Delta Air Corportion annual report 1944

DELTA AIR CORPORATION
ANNUAL REPORT
To Stockholders
for the fiscal Year Ended June 30, 1944
DELTA
*
AIR CORPORATION
(A LOUISIANA CORPORATION)
*
*
General Offices . . . . . . . . . . . . . . . .... Delta Air Lines Building
Municipal Airport, Atlanta, Georgia
Transfer Agent . . . . . . . . . . . . . . . Citizens & Southern National Bank
Atlanta, Georgia
Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . Trust Company of Georgia
Atlanta, Georgia
PAGE 2
DELTA AIR CORPORATI ON
*
*
DIRECTOR S
M.
s. BIEDENHARN L.B. JUDD
C.H. McHENRY
D. Y. SMITH
C. E. w OOLMAN
C.E.FAULK
TRAVIS OLIVER
OFFICERS
C. E. FAULK, President
C. E. WooLMAN, Vice-President and General Manager
M. S. BIEDENHARN, Vice-President
C. H. McHENRY, Secretary
TRAVIS OLIVER, Treasurer
L. B. JuDD, Assistant Secretary
CATHERINE FITZGERALD, Assistant Treasurer
*
*
REPORT OF THE PRESIDENT TO THE
STOCKHOLDERS
Atlanta, Georgia
October 16, 1944
During the second full year of war your Company has
been able to increase its commercial operations and to
complete on or before schedule all the contract require-
ments of the military in the Company's participation in the
war effort.
F I N A N C I A L R E P O R T
* The fiscal condition
of your Company is reflected by the Balance Sheet as of
June 30, 1944, Summary of Income, Profit and Loss for
the fiscal year ended June 30, 1944, and a Statement of
Unappropriated Earned Surplus as of June 30, 1944,
which form a part of this report. These statements reflect
a net profit after Federal and State income taxes of $428,-
605.86. This net profit represents an increase of approxi-
mately $25,000 over the previous fiscal year. This increase
was accomplished even after the reduction in your Com-
pany's mail rate by a decision of the Civil Aeronautics
Board in December, 1943, retroactively applied as of Feb-
ruary, 1943. This reduction now places your Company on
a service mail rate of .3 mill per pound mile. The net
profit of $428,605.86 represents earnings of $2.16 per
share of outstanding stock.
Under the provisions of the Revenue Act of 1943 your
Company was exempt from excess profits taxes for the fis-
cal year ended June 30, 1944.
The Equipment Replacement Fund established under the
provisions of the Internal Revenue code as a result of the
sale to the Government of four Lockheed Electra airplanes
in June, 1942, deferring accounting for the profit thereon
until replacement was accomplished, was cancelled during
this fiscal year, and the net profit of $53,001.80, after
payment of applicable Federal and State income taxes,
was transferred to earned surplus. As a result of this ad-
justment in the Federal income tax return for the fiscal
year ended June 30, 1943, the Internal Revenue Depart-
ment made formal examination of the Company's books
for the fiscal years ended June 30, 1941, 1942, and 1943.
No substantial additional income tax payments were re-
quired other than those necessitated by the cancellation of
the equipment replacement fund agreement.
The unappropriated earned surplus of $423,410.85 as
at June 30, 1943, was increased to $805,826.51 as of June
30, 1944, after the payment of the customary annual divi-
dend on June 10, 1944, of fifty ( $ .50) cents per share to
stockholders of record on May 31, 1944.
Y R A f F I C I N C R E A S E S
* An upward trend in
both passengers and cargo over the previous fiscal year is
accentuated. With the addition of one Douglas DC-3 in
August, 1943, and with more favorable utilization of all
equipment, the available seat miles for the year were
57,367,121 or an increase of 36.8 % over the previous
fiscal year. With this percentage of increase of seats avail-
able, passenger traffic was increased by 45.6% over the
previous year, resulting in 51,843,940 passenger miles for
the year. Mail ton miles increased from 449,841 for the
fiscal year ended June 30, 1943, to 864,354 for the cur-
rent year, a percentage increase of approximately 92 % .
