Bonanza Air Lines Annual Report 1959

BONANZA
BOARD
OF
DIRECTORS
page 2
5\ '
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..
EDMUND CONVERSE is President and Chairman
of the Board of Directors. He has served as director
and chief executive of Bonanza since the
Company was incorporated 15 years ago.
FRANK w. BEER has served as a director since
February, 1951. Mr. Beer is Senior Member of
the law firm, Beer, Seaman and Polley,
of Phoenix, Arizona.
ROGER CONVERSE of Los Angeles, California,
has served as a director since May, 1955. His
many interests include investments, motion
pictures and public relations.
CHESTER M. GLASS, JR., of Los Angeles, partner
in the investment firm, William R. Staats & Co.,
became a director in January, 1959.
G. ROBERT HENRY, Executive Vice President
of Bonanza Air Lines since 1953, has been
associated with Bonanza top management since
1949. He became a director in March, 1959.
JAMES D. MOYLE, Salt Lake City industrialist,
was elected to the Bonanza Board of Directors
in February, 1960.
WILLIAM D. PABST of Oakland, California, is
Managing Operator of San Francisco-Oakland
Television, Inc. Mr. Pabst has been on the
Board of Directors since March, 1959.
GEORGE L. v ARGAS was one of the original
incorporators of Bonanza Air Lines and has served
as director since June, 1952. Mr. Vargas is
Senior Partner in the law firm of Vargas, Dillon
and Bartlett in Reno, Nevada.
WILLIAM T. WAGGONER, JR., of Phoenix, Arizona,
has been a director since September, 1958.
Mr. Waggoner has ranching and oil interests in
Arizona, New Mexico and Texas.
BONANZA AIR LINES, INC.
COMPANY OFFICERS
EDMUND CONVERSE
President
G. ROBERT HENRY
Executive Vice President
MYRON W. REYNOLDS
Vice President- Operations
WILLIAM J. MITCHELL
Vice President-Traffic and Sales
ROBERT J . SHERER
Treasurer
THOMAS J. VAN BOGART
Assistant Treasurer
RALSTON 0. HAWKINS
General Counsel and Secretary
EARL E. JOCHIM
Director, Research and
Development and
Assistant Secretary
WILLIAM C. BURT
Assistant Secretary
TO OUR STOCKHOLDERS:
1959 was the "Jet" year for Bonanza Air Lines. In
March your Company started the integration of the
Fairchild F-27 A jet-prop Silver Dart into its route sys-
tem. The year also marked the first decade of federally
certificated interstate airline service as well as the
thirteenth full year of scheduled operation.
The revolutionary Silver Dart enabled Bonanza to
set new records in virtually every index of operation;
passenger and cargo volume, revenue miles, available
capacity and commercial revenues registered all-time
highs.
The Company did not commence the phase-in of
the Silver Dart on any route segment until March; yet
by the end of the year, six of these fast, pressurized
aircraft were operating on four of Bonanza's five route
segments. The jet-prop Silver Dart has proved that it
can do all that your management expected it to do,
and more. This performance has resulted in a tre-
mendous reception by the public as can be seen by
the following:
1958 1959 % INCREASE
REVENUE PASSENGER
MILES 42,336,000 55,694,000 32%
PASSENGERS 182,086 226,574 24%
COMMERCIAL REVENUE $2,862,000 $4,056,000 42%
Significantly, these gains were made in the face of
the longest steel strike our nation has ever experienced,
a copper mining strike and a strike at the Glen Canyon
Dam project in northern Arizona, all of which had a
depressing effect on your Company's growth.
During 1959, Bonanza initiated service to six
new cities in Arizona, California and Utah. These
cities are Flagstaff, Grand Canyon and Page, Arizona
(site of the $400,000,000 Glen Canyon Dam project),
Oceanside, California, and Kanab and St. George,
Utah.
Bonanza's certificate to serve Grand Canyon, Ari-
zona, was awarded in the fall of 1957, the same time
as its Phoenix-Salt Lake route award; but due to a
variety of airport problems, the Company was unable
to provide service until the 1959 summer tourist
season. The traffic results at this world-famous tour-
ist mecca were so gratifying that the Company asked
for and received a CAB permit for operations during
the 1959-1960 winter season.
1959 also saw your Company vigorously partici-
pate in a route proceeding which, from a route-
strengthening standpoint, is undoubtedly one of the
most important in Bonanza's history. The CAB
Examiner's recommendation is expected momentarily
in this case; the proceeding is known as the Pacific
Southwest Local Service Case.
