Bonanza Air Lines Annual Report 1966

BONANZA AIR LINES 1966 ANNUAL REPORT

3
20 YEAR HIGHLIGHTS AT A GLANCE 1946
System route miles 346
Number of aircraft in service 1
Average number of employees 11
Aircraft miles flown in revenue service
Revenue passengers carried
Revenue passenger miles flown (000)
Total operating revenues (000)
*Exact information unavailable
1951
1956
1961
1966
639
1,422
2,153
2,330
4
8
9
15
129
306
510
897
928,371
2,870,214
4,397,396
8,296,040
29,522
127,860
316,040
848,063
7,531
27,641
79,748
218,665
i 996
$ 3,076
$ 9,282
$ 18,012
1946
1959
1966
20 YEAR HIGHLIGHTS


5
Nineteen hundred sixty-six marked Bonanzas 21st
year as a company and its 17th year as a federally
certified airline. During these years we have en-
joyed continued growth as part of a dynamic Indus-
try. During the past three years, however, the
stage has been set for our most significant growth
by the emergence of the short-to-medium range
pure jet airliner, a development which has opened
the door to enormous service possibilities. Your
company, in pursuit of its expressed goal to elimi-
nate the need for federal subsidy in its operations,
seized upon the short-to-medium range DC-9 fan/
jet as the most effective tool available for the ac-
complishment of this purpose.
Increased public demand for more and better
air transportation over the years, together with our
pure jet equipment program, created the need for
larger, more adequate maintenance and opera-
tions facilities; for extensive personnel training pro-
grams; and for additional personnel to accommo-
date these increased requirements. These projects,
primarily consummated during 1966, were, indeed,
a large bite to digest as reflected in the sharp in-
crease in operating costs. Yet, it is our firm belief
that such costs are directly associated with a great
stride forward in this companys present and fu-
ture service capability; and, in fact, were necessary
to insure our future in the airline industry.
It may well be said that our assets, in terms of
capability, are at an all time high. With respect to
earnings for 1966, increased costs more than off-
set increased income obtained from commercial
revenues, thus, results were not favorable when
compared with prior performance. The 1966 net
earnings from operations were $530,703 plus a
gain of $331,780 arising from the sale of aircraft,
making a total of $862,483 added to retained earn-
ings. This result compared to $842,903 of net
earnings for 1965, which included a carry-back
application of investment tax credit to prior years
of approximately $300,000. The non-recurring ex-
penses of moving the companys base and integrat-
ing fan/jet aircraft were instrumental in depressing
the 1966 earnings result. Yet, viewed in light of
what has been accomplished, 1966 was a very
good year.
Your companys flight equipment and route de-
velopment programs were further implemented
during 1966 in several important respects. First,
the Civil Aeronautics Board, in response to the
companys request for expedited hearings on var-
ious route proposals, set two most important route
cases down for hearing. In addition, our effort to
acquire authority for service into Mexico is pro-
grossing favorably. The award of all, or a substan-
tial portion, of the various route proposals now
pending, would result in the most significant route
strengthening in this companys entire history.
Moreover, the Civil Aeronautics Board has under
study a proposed policy change with respect to
nonstop operating rights for the local service in-
dustry. Should this policy be adopted, it could
further strengthen our overall operating capability.
The support of our employees, stockholders and
the traveling public throughout the changing cir-
cumstances encountered in 1966 was deeply ap-
predated. I firmly believe that 1967 and future
years will open new horizons to all of us. 1966 will
be viewed as a strong and necessary base for this
advancement.
Sincerely,
i5i. ^
President and Chairman of
The Board of Directors
PRESIDENTS LETTER

