Bonanza Air Lines Annual Report 1961

BONANZA AIR LINES, INC 1
0
0
COVER DESIGN:
WINGED VICTORY
(The Victory of Samothrace)
standing as a commemorative
of achievement since the Fourth
Century B. C., ideally symbolizes
for Bonanza Air Lines the most
triumphant year in its history.
BONANZA AIR LINES, INC. COMPANY OFFICERS EDMUND CONVERSE
President
G. ROBERT HENRY
Executive
Vice President
MYRON W. REYNOLDS
Vice President
Operations
ROBERT J. SHERER
Vice President
Finance and Treasurer
LARRY DECKER
Vice President
Traffic and Sales
JOHN D. LINDSAY
Vice President
Advertising and Publicity
ARTHUR M. TAYLOR, JR.
General Counsel
and Secretary
DONALD R. NEILSON
Director
Research and Development
and Assistant Secretary
THOMAS J. VAN BOGART
Controller and
Assistant Secretary
RICHARD A. ROGERS
Director
Industrial Relations
JACK ARANT
Assistant to the President
Governmental Affairs
WILLIAM C. BURT
Assistant Secretary
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 17 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.
GEORGE L. VARGAS 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.
ROGER CONVERSE of Los
Angeles, California, has served
as a director since May, 1955.
His many interests include
investments, motion pictures
and public relations.
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.
CHESTER M. GLASS, JR., of
Los Angeles, partner in the
investment firm, William R.
Staats & Co., became a
director in January, 1959.
WILLIAM D. PABST of Oakland,
California, is General Manager
of San Francisco-Oakland
Television, Inc. Mr. Pabst has
been on the Board of Directors
since March, 1959.
G. ROBERT HENRY, Executive
Vice President, 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.
BONANZA BOARD OF DIRECTORS
BONANZA AIR LINES, INC.
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0
TO OUR STOCKHOLDERS
The year of 1961 was one of unparalleled success
for your Company. It was in many respects the
most profitable in the Company's history. It was
profitable in terms of traffic gains; in terms of
achievement in equipment modernization; in terms
of satisfaction and pride on the part of employees,
stockholders, and others associated with the Com-
pany's welfare and progress; and last, but not least,
it was profitable in terms of earnings, with the
Company obtaining a gratifying level for an airline
of its size and type.
The Company undertook in 1961 a sweeping
promotional program that was translated into
extraordinary traffic and revenue gains. In 1961
Bonanza's improvement in passenger load factor
exceeded that of any other trunk or local service
airline in the country. The Company moved into
first place among the local carriers in over-all load
factor in scheduled service, coming from tenth place
in 1960. Passenger revenue increased by more than
25 percent.
Bonanza's all jet-powered operation with eight
F-27 A's during the first half of 1961, and nine during
the latter half, carried nearly double the traffic that
was carried on ten DC-3's in 1958, the last full
calendar year of all DC-3 operations. Moreover,
the gains were attained during a period when the
Company's basic route structure and operating
authority remained virtually unchanged.
While much of the Company's progress in 1961
can properly be attributed to an intensive effort to
develop and support a variety of effective promo-
tional programs, it is extremely important to note
that a great deal of credit must be given to the Civil
Aeronautics Board. The most important factor in
this respect was the establishment by the Board, on
January 1, 1961, of a "class" mail rate. The greater
flexibility and power of ultimate decision accorded
management under this new Board procedure has
created a regulatory climate that encourages initia-
tive and experimentation by the carriers. It largely
shifts to the carriers the responsibility for the suc-
cess or failure of both policy and operational deci-
sions. This is as it should be! It is a policy that is
designed to reduce the industry's dependence upon
federal subsidy support, and there is good reason
to believe that it will, in fact, lead to that end. Your
Company is in full accord with that program and
is in constant search of means of fulfillment.
Among the more memorable and significant
events of the year was a major Las Vegas address
by Senator Carl Hayden, dean and president pro
tempore of the United States Senate, and Chairman
of the powerful Senate Appropriations Committee.
In addressing an annual meeting of the Association
of Local Transport Airlines, hosted by Bonanza in
Las Vegas, Nevada, in October, Senator Hayden
endorsed two of the concepts of which your Com-
pany has been a principal proponent: (1) local air-
line access to profitable, dense, short-haul markets;
and (2) low-fare and promotional programs. In
connection with the promotional fares he noted
that these low fares "mean improved service and
more accessible service to the traveling public and
should open up important new markets for your
industry."
Mr. Irving Roth, Director of the Bureau of
Economic Regulation, Civil Aeronautics Board,
also addressed the Association to bespeak, among
other things, the Bureau's position that efforts to
strengthen the route systems of the local airlines
should be continued by the Board with a view
toward the eventual self-sufficiency of the carriers.
Support of this high character must inevitably
help to direct the future of this industry toward a
result in which all elements of aviation may take
considerable pride and satisfaction.
The year 1962 opened dramatically for your
Company with the award to it by the Civil Aero-
nautics Board of non-stop authority in the Los
Angeles-Las Vegas market, one of the most heavily
travelled air segments in the United States. Its im-
pact on your Company should be highly beneficial.
