Delta Air Lines annual report 1949

Report
1949
OF PASSENGER
SERVICE
The operations of your Company for the year
ended June 30, 1949, resulted in new highs in
volume of operations, revenues, expenses and
earnings. A substantial portion of the profits
earned during the year can be attributed to the
inauguration of service with Douglas DC-6
equipment on December 1, 1948. The superior
service provided by the DC-6's is most attrac
tive to the traveling public, and has removed
the competitive equipment disadvantage under
which we operated prior to their acquisition.
During the early months of 1949, the Senate
Committee on Interstate and Foreign Com
merce undertook an investigation of all phases
of the airline industry, including the various
governmental agencies closely connected there
with, with particular attention to the apparent
ly increasing dependence of the carriers upon
governmental support through mail pay. Hear
ings were concluded in June, after receiving
testimony from seventy-nine witnesses, includ
ing airline officials, governmental department
heads, and independent aviation consultants
and experts. It is too soon to know what recom
mendations will result from this Committee's
comprehensive and timely investigation.
Your President was invited to appear before
this Committee. He testified at some length on
the current problems faced by the industry and
submitted statistical data in connection with
his testimony. A portion of this data was a
comparison of your Company's revenues and
expenses expressed in cents per available ton
mile for the years 1940 through 1949 inclusive.
This comparison is reproduced for you on page
9 of this Report.
In February, 1949, the Civil Aeronautics
Board released a Statement of Policy outlining
its program for the continued development of
the nation's air transportation system on a
sound basis. This aggressive approach is most
encouraging and promises to restore financial
and economic stability to an industry vitally
important to our country.
EARNINGS AND FINANCIAL
Net profit after taxes was $639,440, equivalent
to $1.28 per share, which permitted a dividend
declaration of $.25 per share on June 27, 1949,
payable July 15, 1949.
Total revenue increased $2,408,876 over the
preceding year, from $12,818,969 to $15,227,-
845. This revenue increase was accompanied
by a $1,663,012 increase in operating expenses,
from $12,618,944 to $14,281,956. The result
ing operating profit of $945,889 represents
6.12% of total revenue, and the net income of
$639,440 constitutes a return of 6.06% upon
investment employed in air transportation.
A major portion of the revenue increase was
the increase in passenger revenue, which was
attributable in part to the additional passenger
miles flown but principally to the higher average
return per passenger mile. Because of the gen
eral industry fare increases in the fall of 1948
(accompanied by the restoration of the 10%
discount on the return portion of round-trip
tickets) and the extra service charges applicable
to DC-6 travel, the average return per passen
ger mile was 5.94^ for the current year as
compared with 5.35^ for the preceding year.
The current year is the first complete fiscal year
reflecting the impact of the general salary and
wage increase granted to employees in Octo
ber, 1947. Another general increase approxi
mating 8% was granted in March, 1949, not
only to maintain our position in the industry
but in recognition of the cost of living. The
increase in salary and wage expense of $696,116
is, therefore, the largest single expense increase.
Higher gasoline prices and a slight increase in
the volume of operations account for $449,058
of the increase in operating expenses. Depre
ciation expense increased $172,911, principally
because of the addition of DC-6's to our fleet.
Although your Company has retained its
position as one of the most efficient in the in
dustry, the cost of operating an available ton
mile (a ton of salable capacity flown one mile)
increased from 27.10^ for the previous fiscal
year to 28.70^ for the current fiscal year. Much
of this increase was caused by circumstances
over which management had no control, but
constant and unceasing attention is being di
rected toward achieving an even more efficient
and economical operation. To this end, a com
mittee was established in the closing months
OPERATING EXPENSES
OPERATING REVENUES
Salaries, Wages & Welfare
$7,155,683
Gasoline & Oil
$1,951,028
Maintenance & Repairs
$ 950,432
Depreciation
$1,185,866
Communications &
Office Supplies 384,512
Passenger Expenses 419,449
Insurance 334,957
Taxes 423,558
Advertising 442,180
Rentals & Landing Fees . . .411,661
Travel Expenses 283,310
Outside Services 194,197
Miscellaneous 145,123
$14,281,956
Freight & Express
$ 603,362
Mail
$ 2,434,888
Passengers
$12,135,731
.06
.05
.04
.03
of the year to review the operating practices
and procedures of the Company, to investigate
all items of expense, and to recommend any
changes which would produce greater efficiency,
better service to the public, or economies in
operation.
