Hughes Airwest: what we were…what we've done…what we're facing [1971]

What we were . . .
What We've Done . . .
What We're Facing . . .

Based on a summary of the first 12
months of Hughes Air Corp. man-
age ment presented by Irving T.
Tague, vice president and general
manager of Hughes Airwest to the
Civil Aeronautics Board, July 16,
1971.

INTRODUCTION
This obviously is not the happi-
est time in the airline industrys his-
tory.
We do not plan to try and show
that everything is rosy at Hughes
Airwest; that all the problems have
been solved since the present man-
agement took over.
We will attempt to show how far
we have come, what has been done,
what the effect has been, and what
the major problems facing Hughes
Airwest appear to be.
tions. Were facing manageable, not
unmanageable, problems;
Two years ago Hughes Airwest
was on the brink of disaster. We
now feel that Hughes Airwest is a
well operated airline that is making
progress and providing good service.
Hughes Airwest, like other air-
lines, is facing severe economic
pressures.
Employee productivity is the
key to increased total revenue for
the airline.
We can see some possible solu

Page 1
The merger between Pacific Air-
lines, West Coast Airlines and
Bonanza Air Lines took effect on
July 1, 1968.
In 1968 expenses were $65.2
million. Revenues, or money
brought into the company, were
only $62.1 million.
In 1969 our expenses were up to
$85.5 million with revenues of only
$68 million.
Like any company, there are
many costs over and above a pay-
roll to keep us in operation.
If we were to take all costs and
all revenues and divide the sum by
the number of employees, this is
what it would look like for Hughes
Airwest.
In 1969 we took in $19,800 per
employee, while we spent $24,000
per employee. Thus we needed to
earn $4,200 per employee just to
break even but didnt. The
$4,200 gap includes subsidy. With-
out it, the difference would have
been $6,700 per employee.
OPERATING REVENUE AND EXPENSE 1968-69
$ Millions
100
80
60
40
20
LOSS
$3.1 Million
REVENUE
LOSS
$17.5 Million
L
1
CO

z

LU

.

X

LU
1
REVENUE
FY 1968
FY1969
$ Thousands 24
OPERATING
REVENUE AND
EXPENSE
PER EMPLOYEE
1969
REVENUE
EXPENSE
I
BREAKEVEN
NEED
PER
-EMPLOYEE-
$6700
PAYROLL
0

Hughes Airwest took control in
April, 1970. With an enormous job
ahead of us we had to map our plan
of action: Our goal was to increase
employee productivity.
Page 2
1
MANAGEMENT TO INCREASE
EMPLOYEE PRODUCTIVITY

Page 3
Before the takeover by Hughes
Air Corp., the airlines organization-
al chart showed too many chiefs:
14 vice presidents, 8 assistant vice
presidents (not shown) and 5 chief
executive officers, including a cor-
porate secretary.
This is our present organization-
al chart. It calls for three operating
vice presidents, one of which has
yet to be filled.
Its a streamlined organizational
chart and the end result is improved
management communications.
}
BEFORE NEW MANAGEMENT
VP CORPORATE
SERVICES
VP RESEARCH
& DEVELOPMENT
EXECUTIVE
VP
CHAIRMAN OF THE BOARD
CHIEF EXECUTIVE OFFICER
VP TRAFFIC
& SALES
VP OPERATIONS
VP
INDUSTRIAL
RELATIONS
VP COMMUNITY
AFFAIRS
VP GOVT
AFFAIRS
VP FINANCE
VP
LEGAL
AFTER NEW MANAGEMENT
TREASURER
\
CONTROLLER
STAFF V.P.
LEGAL
I
STAFF V.P.
INDUSTRIAL
RELATIONS
VICE PRESIDENT
OPERATIONS
VICE PRESIDENT
MARKETING