Also early in 1962 the Company exercised its
option for a tenth F-27 A aircraft to service the
growing traffic requirements on the then existing
route structure. The purchase of an eleventh F-27 A
is in process, to accommodate the requirements for
new Los Angeles-Las Vegas non-stop operations.
As I report on what I consider to be the most
successful year in the history of the Company, and
the prospects immediately ahead, I am extremely
mindful of the very dedicated and enthusiastic sup-
port of our "team" -our directors and manage-
ment, our employees, our stockholders, and our
suppliers. Without these our primary task of pro-
viding an ever improving public service to a rapidly
increasing number of customers could not have
been achieved. I am deeply grateful to all concerned.
Sincerely,
r;a.w(~~
PRESIDENT AND CHAIRMAN OF
THE BOARD OF DIRECTORS
3
Bonanza Air Lines D
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BONANZA mU.."AIN1%0
114,701
AIRllNES APQ.~JIJNl 1%l
77,823
PASSENGER C-:1K .. 'Ii ,tl l>A'~~l',
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Net Earnings
-1 0 2 3 4 5
1957 ($19,182)
1958 $16,222
$23,852
1959
1960
1961
1957
1958
1959
1960
1961
1957
1958
1959
1960
1961
1957
1958
$107,871
$408,731
Revenue Passenger Miles in Scheduled Service
0 2'0 60
------
32,023,000
54,420,000
63,527,000
Revenue Ton Miles Per Scheduled Hour Flown
2 3 4
155
M=N
212
380
Revenue Passenger Miles Per Employee
20 40 ' 60 80 100 120 140 160
112,905
157,917
Comparison of passenger traffic growth in Excursion and Non-excursion markets
April thru December 1961 over 1960
0 20 40 60 80 100 120
6%
Non Excursion Markets
110%
Excursion Markets
4
UNPARALLELED SUCCESS of Bonanza's promotional/ares
is, explained by Executive Vice President G. Robert Henry
during a press conference in Los Angeles. Correspondents from
all branches of the press and TV reported the record increases
in Bonanza traffic.
YEAR OF TRAFFIC GROWTH
The year 1961 saw Bonanza move to the forefront of the
industry in many respects. Representing the first full calen-
dar year of all jet-powered operations and reflecting the
most far sweeping and aggressive promotional campaign
yet undertaken in the local airline industry, 1961 bore fruit
beyond all reasonable expectations. Bonanza's over-all load
factor in scheduled service advanced from 40.8% in 1960
to 48.9% in 1961, moving the Company from tenth to first
in the local airline industry. Not only was this .a remarkable
change in relative standing among the local service airlines
but it was also the most substantial gain in load factor
recorded by any domestic trunk or local service carrier.
On a system-wide basis Bonanza's revenue passenger
miles in scheduled service in 1961 were nearly 26% greater
than in 1960, with essentially the same operations. Accom-
panying this increase in passenger miles was a somewhat
modest expansion in the available seat capacity offered to
the public, increasing by less than 5%. It is clear from these
facts that the substantial growth in passenger traffic was in
no way attributable to an expansion of the Company's
route system or the volume of service provided over that
system.
Underlying these system-wide gains in passenger traffic
were the much greater gains in the markets that were the
particular focus of the promotional programs instituted in
April of 1961. In that month the Company inaugurated
reduced resort and commercial fares in 23 markets, of
which only three were served by other airlines. During the
course of the year the program was extended to additional
markets so that by October of 1961 new excursion fares
were being offered in 35 Bonanza markets, of which only
four were served by other airlines.
The program constituted a marked departure from
standard airline pricing policy, but was undertaken within
the framework of the Civil Aeronautics Board's policy of
encouraging new approaches to traffic generation.
During the April-December 1961 period, over-all pas-
senger traffic in the markets where the excursion fares were
offered increased by 110%, whereas traffic in the markets
where the excursion fares were not offered increased by
only 6%. It is thus apparent that the new traffic generated
in the excursion markets in that period more than exceeded
the total traffic carried in those markets during the same
period in 1960. Moreover, the percentage increase in full-
fare paying passenger traffic in those markets was four
times that experienced in the non-excursion markets.
These very solid traffic gains in the excursion markets
in a nine month period not only boosted the system-wide
traffic for the entire year by 26% over 1960 but, more
importantly, increased Bonanza's total dollars of passenger
revenue in scheduled service by 25% over the 1960 level,
an increase of well over one million dollars.
ROUTE DEVELOPMENT AND PLANNING
During 1961 the Company moved forward as forcefully
as possible on its route strengthening program. The most
advanced of the route proceedings leading toward this
objective was the Pacific Southwest Local Service Case.
