Chicago and Southern Air Lines Annual Report 1952

CHICAGO AND SOUTHERN AIR LINES,, INC.
as reflected in statistical comparison with 1951
Per Cent
1952
Net income and special items
1951 Change
($267,983 in 1951) ---------------------------- $ 1,338,510 $ 1,130,959 +18.4%
Per share _____________ ---- ___
__
------------- $2.63 $2.22 +18.4
Dividends paid per share ________________________ $ .75 $ .65 +15.4
Earned surplus at end of year__ __________________ $ 2,920,862 $ 1,964,347 +48.7
Book value per share at end of year ________ $15.34 $13.46 +14.0
Total non-mail revenues-Domestic $ 13,271,753 $ 10,623,815 +24.9
-International 3,178,622 2,556,872 +24.3
Mail pay -Domestic $ 972,813 $ 1,202,976 -19.1
-International 1,435,882 1,853,267 -22.5
Mail ton miles -Domestic 817,796 669,611 +22.1
-International 60,270 41,610 +44.8
Operating profit -Domestic $ 1,439,091 $ 916,878 +57.0
-International 1,106,798 948,194 +16.7
Revenue plane miles -Domestic 9,623,860 8,507,601 +13.1
- International 1,655,686 1,682,490 - 1.6
Available seat miles -Domestic 325,087,934 269,001,576 +20.8
-International 76,897,010 77,414,401 - 0.7
Revenue passenger miles-Domestic 201,084,672 168,150,135 +19.6
-International 38,239,237 31,805,784 +20.2
Passenger load factor -Domestic 61.9% 62.5% - 1.0
-International 49.7% 41.1% +20.9
Available ton miles -Domestic 39,736,664 33,007,687 +20.4
-International 10,655,954 10,788,016 - 1.2
Revenue ton miles -Domestic 22,352,955 18,416,312 +21.4
-International 5,170,798 4,034,192 +28.2
Average daily hours of revenue flight
per airplane -Constellations 9: 12 8: 16 +11.3
-DC-3's 9:07 8:48 + 3.6
CHICAGO AND SOUTHERN AIR LINES,, INC.
REPORT TO THE SHAREHOLDERS
Your Company's net profit for the year
1952 was $1,338,510, equivalent to $2.63 a
share on the capital stock, after provision for
income taxes. This compares with a net profit
and special items of $1,130,959, or $2.22 a
share for 1951, which included $267,983 rep-
resenting a net capital gain on DC-4 aircraft
and equipment sold, less a foreign reserve
provision. There were no similar special items
in 1952. Profits have been earned on both
domestic and international operations in
every year since 1948.
Four dividends totaling 75 cents a share
were paid in 1952 compared with 65 cents
paid in 1951, 50 cents in 1950, and 35 cents
Ill 1949.
Revenues and Earnings
Reach New High
Operating revenues for the year 1952 to-
taled $18,859,070, a gain of 16% over 1951.
Passenger revenues increased 24%, express
revenues increased 33%, and freight revenues
increased 50%, Although a larger volume of
mail was carried, mail pay declined 21 % and
represented only 13% of total operating reve-
nues in 1952 against 19% in 1951. Our operat-
ing profit for 1952 was $2,545,889 compared
with $1,865,072 for 1951. While actual oper-
ating figures for other air lines are not yet
available, our 36% gain in operating profit
For the year ended December 31, 1952
contrasts sharply with the preliminary esti-
mate for the industry as released by the Air
Transport Association. This estimate indi-
cates that the operating profit of the 14 do-
mestic trunk lines was 9.9% lower in 1952
than in 1951, the operating profit of the 11
international carriers was 67.1 % lower, and
the operating loss of the 18 local service air-
lines was 25 times greater.
The favorable showing of C&S in this com-
parison was achieved by careful control over
costs and by expansion of service closely
keyed to demand, permitting high utilization
of equipment and personnel. For example,
during the first nine months of 1952 (the
latest period for which industry figures are
available) our overall fleet utilization was the
highest of any of the domestic trunk lines,
averaging 9:05 hours of revenue flying a day
for each airplane. This utilization was raised
to 9:08 hours a day for the entire year. The
increased productivity of our personnel is in-
dicated by the fact that in 1952 we operated
15% more available ton miles of service than
in 1951 and carried 23% more ton miles of
revenue traffic with an increase of only 5%
in the average number of employees. Thus,
in spite of inflationary increases in prices and
wages, our ton mile and passenger mile costs
were reduced in 1952 from 1951, again re-
versing the industry trend, which has been
toward higher costs in these categories.
OPERATING
REVENUES
In millions of dollars
-
197
18
17 * INTER
l6J NATIONAL
15
14
13
12
II
10
9
8
7 DOMESTIC
6
5
4
3
2
1936 '37 '38 '39 '40 '41 '42 '43 '44 '45 '46 '47 '48 '49 '50 '51 1952
*International service inaugurated November 1, 1946
financial Position
Current assets at December 31, 1952, stood
at $5,905,171 of which $3,605,238 represented
cash and Government securities. Current li-
abilities were $3,845,828, leaving working cap-
ital of $2,059,343. Our bank loan, which had
a balance of $1,500,000 outstanding at De-
cember 31, 1951, was paid in full in 1952.
