Delta Air Lines annual report 1946

ANNUAL
REPORT
I 9 4 6
The Fiscal Year
in Review
1945
JULY . 9 DC-3 aircraft in revenue service.
AUGUST ... 9 DC-3 aircraft in revenue service.
Y-J Day. Delta awarded Chicago-Miami and
Chicago-Charleston route.
SEPTEMBER 10 DC-3 aircraft in revenue
serv1Ce.
OCTOBER ... 11 DC-3 aircraft in revenue serv-
ice. Air priorities abolished. Preliminary
preparation for in'auguration of service on new
route award. l 0% reduction of passenger
fares. Purchase of first 2 DC-4 's for conversion
by Douglas Aircraft Company.
NOVEMBER ... 11 DC-3 aircraft in revenue
service. Purchase of one more DC-4 for con-
version. Intensified preparation for inaugura-
tion of service on new route award.
DECEMBER ... 12 DC-3 aircraft in revenue serv:
ice. Inauguration of service between Chica90-
Miami. Purchase of 3 more DC-4's for con-
version. Payment of Christmas bonus to all
employees.
1946
JANUARY ... 13 DC-3 aircraft in revenue serv-
ice. Purchase of one more DC-4 for conversion,
completing Delta's fleet of 7. Establishment of
40-hour work week for all employees. Com-
mencement of training of personnel for DC-4
9perations. Reduction in Air Expres$ rates.
FEBRUARY ... 14 DC-3 aircraft :n revenue serv-
ice. Re.ceipt of first converted DC-4. Accel-
erated personnel training program for DC-4
opera'tions.
MARCH ... 15 DC-3 aircraft in revenue service.
Inauguration of DC-4 service with 2 planes.
APRIL ... 15 DC~3 aircraft and 4 DC-4 aircraft
in revenue service. Inauguration of service
b'etween Chicago and Charleston via the Pied-
mont area. Beginning. of establishment of
maintenance base at Miami, Florida.
MAY ... 15 DC-3 aircraft and 6 DC-4 aircraft in
revenue service. Purchase of an additional
DC-3 aircraft for conversion by Delta, com-
pleting the fleet of 16 planes. Completion
of establishment of maintenance base at
Miami, Florida.
JUNE ... 15 DC-3 aircraft and 7 DC-4 aircraft in
revenue service. Start of preparations for air
freight service (began August 15, 1946).
,_ ....
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Revenue Miles Flown
= Total Operating Revenue
- Total Operating Expenses
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TO, THE STOCKHOLDERS--
This has been a year of transition, a year in
which Delta emerged as a major air carrier of
the nation. One main reason for this was the
opening of the Chicago-Miami and Chicago-
Charleston routes, increasing the system total by
1,036 miles and lifting Delta out of the regional
or area class. Another main cause wc:1,s the addi-
tion of new equipment, as Delta placed 44-
passenger Douglas DC-4's in service to match
the speed, capacity and non-stop service of other
airlines of the nation.
Seven of these four-engined airliners were ac-
quired. Though they have space for 60, the Delta
management limited them to 44 seats each, feel-
ing that passenger comfort comes first. Public
reaction to the 56 to 60-seat models has con-
firmed the long-term soundness of this decision.
To meet demands for more local service, six
more Douglas DC-3's were obtained. With both
types of new planes, miles scheduled daily rose
from 16,758 at the beginning of the year, to
35,874 at the year's end.
Delta now has five major applications for new
routes pending final decision by the Civil Aero-
nautics Board, with still other applications waiting
for CAB hearings. Every effort is being made
in Delta's route expansion program, with special
emphasis on the New Orleans-New York applica-
tion. This route will give Delta access to the
"Main Street" of the nation and allow us to
SALES AND
RESERVATIONS
ALL OTH""'E""'R _______ _
carry a larger percentage of originating passen-
gers through to their destination.
Increased operations and added personnel now
demand additional facilities at the general offices
and maintenance base in Atlanta. After ex-
tensive studies, a contract was signed for con-
struction of additional offices, hangars and shops.