Early in 1962 the Civil Aeronautics Board announced
its decision in this case, awarding Bonanza the right to
provide non-stop service between Los Angeles and Las
Vegas. In 1960 this segment was the fifteenth heaviest
traveled air route in the United States. It is currently
served only by Western Air Lines on an unrestricted non-
stop basis. It is also served by United Air Lines and Trans
World Airlines with non-stop authority but with a restric-
tion prohibiting local turn-around flights. Bonanza has
been operating in this market under restrictions which
require one and two intermediate stops. Service to the
intermediate cities will be continued under Bonanza's new
authority, but in addition, the Company is authorized to
provide unrestricted non-stop services.
Under the Board's order, the new non-stop authority is
scheduled to become effective April 24, 1962. On or about
that date the Company will inaugurate the new services
with four non-stop round trips daily. A fifth is to be added
approximately one month later. The five new non-stop
round trips added to Bonanza's existing service in the
market will total nine round trips daily.
The new authority granted will contribute materially to
the Company's future growth by providing direct access to
one of the country's major air travel markets. This award
is indicative of the Board's intent to pursue its announced
route strengthening policy for the local airline industry. In
granting this authorization to Bonanza the Board stated,
among other things, as follows :
" ... Bonanza is an established carrier at both Los Angeles
and Las Vegas, it has served Las Vegas since 1946, and it
does not lack identity in the market. Our assessment of the
record does not disclose any reason for us to conclude
that, in view of the nature and needs of the traffic, Bonanza's
nonstop flights provided with modern pressurized F-27
equipment will not find substantial public acceptance. Nor
do we find any reason to believe that Bonanza, considering
the size and unusual traffic demand of the market, should
not be able to obtain a sufficient share of the local traffic
in competition with Western to enable it to achieve a
profitable operation ... "
* * *
" .. . In any event, we are convinced that, since Bonanza
will provide the needed commuter service equally as well,
if not better, than either United or TWA, and the other
advantages favoring its selection are far greater than those
of any other applicant, it would be in the public interest to
afford Bonanza an opportunity to participate on an un-
restricted basis in this short-haul lucrative market in which
it already operates on a one-stop basis and to prove its abil-
ity to provide a competitive nonstop service successfully."
* * *
" ... Insofar as its system service is concerned, giving
Bonanza access to this high-density market will furnish the
carrier with a valuable opportunity to increase its traffic
opportunities, thus strengthening its over-all operations
and permitting better service to all of the points it already
serves."
* * *
In the Southern Rocky Mountain Area Local Service
Case, in which several important route applications by the
Company are pending consideration, public hearings have
been completed and Briefs submitted to the Hearing Ex-
aminer, Mr. Joseph L. Fitzmaurice. The matter is now
awaiting his initial decision.
Public hearings have been completed in the Boise-Las
Vegas Service Case and Briefs to the Hearing Examiner,
Mr. Thomas Wrenn, were submitted in March of 1962. In
this case the Company is an applicant for the Boise-Las
Vegas route via the intermediate cities of Ely and Elko,
Nevada, and Twin Falls, Idaho, with skip-stop and non-
stop authority.
In addition to these route proceedings, the Company is
constantly re-evaluating its basic route structure and oper-
ating authority with a view toward pursuing any suitable
opportunity for further strengthening. Advanced equip-
ment planning also must necessarily be a part of any such
program. The Company will, therefore, continue its route
and equipment evaluation and planning in pursuit of its
program for improved public service and the ultimate
elimination of the need for government subsidy support.
5
...
FLIGHT OPERATIONS
Evidencing the mature development of the Company's
F-27 A jet-prop operations in 1961 was the fact that Bonanza
was in the latter half of the year engaged by the Federal
Aviation Agency, under contract, to provide F-27 A ground
and flight training to the agency's air carrier and general
aviation inspectors. Several inspectors completed the pro-
gram near the end of 1961, and additional groups are being
processed in 1962. The Company is one of only two airlines
in the country, and the only local service carrier, engaged
in a training program of this nature. Concurrent with this
program, of course, is Bonanza's continuous training of
its own personnel, which covers initial training for new
employees and recurrent courses for those previously
trained.
In March of 1962 the Company completed its program
to qualify all co-pilots as captains on the jet-prop F-27A.
Such qualification training is most extraordinary, and is
well beyond that required by the Federal Aviation Agency.
Pilots newly hired for the Los Angeles-Las Vegas no -stop
operation will go through a similar program.
For the sixth straight year the Company led the indu try
in completing the highest percentage of its scheduleJ m es,
obtaining a performance factor of 99.2%. Such p rfo m-
ance is a result in large part of the high degree of s ill nd
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proficiency exercised by the Company's maintenance, flight
control and flight operations departments.
Airframe overhauls required after 5,000 hours of flight
were completed on six F-27A's during the year, and plans
are now completed for the first 10,000-hour overhaul which
is expected to be started late in 1962. Time between over-
haul on the Rolls-Royce Dart RDa7 engines has been
extended to 2,800 hours, and an extension to 3,000 hours
is expected shortly. Bonanza's 2,800-hour authority on this
engine is the highest yet obtained by any operator. Maxi-
mum overhaul time ever obtained on the Company's DC-3
engines was 1,200 hours.
During 1961 the Company obtained its ninth F-27A from
Fairchild Stratos Corporation and an option on the tenth.
