Bonanza Air Lines Annual Report 1964

BONANZA
AIR LINES, INC.
ANNUAL REPORT
1964

BONANZA AIR LINES, INC.
BOARD OF DIRECTORS
Edmund Converse
President and Chairman of the Board of
Directors. He has served as director and
chief executive of Bonanza since the
company was incorporated.
Frank W. Beer
Became a director of Bonanza Air Lines
in February of 1951. He is the senior member
of the law firm of Beer and Polley;
director of Peoples State Bank, Mineola,
Kansas; director of KOOL and KOLD
radio, CBS affiliates; director of
F. A. Gillespie and Sons Company, Tulsa,
Oklahoma; director of Adams Hotel
Company, Phoenix, Arizona.
George L. Vargas
One of the original incorporators of Bonanza,
Mr. Vargas has served as a director since
June of 1952. He is a senior partner in the law
firm of Vargas, Dillon, Bartlett & Dixon; also a
director of Johnson Service Co. of Milwaukee;
director of Valley Bank of Nevada in Reno.
Roger Converse
Became a director of Bonanza
Air Lines in May of 1955. He is a
director of Island Farms, Inc. and
Cave des Roys. His other interests
include investments, public relations,
and real estate.
Chester M. Glass, Jr.
Became a director of Bonanza Air Lines
in January of 1959. Mr. Glass has been
active in the investment banking business
for 35 years.
William D. Pabst
Elected to the Bonanza Board of Directors
in March of 1959. He is executive vice
president and general manager of
San Francisco-Oakland Television, Inc.;
also president and director, St. Claire
Finance Corporation.
G. Robert Henry
Elected to the Bonanza Board of Directors
in March of 1959. He has been Executive
Vice President of Bonanza since 1953
and associated with Bonanza top
management since 1949.
James D. Moyle
Elected to the Bonanza Board of
Directors in February of 1960. A Salt
Lake City industrialist, Mr. Moyle is
president and director, Superior Oil
Company of Utah; president and director.
Silver Lake Company; vice president
and director. Ideal National
Insurance Company, Industrial Uranium
Company and Empire Capital
Corporation.
Robert O. Reynolds
Became a director of Bonanza Air Lines
in May of 1962. He is president of
Golden West Broadcasters and
Golden West Baseball Co.,
owners of the Los Angeles Angels
baseball team; also president of Board
of Trustees, the Webb School of California.
He is a member of the advisory board
of the Guaranty Bank; and vice president
and director, Los Angeles Rams
and Gene Autry Hotel Co.
COMPANY OFFICERS
EDMUND CONVERSE, President
G. ROBERT HENRY
Executive Vice President
MYRON W. REYNOLDS
Vice President, Operations
ROBERT J. SHERER
Vice President, Finance
LARRY DECKER
Vice President, Traffic and Sales
JOHN D. LINDSAY
Vice President, Advertising and Publicity
DONALD R. NEILSON
Vice President, Research and Development
and Assistant Secretary
RICHARD A. ROGERS
Vice President, Industrial Relations
ARTHUR M. TAYLOR, JR.
Vice President, Legal and Secretary
JACK ARANT
Vice President
Governmental Affairs
NOLAND H. RYAN
Vice President
Community Affairs
FRANK R. CHABOT, Treasurer
THOMAS J. VAN BOGART
Controller and Assistant Secretary
WILLIAM C. BURT
Assistant Secretary
FINANCIAL AND OPERATING HXGHUGHJS / Calendar Years 1960-1964
Total operating revenue'
Earnings before taxes'
Net earnings'
Net earnings per share ' ^
Gross annual payroll . g
Revenue passenger miles per employee
Available seat miles flown
Revenue passenger miles flown .
Passenger load factor
Reflects adjustments related to retroactive subsidy determinations,
1964
1963
1962
1961
$14,085,367
$12,762,543
$10,945,839
$
9,282,366
$ 1,280,166
$ 1,695,269
$ 1,222,980
$
914,054
$ 677,166
$ 874,129
$ 711,144
$
422,054
$ .65
$ .96
$ .78
$
.47
$ 5,541,456
$ 4,682,436
$ 4,024,365
$
3,575,430
214,777
215,719
190,014
156,369
292,480,000
241,284,000
206,849,000
166,821,000
160,653,000
139,139,000
108,688,000
79,748,000
54.9%
57.7%
52.5%
47.8%
-Based on average outstanding shares of stock.
1960
$ 8,178,132
$ 226,271
$ 107,871
$ .12
$ 3,196,299
129,120
159,789,000
63,527,000
39.8%