Considerable increase was experienced in express traffic,
145,148 ton miles for 1944 as compared to 85,930 ton
miles for 1943. These increases in traffic are particularly
significant since the number of revenue miles flown for the
year ended June 30, 1944, increased only 38.5 % over the
number of revenue miles for the previous fiscal year.
During the year the number of priority passengers and
the amount of priority materials have increased consid-
erably. These circumstances have been instrumental in
the allotment towards the close of the fiscal year of two
additional airplanes by the Army for reconversion to air-
liners. These airplanes have since been converted and are
now being utilized on the heavy priority segments of our
routes.
C O S T T R E N D S
* The trends of per mile reve-
nues and expenses are being given careful consideration,
particularly with reference to post-war planning and post-
war operations.
PAGE3
COMPARATIVE PASSENGER, MA IL AND EXPRESS TRAFFIC STATISTICS
Year Ended June 30,
1944 1943 1942 1941
Revenue Miles Flown . 2,771,832 2,000,385 2,968,284 2,476,569
Passengers Per Revenue Mile . 18.7 17.8 10.0 6.3
Passenger Seat Miles Flown . 57,367,121 41,940,889 50,993,835 36,091,177
Revenue Passenger Miles . 51,843,940 35,613,103 29,800,968 15,526,291
Passenger Load Factor 90.4% 84.9% 58.4% 43.0%
Air Mail Ton Miles . 864,354 449,841 179,014 108,067
Air Express Ton Miles . 145,148 85,930 36,543 16,489
COMPARATIVE OPERATING REVENUES
1944
Passenger $2,577,138.84
Mail . 517,370.99
Express 65,507.32
Other 73,308.52
Total $3,233,325.67
PASSENGER 79.71 %
PAGE4
Year Ended June 30,
1943 1942
$1,749,924.13 $1,318,912.95
574,228.47 677,931.53
51,278.05 24,019.01
48,357.96 19,867.19
$2,423,788.61 $2~040,730.68
SALARIES & WELFARE
51.48 %
1941
$ 683,498.95
424,615.78
9,161.45
9,936.87
$1,127,213.05
1940
1,790,706
5.7
19,477,148
10,283,192
52.8%
75,080
12,265
1940
$455,920.93
424,449.36
7,452.06
6,097.42
$893,919.77
REVENUES AND EXPENSES
PER REVENUE MILE FLOWN
Year Ended June 30,
1944 1943 1942 1941 1940
Operating Revenues 116.4c 120.Sc
Operating Expenses 86.4c 89.0c
68.6c 45.4c 49.9c
59.7c 51.8c 46.2c
E Q U I PM E N T
* The fleet of airplanes and sched-
ules remained constant during the year after the addition
of one airplane in August, 1943. This made a total of five
airplanes in operation during most of the fiscal year. Since
the close of the fiscal year one additional airplane was put
into operation in July and another in September. By effi-
cient scheduling of the equipment a considerably higher
utilization factor has been accomplished. After giving
ample time for the usual thorough maintenance and over-
haul comparable to Delta's high standard of quality, even
under the fullest utilization schedules possible, a comple-
tion factor of 94.1 % of scheduled miles was accomplished.
The high load factors which have been accomplished
during this year reflect the high weight utilization of the
aircraft.
SOURCE OF TOTAL INCOME
OPERA TING REVENUES 98.12 %
W A R W O R K
* In support of the war effort your
Company flew regularly scheduled cargo operations for
the Air Transport Command, carrying vitally needed mate-
rials as well as personnel over domestic routes designated
by the Air Transport Command. Besides these regular
daily scheduled flights many special missions to off-line
points over the entire United States were performed for
the emergency movement of materials. Training-plane en-
gines and propellers were overhauled for the Air Service
Command on a regular monthly scheduled quota. Each
month the quota set up was exceeded and the allotted
number of engines and propellers for the year was com-
pleted in May, 1944. This contract with the Air Service
Command was terminated by them in June, 1944. Your
Company received a special letter of commendation from
the Air Service Command for its efficient and economical
operation of this activity upon the completion of the con-
tract. Modification work on various Army planes was
continued during the year until May 15, 1944, at which
time the Materiel Command discontinu,ed the activity
by termination of the contract. In order to continue the
activity and utilize the facilities and trained personnel
your Company contracted with the Navy Department to
DISTRIBUTION Of TOTA~ INCOME
OPERATING EXPENSES 71.33 %
PAGES
continue performance of modification work immediately
on Navy dive bombers.
