BE WARY, GLOBAL INVESTMENTS VARY 

Air Canada and market brokers are currently hyping the stock issue of this partially-privatized, previously-nationalized company.

Unsophisticated investors should tread warily into this field of transportation because the ground rules vary wiely and the bottom line may differ vastly from surface appearances.

Unlike the privatization of British Airways or Japan Air Lines, the Canadian version is only partialization. Forty-three percent to be exact.

The government still calls the shots. The old bureaucracy is still in control and the private sector demand to produce a profit still takes a back seat to government manipulation for political purposes.

If you really want to own a slice of an airline, take a look around the world at some others. You will quickly see that for high return with adequate security, the best bet is probably Cathay Pacific.

In 1987 Air Canada made a net profit of C$46 million. Each of their 109 planes contributed $422000 to this profit picture. Each of their 22,200 employees produced about $2 000 to build up that profit. Canadian Airlines International employees did a little better producing $2200 in productivity earnings; per plane profit was about $365000 per plane for their fleet of 78 aircraft.

Now compare this to Cathay Pacific, one of the world's most efficient airlines. It is totally private and operates from a base that pays but a maximum corporate income tax rate of 15.5 percent!

Last year Cathay Pacific made a profit of almost $28 million dollars per plane in their relatively small squadron of 25 aircraft. Each employee produced $57000 of earnings toward their total profit of $500 million dollars. That is well over 50 times more profit per plane and over 25 times the earnings productivity per employee of either major Canadian Airline! Cathay Pacific made more net profit than all U.S. Airlines put together, after matching airline losses against the profits of others.

Cathay Pacific can hire the best pilots (they pay the top world rates) because Hong Kong residents pay a minimum income tax rate. Just 16.5 in the top brackets. Tax there is so low that only one person in eight, in Hong Kong pays any income tax. In-flight service is superior to that of North American carriers because the cultural view towards service in most of the far east differs vastly from the North American attitude. Cathay is a kingpin in the world's fastest growing air passenger region. They have flexibility, navigational, engineering and equipment superiority factors over most other international carriers. Consider such advantages if you have that desire to invest in any airline. Moral: When investing in airline stocks, patriotism can be fatal (Editors note: Frank Ogden's report on the Hong Kong stock exchange appears elsewhere in this edition.)

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