3
TO OUR STOCKHOLDERS:
The year 1964 saw Bonanza enter into the second
phase of its equipment modernization program
with the completion of the companys second
major equipment financing program. As pre-
viously reported, approximately $11,000,000 is
required to finance the three Douglas DC-9
fan/jet aircraft ordered during 1963. Funds were
made available to the company in May of 1964
through term loan agreements aggregating
approximately $6,500,000, and from a public
offering of $4,500,000 of 514% convertible sub-
ordinated debentures and common stock of the
company.
Douglas Aircraft Company reports that con-
struction of the DC-9 is progressing ahead of
schedule. The first aircraft came off the assembly
line in early January 1965, one month ahead of
schedule. First flight tests were conducted by
Douglas on February 25, and were reported to be
extremely gratifying. The companys first DC-9
is expected to be delivered by February of 1966.
We are, of course, looking forward to that time.
In order to accomplish an orderly assimilation
of the DC-9 into the companys operations every
department in the company is busy with neces-
sary preparations. Present plans call for a major
expansion of the companys maintenance facili-
ties, including a new hangar and shop facilities
designed to accommodate the DC-9. Training
programs for pilots and mechanics have already
been developed.
During 1964 net earnings before special items
amounted to $677,166 or 65 ^ per average number
of shares outstanding, as compared to $874,129
and 96^ per outstanding share during 1963.
Earnings for 1964 were affected somewhat by
an unrestricted low fare program instituted by a
competitive carrier in the Las Vegas-Los Angeles
market, although by mid-1964 effective remedial
action was instituted by the company. A tern-
porarily depressed Salt Lake City economy,
resulting from major labor strikes, added to the
problem. A 26% increase in service over the com-
panys system in late 1963 resulted in increased
costs; due to the normal lag in related traffic
development these increases were not immedi-
ately matched by additional revenues. As a result
of these various factors the 12.6% increase in
commercial revenue during 1964 was not re-
fleeted in an improvement in net earnings. When
viewed in the light of the companys previous
year, an outstanding one I might add, the finan-
cial results would seem to be less attractive. How-
ever, when compared with the overall progress of
the company, 1964 emerges as the third most
prosperous year in the companys history, exceed-
ing the accumulated earnings for the first 16 years
of operation (1946-1961). Bonanza continues to
rank among the leaders in the local service indus-
try and again led that industry in passenger load
factor in 1964.
During November of 1964 the company
suffered the loss of one of its F-27As in a tragic
accident during a snowstorm near Las Vegas,
Nevada. This was the first fatal accident in this
companys 19 year history. The matter is presently
under study by the Civil Aeronautics Board for
their determination of probable cause.
Late in 1964 the company negotiated with
Fairchild Hiller Corporation for the purchase of
two additional F-27As to be delivered early in
1965. One is a replacement aircraft and the
second is needed to serve the additional traffic
requirements on the companys system.
In closing it is appropriate to say that in my
judgment the government approval in 1964 to
purchase the DC-9 fan/jet airliner, together with
the successful completion of the necessary financ-
ing program, constitute, in all likelihood, what
will be looked upon as the most significant step
forward in this companys entire history.
Sincerely,
PRESIDENT AND CHAIRMAN OF
THE BOARD OF DIRECTORS

A NEW ERA
G. ROBERT HENRY
While Annual Reports are largely retrospective
in nature there sometimes occurs in the life of
a company a change so fundamentally affecting
its future course that prospective treatment is
required. Such is the nature of the companys
decision to purchase the Douglas DC-9 fan/jet
aircraft and the governments 1964 approval of
that purchase. This is but a part of the com-
panys long range program, but it is such a vital
part that it warrants special consideration in this
report. To place the DC-9 in its proper perspec-
tive, however, requires a brief discussion of the
nature of that long range program and the poli-
cies and objectives that underlie it. It is to that
purpose that this section will be devoted.
Bonanza is dedicated to the principle that
the inherent advantages of air transportation
must be extended to an increasingly broader
base of our national populace. Two things
are absolutely essential to the achievement of
this objective: Constant progress in the operat-
ing efficiencies of the industry and constant
improvement in the safety of air travel. Low
cost, of course, permits low fares which are a
basic requirement for the greatly broadened use
of air transportation. Reliability of equipment
and personnel provide the obvious key to air
safety.
The emergence of the jet aircraft has per-
mitted miraculous progress in these critical areas
of cost and reliability. Its full cost achievements
are as yet beyond count. Its mating of man and
advanced flight equipment technology is pro-
ducing an incredible reliability factor.
These are a part of the promise that the DC-9
holds for Bonanza. It will bring to the high
density short-haul markets of Bonanza all of the
bright prospects that the larger jets offer in the
major long-haul markets of the domestic trunk
airlines. Great masses of the public will be bene-
fitted by the course Bonanza is setting.
We are still faced, of course, with the problem
of subsidy a not unkindly word if viewed
properly as a developmental tool to be employed
in the creation and maintenance of a required
but not self-sustaining public service. Generally
speaking, though, subsidy should be considered
transitory in nature, as it was in the case of the
trunk airlines and the railroads. It should be
used only as a means of sustaining a public
service until it becomes possible to convert it
into a self-sufficient enterprise.
Bonanza now looks forward to that opportu-
nity and prospect. Again the Douglas DC-9
fan/jet aircraft is a key factor. The DC-9, in and
of itself, is expected to permit substantial reduc-
tions in subsidy in the years ahead. Its antici-
pated efficiency and reliability, and its expected
generation of new traffic through its superior
performance of a highly attractive public service
are expected to reduce materially the companys
need for subsidy support.
To eliminate entirely that need, however, it is
the conviction of the company that further
improvements in route structure and operating
authority are required. Such improvements can
only be obtained by grant from the Civil Aero-
nautics Board. While this generally involves the
processing of a long, intricate and not always
productive proceeding, it must be remembered
that it is the responsibility of the CAB to foster
and develop a sound national air transport
system in accordance with the dictates of the
public convenience and necessity!
Bonanza is fully cognizant of the responsibil-
ities of the Civil Aeronautics Board. Bonanza
recognizes also that the company itself has a
basic obligation to the CAB, the public and its
own stockholders and employees. That obliga-
tion is to continue to present to the CAB a full
and intelligent opportunity for that agency to
meet its assigned regulatory and developmental
responsibilities, in so far as those responsibilities
relate to the role and future of this company in