The present sliding scale basis for determina
tion of mail pay produces a decrease in mail
revenue as passenger revenue increases, and vice
versa. This formula provides a very desirable
buffer against serious losses in periods of de
creasing passenger revenue, but it also curtails
the accumulation of reserves in periods of in
creasing passenger revenues. Under this method
of mail pay allocation, each $1,000 of passenger
revenue increase, at our present level of opera
tions, would effect a $550 reduction in mail pay,
and thus result in a net combined passenger and
mail revenue increase of only $450.
The June 30, 1949, Balance Sheet reflects a
healthy financial condition, with a net working
capital of $2,558,623. Earnings retained for use
in the business at the close of the year were
$1,493,165, and the net book value of your
Company's stock was $13.42 per share.
The entire credit of $5,000,000 provided by
the Loan Agreement of November 16, 1946,
has been borrowed, the last borrowing there
under having been effected on November 5,
1948. Repayments totaling $1,075,000 have
been made, and the present balance of $3,925,-
000 is being repaid at the rate of $250,000 a
quarter, which payments are being met out of
allocations for depreciation.
Complete details of your Company's opera
tions during the year and its condition at the
close of the year are shown in the accompanying
Operating Statement, Balance Sheet, and State
ment of Surplus.
OPERATING EXPENSES & PROFIT PER PLANE MILE
OPERATING EXPENSES & PROFIT PER TON MILE
$1.00
.90
.80
TRAFFIC
The number of revenue passengers carried in
creased to 518,481 from the 493,608 carried
the previous year, and revenue passenger miles
flown increased from 188,292,876 to 201,711,-
436. Available seat miles operated increased
slightly, and the passenger load factor increased
from 53.92% to 55.84%. There was a very
definite increase in the number of revenue
passenger miles flown in the second half of the
fiscal year over the number flown in the first
half. This increase reflects the inauguration of
DC-6 service. There were 110,139,884 passen
ger miles flown during the last six months of
the year as compared with 91,571,552 during
the first six months. Expressed in load factors,
the increase was from 52.32% for the first half
of the year to 59.16% for the second half. Your
Company's load factor of 65.83% for March,
1949, was the highest of all domestic airlines
for that month.
There has been no cessation in the efforts
expended for the promotion and development
of air freight. During the year, there was a
20% increase in air freight ton miles, from
1,397,023 to 1,676,304. The volume of air mail
and air parcel post increased 9.56% from
850,329 ton miles to 931,658 ton miles. Coin
cident with these increases there was an 11%
decrease in air express, from 855,996 ton miles
to 764,305 ton miles. Difficulties are still en
countered in balancing the directional flow of
air freight movements. The Civil Aeronautics
Board has recently granted Certificates of
Public Convenience and Necessity to four new
carriers for all-cargo operations, one of which
-- !, ffj _
SEAT AND PASSENGER MILES
4041 42 43 44 45 46 47 48 49
Shaded Areas: War Year Operations
LOAD FACTOR
100
40 41 42 43 44 45 46 47 48 49
REVENUE MILES AND PASSENGERS
will be directly competitive with your Com
pany. Your Company, along with other carriers,
felt that the air freight volume did not justify
the entry of these new carriers into the air
freight field.
With the load factors which we have ex
perienced there still remains a tremendous
potential for earnings, and your management
is exerting every effort to sell this available
potential. For the first time, special summer
excursion fares are in effect for travel between
the Chicago-Cincinnad area and the Florida
area, and between all cities on our system and
the Caribbean area through the Miami and
New Orleans gateways. Several airlines have
recently inaugurated, on an experimental basis,
"coach" air service, whereby transportation at
less desirable hours and without some of the
special services ordinarily rendered is offered
at lower fares. The results achieved in this type
of operation by other carriers are being very
closely studied. Serious consideration is also
being given to the inauguration of reduced
fares for family travel.
