the B-13ls, as well as the

‘similar trends obtaining for the other jet types, would have

been accentuated. |

Piston aircraft schedules were also dowmgraded as they

: were rip and shorter segments.

|

2/ ‘The tirst jet to be operated at an a stage 1

:

Ir-18

~

uw

4

-_

=

w

=

:

w

4

<

2]

:

we

>

<

"DX359A, page II-19

(Supplemental S.H.E. Report - Volume A)"

MONTHLY AVERAGE STAGE LENGTHS —

OPERATED BY INDIVIDUAL B-131 AIRCRAFT

SHOWING THE FOUR LONGEST AND. FOUR SHORTEST

; 2800 , IN EACH MONTH

=

Jucy, 1959-Dec,, 1963

AX-2489

159 {| 190 | | 1962 | 10963

t APPENDIX B

AX-2490

i I i

"DX359A, page II-20 Sci

(Supplemental S.H.E. Report « Voline Ayn

C. Load Facto rienced by TWA's Je

‘MWA suffered constantly declining load factors

during the first four and one-half years of the 1959-1963

period. As shown in Table II-D, TWA's annual average load

factor for all aircraft, jet and piston, diminished by six

or seven percentage points from year to year until 1963.

The B-13ls, the B-331s and the Cv-880s were all introduced at

relatively high average load factors, which then dropped

sharply in the second year of operation. All three jet fleets

struck bottom in 1962 and rose moderately in 1963.

| TABLE II-D

TWA DOMESTIC LOAD FACTORS 1959-1963

1959 1960 1961 | 1962 1963

All Fleets vel Mae 57% 51% 53%

Piston Aircraft |

M-404 2 3 58 J ™

se 64 63 ‘ & 64 63

Lel 64 2

L-1049G 70 60 61 57

L-1 73 56

L-1 70 59 54 59 56

Jet Aircraft

cv-880 - = 66 76

B-131 83 69 53 9 a5

B-131B ie o - ho 7:

B- | - bh 4g ho i

Be | - - Sy 37

Be - - AR 50 -

Sourc Scheduled . r mile cach oh Aavines by

si scheduled peat miles, cath (2H). (24)

~

: AX-2491

DX359A, page II-21

(Supplemental S.H.&E. Report - Volume: A)"

The decline in TWA's average monthly load factors

preceded the decline in its average annual load factors.

.Since seasonal variations in load factors are even more

pronounced than those in stage lengths, we have compiled 12-

month moving average load factors for each jet type in order

td demong€rate.the monthly trend after eliminating the ef-

fect of seasonal fluctuations V/ These moving average

“load factors, together with the monthly averages, are shown

in Charts II-C-1 through II-C-6 on pages II-22427. The _

steady downward drift of load factors, persisting -through-

out 1960, 1961 and 1962 as more and more jets were intro-

_ duced in the face of a nearly static market, is unmistaka-

ble.

Was in the case of the moving average for stage lengths, the

- Moving average load factor lags the actual decline in load

_ factors owing to the influence of the generally higher load

factors in the preceding eleven months. The difference can

pe seen in the II-C charts. .

"DX359A, page II-22 bi

(Supplemental S.H.E. Report - Volume A)"

CHart IIC-]

AVERAGE LOAD FACTORS OF. B-131 AIRCRAFT

100 ~~ 9 MarR, é 1959-Dec, ) 1963

AVERAGE LOAD FACTOR (2%)

—— MONTHLY

104 —-12-0NTH MovING

JEM AM J aSoN pI eM AM SOND EM AM Ja SoN pI EM AM Ug SQNnJEMAM Ya Solp

1959960, 9621983

Source: TWA Exnipit C&C-3 ,

- II-22

AX-2493

| 5 "DX359A, pare II-23

(Supplemental S.H.E. Report - Volume A)"

Cuart IIC-2

AVERAGE LOAD FACTORS OF B-331 AIRCRAFT

100 - JAN... 1960-Dec., 1963

70 +

AVERAGE LOAD FACTOR (Z)

—— MONTHLY

10+ —— 12-MONTH MOVING

ViPAPARAS GEA DADABABABORS BEB e es eee eee eee

REE: =TWA ExniBit C&C-3

i -II-23

AX-2494

100 - Jan., 1961-Dec., 1963

90

80 -

70 -

S

ge

e

<

uw 50 ye

<

ad

3» 40-

=

uw :

=

30 “

20 -

—— MONTHLY

10° ——— 12-MONTH MOVING

ee AAAAAAASADA LARADARAD EM bah aM

AyD ASoM SEMAN taSoNydeMaM ZpSoNDyEM AM sa SoNDIEMAMwASohD

SOURCE: TWA Exn1BIT Cec-3

"DX359A, page II-24 |

(Supplemental S.H.E. Report - Volume 4)" 3

LHART Livny

AVERAGE LOAD FACTORS OF CV-880 AIRCRAFT

1959 - 1960 1961 1962 1963

,

II-24

AX-2495

"DX359A, page II-25 r

(Supplemental S.h.E. Report - Volume A)

we aru e ase?