A number of steps had to be
taken to increase employee produc-
tivity.
By reorganization we increased
management information.
Another means to increase man-
gement information is budgeting.
We now have a profit-and-loss state-
ment, showing what weVe earned
and spent each month, by the 10th
working day of the following
month.
Budgeting, coupled with the
financial studies (such as the prof-
it-and-loss statement), gives man-
geme nt the ability to pinpoint
where we are financially and, more
important, to see where we are los-
ing money.
Thus we can react and take fast
corrective action.
Page 4

I
Page 5
SYSTEMWIDE TRAINING
APPROXIMATELY 3000 EMPLOYEES
(OUT OF 3530) ATTENDED ONE
OR MORE TRAINING COURSES
IN 1970
Training played an important
role in our reorganization. We
trained and retrained all Hughes
Airwest employees who have con-
tact with the public.

All airlines have continuous
training of their flight and main-
tenance crews as well as new per-
sonnel. This chart shows the
courses in the Air West training pro-
gram when Hughes Air Corp. took
over in April, 1970.
We added 36 new courses over
and above the existing training pro-
gram.
We have, in effect, completely
retrained our supervisors, hostesses,
reservationists, salesmen, and sta-
tion agents.
Page 6
TRAINING COURSES IN EFFECT APRIL 1970
Initial Ramp Agent
F-27 Recurrent/Freon System
Initial Station Agent
F27 Recurrent/Winter Operations
Initial Operations Agent
F27 Recurrent/Pneumatics
Initial Reservations Agent
Initial Inspection
Supervision Basic
Basic Indoctrination Maintenance
initial Hostess
F-27 Maintenance Home Study
Recurrent Hostess
DC9 Initial Maintenance
Weight and Balance
DC-9 Initial Electrical (R & E)
F-27 Initial Maintenance
DC-9 Initial Run-Up, Taxi and Trim
F-27 Initial Electrical (R & E)
DC-9 Initial FD-108
Integrated Flight IR&E)
F27 Initial Run-Up, Taxi
and Interconnect
OC-9 Recurrent/Electrical |R & E)
F-27 Recurrent/Propeller
DC-9 Recurrent/APU
F-27 Recurrent/Flight Controls
and Rigging
DC-9 Recurrent/Air Conditioning
System
F-27 Recurrent/Electrical {R & E)
DC-9 Recurrent/Hydraulic System
DC-9 Recurrent/Electrical System
DC9 Maintenance Home Study
TRAINING COURSES STARTED AFTER APRIL 1970
Supervision Intermediate
Maintenance Plating Course
Supervision Advanced
Initial Supply
Management Development
Recurrent/Supply
Creative Management
Catering
Hostess Requalification
Air Freight
Hostess Standards
Air Freight Procedures for Supervisors
Effective Listening
Ticketing, Basic
Data Processing
Ticketing, Recurrent
F27 Initial Avionics {R & E)
Tariff, Basic
F27 Recurrent/AC Deicing
Generator System
Tariff, Intermediate
PNR Computer Training
F-27 Recurrent/Avionics (R & E)
(All Station Personnel)
F-27 Home Study
Mexico Station Special Training
OC-9 Initial Avionics (R & E)
Orientation Training for Sales
Representatives
DC-9 Initial Radar (R & E)
(New York, Chicago, Miami)
DC-9 Initial DME (R & E)
Technical Assistance Training
DC9 Initial Radio Altimeter (R & E}
for Air Vietnam Personnel
DC9 Recurrent/Pneumatic ITCAN
Travel Agency Training
DC-9 Recurrent/Avionics (R&E)
Reservation Home Study
Basic Electrical Maintenance (Shop)
Station Home Study

Page 7
In order to save money, we
grounded or disposed of 10 air-
planes that were uneconomical to
operate.
While other airlines were increas-
ing their miles flown, we were de-
creasing ours.
We reduced shorthaul trips that
were costly and non-productive.
We did this by rescheduling the
airline and cutting the number of
aircraft miles flown . . . thus de-
creasing our revenue miles flown.
NUMBER OF decrease increase
REVENUE MILES FLOWN
1969- 1970 o/
ALLEGHENY
FRONTIER
MOHAWK*
NORTH CENTRAL
OZARK
PIEDMONT
SOUTHERN
TEXAS INTERNATIONAL
DECREASE INCREASE
10 5 0 5 10 15 20 25 30
*0N STRIKE