The Traffic and Sales Department was re
organized during the year in the interests of
more effective sales solicitation activities, more
detailed schedule analysis, and increased effi
ciency within the department. The advertising
budget was increased substantially during the
year in order to launch the DC-6 fleet and to
maintain the aggressive and continuous cam
paign necessitated by the need for increased
sales and to meet competition. This increased
budget made possible several innovations in
airline advertising, as well as broader coverage
in established media. Sales incentive contests
are being continued, under which a monthly
quota is established for each station and em
ployee bonuses are paid upon attainment of
quota.
INTERCHANGE SERVICE and route applications Miami, Jacksonville,
Atlanta, Birmingham,
June, 1949, marked the completion of thirteen
months of successful operation under the Delta-
TWA interchange agreement, which provides
through-plane service between the Detroit-
Cincinnati portion of TWA's routes and the
Cincinnati-Miami portion of Delta's routes. No
operational difficulties were encountered, and
14,223 passengers received an improved service
by the elimination of the necessity for a change
of planes at Cincinnati.
On November 1, 1948, your Company and
American Airlines, Inc., entered into an
equipment interchange agreement to provide
through-plane service between the principal
routes of Delta east of Dallas-Fort Worth and
the routes of American to the West Coast and
connecting thirteen key cities. The Civil Aero
nautics Board formally approved this agree
ment on September 1, 1949, on a temporary
basis and immediate steps were taken to inau
gurate the new service on September 25, 1949.
Cities involved in the interchange include
New Orleans, Dallas,
Fort Worth, El Paso, Tuc
son, Phoenix, San Diego,
Los Angeles, Oakland and San Francisco. This
interchange operation will be a very valuable
adjunct to the Nation's air transportation sys
tem, providing the only through-plane coast-to-
coast service over the southern section of the
country.
Permanent approval of this agreement is one
of the issues in the Southern Service to the West
route case, in which several carriers are seeking
a new southern transcontinental route. Because
of the parallel competition to much of our
route mileage that an award to any other carrier
would create, your Company itself is requesting
a route from Dallas/Fort Worth to Los Angeles
and from New Orleans to Los Angeles via
Houston and San Antonio. In our opinion,
through-plane service from the Southeast to
California can best be provided through the
American-Delta equipment interchange agree
ment which has been approved by the C.A.B.
Hearings have also been conducted on an
equipment interchange agreement executed be-
Legend
DELTA'S PRESENT ROUTES
PRESENT INTERCHANGES
DELTA'S PROPOSED ROUTES
PROPOSED EQUIPMENT INTERCHANGE
r <ro
tween Delta and Chicago & Southern Air Lines,
Inc., with Memphis as the interchange point.
Approval of this agreement, which was rec
ommended by Public Counsel, would provide
through-plane service between Kansas City and
Miami, via various intermediate cities, and
would give Delta the Birmingham-Memphis
extension of Route 24 which was sought in the
Kansas City-Florida case and deferred by the
Board for consideration in conjunction with
interchange possibilities.
The status of other applications for new route
or existing route alterations are summarized
below:
1. Extension of Route 24 from Savannah to
Miami, via Brunswick and Jacksonville, and
the addition of St. Petersburg/Clearwater as
an intermediate point between Jacksonville
and Miami on both Routes 24 and 54. These
applications have been heard in the Florida
Trunk Line Service Case, which is now await
ing an Examiner's report.
2. Redescription of Route 54 which requests an
amendment permitting Chattanooga to be
served on flights between Knoxville and
OPERATIONS PERFORMANCE
The year saw another "high" in the operations
of your Company without any compromise with
that high standard of safety which has always
characterized Delta's operations. The flight
completion factor (percentage of the sched
uled miles completed) was 97.69%. This is the
highest flight completion factor in your Com
pany's history, and substantially above the
factor of 94.22% for the preceding year. This
material improvement can be attributed in
part to the performance of the pressurized
cabin, high altitude DC-6's which can "fly
above the weather," and to the progress which
has been made in the development and installa
tion of mechanical and electronic aids to navi
gation and all-weather flying.