Flight equipment, including six Constella-
tions and twelve DC-3's, together with all
spare engines, propellers, and parts for main-
tenance, was carried at a net depreciated value
of $4,615,888. Our DC-3's have been fully
depreciated to a residual value of $3,000 each
and our Constellations are being depreciated
to a residual value of $50,000 each by De-
cember 31, 1955.
In addition to our conservative deprecia-
tion policy, we have continued to charge off
all training and development costs as in-
curred, and no expenses of this kind have
been deferred to burden future operations.
Out of the net profit of $1,338,510 for the
year, $381,995 was distributed to our share-
holders in dividends and the remaining
2
$956,515 was added to earned surplus, increas-
ing this to $2,920,862 at December 31, 1952.
The shareholders' equity thus increased dur-
ing 1952 from $6,857,992 to $7,814,507, rais-
ing the book value of the common stock from
$13.46 to $15.34 a share.
Mail Rates
Under our final domestic mail rate, which
was unchanged throughout the year, we re-
ceived mail pay of $972,813 in 1952, a reduc-
tion of 19% from the $1,202,976 received in
1951. At the same time mail loads increased
22%, reducing our mail compensation on a
ton mile basis by 33%.
On August 1, 1952, our final international
mail rate was opened for review and a lower
final rate was made effective from that date
forward. Under these final rates we received
$1,435,882 of international mail pay in 1952,
a reduction from 1951 of 23% in dollar
amount and 47% in ton mile yield.
The Post Office Department has petitioned
the United States Court of Appeals for the
District of Columbia Circuit to review the
CAB decision not to offset domestic profits
against international mail pay need in estab-
lishing our final international mail rate which
was set in October 1951. We are supporting
the CAB decision in this appeal.
Taxes
Our Company's federal income taxes for
1952 amounted to $1,194,000 while federal
taxes paid on gasoline and oil totaled
$205,000. In addition, we collected federal
transportation taxes of $1,740,000 from our
passengers and shippers and paid this over
to the Government. The Government derived
in taxes from our operation more than I
times the amount paid to us in subsidy.
Merger Agreement
On April 24, 1952, one of the most impor-
tant and constructive steps in our Company's
history was taken when C&S and Delta Air
Lines, Inc., executed an agreement calling
for the consolidation of the two companies.
This initial agreement, reached after several
months of extensive negotiations, was fol-
lowed by the execution of a final definitive
agreement by all members of the Boards of
Directors of both companies on July 8, 1952.
As you have been advised since the merger
was first announced, the major provisions of
the underlying agreements are:
(1) In exchange for their common stock, C&S
stockholders will receive $10,695,846 (equiva-
lent to $21.00 a share) of the surviving corpo-
ration's 5% convertible subordinated deben-
tures, maturing 20 years from date of issue.
(2) The debentures are to be convertible at any
time before maturity into common stock of the
surviving corporation at the rate of one share
of stock for each $35 face value of debentures,
with provisions protecting the C&S stockhold-
ers against dilution of the conversion privilege.
(3) The debentures are callable at premiums of
3% during the first two years after issuance,
at 2% during the third year, and at I% during
the fourth year. Not more than 30% of the
aggregate amount can be called during the
first two years.
( 4) The merger agreement provides that three of
the C&S directors (Carleton Putnam, Sidney
A. Stewart, and John R. Longmire) will serve
on the Board of Directors of the surviving cor-
poration. In addition, Carleton Putnam, Chair-
man of the Board of C&S, will occupy a similar
position in the merged company; C. E. Wool-
man, President and General Manager of Delta,
350
325
_ AVAILABLE
SEAT MILES
300
275
250
225
REVENUE
__.... 200 PASSENGER
MILES
175
150
125
100
75
50
25
0
1936 '37 '38 '39 '40 '41 '42 '43 '44 '45 '46 '47 '48 '49 '50 '51 1952
38.2 38.4 48.0 58.0 49.7 50.0 62.2 83.9 82.6 79.3 70.2 58.6 56.4 53.3 56.3 62.5 61.9
3
% LOAD FACTOR
Percentage of seats
occupied
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---
INDIANAPOLIS
EMPHIS
== C & S-Trans World Air-
lines through plane service
Houston-New York via St.
Louis and Pittsburgh.
C & S-Trans World Air-
lines through plane service
Houston-New Yo-rk via
Memphis, Indianapolis, and
Pittsburgh.
will retain that position in the merged com-
pany; and Sidney A. Stewart, President of
C&S, will become Executive Vice President of
the surviving corporation.
At hearings before the Civil Aeronautics
Board it was also announced that other officers
of the merged company would include Junius
H. Cooper as Vice President-Finance, R. S.
Maurer as Vice President-Legal, and Todd
G. Cole as Vice President-Comptroller. Mr.
Cooper is Vice President-Finance of C&S; Mr.