The most recent development in your Company's
operation took place when it received a change in
service pattern authority from the CAB on January
13, 1960. This permitted Bonanza to operate its Las
Vegas-Los Angeles segment via only one stop at
Ontario/ Riverside in addition to a flight serving both
Apple Valley and Ontario/ Riverside. The authority
also permitted non-stop shuttle service between Los
Angeles and Apple Valley. As recently as February
11, 1960, Bonanza started flying these new patterns.
Bonanza is able, as a result of this authority, to provide
Silver Dart one-stop flights on the Las Vegas-Los
Angeles segment. Thus your Company is now pro-
viding Silver Dart service on all five of Bonanza's
route segments. The integration of the Silver Dart
on Bonanza's system has, of course, reduced the usage
in scheduled service of the DC-3 aircraft owned by
your Company. As a result, one DC-3 has been
assigned to charter service exclusively and is based
in Los Angeles. Three additional DC-S's have been
listed for sale on the aircraft market. As of this
writing, one DC-3 has been leased for three years
with an option to the lessee to buy.
In July your Company entered into a merger agree-
ment with Apache Airlines in Arizona. This agreement,
subject to CAB approval, provides that Bonanza take
over Apache's Arizona state-certificated routes. These
routes are identical with Bonanza's proposed applica-
tion in the Southern Rocky Mountain Area Local Serv-
ice Case between Phoenix, Tucson, Nogales and Fort
Huachuca, and complement the Company's applica-
tion for a Phoenix-El Paso segment via Tucson, Fort
Huachuca and Bisbee/Douglas.
Also in July your Company exercised its option
with Fairchild for the purchase of four additional
F-27 A Silver Darts. Growing public demand for the
Company's Silver Dart service and the anticipated
growth of your Company's system makes it imperative
that Bonanza move forward as rapidly as possible
into an all jet-prop operation. Your Company will, of
course, only undertake this program with the full
approval and concurrence of the Civil Aeronautics
Board.
1960 opens new horizons for your Company.
Despite the most rugged winter weather conditions
experienced in over ten years, Bonanza broke its all-
time traffic record with 21,398 passengers boarded
in the short month of February. Continued traffic
development, route strengthening through restriction '
modifications, and strong route extensions, together
with further phase-out of the DC-3 as new Silver
Dart service is added, will be our targets.
Management is most grateful for the unswerving
support of the Company's stockholders and employees
without whose vision and loyalty our combined prog-
ress would not be possible.
Sincerely,
gj,eu~~~~
EDMUND CONVERSE, President
THE SILVER DART
The year 1959 saw six jet-powered F-27A Silver
Darts integrated into the Bonanza system. Pas-
senger acceptance of this extremely modern 40-
passenger aircraft was such that it even exceeded
management's highest expectations. Added to the
tremendous passenger appeal generated by the
airplane was its outstanding operating perform-
ance. In addition, the Silver Dart's dependability
placed Bonanza among the leaders in on-time
performance among the U.S. airlines operating
jet-powered equipment, and was instrumental in
your Company's achievement of the highest 1959
schedule completion record in the domestic air-
line industry.
In the short space of nine months the Silver
Dart has made such an impact on Bonanza pas-
sengers and Bonanza personnel that it is difficult
to determine which of its many outstanding fea-
tures is the most appreciated. The flight crews
and the passengers have been impressed with its
short take-off and rapid-climb abilities. Many
passengers have commented favorably about the
on-ground and in-flight air conditioning so import-
ant in the temperature extremes on the Company's
system. Also among its many impressive features
are the large panoramic windows which have
probably occasioned more obvious passenger
pleasure than any single item because of the extra-
ordinary and unobstructed view afforded the
passenger from any seat in the airplane. There
are, of course, such other fine features as pres-
surization and weather radar-elements which
the passengers sometimes take for granted, but
which are so essential for passenger comfort.
Well in advance of the introduction of the
Silver Dart, the Company initiated a completely
new and comprehensive Silver Dart ground and
flight training program for pilots, dispatchers,
mechanics and station agents. Your Company's
management had great confidence that such a
training program would pay return benefits many
times over in terms of increased safety, efficiency
page 4
Bonanza's Silver Dart: A symbol of the Jet Age.
Young and old alike
enjoy convenient loading,
comfortable seating and full visibility
afforded by Bonanza's Silver Dart.
The Silver Da1t is jet-powered by the
dependable precision engines of Rolls-Royce.
SILVER DART ( continued)
and productivity, and this has certainly been the
case. Bonanza's Supervisor of Operations Training
not only conducted the initial ground school train-
ing but also maintains the instruction on a con-
tinuing basis. The concentrated in-flight training
for pilots was, and continues to be, administered
by the System Chief Pilot. As a result of careful
planning and conscientious application, Bonanza's
training program has been widely recognized as
one of the best in the airline industry.