AVERAGE LOAD FACTORS OF B-720B AIRCRAFT

Auc.. 1961-Oct.. 1962

S

5

2

g

z

—— MONTHLY

——— 12-MONTH MOVING

HAPAAAB APA MAPAPARAD MEADOR MRA OA DARPA OR

; JeMaM J aSoNnJeMaM Jy SoNnJeMaM pa SONnJeM aM Ja SNnJEMyM J, SOND

(«1959 1960 1961 1962 1963

Bounce: TWA Exureit Cec-3

II-25

"DX359A, page II-26 i

(Supplemental S.H.i. Report - Volume A)" —

—Cuart IIC-5

AVERAGE LOAD FACTORS OF B-131B AIRCRAFT

7 100 - Apr... 1962-Dec. . 1963

AVERAGE LOAD FACTOR (%)

—— MONTHLY

104 == 12-MONTH MOVING

0; DARARODARSDA DARADRARBOBS DEAARABABOBS RABABABAB OBA RARARABASEM

SEMAN aSoNpyeMaM st aSoNp ye Masta SoN Ye MAM sya SONY MAM ASO'D

1959 ie TMG. 1962 1963

Source: TWA Exnisit Cac-3

7 TI-26

™~

"DX359A, pace II-27 ieee

(Supplemental S.li.b. Report - Volume A)"

CHart IIC-6

AVERAGE LOAD FACTORS OF B-331B AIRCRAFT

Jan-Dec, 1963

~

rw

~~

o

re

3)

<

uw

WwW

;

Ww

>

<

i i eR ik ae” Wn ee er ee eke eee ee ae” eee or ee Se

1959 1960 1961 1962 1963

TWA Exuisit Cac-3

II-27

AX-2498

"DX359A, page II-28 AS

(Supplemental S.H.E. Report - Volume A)"

Even during periods of relatively high load

factors, such as the introductory years of the B-131,

B-331 and CvV-880 jet fleets, there was great variation

in the load factors achieved by individual aircraft within

each jet fleet. We have computed the individual load

factors from the data recorded in TWA's on-board reports.

The CV-880 average load factor of 66% in 1961

was much higher than the 56% average in 1962, but even in

1961 TWA was unable to achieve a 66% load factor in all of

its 880 operations. In April, for example, four out of the

12 active Cv-880s were already operating at load factors

below 66% (Appendix B). One of these operated at a load

factor of only 51%. Four months later, in August,@ much

stronger month for air passenger travel, seven out of 17

active Cy-880s were operating below 66%, and again one was

operating as low as 51%. By October, when TWA had received

all 20 cV-880s and was scheduling 18 of them in active use,

ten were operating at load factors below 66%. Four of

these were now at 51% or below, with the lowest at 438.

It is apparent that TWA could not have operated additional

cv-880s at @ load factor as high as 66%.

Since load factors directly and sharply affect

profitability, there can be little doubt that management

would have qpepres these aircraft at auneuel load factors

[1-28

DX359A, kage II-29 ened

fupalibicte: S.ll.eé. Report - Volume A)"

if it had been able to do so. There can be no doubt that

it could not have operated any additional 880s, let alone ten

more at load factors close to the 66% average.

In 1962, the situation grew far worse for the

cv-880s, as TWA's average annual load factor dropped ten

points to 56%. In November, when the full fleet of 20 had

been available for a year, eleven of the 18 active 880s

experienced load factors below 50%, three of them below

hog, The operations by these jets were contributing sub-

stantially to the losses which TWA sustained in 1962. If

there had been ten additional Cv-880s in November 1962, it

is our opinion that they could have achieved load factors

no better, and would almost certainly have experienced load

factors worse than those of the three 880s actually operated

at load factors below 40s.

In spite of the upturn in traffic that occurred

in the last half of 1963, in November of that year TWA was

Wable to operate the six additional CV-880s with which by

then it had augmented its fleet, at load factors above 50s.

