Evening star., 1939-08-27
BY CHARLES E. HARNER,

Associated Press Business Writer.
NEW YORK, Aug. 26.-Ever since
World War days, flying enthusiasts
have been saying: Aviation is the
coming industry: its profits are just
around the corner
A lot of people went broke on
that theory. The roster of dead and
tter-forgotten airlines and air.
plane manufacturers is a dreary
sight.
But, right now, the most conserva-
tive observers are wondering If that
long-sought corner hasn't been
reached.
Untitled aviation orders today to-
tailed three times the whole amount
of capital invested in the industry
in the United States.
If manufacturers placed their la
Dor on a three-shift-a-day basis
(supposing there was that much
skilled labor available) it would take
solid year to clean up the orders.
Airlines actually are starting to
show operating profits.
American airplanes and engines
are being purchased in contracts of
millions of dollars at time by for
eign governments which are them
selves engaged in manufacturing
competing equipment.
Arms Orders Predominate.
It's, pretty optimistic picture
these days, except for the danger
of world peace.
For 80 per cent of the planes are
being turned out at present are mill
tary craft-and the acknowledged
backbone Of the industry is the for
eign exports, of which only IL per
cent are for commercial purposes.
To interpose a few statistics, take
aviation's banner year, 1898, which
may surpass by so per cent in total
values:
Value of total United States pro-
duction, $162 500 900.
Value domestic sales, $94 ,25O, 900.
Value exports, $68 8,250, 900.
Domestic military, s69, ,875 900.
Domestic commercial, 4,375, 900
Export military, $50, lbs 900.
Export commercial, $8,l25 900.
American factories are turning
out airplanes and parts at the rate
Of $15,000,000 month and the
profits on that production are stead
lily rising.
One reason is that after years OF
experimentation in a newborn in
dustry for which there were no cost
accounting yardsticks, the manu-.
facturers have at last determined
their fixed costs. Most important
of these is labor, which is estimated
at a per cent the cost of produc-
ton.
Research Costs Higher.
Another Is research and develop
ment. A manufacturing authority
asserted:
I'm the last five years we have
spent 10 cents of every sales dollar
for research. for experimentation
with new types of planes and equip
ment."
The high cost Of research was
made even higher, previously by the
fact that airplane orders rarely were
in lots of more than 10 or 20. Each
contract required the installation OF
new tools, interrupting production
Now, however, the multi million
dollar Government orders permit
mass production with a consequent
increase in profits.
A typical example of this profit
ratio is shown in the Douglas Air
craft report for the first six months
Of this year, when it made a profit
Of $1,396,791 on sales of $11,751,.
531, compared with profit of ST.
093,149 on sales Of $16,643, ,242 in the
like 1898 period.
Earnings in the next two years,
said manufacturers spokesman
should show considerably better
ratio"
For the last five years, the aver
age profit of airplane manufacturers
have been So per cent Of their gross
sales.
AS far as ratios go, the young
industry's comparison of invested
capital and contradiction business
is something Of an eyebrow litter
when such operations as steel mill
ing and automobile manufacture are
considered.
In the steel industry, 1t takes
about $3.50 Of capital to produce and
sell a dollars worth of steel; In
automobiles 1t takes about 80 cents
in capital to produce dollars worth
Of car.
But aviation manufacturers, with