The option on the tenth was exercised early in 1962 and
approved by the Civil Aeronautics Board ; delivery was
made early in April. The eleventh F-27 A was also contracted
for in 1962, subject to approval by the Civil Aeronautics
Board, and delivery was tentatively scheduled for April.
Bonanza now operates the largest F-27 fleet of any carrier
in the world. A total of 169 F-27's are now operated
throughout the world by 28 airlines and by 26 private and
corporate owners, and foreign governments.
FEDERAL AVIATION AGENCY
INSPECTORS receive instruction
under a Bonanza program which provides
F-27 A ground and /Ught training.
Bonanza is the only local service carrier
engaged by the FAA in a program of
this nature.
GROUND OPERATIONS
NEW CITY TICKET OFFICE in the Adams Hotel in
Phoenix, Arizona opened in April, 1961.
BONANZA SILVER DART at the new Los Angeles
International Airport. Bonanza flights began operations
at the new terminal in April, 1962.
...........
Ground operations throughout the system have reflected
a very high level of efficiency. This fact has contributed in
great part to the Company's ability to absorb the increased
traffic and service demands at reasonable cost level in-
creases-and with a continuously improving performance
of its public responsibilities.
Bonanza's operations in Salt Lake City were moved to
the new airport terminal building in 1961, as were those
of all other carriers serving Salt Lake City. Also during
the year, new airport terminals were being constructed in
Los Angeles, Phoenix and Las Vegas. The Company moved
into the new terminals in Los Angeles and Phoenix in
April of 1962, and the move into the new Las Vegas ter-
minal is expected early in 1963. A new city ticket office in
the Adams Hotel in Phoenix, Arizona was opened by the
Company in April of 1961, and larger reservations offices
in the Adams were also occupied at that time. These new
facilities should greatly benefit the public convenience.
The Company's instrument and electronics division at
the Sky Harbor Airport in Phoenix was enlarged during
1961 and its functions considerably expanded. In addition
to assuming new responsibilities in connection with the
Company's own radio, instrument and electronic require-
ments, the division is developing more outside sales and
service business in the private and corporate aircraft field.
Its location is particularly appropriate in view of the fact
that Sky Harbor Airport is one of the most active muni-
cipal airports in the nation in terms of private and corporate
aircraft arrivals and departures.
At its maintenance base at McCarran Field, Las Vegas,
Nevada, the Company's various overhaul shops have like-
wise enlarged their scope of operations and reduced the
amount of work required under contract with outside
overhaul agencies. This expansion has enabled the Company
to undertake its own overhaul work on a number of major
cost items, thus permitting substantial cost reductions in
these areas. Also at its main base the Company provides a
number of maintenance services for several corporate
owners of F-27 aircraft.
During 1961, a new sub-maintenance facility at the Los
Angeles International Airport was constructed on one and
a half acres of leased land, with ample provision for the
expansion of this facility should the need arise.
7
8
SALES AND ADVERTISING
In support of the many new promotional ideas introduced
by the Company in the spring of 1961 was a wholly new
dedication of effort. The entire project was undertaken on
an experimental basis and fully joined in by everyone
associated with Bonanza. The Hal Stebbins Incorporated,
advertising agency, new to Bonanza in 1961, joined with
the personnel of the Company in providing an infusion of
fresh thought. Mr. Kendall Mau, newly appointed execu-
tive vice president of the agency, but long associated with
Bonanza's outside advertising counseling services, under-
took personal charge of the agency's support of the new
program. The zeal for a new and more productive approach
was greatly augmented by Bonanza's Traffic and Sales
Department, and by the Company's Advertising and Pub-
licity Department. ln addition, of course, were the indis-
pensable support and enthusiasm of all other departments
of the Company.
Resort excursions, commercial excursions, youth fares,
"BonanzaLand" area fares, and various other promotions
were the order of the day. ln combination, and in conjunc-
tion with a full year of all jet-powered operations, they
served to focus more public and industry attention on the
services of Bonanza than has ever before been possible.
The resort and commercial excursion fare program was
launched in the spring of 1961 on a large-scale basis. A
system-wide newspaper advertising campaign was used to
introduce and sustain the promotion. Also in support of
the program was a wholesale conversion of existing copy
on radio and television stations and outdoor billboards.
Company advertising on 57 radio stations in 17 cities was
turned to the direct support of the excursion plan. Copy
on 11 television stations in 7 of Bonanza's cities was like-
wise converted to this purpose, and 17 outdoor boards in
13 of Bonanza's cities were joined in the promotion. Over
a half-million mailings of supporting promotional litera-
ture and notices were made during the year. Dissemination
of news and publicity was greatly accelerated in response
to outside demand, as well as in furtherance of the new
sales drive.
In August of 1961, Bonanza became the first carrier in
the country to introduce a half-fare youth plan, extending
.this reduced fare to young people aged twelve through
twenty-one. This program was designed to accommodate
AUTOGRAPHED BASEBALLS were presented to members of
the Bonanza Board of Directors honoring sponsorship of a por-
tion of the Los Angeles Angel broadcasts over radio KMPC.