Of the 24 cv-880s active in November, eight experienced load

factors below 508. six of these had load factors ranging

from 45% dom to 39s.

of Charts II-D-1 and II-D-2 on pages II-31 and II-32

cally compare the four highest with the four lowest

| monthly load factors obtained by individual aircrart

~

"DX359A, page II-30

(Supplemental S.H.E. Report - Volume 4A)"

of the B-131 and Cv-880 fleets in each month during the

1959-1963 period. In our opinion, if TWA had operated

additional B-131s or CV-880s, they would have experienced

load factors not greater, and in most cases less, than

the lowest load factors historically experienced in the

corresponding month and fleet, as shown in Charts II-D-1

and II-D-2. |

II-30

AX-2501

"DX359A, page II-31

(Supplemental S.H.E. Report - Volume A)"

ag

“ae

a

MONTHLY AVERAGE LOAD FACTORS

OF INDIVIDUAL B-131 AIRCRAFT

SHOWING THE FOUR HIGHEST AND FOUR LOWEST

IN EACH MONTH

100 - Jucy, 1959-Dec,, 1963

10 :

AVERAGE LOAD FACTOR (2)

i* _. ii :

: 0 errr ere ee | ee eee | ee ee ee eee eee eee ee

z

ween... 1959 1960 . 1961 1962 1963

Mitts: -Appenvix B 7

Be

AVERAGE LOAD FACTOR (2)

"DX359A, page II-32 a

(Supplemental S.H.E. Report - Volume A)" ~~

MONTHLY AVERAGE LOAD FACTORS

OF INDIVIDUAL CV-880 AIRCRAFT

SHOWING THE FOUR HIGHEST AND FOUR LOWEST

~ IN EACH MONTH

Apr. 1961-Det:., 1963

JeMaM J aSoN deta Ja SqNndeMaM Jp SoNpdeMaM Sy SoNnJeM aM yaSolp

1959 1960 196° 1962 1963

AX-2503

"DX359A, page II-33

(Supplemental S.H.E. Report - Volume A)"

D. Profitability of TWA's Individual Jet Aircraft

We have determined the monthly operating profit or

”

loss for each jet aircraft operated by TWA in 1959-1963 for

| which we were furnished routing charts. We have done this on

wo different bases, estimating revenues and costs (1) according

to the S.H.E. procedures (Appendix a)2/ ané' (2) according to Mr.

Wemple's procedures (Appendix B). Both estimates are based

upon the distances actually flow and the number or passengers

actually carried in each month by each jet aircraft.

| While the profit. or loss determined under tne S.H.E.

procedures is, in our opinion, substantially more accurate,

the difference is not significant to the present analysis. For

both methods demonstrate with equal certainty, although in dif-

ferent degree, that individual aircraft in each of TWA!s jet

fleets varied strikingly in their earning capacity, depending

upon their scheduling, and they also demonstrate that, as jets

“were added, the additional jets were placed on routes where

“they began to contribute not profits, but losses.

1. Profit or Loss Under S.H.E. Procedures

| The monthly profit or loss for each jet aircraft is

“Dased upon information appearing in the TWA rduting charts and

| ‘on-board reports. THePollowing illustrates how we used such

ae BEARS

: ber ian A is a computer printout similar to Appendix B

ith operating profit or loss computed by S.H.E.

II-33

"DX359A, page II-34 @

(Supplemental S.H.E. Report - Volume Ayn

MWA routing charts for June 1962 show @ B-131 as

operating flight number 42 fron San Francisco to Idlewild.

This was the entire daily scheduled activity for one aircraft y

The on-board report for June 1962 shows that flight 42 operated

from San Francisco to Idlewild 29 times nonstop as scheduled

and once with a stop at Baltimore. The number of passengers

carried on flight 42 with a B-131 aircraft over each of the

three segments San Francisco-Idlewild, San Franc isco-Baitimore

and Baltimore-Idlewild is recorded in the on-board report for

June. The number of aircraft miles flown over each of the

three seenuibe was obtained by multiplying the airport-to-

airport mileage for the segment by the number of departures

flown over the segment as shown in the on-board report. The

number of passengers multiplied by the number of aircraft

miles gave the passenger revenue miles for each segment. The

appropriate yield was then applied (see, e.g., DX 2715, Part D

and DX 271A, pp. IV-27, 28) to arrive at the passenger revenues

realized on each seguent. The total of the, passenger revenues

tor the three segments, multiplied by 105% to obtain trans-

portation revenues, appears in Appendix A as the total revenues

earned in June 1962 by A/C O40, the B-131 performing flight 42.

VY — for B-70s

v.vwn7t

"DX359A, page II-35

(Supplemental S.H.E. Report - Volume | el

‘In instances of irregular operations (operations

performed with scheduled equipment under & scheduled flight

number but on a non-scheduled segment), where two or more

routing charts were effective in the same month and where

the same flight was scheduled for different aircraft in the

- gecond or subsequent routing charts, we allocated the de-

partures, aircraft miles and block hours flown and passen-

gers carried over a segment among such different aircraft.