Meantime, several buildings and a hangar have
been leased temporarily on the Atlanta airport
until construction is completed. Also, to improve
operating conditions, the Fort Worth mainte-
nance base was enlarged to take care of most
DC-3 maintenance, and a new base in leased
quarters added in Miami to facilitate DC-4
maintenance.
In order to have a name more descriptive of
the corporation's business, the stockholders in
1946 1945
PASSENGER $6,953,945 $4,193,214
MAIL 680,360 752,963
EXPRESS 129,411 97,286
EXCESS BAGGAGE 89,975 103,393
OTHER 7,979 9,671
TOTAL $7,861,670 $5,156,527
December, 1945, voted the change from Delta
Air Corporation to Delta Air Lines, Inc.
FINANCIAL
The Balance Sheet as of June 30, 1946, Sum-
mary of Income, Profit and Loss for the fiscal
year ended June 30, 1946, and the Earned
Surplus Statement as of June 30, 1946, which
reflect the financial results of the company, are
given in detail in another part of this report.
EARNINGS - The operating revenues in-
creased from $5,156,527 last year to an all-time
high of $7,861,670 this year. The comparison
of the sources of income for the past five years
indicates greatly increased ratios of revenues from
passenger and express sources as against com-
parative decreases in mail revenue-
1944 1943 1942
$2,577,139 $1,749,924 $1,318,913
517,370 574,228 677,931
65,508 51,278 24,019
66,738 35,897 15,110
6,571 12,461 4,757
$3,233,326 $2,423,788 $2,040,730
MILLIONS
The reduction in passenger fares from 5 to
4 per mile which became effective in October
1945 tended to reduce revenues at a time when
additional airplanes were being put into service,
increasing scheduled mileage.
Express rates were also reduced during the
year approximately 13 % .
Considerable development was carried on this
year in the field of Air Freight; however, Air
Freight tariffs were not published and regular
Air Freight service was not inaugurated until
after the close of the fiscal year. The prospects
from this type of revenue are very encouraging
from the experience gained over the short period
since the fiscal year ended.
Half-fares for children, discontinued in war-
time, were re-established shortly after the close
of the fiscal year.
EXPENSES - Operating expenses for the
period increased proportionately more than did
revenue. Expenses were up 99 % over last year,
while revenues increased 53 % . During the year,
Delta completed the largest operational expan-
sion program in its history. The necessary addi-
tional expenses for this account for the seem-
ingly unfavorable operating results. However,
the company history shows similar trends in other
years when new equipment and new routes were
placed in operation.
Adoption of a 40-hour work week on January
1, 1946, also increased payroll expenses con-
siderably, since take-home pay was not reduced
and overtime costs were higher.
As the Delta fleet grew during the year from
nine Douglas DC-3's to fifteen DC-3's and
seven Douglas DC-4's, the hiring and training
of personnel to man these planes entailed thou-
sands of hours of. non-productive flying to pro-
duce safe and ~fficient pilots. More aircraft in
operation also proportionately increased the num-
ber of ground personnel who had to be added
to payrolls and trained during periods of non-
productivity. The newly awarded Chicago-
Miami route, opening with a minimum of serv-
ice and increasing gradually to the present
schedule pattern for public convenience, involved
increased non-recurring expenses.
It was the decision of the management to treat
as current expenses all costs in connection with
the inauguration of new routes and of the new
DC-4 equipment. This policy places the com-
pany in a very favorable position to reap more
profits in the periods to come since there are no
def erred items from these sources to be amortized.
TON MILES VS.
PLANE MILES
OPERATING . EXPENSES AND PROFIT
PER PLANJ MILE
OPERATING EXPENSES AND PROFIT
PER TON MILE
$1.Jo 1
1.20
1.10
1.00
.90
.80
.70
.60
.50
.40
_
$ _.9o 1
.80
.70
.60
.50
~
,41 '42 '43 ,'44 '45 '46
In addition to these expenses, the marked in-
crease in wages and materials has had con-
siderable influence on the trends toward higher
expenses.
DIVIDENDS
During the year your Board of Directors
established the policy of semi-annual dividend
payments and paid the usual $.50 dividend to
the corporation's stockholders in semi-annual
E:xpress and long range non-stop flights are made with
seven Douglas DC-4's. For ma:ximum passenger comfort,
Delta DC-4's carry only 44 seats in space for 60.
payments in January and June, 1946. After the
payment of $200,000 in dividends, there was a
net addition to Surplus of $162,155 from cur-
rent operations.