Incident to this intensive Silver Dart training
program was a plan that would qualify all of
Bonanza's pilots and co-pilots to obtain an "Air-
line Transport Rating:' the highest civilian flying
license issued in the United States. The Federal
Aviation Authority has long required that airline
captains have an Airline Transport Rating license,
but there has been no such requirement for co-
pilots. It has always been the Company's policy,
however, to up-grade the second-in-command
pilot when possible in the interest of maintaining
an extremely high margin of safety. The plan has
now reached fulfillment and all of Bonanza's pilots
and co-pilots hold an Airline Transport Rating.
Bonanza's situation in this respect may well be
unique in the airline industry and is another indi-
cation of your Company's pace-setting progression
into the jet age.
In 1959 your management recommended to
the Board of Directors that four additional Silver
Darts be ordered under the option agreement held
by the Company, and such recommendation was
unanimously approved. The anticipated and fore-
shadowed growth of your Company necessitated
such advance planning. Moreover, your manage-
ment is of the firm belief that its public service
obligation requires completion, at the earliest
possible date, of the Company's program for tran-
sition to an all jet-powered operation. This pro-
gram is in its advanced stages and will, when
completed, constitute a historic milestone in the
annals of aviation progress and public service.
page 5
GROWTH
A decade of constant progress by Bonanza in scheduled
interstate service is reflected graphically in the accom-
panying charts. Passenger miles, ton miles, and passengers
enplaned have increased ten-fold in the last ten years.
Bonanza flew almost five times as many plane miles in
1959 as were flown in 1950.
Passenger miles in 1959 were 32 % greater than in
1958, a rate of growth ranking second highest in the
thirteen carrier local service industry; and fourth highest
in the entire domestic airline industry. The same rank-
ing was achieved in rate of growth in total ton miles of
revenue traffic, showing a 31 % increase for your Company.
Commercial revenues have increased from $279,000
in 1950 to $4,056,000 in 1959. In 1959 commercial revenue
was over $1,000,000 greater than that earned in 1958,
an increase of 42 % .
For the fourth consecutive year the Company led
the domestic airline industry in operating performance
by completing 99.2 % of its scheduled miles. Considering
that the Company introduced the entirely new Silver Dart
aircraft into operation during the year, this is truly an
outstanding achievement.
Once again employee productivity increased substan-
tially in the past year. Passenger miles per employee
increased nearly 20 % from 97,000 in 1958 to 116,000 in
1959, while total commercial revenue per employee
increased 29 % .
Integration of the F-27 A Silver Dart into Bonanza's
system produced certain cost increases as was expected.
Industry experience has shown that introduction of a new
and larger type of equipment into a carrier's system
results in an initial expense increase, even on a unit cost
basis, and that increased revenue from the new equipment
generally lags behind the cost increases during the inte-
gration period. The Civil Aeronautics Board has histori-
cally recognized the additional costs inherent in the
phasing-in of different equipment.
Available seat miles, Bonanza's saleable commodity,
were increased 33 % in 1959 over 1958, while revenue
passenger miles, as mentioned, were increasing 32 % . It
is anticipated that in 1960 the increase in passenger miles
will be substantially greater than the increase in available
seat miles, thus reflecting a much greater utilization of
available capacity. Operating costs per seat mile increased
very slightly in 1959 over 1958, but this increase was
accompanied by increased commercial revenue per seat
mile. The resulting effect was a slight decrease in break-
even need per seat mile. Seat mile costs in the latter part
of 1959, however, were notably below those in the com-
parable 1958 period and every effort will be made in 1960
to improve upon this favorable trend.
page 6
140 - - - - - - - 10 - - - - - - - 40
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1950 1953 1956 1959 1950 1953 1956 1959 1950 1953 1956 1959
Passenger Miles Commercial Revenue Dollars of Total
Per Employee Per Employee Commercial Revenue
(Thousands) (Thousands) (Hundreds of Thousands)
250- - - - - - - 60- - - - - - - 6-------
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1950 1953 1956 1959 1950 1953 1956 1959 1950 1953 1956 1959
Passengers Enplaned Passenger Miles Ton Miles
(Thousands) (Millions) (Millions)
Reservations/ Space Control is an
intricate part of passenger handling.
Regular inspection programs
are maintained by highly
specialized maintenance personnel.
Friendliness is a byword
with Bonanza stewardesses.
Regular classroom training sessions
are scheduled for maintenance personnel.