Maurer is Vice President-Secretary and Gen-
eral Counsel of C&S; and Mr. Cole is Comp-
troller and Assistant Secretary of Delta. It is
anticipated that other personnel of the two
companies will be similarly integrated.
4
Studies made by the managements of the
two companies in preparation for hearings
before the Civil Aeronautics Board support
the conclusion that the Delta-C&S combina-
tion is one of the most logical and desirable
in the entire aviation industry, both from the
standpoint of assets, routes, equipment and
personnel, and from the standpoint of econ-
omies and increased revenues which should
assure continued and increasingly profitable
operations. The combination should benefit
not only the stockholders and employees of
both companies, but should also benefit the
public through improved and additional serv-
ices. The CAB has stated that the merger will
eliminate any need for subsidy for domestic
operations. Accordingly, the Government will
also benefit from the proposed consolidation.
The proposed merger was given expeditious
treatment by the governmental authorities
concerned. Following hearings in August, the
Board, on December 31, 1952, issued its
opinion and order approving the merger, with
the approval of the President of the United
States to the extent required by law. These
approvals imposed no conditions or restric-
tions which would prohibit through flights
between points on the separate routes of the
two companies, leaving the surviving corpora-
tion free to develop fully the traffic potential
of the consolidated route system. The CAB's
order also adopted the employee protective
conditions suggested by C&S and Delta, with
certain modifications.
Under no circumstances should the ref-
erences herein contained be considered as a
proxy solicitation. The full text of the merger
agreement and necessary explanatory mate-
rials will be supplied to each stockholder
when the agreement is submitted for approval
at a special stockholders' meeting to be called
in April. If approved by the stockholders, it
is believed that the merger can be concluded
promptly thereafter.
Annual Shareholders' Meeting
In the past, the annual meeting of the
Company's shareholders has been held on the
first Tuesday in May of each year. At their
regular meeting of January 22, 1953, the Di-
rectors of the Company amended the Com-
pany's by-laws so as to change the annual
meeting date to the first Tuesday in October.
The purpose of this change was to avoid any
possible conflict between the annual meeting
and the special shareholders' meeting to be
called m connection with the C&S-Delta
merger.
Service to San Juan
On January 10, 1953, we inaugurated week-
ly Constellation service from New Orleans to
San Juan, Puerto Rico, with intermediate
stops at Port-au-Prince, Haiti, and Ciudad
TO:
MINNEAPOLIS
ST. PAUL
Trujillo, Dominican Republic. This com-
pletes activation of the Company's interna-
tional routes, with the exception of those few
intermediate cities and certain point-to-point
traffic for which operating clearance has not
yet been obtained from the foreign govern-
ments involved. The initial weekly service to
Puerto Rico will be increased in frequency
as traffic demand warrants and new aircraft
now on order become available.
Interchange with TWA
The CAB has approved an interchange
agreement between C&S and TWA under
which through flights without change of plane
will be operated between Houston and New
TO:
TO -
~~;;~~D -----CH I CAGO
MONTREAL
BUFFALO
BOSTON
SEATTLE
TO:
DENVER
OMAHA -------
SA/,~~E CITY
CITY -
10S ANGELES -------
SAN FRANCISCO
TO:
Ti.JCSON
PHOENIX
LOS ANGELES
TO: ~
OKLAHOMA CITY
TULSA
F'T. WAYNE TO:
TERRE HAUTE :~::..~GGT~N
1
C. - - - - - - - - PHIL.ADELPHIA
- - - - - - - - ------ NEW YOIK
INDIANAPOLIS BOSTON
-----
MPHIS
EENWOOO
NASHVILLE
WASHINGTON
NEW YORK
~
TO:
PORT AU PRINCE
HAITI
CIUDAD TRUJILLO
DOMINICAN REPUBLIC
York via St. Louis and Pittsburgh, with an
alternate routing via Memphis, Indianapolis,
and Pittsburgh. The interchange flights will
be operated by our crews over the C&S seg-
ments of the route and by TWA crews over
the TWA segments. Service will be inaugu-
rated on April 1st using TWA equipment
initially.
This interchange will provide the first one-
plane service between the fast growing indus-
trial cities of Houston and Pittsburgh, as well
as the first competitive one-plane service be-
tween Houston and New York. A substantial
volume of new long-haul traffic should be car-
ried on these through flights over our routes
between Houston and St. Louis and between
Houston and Indianapolis.
New Convairs on Order
The ten new 44-passenger Convair 340's
which we ordered in 1951 are now scheduled
for delivery beginning in September 1953.
Delta also has ordered ten Convairs, three of
which have already been received, so our
merged Company will have a fleet of twenty
of these fast, modern, twin-engine airplanes.
Our Convair program, including spare en-
gines, propellers, and parts and equipment
for maintenance, together with training ex-
penses, was initially estimated to cost about
$8,000,000. By combining the C&S and Delta
requirements for spares, it is estimated that
the total outlay of our merged Company will
be reduced by more than $1,000,000. An ad-
vance payment of $300,000 has been made by
C&S to the Consolidated Vultee Aircraft Cor-
poration and a further advance of $500,000
will be payable in March.