Allocation was necessary because the on-board reports do

not shaw the day of the month on which a flight was per-

formed. ‘wemade such allocations in proportion to the

number of days the pertinent flight patterns were effec-

tive during the month. In a very few instances, where

such allocation resulted in apportioning less than one-half

of a departure to an aircraft, the printout (Appendix A)

shows: departures as zero, but the computer in determining

average stage lengths for the purpose of yield and cost

estimation used the appropriate fraction less than 0.5.

Flying operations costs, maintenance and main-

tenance burdan, all of which vary with the amount of

operations performed, were- based upon block hours flown

as recorded in the on-board reports and upon block hour-cost

TI-35

| "DX359A, page II-36 4

(Supplemental S.H.E.. Report - Volume A)" —

ratios derived from total annual block hours flown and

total annual direct operating costs experienced for the

aircraft type and year in question (see DX 271B, Part F)..

To determine the direct costs which vary with fleet size

(depreciation, hull insurance and leased aircraft rentals),

we computed the historical costs per aircraft day and applied

these units to the number of days in each month that each

aircraft was scheduled as active. These costs are under-

stated because the aircraft days reported by TWA and used

by us to derive our unit costs included all aircraft ina

fleet, active and inactive, but-we did not apply the unit

costs to aircraft which were unassigned, assigned as

spares, assigned to pilot training or in maintenance for

whole aircraft days .2/

We have not attempted to determine profit or loss

for scheduled trips performed with substituted equipment of

another jet aircraft type: for example, a scheduled Cv-880

run performed with a B-131. In many instances, no doubt,

the substituted aircraft was one assigned as a spare or un-

assigned. Lack of time prevented the extension of our

1/ There was considerable variation from year to year and

fleet to fleet in the percentage of active aircraft. In

1 for example, 97 percent of the reported available

B-131 aircraft days were scheduled in the routing charts

compared with 82% in 195 .

~~

-2507

, "DX359A, page II-37 A& ‘

(Supplemental S.H.E. Report - Volume A)

program to this kind of irregular operation.1/ We estimate

that the operations for which we have determined profit or

108s account for 90 percent or better of all jet operations

conducted by TWA. The inclusion of these irregular operations

would not, in our opinion, Significantly affect our results.

_ Ground and indirect expenses were determined in

accordance with the procedures set forth in Dx 271B, Part G.

Data set forth inor compiled from TWA routing charts and on-

board reports furnished us with the basis for estimating our

various indirect costing units. as outlined on page G-42 of

DX 2718.

@. The B-1318

In 1959, the B-131s all operated at high load factors

and showed substantial operating profits, except for the air-

craft which operated in November at a load factor of 514.

In January 1960, the least profitable B-131s began

operating at a loss. )

‘the B-13ls were operated profitably in June and September,

but the respite was brief. In every month from October 1960

through December 1963, one to eight B-131s sustained operating

losses .2/ 7

_—

_Y/ We did, as stated adove, p. II-10, include irregular opera-

‘tions performed with aircraft of the type scheduled by Twa.

TWA owed all its

which returned a s

turning a net profit

"DX359A, page II-38

(Supplemental S.H.E. Report - Volume A)"

‘Thus, during 47 months out of 57 in the April

1959-1963 period, never less than one, and often as many

as six, seven or eight B-13ls failed to return an operating

profit. Chart II-E-1 on page II-39 compares the monthly

operating profits earned by the four most profitable B-131s

‘in each month from July 1959 through December 1963 with the

operating profit or loss experienced by the four least

profitable B-13ls in each month.

"DX359A, page II-39 sealed

(Supplemental S.li.E. Report - Volume A)"

~Cuart IIE-1

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-131 AIRCRAFT

SHOWING THE FOUR MOST PROFITABLE

AND FOUR LEAST PROFITABLE

IN EACH MONTH

Jucy, 1959-Dec., 1963

400-

3007. ~~ | |

”

4

q

a

3 200-

u

0

5

z

® 100+

2

?

/

of PROFIT Vv /I\

(Loss) \ v

SE Lisncorrerecsrcersesseretepepusdinecniivoniecbeuind —_

— JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASOND

a 1959 | 1960 | 1961 | ° 1962 | i965" |

me «Source: AppeNDIXA 5,

"DX359A, page II-40 =

(Supplemental S.H.E. Report - Volume A)" —

b. The Cy-8808

Beginning in’ February 1961, the first full month

of operation, at least one CV-880 experienced an operating

loss every month through December 1963, with the one excep-

tion of July 1963. Even in the first peak month of June

1961, when only 14 880s were active, three aircraft failed

to earn an operating profit.