ON STRIKE
The result was that we were able
to reduce our departures around 17
per cent.
It costs us money to be in the
air. Fuel and personnel expenses
alone are high.
By (1) cutting our airplane
miles, (2) grounding our older,
more expensive airplanes and (3) re-
ducing our departures, we reduced
our time in the air.
Thus we cut our revenue hours
flown.
Page 8
AIRCRAFT DEPARTURES
1969 - 1970
DECREASE INCREASE
% 20 15 10 5 0 5 10 15
ALLEGHENY
NORTH CENTRAL
TEXAS INTERNATIONAL
*ON STRIKE
REVENUE HOURS FLOWN
1969 - 1970
DECREASE INCREASE
20 15 10 5 0 5 10 15
ALLEGHENY
NORTH CENTRAL
TEXAS INTERNATIONAL

Page 9
When our passenger trip length
increases, our revenue, or income,
increases. We want passengers tak-
ing longer trips on Hughes Airwest.
As a result of schedule changes
that give the passenger fewer stops,
better connecting service to our
own and other airlines and more di-
rect service to their destination
city, we increased the average pas-
senger trip from 281 miles to 324
miles.
A concentration of flights into
large, metropolitan airports keep
our planes in the air longer due to
air traffic congestion.
We added jet operations to satel-
lite airports (airports within 60 to
90 minutes driving time away from
a major metropolitan airport).
Thus better service is offered to
suburban customers and money is
saved through less time spent wait-
ing to take off or land.
Departures
per Week
JET SERVICE TO SATELLITE AIRPORTS*
n
m 11
mil
Mill
1II
F M A N I F M A N F
1969 I 1970
BURBANK, OAKLAND, ONTARIO, SAN JOSE, SANTA ANA
1971

2800
4000
3800
We had to reduce the number of
employees because the airline was
losing money.
3400
We went down from 3,700 em-
ployees in 1969 to 3,200 em- 3200
ployees currently.
3000
NUMBER OF EMPLOYEES
Average
Apr. 70
June 71
^3448

Page 11
With all these changes came improvements.
Our airplanes completed more
trips. Our completion factor went
up from 96 per cent to more than
98 per cent.
Our airplanes were on-time. We
are now operating at 85 per cent
on-time. This 85 per cent is an aver-
age for our entire system of 72 air-
port stations.
f
Percent
100
98
96
94
92
0
COMPLETION FACTOR
M J J A S O N 0
1970
J F M A M J
1971
Average
Apr. 70
May 71
98.2%
ON TIME PERFORMANCE
Percent 90
80-
70-
60-
50-
Abbreviated Scale 1969
* Within 15 Minutes of Schedule
1970
FIVE MONTHS
1971

More of our passengers are re-
ceiving the jet service they desire.
More than 82 per cent of our in-
come from passenger traffic, or rev-
enue passenger miles, is on jets.
Our load factor has improved.
Weve been filling our planes.
Page 12
LOAD FACTOR
Percent
45
40
35
30
Abbreviated Scale
1969
1970
SIX MONTHS
1971

Page 13
More indicative, our passenger
density (average number of passen-
gers per mile) has improved from
24.6 passengers for every plane mile
we fly to the current 33.7.
Improving the quality of our ser-
vice and holding the line on flying
hours and the number of employees
has paid off.
In 1971 our revenue ton miles
per employee (or percentage of
planes filled with revenue passen-
gers and cargo) was up 37.5 per
cent in two years over 1969.
PASSENGER DENSITY
Passengers
per mile
35
30
25
20
Abbreviated Scale
1969
1970 SIX MONTHS 1971
Thousands
REVENUE
TON MILES
PER EMPLOYEE
0
FY 1969
FY 1971

We've explained a few of the
changes we made and the results of
these changes. Still more had to be
done and Is being done to improve
our financial situation.
Sales quotas have been estab-
lished, implemented and are regu-
larly checked.
We also have financial reports
for each segment, or flight, in our
system. This is called a segment
profit-and-loss statement.
We have been working on our
cargo sales. Our ton miles are up 25
per cent over last year.