CAPITAL
During the year no change was made in the
capital structure of the corporation. Neither has
there been any need during the year for any type
of financing.
- - - - - - - - - ANNUAL LOAD FACTOR
100
1941
-~=-+-~..;.....II! 1942
~~~~~_..;...;.....J,.;.....__~ 1943
B~~~~.;..,.._~j....;....~-l 1944
1945
~~ ........ --=;i_J..~-...11 1946
75 50 25 %
AVERAGE YEARLY LOAD FACTOR
0
-~Tlffl1MJlU SU T MILES OPERA TED
PASSENGER MIUS
20 40 60 80 100 120 140 160 180 200
SEAT AND PASSENGER MILES-IN MILLIONS
Delta now flies 18 Douglas DC-3's, including two used for
cargo and pilot training. They give the intensive local
$ervice which is a main part o'f Delta operations.
NEW EQUIPMENT PROGRAM
During this year the management had under
consideration the purchase of equipment for the
future and shortly after the close of the fiscal
year a contract was made with the Glenn L.
Martin Company for delivery, beginning in mid-
1947, of ten Martin 2-0-2, 36-passenger airliners
with an option for the delivery of ~n additional
ten planes in late 194 7. These planes will be used
as a supplement to our present fleet or as a re-
placement of a portion of our twin-engine DC-3
ships, depending upon the traffic and cargo de-
mands. The plans and specifications of these
new aircraft do not contemplate a high density
seating arrangement.
At the close of the year one Douglas DC-3
was in the process of modification in the Com-
pany's hangar which, since put into service,
brings the company's present fleet of airplanes to
sixteen Douglas DC-3's, seven Douglas DC-4's,
and two C-4 7 training and cargo planes. Eleven
e 41'
250 miles
option for
over local ro
oi the DC-3's, all seven of the DC-4's and one
C-4 7 have been purchased. However, five of
the DC-3's and one C-4 7 are under five-year
lease agreements with the government which can
be terminated at the close of any lease-year.
NEW BUILDING AND HANGAR
After negotiations with the city of Atlanta, an
extension was made in the term of the lease for
the land on which our present building is situ-
ated and on which new buildings are to be con-
structed. The new term is for forty-five years
from March 1, 1941, more than doubling the
original term.
Construction began soon after the close of the
fiscal year on additions to the general offices,
shops and hangars at the Atlanta Municipal
Airport.
These additions, of steel and concrete faced in
red brick to match the present structure, will
increase working space 90 per cent. New office
This a chitect's dr,,uing shows hou: Deltt,'s beudquart r
u,1il/ appear whe,i construction is completed in 1 rrent e:1:
panswn program. New 'hangar is shown at "A". Additionttl
oflfres are indicated in area m,trked by "13", 1'wo new test
tells with a baf}le system for so1tnd-p1oofing, (Ire located 111
extreme right, under "C''.
space will total 20,150 square feet; new hangar
area 29,500 square feet, and new shops 18,450
square feet. With the expansion, Delta's total
space will be 129,000 square feet.
The project includes a separate test cell, 80
by 55 feet, and with a baffle system to reduce
noise, where two engines can be "run in" si-
multaneously after overhaul.
In all, the expansion will cost approximately
$1,000,000. The Austin Company is designer
and contractor.
PERSONNEL RESOURCES
Significant is the fact that the number of Delta
employees increased from 982 to 2,350 during
the year. Well-trained, loyal employees are as
much an asset to us as physical properties. Dur-
ing this year, which saw an end of war, there
was a general shift in the percentage of women
employees. As men returned from the Services,
many women turned from business to homes.
This meant training new employees, mostly vet-
GROWTH IN PERSONNEL
0 400 800 1200 1600 2000 2400
erans. The program has been expensive but is
worth the cost in order to have the well-trained
personnel we need. The accompanying chart
shows the employment trend from pre-war to
present.
