Bonanza Air Lines Annual Report 1965

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 Kalyna; 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 is associated with
Homblower & Weeks-Hemphill Noyes. He has
been active in the investment banking
business for 36 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 California 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
ARTHUR M. TAYLOR
Vice President, Legal and Secretary FINANCIAL AND OPERATING HIGHLIGHTS / Calendar Years J965-I96J
NOLAND H. RYAN
Vice President
1965
1964
1963
1962
1961
Community Affairs
Total operating revenue'
. . $14,514,911
$14,085,367
$12,762,543
$10,945,839
$ 9,282,366
Earnings before taxes'
. . $ 884,903
$ 1,280,166
$ 1,695,269
$ 1,222,980
$ 914,054
JOHN R. Mackenzie
Net earnings'
. . $ 842,903
$ 677,166
$ 874,129
$ 711,144
$ 422,054
Vice President
Governmental Affairs
Net earnings per share ' -
. . $ .75
$ .65
$ .96
$ .78
$ .47
Average outstanding shares
. . 1,127,715
1,037,708
913,859
911,480
894,405
FRANK R. CHABOT, Treasurer
Gross annual payroll
. . $ 6,114,226
$ 5,541,456
$ 4,682,436
$ 4,024,365
$ 3,575,430
Revenue passenger miles per employee . . .
. . 210,583
214,777
215,719
190,014
156,369
THOMAS J. VAN BOGART
Available seat miles flown
. . 308,812,000
292,480,000
241,284,000
206,849,000
166,821,000
Controller and Assistant Secretary
Revenue passenger miles flown
. . 170,151,000
160,653,000
139,139,000
108,688,000
79,748,000
WILLIAM C. BURT
Passenger load factor
. . 55.1%
54.9%
57.7%
52.5%
47.8%
Assistant Secretary
'Reflects adjustments related to retroactive subsidy determinations. -
Based on average outstanding shares of stock.
RICHARD A. ROGERS
Vice President, Industrial Relations
A welcome cake for Bonanza was presented to President Edmund Converse at a luncheon in Phoenix following the groundbreaking ceremony at the
site of the new headquarters base, shown above. Phoenix Mayor Milton Graham extended the welcome of the City of Phoenix to its newly-acquired
resident industry.

3
TO
OUR
STOCKHOLDERS
On December 21, 1965 I was pleased to accept from Mr.
Donald Douglas, Jr. a gold key to Bonanzas first Douglas
DC-9 fan/jet in a ceremony held at the Douglas Aircraft
Company in Long Beach, California. The occasion rep-
resented a major transition in your companys jet mod-
ernization program and marked the beginning of a new
service capability.
Our second DC-9 was delivered in January 1966.
Scheduled service commenced on March 1, 1966 in the
companys relatively long-haul, high density markets,
namely between Las Vegas and Los Angeles, Las Vegas
and Phoenix, Las Vegas and Reno, and Phoenix and
Salt Lake City.
In conjunction with the commencement of scheduled
service, and in order to introduce our new equipment to
the public, an extensive advertising and promotional
program has been undertaken, designed to exploit fully
all of the advantages of this most modern, up-to-date
aircraft. In addition, the DC-9 has been displayed at each
of the cities to be served in the early stages of the pro-
gram. Public response to the aircraft has been most grat-
ifying and encouraging. It is estimated that in excess
of 24,000 persons, representing a cross section of the trav-
eling public on your companys system, viewed the DC-9
on display.
The true significance of the DC-9 in this companys
future is, I think, made more graphic when viewed in
relation to the results obtained in the past, following a
firm policy to provide the most suitable and most effi-
cient equipment available in the conduct of our
operations.
Per Cent
1958
1965
Increase
Type of Equipment
DC-3
F-27A
Number
10
14
40%
Revenue Miles
4,013,292
7,720,324
92
Available Seat Miles
92,307,000
308,812,000
235
Revenue Passenger Miles ...
41,944,000
170,151,000
306
Revenue Passengers
180,770
668,568
270
Passenger Revenue
$2,707,905
$10,782,264
298
Average Passenger Load ....
10.5
22.0
110
1966 traffic results will
not reflect
a full year
of DC-9
service. However, present analysis, based upon the
companys existing routes and operations, indicates that
results for the year 1967, the first full calendar year of
operations incorporating pure jet equipment, should be
most gratifying. It is expected that during 1967 available
seat miles will increase 42% to 439,560,000 from the
308,812,000 recorded in 1965. Correspondingly, per seat
mile total operating cost on a system basis is expected to
decrease approximately 12% from 4.335</ to 3.S2S4. Rev-
enue passenger miles are expected to increase 40% in
1967 from the 1965 level, even with the assumption of
only a slight increase in route miles served. These pro-
jected results should produce a substantial increase in
the companys commercial revenues.
Commercial revenue of $11,348,354 for 1965 reflected
a 5.3% increase over the $10,773,627 experienced in 1964.
Operating expenses of $13,414,268 in 1965 represent a
6.8% increase over the $12,560,321 in 1964. This result is
somewhat less satisfactory than was anticipated, and is
primarily due to equipment disadvantages in the com-
panys Los Angeles-Las Vegas market and to some
extent due to the higher labor costs experienced as a
result of contract negotiations completed in 1965.
Manpower increases were necessary in several areas
in order to support the new equipment and services, and
these added costs are also reflected in most areas of the
companys operations.
Public acceptance and indeed demand for fast and
efficient jet equipment in many markets presently served
by your company have made it apparent for some time
that additional DC-9 equipment will be needed over the
next two years in order to accommodate the projected
additional service requirements. In order to insure the
availability of the needed aircraft the company has
decided to acquire three additional DC-9s for delivery
in 1967 and 1968. Because of the economic benefits
involved, the company has commenced negotiations to
acquire these aircraft on a long-term lease arrangement
which will not require additional financing.
1965 was not only highlighted by the all-important
delivery of the first DC-9 but also marked the commence-
ment of the companys move to its new administrative
and maintenance facilities at Sky Harbor Airport,
Phoenix, Arizona. The companys new facilities are near-
ing completion and it is expected that a complete move
will be accomplished by June of 1966. Approximately
300 employees, comprising the companys maintenance
and service personnel, have made the move to date. All
flight and maintenance operations are now being directed
from the Phoenix plant.
In closing I think it most appropriate to point out
that the operating experience of this company, when
viewed in its proper perspective, reflects a remarkable
advancement.
Sincerely,
PRESIDENT AND CHAIRMAN OF
THE BOARD OF DIRECTORS