Page 15
Our old reservations system was
inadequate. We were faced with do-
ing something about it right after
the April, 1970 takeover.
We chose the Mutual Computer
Services subsidiary of Continental
Airlines, joining in time sharing
with Continental, Piedmont and
Ozark.
Using this system, the cost per
passenger is 14 cents. If we had put
in our own computer system, the
cost would have been somewhere
between 50 and 60 cents per pas-
senger.
This new system makes it possi-
ble for us to implement new mar-
keting surveys using information
about the passenger that is received
from the computers.

One of our major problems was
yield, or how much we receive per
revenue passenger mile.
We had a yield gap. In other
words, our yield was not up to aver-
age with the rest of the airline in-
dustry. If Hughes Airwest yields in
1970 had been at the local service
industry average, Hughes Airwest
revenues would have been $5
million higher. This amount would
have accounted for three-fourths of
our total operating loss in 1970.
The yield problem is two-fold:
We had too many discounts and too
small a share of full fare traffic. We
discontinued several discount fares,
such as the Discover America Fare,
in an attempt to get full fare pas-
sengers.
Now our full fare traffic is more
than 80 per cent.
Page 16
COMPARISON OF YIELD PER PASSENGER MILE
FULL-FARE TRAFFIC
% of 80
Total RPMs
70
60
50
40
30
20
10
0

i
Page 17
Subsidy is dollar funding from
the government that supplements
the airline industry for monies lost
due to unprofitable routes.
From Fiscal Year 1968 on, sub-
sidy for Hughes Airwest, as well as
for the other regionals, had
dropped sharply faster than we
could offset inflation with in-
creased revenue and productivity.
The reversal of that decrease in
total subsidy dollars for Fiscal Year
1971 has helped.
AIR WEST SUBSIDY
FY1967 FY1968 FY1969 F Y1970 FY1971

Here's where we are now.
Page 18
In Fiscal Year 1970 and 1971
commercial revenues, or income
from operating our aircraft, have
gone up.
OPERATING REVENUE AND EXPENSE 1970-71
SMillions
LOSS $4.3 Million
In Fiscal Year 1971 our ex-
penses have gone up.
Our revenue has increased.
But our losses have decreased
substantially. Our operating loss
was cut in half, from $8.6 million
to $4.3 million. (This is based on a
Civil Aeronautics Board Fiscal Year
which is June to June. Thus June
1969 to June 1970, and June 1970
to June 1971.)
EXPENSE REVENUE LOSS
$ Millions
100

}
Page 19
The expense and revenue picture
for each employee, or employee
productivity, changed.
While expenses to maintain each
employee went up, revenue to sup-
port that employee went up even
more.
The company lost $1,300 for
each employee in Fiscal Year 1971,
compared with $6,700 in 1969.
EXPENSE
$ THOUSANDS PER EMPLOYEE
30 I
REVENUE
PER EMPLOYEE
LOSS
PER EMPLOYEE
0
1969 1970 FY 1971
1969 1970 FY 1971
1969 1970 FY 1971

The remaining gap is going to be
difficult to close.
There are five major reasons, as
we see it, for the gap.
They are (1) uneconomic cities,
(2) rising costs, (3) constraints on
California operations, (4) what we
call the aerospace recession and (5)
route integration.
Well explain these further.
MAJOR PROBLEMS
UNECONOMIC CITIES
RISING COSTS
CONSTRAINTS ON
CALIFORNIA OPERATIONS
AEROSPACE RECESSION
ROUTE INTEGRATION