During the year a total amount of $942,259.98 was ex-
pended on cost-plus-a-fixed-fee and fixed-price contracts in
performance of the above services. The resulting profit
from these contract operations was $36,226.49 or 3.84%
of cost. This small margin of profit on Government con-
tracts would indicate that the Price Adjustment Board will
not have sufficient evidence for the recovery of any exces-
sive profits. A conference has been held with the Price
Adjustment Board but no definite clearance has yet been
received.
P E R S O N N E L
* Employee problems have been
met by continuous training programs in replacing those
employees going into the armed services. As at June 30,
1944, 187 men and women, classified as permanent em-
ployees, had entered the armed services, and there are
now six gold stars in Delta's Service Flag. During the year
your Company had an average of 875 employees on its
payroll of which one-third were women. The loyalty of
Delta employees to the Company has alleviated the per-
sonnel problem.
PAGE6
The benefits received from the Company's group insur-
ance program, of which a majority of the employees take
advantage, have eased the problems of many Delta em-
ployees and their families at times of sickness or death.
The Group Annuity, purchased entirely by the Company
for retirement income, continues to be an attractive incen-
tive during these times when personnel turnover is ex-
cessive.
E X P A N S I O N
* Proceedings before the Civil Aero-
nautics Board have been held during the year on several
new route applications. Your Company's application for
an extension of its present route from Birmingham, Ala-
bama, to Oklahoma City, Oklahoma, through Memphis,
Tennessee, Tulsa, Oklahoma, and several other interme-
diate points was heard before an examiner of the Board
in February, 1944. The examiner has recommended that
Delta be granted the Birmingham-Memphis portion of this
application. In April, 1944, the hearing on Delta's appli-
cation for an extension of its present route from Shreve-
port, Louisiana, to Kansas City, Missouri, and Tulsa, Okla-
homa, via several intermediate points was held before an
examiner. The examiner's recommendation is that Delta
Despite war problems, Delta has maintained its reputation for hos-
pitality and efficient service at all times. Representative of Delta's
passenger service is this group of new stewardesses.
be awarded the extension from Shreveport, Louisiana, to
Kansas City, Missouri, however the Tulsa extension was
recommended to be denied. The Civil Aeronautics Board
must yet take action on these recommendations of the ex-
aminer before the decisions are final.
Your Company's application in the Great Lakes to
Florida case was presented before an examiner of the
Board in June, 1944. These applications involve addi-
tional route mileage sought by Delta from Chicago, Illi-
nois, to Miami, Florida, from Chicago, Illinois, to Norfolk,
Virginia, and Detroit, Michigan, and Cleveland, Ohio, to
Miami, Florida. As yet no action has been taken since
the hearing. Since the close of the fiscal year hearing on
Delta's application from New Orleans, Louisiana, to San
Juan, Puerto Rico, via Havana, Cuba, and other interme-
diate points in the West Indies has been held before an
examiner.
The philosophy of Delta's expansion program as per-
tains to new route applications is expressed elsewhere in
this report.
Very truly yours,
PRINCIPLES GOVERNING
DELTA'S ROUTE APPLICATIONS
Before the war, as air line routes were extended, travelers
showed an increasing tendency to use one system of service
between destinations. As schedules will be speeded up
through the use of improved post-war equipment this prac-
tice will increase. The use of one system, one plane service
saves time, avoids missed connections, and eliminates
many other inconveniences.
With the extension of through routes au travel will
move largely on those carriers that serve major destina-
tions. Such terminals will support the frequency of sched-
ules which also will be one of the post-war travelers'
requirements.
Delta presently serves a group of exceptionally air-
minded cities, but to retain their patronage it must extend
its routes to the air terminals most visited by the travelers
in these cities. Delta's new route applications have been
made with a view to achieve three objectives:
1. To give through service to the destination terminals
of Southern travelers-New York, Cleveland, Detroit,
Kansas City, New Orleans, and Miami.