Included in our expense is an item of $122,-
617 .62 spent during the year on the group
insurance program and group annuity retire-
ment plan for the welfare of our employees. Both
are available to employees; they participate in
the cost of our group insurance program but
make no contribution whatsoever to the retire-
ment plan. During the year, our employees and
their families received approximately $58,000
from the group insurance alone.
The 40-hour work week adopted voluntarily
by the company on January 1, 1946, was in line
with the trend of the times and with uniform
action of the air transport industry.
During the year the Company has grown to
the point that it was necessary to divide the
duties of certain department heads and to cre-
ate new departments to facilitate the smooth
working of your expanding company. The pres-
ent arrangement is illustrated in the organization
chart on a following page.
C . E. WOOLMAN, President
Assistant Treasurer
President and General Manager
H. R.
Assistant to President
and General Manager
Pouenger
R totion Monager
Route Applications Now Pending Decision
Illustrate Delta's Pattern of Expansion
At the present time Delta is prosecuting
applications before the Civil Aeronautics Board
as follows:
In the Southeastern States Case all procedural
steps have been completed. Involved in this
hearing are : ( 1 ) an extension of the Chicago-
Cincinnati segment of Route 54 from Cincinnati
to Norfolk via Huntington, Charleston, W. Va.,
Roanoke, Lynchburg and Richmond, and an ex-
tension from Roanoke to Columbia via Greens-
DETROI
TOLEDO NEW YORK
NEWARK
'Q AKRON CANTON
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COLUMBU ~,, PHILADELPHl~o
~ PITTSBURGH WILMINGTON(J.

aaa01eQ BALTIMOREO ~
~.......... . ~
It PORTSMOUTH
.c~w HIN
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1
0,_,~HARLESTON :
HUNTINGTON Q,11 ........ (t :
11
11
CHARLOTT~.fitCEo RICHM
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ROANOKE t)' l YNCHBURG
11't:J
: NORFOLK
.. ~
WINSTsNSALE~()~ GREENSBORO .
KNOXVILLE V- HIGH POINT
----- .,
-c'cHARLOTTE
GREENVlllE-
SPtRTANBURG
boro, Winston-Salem and Charlotte; ( 2) the
addition of Chattanooga and Louisville as inter-
mediate points between Atlanta and Cincinnati;
(3) a Memphis-Jacksonville route via Chatta-
nooga and Atlanta and via Tupelo, Birmingham,
Cohimbus, Albany and Valdosta; ( 4) an Atlanta-
Meridian service via Columbus and Montgom-
ery; ( 5) the addition of Macon as an inter-
mediate point on Route No. 24 between Atlanta
and Savannah. The outcome of this case should
be known on or before January 1, 194 7.
In the Great Lakes Area Case Delta's applica-
tion for a Cincinnati-Detroit and a Cincinnati-
Cleveland service was heard. The examiners'
report recommends that the services proposed by
Delta be denied. Brief in support of exceptions
has been filed which will be followed by argu-
ment before the Board.
An examiner's report is also due in the Missis-
sippi Valley Case in which Delta requested a
Monroe-Baton Rouge-New Orleans service and
the addition of Longview / Kilgore to Route No.
24.
The examiner's report in the Kansas City-
Florida Case favored an extension of Mid-Con-
tinent's system from Kansas City to Memphis
only, with denial of all other applications, in-
cluding Delta's proposal to provide a Kansas
City-Miami service via Birmingham and Chat-
tanooga. Delta will re-state its claims to the
route in brief and at oral argument before the
CAB prior to the Board's decision.
The Boston - New York-Atlanta - New Orleans
Case which includes Delta's request for entry into
the New York-Washington area was heard in
Washington in June. Delta witnesses entered
more evidence of "convenience and necessity"
for this route than has been introduced by the
company m any previous CAB hearing. A de-
cision in this case, however, is not expected until
next summer.
Another case recently heard was the route con-
solidation case in which Delta is seeking a re-
alignment of its route designations so as to permit
it to effect economies in operations, operate more
efficiently and off er improved service to the
public.
In addition to the above pending applications
Delta and TWA have filed an interchange agree-
ment with the Board which would establish s:n-
gle plane service between Detroit, Toledo, Cin-
cinnati and other points on Delta's system. This
appiication has not yet been scheduled for hear-
ing on the Board's calendar.