TWO DECADES
OF PROGRESS
. BONANZA
In 1965 this company reached its 20th year of airline
operations. During that time the airline industry and the
technology supporting it have made almost inconceiv-
able strides forward.
Last year we reported to you that the coming of the
DC-9 to Bonanza Air Lines constituted an event which
might be termed as a new cornerstone in your companys
future. We further expressed a dedication to the prin-
ciple that the great advantages brought about by the
growth of air transportation and the fast, modern equip-
ment now available must be extended to an increasingly
broader base of our national populace. To that end this
company filed a comprehensive program with the Civil
Aeronautics Board, which we call a subsidy elimination
program. It is designed to extend the greatest possible
air transportation benefits to the greatest number of
people within the area we serve and to make possible
this companys emergence as a self-sufficient enterprise.
The delivery of the DC-9 and the commencement of
service over your companys system were events which
brought this major goal into view.
In 1945 this company was possessed of one eight-
passenger Cessna aircraft, with which operations were
commenced. During the next 15 years operations were
carried on with a fleet of DC-3 aircraft, the backbone of
the entire aviation industry for many years, and in 1960
we accomplished a conversion from a maximum fleet
of ten DC-3s to an all F-27A aircraft fleet to become the
nations first all jet-powered airline.
Supplemented and strengthened by the Civil Aero-
nautics Board in its award of new routes and improved
operating authority over existing ones, our service capa-
bilities were also greatly expanded through these 20
years. As a result, the subsidy which your company has
received over the years in order to continue operations
has become less and less of a factor in the companys
overall program.
In the five short years since 1960, through develop-
ments in aviation technology and our own advance
planning, we have progressed to a fleet consisting of 12
F-27A jetprop aircraft and three DC-9s. By 1968 the
DC-9 fleet will be increased to six. So long as the F-27A
jetprop is the most suitable aircraft available for the
companys short-hop, low density routes it will continue
to be used in these markets and will continue to provide
a high quality, very modern type of air service. When a
more economically suitable aircraft becomes available
for these markets, be it pure jet or some other advanced
form of flight equipment, we will again provide this fur-
ther advancement in public service. To this end new
4
A prime objective was to give the interior oj the
DC-9 a service personality, a look and feel
suggestive of the colorful, friendly and exciting
areas it serves.
where, in other markets authorized to be served by your
company, we will continue to build and expand our pub-
lie functions and services with DC-9 fan/jet equipment, a
completely new and modern airliner that equates with
the finest anywhere in the world. And we will continue
our endeavors to provide our type of short-haul markets
with a quality of personalized, responsible and respon-
sive public service that is unmatched anywhere in
markets of this type.
It is clear that efficient equipment and strong route
authority can provide the key to economic self-suffi-
ciency in the air transportation industry. The equipment
suitable to the job is now on hand. Moreover, and equally
important, there are now increasing signs that the Civil
Aeronautics Board has adopted a new national air trans-
portation policy that will permit such carriers as Bonanza
a reasonable opportunity to attain such self-sufficiency.
Bonanza can and does, with its subsidy elimination pro-
gram, meet the criteria that the CAB has established
for obtaining such an opportunity. Therefore, Bonanza
now fully expects to obtain that opportunity and to
achieve that ultimate objective.
In these circumstances your company should soon
move forward into an era of greatly expanded public
service, peak operating efficiencies and optimum eco-
nomic strength.