Some of these recent developments are the
installation of radio altimeters in the aircraft;
additional airport installations of I.L.S. (In
strument Landing System) equipment, and the
Atlanta, as well as on flights between Atlanta
and Lexington. Approval has been recom
mended by the Examiner.
3. Proposal to connect Monroe and Baton
Rouge on Route 24. This is also awaiting the
Examiner's report.
4. Applications which have not yet been as
signed for hearing are as follows:
a. Extensions of Routes 24 and 54 from
Atlanta to New York via Washington.
b. Proposal to close the gap in Routes 24 and
54 between Charleston and Savannah.
c. Extension from Cincinnati to Washington
via Pittsburgh and from Cincinnati to
Norfolk via various intermediate points.
d. Extension of Route 54 from Chicago to
Minneapolis via various intermediate
points.
During the early part of the fiscal year, dis
cussions were had with National Airlines look
ing to its possible acquisition by your Company.
These negotiations were terminated after some
months when mutually satisfactory terms could
not be agreed upon.
greater proficiency of the personnel in its use;
and an increased use of static-free V.H.F. (Very
High Frequency) radio communication for
ground-air traffic and flight control.
The dependability of flight schedules is an
important element in service to the traveling
public, and hence a stimulant to repeat pas
senger sales. Your Company is singularly for
tunate in an Operations Department which is
unusually sales conscious. Among its future
plans for continued improvement in flight com
pletion and "on-time" performance is the ini
tial installation and study of Omni-Directional
range receivers in the aircraft. This new range
receiver provides visual (rather than auditory)
cockpit course selection and subsequent con
tinuous visual confirmation of "on-course"
flight. Like the new V. H. E. voice radio, it
operates on Very High Frequency and is free
from static.
EQUIPMENT and facilities
Five DC-6 aircraft and one C-47 freighter were
added to the fleet during the year, and one
DC-4 was sold.
Flight equipment at the end of the year con
sisted of five DC-6's, six DC-4's, seventeen
DC-3's, and three C-47's. This fleet with neces
sary spare parts is reflected in the accompanying
Balance Sheet at an original cost of $8,260,228
and a depreciated value of $4,838,295.
An additional DC-6 has been ordered, with
delivery presently scheduled for December of
1949. \our six DC-4's include two more than
required by present operations, and these two
PERSONNEL
have been offered for sale. However, recent de
velopments in aircraft leasings, charter opera
tions, and "coach" type service have indicated
possible advantages which might accrue
through the retention of these two aircraft for
the time being.
There were no major additions to our ground
property and facilities during the year, although
our investment therein was increased $190,217
by the purchase of equipment necessary for ser
vicing the DC-6 aircraft, a greater mechaniza
tion of ramp equipment, and improvements in
communications equipment.
One of the most valuable assets of your Com
pany is its corps of skilled, experienced, and
loyal employees. Total employment at the end
of the year was 2,119, a slight increase over the
2,093 at the beginning of the year. The produc
tivity of each employee for this year and also
for the preceding year is shown by the adjacent
tabulation:
Year Ended June 30 1949 1948
Seat Miles per Employee 170,457 166,860
Revenue Ton Miles
per Employee 10,762 9,540
Available Ton Miles
per Employee 23,486 22,246
Total payments for salaries and wages during
the year were $6,958,000, an increase of $734,-
000 over the preceding year. In addition to
these direct payments, your Company continued
its policy of providing additional employee
benefits to the maximum extent possible. The
Delta Employees Credit Union, which for many
years has been sponsored by Delta Air Lines for
the benefit of the employees, was recently ex
panded to provide for employee savings in that
organization through payroll deductions. Cov
erages provided by the Group Insurance Plan
were broadened during the year. The number
of employees for whom benefits are provided
under the Retirement Plan is 1,665, or 79% of
the total.

Your management is most encouraged that
the coming year will continue to reflect the im
proved position experienced during the year
just ended. Costs are showing a tendency to
stabilize, and there is no present reason to antic
ipate any serious decline in traffic volume. Ag
gressive efforts will be continued to increase
sales and to perfect operating and economic effi
ciencies. We are confident that your Company
will maintain its leadership in the highest
standards of air transportation service to and
through the South.