As additional Cv-880s were scheduled, more and more

of them sustained operating losses. In October 1961, there

were substantial losses for at least one-third of the 880

fleet. In November, a majority of the 880s were showing

losses, a pattern which continued through the first quarter

of 1962. There was no month in 1962 during which at least

one-third of the fleet failed to return an operating profit,

even during the peak summer season. Throughout the fourth

quarter of 1962, three quarters of the fleet came in with

losses. This indicates clearly that TWA did not need ad-

ditional 880s at this time, but needed instead additional

profit opportunities for the fleet which it did have.

In 1963, the cv-880 losses, although not as severe,

continued in each of the first six months. In July, for tne

first time in the history of the fleet, no active Cv-880 air-

craft showed a loss. The introduction of additional 880s,

beginning in August, resulted in some 890s again being operated

eta loss. By November, when the active 880s had reached 24,

seven were showing losses.

; "DX359A, page II-41

(Supplemental S.H.E. Report - Volume A)"

Chart II-E-2 on page II-42 compares the operating

profits and losses of the top four and bottom four CV-880s

in each month from April 1961 through December 1963.

AX-2511

*

:o

THOUSANDS OF DOLLARS

. &X-2512

"DX359A, page II-42

(Sispidacnten S.H.E. Report - Volume A)"

CHART le?

ae

err 3

~ MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL CV-880 AIRCRAFT

SHOWING THE FOUR MOST PROFITABLE

AND FOUR LEAST PROFITABLE

300- | IN EACH MONTH ©

Apr. 1961-Dec.. 1963

200-

100-

PROFIT

(Loss)

(100)-

(200)-

MAAS SAASS SSAA SSADI ASOD eeeaaee

JFMAMJ JASONDJFMAMJJASONDJFMAMJJASONDJFMAMJ JASONDJFMAMJJASOND

1959. | 1960 | 1961 |. 1962 | 1965 |.

™~

> DPreNviA fF

AX-2513

"DX359A, page II-43

(Supplemental S.H.E. Report - Volume A)"

c. The B-131Bs

This tleet first appears in the routing charts in

_ April 1962, but TWA did not have a substantial number of active

‘B-131Bs until August 1962. In September 1962, when 15 air-

craft were active, two of them showed operating losses. It

can be said in general that TWA's B-131B fleet operated

profitably. This can be traced to a number of factors, in-

cluding the upturn in traffic in 1963, the use of B-131Bs over

the more profitable TWA routes formerly operated with B-13ls,

and the cost economies associated with the fan jet.

Chart II-E-3 on page II-44 compares the operating

profits and. losses of the top four and bottom four B-131Bs

in each month from August 1962 through December 1963.

.)

‘AK "DX359A, page II-44 ee

(Supplemental S.H.E. Report - Volume ye

FE sik as ace esos sc eee

FOR INDIVIDUAL B-131B “AIRCRAFT

SHOWING THE FOUR MOST PROFITABLE

AND FOUR LEAST PROFITABLE

IN EACH MONTH ©

Auc., 1962-Dec.. 1963

400 -

fo

Oo

L

Nm

oO

O

L

THOUSANDS OF DOLLARS

8

(100) T5ERANJJASONDJFMAMS TESORRIFAARSIASONDJFIURIASONDUFINRIS

1959 3 1960 1961 | 1962 =

Source: ApPenDIx A “11-44

% AX-2515

DX359A, page II-45

(Supplemental S.H.E. Report - Volume A)"

dad. The Minor Domestic Jet Fleets:

.B-331s,-720Bs, B-331Bs

Only a few aircraft in these fleets were operated

domestically by TWA during the 1959-1963 period A/ TWA furnished

no B-331 routing charts for the period May 1962 through December

1963, and, consequently, we did not compute individual B-331

profit or loss after April 1962. TWA furnished routing charts

for ite four 720Bs only for the first few months of operation.

Since the 720B schedules remained fairly static » we were able

in this case to determine profits and losses for individual

aircraft throughout most of the period of 720B operation.

Since no B-331B routing charts were furnished for domestic op-

4 erations, we did not compute profit or loss for individual B-331Bs.

The few B-33l1s used domestically were scheduled on

“tong haul high load factor flights in the highly seasonal

4 ‘California market and were profitable in 1960 and 1961 during

- peek months. In off-peak months, some of the domestic B-331s

i -tealized operating losses. In 1962, the off-season losses

continued. Chart II-E-4 on page I-47 presents the individual

| operating profits and losses of all B-33ls flown domestically ;

“ti each month from March 1960 through April 1962. |

vis TWA never operated all of its -T20Bs ‘at a profit.

In eight of the 13 months for which we were able to determine

the profitability of individual aircraft, at least three, and

“sometimes al] four, of the 720Bs showed substantial operating

AX-2516. "DX359A, page I1I-46

«! moe)

(Supplemental S.H.E. "Report - Volume | Aye "

losses eA The profit picture improved in the peak summer

season of 1962, but the fleet as a whole operated in the

red during the lease period.