Page 21
Other airlines are worrying
about stops that do not enplane
(board) 30 or even 20 passengers a
day. Twenty-seven of our cities gen-
erate less than 30 passengers a day.
Our problem is that we have too
many points that do not even board
10 passengers a day.
We are still paying for crews,
maintenance, and ground personnel
for these low-productivity points.
Other regional carriers serve an
average of eight cities that enplane
less than 10 passengers a day.
Hughes Airwest serves 19 cities
enplaning less than 10 passengers a
day.
Up to 10, or maybe 12, of these
19 cities are within some 60 to 90
minutes driving time of another
major airport.
It has been extremely difficult
for us to find suitable, financially
$
responsible third-level carriers (or
carriers operating smaller airplanes)
willing to serve these small cities.
Uneconomic cities.
/WRVUESr LOW-TRAFFIC CITIES
1970
Enplanements
Number
Per Day
of Cities*
Less than 10
19
10-20
4
20-30
_4
Total
27
'Total Air llVest System, Excluding Canada and Mexico.
AIR WEST SERVES MORE THAN
TWICE AS MANY LOW TRAFFIC CITIES*
AS THE AVERAGE LOCAL SERVICE CARRIER
Served by Local Service Carrier 83
Served by Air West J9
Served by Other Locals 64
Average Other Locals 8
*N0. OF CITIES
WHICH AVERAGE
LESS THAN 10
ENPLANEMENTS
DAILY

Our second economic problem is rising costs.
Page 22
Our new wage contracts average
more than 10 per cent in initial in-
creases, with further raises to fol-
low.
ALPA Air Line Pilots Asso-
ciation
ALPA Hostess division
ALEA Air Line Employees
Association
lAM International Association
of Mechanics
AMFA Aircraft Mechanics
Fraternal Association
ALDA Air Line Dispatchers
Association
STATUS OF LABOR AGREEMENTS
INITIAL
INCREASE
STATUS
JULY, 1971
EXPIRATION
DATE
ALPA Pilots
10%%
April 1972
ALPA Hostesses
11%
October 1972
ALEA Station, Clerical
11 %
February 1973
lAM Storekeepers
12%
July 1973
AMFA Mechanics
In
Negotiation
March 1971
ALDA Dispatchers

Negotiation
Due
October 1971

1969
1970
FIVE MONTHS 1971
Page 23
Fixed costs are rising. One exam-
pie is our landing fee picture.
Landing fees were up 13 per
cent in 1970. In the first five
months of 1971 landing fees are up
44 per cent and they will continue
to rise.
Wages and increased landing fees
particularly hit our smaller aircraft,
the F27s.
Their block hour costs, or cost
per hour in the air, are escalating.
In 1969 it cost $220 per airborne
hour to operate an F-27. It cost
$287 per block hour for the first
five months of 1971.
{
50 %
Cost of
Landing Fees
{% Increase
over 1969)
1970
1st FIVE MONTHS 1971
F-27 OPERATING COSTS
Dollars
per Block
Hour 300-
250
200
150
100
50

Constraints on California operations.
Page 24
California is a very important
part of our system, but the state
presents some serious and unique
problems.
First, California fares are lower
than local service carrier fares in
other states. There is always a time
lag involved in getting California
fare changes moved upward.
As a case in point, the fare in-
creases approved by the Civil Aero-
nanties Board to become effective
May 7, 1971, are not yet effective
in California. This is because this
fare increase has to be approved by
the California Public Utilities Com-
mission. (As of September 30,
1971, it was still pending before the
PUC.)
As pointed out, California is im-
portant in our system and since the
increased fare is not effective in
California it costs Hughes Airwest
$1,700 a day in lost revenue.
CALIFORNIA FARE LAG
("PHASE 7" FARES ONLY)
Revenue Loss Per Day
$ 1,700
X Days Lag May 7Oct. 1
x146
= Total Revenue Loss
$248,200