6
The climate has changed,There are a number of
new and significant developments moving across
the national aviation scene. Several of these will
in all likelihood have great impact on the future
direction and growth of Bonanza Air Lines.
At the root of most of these developments has
been the rapidly advancing technology of aviation.
The development, adaptation and mastery of the
jet aircraft and its selective employment for the
benefit of commercial aviation has been a partic-
ularly significant achievement.
While these great strides forward were being
made, there was also developing a growing con-
cern in Congress, the Civil Aeronautics Board and the Executive
Branch of the government over the continuing and growing need
for federal subsidy support of the local airline industry.
Out of this concern there gradually grew a resolute government
determination to reduce this subsidy burden, and ways and means
by which this could be done became the subject of intense study.
One fact became clear.- A local service airline route system cannot
be dominated by loss (or subsidy requiring) markets and be op-
erated on a subsidy-free basis. Thus, access to more profitable
markets became a matter of prime focus, as it had been many
years before when the trunk airlines were dependent upon the
federal government for subsidy and necessary route strengthening.
In the light of this new focus, the evolution of the highly efficient
jet aircraft became an increasingly more interesting companion
piece, particularly when the smaller versions of the new jets came
into production, specifically designed to meet the economic de-
mands of the shorter-haul, high density traffic markets. Here then,
was an opportunity to match aircraft-to-market-to-carrier and
emerge with improved public service at a reduction in federal sub-
sidy and, overall, a stronger national airline industry. This was
indeed a worthwhile national objective.
Partly because of its important role in the formation of these
developments, and partly because of an acutely developing sense
of responsiveness to them, the Civil Aeronautics Board began to
move with unmatched speed and determination toward a realiza-
tion of the opportunities thus evolving.
In a clearly designed effort to reap the fruits of these oppor-
tunities and strengthen the local airline industry, the Board com-
menced a sweeping series of activities including, among others,
the use of a streamlined show-cause procedure, the initiation of
route cases through the investigatory technique, the granting
of motions for priority hearings, a rule-making proposal for new
nonstop authority and a program to confine its
proceedings more nearly to the specific purposes
for which they were originally intended. Finally,
the Board took to the podium, in a sense, to sug-
gest somewhat subtly that the individual airline
members of the aviation industry might more in-
telligently and productively concentrate their at-
tention on proceedings which were vital to their
economic welfare, rather than opposing virtually
all efforts on all fronts to the great detriment of
the administrative process and the major public
interest objectives of the Board. Moreover, the
Board appears to be attempting to discourage
each airline from making unwarranted forays into areas of oppor-
unity on which another carrier may be more urgently dependent.
In all of these matters the Board appears to have the endorse-
ment or assent of the aviation leaders in the Congress.
Viewing our own pending route projects very carefully in the
light of these recent developments, we can reasonably conclude
that after the long, lean period of new route development through
which Bonanza has passed, there are indeed bright prospects for
the near future.
The Board has granted Bonanzas motions for priority hearings
in most of the important route applications that were filed as a part
of the companys subsidy elimination program, and two cases that
are vitally important to the company are now underway on an ex-
pedited basis. In addition, the company has an excellent oppor-
tunity for nonstop authority on its important Phoenix-Los Angeles
segment under the Boards proposed nonstop rule-making pro-
cedure. Lastly, the companys prospects for important new route
authority into Mexico are certainly encouraging.
All of these proposals meet the Boards standards and objectives.
All will effectively utilize modern and efficient aircraft especially
suited to the task. From the companys standpoint the goal is clear;
improved public service with the concurrent elimination of the
need for federal subsidy.
Clearlythe regulatory climate for the achievement of these objec-
tives is now most favorable. The company has prepared for this
change. It has fought long and hard to help bring it about. We
would hope that we have made at least a modest contribution to-
ward that end. Such objectives are not without their associated
costs but the investment inherent in this program now offers every
prospect of providing a handsome return in the not too distant
future. The company, its stockholders and employees and the
public it serves should all benefit greatly.
G. Robert Henry, Director
and Executive Vice President

-vstyoming
SALT LAKE CITY
RENO
; VEGAS
GRAND CANYON
KINGMAr
APPLE VALLEY
NEW
^riversidI
LOSANGELE5
PHOENIX
SANTA ANA?
ALM SPRINGS
SAN DIEGO
TUCSON
ENSENADA
GUAYMJ
MA2ATLAN
j^/s-NSAS
TEXAS
LOS MOCHIS
PUERTO VALLARTA
The route map shown above includes Bonanzas
present route system; all of the route authority
requested in the SERVICE TO TUCSON CASE;
the SALT LAKE CITY - LAS VEGAS - SOUTHERN
CALIFORNIA CASE; and Bonanzas MEXICAN
ROUTE PROPOSALS. The map illustrates the
nature of the companys route system in the
event Bonanza is successful in obtaining all of
the authority requested.
Present Route System
7
THE REGULATORY CLIMATE

8
Present System ARIZONA
OC-9 FAN/JET
F-27AJET/PROP ^
PRESENT ROUTE STRUCTURE
Bonanzas present route structure, comprised of 2,330
route miles, involves service to 19 cities in the states of
Arizona, California, Nevada and Utah. The company cur-
rently flies 24,000 miles daily, utilizing twelve Fairchild
F-27As and three Douglas DC-9 fan/jets. The company
system provides service to most of the important tourist
and commercial centers in the Pacific Southwest.
F-27A JET/PROP
SERVICE TO TUCSON CASE
On October 24, 1966, the Civil Aeronautics Board di-
rected that there be set down for hearing. Bonanzas ap-
plication to provide service between Tucson, Arizona and
various cities on Bonanzas system to the north and
west. The proceeding entitled SERVICE TO TUCSON
CASE will consider Bonanzas application for nonstop
authority for DC-9 service between Tucson, Arizona on
the one hand, and Los Angeles, San Diego, Las Vegas,
Reno and Salt Lake City on the other; and for a Tucson-
Phoenix authority. Additionally, route authority is being
sought between Tucson and Yuma, Arizona. Thus Tucson
would be tied-in directly with every point on Bonanzas
existing system. The award of these routes would be
granted on a subsidy-ineligible basis. Applications of other
carriers involving requests for the same or similar ser-
vice will be heard at the same time in accordance with
Civil Aeronautics Board policy. The case is proceeding
on an expedited basis, with hearings to begin in Tucson
on May 4, 1967.