NUMBER OF EMPLOYEES AND
LENGTH OF SERVICE
4s of June 30
1947 1948 1949
YEARS IN SERVICE
20 YEARS_
AND OVER
15-20
10-15 44 55 53
5-10
1-5
LESS
THAN
1 YEAR
172 241 295
806 1285 1380
1053 503 381
2081 2093 2119
President and General Manager
10 Year Comparison
Revenue and Expense per Available Ton Miles
Year Ended Available Cost per Available Ton Mile Revenue per Available Ton Mile
June 30 Ton Miles Direct Indirect Total Mail Passenger Other Total
1940 . . . . 2,121,365. . . . . . . 22.370... . .16.590... . .38.960... . .22.080.. . .. .21.490. ,.. .640.. . . . .44.210
1941 . . . . 3,843,853.. . . . . .20.11 0. .,
.. .13.240... ..33.350... .. .13.140... ... 17.780.... ... .500... . . .31.420
1942 . . . . 6,028,045. . . . . . .
16.090. .. .13.280... ..29.370... . . .11.250.. . .. 21.880. .., ... .730... . . .33.860
1943 . . . . 4,800,924. . . . . . .14.680... ...22.390... . .37.070... ... 9.390... .. .36.450.... . .2.080. . . . . .47.920
1944 . . . . 6,652,397. . . . . . .13.160... ,. .22.180... ..35.340... . 7.780... .. .38.740.... . .2.090. . . . . .48.610
1945 . . . .11,221,277. . . . . . ,llo50... . .19.640... . .31.690... .. 6.710... ...37.370.... , . .1.870. . . .. .45.950
1946 . . . .21,981,040. . . . . . .12.750... .. .19.680... ..32.430... ... 3.100... ...31.640.... ..1.030... . . .35.770
1947 . . . .42,715,536. . . . . . . 12.500. .. ,. .15.080... . .27.580... ... -990... .. .24.720.... .. .1.190. . . .26.900
1948 . . . .46,561,615.. . . . . . 12.490.. . . .14.610... . .27.100... .. 4.320... .. .21.650.... . .1.570. . . . . .27.540
1949 . . . .49,766,324.. . . . ..13.170... ...15.530... . .28.700. . . ... 4.890... ...24.090.. .. .1.620.. . . . .30.600
Assets
DELTA AIR
ATLANTA,
BALANCE SHEET
CURRENT ASSETS:
Cash
U. S. Government securities, at cost
Accounts Receivable --
U. S. Post Office Department $ 444,739
Traffic (net) 638,467
Other 189,152
Maintenance and operating supplies, at cost
Other current and accrued assets
INVESTMENTS:
Net assets of dusting division
Other investments
$ 1,806,981
1,000,228
1,272,358
1,162,684
68,231
$ 78,754
76,051
$ 5,310,482
154,805
OPERATING PROPERTY AND EQUIPMENT
(Including $1,670,000 fully depreciated):
Cost
Flight equipment $ 8,260,228
Ground property and equipment 2,596,685
Construction work in progress 23,224
$10,880,137
DEFERRED CHARGES:
Reserve for
Depreciation
$3,401,933
677,486
$4,079,419 6,800,718
Training and other costs applicable to new DC-6 aircraft
being amortized over first two years of service lives
Advances for leased facilities, being amortized
Other prepayments, etc
119,855
161,724
81,684
363,263
$12,629,268
Auditor's Certificate
Inc.