This conclusion is confirmed by an estimate of

the profitebility of the 720B fleet based on aircraft miles

operated and revenue passenger miles achieved by the fleet

as reported to the CAB. We found that the fleet lost ;

$895,449 in 1961 and earned $9,307 in 1962 for a net operating

loss of $886,142 over the period of the lease.2/

Chart II-E-5 on page TI-48 presents the individual

operating profits and losses of all 720Bs in each month

from September 1961 through September 1962.

jie

wee

17 |

™ Since the 720Bs were leased aircraft, rentals are gpeiuaed

' 4n direct operating costs.

2/ rin the ees of this estimate, we used Mr. Wemple's

as described below at. pages II-49, 50,

epplying, then to statistics reported by TWA in Form his.

. : AX.2517

DX359A, page II-47

(Supplemental S.H.E. Report - Volume A)"

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-331 AIRCRAFT.

MaR., 1960-Apr., 1962

;

(LOSS)

PROFIT (\

PTT Te TT eee ee eee TTT UTTTTrGOVrreCrrrrrrrrrrrrererevtrrgtry?T?

JFMAMJJASONDJ FMAMJJASONDJFMAMJJASONDJFMAMJ JASONDJFMAMJJASOND

1959 | 1960 | ml .j. im | wes |

Source: APPENDIX A = yy _y7

AX-2518

160 "

120 -

2:

"DX359A, page II-48 i

(Supplemental S.H,E. Report - Volume A)"

CHarT IIE-5

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-720B AIRCRAFT

SEPT, 1961 - SEPT. 1962 |

PROFIT

THOUSANDS OF DOLLARS

So

(Loss)

—

rTrT9TrrrTTyT.?:.

(120)

1959 | 1960

Source: APPENDIX A :

TI-48

: AX-2519

DX359A, page II-49

(Supplemental S.H.E. Report - Volume A)"

sp. ‘Profit or Loss Under Mr. Wemple's Procedures

The conclusion that TWA operated many of its jets

at a loss during the 1959-1963 period does not depend upon

using the S.H.E. revenue and costing procedures. The use

of Mr. Wemple's procedures results in @ similar profit and :

loss pattern.2/

Applying the procedures set forth in the C&C

- Report we obtained passenger revenues by multiplying the

ponthly revenue passenger miles for each jet aircraft, deter-

mined from the TWA on-board reports in the manner described

above, pp. TI-34, 35, by TWA's average passenger mile

yield for the year in question.2/ These passenger revenues

were then multiplied by 105 percent to obtain the monthly

transportation revenues per aircraft. Those direct operating

costs which vary with the amount of operations performed were

computed by multiplying the number of aircraft miles flown

by each jet during a month by a cost-per-mile based on the

ratio of the total of such costs experienced to total miles

operated by jets of the same type in the year in question .2/

The direct costs which vary with fleet size were determined

I

in the manner described above, p. II-36. !'

a

Fe 2/ Appendix B.

fie

. & see TWA Nc-4, Exs. F-J.

II-49

AK -2520 | "DX359A, page II-50 a

(Supplemental S.H.E. Report - Volume A)" i

In computing ground and indirect expenses, we

“first ascertained’ what portions of these expenses Mr.

Wemple considered variable 2/ We then multiplied the cor-

responding portions of the pertinent monthly statistics

for each jet aircraft by the appropriate ratios, as deter-

mined from the cost experience in the year in question.2/

The table in Appendix B (Mr. Wemple's method)

for the B-13ls in July 1963, when compared with the correspond-

ing table in Appendix A (the S.H.E. method) » illustrates the

similarities and differences between the two methods. The

transportation revermes are slightly higher in Appendix B.

The aircraft operating expenses are higher in Appendix B on

longer haul flights and lower on shorter haul trips because

Mr. Wemple used a flat rate per aircraft mile whereas the

S.H.E. method reflects the higher costs of shorter hauls “

with slower block speeds. The ground and indirect expenses

in Appendix B are less for aircraft with high load factors

- and greater for aircraft with low load factors, reflecting

less sensitivity to the effect of traffic on such costs.

oe - ‘Under both methods the most profitable B-131 in |

July 1963 shows a profit that is very close: $167,000 in Appendix

B compared with $164,000 in Appendix A.. The least profitable

B-331, however; shows a profit of $21,000 in Appendix B compared

with a loss of $42,000 in Appendix A. . The loss estimate is

2/ see DX 271B, Part @; TWA 4C-4, Exs. F-J; DX obs.

- B/ Bee DX 271B, p. G-H2; TWA MCh, Exs. F-J.