With the above six cases pending decision,
there are also a Fort Worth to Albuquerque ap-
plication and an additional Cincinnati-Norfolk
request on file. Hearing dates have not yet been
set. Under consideration are other applications
for extensions to the west and in the south, to
be based on Delta's "place in the air," and its
need for access to additional important traffic
generating centers.
This drawing shows what Delta describes as the na-
tion's "Main Street"-the line of major cities from
Washington to New York and Boston. A proposed
route extension will give Delta-generated traffic in the
south direct one-carrier service to this
heart of the nation.
CURRENT ASSETS
Cash Working Funds _______________________________________________________________________________ _
Cash in Banks and In Tran iL_--------------------------------------------------------
U. S. Government Securities- At CosL------------------------------
Accrued Interest on Above. -------------------------------------------------------
Accounts Receivable:
U. S. Government_---------------------------------------------
Traffic and Agents Balances_-----------------------------------------
Air Travel Card Account -------------------------------------------------
Trade Accounts -------------------------------------------------
Estimated Express Revenue __ ----------------------------------
Employees ------------------------
$ 9,885.00
752,759.34
$ 600,091.85
2,834.59
$ 177,871.59
612,954.76
9,982.06
194,615.85
33,987.87
23,122.82
$ 762,644.34
602,926.44
1,052,534.95
Inventories-At Cost -------------------------------------------------- 347,104.28
TOTAL CURRENT ASSETS.------------------------------- $2,765,210.01
OTHER ASSETS
Stocks ----------------- $ 10,061.00
Deposits- Postage and Utilities----- 231.20 l 0,292.20
PROPERTY AND EQUIPMENT
Airline -------
Dusting Division --------
Equipment in Process ....... --
COST
$4,386,810.50
78,653.82
132,821.20
DEPRECIATION
TAKEN
$1,438,030.23
33,112.76
BOOK
VALUE
$2,948,780.27
45,541.06
132,821.20
$4,598,285.52 $1,471,142.99 $3,127,142.53
PREPAID EXPENSE
Insurance ----------------------
Rentals --------------------------
Other ------------------------------
$ 108,910.15
20,011.34
2,797.89
3,127,142.53
131,719.38
$6,034,364.12
(A Louisiana Corporation)
Atlanta, 1 Georgia
Balance Sheet
June 30, 1946
CURRENT LIABILITIES
Accounts Payable:
Trade --------------------
Traffic and Agents Balances_-------:-._------
Employees ---------------------------------
Employees-Bond Deposits -----------------------------
Taxes-Federal Transportation ---------------------
Taxes-Employees' Income ----------------------
Taxes- Employees' Social SecuritY---------------------
Ticket Refund Liability:
Outstanding Drafts ------------------------
Refunds Payable --------------------------------------
$ 619,828.35
387,481.18
1,232.48
2,030.07
126,092.43
44,949.80
11,593.16
$ 16,362.52
1,569.63
Employees' Benefit Fund .. -------------------------------------------------
Air Travel Card Deposits.-------------------------------------------
Accrued Expenses:
Income Taxes-Federal and State----------------------------
Social Security Taxes----------------------------------
Property Taxes ----------------------------------
Salaries and Wagcs .. ------------------------------
Insurance --------------------------------------------------
Auditing ------------------------------------
$ 258,047.65
38,633.48
319.60
54,595.01
19,480.12
3,000.00
TOTAL CURRENT LIABILITIES ----------------------------------
OTHER LIABILITIES AND RESERVE
Transportation Sold But Not Used.-------------------------- $ 162,932.16
Reserve for Aircraft OverhauL ___ --------------------- 11,713.43
TOTAL LIABILITIES -------------------------------
CAPITAL STOCK
Authorized 500,000 Shares-$3.00 par value
Issued and Outstanding 400,000 Shares------------------ $1,200,000.00
CAPITAL SURPLUS --------------
EARNED SURPLUS ---------------------------------------
2,037,783.29
982,987.00
$1,193,207.47
17,932.15
4,857.76
48,875.00
374,075.86
$1,638,948.24
174,645.59
$1,813,593.83
4,220,770.29
$6,034,364.12
SUMMARY
REVENUES
Passenger ............................................. ............................................................ .