TRAFFIC
AND
SALES
Developing existing markets and penetrating new ones
requires a continuing effort and is not necessarily related
to any 12-month period.
Over the past several years new concepts have been
developed in the search for new and better ways to tell
the BonanzaLand story and to reach as many people
with that story as possible. The BonanzaLand program
with its world wide exposure is in its third year and has
proved most successful. The Visit USA program, organ-
ized and directed by your company, represented an
industry-wide effort to acquaint the traveling public with
local service benefits. These programs, as well as those
efforts confined to the companys system, will now serve
as a reservoir from which the most effective results can
be hoped for in fully developing the companys pure jet
service opportunities.
During 1965 the entire sales staff busied itself with
the challenges and opportunities presented by this new
service capability. Shorter flight time, improved comfort
and convenience, better scheduling became a reality. In
addition, two new markets became available in 1965.
New service between Las Vegas and Santa Ana com-
menced April 1, the result of a Civil Aeronautics Board
award, and increased total sales possibilities by provid-
ing the traveler with three southern California areas as
co-terminals, Los Angeles, Ontario/Riverside and Santa
Ana the southern California megalopolis!
Additionally, the newly awarded nonstop authority
between Las Vegas and Grand Canyon has opened up a
sizeable and largely untapped sales potential. It allows
for the combining in a single package three major world
tourist attractions located in the U. S. Pacific Southwest,
namely Disneyland, Las Vegas and Grand Canyon, a
convenience to the traveler which heretofore has not
been available.
Extensive sales promotion efforts were made during
1965 in preparation for the inauguration of DC-9 service.
Included among these efforts were public display of the
aircraft and courtesy flights to personally acquaint travel
agencies and the general public with the benefits of this
newest and most modern jet airliner. Favorable response
to the new jet was immediate.
As part of the companywide effort with respect to the
jet transition, in-flight services as well as passenger han-
dling techniques and reservations procedures are now
geared to the new jet service.
Reno
Las Vegas
Lake Tahoe
Show Sheet
HIGHLIGHT EXCURSION
-GRano
canyon
So what's so much fun about March 1st

7
ADVERTISING
AND
PUBLICITY
During 1965 a concentration of advertising and publicity
attention was directed upon each of the new or improved
services .scheduled on the companys system.
Foremost among those was the Santa Ana (Orange
County)-Las Vegas new service, where several waves of
publicity and advertising effort were applied for almost
a year after the initial pre-inaugural activity in order
to reach a maximum penetration of the market in both
terminal areas.
More than 24,000 people came to see when two DC-9s were flown
into Reno, Las Vegas, Salt Lake Ctiy and Phoenix on successive
weekends and put on public display.
Special emphasis was also placed on the improved
service being operated on the Salt Lake City-Phoenix
route; and on the Phoenix-Santa Ana segment where
still greater traffic stimulation is desired.
The period of equipment disparity which the com-
pany experienced in the Los Angeles-Las Vegas market
became in one sense an opportunity to emphasize the
quality and versatility of the service offered at the three
other air terminals of the Greater Los Angeles area.
In the third and concluding year of group and televi-
sion showings of the BonanzaLand, U. S. A. film
throughout the nation, an ever larger total audience
and acceptance was evident than in previous years.
Color films on the DC-9 are now available and being
used wherever possible.
The preparation of an advertising and publicity pro-
gram designed to effectively introduce and integrate
the Douglas DC-9 fan/jet into the companys operations
occupied a large portion of this departments time. The
first part of the informational and promotional progi'am
was directed to travel agents, airline reservations and
sales personnel, industry and business traffic managers
and travel affiliates. Following this, the consumer cam-
paign was put into effect.
In addition, development of programs for the newly
awarded Las Vegas-Grand Canyon authority, for adver-
tising and publicizing the F-27A services and for attract-
ing passengers from the adjacent areas of Ogden, Provo,
Lake Tahoe, Tucson, and other areas, received close
attention.
In an effort to bring maximum capability and effective
strategy to bear upon the companys marketing oppor-
tunities, a new advertising agency, MacManus, John &
Adams, was appointed late in 1965. A fast start on the
work and a thorough grasp of the companys business
enabled them to carry out full responsibilities without
delay.
'll
They're here!
Mas y mas agentes
de viajes en todo
el mundo recomiendan
BonanzaLand, u.s.a.,
y Bonanza Air Lines
BONANZA AIR LINES
The DC-9 introduction campaign was launched with a huge contest
for employees of all the nations airlines. First prize, a car for a year
provided to Bonanza by Hertz.

8
ROUTE
The route map shown below describes
the companys present route structure
ENT including the new Las Vegas-Grand Canyon
nonstop segment.
The companys subsidy elimination program
proposals as filed with the Civil Aeronautics
Board are indicated. Those segments
currently provided with and proposed
for DC-9 service are also shown.
SALT LAKE CITY,
RENO-LAKE TAHOE
Nevada
California
LAS VEGAS
GRAND
CANYON
KINGMAN
APPLE VALLEY
LOS
ANGELES
ONTARIO
^RIVERSIDE
PALM SPRINGS
BLYTHE
EL CENTRO
YUMA
Utah
CEDAR CITY
PAGE
Arizona
SANTA ANA
PHOENIX
SAN DIEGO
TUCSON
DOUGLAS-BISBEE
DC-9 FAN/JET F-27A JET/PROP
Present System
Proposed Subsidy
Elimination Program
Proceeding in Progress
to
DENVER
to
EL PASO