INDUSTRIAL RELATIONS AND PERSONNEL
Bonanza has obtained an outstanding labor relations
record in the airline industry through its increasing atten-
tion to employee problems and welfare. Of employee
complaints received, over 90% are resolved prior to
reaching a "grievance" or dispute level. Employees are
kept informed on Bonanza's progress and growth through
news items in the company house organ-the "Big B"-
and through departmental supervisors. Additionally, both
the Company and the employees benefit from employee
idea contributions submitted through the Employee Sug-
gestion Program.
The progress made in the field of the Company's labor-
management relations in the year 1959 was outstanding.
Four of the five Company labor agreements were rene-
gotiated. Bonanza's airline pilot agreement and hostess
agreement were signed in March and February, respec-
tively, with both to remain in effect 18 months from the
date of signing. The agreement with the Company's air-
craft maintenance mechanics was opened by mutual con-
sent in order to adjust wages to a more realistic figure
in line with the industry and to extend the contract to a
new expiration date of June 1961. During the latter part
of 1959 the dispatchers' contract, due to expire on January
1, 1960, was renegotiated for a four-year period.
The advent of the Silver Dart resulted in a sizeable
increase in traffic and in all other Company activity. Six
new stations were opened on Bonanza's system. The
maintenance, inspection, communications, accounting, dis-
patch, station, stores, training, flight operations and
numerous other functions and responsibilities were mul-
tiplied. Yet the total over-all employment increased by
only 10% to 480, with a very significant decrease in turn-
over rate. This reduction in turnover may be attributed
to several factors, including (a) closer liaison with the
accredited airline training schools, allowing the acqui-
sition of higher caliber and better trained station and
reservations personnel, ( b) more thorough screening of
all applicants, ( c) an employee development program
which keeps the employees posted on their advancement
and the areas in which they need improvement as well
as providing them with a better understanding of the
supervisors' requirements, and ( d) an intensified and
continuing training program.
In addition, the Company offers the employees an
educational assistance program, liberal on-line pass priv-
ileges, a retirement program, a group medical and hos-
pital program and numerous other employee benefits.
As indicated by the foregoing, your Company is greatly
pleased with the loyalty and the competency of its
employees, and it endeavors to provide them with every
possible advantage consistent with good economic judg-
ment and sound administration.
page 7
ROUTE DEVELOPMENT AND PLANNING
Bonanza took an active part in three Civil Aero-
nautics Board route proceedings in 1959-in one
case as an applicant for new route authorizations,
in two cases as an intervenor.
In March, April and May of 1959 the Company
vigorously participated in hearings before CAB
Examiner William F. Cusick, who presided over
a proceeding known as the Pacific Southwest
Local Service Case. In this case, Bonanza is seek-
ing authority from the CAB to provide, among
other things, the following services: ( 1) Silver
Dart non-stop service between Los Angeles and
Las Vegas, with five daily round trips; ( 2) Silver
Dart Las Vegas-Oakland/San Francisco service,
both non-stop and via Fresno; ( 3) Silver Dart Las
Vegas-San Diego service, both non-stop and via
Palm Springs; ( 4) Silver Dart Oakland/ San Fran-
cisco-Reno service via Sacramento; and ( 5)
service over a San Diego-Reno route via various
intermediate cities in the San Joaquin Valley.
Receipt of major awards in this proceeding would
substantially strengthen the Company and mate-
rially reduce its requirements for public service
payments from the Government. Upon issuance
of the CAB examiner's recommendation, which
is expected soon, the case will go directly into
the hands of the Civil Aeronautics Board. The
year 1960 is therefore expected to produce the
final decision in this important case.
Bonanza intervened in two proceedings known
as the Reopened Pacific Northwest Local Service
Case and the Southern Transcontinental Service
Case. The Company exhibits and testimony in
these proceedings were designed to protect not
only its present system interests but also its pro-
posals and requirements for future expansion
and development.
In addition to the above cases, Bonanza has
become a party in the recently designated South-
ern Rocky Mountain Area Local Service Case. As
the boundaries of the case are now defined, the
Company expects consolidation of its applications
for authority to provide service to cities in
Colorado and New Mexico as well as to El Paso,
Texas. Bonanza has also applied for additional
operating authority in the four states it now serves
-Arizona, California, Nevada and Utah. The
Company also expects these applications to be
page 8
included in the case. Bonanza has several applica-
tions on file which would likely be included if the
case is expanded beyond its present boundaries.