Present System Proposed
DC-9 FAN/JET
F-27A JET/PROP
UTAH
SALT LAKE CITY-LAS VEGAS-SOUTHERN CALIFORNIA
CASE
By the same order, the Civil Aeronautics Board also di-
rected for hearing, Bonanzas application involving the
company's proposal to provide service from Salt Lake
City to various points in Nevada and California. The com-
panys route applications in this case are also being con-
sidered on a subsidy-ineligible basis. In this proceeding
entitled SALT LAKE CITY - LAS VEGAS - SOUTHERN CALI-
FORNIA CASE the Civil Aeronautics Board will consider
the companys proposal to provide nonstop service be-
tween Salt Lake City and Los Angeles and Salt Lake City
and Las Vegas in addition to the companys application
for Salt Lake City-Cedar City-Las Vegas service. The com-
panys proposals for Las Vegas-San Diego service, both
nonstop and via Palm Springs, and Los Angeles-Palm
Springs turnaround service are likewise to be heard in
the same case. Hearings are scheduled to commence in
Salt Lake City July 25 on the SALT LAKE CITY - LAS
VEGAS - SOUTHERN CALIFORNIA CASE.
The successful conclusion of both the SERVICE TO
TUCSON CASE and the SALT LAKE CITY - LAS VEGAS -
SOUTHERN CALIFORNIA CASE, which were set down for
priority consideration at Bonanzas request, would provide
substantial opportunities for new public service and traf-
fic development and result in increased operating profit.
MEXICO
During 1966 and early 1967 the governments of the
United States and Mexico met for bilateral discussions
to determine whether the two countries would authorize
new air routes between the respective countries. In 1966
Bonanza filed an application with the Civil Aeronautics
Board requesting authority to provide service between
the Phoenix-Tucson gateway and Guaymas, La Paz, Maza-
tian and Puerto Vallarta; between the co-terminals of Las
Vegas and Yuma and Los Mochis, Mazatlan and Guadala-
jara; and between Los Angeles and Ensenada. The com-
panys proposals constitute a logical extension of our
present route system and we are confident that the pro-
posals, if agreed to between the governments of the
United States and Mexico, will be most beneficial to the
traveling public, to the respective countries and to
Bonanza.
To date, the results of the bilateral conferences have
not been formally approved by the two governments and
we are, therefore, unable to say as yet what authorizations,
if any, will finally be accorded. Should additional route
authority be granted for a U.S. carrier by the Mexican
government, the companys application now pending be-
fore the Civil Aeronautics Board would, in whole or in part,
then be set down for hearing. Competitive applications
of other carriers, if any, would be heard at the same time.
m
cn
m
>
73
O
X
9
AND DEVELOPMENT

Bonanzas Avionics Division, an FAA licensed agency,
overhauls and maintains aircraft instruments and radio equipment.
Scheduled service with the company's first two
Douglas DC-9 fan/jets, was commenced on March
1, 1966, with the third DC-9 being added to sched-
uled service in August. Our fourth DC-9 is sched-
uled for delivery in mid-1967. The companys two
DC-9-30 model aircraft, a stretched version of the
DC-9-10 now in service, are scheduled for delivery
during the first half of 1968 and will be placed in
service in the companys high-density markets.
Since the inauguration of jet service, the DC-9s
have been utilized on an average of eight hours
daily and have been most favorably accepted by
both the traveling public and the companys flight
and maintenance personnel. Of the 8,296,040 air-
craft miles flown during 1966, the DC-9s ac-
counted for 2,186,164 aircraft miles, or 26.4 per-
cent.
Bonanzas continuous-maintenance program, ap-
proved by the Federal Aviation Agency with respect
to the companys F-27A fleet, has now been ap-
proved for the DC-9. The companys entire fleet is
now being maintained in accordance with that
program.
In order to reduce the costs generally related to
the Federal Aviation Agency authorized time be-
tween overhauls on a limited number of Pratt and
Whitney JT8D jet engines. Bonanza and Allegheny
Air Lines originated a program, unique in the air-
line industry, which joins nine regional carriers in
a Federal Aviation Agency approved program giv-
ing the combined carriers the maintenance and
time between overhaul benefits associated with
airlines operating large fleets of aircraft. The pro-
gram should result in a substantial savings to all
participants.
Early in 1966, as a further improvement in main-
tenance service, a new Maintenance Services -
Production Control Department was created. The
new department is comprised of a maintenance
planning and statistical group, which schedules
maintenance work, modifications, provides data
on mechanical problems, and produces equipment
routing analyses. The department utilizes the com-
panys IBM 1440 computer for maintaining time
records on aircraft and components. The results,
to date, of the activities of this new department
have been improved production and reduced main-
tenance delays.

One of Bonanzas two spacious hangars at its new facility in Phoenix.
Each hangar is large enough to accommodate three DC-9 Funjets.