Page 25
Competition within the state of
California (called intrastate compe-
tition) is severe.
Intrastate carriers (or carriers
which can operate only in one
state) have many of the same routes
in California as Hughes Airwest.
This chart shows the duplication
of routes by California intrastate
carriers and Hughes Airwest.
CALIFORNIA ROUTE SYSTEMS OF
INTRASTATE CARRIERS
November Schedules
Pacific Southwest
Holiday Airlines
Air California >
'''Jm TAHOE
i/ .'^CTvfENfoX \\
" ' X \ \
SAN franciscoi^^^aklanXI \
SAN J0SEWrX.''\ w \ \'\
>x
OA K L AN D \\
\' i \ \ \ ' BU.RBAr^K- I \K I
\\ \ \ VV /lOTARIO/
y ioibv,
' '/RSIDE
I liZo.
^ ,, ^
November schedules: shows only routes to points
served by Air West.

Page 26
This chart shows applications by
intrastate carriers for new routes
within the state of California.
The dotted lines indicate appli-
cations for routes over and above
their present route structure.
For example, new applications
to Fresno, Stockton and Eureka are
duphcations of Hughes Airwests
routes. We feel these routes being
sought by intrastate carriers would
divert some $1.6 million annually
from Hughes Airwest.
Since intrastate carriers need
only apply to the California Public
Utilities Commission (and not to
the Civil Aeronautics Board) for
new routes, Hughes Airwest has
asked the Public Utilities Commis-
sion NOT to grant these routes to
the intrastate carriers.
EUREKA ARCATA^
\
\
ROUTE APPLICATIONS OF CALIFORNIA
INTRASTATE CARRIERS
(AS OF JANUARY, 1971)
PACIFIC SOUTHWEST
AIR NEVADA
HOLIDAY AI R LI NES
AIR CALIFORNIA
</ / / K i X \ \
: , , -VA"FRESNO y\ \ \ V
: . i v'x'v \i XV' \ ; i 's'- W ' \
; * \ i X <v \ A V A Xci V
\ \ \ \ \ 1 %
s \ \ \ i V // i l
Our main reason for opposition
is that it would not be profitable
for two carriers to serve the same
route.

Page 27
Air taxis, or shorthaul carriers,
are serious competition in many
California markets. These com-
muter carriers carry more than 1.5
million passengers per year in Cali-
fornia.
This chart shows California air
taxi markets competing with
Hughes Airwest.
Hughes Airwest is more affected
by air taxi competition on our
routes than any other regional car-
rier.
This chart gives comparative fig-
ures for nine regional carriers, indi-
eating the percentage of air taxi
passengers in their markets.
f
CALIFORNIA AIR
TAXI MARKETS*
EUREKA#
COMPETITIVE WITH AIR WEST
LAKE TAHOE
SANTA ROSA % \ /
\ I//SACRAMENTO
jlj. STOCKTON
SAN FRANCISCO?^/"'
SAN JPSE
MONTEREY# ^ \
i \ FRESNO \
\ "X. BAKERSFIELD
SANTA MARIA'X,
SANTA BARBARA'l#/,.,_
OXNARDV....'Xv
# ONTARIO
LOS ANGELES
AIR TAXI COMPETITION*
1969
COMMUTER PASSENGERS AS A PERCENT
OF TOTAL LOCAL-SERVICE PASSENGERS
6,90
ALLEGHENY
4.58
NORTH CENTRAL
4 . 43 '
OZARK
2.67
FRONTIER
1.66
PIEDMONT
1.29
SOUTHERN
0.95
MOHAWK
0.70
TEXAS INTERNATIONAL
0.62
Markets in which both carriers averaged
a minimum of five passengers per day.