During the year 1959, six new commu_nities
were added to Bonanza's system service. Two of
the cities, Grand Canyon, Arizona and St. George,
Utah, certificated in late 1957, had not been served
earlier due to the unavailability of adequate
airport facilities; three cities, Kanab, Utah, Flag-
staff and Page, Aiizona, were provided service as
a result of an award granted by the CAB in Feb-
ruary 1959. One city, Oceanside, California, is
receiving service by Bonanza under an exemp-
tion authority.
The hemendous impact of the F-27 A jet-prop
Silver Dart can be most readily seen in the sec-
tion of this report covering growth. Since March
1959, when Bonanza proudly introduced this
attractive new airplane to its traveling public on
the Reno-Las Vegas-Phoenix and the Phoenix-Salt
Lake City segments, demand has required the
addition of a number of Silver Dart flights. The
Company has always tried to meet traffic demands
and develop additional traffic potentials when-
ever possible, and here was no exception. Service
was commenced with two Silver Dart round trips
in April 1959 between Phoenix and Los Angeles
via Yuma, El Cenho, San Diego and Santa Ana.
In September 1959 a second Silver Dart non-stop
was added between Las Vegas and Reno. Bonanza
received delivery of its sixth Silver Dart in
October, thereby permitting the Company to
integrate further this fine aircraft into its opera-
tions. Thus, October saw a fourth Silver Dart
round trip added between Las Vegas and Phoenix
via Kingman, Arizona to supplement the then
existing three non-stops; a second Silver Dart
non-stop round trip was added between Phoenix
and Salt Lake City; and Silver Dart service was
initiated between Phoenix and Los Angeles via
Blythe, Palm Springs and Riverside/Ontario. In
February 1960 the Company inaugurated service
with the Silver Dart between Las Vegas and Los
Angeles via Ontario, thus providing jet-prop serv-
ice to the only Bonanza segment which had not
received it theretofore. The institution of this
service completes the first step of the Company's
plan for an all jet-powered operation.
PRESENT SYSTEM
APPLICATIONS
DOCKET 5395
EXPANDED 5395
DOCKET 5645
BO\SE





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page 10
MAIL AND
PUBLIC
SERVICE
REVENUE
ACCOUNTANTS'
REPORT
Mail and public service revenue received by the Company during 1959
were paid under temporary rates established by the Civil Aeronautics Board,
thereby extending the period for which final revenues from this source are
to be determined to a two and one-half year period dating back to July 1,
1957. The revenues received under such temporary rates were intended,
together with commercial revenue, to approximately equal operating expenses
plus interest on indebtedness.
The Company sought a conference proceeding with the CAB during
1959 to determine final rates for the expired period from July 1, 1957 through
December 31, 1959 as well as for future periods of operation. In its petition
of October 22, 1959 the Company formally requested the commencement
of such proceeding at the earliest date available on the schedule of the CAB.
To date no specific time has been set for th~ convening of a proceeding but
the Company is hopeful that it may be scheduled during 1960.
The ultimate determination of a final rate for the period from July 1,
1957 through December 31, 1959 is expected to provide the Company with
additional net revenue in excess of $250,000 after income tax comprising a
7 percent return on investment less amounts advanced under temporary
rates covering interest on indebtedness.
On January 22, 1960, the CAB announced a program of establishing final
mail and public service rates for future periods of operation by the end of
1960, for all local service airlines presently operating under temporary rates.
In response to the request of the CAB with respect to the scheduling of such
proceeding, the Company urged that the earliest available date be reserved
and that effort be made to commence the proceeding prior to July 1, 1960.
Although the CAB has announced no decision in the Local Service Ra;te
of Return Investigation, all procedural steps have been completed and the
matter stands ready for decision. In the interim period, pending decision in
that case, the CAB continued to apply a 7 percent return on investment for
past periods of operation and a 9 percent return on investment for the
profit element of a rate for future periods of operation. It is anticipated that
the 9 percent measure of profit will be employed in determining the
Company's rate to be fixed on a prospective basis in 1960, unless final decision
in the investigation has been announced with a different percent for profit
computation; prior to the completion of the Company's rate proceeding.
In announcing the program for the determination of final mail and public
service rates during 1960, the CAB indicated that its study of group rates for
local airlines has not been resolved in all particulars but that it would con-
tinue study of the plan. The Company has strongly supported the adoption of
such a method of determining rates because of the greater flexibility which
would be made available for planning and conducting its operations with the
advance knowledge of the probable profit result that could be expected.
The Board of Directors
Bonanza Air Lines, Inc.:
We have examined the balance sheet of Bonanza Air Lines, Inc. as of December
31, 1959 and the related statements of income, deficit and additional paid-in
capital for the year then ended. Our examination was made in accordance with
generally accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as we considered necessary
in the circumstances.