RESEARCH
AND
DEVELOPMENT
Route applications filed in 1964 requesting Las Vegas-
Grand Canyon nonstop authority and Santa Ana/
Laguna Beach-Las Vegas nonstop authority were both
granted by the Civil Aeronautics Board during 1965.
These awards have provided important new markets
which can now be developed to their fullest potential.
The Board also permanently certificated the companys
Las Vegas-Los Angeles route which had been served by
the company under a temporary certificate since 1957.
Except for the Santa Ana/Laguna Beach-Las Vegas
nonstop authority (a two year exemption) all of the
companys routes are now permanently certificated.
Culmination of years of painstaking research and analysis is exem-
plified in this birds-eye view of the first DC-9 fleet arrivals. Four
more are yet to come.
The order and delivery of Douglas DC-9 equipment
concluded this departments initial jet equipment analy-
sis program. Constant analysis of operating results and
of equipment in relation to the companys overall route
development program will continue.
The company currently has before the Civil Aeronau-
tics Board an application for Change in Service Pattern
which would, if granted, authorize nonstop operations in
the high traffic density Los Angeles-Phoenix market and
add considerably to the overall strength of the company.
In addition to filling an important service requirement
benefitting many thousands of passengers, it would per-
mit a substantial reduction in the companys subsidy
requirement with no undue economic impact on any
other carrier.
The subsidy elimination program, previously reported
to stockholders, was finalized for presentation during
1965 and filed with the Civil Aeronautics Board. The
program is designed to eliminate this companys depend-
ence on federal subsidy in its operations through route
strengthening proposals and with the addition of some
new route authority. No hearing date with respect to
these applications has been set as of this date.
Additionally during 1965 the research and develop-
ment department participated in numerous activities
involving proceedings before the Civil Aeronautics
Board, both with respect to this companys proposals
and with respect to proposals of others in which this
company had an interest.
Grand Canyon, now directly connected to Las Vegas and Los Angeles
as well as Phoenix and Salt Lake City, is now available to many
new millions of vacationers.

10
Myron W. Reynolds, vice president-operations, at the controls
in the DC-9 cockpit at Phoenix upon delivery of the first DC-9.
OPERATIONS
ACTIVITIES
The DC-9 program moved into high gear during 1965
as the first Douglas aircraft was rolled out and flown on
schedule. The Douglas Company advised that the first
two deliveries of Bonanzas DC-9 would be expedited
and offered to us in December 1965 and January 1966,
and this offer was accepted by Bonanza. The earlier
deliveries meant that all other aspects of the program
provisioning, training, maintenance facilities, tooling
also had to be moved forward. Nevertheless, we believed
it could be done, and operations activity became very
intense in this area.
The lack of necessary approvals and related sanctions
for expansion of the companys existing headquarters
and maintenance facilities at Las Vegas, required that
the company design a new facility in Phoenix, Arizona,
capable of handling ourDC-9, which was then six months
from first delivery. The operations department was
given the re.sponsibility of working with the City of
Phoenix and its architects and engineers in order to
design an appropriate maintenance, operations and
administration building for the company. Work began
only hours after the decision to move was made. Ground
was broken for the new building on September 14, 1965,
and sufficient shop and maintenance space was complete
in time to begin moving people to Phoenix in December.
The first phase of the move (operations, maintenance
and supply) was completed late in January and the
building continues to progress toward a final completion
date in June.

First order of business in Flight Operations pilot training in the
cockpit of the DC-9 flight procedures simulator, under the watchful
eyes of Bonanza training teams.
Twenty-five pilots were trained for the March 1 DC-9
schedules. All twenty-five received ATR type ratings
in the DC-9, in line with the companys policy to provide
maximum training to all flight personnel.
The company purchased two instrument trainersone
for F-27 and one for DC-9, and a cockpit procedures
trainer was purchased for the DC-9 program. These
trainers permit pilots to become familiar with the flight
director system and cockpit layout prior to getting in
the aircraft. Through the use of these training aids con-
siderable sums of money are saved in the initial training
and also in recurrent training over the years. Training
facilities were provided in a leased location at Phoenix
pending completion of the companys new plant.
A further improvement in the companys F-27A main-
tenance was achieved in 1965 when the U. S. Federal
Aviation Agency approved the elimination of costly
16,000 hour major airframe overhauls on the companys
F-27A fleet. The new program designed to provide con-
tinuous maintenance in lieu of major overhaul will
result in a savings of up to $25,000 per aircraft per over-
haul period. Additionally, the program will require each
aircraft to be idle for a maximum of five hours per
check, occurring every 300 airframe hours as compared
to the 60 days needed for major overhaul. The result
better maintenance, better utilization of each aircraft
and substantial cost savings.
A captivating aircraft. Employees and the public alike demonstrate
an eagerness to inspect it.