Aerospace recession.
Page 28
We operate in four of the top 10
unemployment areas in the nation.
The statistics on the chart are
for March, 1971. In July, 1971,
Seattles unemployment figures
were in excess of 15 per cent.
This affects the travel business.
People are uncertain and cautious.
They are waiting. To point this out,
personal savings in California have
risen 38 per cent in the last year.
People simply are not spending
money.
UNEMPLOYMENT
IN MAJOR MARKETS
Air West Cities Include Four
of the Top Ten Unemployment
Areas*
'MARCH, 1971 - CITIES WITH OVER
500.000 IN LABOR FORCE
CITY
% UNEMPLOYMENT
1
2
3
4
5
6
7
8
9
10
Seattle
Detroit
Anaheim
Los Angeles
Paterson (N.J.)
Buffalo
Newark
St. Louis
San FranciscoOakland
Kansas City
Ave. 26 Largest
Labor Areas
13.2
8.2
7.8
7.7
7.0
6.9
6.5
6.3
6.2
6.1
5.7
Other leading Hughes Airwest
markets also are hurting because of
unemployment. Even our smaller
cities, which have less than a half-
million work force, are well above
the national average for unemploy-
ment.
UNEMPLOYMENT-OTHER LEADING AIR WEST MARKETS
%
Fresno
9.2
Sacramento
7.2
San Bernardino, Riverside, Ontario
7.3
San Diego
7.1
Spokane
9.4
Tacoma
11.0
MARCH. 1971

Page 29
R
Route integration is one of our
major problems. From a certifi-
cated route standpoint we are still
three separate airlines.
For example, when the three air-
lines merged in April, 1968, they
brought with them three separate
and different route systems that
connected at different cities.
As a case in point. West Coast
Airlines flew from Eugene to San
Francisco. Pacific Airlines flew
from Los Angeles to San Francisco.
Hughes Airwest still stops at San
Francisco when flying from Los
Angeles to Eugene. Legally elimi-
nating this required stop at San
Francisco would be called route in-
tegration.
Without route integration, we
still have 15 separate segments (13
domestic and 2 trans-border) all of
which require mandatory stops and
some of which are unnecessary and
costly.
AIR WEST ROUTE SEGMENTS
T
S
SE*TTl SPOKANE / ^
i L*yakiM^ MOS^LAKEi VaOSCOW
PORTLANDH flICHLANO VALLA
co.v..,s, ir
CRESCENT CITY L AKE)^
(REDWOODS NAT L PARKI^*^^
EUREKA/ARCATA I
(REDWOODS NAT L PARK)4,^
***^^^^RDDINC/RED BLUE F
Terminal point SAN FRANCISCO ^
Intermediate point
Terminal and intermediate point
Temporary point
Service suspended nnnAwn/vEitfTt.BA.**'*' ^tRSI^E
LOS ANGELES*

Page 30
Every regional carrier has re-
ceived a Subpart M Award.
Usually, when a carrier wishes to
delete a stop or change a route it
applies to the Civil Aeronautics
Board which will consider the ac-
tion in a hearing.
A subpart M, however, is an ac-
tion to delete a stop awarded by
the Civil Aeronautics Board with-
out hearings.
AIR WEST AND ITS PREDECESSOR
COMPANIES HAVE NEVER RECEIVED
A SUBPART M AWARD
CARRIER
Mohawk
Allegheny
Frontier
Ozark
North Central
Texas Int'l
Piedmont
Southern
RWESr*
NUMBER OF
SUBPART M AWARDS
14
5
5
4
3
3
1
1
None
Neither Hughes Airwest, nor its
predecessor airlines have ever had a
Subpart M before.
SUBPART M BENEFITS
1. Reduced Operating Expenses
2. Increased Yields on Existing Traffic
3. End-to-End Traffic Stinnulation
4. Beyond Flows
*And predecessors
A Subpart M provides four bene-
fits:
1) It reduces operating expenses
(by deleting costly stops).
2) It decreases the per mile cost to
the passenger and increases the
average ticket value by generat-
ing more distance traffic and
larger fares.
3) It provides end-to-end traffic
stimulation (longer passenger
trips).
4) It adds a considerable amount to
beyond flows (traffic beyond the
route in question).