In our opinion, subject to any retroactive adjustment of mail revenue as men-
tioned in Note 6, the accompanying balance sheet and statements of income,
deficit and additional paid-in capital present fairly the financial position of Bonanza
Air Lines, Inc. at December 31, 1959 and the results of its operations for the year
then ended, in conformity with generally accepted accounting principles applied
on a basis consistent with that of the preceding year.
Los Angeles, California
April 8, 1960
PEAT, MARWICK, MITCHELL & CO.
BONANZA AIR LINES, INC.
STATEMENT OF INCOME
Year ended December 31, 1959
( with comparative figures for 1958)
Operating revenues:
Passenger .
Mail (Note 6) .
Express, freight and excess baggage
Charter and other transport services
Other .
Operating expenses:
Flying operations .
Maintenance .
Passenger service .
Aircraft and traffic servicing .
Promotion and sales .
General and administrative .
Depreciation .
Amortization of development and preoperating costs
Operating income (loss)
Non-operating income .
Non-operating expenses:
Interest ( Note 7)
Other .
Income (loss) before Federal income taxes
Provision (credit) for deferred Federal income taxes ( Note 2)
Net income (loss)
Additional prior years' mail revenue, less deferred Federal
income taxes, $9,200 and $43,600 ( N ates 2 and 6)
Net income (loss) and additional
prior years' mail revenue
Statements of Deficit and Additional
Paid-In Capital
Vear ended December 31, 1959
Amount at beginning of year .
Net income and additional prior years' mail revenue
Excess of proceeds over par value of 6,415 shares
of stock issued under option .
Excess of indebtedness cancelled over par value of
13,143 shares of stock issued in consideration therefor
Amount at end of year .
See acco mpanyi ng notes to financial sta tements .
1959
$3,814,884
2,454,792
125,672
89,316
26,447
6,511,111
1,746,686
1,377,211
276,352
1,427,059
470,129
515,243
433,449
111,888
6,358,017
153,094
13,888
166,982
131,354
6,924
138,278
28,704
17,300
11,404
8,362
$ 19,766
Deficit
$ 172,959
19,766
$ 153,193
1958
$2,707,905
1,800,969
110,702
36,721
6,297
4,662,594
1,419,408
928,743
221,835
1,153,101
342,231
371,947
189,236
44,017
4,670,518
(7,924)
10,347
2,423
11,325
714
12,039
(9,616)
(7,100)
(2,516)
40,309
$ 37,793
Additional
Paid-in
Capital
$1,162,377
8,754
32,857
$1,203,988
page 11
page 12
ASSETS
Current assets:
Cash
Receivables:
United States Government Departments
Traffic, less allowance for doubtful accounts,
$4,000 and $11,000
Other .
Net receivables
Spare parts, service materials and supplies, at cost
Prepaid expenses .
TOTAL CURRENT ASSETS
Investments, at cost .
Properties and equipment, at cost ( Notes 1 and 3):
Flight equipment .
Ground equipment
Buildings and improvements on leased property
Other property and equipment
Construction in progress .
Less allowance for depreciation and amortization
Net properties and equipment
Deposits on equipment purchase contracts .
Unamortized development and preoperating costs
Deferred charges
See accompanying notes t o fin ancial sta teme nts.
1959 1958
$ 479,581 $ 318,776
556,984 415,674
37,932 138,452
58,485 51,001
653,401 605,127
164,717 92,392
203,252 51,775
1,500,951 1,068,070
2,621 2,821
6,241,065 1,615,080
584,149 344,884
405,793 390,014
14,980 15,347
9,862 121,789
7,255,849 2,487,114
1,631,192 1,004,793
5,624,657 1,482,321
1,000 533,933
266,952 176,013
31,968 20,527
$7,428,149 $3,283,685
BONANZA AIR LINES, INC.
BALANCE SHEET
as of December 31, 19 5 9
( with comparative figures for 1958)
LIABILITIES
Current liabilities:
Current portion of long-term debt
Accounts payable:
Purchases
Traffic
Amounts collected for others
Accrued salaries and wages
Other accrued liabilities
Unused transportation
TOTAL CURRENT LIABILITIES
Long-term debt, less payments due within one year ( Note 1)
Deferred Federal income taxes ( Note 2) .
Commitments and contingent liabilities ( Note 3)
Retirement plan ( Note 4)
Stockholders' equity:
Common Stock, $1.00 par value per share.