Accepting from Robert 0. Reynolds (right) president of the
ballclub are Roger Converse and Edmund Converse.
youths who could not otherwise afford full-fare air travel.
It was also designed to introduce our future adults to the
substantial benefits of air travel and to encourage in them
the air travel habit. The program reflected immediate bene-
fits in terms of extended use of our services.
The year 1961 also saw the introduction by Bonanza of
the most unique air travel plan in the history of aviation-
the BonanzaLand Fare. Late in the year Bonanza obtained
special approval from the Civil Aeronautics Board for an
area-type passenger fare which permits unlimited travel
over Bonanza's route system for a given number of days
at a fixed total air travel cost. It is available only to resi-
dents of areas wholly beyond the geographic boundaries of
Bonanza's system. It is designed to attract travelers from
abroad and from distant areas of the United States and
the North American Continent into "BonanzaLand" for
both vacation and business travel. The unique concept of
this program and the promotional efforts behind it have
attracted world-wide attention to the operations of Bonanza
and to the area it serves-BonanzaLand. The benefits to
your Company and to the area, in terms of recognition
and attention, are incalculable.
Over 500,000 four-color brochures were printed and are
being distributed in support of the program. More than
100,000 of these have thus far been purchased by other
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companies who desire to join in direct participation in the
plan. One of the largest travel agencies in the country has
adopted the "BonanzaLand" fare as the focal point of a
nation-wide package promotion campaign. Trunk airlines
throughout the eastern half of the United States have
sponsored meetings of their own sales and reservations
personnel for personal indoctrination in the "Bonanza-
Land" program by your Company's interline and sales
managers.
The undertaking is vast in scope, and one that requires
promotional efforts in areas far beyond the Company's
own territory. While not yet as measurably productive as
some of the other traffic stimulations, the "BonanzaLand"
area fare has probably fired the imagination of the public,
the airlines, and the press, nationally and internationally,
more than any single airline concept. It has likewise evoked
much interest from within the U.S. Travel Service in con-
nection with the country's "Visit U.S.A." travel promotion.
It must, therefore, be concluded that some part of Bonanza's
1961 unprecedented traffic gains may be attributed to the
recognition accorded your Company in direct response to
the "BonanzaLand" program.
All in all, Bonanza's 1961 promotional campaigns and
the singularly outstanding traffic increases resulting from
these efforts have engendered a marked public response
and captured the interest of aviation editors throughout
the country and abroad. In this country, from newspapers
throughout our system, to such national publications as
Newsweek, Business Week, The Wall Street Journal, the
New York Times, The Christian Science Monitor, and
virtually every aviation trade journal in the nation, the
public's attention has been directed to Bonanza's activities.
ln terms of traffic promotion and gain, 1961 was indeed a
year of great achievement.
ln furtherance of the sales program, the Company's
promotional efforts along a broad front were accompanied
by various improvements in ticketing and reservations pro-
cedures, and in the ground and flight personnel training
programs. Still greater strides forward in reservations pro-
cedures are anticipated for the future in the light of the
Company's proposed participation in an industry-wide
electronic data processing program. Your Company was
one of the first to commit to this industry plan. If adopted
by most of the industry, the program will greatly facilitate
and increase reservations handled by any one office. It
would provide immediate information on seat availability
on any participating carrier in the country and permit
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almost immediate confirmation of reservations. Time and a.L.
cost per reservation handled should be substantially rr
reduced. The public would be greatly benefited.
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NEW FLEET OF COMET STATION WAGONS
purchased for use by Bonanza's field sales managers.
Cars are painted with the Bonanza insignia and the
name and location of each sales manager.
FINANCIAL RESULTS
~
The Company's traffic promotional program and a full
year of operation with completely modern jet-powered
equipmentproducedpassengerrevenuein 1961 of $5,698,459,
an increase of $1,155,017, or more than 25% over the
passenger revenue developed in 1960. This increase was
obtained with an additional advertising expenditure of
only $143,980, for a net gain of $1,011,037.
Federal subsidy was held to a level very closely approxi-
mating that of 1960, but net earnings increased from $107,871
in 1960to $408,731 in 1961. Net earnings, including a credit
of $47,519 from the sale of equipment, were $456,250,
equivalent to 50 per share of stock outstanding.
The notable gain in revenue, accompanied by a sub-
stantially lesser increase in operating expense, enabled
Bonanza to reduce its operating break-even need subsidy
requirements by $561,589 in 1961. Break-even need per
scheduled aircraft-mile flown declined from 58.6 in 1960
to 48.0 in 1961; break-even need per revenue ton-mile of
traffic carried in scheduled service was reduced from 42.0
to 26.5. The latter represents a 37% improvement in this
category. Commercial revenue as a percent of operating
expense continued to improve, showing 74% in 1961, as
compared with 65% in 1960. In terms of the relationship of
break-even need to commercial revenue, a measurement
of progress frequently used, the Company showed a marked
improvement from 54% in 1960 to 35% in 1961.