AX-252

"DX359A, page II-51 !

(Supplemental S.H.E. Report - Volume A)"

occasioned primarily by the higher costs incurred in short

haul operations and attributed to them under the S.H.E.

method in contrast to Mr. Wemple's method..

While Mr. Wemple's method, in our opinion, tends

to minimize the disparity in operating results attained

by different aircraft within the fleet, it does not neces-

sarily result in a showing of fewer loss aircraft. In the

ease of the B-131s for example, Appendix B, compared with

Appendix A, shows fewer 13ls returning operating losses in

23 months, the same number in 30 months and a greater number

in 4 months. ‘The number of months in which one or more

B-13ls lost money is 39 in Appendix B compared with 47 in

Appendix A.

The results of using Mr. Wemple's procedures to

determine the profitability of individual jet aircraft lead

to the same conclusions as those obtained by the S.H.E.

"procedures.

a. The B-l3ls .

Again, the first and only B-131 to show an operat-

ing loss-in 1959 appears in November. Again, beginning in

4 January 1960, one or more B-13ls each month failed to earn an

oa Operating profit until the peak month of June. Profitable

: _ ; -Operations for all B-13l1s continued through September.

II-51

AX-523 "DX359A, page II-52 a

(Supplemental S.H.E. Report - Volume A)" —

Thereafter, the pattern of loss operations persisted without

a break, except for the months of November 1962 and April

1963, until the traffic upswing in mid-1963. In a number of

months, the losses extended to as many as five, six or seven

aircraft. In February 1961 nine B-131s registered losses

under Mr. Wemple's methods. :

b. The Cv-880s |

The Cv-880s strikingly demonstrate the similarity

of the profit and.loss pattern obtained by the two methods.

Again, it appears that beginning in February 1961, the-first

full month of operation, TWA was unable to operate all of

its cv-880s at a profit in any month until July 1963. with

the addition of six more 880s beginning in August 1963, unprofit-

able operations were resumed, and by November 1963 as many as

seven CV-880s were again losing money.

Under both methods there appears a trough from November

1961 which continues throughout 1962. In this 14-month period

there was no month without at least seven loss 880s, and there

were six months with as many as eleven or twelve.

Under Appendix B, compared with Appendix A, fewer

cv-880s returned operating losses in 14 months, the same number

in 13 months and a greater number in 9 months. Both methods shor

only one month, July 1963, in which no Cv-880 operated at a loss.

_II-52

pels a "DX359A, pare II-53

ok (Supplemental S.ii.k. Report - Volume A)"

ec, The B-131Bs

Appendix B is not as favorable to B-131B operations

as Appendix A. Notably in 1963, many more 131Bs appear in

Appendix B as experiencing losses, and there are only four

months, &8 compared with seven months in Appendix A, in which

no loss operations were sustained. The reason is that the

flat rates per aircraft mile used in Mr. Wemple's costing do

not reflect the cost ‘savings produced by the long hauls on

which the B-13ls were routed. Especially noticeable are the

os sharp differences in the ground and indirect expenses.

The pattern that emerges is basically the same,

however, even though somewhat obscured by inexact costing.

The B-131Bs, which appeared late on the scene and displaced

the B-13ls from the more profitable routes because of their

greater speed and economy, turned in the best profit per- |

formance of any of TWA's jet fleets in the 1959-1963 period.

There were still some months, however, in which some of the

aircraft in this fleet failed to find profitable employment.

ad. The Minor Domestic Jet Fleets:

B-331s, B-720Bs, B-331Bs

The pattern for B-33ls is almost identical under both

mthods, with profitable operations in peak months and some loss

aircraft in the off seasons. Again, Mr. Wemple's methods disfavor

"DX359A, page II-54

(Supplemental S.H.E. Report - Volume A)" -

the relatively long-haul B-33ls. Again, the B-720B fleet

experiences no month in which all four aircraft return a

profit.

Chart II-F-1 on page II-55 compares the monthly

operating profits, as computed in Appendix B, earned by the

four most profitable B-131s in each month from July 1959

through December 1963 with the operating profit or loss ex-

perienced by the four least profitable B-131s in each month.

Charts II-F-2 and II-F-3 on pages II-56, 57 present similar

comparisons for the CV-880s and B-131Bs. Charts II-F-4

and II-F-5 on pages II-58, 59 present the individual oper-

ating profits and losses of all the B-331s (March 1960-

April 1962) and all the B-720Bs (September 1961 - September

1962), as computed in Appendix B.