Authorized 1,500,000 shares; issued and outstanding 868,695
and 849,137 shares respectively ( Note 5)
Additional paid-in capital
Less Deficit
Total stockholders' equity
1959 1958
$ 425,489 $ 33,691
348,061 369,910
14,084 190,557
102,078 69,096
171,158 158,770
197,861 49,316
30,181 13,605
1,288,912 884,945
4,156,747 523,685
63,000 36,500
868,695 849,137
1,203,988 1,162,377
2,072,683 2,011,514
153,193 172,959
1,919,490 1,838,555
$7,428,149 $3,283,685
page 13
BONANZA AIR LINES, INC.
NOTES TO
FINANCIAL
STATEMENTS
DECEMBER 31, 1959
ANNUAL
MEETING
page 14
NOTE 1. LONG-TERM DEBT . The long-term debt as of December 31, 1959 is summarized
as follows:
Notes payable to banks:
5 % note maturing December 1, 1962,
secured by a chattel mortgage on all
DC-3 aircraft
5 S1
o notes maturing June 1, 1968, secured
by a chattel mortgage on six
F-27 A aircraft
Equipment purchase contracts, maturing
in 1964 or prior
Less current portion
Net long-term debt
Outstanding
Dec. 31, 1959 Payable
$ 300,000 $15,000 monthly
( including interest),
commencing April 1,
1961
4,169,871 $51,621 monthly
( including interest)
112,365 $1,910 monthly plus
interest at 4 % per
4,582,236 annum
425,489
$4,156,747
NOTE 2. FEDERAL INCOM E TAXES. Differences in the treatment of certain items of income
and expense result in substantial variations between net income (loss) as reflected in the
company's financial statements and as reported in its income tax returns. These differences
are primarily in connection with the year in which temporary mail revenue adjustments
are recognized as income, and route development and preoperational costs which are
expensed, for tax purposes, in the year in which incurred, although such costs are being
amortized on the books.
Deferred Federal income taxes have been computed after giving effect to net operating
losses for tax purposes, which are available for carry-over to subsequent years.
The company's Federal income tax returns for 1956 and subsequent years are subject
to review by the United States Treasury Department.
NOT E 3. COMMITMENTS AND CONTINGENT LIABILITIES. At December 31, 1959 the company
had on order four additional F-27 A aircraft which are scheduled for delivery in 1960.
The purchase of these aircraft, representing a commitment of approximately $2,832,000,
is contingent upon the company obtaining the necessary financing therefor.
As of December 31, 1959, the company was contingently liable for claims and lawsuits
in which it is or may be a defendant; however, management and its counsel believe the
ultimate liability, if any, will not materially affect the financial position of the company
at December 31, 1959 or the results of its operation for the year then ended.
NOTE 4. RETIREMENT PLAN. The company has a contributory retirement plan for all eligible
employees, which is implemented by a trust fund. The plan is cancellable by the company.
The cost of this plan charged to operating expense in 1959 totaled $132,005 for both
current and past services. Management contemplates that the remaining past service costs
of the plan will be funded over a period of approximately nine years and will require annual
payments of $71,859 ( including interest ).
NOTE 5. CAPITAL STOCK RESERVED. In July 1959, the company adopted a restricted stock
option plan for its officers and key employees. The plan provides for the granting of options
to purchase an aggregate of 85,000 shares of the company's capital stock at prices not less
than 95/c of the fair market value of said stoC'k on the dates of granting the options. The
options are exercisable generally in equal instalments over a period of five years. As of
December 31, 1959, options to purchase 40,300 shares at prices aggregating $141,006 had
been granted and were outstanding as of said date.
As of December 31, 1959, 40,000 additional shares of capital stock were reserved
under options granted to several underwriters in 1958. Said options are exercisable at a
purchase price of $2.75 per share and expire in June 1963.
The company has agreed to acquire all of the outstanding capital stock of an Arizona
intrastate airline, in exchange for a maximum of 18,595 shares of the company's capital
stock. This acquisition is subject to approval of the Civil Aeronautics Board.
NOTE 6. MAIL REVENUE. The company has received mail and public service revenues under
temporary rates established by the Civil Aeronautics Board following petition by the
company on July 1, 1957. During the two and one-half year period subsequent to the
original petition, four adjustments to the temporary rate have been authorized with the
fourth amending order issued on April 5, 1960. An additional amount of $275,773 was
authorized in the fourth amendment over rates previously established for the period July 1,
1957 through December 31, 1959, of which $17,562 related to the periods prior to 1959.
The company has requested the Civil Aeronautics Board to determine final rates for this
period ; however, no accruals have been included in the financial statements to reflect
the effect of such final rates. In the opinion of management, based on current rate policies
of the Civil Aeronautics Board, operating results for the period July 1, 1957 through
December 31, 1959 will be favorably affected when the rates for such period are finally
reviewed and settled.