the overall pattern of the nations air transport
services.
Guided by its deepest convictions respecting
public service and managerial responsibility the
company intends in the near future to present
its program for subsidy elimination to the Civil
Aeronautics Board. It will do so in the hope and
expectation that the public convenience and
necessity benefits to be derived from this pro-
gram are sufficiently great and challenging to
warrant the CABs full endorsement of priority
consideration and ultimate approval.
The criteria which this route program must
embrace in order to meet the high standards
deemed essential by this company are in sub-
stance as follows;
1. The proposals must and will lead to improved
public service in the area involved.
2. The proposals must and will greatly stimu-
late the public use of air transportation in
the markets affected.
3. The proposals, either separately or in combi-
nation, must and will have no unduly adverse
impact on the economic welfare of any exist-
ing scheduled airline operating in the area
involved.
4. The proposals must and will take full advan-
tage of the extraordinary efficiencies and
attractions of modern jet equipment such as
the DC-9.
5. The new air service patterns to be developed
must and will effectively and efficiently inte-
grate into the companys existing services.
6. Except to the degree of economic self-
sufficiency to be obtained, the proposals
must not and will not present a significant
departure from the character of the services
currently being provided by the company.
7. The proposals must and will be designed to
eliminate eventually the companys entire
need for subsidy support from the Civil Aero-
nautics Board.
This is an attainable program. Concurrence
in it by the Civil Aeronautics Board, however,
is an obvious prerequisite to attainment. The
company will soon present such a program and
will vigorously urge its consideration and
approval by the Civil Aeronautics Board.
Perhaps a word of caution should be
expressed with respect to a full understanding
of the program. The program should not be
misconstrued to suggest that Bonanza will not
continue to provide and continue to improve its
existing public services. Nor that Bonanza is not
willing to provide any other public service that
the Board should find required by the public
convenience and necessity, even though such
service requires subsidy support.
Also it must be noted that there may be occa-
sions when the company finds itself required to
seek a subsidized new route authority that it
deems required in the long run for the appro-
priate establishment and preservation of a sound
route structure, even though a subsidy require-
ment would attach thereto in the developmental
stages of that route segment.
It is the company policy, however, to seek to
establish a sound route structure in which the
stronger components will permit our own under-
writing and support of the weaker markets
required to be served in the public interest.
In summary it is the unequivocal conviction
of the company that the Douglas DC-9 aircraft
will soon permit your company a flight from the
present economic and public service plateau

SALES AND ADVERTISING
LARRY DECKER
The companys advertising and traffic pro-
motion efforts were employed with considerable
diversity during 1964. Numerous additions and
improvements in customer service were directed
to all segments of the system. Each of these
efforts received substantial advertising support.
The DC-9 purchase and associated activities
in preparation for its delivery were the subject
of an appreciable amount of Bonanza publicity
during the year. Additionally, preparations are
being made to support the many activities which
will accompany the companys entrance into the
pure jet field. These promotion and publicity
programs will commence in 1965, and continue
on through 1966 when the DC-9 becomes part
of the companys fleet.
In line with the companys continuing sales
program designed to expand the companys sales
effort to its maximum efficiency, and as a result
of increased traffic potential over the past
several years, sales areas covered by district
sales personnel were expanded during 1964 into
Idaho, Montana, northern California, Texas and
New Mexico.
The several vigorous advertising programs
normally pursued through newspaper, outdoor
and radio media were supplemented by special
VEGAS
Edmund Converse, Bonanza President, is shown
speaking at a press luncheon in Tokyo in November,
1964. This meeting was part of the festivities that
attended the opening of the companys new sales office
in the world-famed Imperial Hotel.
6