Page 31
Here is a hypothetical example
of what a Subpart M would pro-
duce for us: a 28 per cent saving on
our costs by changing a one-stop to
a non-stop.
Hypothetically, we could then
eliminate some 24 per cent of the
miles flown.
Our departures would be cut in
half.
Our flying time would go from
one hour and forty-seven minutes
to one hour and four minutes. This
is a 41 per cent reduction in block
hours.
By being able to operate at a 28
per cent cost reduction we would
be able to give a lower fare to the
passenger and increase our average
ticket price at the same time.
HYPOTHETICAL SUBPART M AWARD-
SHORTEST
ONE STOP
NON-STOP
SAVINGS
Round
Per Trips
Trip Per Yr.
Rou nd
Per Trips
Trip Per Yr.
Round
Per Trips
Trip PerYr.
Distance
in Miles
600 438,000
458 334,000
142 24%
No. of
Departures
2 1460
1 730
1 50%
Block Hours
1.47 1325
1:04 779
0:43 41%

It looks as if we will be unable to close
the gap between expenses and revenues
ourselves during the next 12 months.
If we allow for new wage con-
tracts and the escalations built into REVENUES AND EXPENSES ($000,000)
the old contracts, we feel the oper-
ating expenses will be in the area of
FY 1971
Forecast
FY 1972
$105.4 million in Fiscal Year 1972.
Revenues Commercial
82.8
91 .3
Subsidy
10.7
10.7
TOTAL
93.5
102.0
If the most recent 12 months
traffic is carried at current yields, if
Expenses Payroll
47.0
53.0
our cargo gains continue as strong
Non-Payroll
50.8
52.4
as they have been for the last year.
TOTAL
97.8
105.4
and if our Class Rate V subsidy re-
Operating Profit (Loss)
( 4.3)
( 3.4)
mains where it is today, our annual
Non-Operating Expenses
2.7
2.4
revenues will be $102 million.
Net Profit ( Loss)
( 7.0)
( 5.8)
In addition, there are $2.4 mil-
lion in non-operating expenses,
making a net loss of $5.8 million
after subsidy.


Page 33
We could keep these expenses
from reaching $105 million by:
1) Eliminating some of the
points that do not board 10
passengers a day.
2) Realigning our route structure
to eliminate non-productive
departures.
3) Arranging route transfers and
joint servicing (sharing facili-
ties with other airlines).
4) Obtaining Subpart Ms to al-
low fewer mandatory stops.
Without such changes, we can-
not catch up with the $2,700 per
employee increase in operating ex-
pense this coming year.
REVENUES AND EXPENSES PER EMPLOYEE
$Thousands
30
25
20
15
10
Expenses Revenues
-^Non-Operating^
Expenses Revenues
PAYROLL
49 %
NON-
PAYROLL
51 %
0
FY 1971
Forecast
FY 1972

This presentation is based on hard eco-
nomic factors traditionally used to determine
the financial status of a company.
However, economic statistics do not reflect
the human element, an immeasurable factor
that determines the quality and depth of any
company.
In this respect, Hughes Airwest has the
people who already have demonstrated the
skill, professionalism and pride needed to de-
velop their airline as one of the best in the
industry.
We must become profitable for several rea-
sons. The first is that we cannot afford not to
be. But more important, a profitable airline
will provide us with opportunity, security and
future of interest to every employee.
The years 1970 and 1971 were periods of
stabilization and over-all product improve-
ment. Now we must reach out to our cus-
tomers and tell them about our product.
This is why 1972 will be the year to con-
cntrate the whole company on marketing its
products and services.
Page 34
This important program will include:
A new image for Hughes Airwest, which
will involve new hostess and agent uniforms,
new corporate colors, a new insignia (or
mark), and a new logo (or type style for the
company name).
Under current development are new sales
quotas, automatic ticketing at certain sta-
tions, new scheduling and an improved reser-
vation system.
There are many more phases of the pro-
gram all directed at emphasizing the 1972
coordinated marketing effort.
Even though economic conditions in the
Western region are at a low point, we expect
an upswing in 1972 within the territory we
serve.
That, coupled with our new marketing pro-
gram and our desire to implement our goals,
can assure success not only for Hughes
Airwest and its employees but also for the
many communities it serves.
Prepared by:
Hughes Airwest
Public Relations Department, JH
September 30, 1971