CORPORATE
AFFAIRS
On August 2, at the American Stock Exchange and at the Pacific
Coast Stock Exchange, company officers were on hand to witness the
commencing of trading on Bonanza stock.
Negotiations during 1965 resulted in Bonanza acquiring
a modern maintenance and administrative facility at
Phoenix, Arizona. The new plant, costing approximately
three million dollars, is being constructed by the City of
Phoenix and made available to the company under a
28-year lease. The facility is ideally suited for the com-
panys operations and will accommodate the companys
present and known future needs. Adequate provision
has been made for appropriate expansion as required.
The companys Qualified Stock Option Plan was regis-
tered with the Securities and Exchange Commission in
accordance with the stockholders approval granted at
the last stockholders annual meeting.
Corporate activities during the year also included the
listing of the companys $1 par value common stock on
the American Stock Exchange and the Pacific Coast
Stock Exchange, after seven years of trading in the over-
the-counter market. Trading commenced on August 2,
1965.
Of the $3,200,000 of 514% convertible subordinated
debentures due May 1, 1979, sold in connection with the
companys public offering in 1964, $448,100 of deben-
tures have been converted to date, representing an
additional 40,329 shares of the companys common stock
outstanding.
During the performance of a Federal Aviation Agency
pilot training contract one of the companys aircraft was
damaged beyond repair during 1965. The terms of the
contract provided for the U. S. government to assume
risk of loss. A claim was filed with the FAA for the
value of the aircraft and was initially denied by the
Agency. The company has filed within the Agency an
appeal to the denial and intends to vigorously pursue
all of its legal remedies in order to recover the full value
of the aircraft. Legal counsel for the company is of the
opinion that the claim has substantial merit and that
the company will ultimately prevail with respect to
this claim.
Family attendance and interest was high at employee meetings held
with Phoenix leaders to discuss schools, housing, living conditions
and economic matters.
INDUSTRIAL
RELATIONS
The company experienced a 10% increase in complement
during 1965, growing from 740 to 814 employees. The
increase was due largely to the companys increased
service requirements and was also related to additional
requirements resulting from the acquisition and placing
in service of pure jet equipment.
Extensive training programs relating to the DC-9 were
developed and carried out during the year. These
included training in all departments, including ground
and flight personnel.
In connection with the companys relocation to its new
facilities in Phoenix, Arizona, procedures were estab-
lished designed to accomplish the relocation with a
minimum of inconvenience and to insure against any
interruption in the companys day-to-day operations. To
date 300 of the 400 employees of the company to be relo-
cated have accomplished an orderly move to Phoenix,
and the remaining 100 employees, including the execu-
five and administrative staffs, are expected to relocate
during the month of June. The company will retain 85
employees at Las Vegas, comprised mainly of stations,
reservations and maintenance personnel.
In the area of training, approximately 40 hostesses
were recruited and trained during the year with extra
emphasis being placed on customer service, an area
where continued improvement is always sought.
Twenty-eight classes were conducted throughout the
system for the companys passenger service agents which
was the first attempt by this company to undertake a
field training program. It was so successful that it will
become a permanent part of the companys projected
overall training programs.
Bonanza has continued to maintain its high standard
of job recruitment, seeking the finest caliber personnel
in all areas from administrative to technical; and in
order to maintain these standards the company periodi-
cally reviews and adjusts non-union salaries to maintain
a level consistent with industry levels for comparable
positions.
New contract negotiations were completed during the
year with the Airline Pilots Association covering the
companys 104 pilots, the Bonanza Air Lines Agents
Association representing 276 personnel, the International
Brotherhood of TeamstersAirline Division represent-
ing 184 personnel, and the Airline Dispatchers Associa-
tion representing 8 personnel.
The companys payroll for the year, representing an
average of 808 employees, was $6,114,000 or a 12%
increase over 1964.
Early attention was given to the important task of assisting personnel
in relocating in Phoenix. Valuable help was received from Arizona
officials and businessmen.

FINANCIAL
RESULTS
Three principal factors affected earnings before taxes
for 1965.
The first of these was the modest increase of only
5.3% in passenger revenue which was well below the
increase realized in prior years. Revenue increase from
passengers was less than expected due to the introduc-
tion of pure jet aircraft in the Los Angeles-Las Vegas
turn-around market by another airline during the year
which materially restricted the companys participation
in the market. The company reduced the number of
flights which it offered in the market concurrently with
the commencement of the competitive jet service
because of its equipment disadvantage. The introduc-
tion of the companys DC-9 fan/jet into service on March
1, 1966 has once again placed it in a fully competitive
position.
A computer system is currently being installed as part of an infor-
mation system utilizing advanced management techniques.
4
The second factor affecting earnings before taxes was
a reduction of $145,183 in federal subsidy below the
level received in 1964. This reduction was due to the
establishment of a revised Class Subsidy Rate formula
for the local service airlines in the latter half of 1964
which contained a downward adjustment in rate for
the airlines having longer average flight stage. The
company has the longest average flight stage of the 13
local service airlines and therefore sustained the great-
est decline in subsidy stemming from this adjustment.
A revised Class Subsidy Rate is in process of being
developed to be effective from January 1, 1966 and,
although the final rate is yet to be announced, prelim-
inary information indicates that the company will sus-
tain no further reduction and may receive a modest
increase in rate. The rate under consideration is, how-
ever, expected to remain in effect for an interim six
month period until a new formula is developed. This
formula is intended to relate subsidy payments more
directly to service rendered to those communities that,
in their present state of development, are unable to gen-
erate sufficient traffic and revenues to sustain air service.
The amount of subsidy which the company may receive
under a formula designed in this manner cannot pres-
ently be determined.
Finally, operating expenses of the company increased
6.8% due to higher wage, material and facility costs.
Contracts negotiated in line with industiy wage trends
during 1965 with three employee groups comprising the
numerical majority of the companys employees (pilots,
mechanics and station agents) accounted for a sizeable
portion of the increase in wage costs. An increase in
staffing in the more dense traffic centers and in other
operational and administrative departments due to
increased traffic and the increase in servicing of aircraft,
which customarily is required as flight time accumulates,
contributed to increased wage costs. Some increase in
staffing also occurred as necessitated in the training, pro-
visioning and preparation for the introduction of the
DC-9 fan/jets as well as the physical relocation of the
companys headquarters and maintenance base to Phoe-
nix, Arizona. Although the company endeavored to
defer all identifiable costs connected with these projects
to future operations which will benefit therefrom, it is
extremely difficult to relate all changes in staffing and
increases in other costs with projects not directly con-
tributing to current revenue-generating services.
Earnings before taxes for 1965 were $884,903 on total
revenues of $14,514,911 as compared with 1964 earnings
before taxes of $1,280,166 on total revenues of $14,085,367.
Provision for taxes for 1965 was substantially lower at
$42,000, down from the 1964 amount of $603,000, due to
investment tax credits of $371,376 recorded from the
purchase of an F-27A prop/jet, a DC-9 fan/jet and other
equipment and parts. In the 1964 period, investment
tax credits recorded fiom the purchase of equipment
amounted to $47,748. The unusually large amount re-
corded in 1965 resulted in the application of credits
against 1965 tax of $75,306 and $296,070 carried back for
refund of prior years taxes paid. Additionally the
reduction of 2% in the Federal corporation income tax
rate for 1965 accounted for a portion of the lesser tax
provision for 1965.
Net earnings for 1965 were $842,903 equivalent to 154
per share as compared to $677,166 for 1964 or 65^, with
both years per share amount computed on the average
number of shares of common stock outstanding during
the respective years. The higher figure for 1965 reflected
the benefit of the larger amount of investment tax cred-
its recorded. Delivery of the second DC-9 fan/jet in