7
JOHN D. LINDSAY
impact programs directed toward new services
and potential new traffic.
BonanzaLand and the Visit U.S.A. programs
both continue to attract large numbers of for-
eign visitors to the area served by Bonanza, and
the companys effort along these lines was fur-
ther strengthened with the opening of a sales
and information office in Tokyo, Japan. The
Orient is expected to be a major source of addi-
tional traffic in the future.
The new BonanzaLand film completed its
second year of circulation, and in November of
1964 this outstanding film won the Golden
Eagle award of the Council for International
Non-theatrical Events (CINE). The award was
presented at ceremonies at Washington, D. C.
In the fall of 1964 Bonanza embarked on
another effort to improve passenger service by
introducing cocktail service aboard selected
flights throughout the system. The service has
proved to be very successful.
Additionally, the fifth hostess exchange pro-
gram has been finalized and the company will
during 1965 exchange a hostess with Alitalia.
This program has been very beneficial to the
company.
(^12 Jefc-props daily
LAo V cbAo
13 .
EVERY FUGHT!
NO RESTRICTIONS!
You will fly DC-9 fan-jets
on Bonanza Air Lines
BONANZA AIR UNES Eli
\
NEW ON
BONANZA
AIRLINES
NONSTOP
IDS ANGELES
NEW AnrCRNOON NONSTOP GETS
YOU THERE IN JUST S4 MINUTESf

8
ROUTE DEVELOPMENT
DONALD R. NEILSON
The companys continuing efforts to maintain its
position among the leaders in the local service
industry require a continuing analysis of the
companys route structure, service needs of the
communities we serve, and the methods of pro-
viding for these needs through an efficient and
economic operation. The task of sound route
development in the ever expanding southwest
has as its goal a twofold purpose: a constantly
improving public service and the ultimate elimi-
nation of the companys reliance on federal
subsidy. These goals require the closest possible
coordination of research, community relations
and governmental activities.
During 1964 with these goals in mind the
company filed two significant route applications,
a Las Vegas-Grand Canyon nonstop application
and a Santa Ana/Laguna Beach-Las Vegas
nonstop application. The first proceeding is
designed to link Las Vegas and Grand Canyon
with direct air service, thus tying together these
two major tourist areas. Additionally this kind of
service will provide a much needed convenience
to the traveling public throughout the Los
Angeles-Las Vegas-Grand Canyon-Phoenix area.
JACK ARANT
Bonanzas certification for the Las Vegas-Grand
Canyon route has been recommended by the
Bureau of Economic Regulation of the Civil
Aeronautics Board. The Santa Ana application
was filed in the conviction that this authority
was necessary to serve the growing public need
NOLAND H. RYAN

9
tNTERNi
'<SRANi|i'e6yp^
With the inauguration of nonstop
flights between Santa Ana
(Orange County A irport) and
Las Vegas April 1,1965,
Bonanza became the only airline
with this convenient, direct
service for the 9 million people
living in the Los Angeles
megalopolis.
for more direct service between the densely
populated Orange County area and Las Vegas.
The authority was granted by the CAB on
February 16, 1965, for a trial period of two
years and should prove a significant stimulus
for the development of substantial traffic in this
market.
Permanent certification of the companys Las
Vegas-Los Angeles route is presently pending
before the CAB. This route, the only one of the
companys routes not permanently certificated,
has been served under a temporary certificate
since July, 1957, and has become one of the
most vital segments on the companys entire sys-
tern. Permanent certification has been recom-
mended by the Civil Aeronautics Boards
Bureau of Economic Regulation and has not
been opposed by any party to the proceeding.
The grant of permanency therefore seems
virtually assured. Decisions on this application
and in the Grand Canyon case are expected in
the not too distant future.
A new program for vastly improved route and
operating authority is now in the process of for-
mulation and will soon be presented to the Civil
Aeronautics Board.

10
FLIGHT AND GROUND OPERATIONS
MYRON W. REYNOLDS
Much of 1964 was devoted to the development
of plans and programs in preparation for the
arrival of the DC-9. The entire operations
department has been working continuously and
will continue to work on through 1965 formu-
lating detailed plans for the integration and
implementation of the new fan/jet into the com-
panys operational system. Fan/jet programs
already formulated include maintenance,
ground operations, technical training programs
and handling techniques.
An important part of a new equipment under-
taking necessarily involves spare parts provision-
ing, specification and procurement of ground
support equipment; and these rank high among
the many activities presently under way. This
advanced planning is designed to make possible
the most effieient utilization of the DC-9 at the
earliest possible date after it is received. In
order to accomplish this objective the company
is planning a substantial hangar addition large
enough to accommodate the DC-9, as well as
suffieient space to house necessary ground sup-
port equipment, shop and training facilities and
parts storage.
The companys continuing pohcy to main-
tain the most modem up-to-date fleet possible
resulted in further modernization of the com-
panys F-27A fleet during 1964. New naviga-
tional aids were installed on all aircraft and
numerous technieal improvements were made
during the year.
During 1964 the company departed from its
historic configuration of 40 seats in the F-27A in
order to effeetively meet additional competition
in the Las Vegas-Los Angeles market. This was
aeeomplished by converting three aircraft to a
48-seat configuration which, in conjunction with
the companys new Budget-Aire fare, has
helped restore Bonanzas competitive position in
that market.
For the fourth consecutive year the Federal
Aviation Agency again chose Bonanza to pro-
vide the F-27A,training for its inspectors.