This scene, made at the Douglas Aircraft factory in Santa Monica,
Calif., shows a Delta DC-3 undergoing complete rebuilding while
being reconverted from military to airline use.
PAGE7
2. To plot these routes by way of intermediate points of
interest and importance to the South and to which
directness and convenience of service can be improved.
3. To establish an overall system service pattern that will
contribute to the development of new uses for air trans-
portation in the era of industrial expansion, which
authorities in general are predicting for the South.
It is this accelerated development of the South that
makes it essential for Delta to expand, if it is to serve
fully its cities and retain its relative position in the
industry.
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* * * *
In the post-war period there will be an increase in the
movement of products and goods by air. This traffic, too,
will go to carriers that give major producing and distribut-
ing centers direct routes to important marketing areas.
Such considerations as these have governed Delta's ap-
plications for routes which will enable it to contribute its
part in the creation of traffic and to serve completely a
large part of the air transportation needs of the cities to
which it is now certificated. Only in this manner can the
hazards attending the dependence on connecting traffic
be avoided.
* *
DELTA AIR CORPORATION
SUMMARY OF INCOME PROFIT AND LOSS
YE AR ENDED JUNE 3 0, 1 9 4 4
REVENUES
Passenger .
Mail . . .
Express and Freight
Excess Baggage . .
Incidental Revenues
TOTAL OPERATING REVENUES
EXPENSES
Flying Operations . . . . . . . . .
Ground Operations . . . . . . . .
Flight Equipment Maintenance- Direct
Ground Equipment Maintenance-Direct
Equipment Maintenance-In direct
Passenger Service . . . .
Traffic and Sales . . . . .
Advertising and Publicity .
General and Administrative
Depreciation . . . . . .
TOTAL OPERATING EXPENSES.
NET OPERATING INCOME
OTHER INCOME
Cash Discounts . . .
Interest Income . . .
Net Profit on Government Contracts
Additional Proration of Prior Year's Expense to Government Contracts .
TOTAL INCOME .
OTHER DEDUCTIONS
Interest Expense . . . . .
Net Loss- Dusting Division .
Extension and Development Expense
Reduction in Mail Revenue- Prior Year .
Net Loss on Retirements of Operating Equipment .
NET INCOME (Before Income Taxes) .
INCOME TAXES
Federal .
Louisiana
Other States
NET ADDITION TO SURPLUS .
. $2,577,138.84
517,370.99
65,507.32
66,738.11
6,570.41
$3,233,325.67
. $ 520,174.40
534,875.32
278,710.03
19,253.47
102,856.09
208,595.55
237,125.08
79,652.35
259,702.61
154,591.41
2,395,536.31
$ 837,789.36
.$ 2,432.36
2,443.26
36,226.49
20,730.37 61,832.48
$ 899,621.84
. $ 3,011.12
2,279.95
24,789.64
123,647.75
3,454.87 157,183.33
$ 742,438.51
. $ 282,862.91
17,889.57
13,080.17 313,832.65
$ 428,605.86
PAGE9
ASSETS
CURRENT ASSETS
Cash Working Funds . .
Cash in Banks . . . . .
U. S. Government Securities at Cost .
Accrued Interest on Above
Accounts Receivable:
U. S. Government:
Mail and Transportation . . . . . . . . .
War Contracts . . . . . . . . . . . . .
Reimbursable Cosls and Expenses-Unbilled .
Less Advances on War Contracts
Traffic Balances . . . . .
Trade Accounts . . . . .
Estimated Express Revenue .
Employees . . ...
Agents (Employees) . . .
Inventories-at Cost . . . . .
TOTAL CURRENT ASSETS .
OTHER ASSETS
Stocks .
Deposits-Travel Plan, Meter and Postage
PROPERTY AND
EQUIPMENT
Airline
Dusting Division
Equipment in Process
PREPAID EXPENSE
Insurance
Rentals
Other .