As indicated earlier, the year of 1961 was the first year
OPERATING AND FINANCIAL STATISTICS
Traffic and Capacity
System route miles operated as of last day of the period
Total aircraft miles flown in revenue service
Scheduled aircraft miles flown . . . . .
Percent of scheduled aircraft miles flown .
Revenue passengers carried
Revenue passenger miles flown (000)
~~le seat miles flown (000) 1

ger load factor . . . .
Available ton-miles flown (000)2

Revenue ton-miles flown (000)
Overall load factor
zber of employees at year end . .
nue passenger miles per employee
Financial
Total operating revenue (000)
Passenger revenue (000)
~al commercial revenue (000)3

ublic service revenue (subsidy) (000) 4

Total operating expense (000)
Total operating expense per revenue ton-mile of traffic .
Public service revenue required to provide operating
break-even need: Total (000) .
Per available ton-mile flown
Per revenue ton-mile of traffic .
Break-even need as percent of commercial revenue
C mercial revenue as percent of operating expenses
et earnings or (loss)
1957
1,610
3,165,254
3,083,644
99.5%
147,710
32,023
74,007
43.3%
7,401
3,220
43.5%
384
83,393
$ 3,533
1,927
2,121
1,412
3,543
1.100
1,422
0.192
0.442
67%
60%
$(19,182)
in which the local air carrier industry operated under the
Civil Aeronautics Board's new "class rate" subsidy plan.
Under this new technique the outer limits of allowable
subsidy are relatively fixed, but the plan is designed to
lead ultimately to a reduction in subsidy requirements for
the industry. It accomplishes this by permitting carrier
management a more normal exercise of basic management
prerogatives, thus obtaining a far more effective utilization
of normal management incentives. During 1961 the Com-
pany demonstrated that this approach toward the attain-
ment of a self-dependent local airline industry is basically
sound. It did so by producing, through its promotional
efforts, fare policies and cost controls, an appreciably
lower break-even subsidy need and an appreciably higher
level of earnings.
A requirement for two additional F-27 A aircraft became
clearly apparent early in 1962, one for the current demands
of the system without the Los Angeles-Las Vegas non-stop
authority, and one to embrace the additional schedules
required for the non-stop operations. The Company's cash
position at December 31, 1961, was such that a portion of
the capital requirements immediately necessary to meet
these growing equipment needs could be provided from
this source. Commitments have been obtained from the
First National Bank of Nevada for the balance of the
financing required for the purchase of the two additional
aircraft.
1958
2,078
4,046,641
4,013,292
99.6%
Calendar Years
1959
2,211
4,454,991
4,357,183
99.2%
1960
2,135
4,678,137
4,554,843
99.1%
1961
2,153
4,397,396
4,390,038
99.2%
180,770 223,697 257,719 316,040
41,944 54,420 63,527 79,748
96,319 125,420 159,523
I>
166,821
43.5% 43.4% 39.8% 47.8%
9,632 12,393 15,592 16,243
4,202 5,426 6,362 7,948
43.6% 43.8% 40.8% ~ %
428 482 495 505
98,000 112,905 128,337 157_,917
$ 4,702 $ 6,537 $ 8,178 $ 9,252
2,708 3,815 4,543 5,698
2,904 4,100 4,900 5,968
1,798 2,437 3,278 3,284
4,671 6,358 7,569 8,075
1.112 1.172 1.190 1.016
1,767 2,258 2,669 2,107
0.183 0.182 0.171 0.130
0.421 0.416 0.420 0.265
61% 55% 54% 35%
62% 64% 65% 74%
$16,222 $23,852 $107,871 l~/31
1DC-3 24 seat basis; F-27 38 seat basis.
2DC-3 2.4 ton basis; F-27 3.7 ton basis.
3Operating revenue less public service revenue.
4Adjusted for retroactive public service revenue received
in 1960 which was applicable to the years 1957-1959.
10
STATEMENT OF EARNINGS
Year ended December 31, 1961
with comparative figures for 1960
BONANZA AIR LINES, INC.
Operatmg revenues:
Passenger . . . . . . . . .
Mail . . . . . . . . . . .
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 .
Non-operating income. .
Non-operating expenses:
Interest . . . . . .
Other. . . . . . .
Earnings before taxes on income .
Provision for taxes on income (Note 2)
Net earnings. . . . . . . .
Special credit:
Gain on sale of aircraft, less applicable
income taxes, $15,800 and $40,300, respectively.
Net earnings and special credit . .
1961 1960
$5,698,459 4,543,442
3,333,548 3,327,880
169,266 151,380
29,462 126,205
21,308 29,225
9,252,043 8,178,132
1,995,546 1,964,325
1,608,311 1,572,700
371,384 329,305
1,659,332 1,556,440
935,266 703,437
790,532 725,193
667,473 621,766
47,208 96,058
8,075,052 7,569,224
1,176,991 608,908
20,076 4,752
1,197,067 613,660
294,506 321,167
18,830 66,222
313,336 387,389
883,731 226,271
475,000 118,400
408,731 107,871
47,519 120,968
$ 456,250 228,839
STATEMENT OF RETAINED EARNINGS
AND ADDITIONAL PAID-IN CAPITAL
Year ended December 31, 1961
Amount at beginning of year. . . . . . . .