January 1966 and the third DC-9 scheduled for June 1966
plus other equipment and parts will afford the company
investment tax credits for 1966 to the full extent allow-
able against federal income tax with a probable carry-
forward of credits to 1967 and 1968. Since only a minor
unused investment tax credit allowance is remaining for
refund of 1964 income taxes paid, the 1966 net earnings
can be affected to only a small extent from carry-back
effect as compared with 1965 in which sizeable carry-
back of the credits to prior years was available.
Near the close of 1965 the company found it necessary
to refund a portion of its term debt to enlarge the credit
from $1,453,033 to $3,000,000 of which $2,500,000 has been
drawn down to date. The increase in borrowing was
principally occasioned by the loss of an F-27A in a train-
ing accident for which the company has a claim pending
with the Federal Aviation Agency that has not been
settled. In the refunding and enlargement of the credit
the company pledged the proceeds to be received from
the sale of two F-27A aircraft. Subsequently the com-
pany negotiated the sale of the aircraft for a net amount
of $1,700,000, which proceeds will be applied to prepay-
ment of the loan when received.
The company has drawn a total of $4,600,000 from the
loan of $6,500,000 arranged for the DC-9 fan/jets and
applied the funds to settlement on the purchase of the
two aircraft and spare engines delivered. The balance
of the loan is intended to be drawn upon delivery of the
third DC-9 and spare engine and used in payment for
the equipment.
The headquarters and maintenance facilities being
constructed at Sky Harbor Airport by the City of
Phoenix for the company will materially increase rental
costs. However, the agreement provides for the rentals
for the first five years of the 28 year period to be based
on a reduced rental payment in order to afford the
company a period in which to amortize moving and
relocation costs. The rental for the balance of the term
will be based on full amortization of the cost of the
facility. Although such rentals will be substantially
more than those previously incurred for the facilities
at Las Vegas that had become inadequate to meet the
companys needs, it is expected that the efficiency that
can be gained in many areas of the operational and
administrative functions of the company will partially
offset the increased rental cost.
Commitment, subject to necessaiy bank and govern-
ment approvals, for the purchase of a fourth Series 10
DC-9 fan/jet and two Series 30 DC-9 fan/jets has been
made with Douglas Aircraft Company with the inten-
tion that such aircraft will be purchased by a Trust
formed by banks who will lease the aircraft to the com-
pany over a 13 year term. The investment tax credits
flowing from the purchase of the aircraft are intended
to be taken by the Trust, thereby making lease terms
available to the company on more favorable terms than
any other method of financing that may otherwise be
obtainable. No other financing requirement is contem-
plated in connection with the three additional aircraft.
Summary of Source and Disposition of
Funds for 1965
Source of funds:
Net earnings $ 842,903
Depreciation and overhaul amortization 1,533,039
Amortization of deferred charges 55,458
Deferred taxes 165,000
Proceeds from sale of capital stock 2,089
Increase in long-term debt 1,827,189
Decrease in working capital 926,418
Total $5,352,096
Disposition of funds:
Investment in propexty and equipment . . . $5,819,149
Deposits on equipment purchase contracts (751,989)
Deferred preoperating and other costs . . 284,936
Total $5,352,096
OPERATING AND FINANCIAL STATISTICS
Calendar Years
1965
1964
1963
1962
1961
Trafflc and Capacity