Personnel
One of the most gratifying features of 1952
was the high level of morale among all of the
personnel of our Company. The pleasant and
cooperative spirit was reflected in increased
productivity and, equally important, drew
many complimentary expressions from pas-
sengers.
The voluntary contributory retirement in-
come plan for our personnel was put into
effect on July 1, 1952, and 660 employees out
of 892 eligible have elected to participate.
Our Company's share of the cost in 1952 was
$91,441, while emplo,yees contributed $64,338
through pay roll deductions. This retirement
income plan proved highly popular with our
personnel and rounded out our Company's
employee benefits program which includes
group insurance, liberal vacations, sick leave
with pay, a suggestion system, free and re-
duced rate transportation and paid holidays.
Shareholders
C&S is owned by 2,309 shareholders who
live in 41 states, the District of Columbia, the
Virgin Islands, and Brazil. At December I,
1952, the average holding was 221 shares and
80% of the shareholders owned 100 shares
or less each.
Safety Record
During 1952 we entered our seventeenth
year of perfect safety and at the end of the
year we had flown more than 1.3 billion reve-
nue passenger miles without fatality to any
passenger or flight crew member.
By authority of the Board of Directors,
Chairman of the Board
February 16, 1953
6
CHICAGO AND SOUTHERN AIR LINES,, INC.
FOR THE YEARS ENDED DECEMBER 31
OPERA TING REVENUES:
Passenger aryd excess baggage
United States mail (Note 6)
Express and freight . . . .
Miscellaneous (net) . . . .
Total operating revenues
OPERATING EXPENSES:
Flying and ground operations
Maintenance . . . . . .
Traffic, sales and advertising
General and administrative .
Depreciation (Note 2) . .
Total operating expenses
NET INCOME FROM OPERA TIO NS
BEFORE INCOME TAXES . . .
PROVISION FOR FEDERAL AND STATE
INCOME TAXES (Notes 7 and 8) .
OTHER INCOME OR DEDUCTIONS* (NET)
NET INCOME FOR THE YEAR ..
SPECIAL ITEMS:
Profit on sale of DC-4 aircraft and related spares
(less $114,000 applicable Federal income taxes)
Reserve provision for foreign operations
NET INCOME AND SPECIAL ITEMS . . . . . . . . . .
(SINCE MAY 23, 1938)
1952
1952
$15,305,552
2,408,695
989,003
155,820
$18,859,070
$ 7,655,205
2,478,736
3,473,206
1,135,406
1,570,628
$16,313,181
$ 2,545,889
1,210,000
2,621
$ 1,338,510
$
$
$ 1,338,510
$1,964,347
1951
$12,358,781
3,056,243
688,911
132,995
$16,236,930
$ 6,857,481
2,157,924
3,076,097
912,317
1,368,039
$14,371,858
$ 1,865,072
962,000
40,096*
$ 862,976
$ 341,411
73,428
$ 267,983
$ 1,130,959
1951
$1,164,450
BALANCE AT BEGINNING OF YEAR
Net income for the year . . . 1,338,510 $862,976
Special items . . . . . . .
Cash dividends of 75 a share in
I 952 and 65 a share in 1951 . . . . . . .
Reduction in international mail
pay for prior years (less
$331,153 applicable Federal
income taxes) . . . . . .
Less reserve for foreign opera-
tions provided therefor (Note 8)
BALANCE AT END OF YEAR .
267,983
$3,302,857
381,995
$373,428
373,428
$2,920,862
The accompanying notes are an integral part of these statements.
7
1,130,959
$2,295,409
331,062
$1,964,347
BALANCE SHEETS AT DECEMBER 31, 1952 AND 1951
CHICAliD AND SOUTHERN AIR LINES, tNc.
CURRENT ASSETS:
Cash . . . .
United States Government securities
Receivables from-
United States Post Office . . . .
Air lines, customers, agencies, etc.
Maintenance and operating supplies, at
average cost
Prepaid insurance, etc.
Total current assets
OTHER ASSETS:
1952
. $ 1,605,238
2,000,000
198,939
1,726,481
278,038
96,475
$ 5,905,171
Advance payments on new aircraft (Note 3) $ 300,000
207,046
Miscellaneous . . . . . . . . . .
$ 507,046
OPERATING PROPERTY AND EQUIPMENT:
Flight Other
Equipment Property and
(Note 2) Equipment
Cost-
1952 . $8,808,975 $1,637,071 $10,446,046
1951 . 8,687,657 1,445,648
Depreciation reserves-
1952 . $4,193,087 $1,004,842 5,197,929
19~
51 . 2,786,283 890,213
$ 5,248,117
FRANCHISES AND GOODWILL . . . $
$11,660,335
1951
$ 1,204,815
1,000,000
527,683
1,353,116
260,926
99,963
$ 4,446,503
$
$
240,000
272,264
512,264
$10,133,305
3,676,496
$ 6,456,809
$
$1.1,415,577
CH/CAii
CURRENT LIABILITIES:
Notes payable to banks
Accounts payable and accrued liabilities
Federal and state income taxes (Note 7) .