Mail. ................................................................................................................. .
Express and Freight.. ...................................................... ................................ .
Excess Baggage ................................................................ .............................. .
Other Transportation .................................................................................... .
Incidental Revenues ...................................................................................... .
Total Operating Revenues ..................................... ........ .............. .
EXPENSES
Flying Operations .......................................................................................... .
Ground Operations ........................................................................................ .
Flight Equipment Maintenance-Direct ..................................................... .
Ground Equipment Maintenance-Direct .................................................. .
Equipment Maintenance-Indirect ............................................................. .
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 Income-Dusting Division ...................................................................... .
Profit on Sale of Bonds ................................................................................... .
Net Profit on Retirements of Operating EquipmenL. ................................. .
Sundry .............................................................................................................. .
Total Income -
OTHER DEDUCTIONS
Interest Expense ............................................................................................ .
Extension and Development Expense ........................................................... .
Excess Amortization of Building Addition over Ordinary Depreciation .... .
Christmas Bonuses to Employees in Military Service .................................. .
Sundry .............................................................................................................. .
Net Income (Before Income Taxes) ............................................ .
INCOME TAXES
Federal. ............................................................................................................ .
States ................................................................................................................ .
NET ADDITION TO SURPLUS .......................................................................... .
$6,953,944.76
680,359.67
129,411.05
89,975.46
686.50
7,293.31
$1,665,031.90
1,562,902.46
762,225.91
70,058.50
404,611.95
552,008.03
794,072.42
284,236.75
599,117.10
532,577.89
$ 7,368.21
17,724.50
29,207.12
595.80
23,536.98
221.72
$ 2,912.82
77,105.93
9,580.64
3,950.00
235.20
$ 233,469.90
24,211.06
Year Ended
June 30, 1946
$' 6$4,827 .134
78,654.33
$ 713,482.P
93,784.59
$ 619.,697 .58
257,680,96
;>,
\;ate
tb.e:t
,a.cc
u~~
EARNED SURPLUS - JUNE 30, 1946
Credit Balance, July 1, 1945 _______ ------------------------------------------------------------------------
Add: Net Income for Year Ended June 30, 1946, after Income Taxes________ $362,016.62
Over-estimate of State Income Taxes for year ended June 30, 1945__ 98.25
Federal and State Income Tax reduction resulting from accelerated
amortization of Addition to Main Building, Atlanta, Georgia
Year ended 6-30-44 _____________________________________________________________________ _
Year ended 6-30-45 _____________________________________________________________________ _
Less; Cash Dividends Paid _______________________________________________________________________________ _
Additional charges for amortization of Addition to Main Building,
Atlanta, Georgia
Year ended 6-30-44 _____________________________________________________________________ _
Year ended 6-30-45 _____________________________________________________________________ _
10,370.94
10,985.66
$200,000.00
24,153.55
24,153.55
Credit Balance, June 30, 1946 _____________________________________________________________________________________________________ _
$ 847,822.63
383,471.47
$1,231,294.10
248,307.10
$ 982,987.00
IIATIONAL '
AVIATION
SAfE';fY AWARD
TO
ll))ELTA
DR OIINES,UNCORPORf\TED
having o~tat~d as of' Deamb1tt 31 , 194$
T~n Years an'd
311.~t~:!~;s~~~~~~~~~iles
1936-1945
~d~
p_,.
10-Year Safety Record Wins Special Award
Delta won the Aviation Safety Award in the Group B mileage classification
during the past fiscal year with a 10-year record of operations without a fatality.
The National Safety Council pointed out in its citation that Delta had operated
311,840,152 passenger miles during the decade.
The company also was one of two companies receiving bronze plaques from
Aviation and Air Transport magazines for excellence in aircraft maintenance.
DELTA AIR LINES
The present Delta system covers 2,893 route miles
and includes 29 certificated stops in thirteen
states. This map, reproduced from a full-color print-
ing provided for passengers on all planes, shows
how the Chicago-Miami and Chicago-Charles-
ton additions blend into other route segments.