CORPORATE AFFAIRS
ARTHUR M. TAYLOR, JR.
During 1964 Bonanzas DC-9 acquisition
program required the coordinated efforts of the
company to secure the necessary government
approval of that purchase, to negotiate and
conclude adequate term loan agreements with
various lenders and to finalize the registi'ation
with the Security and Exchange Commission
of the publie offering of the companys convert-
ible subordinated debentures and common
stock. The success of this financing program not
only provided the necessary funds to acquire
these new pure jet aircraft, but in addition added
approximately 1,000 persons to the 6,250 stock-
holders who have already invested in Bonanzas
future.
Negotiations are presently underway to pro-
vide the much needed shop maintenance hangar
and office facilities to accommodate the jet
expansion which will result from the integration
of the DC-9 into the eompanys operations. In
addition to the financing and expansion aspects
of the DC-9 program the company, in further-
ance of its overall route development pro-
gram, was involved during 1964 in numerous
WILLIAM C. BURT
proceedings before the Civil Aeronautics Board
involving requests for new authority or efforts
to secure more realistic operating authority over
existing segments of the companys system.
Some beneficial results of these proceedings
have already been reported.
During the year negotiations were concluded
with Pratt & Whitney Aircraft Division, United
Aircraft Corporation for spare jet engines for
the DC-9, with Fairchild Hiller Corporation for
the acquisition of two additional F-27As, and
with numerous suppliers of materials and serv-
ices required by the company in its day-to-day
operations.
The economic and population growth in the
area served by your company which has played
an important part in Bonanzas emergence into
the pure jet era, has also been reflected in the
fact that seven of the cities on the companys
system are busily engaged in airport expansion
programs of varying proportions. The eompany
is presently engaged in negotiations with these
cities to determine reasonable rates and charges
for the new or improved facilities.
Note: William C. Burt, Assistant Secretary and
Washington Counsel, together with Albert F Grisard,
has represented the company before the CAB
in all route matters.

INDUSTRIAL RELATIONS
Year end employment was up 7.6% over the
year end 1963 with the main increases occurring
in reservations, stations and pilot personnel.
Union contracts continued to provide our
employees with earnings within the upper range
of industry pay for comparable employment.
Similarly, in order to maintain a sound compet-
itive position in the industry new surveys were
undertaken and completed during 1964 which
resulted in general salary adjustments for other
employee groups where appropriate.
Looking forward to the arrival of the DC-9 in
early 1966, increased emphasis has been placed
on training. During 1964 management and
supervisory groups attended seminars conducted
by the company to further develop their man-
agement skills. In addition, new training pro-
grams are under way in the areas of customer
service, reservations and ticket counter per-
sonnel. Numerous technical training programs
are being designed, improved or strengthened
to meet the demands of DC-9 service.
The companys group insurance plan was
reviewed and improved in several ways during
1964 resulting in improved benefits to the
companys employees.

FINANCIAL RESULTS
ROBERT J.SHERER
Earnings from operations in 1964 were $677,166 or an
equivalent of 65^ per share on the average outstanding
shares of stock during the year. Special items of $193,789
relating to prior years contributed another 19^ per share
to the retained earnings figure. The all time high earnings
of 1963 of $874,129 or 964 share from operations were
not equalled due to a number of factors which occurred in
1964 that were not present in 1963.
Near the end of 1963 the company inaugurated addi-
tional service between Phoenix and Los Angeles under
authority granted to permit flights to operate without
serving every point on each flight on the route. Normally
the development of traffic and revenue in any new service
lags behind the incurrence of additional costs related to
such service in its initial period of operation. For this
reason a less favorable balance of revenue and expense
initially occurs than that experienced after traffic has been
more fully developed. This circumstance was present
following the inauguration of service near the end of 1963
and for the first half of 1964.
In the Los Angeles-Las Vegas market a low economy
service fare offered by a competing airline served to divert
a portion of the companys passengers to such low fare
service for the first half of 1964. The company established
a competitive fare in this market on July 1, 1964 through
an increase in the seating capacity of its aircraft and by
obtaining approval for the removal of all restrictions on its
promotional excursion fare. In the latter half of 1964, the
company substantially regained its competitive position
in this market as a result of the fare adjustment and the
higher passenger capacity in its aircraft.
One other factor that affected the companys earnings
was a strike in a major industry in Salt Lake City during
most of the third quarter of 1964. Inasmuch as the economy
of the area was affected the companys traffic was similarly
depressed. Recovery in this area is now indicated.
The special items taken into retained earnings in 1964
arose from a revision of accounting treatment for invest-
ment tax credits earned in 1962 and 1963. The company,
pending treatment to be accorded such items by the Civil
Aeronautics Board, had deferred the investment tax credits
and commenced amortization in 1962 and 1963. Amorti-
zation of the credits to earnings was to be made over an
eight year period from the date of purchase of the capital
assets which had engendered the tax credits. However, the
amortization of such credits did not conform to the prac-
tices prescribed by the Civil Aeronautics Board in its
administration of the subsidy program as ultimately deter-
mined in 1964. Accordingly, it was considered proper to
take the balance of such credits to retained earnings in
1964 and forego the amortization method. Offsetting the
investment tax credit was an adjustment for subsidy esti-
mated to be refundable to the Civil Aeronautics Board for
1962 and 1963.
Commercial operating revenues for 1964 were
$10,773,627 or an increase of 12.6% over the 1963 level.
Federal subsidy of $3,311,740 represents an increase of
approximately 1.6% due principally to the additional
service provided to the intermediate cities between
Phoenix and Los Angeles. Operating expenses rose to
$12,560,321 for an increase of 16.5% over 1963. Such
increase in operating expense was mainly attributable to
the additional services provided, as set forth previously,
which constituted an increase in revenue aircraft miles
flown of 19.9% Operating expense per revenue aircraft
mile showed reduction to $1.65 from the $1.70 level
experienced in 1963.
A decline in non-operating expense from the $317,450
amount in 1963 to $244,880 in 1964 resulted principally
from interest saved through prepayment of outstanding
loans in 1964. Provision for federal and state taxes based
on income declined due to the reduced level of taxable
earnings and to a reduction in rate of the federal corpora-
tion tax made effective in 1964.