12
A group of Japanese visitors enroute to the Grand Canyon via Bonanza.
bonanza air
limes
R/kDAR
EQUIPPED
Celebrating new nonstop service Bonanza training and administrative personnel
to the Grand Canyon. with a recent graduating class of hostesses.
With the commencement of DC-9 service in 1966, a new emphasis
was placed on freight sales. In an effort to fully utilize the greatly
increased capacity, freight rates were revised and several addi-
tional specific commodity rates were introduced. To further supple-
ment freight sales efforts, a manager of cargo sales was appointed.
It is expected that these efforts will result in substantially increased
freight revenues.
New traffic highs were set in 1966. The 848,063 passengers
served in 1966 represented a 26.8% increase over the 668,568
served in 1965. Utilization of the DC-9 in the companys high den-
sity longer distance markets resulted in an increase in revenue
passenger miles in 1966 of 28.5% or 218,665,000 compared to
170,151,000 in 1965.
Efficient utilization of the 72 seat DC-9 aircraft plus additional
miles flown in 1966 over 1965 increased available seat miles
29.9% for the year. The slightly larger increase in available seat
miles over revenue passenger miles caused the passenger load
factor to edge below the 55.1% achieved in 1965 to 54.5%.
Dramatic proof of the public acceptance of the DC-9 is found
in the Las Vegas-Los Angeles story. By February of 1966, im-
mediately prior to the introduction of the DC-9 in that market,
Bonanzas F-27A traffic in competition with a high volume of pure
jet service was 44% below February of 1965. For the 11 months
following the DC-9 introductory month of March, 1966, Bonanzas
traffic was 84% ahead of the same 11 months a year earlier.
A positive space military furlough fare went into effect in 1966,
which allows military personnel to travel at a 40% discount on a
reservation basis, a departure from the usual standby fare gen-
erally offered to military personnel. In view of the many service
personnel now in travel status, the new fare was deemed to be a
necessary accommodation.
A new sales manager was added in the Los Angeles area in
order to more adequately serve the fast-growing Orange County
and adjacent Pacific coast cities. Increased traffic resulting from
the companys newly inaugurated nonstop service between Orange
County and Las Vegas, as well as between Orange County and
Phoenix, Arizona, necessitated the additional sales representation
for that general area.
Again for the sixth year, the company engaged in a hostess ex-
change program, this time with Airlines of New South Wales. The
Bonanza hostess flew the routes of Airlines of New South Wales en-
compassing all of Australia, for a two-week period, and a hostess
from Airlines of New South Wales flew Bonanzas routes for a
similar period, each acquainting the passengers with the travel
and tourism benefits of their respective areas.

13
The major thrust of the companys advertising effort in 1966 was
directed to improving the companys revenue position in various
of its markets being served with DC-9 fan/jet equipment. New and
improved services in F-27A markets were also highlighted in the
companys advertising.
Following the award of nonstop authority between Las Vegas
and Santa Ana, and in order to exploit the untapped traffic poten-
tial felt to exist in that market, extensive and varied advertising
and sales promotion was conducted throughout Orange County,
California and in Las Vegas during September and October.
At year end, planning was nearing completion on a Discover
BonanzaLand 67 advertising and promotion campaign in the
major travel markets of the East. The object of this promotion is
to publicize Bonanza as the four season symbol of the many tour-
ist attractions and vacation opportunities available In the West.
Still another major advertising and publicity effort was undertaken
to support the newly awarded nonstop service between Las Vegas
and Grand Canyon, and to promote the many improved routings
into Grand Canyon which resulted from the new route award.
The advertising and promotion of DC-9 fan/jet service during
the year provided many opportunities for public and press con-
tact both in the system area and nationally. Several major stories
on Grand Canyon, the new Grand Canyon National Park Airport
and the improved service also appeared.
Trading of transportation for advertising in accordance with
Civil Aeronautics Board approval and procedures gave the com-
pany additional advertising exposure while conserving dollar out-
lay. Under this plan for regional carriers, airline seats are ex-
changed for advertising space and time at market value with
media companies who have need for the travel. In 1966 the
company utilized the full limit of trading authorized by the Civil
Aeronautics Board.
AIR LINjES
to las Vegas
bonanza
Fl y a DC-9 Funjet to LA-
we'll give you one
to take home!
Around-the-clock FUNJETS to Los Angeles
DC-9 I DC-9 I DC-9 | DC-9 [ DC-9 I 00-9
7;50ain h0:55am| 1:30pm | 2:40pm | 4:05pm | 7;00pm
Give you a $3,500,000 jet? Not really-but an exact copy in
a DC-9 Funjet model kit. Its 10 inches long, to scale in every
detail, packed in a wild sort of tote bagwe call a Funjet Funkit.
Get one on every Bonanza
DC-9 flight to Los Angeles-
plus more of the same when
you Funjet back. Have fun.
BONANZA
AIR LINES
Bonanza utilizes all types of advertising media to promote its routes.
SALES & SERVICE/ADVERTISING & PUBLICITY