System route miles operated as of last day of period .
2,106
2,106
2,106
2,135
2,153
Total aircraft miles flown in revenue service ....
7,729,660
7,618,013
6,354,940
5,445,869
4,397,396
Scheduled aircraft miles flown
7,720,324
7,599,716
6,349,638
5,443,441
4,390,038
Percent of scheduled aircraft miles flown
98.5%
99.2%
99.3%
99.0%
99.2%
Revenue passengers carried
668,568
620,497
536,377
425,475
316,040
Revenue passenger miles flown (000)
170,151
160,653
139,139
108,688
79,748
Available seat miles flown (000)
308,812
292,480
241,284
206,849
166,821
Passenger load factor
55.1%
54.9%
57.7%
52.5%
47.8%
Available ton-miles flown (000)
30,881
28,673
23,494
20,188
16,243
Revenue ton-miles flown (000)
16,885
16,014
13,818
10,785
7,948
Overall load factor
54.7%
55.9%
58.8%
53.4%
48.9%
Average number of employees
808
748
645
572
510
Revenue passenger miles per employee
210,583
214,777
215,719
189,682
156,369
Financial
Total operating revenue (000)
? 14,515
? 14,085
$ 12,763
5 10,946
$ 9,282
Passenger revenue (000)
10,782
10,244
9,156
7,441
5,698
Total commercial revenue (OOO)-'^
11,348
10,773
9,565
7,810
5,968
Public service revenue (subsidy) (000)'
3,167
3,312
3,198
3,136
3,315
Total operating expense (000)
13,414
12,560
10,750
9,426
8,075
Total operating expense per revenue ton-mile of traffic
0.794
0.784
0.778
0.874
1.016
Public service revenue required to provide operating
break-even need: (Total (000) )
2,066
1,787
1,185
1,616
2,107
Per available ton-mile flown
0.067
0.062
0.050
0.080
0.130
Per revenue ton-mile of traffic
0.122
0.112
0.086
0.150
0.265
Break-even need as percent of commercial revenue .
18%
17%
12%
21%
35%
Commercial revenue as percent of operating expenses
85%
86%
89%
83%
74%
Net earnings' -
$ 842,903
8 677,166
$ 874,129
? 711,144
8 422,054
' Reflects adj ustment 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.

16
IBM
t
If ^ ^ ^
n ^ ^ ^ ^ ^
ASSETS
1965
1964
Current Assets:
Cash
Receivables:
United States Government Departments (note 8) . . . .
Traffic, net
Other
$ 1,220,761
1,525,289
281,951
226,007
2,382,057
451,354
297,872
108,769
Less allowance for doubtful accounts
2,033,247
10,000
857,995
12,000
Net receivables
2,023,247
845,995
Federal income taxes refundable (note 3)
Spare parts, service materials and supplies, at average cost .
Prepaid expenses
173,678
711,596
115,002
549,592
64,946
Total current assets
4,244,284
3,842,590
Properties and equipment, at cost (note 1) :
Flight equipment
Ground equipment
Buildings and improvements on leased property
Other property and equipment
Construction in progress
16,775,647
1,027,046
724,394
31,527
248,886
11,689,058
977,731
698,189
3,305
169,559
Less allowance for depreciation and amortization
18,807,500
5,839,285
13,537,842
4,855,737
Net properties and equipment
12,968,215
8,682,105
Deposits on equipment purchase contracts (note 6)
Unamortized development and preoperating costs
Deferred loan costs and other assets
1,667,826
360,045
250,028
2,419,815
142,272
245,736
$19,490,398
15,332,518
See accompanying notes to financial statements.

17
BONANZA
AIR LINES, INC.
BALANCE
SHEET
December 31,1965 with
comparative figures for 1964
Peat, Marwick, Mitchell & Go.
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, Bonanza Air Lines, Inc.:
We have examined the balance sheet of Bonanza Air Lines, Inc. as of December
31, 1965 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, subject to the final determination of the claim described in
Note 8 to financial statements, 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, 1965 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 PEAT, MARWICK, MITCHELL & CO.
March 12,1966
LIABILITIES AND STOCKHOLDERS EQUITY 1965 1964
Current liabilities:
Current maturities of notes payable $ 1,419,778 592,565
Accounts payable 1,076,415 560,749
Amounts collected for others 165,693 138,754
Accrued salaries and wages 458,818 349,547
Other accrued liabilities 207,413 176,874
Unused transportation 72,542 70,380
Federal income taxes (note 3) 183,678
Total current liabilities 3,400,659 2,072,547
Notes payable to banks, less current maturities (note 1) . . . 4,929,092 3,101,903
514% convertible subordinated debentures (note 2) 3,069,400 3,200,000
Deferred federal income taxes (note 3) 344,000 179,000
Commitments and contingent liabilities (note 6)
Stockholders equity:
Common stock $1.00 par value per share.
Authorized 3,000,000 shares: issued
1,139,754 and 1,127,605 shares, respectively (notes 2 and 5) . 1,139,754 1,127,605
Additional paid-in capital 2,935,926 2,822,799
Retained earnings (note 1) 3,671,567 2,828,664
Total stockholders equity 7,747,247 6,779,068
$19,490,398 15,332,518
See accompanying notes to financial statements.

STATEMENT
OF EARNINGS
Year ended December 31,1965
with comparative figures for 1964
1965
1964
Operating revenues:
Passenger and excess baggage
Mail, express and freight
Charter and incidental
Public service (subsidy)
. $10,887,534
357,992
102,828
3,166,557
10,345,445
338,883
89,299
3,311,740
14,514,911
14,085,367
Operating expenses:
Flying operations
Maintenance
Passenger service
Aircraft and traffic servicing
Promotion and sales
General and administrative
Depreciation and amortization
Amortization of development
and preoperating costs
3,193,826
2,560,719
634,501
2,840,125
1,757,809
1,240,016
1,145,306
41,966
3,037,464
2,391,942
625,309
2,556,436
1,683,060
1,137,576
1,076,229
52,305
13,414,268
12,560,321
Earnings from operations
Non-operating revenue (expense):
Interest (note 7)
Other, net
1,100,643
(212,254)
( 3,486)
1,525,046
(262,515)
17,635
Earnings before taxes on income . . .
Provision for taxes on income (note 3) . .
884,903
42,000
1,280,166
603,000
Net earnings
842,903
677,166
Special items:
Prior years investment credits
223,024
( 29,235)
Adjustment of prior years subsidy . . .
Net earnings and special items ....
. $ 842,903
870,955
See accompanying notes to financial statements.
Statement of Retained Earnings
and Additional Paid-in Capital
Year ended December 31,1965
Retained
Earnings
Additional
Paid-in
Capital
Amount at beginning of year
$ 2,828,664
2,822,799
Net earnings
842,903
Excess of proceeds over par value of
11,754 shares of common stock issued upon
conversion of debentures
111,433
Excess of proceeds over par value of 395 shares
of common stock issued under options (note 5)
1,694
Amount at end of year
$ 3,671,567
2,935,926
See accompanying notes to financial statements.

