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). ,_ .... - ... - ... :::, :::, - ... ::, ... C ... ... - - Revenue Miles Flown = Total Operating Revenue - Total Operating Expenses - - - >- ,_ :z: - ,_ ... ... ... ... - - '"' -C z - - - C C - ... ::, 0 :::, :::, C C - ... Ill Ill z - "" > "" C - 0 0 - ... A ""' ... z 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 ~ . COLUMBU ~,, PHILADELPHl~o ~ PITTSBURGH WILMINGTON(J. aaa01eQ BALTIMOREO ~ ~.......... . ~ It PORTSMOUTH .c~w HIN o,, - , 1 0,_,~HARLESTON : HUNTINGTON Q,11 ........ (t : 11 11 CHARLOTT~.fitCEo RICHM o ~ 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.