14
Earnings before taxes for 1966 were $810,703 compared with
$884,903 in 1965. Provision for taxes for 1966 was $280,000
while the 1965 provision was only $42,000 due to investment tax
credits generated through equipment purchases in 1965 and ap-
plied to 1965 as well as carried back in the amount of $296,070
for refund of prior years taxes paid. The 1966 provision for taxes
contained application of investment tax credits to prior years of
only $13,135. Net earnings from operations for 1966 were $530,703,
equivalent to 44 cents per share as compared to $842,903 for
1965 or 75 cents per share, computed on the average number of
common shares outstanding during the respective years. A gain of
$331,780, net of tax obligation, was recorded in 1966 from the
sale of two F-27A aircraft. The addition to retained earnings in
1966 from net earnings aggregated $862,483 or 71 cents per
average number of shares outstanding.
Total revenues for 1966 were $18,011,807 up 24 percent from
the $14,514,911 realized in 1965. Operating expenses however
increased 25 percent from $13,414,268 recorded in 1965 to
$16,749,361. Depreciation and amortization charges increased
48 percent from $1,187,272 in 1965 to $1,753,829 due to the
inauguration of DC-9 fan/jet aircraft in 1966.
The increase in cash operating expense was in part related to
the relocation of the companys administrative and operating base
from Las Vegas to Phoenix and in part to costs associated with the
inauguration of the DC-9 service. The company also experienced
marked increases in the cost of materials, wages and outside ser-
vices. Interest expense increased to $470,383 in 1966 from
$212,254 in 1965 from term loans incurred for the purchase of
the DC-9 aircraft.
The company experienced depression in the average revenue
received per mile from passengers in 1966 with the rate showing a
decline from 6.34 cents per mile in 1965 to 6.30 cents in 1966.The
decline resulted primarily from more rapid growth in traffic in the
low fare Las Vegas-Los Angeles market, where the $13 one-way
fare equals 5.53 cents per mile, than on the remainder of the
routes. The company increased its fare in this market on March
1, 1967 to $15, equal to 6.30 cents per mile. The results to date
indicate that no major diversion of traffic has occurred following
the fare increase. Another factor in reduction in the average reve-
nue received per mile from passengers in 1966 resulted from the
prolonged strike of trunk airlines. During this period, and in line
with industry practice, the company transported passengers on cir-
cuitous routings over its system at the fare collected by the struck
carriers for more direct service, thereby lessening the revenue
per mile below the companys established fares.
Near the end of 1966 a favorable decision was rendered by the
review panel of the Federal Aviation Agency with regard to the
companys claim for an aircraft destroyed in a training accident
in 1965. The claim was settled in January 1967 for $1,100,000 less
salvage value of $47,874 or a net of $1,052,126. Prepayment of
$400,000 was made on a bank term loan from this recovery. Addi-
tionally the company prepaid $1,675,000 on a bank term loan
with net proceeds from the sale of two F-27A aircraft. The balance
of a $6,500,000 loan was taken down in 1966 and applied to pay-
ment of the second and third DC-9 aircraft and spare engines.
During 1966 the company arranged for the purchase of a fourth
DC-9 by a Trust formed by the United California Bank, the First
National Bank of Nevada and the First National Bank of Arizona.
The aircraft was leased by the Trust to the company for a period of
13 years and in turn was subleased to another regional airline,
who had originally placed the order for the aircraft, until mid-1967,
when it will revert to the company for the balance of the lease term.
The company has on order two DC-9 series 30 fan/jet aircraft
scheduled for delivery in early 1968. It is tentatively planned to
have such aircraft purchased by a Trust for long term lease to the
company. The order for these aircraft was placed well before sus-
pension of the investment tax credit in 1966. Investment tax
credits generated from equipment purchases in 1966 amounted
to $525,553 of which $410,611 is available for application to
future income taxes.
During the year, debentures having a face value of $1,517,300
were surrendered for conversion to common stock resulting in
the issuance of 136,557 shares and the elimination of the associ-
ated indebtedness.
Finalization of Bonanzas acquisition of fourth DC-9.