Unearned revenue . . .
Air travel plan deposits
$
1952
2,010,543
1,354,388
254,372
226,525
Total current liabilities . $ 3,845,828
NOTES PAYABLE TO BANKS, due after
one year . .. $
CAPITAL STOCK AND SURPLUS:
Common stock-authorized 650,000 shares,
without nominal or par value; issued and
outstanding 509,326 shares (Note 4) $ 4,893,645
Earned surplus since May 23, 1938 . . . 2,920,862
$ 7,814,507
COMMITMENTS (Note 3)
$11,660,335
' The accompanying notes are an integral part of these statements.
8 9
1951
$ 1,000,000
1,950,133
716,885
179,767
210,800
$ 4,057,585
$ 500,000
$ 4,893,645
1,964,347
$ 6,857,992
$11,415,577
I. The Company has entered into a merger agreement
with Delta Air Lines, Inc., which was approved by
the Civil Aeronautics Board on December 31, 1952,
and will be submitted to the stockholders of the
two Companies for approval at special meetings to
be called in April. The C&S stockholders will
receive $10,695,846 of 5~12%, 20-year, convertible
subordinated debentures to be issued by Delta, sub-
ject to the provisions of the statutory Joint Agree-
ment of Merger, each $35 of such debentures to
be convertible at the holder's option into one
share of Delta common stock.
2. At December 31, 1952, the Company's fleet con-
sisted of six Model 649 Constellations and twelve
DC-3's. The DC-3's ($1,441,843 including spares)
were fully depreciated to a residual value of $3,000
each at December 31, 1948, and the Constellations
($7,367,132 including spares) are being depreciated
to a residual value of $50,000 each from the dates
placed in service (3 in 1950 and 3 in I 951) to
December 31, 1955.
3. The Company has entered into a contract with
Consolidated Vultee Aircraft Corporation for the
purchase of ten new Convair 340 aircraft to be
delivered beginning in September 1953. These air-
craft, together with the necessary spare engines,
propellers, parts and equipment for maintenance
and operation, will cost approximately $7,000,000,
against which advance payments of $300,000 have
been made.
4. Stock purchase warrants were outstanding to two
officers at December 31, 1952, entitling one to
;:icquire 8,000 shares of common stock and the
other 3,750 shares at a price of $10 per share prior
to 1956. The market quotations of the common
stock at the date of fixing the price of the warrants
were less than $10.
5. In 1951 the Company adopted a contributory re-
tirement income plan for its employees, which was
put into effect on July 1, 1952. The Company's
liability for past service benefits under the plan
is estimated at $700,000 and it is anticipated that
this will be paid over a period of 12 years. The
Company's share of the cost of the plan for the
last half of 1952, including past service benefits,
was $91,441.
6. Mail revenues from the United States Government
are stated in accordance with final rates fixed by
the Civil Aeronautics Board in rate orders issued
as follows:
Date of Effective Effective
Order From To Routes
July 28, 1948 Jan .. 1, 1946 Sept. 30, 1951 Domestic
Oct. 18, 1951 Nov. 1, 1946 July 31, 1952 International
Dec. 19, 1951 Oct. 1, 1951 Still in effect Domestic
Oct. 22, 1952 Aug. 1, 1952 Still in effect International
10
On l\Iarch 18, 1952, the Post Office Department
filed a petition requesting the United States Court
of Appeals for the District of Columbia Circuit to
review the Company's final international mail rate
order issued by the CAB on October 18, 1951. The
Post Office Department contends that the CAB
erred in refusing to offset the profits above 7.4%
earned under the Company's final domestic mail
rates during the years 1948-1950 against the mail
pay need of the Company's international opera-
tions, and accordingly that the Company's mail
pay for that period should be reduced by $654,000.
The Company is participating in this appeal as a
special intervenor. General Counsel for the Com-
pany believes that the Court should uphold the
CAB's decision, both as a matter of law and equity.
7. The Company's federal income tax returns through
1949 have been examined by the Bureau of In-
ternal Revenue and settled. The tax returns for
1950 and 1951 are now in process of examination
and it appears that the depreciation rates used by
the Company on DC-4 and Constellation aircraft
may be questioned.
It is believed that the Company has made reason-
able provision in its accounts for any additional
taxes related to DC-4 depreciation. With respect
to Constellation aircraft and related spares, the
Company has been depreciating this equipment to
a common end date of December 31, 1955, giving
an approximate a_
verage life of five years. The
internal revenue agent examining the returns may
recommend a six or seven-year life. The Company
considers its depreciation policy proper and pro-
poses to contest any change. Further, the Company
has applied for a necessity certificate which, if
granted, will authorize five-year amortization of
approximately 80% of the cost of the Constellation
fleet. Any depreciation on Constellation aircraft
disallowed for prior years should be allowable in
future years.
