So O.K. there are two explanations and no way to decide which one might be right.
That's right, but it's not "ship" that makes Dana Randolph's report credible. He said he heard AE say "ship on reef southeast of Howland" at a time when everyone was still assuming that distress calls were coming from an airplane afloat on the ocean. Lockheed's statement that the plane could not transmit if it was in the water had not yet appeared in the media.
Also keep in mind that at wasn't only Earhart that used the word "ship" in referring to airplanes, it was commonly used by everybody during that era so this message is not conclusively proven as being from Earhart.
Yes, ship was a common term for an airplane right up through WWII. The credibility of Randolph's report has nothing to do with "ship." A local Department of Commerce radio operator investigated and verified Randolph’s report, and found that the call sign heard was KHAQQ, and that the signal frequency was “near 16000” kHz, which is close to 15525 kHz, the 5th harmonic of 3105 kHz. It was plausible for Randolph to be tuning there, since 15525 kHz was near a shortwave broadcast band. The investigator also found that the signal included a statement – not reported by the newspaper – that the plane was “on a reef southeast of Howland Island.” The possibility of a hoax can be ruled out, given the investigation and the fact that the newspaper was published every other day, hence printed news of post-loss signals had not yet reached Rock Springs.
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As I see it, there are four possible explanations for Randolph's report:
1) he made it up himself;
2) he heard a hoax broadcast;
3) he misunderstood a news broadcast about the Earhart situation; and
4) he actually heard a transmission from Amelia.
Your argument against the first possibility is that the local newspaper had not yet published a story about the disappearance so Randolph could not have known about it and so could not have made up this story. HELLO!, the kid had a RADIO and could have learned about the Earhart situation before the story was published in his local newspaper.
As for the second possibility, anybody who had also heard of the situation could have made up the story and a hoax broadcast. As to being on a reef southeast of Howland, any hoaxter could look at any map of the Pacific or a globe and notice that the closest islands are southeast of Howland, so it would not be a great leap for a hoaxter to put that language in his fake message and to also use the common word "ship" for the plane on the reef. And this other hoaxter didn't need to read about it in Randolph's local newspaper.
In the third scenario, the kid heard part of a shortwave broadcast in the standard 19 meter international broadcast band, 15,100 to 15,800 kcs: .....static (fade) "......
the ship may be afloat but some believe (suddenly louder)
the ship is on a reef southeast of Howland Island (fade)
but the Coast Guard is still....." Anybody who has ever listened on a shortwave radio to international broadcasts knows that these signals fade in an out so this scenario is realistic.
And the fourth possibility is that he heard a legitimate Earhart message.
gl