While the companys federal subsidy showed a slight
increase in 1964 over 1963 this increase was related to
the first six months of 1964 and resulted from the increase
in service. On July 1, 1964 a revised subsidy rate formula
was made effective which reduced the companys subsidy
in the latter half of the year approximately $192,000 below
the same period of 1963.
Funds provided through the sale of common stock and
convertible subordinated debentures of the company were
applied in part to the deposit requirements of the contract
with Douglas Aircraft Company for the purchase of three
DC-9 aircraft. Additionally a portion of the funds was
employed in prepaying outstanding loans. The company
has contracted for the purchase of a new F-27A aircraft
for delivery on April 1, 1965 and funds presently on hand
will be used for such purchase.
A replacement F-27A aircraft was purchased from
Fairchild Hiller Corporation from insurance proceeds
received following the loss of an aircraft in November.
Summary of Source and Disposition of
Funds for 1964
Source of funds:
Net earnings and special items $ 870,955
Deferred investment credit (223,024)
Depreciation and overhaul amortization. 1,466,912
Deferred taxes 18,180
Amortization of deferred charges, net . . 27,999
Proceeds from sale of capital stock 1,745,596
Convertible debentures issued 3,200,000
Total $7,106,618
Disposition of funds:
Investment in property and equipment. . ^ $1,030,182
Deposits on equipment purchase contracts 2,234,179
Deferred loan costs 250,830
Reduction of long-term debt 1,157,929
Increase in working capital 2,433,498
Total $7,106,618
OPERATING AND FINANCIAL STATISTICS
Calendar Years
1964
1963
1962
1961
1960
Traffic and Capacity
System route miles operated as of last day of period .
2,106
2,106
2,135
2,153
2,135
Total aircraft miles flown in revenue service . . .
7,618,013
6,354,940
5,445,869
4,397,396
4,678,137
Scheduled aircraft miles flown
7,599,716
6,349,638
5,443,441
4,390,038
4,554,843
Percent of scheduled aircraft miles flown . . .
99.2%
99.3%
99.0%
99.2%
99.1%
Revenue passengers carried
620,497
536,377
425,475
316,040
257,719
Revenue passenger miles flown (000)
160,653
139,139
108,688
79,748
63,527
Available seat miles flown (000)
292,480
241,284
206,849
166,821
159,523
Passenger load factor
54.9%
57.7%
52.5%
47.8%
39.8%
Available ton-miles flown (000)
28,673
23,494
20,188
16,243
15,592
Revenue ton-miles flown (000)
16,014
13,818
10,785
7,948
6,362
Overall load factor
55.9%
58.8%
53.4%
48.9%
40.8%
Average number of employees
748
645
572
510
492
Revenue passenger miles per employee
Financial
214,777
215,719
189,682
156,369
129,120
Total operating revenue (000)
$ 14,085
$ 12,763
$ 10,946
$ 9,282
$ 8,178
Passenger revenue (000)
10,244
9,156
7,441
5,698
4,543
Total commercial revenue (000)^
10,773
9,565
7,810
5,968
4,900
Public service revenue (subsidy) (000) ^
3,312
3,198
3,136
3,315
3,278
Total operating expense (000)
12,560
10,750
9,426
8,075
7,569
Total operating expense per revenue ton-mile of traffic
Public service revenue required to provide operating
0.784
0.778
0.874
1.016
1.190
break-even need: (Total (000) )
1,787
1,185
1,616
2,107
2,669
Per available ton-mile flown
0.062
0.050
0.080
0.130
0.171
Per revenue ton-mile of traffic
0.112
0.086
0.150
0.265
0.420
Break-even need as percent of commercial revenue .
17%
12%
21%
35%
54%
Commercial revenue as percent of operating expenses
86%
89%
83%
74%
65%
Net earnings**^
$ 677,166
$ 874,129
$ 711,144
$ 422,054
$ 107,871
iReflects adjustment related to retroactive subsidy determinations.
^Adjusted for 1963 and 1962 Investment tax credits reported as special item in 1964.
^Operating revenue less public service revenue.