The Company has no excess profits tax liability.
8. The October 18, 1951 final rate order of the CAB
fixed the Company's international mail pay for
both past and future periods. The excess ($704,581)
of international mail pay received under temporary
rates from the beginning of foreign operations on
November 1, 1946 to December 31, 1950 over the
final mail pay for this four-year period as fixed in
the October 18, 1951 order was refunded in 1951
and charged to earned surplus. This refund was
not deducted in determining the $962,000 provi-
sion for income taxes in 1951. The income taxes
payable for 1951 after deducting this refund were
estimated at $630,847; the reduction of$331,153 in
tr1xes occasioned by the refund was credited to
earned surplus. The net surplus charge ($704,581
less $331 .153) for the mail pay refund was offset
by a credit from the foreign operating reserve pro-
vided for that purpose. '

ARTHUR ANDERSEN & Co.
ACCOUNTANTS AND AUDITORS
To The Stockholders of
Chicago and Southern Air Lines, Inc.:
RAILWAY EXCHANGE BUH.DING
ST. Lours 1
We have examined the balance sheet of CHICAGO AND
SOUTHERN AIR LINES, INC. (a Delaware corporation) as of
December 31, 1952 and the related statements of income
and surplus 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. We
had previously made a similar examination for the year
ended December 31, 1951.
In our opinion, the accompanying balance sheets
and statements of income and surplus present fairly the
financial position of Chicago and Southern Air Lines,
Inc. as of December 31, 1952 and 1951 and the results of
its operations for the years ended those dates, and
were prepared in conformity with generally accepted
accounting principles applied on a basis consistent
with that of the preceding year.
St. Louis, Missouri
January 30, 1953
Introduction to the Statistic.al Summaries ...
Audited financial statements presenting our operating results_ and year-end
financial position for the last two years have been reproduced on the preced-
ing pages. The data on the following pages have been prepared by the
company for convenient reference in tracing our growth and progress. A
ten-year summary, comparing significant financial items, is presented on the
following two pages. A comprehensive seventeen-year summary of operating
statistics on pages 14 and 15 covers the entire operating history of Chicago
and Southern Air Lines, Inc.
11
_____ __.L-
fl,Lj:1
CHICAGO AND SOUTHERN AIR LINES, tNc.
FOR THE YEARS ENDED DECEMBER 31: 1952 1951 1950 1949 1948 1947 1946 1945 1944 1943
OPERATING RESULTS (in thousands of dollars)
Operating Revenues $18,859 $16,237 $12,885 $12,369 $10,453 $8,565 $8,750 $4,849 $2,947 $2,268
Operating Expenses . 16,313 14,372 11,891 11,204 9,564 8,809 9,445 4,556 2,775 2,243
Net Income from Operations before Income Taxes $ 2,546 $ 1,865 $ 994 $ 1,165 $ 889 $ 244* $ 695* $ 293 $ 172 $ 25
Other Income-Net . 3 40* 6 72* 40* 32* 18* 5 51 143
Provision for Income Taxes 1,210 962 465 463 210 237* 125 94 68
Net Income for the Year $ 1,339 $ 863 $ 535 $ 630 $ 639 $ 276* $ 476* $ 173 $ 129 $ 100
Special I terns 268 321
Net Income and Special Items $ 1,339 $ l, 131 $ 856 $ 630 $ 639 $ 276* $ 476* $ 173 $ 129 $ 100
Dividends Paid on Common Stock $ 382 $ 331 $ 255 $ " 178 None None None $ 77 $ 73 $ 143
Net Income per Share of Common Stock $2.63 $2.22 $1.68 $1.24 $1.26 $0.54* $0.93* $0.56 $0.44 $0.34
Dividends Paid per Share of Common Stock 0.75 0.65 0.50 0.35 None None None 0.25 0.25 0.625
YEAR-END FINANCIAL POSITION (in thousands of dollars)
ASSETS:
Cash and Government Securities $ 3,605 $ 2,205 $ 1,998 $ 3,3_45 $ 2,320 $1,463 $1,880 $1,191 $ 899 $ 957
Other Current Assets . - 2,300 2,242 1,685 1,190 1,770 1,013 2,053 475 707 1,331
Flight Equipment and Other Operating Prop-
erty-Net 5,248 6,457 4,162 1,184 1,884 2,642 3,163 1,450 527 394
Other Assets 507 512 1,010 1,535 433 276 401 213 55 284
Total Assets $11,660 $11,416 $ 8,855 $ 7,254 $ 6,407 $5,394 $7,497 $3,329 $2,188 $2,966
LIABILITIES:
Notes Payable . None $ 1,500 None None None $r,o6o $1,660 $ 400 None $ 225
Other Liabilities . $ 3,845 3,058 $ 2,797 $ 1,797 $ 1,402 1,022 1,725 1,034 $ 593 1,190
q
Total Liabilities . $ 3,845 $ 4,558 $ 2,797 $ 1,797 $ 1,402 $2,082 $3,385 $1,434 $ 593 $1,415
SHAREHOLDERS' EQUITY:
1
Common Stock $ 4,894 $ 4,894 $ 4,894 $ 4,894 $ 4,894 $4,894 $4,831 $1,599 $1,452 $1,450
Surplus . 2,921 1,964 1,164 563 111 1,582* 719* 296 143 101
Total Shareholders' Equity $ 7,815 $ 6,858 $ 6,058 $ 5,457 $ 5,005 $3,312 $4,ll2 $1,895 $1,595 $1,551
Shares of Common Stock Outstanding 509,326 509,326 509,326 509,326 509,326 509,326 509,326 310,011 291,687 291,337
Book Value per Share . . . . . . $15.34 $13.46 $11.89 $10.71 $9.83 $6.50 $8.07 $6.11 $5.47 $5.32
* Denotes red figure
12 13
~r
~7 Wewt fJJuninut1ty of &ftmalinfl fJJtalt~licd ____ -;---~;;;J/1/ CHICAGO AND SOUTHERN AIR LINES,,1Nc.