"DX359A, page II-55

AX-2525

(Supplemental S.H.E. Report - Volume A)"

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-131 AIRCRAFT

SHOWING THE FOUR MOST PROFITABLE

AND FOUR LEAST PROFITABLE

IN EACH MONTH

Jucy, 1959-Dec,.; 1963

CHART LIF -|

DJFMAMJJASONDJ

ao

re se any

(Supplemental S.H.E. Report - Volume A)"

CHartT IIF-2

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL CV-880 AIRCRAFT

SHOWING THE FOUR MOST PROFITABLE

AND FOUR LEAST PROFITABLE

IN EACH MONTH

APR. ‘ 1961-Dec. ’ 1963

Agog

:

8

:

=

wet res ce aasme re 6Fr| mk A

"DX359A, page 11-57 “™-202

(Supplemental S.H.E. Report - Volume A)"

CHART IIF-3

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-131B AIRCRAFT

SHOWING THE FOUR MOST PROFITABLE

AND FOUR LEAST PROFITABLE

IN EACH MONTH

Aus te 1962-Dec. r) 1963

‘s)

<

:

Al 100-

i

PROFIT

(LOSS)

~

1959

iam |

». Source: APPENDIX B TI-57

AX-2528 "DX359A, page II-58

(Supplemental S.H.E. *Report - Volume A)"

THOUSANDS OF DOLLARS

: CHART IIF-4

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-331 AIRCRAFT

Mar., 1960-Apr., 1962

400 -

300 -

200 -

100 -

0 PROFIT /\ | K

(LOSS) LA VA\

3 V

(100)-

(200)=+

lisse APPENDIX - 11-58 | | |

AX-2529

"DX359A, page II-59 i

(Supplemental S.H.E. Report - Volume A)

CHart IIF-5

MONTHLY OPERATING PROFIT OR LOSS

FOR INDIVIDUAL B-720B AIRCRAFT

Sep., 196]-Sep,, 1962

PROFIT

(LOSS)

g

:

g

3

8

:

1959 |

\

_1960 | | 1962 | — 1963;

- Source APPENDIX BS |

\

|

| Rat

AX-2530

"DX359A, page II-60 a

(Supplemental S.H.E. Report - Volume A)"

3. General Conclusions as to the Historical Profitability

of TWA's Jet Aircraft ae

Whichever method of estimating profit and loss is

followed, it appears that there were very few months of the:

1959-1963 period in which TWA's management: was able to employ

all of its jet aircraft at an operating profit. Appendix A

shows only ten months and Appendix B only 12 months. in which

no jets experienced a loss. Eight of these months occur in

1959, when the difference between TWA's actual domestic jet

fleet and that assumed by Mr. Wemple is only 1.4 aircraft.

From January 1960 through December 1963, the period during 7

which the bulk of additional jet capacity is postulated, TWA

was unnbie: except in the peak summer season of 1960, to fly

all of the jets it did have at a profit.

Chart II-G on page II-61 presents graphically

the total number of jet aircraft which TWA operated at a

loss in each month from April 1959 through December 1963, as

shown both by Appendix A and Appendix B. Chart II-H-1 on

page II-62 presents the range of operating profit and loss

per jet aircraft in each month of the same period, as com-

puted in Appendix A, graphed against the actual number and

the assumed additional number of jet aircraft available to

TWA in each such month. Chart II-H-2 on page II-63is a

similar graph based on Appendix B. Hi

AX-2531

"DX359A, page II-61

(Supplemental S.H.E. Report - Volume A)"

CHarT I1G

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AX-2534

"DX359A, page II-64 :

(Supplemental S.iIl.E. Report - Volume A)

The comparison of the growing extent of jet. losses

with the actual jet fleet buildup is, in our opinion, convincing

evidence that TWA did not need and could not profitably have

used the assumed additional jet capacity. Additional jets could

only have been added on schedules less profitable than those

already being flown and would therefore have created addi-

tional operating losses for TWA.

~~

"DX359A, Appendix A

Supplemental S.!l,.E. Report = Volume A)

APPENDIX A

~

This table is a profit and loss tabulation by month

for TWA jet aircraft shown upon TWA routing charts for the

years 1959-1963. The methods used to determine revenues :

and expenses are those of the previous S.H.&E. report// and

are described in Part II, pp. II-33-37, of the present report.

The manual changes recorded in the profit and loss

columns were reallocations of revenues and expenses in those

months where TWA changed routings of certain flights from one

aircraft day to another or had a single trip divided between

two aircraft: e.g., where a routing chart shows that Flight 85

was flown from Boston to Baltimore to Kansas City with one

720-B and continued from Kansas City to Los Angeles with a

second 720-B. Lack of time prevented new runs being prepared.

The load factor columns and stage length columns in

Appendix A were not used.

The aircraft codes used in Appendix A are as follows:

B-70 B707-131

B7F B707-131B

B30 B707-331

B2F B720B

880 Cv-880

page S

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