ASSETS
1964
1963
Current assets:
Cash
$ 2,382,057
732,603
Receivables:
United States Government Departments ....
451,354
454,807
Traffic
297,872
276,544
Other
108,769
54,318
857,995
785,669
Less allowance for doubtful accounts
12,000
12,000
Net receivables
845,995
773,669
Spare parts, service materials and supplies,
at average cost
549,592
507,351
Prepaid expenses
64,946
112,259
Total current assets
3,842,590
2,125,882
Properties and equipment, at cost (Note 1):
Flight equipment
11,689,058
11,333,236
Ground equipment
977,731
912,837
Buildings and improvements on leased property . .
698,189
688,018
Other property and equipment
3,305
26,251
Construction in progress
169,559
211,840
13,537,842
13,172,182
Less allowance for depreciation and amortization . .
4,855,737
4,053,347
Net properties and equipment, . . .
8,682,105
9,118,835
Deposits on equipment purchase contracts (Note 6)
2,419,815
185,636
Unamortized development and preoperating costs . .
142,272
162,156
Deferred loan costs and other assets
245,736
3,021
$15,332,518
11,595,530
See accompanying notes to financial statements.
16
BONANZA
AIR LINESJNC.
BALANCE
SHEET
December 31,1964 with
comparative figures for 1963
LIABILITIES
1964
1963
Current liabilities:
Current portion of notes payable
$ 592,565
977,511
Accounts payable
560,749
463,702
Amounts collected for others
138,754
154,874
Accrued salaries and wages
349,547
299,887
Other accrued liabilities
176,874
212,458
Unused transportation
70,380
56,412
Federal income taxes estimated (Note 3) ....
183,678
624,493
Total current liabilities
2,072,547
2,789,337
Notes payable to banks (Note 1)
3,101,903
4,259,832
514 % Convertible subordinated debentures (Note 2) .
3,200,000
Deferred federal income taxes (Note 3)
179,000
160,820
Deferred investment credits (Note 4)
223,024
Commitments and contingent liabilities (Note 6) . . .
Stockholders equity:
Common stock, $ 1.00 par value per share.
Authorized 3,000,000 shares: issued
1,127,605 and 915,115 respectively (Notes 2 & 8)
1,127,605
915,115
Additional paid-in capital
2,822,799
1,289,693
Retained earnings (Note 2)
2,828,664
1,957,709
Total stockholders equity
6,779,068
4,162,517
$15,332,518
11,595,530
See accompanying notes to financial statements.
ACCOUNTANTS' REPORT
Peat, Marwick, Mitchell & Co.
CERTIFIED FDBEIG ACCOUNTANTS
The Board of Directors, Bonanza Air Lines, Inc.:
We have examined the balance sheet of Bonanza Air Lines, Inc. as of December
31, 1964 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, 1964 and the results of its operations
for the year then ended, in conformity with generally accepted accounting principles
which, except for the change in accounting for investment credits as set forth in
Note 4 to financial statements, have been applied on a basis consistent with that
of the preceding year.
Los Angeles, California PEAT, MARWICK, MITCHELL & CO.
March 1, 1965
17

18
STATEMENT OF EARNINGS
Year ended December 31,1964
with comparative figures for 1963
THOMAS J. VAN BOGART
FRANK R. CHABOT
1964
Operating revenues:
Passenger and excess baggage $10,345,445
Mail, express and freight 338,883
Charter and incidental 89,299
Public service (subsidy) 3,311,740
14,085,367
Operating expenses:
Flying operations 3,037,464
Maintenance 2,391,942
Passenger service 625,309
Aircraft and traffic servicing 2,556,436
Promotion and sales 1,683,060
General and administrative 1,137,576
Depreciation 1,076,229
Amortization of development and
preoperating costs 52,305
12,560,321
Earnings from operations .... 1,525,046
Non-operating revenue (expense):
Interest (Note 9) (262,515)
Other, net 17,635
Earnings before taxes on income . 1,280,166
Provision for taxes on income (Note 3) .... 603,000
Net earnings 677,166
Special credits (charges):
Prior years investment credits (Note 4) . . . 223,024
Adjustment of prior years subsidy (Note 5) . . (29,235)
Loss on sale of equipment,
less applicable taxes of $11,000
Net earnings and special items . . $ 870,955
See accompanying notes to financial statements.
1963
9,249,267
258,259
57,009
3,259,749
12,824,284
2,563,508
1,970,516
520,137
2,246,523
1,483,627
995,376
937,838
62,986
10,780,511
2,043,773
(304,526)
( 12,924)
1,726,323
922,000
804,323
( 9,000)
795,323
STATEMENT OF RETAINED EARNINGS
AND ADDITIONAL PAID-IN CAPITAL
Year ended December 31,1964
Additional
Retained
Earnings
Paid-in
Capital
Amount at beginning of year
$1,957,709
1,289,693
Net earnings and special items
870,955
-
Excess of proceeds over par value from sale
of 192,000 shares of common stock,
less expenses of $196,704
1,483,296
Excess of proceeds over par value of
20,490 shares of common stock issued
under options (Note 8)
49,810
Amount at end of year
$2,828,664
2,822,799
See accompanying notes to financial statements.