* DOMESTIC OPERATING RESULTS
Total Amounts 1952 1951 1950 1949 1948 1947
Operating Revenues
Passenger and excess baggage $12,499,226 $10,068,280 $6,869,179 56,407,449 $6,148,222 $5,774,239
United States mail 972,813 1,202,976 1,747,319 1,800,384 1,891,989 1,465, l 02
Express and freight 681,454 487,533 468,337 319,722 321,940 340,486
Miscellaneous 91,073 68,002 61,496' 56,175 70,090 71,664
Total Operating Revenues $14,244,566 $11,826,791 $9, 146,33 I $8,583,730 $8,432,241 $7,651,491
Total Operating Expenses 12,805,475 10,909,913 8,442,261 7,783,557 7,797,320 7,853,822
Operating Profit before Income Taxes S 1.439,091 $ 916,878 $ 704,070 S 800,173 s 634,921 s 202,331 *
Unit Operating Costs
Cents per available ton mile 32.23 33.05 34.20 33.16 32.69 31.79
Cents per revenue ton mile 57.29 59.24 62.25 64.89 66.15 63.04
Cents per available seat mile 3.94 4.06 4.02 3.86 4.16 4.09
Cents per revenue passenger mile 6.37 6.49 7.15 7.24 7.37 6.98
* INTERNATIONAL OPERATING RESULTS
Total Amounts 1952 1951 1950 1949 1948 1947
Operating Revenues
Passenger and excess baggage . $ 2,806,326 $ 2,290,501 $1,983,334 $2,153,413 $1,048,967 $ 455,236
United States mail 1,435,882 1,853,267 1,514,928 1,504,706 909,610 443,812
Express and freight 307,549 201 ,378 193,837 109,434 56,444 14,466
Miscellaneous 64,747 64,993 46,614 17,241 5,590 161
Total Operating Revenues $ 4,614,504 $ 4,410,139 $3,738,713 $3,784,794 $2,020,611 $ 913,675
Total Operating Expenses 3,507,706 3,461 ,945 3,448,722 3,419,907 1,766,194 955,092
Operating Profit before Income Taxes$ 1,106,798 $ 948,194 $ 289,991 $ 364,887 $ 254,417 $ 41,417*
Unit Operating Costs
Cents per available ton mile 32.92 32.09 37.95 33.26 47.67 41.35
Cents per revenue ton mile 67.84 85.82 98.28 107.58 116.33 126.33
Cents per available seat m1le 4.56 4.47 4.58 4.09 4.55 4.84
Cents per revenue passenger mile 9.17 10.88 12.73 12.51 13.38 14.26
* Denotes red figure
14
1946
$6,699,813
1,672,872
218,038
24,138
$8,614,861
9,221,022
$ 606,161*
37.69
62.07
4.70
6.69
1946
$ 61,234
69,580
4,629
8
$ 135,451 '1
224,624
$ 89,173*
119.48
229.21
9.74
25.10
1945
.$4,376,776
277,238
169,396
25,413
$4,848,823
$
4,555,646
293, I 77
35.97
49.57
4.15
5.24
YEAR
19S2
19S1
19S0
1949
1948
1947
1946
1945
1944
1943
1942
1941
1940
1939
1938
1937
1936
1944
$2,545,016
281,808
107,245
12,644
$2,946,713
2,774,292
s 172,421
40.10
50.74
4.65
5.63
REVENUE
PLANE
MILES
(Thousands)
DOM.
9,624
8,508
7,436
7,497
7,096
7,ll8
8,108
5,279
2,882
2,179
2,210
2,328
1,983
1,769
1,442
1,344
I, 135
INT.