SUMMARY OF SOURCE AND DISPOSITION OF FUNDS FOR 1966
Source of funds:
Net earnings $ 862,483
Depreciation and overhaul amortization . . . 1,971,189
Amortization of deferred charges 178,884
Deferred taxes 250,000
Proceeds from sale of capital stock 66,083
Increase in long-term debt 2,540,753
Decrease in working capital 1,220,524
Total $7,089,916
OPERATING AND FINANCIAL STATISTICS
1966
Traffic and Capacity
System route miles operated as of last day of period.... 2,330
Total aircraft miles flown in revenue service 8,296,040
Scheduled aircraft miles flown 8,279,578
Percent of scheduled aircraft miles flown 98.8%
Revenue passengers carried 848,063
Revenue passenger miles flown (000) 218,665
Available seat miles flown (000) 401,144
Passenger load factor 54.5%
Available ton-miles flown (000) 43,503
Revenue ton-miles flown (000) 21,676
Overall load factor 49.8%
Average number of employees 897
Revenue passenger miles per employee 243,774
Financial
Total operating revenue (000)* $ 18,012
Passenger revenue (000) 13,766
Total commercial revenue (000)^ 14,431
Public service revenue (subsidy) (000)* 3,581
Total operating expense (000) 16,749
Total operating expense per revenue ton-mile of traffic. . 0.773
Public service revenue required to provide operating
break-even need: (Total (000) ) 2,319
Per available ton-mile flown 0.053
Per revenue ton-mile of traffic 0.107
Break-even need as percent of commercial revenue .... 16%
Commercial revenue as percent of operating expenses . . 86%
Net earnings from operations* ^ $530,703
Net earnings* ^ $862,483
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.
Disposition of funds:
Investment in property and equipment .... $7,114,834
Deposits on equipment purchase contracts. (661,519)
Deferred preoperating and other costs .... 636,601
Total $7,089,916
Calendar Years
1965 1964 1963 1962
2,106
7,729,660
7,720,324
98.5%
668,568
170,151
308,812
55.1%
30,881
16,885
54.7%
808
210,583
$ 14,515
10,782
11,348
3,167
13,414
0.794
2,066
0.067
0.122
18%
85%
$842,903
$842,903
2,106
7,618,013
7,599,716
99.2%
620,497
160,653
292,480
54.9%
28,673
16,014
55.9%
748
214,777
$ 14,085
10,244
10,773
3,312
12,560
0.784
1,787
0.062
0.112
17%
86 %
$677,166
$677,166
2,106
6,354,940
6,349,638
99.3%
536,377
139,139
241,284
57.7%
23,494
13,818
58.8%
645
215,719
$ 12,763
9,156
9,565
3,198
10,750
0.778
1,185
0.050
0.086
12 %
89%
$874,129
$865,129
2,135
5,445,869
5,443,441
99.0%
425,475
108,688
206,849
52.5%
20,188
10,785
53.4%
572
189,682
$ 10,946
7,441
7,810
3,136
9,426
0.874
1,616
0.080
0.150
21 %
83%
$711,144
$717,808
15
FINANCIAL RESULTS & OPERATIONS & FINANCIAL STATISTICS

December 31, 1966 with comparative figures for 1965
16
New computer facility at General Headquarters.
ASSETS 1966 1965
Current assets:
Cash $ 786,049 1,220,761
Receivables;
United States Government Departments (note 8) 1,464,395 1,525,289
Traffic, net 599,947 281,951
Other 127,996 226,007
2,192,338 2,033,247
Less allowance for doubtful accounts 10,000 10,000
Net receivables 2,182,338 2,023,247
Federal income taxes refundable (note 3) 173,678
Spare parts, service materials and supplies, at average cost 834,464 711,596
Prepaid expenses 165,143 115,002
Total current assets 3,967,994 4,244,284
Properties and equipment, at cost (note 1):
Flight equipment 23,120,337 16,775,647
Ground equipment 912,550 1,027,046
Buildings and improvements on leased property 206,478 724,394
Other property and equipment 579,097 31,527
Construction in progress 71,694 248,886
24,890,156 18,807,500
Less allowance for depreciation and amortization 6,778,296 5,839,285
Net properties and equipment 18,111,860 12,968,215
Deposits on equipment purchase contracts (note 6) 1,006,307 1,667,826
Unamortized development and preoperating costs 829,979 360,045
Deferred loan costs and other assets 154,504 250,028
$24,070,644 19,490,398
See accompanying notes to financial statements.

17
December 31, 1966 with comparative figures for 1965
LIABILITIES AND STOCKHOLDERS EQUITY 1966
Current liabilities:
Current maturities of notes payable $ 1,931,971
Accounts payable 1,322,564
Amounts collected for others 196,637
Accrued salaries and wages 558,580
Other accrued liabilities 215,738
Unused transportation 90,181
Federal income taxes (note 3) 29,222
Total current liabilities 4,344,893
Notes payable to banks, less current maturities (note 1) 7,469,845
5^^% convertible subordinated debentures (note 2) 1,552,100
Deferred federal income taxes (note 3) 594,000
Stockholders equity:
Common stock $1.00 par value per share.
Authorized 3,000,000 shares; issued 1,288,896 and
1,139,754 shares, respectively (notes 2 and 5) 1,288,896
Additional paid-in capital 4,286,860
Retained earnings (note 1) 4,534,050
Total stockholdersequity 10,109,806
Commitments and contingent liabilities (note 6).
$24,070,644
1965
1,419,778
1,076,415
165,693
458,818
207,413
72,542
3,400,659
4,929,092
3,069,400
344,000
1,139,754
2,935,926
3,671,567
7,747,247
Pkat, Ma-rwick, Mitchell & Co.
CERTIFIED PUBLIC ^VCCOUNTANTS
629 SOUTH SPRING STREET
LOS A.NGELES 14, CALIF.
The Board of Directors
Bonanza Air Lines, Inc.:
We have examined the balance sheet of Bonanza
Air Lines, Inc. as of December 31, 1966 and the re-
lated statements of earnings, retained earnings and
additional paid-in capital for the year then ended.
Our examination was made in accordance with gen-
erally 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,
1966 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.
PEAT, MARWICK, MITCHELL & CO.
March 25, 1967
19,490,398
BALANCE SHEET