December 31,1964
BONANZA AIR LINES, INC. Notes to Financial Statements
NOTE 1. Notes Payable to Banks
The notes payable to banks as of December 31, 1964 are summarized as follows:
Monthly Payments Final Outstanding
(Including Interest) Maturity Dec. 31, 1964
5V2% note payable $51,621 1968 $1,905,293
6% note payable 12,490 1970 736,142
6% notes payable 27,173 Various 1,053,033
3,694,468
Less current portion 592,565
^3,101,903
The notes are secured by chattel mortgages on twelve F-27A aircraft. The company has prepaid monthly instalments on a portion of
the notes through March 31, 1966.
In connection with the loan agreements relating to two of the above notes, the company has agreed, among other things, to main-
tain certain minimum working capital and stockholders equity (net worth) requirements.
NOTE 2. 5%% Convertible Subordinated Debentures
The debentures, which mature May 1, 1979, are subordinated
to the bank loans and are convertible into shares of common
stock of the company at the initial conversion price of $11-1/9
per share. The conversion price increases to $12-1/2 per share
on May 1, 1968 and to $14-2/7 per share on May 1, 1972. The
trust indenture relating to the debentures provides for a sinking
fund payment of $160,000 annually beginning May 1, 1969
and for the payment of interest semiannually.
The indenture further provides for certain restrictions on the
payment of cash dividends which, as of December 31, 1964,
were more restrictive than the provisions of the agreement
relating to the bank loans. Accordingly, $1,990,081 of retained
earnings at December 31, 1964 was so restricted.
NOTE 3. Taxes on Income
The companys Federal income tax returns for 1963 and sub-
sequent years are subject to review by the United States
Treasury Department.
Differences in the treatment of certain expenses result in
substantial variations between net earnings as reflected in the
companys financial statements and as reported in its income
tax returns. These differences are primarily in connection with
aircraft preoperational costs which were expensed for tax
purposes in the year in which incurred, although such costs are
being amortized on the books, and the use of accelerated depre-
elation methods for tax purposes.
The 1964 provision for income taxes is summarized as
follows:
Charged to operations:
Current taxes $632,568
Deferred taxes 18,180
650,748
Less investment credits (note 4) 47,748
603,000
Included in special items (31,000 )
Provision for taxes $572,000
NOTE 4. Investment Credits
In 1964 the company elected to record investment credits as
reductions of Federal income taxes in the year in which the
credits are realized, whereas in prior years the tax benefit of the
investment credits was being amortized over eight years.
Accordingly, the 1964 provision for taxes on income has been
reduced by $47,748 and the previously deferred credits of
$223,024 applicable to 1962 and 1963 have been recorded as
a special credit in the statement of earnings.
NOTE 5. Public Service Revenue
During 1964, the public service subsidy for 1962 and 1963 was
reduced by $104,066. This amount, less amounts capitalized
and the resulting $31,000 reduction of income taxes, has been
included as a special charge in the statement of earnings.
NOTE 6. Commitments and Contingent Liabilities
At December 31, 1964, the company had on order one F-27A
aircraft scheduled for delivery in early 1965 and three DC-9
aircraft and related spare engines scheduled for delivery in
1966. Said purchases represent commitments of approximately
$9,010,000 in excess of related deposits. The company has
arranged to borrow $6,500,000 from a group of banks to par-
tially finance these purchases.
As of December 31, 1964, 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, 1964 or the results
of its operations for the year then ended.
The estimated minimum annual rentals under long-term
leases, the majority of which expire prior to 1990, were
approximately $132,000 at December 31, 1964.
NOTE 7. 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 1964 totalled $291,567 for both current
and past services. As of December 31, 1964, the remaining por-
tion of the originally computed past service liability amounted
to $179,647, which management contemplates funding at the
annual rate of $71,859.
NOTE 8. Common 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 10% of the total outstand-
ing shares of the companys 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 instalments over a period of five years. As of Decern-
ber 31, 1964, options to purchase 60,000 shares have been
granted, options have been exercised on 26,910 shares and
options to purchase 14,100 shares have been canceled, thereby
leaving 18,990 shares subject to outstanding options as of that
date; the options were exercisable through May 20, 1968 at
prices ranging from $3.38 to $6.65 per share and represented
total option prices aggregating $96,508.
NOTE 9. Capitalized Interest
Interest expense included in the statement of earnings for 1964
does not include $81,547 which was capitalized as aircraft
acquisition costs.
ANNUAL MEETING
The Annual Meeting of Stockholders 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
17, 1965, in the company offices. 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 9, 1965.
Stockholders are cordially invited to attend the meeting or
send in their proxies.

BONANZA AIR LINES, INC.
TRANSFER AGENTS:
First National Bank of Nevada, Las Vegas, Nevada
Bankers Trust Company, New York, New York
REGISTRARS:
Bank of Nevada, Las Vegas, Nevada
First National City Bank, New York, New York
CORPORATE OFFICES: g?
Bonanza Air Lines, Inc., McCarran Field
P.O. Box 391, Las Vegas, Nevada
Mi