BONANZA AIR LINES, INC. Notes to Financial Statements
December 31,1965
NOTE 1. Notes Payable to Banks.
The notes payable to banks as of December 31, 1965 are summarized as follows:
Payments
(Including Interest)
Final
Maturity
Outstanding
Dec. 31,1965
51 / 2 % note payable
1968
$1,421,394
6% note payable
1970
627,476
6% note payable
5^/4% notes payable:
1970
2,000,000
Series A
1970
391,000
Series B
Less current maturities
1975
1,909,000
6,348,870
1,419,778
$4,929,092
The notes are secured by chattel mortgages on one DC-9 and fourteen F-27A aircraft.
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. Under the most restrictive
provision of these agreements $3,164,878 of retained earnings as of December 31, 1965 was restricted as to the payment of
cash dividends.
The company is required to offer to prepay the 514% Series B notes in an amount equal to 15% of the annual net earnings up
to $1,000,000 plus 25% of the net earnings in excess of $1,000,000; accordingly a prepayment of $126,435 will be offered to the note-
holders during the coming year.
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,
1965, were less restrictive than the provisions of the agree-
ments relating to the bank loans described in Note 1.
NOTE 3. Income Taxes.
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 con-
nection with aircraft preoperational costs which were ex-
pensed 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.
The 1965 provision for income taxes is summarized as
follows:
Current taxes $248,376
Deferred taxes 165,000
413,376
Less investment credits (including
amounts carried back to prior years) .... 371,376
Provision for income taxes $ 42,000
The company records investment credits as a reduction of
Federal income taxes in the year in which such credits are
realized.
NOTE 4. Retirement Plans.
The company has contributory retirement plans for all eligi-
ble employees, which are implemented by trust funds. The
plans are cancellable by the company. The cost of these plans
charged to operating expense in 1965 totalled $337,682 for
both current and past services. As of December 31, 1965, the
remaining portion of the originally computed past service
liability amounted to $107,788, which management contem-
plates fully funding during the next two years.
NOTE 5. Options to Purchase Common Stock.
On May 17, 1965 the shareholders approved a qualified stock
option plan for officers and key employees of the company.
The plan provides that options may be granted to purchase
55,810 shares of the companys common stock at not less than
100% of the fair market value on the date of grant. The
options are exercisable in equal instalments over a period of
five years. No options have been granted under this plan.
As of December 31, 1965, certain officers and employees
held options to purchase 16,885 shares under the companys
restricted stock option plan. 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
$85,373.
NOTE 6. Commitments and Contingent Liabilities.
At December 31. 1965, the company had on order two addi-
tional DC-9 aircraft and related spare engines scheduled for
delivery in January and June 1966. Such purchases represent
commitments of approximately $5,106,000 in excess of related
deposits. The company can borrow an additional $5,200,000
from a group of banks under existing loan agreements to
finance these purchases.
As of December 31, 1965, 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 finan-
cial position of the company at December 31, 1965, or the
results of its operations for the year then ended.
During the year the company agreed to move its general
offices and principal maintenance facilities to Phoenix, Ari-
zona. In connection therewith, the company has entered into
a lease agreement requiring payments not to exceed $168,000
annually for the first five years and not to exceed $264,000
annually during the remaining twenty-three years of the
lease.
The estimated minimum annual rentals under other long-
term leases, the majority of which expire prior to 1990, were
approximately $100,000 at December 31, 1965.
NOTE 7. Capitalized interest.
Interest expense included in the statement of earnings for
1965 does not include $186,900 which was capitalized as air-
craft acquisition costs.
NOTE 8. Claim against the Federal Aviation Agency.
In April 1965, one of the companys F-27A aircraft was dam-
aged beyond repair during the performance of its contract
for ground and flight training for inspectors of the Federal
Aviation Agency. The company filed a claim with said agency
in the amount of $1,052,126; however, the claim was denied in
October 1965. In December 1965, the company filed a notice of
appeal with the Federal Aviation Agency, which is presently
still pending. Management and legal counsel believe that the
company will ultimately recover the value of the destroyed
aircraft, and accordingly the claim is included as a receivable
in the accom panying balance sheet as of December 31, 1965.
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
16,1966, in the company offices, 3737 Bonanza Way, Sky Harbor
Airport, Phoenix, Arizona.
The record date for the determination of stockholders enti-
tied 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 8, 1966.
Stockholders are cordially invited to attend the meeting or
send in their proxies.

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:
Bonanza Air Lines, Inc., McCarran Field
P. O. Box 391, Las Vegas, Nevada
BONANZA AIR LINES, INC.