18
STATEMENT OF EARNINGS
Year ended December 31, 1966
with comparative figures for 1965
1966 1965
Operating revenues:
Passenger and excess baggage
Mail, express and freight
Charter and incidental
Public service (subsidy)
$13,855,483
456,064
119,260
3,581,000
10,887,534
357,992
102,828
3,166,557
18,011,807 14,514,911
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
3,995,318
3,422,564
811,384
3,454,429
1,911,960
1,399,877
1,593,805
160,024
3,193,826
2,560,719
634,501
2,840,125
1,757,809
1,240,016
1,145,306
41,966
16,749,361
13,414,268
Operating income
1,262,446
1,100,643
Non-operating revenue (expense):
Interest (note 7)
(470,383)
(212,254)
Other, net
18,640
( 3,486)
Earnings before taxes on income
810,703
884,903
Provision for taxes on income (note 3)
280,000
42,000
Net earnings from operations . . .
530,703
842,903
Gain on sale of aircraft.
less applicable taxes of $312,000
331,780

Net earnings
. $ 862,483
842,903
See accompanying notes to financial statements.
STATEMENT OF RETAINED EARNINGS
AND ADDITIONAL PAID-IN CAPITAL
Year ended December 31, 1966
Retained
Earnings
Additional
Paid-in
Capital
Amount at beginning of year . .
$3,671,567
2,935,926
Net earnings
862,483

Excess of proceeds over par
value of 136,557 shares of
common stock issued upon
conversion of debentures . .
1,297,436
Excess of proceeds over par
value of 12,585 shares of
common stock issued under
options (note 5)
53,498
Amount at end of year
$4,534,050
4,286,860
See accompanying notes to financial statements.
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 15, 1967, in
the company offices, 3737 Bonanza Way, Sky Harbor Airport,
Phoenix, Arizona.
The record date for the determination of stockholders entitled
to receive notice and to vote at the meeting and any adjourn-
ment thereof has been fixed by the Board of Directors as of the
close of business on April 7, 1967.
Stockholders are cordially invited to attend the meeting or to
send in their proxies.
Q B

19
BONANZA AIR LINES, INC., Notes to Financial Statements December 31, 1966
NOTE 1. NOTES PAYABLE TO BANKS
The notes payable to banks as of December 31, 1966 are summarized as follows:
Payments
Final
Outstanding
(Including Interest)
Maturity
Dec. 31, 1966
5V2% note payable
$ 51,621 monthly
1968
$ 867,162
6% note payable
1970
512,109
6% note payable
5%% notes payable:
.... 23,853 monthly
1970
1,012,593
Series A
1970
962,227
Series B
. . .. 178,583 quarterly
1975
5,097,725
6y2% note payable
.... interest only
1968
950,000
9,401,816
Less current maturities
1,931,971
$7,469,845
The notes are secured by chattel mortgages on three DC-9 and twelve 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 stock-
holders equity (net worth) requirements. Under the most restrictive provision of these
agreements $3,850,459 of retained earnings as of December 31, 1966 was restricted as to
the payment of cash dividends.
The Company is required to offer to prepay the 5Va% Series B notes in an amount equal to
15% of the annual net earnings (as defined) up to $1,000,000 plus 25% of the net earnings
in excess of $1,000,000; accordingly, a prepayment of $79,605 will be offered to the note-
holders during 1967.
NOTE 2. 5V4% 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% per share. The conversion price increases to $12V2 per share on May 1, 1968 and to
$14% 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.
As of December 31, 1966, 139,689 shares of common stock were reserved for conversion
of the outstanding debentures.
The indenture further provides for certain restrictions on the payment of cash dividends
which, as of December 31, 1966, 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 subsequent 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 preopera-
tional 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 depreciation
methods for tax purposes.
The 1966 provision for income taxes is summarized as follows:
Current taxes $ 144,942
Deferred taxes 250,000
394,942
Less investment credits (including amounts carried back to prior years) 114,942
Provision for income taxes $ 280,000
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 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 1966 totaled $347,443 for both current and past
services. As of December 31, 1966, the remaining portion of the originally computed past
service liability amounted to $35,929, which management contemplates fully funding
during the next year.
NOTE 5. OPTIONS TO PURCHASE COMMON STOCK
The Company has 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. As
of December 31,1966 options to purchase 8,700 shares were outstanding; the options were
exercisable through 1971 at $15.13 per share and represented total option prices aggregat-
ing $131,631.
As of December 31, 1966, certain officers and employees held options to purchase 4,300
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 $19,290.
NOTE 6. COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1966 the Company had on order two additional DC-9 aircraft scheduled
for delivery in 1968. Such purchases represent commitments of approximately $6,125,000
in excess of related deposits. The Company contemplates that such aircraft will be pur-
chased by a Trust formed by banks who will lease the aircraft to the Company over a 13
year term. It is anticipated that lease payments for both aircraft under such an agreement
will approximate $685,000 annually.
The Company also had on order at December 31,1966 two engines scheduled for delivery
in May 1967 and April 1968 representing a commitment of $463,880 in excess of related
deposits.
At December 31, 1966 the Company had a DC-9 aircraft under a 13 year lease from a
Trust formed by banks. Such aircraft is subleased to another airline until June 30, 1967
at which time the Company is obligated to assume the lease payments amounting to
$302,167 annually.
During the year the Company moved its general offices and principal maintenance facili-
ties to Phoenix, Arizona. 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, 1966.
As of December 31, 1966 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 positon of the Company at
December 31, 1966, or the results of its operations for the year then ended.
NOTE 7. CAPITALIZED INTEREST
Interest expense included in the statement of earnings does not include $136,424 for
1966 and $186,900 for 1965 which were capitalized as aircraft acquisition costs.
NOTE 8. CLAIM RECEIVABLE
The Companys claim against the Federal Aviation Agency (included as a receivable)
which was filed in 1965 was approved in December 1966 and payment was received in
January 1967.
STATEMENT OF EARNINGS & NOTES