LINES,
GEORGIA
JUNE 30, 1949 Liabilities
CURRENT LIABILITIES:
Current maturities of long-term debt
Accounts payable and accrued liabilities
Accrued Federal and state income taxes
Dividends payable July 15, 1949
Air travel plan deposits
LONG-TERM DEBT--
Notes payable to banks, 2l/2
%, due serially to 1953 (less current
maturities of $1,000,000 included in current liabilities)
$ 1,000,000 \
1,130,419 /
376,165 > $ 2,751,859
125,000 (
120,275 /
2,925,000
DEFERRED CREDITS AND RESERVES --
Unearned transportation revenue ($184,118), etc
CAPITAL STOCK AND SURPLUS:
Common stock, $3.00 par value --
Authorized 1,000,000 shares
Issued and outstanding 500,000 shares
Capital surplus (principally net premium on sale of
common stock) -- No change during year
Earned surplus (of which $500,000 under the terms of the bank
loan agreement is not available for the payment of dividends)
241,915
$1,500,000
3,717,329 v/ 6,710,494
1,493,165
$12,629,268
Notes:
CONTINGENT LIABILITIES
On March 17, 1949, the Collector of Internal Revenue
issued assessments aggregating $99,501.32 against the
Company claiming this amount as interest on excess
profits taxes which would have been payable for the
fiscal years 1944 and 1945 if the liability for such excess
profits taxes had not been liquidated by the carry-back
of unused excess profits credit and net operating loss
for the fiscal years 1946 and 1947, respectively. The
Company is protesting these assessments and in August
1949, in order to have the assessments held in suspense
by the Collector, deposited $100,000 principal amount
of U. S. Government bonds in escrow pending the
settlement of the disputed assessments.
PURCHASE COMMITMENTS
The Company has made a purchase commitment to
Douglas Aircraft Company of approximately $728,000
for one DC-6 airplane, excluding engines, scheduled
for delivery in December 1949.
STATEMENT OF INCOME
for the year ended June 30, 1949
OPERATING REVENUES:
Passenger
Mail
Express
Freight
Excess Baggage
Other Revenue, Net
OPERATING EXPENSES:
Flying Operations $3,970,314 )
Direct Maintenance -- Flight Equipment 1,582,853 >
Depreciation -- Flight Equipment 1,002,312 )
Ground Operations
Ground and Indirect Maintenance .
Passenger Service
Traffic and Sales
Advertising and Publicity
General and Administrative
Depreciation -- Ground Equipment
Net Income from Operations, before Income Taxes
OTHER INCOME (EXPENSE):
Profit on Sale of Property and Equipment
Net Profit of Dusting Division
Interest Expense
Other Expense -- Net
$11,987,246 \
2,434,888 I
244,859 \
358,503 (
148,485 1
53,864 /
$15,227,845
$ 6,555,479
2,325,963
954,012
1,025,314
1,655,170
529,592
1,052,872
183,554
14,281,956
$ 945,889
$ 193,672
9,255
(87,468)
(52,908)
62,551
Net Income, before Income Taxes $ 1,008,440
PROVISION FOR FEDERAL ($336,000)
AND STATE INCOME TAXES 369,000
Net Income for Year $ 639,440
STATEMENT OF EARNED SURPLUS
for the year ended June 30, 1949
Balance June 30, 1948 $ 978,725 \ n
Net Income for Year Ended June 30, 1949 $ 639,440 f ' '
Dividend (Cash) on Common Stock (25^ per share) 125,000
$ 1,493,165
Balance June 30, 1949 (Restricted as Indicated on Balance Sheet)
C. E. Faulk, Chairman
M. S. Biedenharn
Richard W. Courts
R. W. Freeman
Edward H. Gerry
L. B. Judd
C. H. McHenry
Winship Nunnally
Travis Oliver
Laigh C. Parker
Richard J. Reynolds
D. Y. Smith
C. E. Woolman
C. E. Woolman
President and General Manager
Laigh C. Parker
Vice President of Traffic and Sales
Charles H. Dolson
Vice President of Operations
M. S. Biedenharn
Vice President
Travis Oliver
Treasurer
C. H. McHenry
Secretary
L. B. Judd
Comptroller
Catherine FitzGerald
Assistant Treasurer
General Offices:
Delta Air Lines Building
Municipal Airport, Atlanta, Georgia
Transfer Agent:
Citizens & Southern National Bank
Atlanta, Georgia
Trust Company of Georgia
Atlanta, Georgia
D E L T A AIR LINES INC
General Offices: Municipal Airport
ATLANTA, Georgia