Net earnings and special credit . . . . . . .
Excess of proceeds over par value of 39,060 shares
of capital stock issued (Note 5) .
Amount at end of year. . . . . . . . . .
See accompanying notes to financial statements.
Retained
Earnings
$ 98,988
456,250
$ 555,238
Additional
Paid-in
Capital
1,203,988
70,339
1,274,327
11
12
Assets
Current assets :
Cash
Receivables:
United States Government Departments
Traffic
Other
Less allowance for doubtful accounts
Net receivables
Spare parts, service materials and
supplies, at average 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
Unamortized development and preoperating costs.
Deferred charges and other assets
See accompanying notes to financial statements.
BONANZA AIR LINES, INC.
BALANCE SHEET
December 31, 1961 with comparative figures for 1960
1961 1960
$1,032,597 783,889
370,207 394,662
161,707 108,412
68,919 196,253
600,833 699,327
13,000 6,500
587,833 692,827
289,604 185,055
186,643 194,563
2,096,677 1,856,334
2,921 2,621
7,619,455 6,827,224
698,629 660,166
485,628 426,823
494,488 537,585
37,478 64,175
9,335,678 8,515,973
2,544,199 2,058,035
6,791,479 6,457,938
221,812 208,637
- 21,844
$9,112,889 8,547,374
Liabilities 1961 1960
Current liabilities:
Current portion of long-term debt $ 686,204 586,118
Accounts payable . 277,493 407,566
Amounts collected for others 138,457 125,287
Accrued salaries and wages . 213,903 225,547
Other accrued liabilities . 103,429 88,826
Unused transportation 31,959 27,108
Federal taxes on income, estimated (Note 2) . 320,000 37,000
Total current liabilities 1,771,445 1,497,452
Long-term debt, less payments due within
one year (Note 1) . 4,357,124 4,680,251
Deferred federal taxes on income (Note 2) 247,000 198,000
Commitments and contingent liabilities (Note 3)
Retirement plans (Note 4)
Stockholders' equity:
Common stock. $1.00 par value per share.
Authorized 1,500,000 shares; issued 907,755 and
868,695 shares, respectively (Note 5) . 907,755 868,695
Additional paid-in capital 1,274,327 1,203,988
Retained earnings . 555,238 98,988
Total stockholders' equity 2,737,320 2,171,671
$9,112,889 8,547,374
ACCOUNTANTS' REPORT
The Board of Directors, Bonanza Air Lines, Inc. :
We have examined the balance sheet of Bonanza Air Lines, Inc. as of December
31, 1961 and the related statements of earnings, retained earnings 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, the accompanying balance sheet and statements of earnings,
retained earnings and additional paid-in capital present fairly the financial position
of Bonanza Air Lines, Inc. at December 31, 1961 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,
March 9, 1962
PEAT, MARWICK, MITCHELL & CO.
13
ARRIVING IN LAS VEGAS
ON BONANZA to speak before
the Association of Local
Transport Airlines, Senator Carl
Hayden of Arizona (left) is
greeted by Senator Alan Bible,
Nevada; Edmund Converse and
Roger Converse.
ANNUAL MEETING
The Annual Meeting of Stock-
holders of Bonanza Air Lines,
Inc., is held on the third Monday
of May in each year. This year the
Annual Meeting will be held at
10 :00 A.M. on May 21 , 1962, at
the Company's General Offices,
McCarran Field, Las Vegas,
Nevada.
The record date for the deter-
mination 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 16, 1962.
Stockholders are cordially in-
vited to attend the meeting or
send in their proxies.
14
BONANZA AIR LINES, INC.
Notes to Financial Statements
December 31, 1961
Note 1. Long-term Debt. The long-term debt as of December 31, 1961 is
summarized as follows :
Notes payable to banks:
5% notes maturing June 1,
1968, secured by chattel mort-
gage on six F-27A aircraft ...
6% note maturing October 10,
1970, secured by chattel mort-
gage on two F-27A aircraft ...
6% note maturing June 2, 1966,
secured by a chattel mortgage
on one F-27A aircraft. ..... .
Unsecured 6% notes payable, ma-
turing October 10, 1965 ....... .
Equipment purchase contracts,
maturing in 1964 or prior ..... .
Less current portion ........... .
Net long-term debt ........ .
$51,621 monthly
(including
interest)
$12,490 monthly
(including
interest)
$ 7,734 monthly
(including
interest)
$ 5,800 monthly
(including
interest)
$ 2,046 monthly
(including
interest at
4% per
annum)
Outstanding
December 31, 1961
$3,353,875
1,025,706
365,359
238,090
60,298
5,043,328
686,204
$4,357,124
In connection with the loan agreements relating to two of the above notes, the
Company has agreed, among other things, to maintain certain minimum working
capital and stockholders' equity (net worth) requirements. However, as of
December 31, 1961, such minimum requirements did not impose any restrictions
upon retained earnings.