One of the more important activities of this depart-
ment during 1966 was the task of moving 388 of the
companys employees from Las Vegas to the com-
panys new administrative offices and maintenance
facilities in Phoenix, Arizona. The move was ac-
complished with a minimum of disruption to ser-
vice; and only 6.3 percent,or 26 employees, elected
not to transfer with the company. Bonanza made
every effort to assist each family in its move, by
providing additional time off, transportation, lodg-
ing, and other help; most employees were able
to relocate with a minimum of difficulty.
The expansion of the company's facilities and
its jet aircraft fleet, together with increased traffic
and larger terminal buildings, produced the need
fora significant increase in personnel during 1966.
Year-end employment (as distinguished from aver-
age employment for the year) was 962. This rep-
resents an 18.2 percent increase over the 814
employees at year-end 1965. The companys pay-
roll for the year was $7,451,912, an increase of
22 percent over 1965.
Intensive training, both in the classroom and
on the aircraft, was conducted early in 1966 for
pilots and mechanics on the DC-9 fan/jet aircraft.
The thoroughness of such training and the apti
tude of the personnel involved resulted in excellent
operational performance with the DC-9 from the
inception of service.
During 1966 a jet-oriented hostess training pro-
gram for all hostess personnel was initiated, to
acquaint them with the new and additional custo-
mer service requirements of the DC-9. The com-
panys training section also provided continuing
training programs for all personnel including new
employees, and conducted field programs aimed
toward further improving customer service. At the
close of 1966, all company personnel affected by
the addition of jet equipment had completed this
training.
In keeping with corporate policy, the company
effected a general salary increase for all employees
not covered by one of the companys five collective
bargaining agreements. The companys compensa-
tion program is designed to sustain its level of
competent personnel. New collective bargaining
agreements were signed with the hostesses repre-
sented by the Air Line Pilots Association and with
the aircraft mechanics and supply personnel rep-
resented by the airline division of Teamsters Inter-
national. The duration of both agreements was in
excess of two years.
20-year pins are awarded by President Converse to Vice President Operations,
Myron W. Reynolds and Captains Dick Hall and George Martin.
Bonanzas attractive new employee cafeteria.

21
INDUSTRIAL RELATIONS

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
A director of Bonanza Air Lines since
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
A director since 1952. A senior partner in
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; director of the Balboa
Club de Mazatlan, S.A. Mazatlan,
Sinaloa, Mexico.
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. He is an independent
financial advisor. He has been active in the
investment banking business for 37 years.
WILLIAM D. PABST
Elected to the Bonanza Board of Directors
in March of 1959. He is former 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 vice president
and director. Ideal National Insurance
Company, Industrial Uranium Company and
Empire Capital Corporation, also chairman
of Utah State Park and Recreation
Commission.
ROBERT 0. 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
RICHARD A. ROGERS
Vice President, Industrial Relations
ARTHUR M.TAYLOR
Vice President, Legal and Secretary
NOLAND H. RYAN
Vice President, Community Affairs
JOHN R. MacKENZIE
Vice President, Governmental Affairs
RUDOLPH ZEPEDA
Vice President, International Affairs
FRANK R. CHABOT, Treasurer
THOMAS J. VAN BOGART
Controller and Assistant Secretary
WILLIAM C. BURT
Assistant Secretary
Board room at new General Headquarters.

OFFICERS

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:
Bonanza Air Lines
P.O. Box 12405
3737 E. Bonanza Way
Phoenix, Arizona 85034
f