NOTE 7. INTEREST ON INDEBTEDNESS. Interest expense as reflected in the statement of
income does not include $37,380 in the year 1959 which was capitalized as a part of the
cost of acquiring six F-27 A aircraft.
The Annual Meeting of Stockholders of Bonanza Air Lines, Inc., is held on
the first Monday of May in each year. This year the Annual Meeting will be
held at 10:00 A.M. on May 2, 1960, at the Company's General Offices,
McCarran Field, Las Vegas, Nevada.
The record date for the determination of stockholders entitled to receive
notice and to vote at the meeting and any adjournment thereof has been
fixed by the Board of Directors as of the close of business on April 1, 1960.
Stockholders are cordially invited to attend the meeting or send in their
proxies.
I
SALES AND ADVERTISING
In anticipation of the introduction of Silver Dart service to the
traveling public in the explosively growing southwestern area of
the nation, your Company's sales, promotion and advertising efforts
were greatly accelerated during the early part of 1959. This inten-
sified program was continued throughout the year as additional
aircraft were delivered and placed into service. Not only was this
ultramodern aircraft new to our public but so also were many of
the scheduled services being added because of it.
Your Company continued its strong penetration into the vacation
package field, with several new tours being offered. The tour program
has brought substantial recognition to the Company through several
thousand recognized travel agencies in the United States and abroad.
The sales benefits from the increasingly popular tour vacations are
expected to mount in succeeding years, as the cumulative effects of
the broadening program are realized.
The availability of jet-prop Silver Dart service on Bonanza's
system has provided a notable stimulus to the joint promotional
efforts undertaken by your Company in conjunction with the trunk
airlines, travel agencies, hotels and various national and regional
businesses and organizations. Tie-in advertising in connection with
the new Silver Dart service was also greatly accelerated during
the year.
The year reflects an increased use by Bonanza of virtually all
fields of advertising media reasonably available to the Company,
including, among others, radio, television, newspaper, magazine,
outdoor and transit. Direct mail advertising was also used extensively.
While necessarily and properly a large amount of the advertising
program has been directed toward point-to-point or destination type
promotion, a larger than usual amount has been devoted to a so-called
prestige or institutional kind of advertising to create a public aware-
ness in 1959 of the astounding rise in the stature of your Company.
The program in all respects has been exceptionally well received
and highly productive.
In addition to the near-phenomenal 1959 increase of 32 % in
passenger traffic over the same basic route structure operated in
1958, exceptional advances were also made in other traffic cate-
gories; total mail ton miles increased by more than 25%; freight
ton miles were up over 11 % ; and other ton miles increased by 20 % .
Also reflecting the greatly improved services and the intensified
sales efforts of your Company were notable gains in interline sales,
excursion travel, military and government traffic, charter services
and the use of Company on-line credit cards.
A new combination city ticket office and reservations office
was opened in 1959 in the Beverly Hills area of Los Angeles. The
expected growth in traffic from the Los Angeles area makes this
addition one of the most important of Bonanza's sales facilities and
outlets. A new sales office has also been opened in San Diego, in
keeping with the growing importance of this area to your Company's
total system traffic potential. In addition, your Company also main-
tains sales offices in Reno and Las Vegas, Nevada; Phoenix, Arizona;
Ontario, California and Salt Lake City, Utah.
page 15
SERVING:
APPLE VALLEY, CALIF.
BLYTHE, CALIF.
CEDAR CITY, UT AH
EL CENTRO, CALIF.
FLAGSTAFF, ARIZ.
GRAND CANYON, ARIZ.
KANAB,UTAH
KINGMAN, ARIZ.
LAS VEGAS, NEV.
LOS ANGELES, CALIF.
OCEANSIDE, CALIF.
ONTARIO, CALIF.
PAGE, ARIZ.
PALM SPRINGS, CALIF.
PHOENIX, ARIZ.
PRESCOTT, ARIZ.
PROVO, UTAH
RENO, NEV.
RIVERSIDE, CALIF.
ST.GEORGE,UTAH
SALT LAKE CITY, UT AH
SAN DIEGO, CALIF.
SANTA ANA, CALIF.
LAGUNA BEACH, CALIF.
TO NOP AH, NEV.
YUMA, ARIZ.
TRANSFER AGENT: First National Bank of Nevada, Las Vegas, Nevada
REGISTRAR: Bank of Nevada, Las Vegas, Nevada
CORPORATE OFFICES: Bonanza Air Lines, Inc., McCarran Field
P. 0 . Box 391, Las Vegas, Nevada