1,656
1,682
1,884
1,817
806
473
74
1943 1942 1941 1940 1939
$1,864,998 $1,421 ,835 $1,080,173 $ 733,025 $427,670
301,823 606,004 611,670 429,445 410,619
96,666 62,309 34,318 24,905 19,557
4,842 9,688 5,440 3,192 5,311
$2,268,329 $2,099,836 $1,731,601 $1,190,567 $863,157
2,243,673 1,651,408 1,734,217 1,234,221 776,346
$ 24,656 S 448,428 s 2,616 * $ 43,654* $ 86,811
42.89 31.14 31.05 30.73 39.89
55.10 53.27 70.73 72.73 76.87
5.33 3.61 3.70 3.84 4.87
6.36 5.81 7.41 7.72 8.40
* OPERATING STATISTICS
AVAILABLE
TON
MILES
(Thousands)
DOM.
39,737
33,008
24,685
23,475
23,853
24,705
24,465
]2,666
6,918
5,231
5,304
5,586
4,016
1,946
1,586
1,479
1,177
INT.
10,656
10,788
9,089
10,280
3,705
2,310
188
REVENUE
TON
MILES
(Thousands)
DOM.
22,353
18,417
13,562
11 ,995
11 ,788
12,458
]4,856
9,191
5,468
4,072
3,100
2,452
1,697
1,010
750
569
404
INT.
5,171
4,034
3,509
3,179
1,518
756
98
AVAILABLE
SEAT
MILES
(Thousands)
DOM. INT.
325,088 76,897
269,002 77,414
209,814 75,2]2
201 ,599 83,559
187,381 38,854
]92,132 19,747
196,290 2,306
109,596
59,654
42,057
45,720
46,813
32,152
15,932
14,357
13,405
9,742
NoTE: International service was inaugurated on November 1, 1946
15
1938 1937 1936
$317,481 $227,362 $162,912
407,837 361,938 335,724
13,813 13,904 7,421
6,868 3,243 1,881
$745,999 $606,447 $507,938
660,070 620,287 513,695
$ 85,929 $ 13,840* $ 5,757*
41.62
88.01
4.60
9.57
REVENUE
PASSENGER
MILES
(Thousands)
DOM.
201,085
168,150
118,131
107,440
105,744
l 12,5G4
137,844
86,877
49,242
35,293
28,438
23,414
15,979
9,242
6,895
5,154
3,720
INT.
38,239
31,806
27,090
27,327
13,196
6,700
895
41.94 43.64
109.01 127.15
4.62 5.27
12.04 13.81
PASSENGER
LOAD
FACTOR
(Percent)
DOM. INT.
61.9% 49.7%
62.5 41.1
56.3 36.0
53.3 32.7
56.4 34.0
58.6 33.9
70.2 38.8
79.3
82.6
83.9
62.2
50.0
49.7
58.0
48.0
38.4
38.2
ICAGD AND SOUTHERN AIR LINES,, 1Nc.
GENERAL OFFICES Memphis Municipal Airport, Memphis 14, Tennessee
ORPORATE OFFICE 100 West Tenth Street, Wilmington, Delaware
CARLETON PUTNAM SIDNEY A. STEWART
L. RAYMOND BILLETT JUNIUS H. Coo PER JOHN R. LONGMIRE
CARLETON PUTNAM .
SIDNEY A. STEWART .
JUNIUS H. COOPER .
WILLIAM T. ARTHUR
. Chairman of the Board
. President
Vice President-Finance
Vice President-Operations
R. s. MAURER .
T. M. MILLER .
w. T. BEEBE.
Vice President-Secretary and General Counsel
Vice President-Traffic and Sales
. Vice President-Personnel
T. F. HAMBLETON .
R. s. SCRIVENER .
E. MURRAY.
. . Treasurer
. Assistant Treasurer
. Assistant Secretary
TRANSFER AGENT
CHEMICAL BANK & TRUST COMPANY
New York 15) New York
REGISTRAR
THE CHASE NATIONAL BANK
OF THE CITY OF NEW y ORK
New York 15) New York
LISTED
NEW y ORK STOCK EXCHANGE
AND
MIDWEST STOCK EXCHANGE
OF THE
CARIBBEAN
With the new weekly Constellation service,
inaugurated on January 10, 1953, from New
Orleans direct to Port au Prince, Haiti, Ciudad
Trujillo, Dominican Republic, and San Juan,
Puerto Rico, added to the existing daily Con-
stellation service from New Orleans to Cuba,
Jamaica and Venezuela, C&S now reaches all
of the principal islands of the Greater Antilles,
as well as the north coast of South America.
The entire Caribbean area holds great promise
for both business and pleasure travel from the
United States.
Pool and terrace of Jaragua Hotel,
Ciudad Truiillo, Dominican Republic.
Famed Nacional Hotel
Havana, Cuba.
Entrance, Varadero
International Hotel,
Varadero Beach, Cuba.
View from terrace of Tower Isle
Hotel on Jamaica's North Shore.
Episcopal Cathedral at
Port au Prince, Haiti.
Caribe Hilton Hotel at
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sot' CHICAliD AND SOUTHERN AIR LINES, INC.
SYSTEM MAP
Showing Proposed Consolidation With
DELTA AIR LINES
- C&SROUTES
- - DELTA ROUTES
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