TOTAL ASSETS
PAGE 10
COST
. $1,162,414.32
68,467.71
20,267.02
$1,251,149.05
. $315,685.79
. 276,060.39
31,371.86
$623,118.04
200,930.75
DEPRECIATION
$591,107.97
34,761.95
$625,869.92
DELTA AIR CORPORATION
(A Louisiana Corporation)
BALANCE SHEET JUNE 30, 1944
$ 3,270.00
550,802.44
$325,000.00
494.80
$422,187.29
190,552.46
31,119.77
17,932.87
9,210.38
655.86
$ 751.00
580.83
BOOK VALUE
$571,306.35
33,705.76
20,267.02
$625,279.13
$ 24,363.07
460.87
3,915.10
$ 554,072.44
325,494.80
671,658.63
117,472.33
$1,668,698.20
1,331.83
625,279.13
28,739.04
$2,324,048.20
CURRENT LIABILITIES
Accounts Payable:
Traffic Balances . .
Trade . . ....
Employees . . ..
Employees-Bond Deposits .
Agents . . . . . . . . . .
Taxes-Federal Transportation
Taxes-Federal Withholding
Taxes-Social Security .
Ticket Refund Liability:
Outstanding Drafts . . . . . . . .
Refunds Payable . . . . . . . . .
Transportation Purchased but Not Used
Employees Benefit Fund . . . . . .
Accrued Expenses:
Federal and Slates-Income Taxes .
Property Tax . . .
Social Security Taxes
Salaries and Wages .
Insurance . . . . .
Auditing . . ...
TOTAL CURRENT LIABILITIES .
LIABILITIES
. $128,770.15
85,258.49
1,151.57
3,750.54
1,545.06
25,015.60
17,876.33
4,663.02
. $ 11,116.57
787.52
. $313,895.85
199.03
16,490.18
17,787.87
5,864.05
2,200.00
NET WORTH
CAPITAL STOCK
Authorized-500,000 Sh. No par Common
Outstanding- 197,424 Sh. New Stock } . . . . . . .
Outstanding-240 Sh. Old Stock
SURPLUS
Earned Surplus
TOTAL NET WORTH . .
TOTAL LIABILITIES AND NET WORTH .
$268,030.76
11,904.09
28,480.07
2,629.79
356,436.98
$850,740.00
805,826.51
$ 667,481.69
1,656,566.51
$2,324,048.20
PAGE 11
UNAPPROPRIATED EARNED SURPLUS
JUNE 30, 1944
Credit Balance, July 1, 1943 . . . .
Transfer from Appropriated Surplus .
Net Income for Year Ended 6-30-44 after Income Taxes .
Less:
Dividend of $ .50 per share paid 6-10-44 .
Additional Federal Income Taxes for prior years .
Net additional State Income Taxes for prior years
. $99,192.00
28,989.41
1,084.43
Credit Balance, June 30, 1944 .
PA GE 12
P. J . COX,P. A .
H , C . PI\.AZEJ\. , C . P. A .
COX AND FRAZER
ACCOUNTANTS AND TAX CONSULTANTS
OUACHITA NATIONAL. BANK lt,UILDlNC
MONROE, LOUISIANA
October 5. 1944
Board of Directors and
Stockholders,
Delta Air Corporation,
Atlanta, Georgia.
Gentlemen:
We have examined the Balance Sheet of Delta Air
Corporation (a Louisiana Corporation) as at June 30,
1944, and the Statement of Profit and Loss for the
year ended on that date, have reviewed the system of
internal control and the accounting procedures of
the Company, and have made a detailed audit of the
transactions. The examination was made in accordance
with generally accepted auditing standards applicable
in the circumstances and included all procedures
deemed necessary.
In our opinion, the accompanying Balance Sheet
and Statement of Profit and Loss, with notes thereon,
present fairly the position of the Delta Air
Corporation at June 30, 1944, and the results of its
operations for the year then ended in conformity with
generally accepted accounting principles applied on a
consistent basis throughout the period reviewed.
Respectfully submitted,
COX AND FRAZER
$423,410.85
83,075.64
428,605.86
$935,092.35
129,265.84
$805,826.51
I