Note 2. Federal Taxes on Income. Differences in the treatment of certain
items of income and expense result in substantial variations between net earnings
as reflected in the Company's financial statements and as reported in its income
tax returns. These differences are primarily in connection with aircraft preopera-
tional costs which are expensed, for tax purposes, in the year in which incurred
although such costs are being amortized on the books, and the use of accelerated
depreciation methods for tax purposes.
Taxes on income for 1961 includes a net provision of $49,000 for deferred
federal income taxes resulting from the differences in treatment described above.
The Company's federal income tax returns for 1958 and subsequent years are
subject to review by the United States Treasury Department.
Note 3. Commitments and Contingent Liabilities. At December 31, 1961
the Company had on order an additional F-27 A aircraft for delivery in 1962.
The purchase, representing a commitment of approximately $780,000, is con-
tingent upon the Company obtaining necessary financing therefor and approval
of the Civil Aeronautics Board.
As of December 31, 1961 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, 1961 or the results of its
operations for the year then ended.
Rentals under long-term leases are not significant.
Note 4. Retirement Plans. The Company has contributory retirement plans
for all eligible employees, which are implemented by trust funds. The plans are
cancellable by the Company. The cost of these plans charged to operating expense
in 1961 totaled $181,601 for both current and past services. Management contem-
plates that the remaining past service costs will be funded over a period of
approximately seven years and will require annual payments of $71,859 (including
interest).
Note 5. Capital Stock Reserved. The Company has a restricted stock option
plan for its officers and key employees. The plan provides for the granting of
options to purchase an aggregate of the greater of 85,000 shares or 10% of the
total outstanding shares of the Company's capital stock at prices not less than
95% of the fair market value of said stock on the dates of granting the options.
The options are exercisable generally in equal installments over a period of five
years. During 1959, options to purchase 40,300 shares at prices aggregating
$141,006 were granted. In 1961 options to purchase 13,400 shares at prices aggre-
gating $70,886 were granted, options were exercised on 2,960 shares and options
to purchase 7,920 shares were cancelled, thereby leaving 42,820 shares subject
to outstanding options as of December 31, 1961 which represented total option
prices aggregating $174,682.
Pursuant to an underwriting agreement, options to purchase 40,000 shares
of capital stock at $2.75 per share were granted to several underwriters in 1958.
During 1961, options were exercised in respect to 36,100 shares and the remaining
options were exercised in January 1962.
Note 6. Statement of Earnings for 1960. The1960figureswhichareshown
in the statement of earnings for comparison purposes have been revised to ex-
clude $23,342 of net additional prior years' mail revenue which amount was
included in the statement of earnings for the year ended December 31, 1960.
IN MEMORIAM
RALSTON 0. HAWKINS 1920-1961
General Counsel and Secretary, Bonanza Air Lines, Inc.
Our Company suffered a great loss with the untimely and unexpected
passing of its General Counsel and Corporate Secretary in early
December. Lawyer, soldier, civic leader, devoted husband and fat her,
Ralston Hawkins was one of Bonanza's most zealous executives.
Joining the executive team in early 1959, after resigning as City
Attorney of Las Vegas, Nevada, Mr. Hawkins quickly absorbed the
technical workings of airline operation and legal practice. H fa
intimate knowledge of industry problems provided our Company
with a vital service.
Mr. Hawkins' contributions to our Company for the past three
years were an essential part of our rapid growth. The void that
Ralston Haw kins leaves in both our personal and corporate lives
is beyond expression.
BO/VANZA
TRANSPORTING BLOOD AND PLASMA for blood banks,
Bonanza fl.ies an average of 100 shipments each month.
INDUSTRIAL RELATIONS
The excellent management relations developed
in prior years with all employee groups continued
throughout 1961. A very evident sense of mutual
pride and responsibility contributed greatly to
the notable progress of the Company in 1961.
Employee turnover for the year was 38% below
the 1960 level. Total number of employees in-
creased by 2% between December 31, 1960 and
the close of 1961, going from 495 to 505. Passen-
ger miles per employee increased from 128,337
to 157,917 during the same period, or by 23 % .
Between 1957 and 1961 the Company's pas-
senger traffic has increased nearly two and one-
half times while its number of employees has
increased by less than one-third. No other local
FIRST 15-YEAR SERVICE PINS were presented by
Edmund Converse to Captains George Martin and
Richard Hall, and Vice President of Operations
Myron Reynolds.
airline maintained such a favorable growth rela-
tionship. This factor is perhaps one of the most
significant keys to the Company's progress during
the past few years.
New labor contracts for the mechanic group
and for the stewardess group became effective in
1961. A new pilot contract became effective in
March of 1962. No other labor contracts are due
to expire in the immediate future.
The Company offers a number of additional
benefits to its employees, such as a pension plan,
group medical and life insurance plans, sponsor-
ship of a Federal Credit Union, liberal vacation
and airline travel-pass privileges, and other pro-
grams designed to be of assistance to employees.
BONANZA AIR LINES, INC.
0
0
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. O. Box 391, Las Vegas, Nevada