Wisconsin Central Airlines Annual Report 1948

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WISCONSIN CENTRAL AIRLINES
INC.
YEAR ENDED DECEMBER 31, 1948
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- C.A.B. authorized route now
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C.A.B. authorized route on
which service is delayed
pending improvement of
airports
Proposed service to i.and o
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STEVENS PT.-
WIS. RAPIDS
sVPERIOR
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On behalf of the Board of Directors, we are pleased to submit a
review of our first year of scheduled airline operations and the
financial statements of the company for the calendar year 1948.
REVIEW OF FIRST YEAR'S OPERATION:
Our first scheduled flights carrying passengers, mail, and express
were authorized on February 24, 1948. The ten-month period follow-
ing the start of scheduled operations was one of perfecting the
organization, improving and adding equipment, and expanding the
operation.
The company started scheduled operations with two airline certi-
fied Lockheed twin engine, nine passenger aircraft. The third plane
was placed in operation within a month and while these three planes
met all safety requirements, they were not equipped for instrument
operation and required extensive modification to meet this standard.
Three additional aircraft, all of the same make and size, were pur-
chased during the year and modified to meet air carrier requirements.
Four of the six aircraft are now fully modified for instrument authority
and it is anticipated that the remaining two aircraft will be fully
converted for instrument operation in approximately thirty days.
The cost of the aircraft, completely modified, averages approxi-
mately $38,000 per plane.
OPERATION RESULTS:
Operating revenues for the ten months of scheduled operations
were $703,123.45, plus $2,132.84 of other income. Operating ex-
penses for the same period were $739,648.19, which, with other de-
ductions amounting to $3,029.35, resulted in a net loss of $37,421.25,
after a provision for depreciation amounting to $40,229.47. It has
been the policy of the Civil Aeronautics Board in determining mail
rates of feeder airlines to reimburse them for operating losses pl us
an additional amount equivalent to 7% return on investment used
in the operation.
Inventories at our cost at the beginning of scheduled operations
amounting co $30,564.58 were required to be increased to $82,379.15
at the end of the year and the investment in operating property and
equipment was increased from $193,541.93 to $297,744.77 after
deducting $47,273.19 as a reserve for depreciation.
FINANCIAL:
Pending a final determination of the company's permanent mail
rate, which cannot be anticipated until the latter part of 1949, the
company found it necessary to resort to long-term borrowing from
an insurance company. The amount due from the U.S. Government
for the carrying of mail in 1948 was $147,195.44. Pre-operational
expense was $224,831.49. Net loss for the year 1948 was $37,421.25.
The total of these amounts or $409,448.18 is subject to government
audit and eligible for reimbursement to the company from the
government under its prevailing policy, in the opinion of the Board
of Directors.
While, as has been stated, it is the policy of the Civil Aeronautics
Board to reimburse an airline operating under a temporary mail rate
for its operational losses, its eligible pre-operational expense, and
a 7% return on the investment used in the operation, the withholding
of these large sums from the company, until the permanent mail rate
if established, is a severe financial handicap to the company.
RADIO AND NAVIGATIONAL Arns:
The company found it necessary to install its own radio communi-
cation facilities over its entire system and navigational aids over
that part of its routes not already so equipped. These navigational
aids will permit the company to operate under instrument authority
over its entire system. The cost of the navigational aids and radio
facilities will represent an investment of approximately $100,000
when completed for the system. It is expected that these radio
communication facilities and navigational aids will increase per-
formance reliability an average of 10% throughout the year.
OUTLOOK FOR 1949:
During the year the company served twenty-two C1t1es through
sixteen airports. An additional twenty-two cities on routes awarded
the company could not be served because of the lack of adequate
airports. At least eight additional airports, however, were under con-
struction during the year. If additional financing can be arranged to
provide funds for more planes, station installations, and other capital
outlays, some of these cities can be added to the system in 1949.
The company's passenger, mail, and express revenues should be
materially improved during 1949 with the more reliable and frequent
service that can be provided with the navigational aids. We have
implicit confidence in the future of Wisconsin Central Airlines based
on our experience of the past year and our estimates of traffic and
revenue potentials of the routes awarded us.
CONCLUSION:
The remarkable showing of Wisconsin Central Airlines in its first
year of operation is a tribute to the pioneering spirit, loyalty and
resourcefulness of the men and women in its employ. Special recog-
ntion should also be given the members of the Board of Directors
who unselfishly gave much of their time and effort to the organi-
zation during the year.
Respectfully submitted,
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Madison, Wisconsin
March 19, 1949
FRANCIS M. HIGGINS
President
WISCONSIN CENTRAL AIRLINES, INC.
ASSETS
CURRENT ASSETS
Cash . .... . $ 36,092.83
Accounts receivable
U.S. Government.
Traffic . . . . .
Other . . ...
. $147,195.44
15,486.20
Inventories-at cost
Parts and supplies '
Gasoline and oil
Prepaid insurance, interest
and other expenses. . .
6,030.80 168,712.44
16,608.57
4,358.98 20,967.55
15,734.73 $241,507.55
OPERATING PROPERTY AND EQUIPMENT
Flight equipment-at cost
(Equipment costing
$210,705.26 pledged as
security for notes pay-
able-contra) . . . .
Ground equipment-
at cost . . . . . . . .
Hangar and office building
-at cost ..... .
Furniture and fixtures-
at cost . . . . .
Less reserves for
depreciation
Radio equipment instal-
lation in progress-at
cost (pledged as security
for notes payable-
contra) . . . . . .
DEFERRED CHARGES
Route development
~ expense (note 1) .
Organization and capital
stock expense
Other . . .. . . . .
274,990.41
27,304.35
42,329.47
13,247.80 357,872.03
47,273.19
310,598.84
48,557.53 359,156.37
224,831.49
65,378.39
3,877.74 294,087.62
$894,751.54
Balance Sheet
December, 31, 1948
LIABILITIES
CURRENT LIABILITIES
Notes payable-unsecured
Notes payable-installments
due within one year
Accounts payable . .
Accrued liabilities
Salaries and wages . . $ 10,711.07
Taxes ( other than
income taxes) .
Other . ....
NONCURRENT LIABILITIES
5% notes payable, due
$6,300.00 monthly
January 12, 1949 to
February 12, 1950, and
$6,800.00 on March 12,
1950 (secured-contra)
Less installments due
within one year . .
6% notes payable, due
$2,999.89 monthly
(secured-contra) .
Less installments due
within one year .
DEFERRED INCOME
Unearned transportation
revenue .. . .. .
8,071.33
13,232.14
95,000.00
75.600.00
41,998.45
35,998.69
CAPITAL STOCK AND SURPLUS
Capital stock-common;
authorized, 300,000
shares of $1.00 par value;
issued, 155,000 shares . .
Paid-in surplus-excess of
issue price over par value
of common stock . . .
Earned surplus (Deficit)-
net loss from February
24 to December 31,
1948 (note 2) . . .
The accompanying notes to financial statements are an integral part of this balance sheet.
$ 6,280.61
111,598.69
134,105.51
32,014.54 $283,999.35
19,400.00
5,999.76 25,399.76
2,773.68
155,000.00
465,000.00
37,421.2.5 582,578.75
$894.751.54
WISCONSIN CENTRAL AIRLINES, INC.
STATEMENT OF INCOME
FEBRUARY 24 (NOTE 2) TO DECEMBER 31, 1948
TRANSPORTATION REVENUE
Mail (note 2)
Passenger .. .
Express ...
Excess baggage
OPERATING EXPENSES
Flying operations
Flight equipment maintenance
Ground operations . . . . .
Ground and indirect maintenance
Passenger service . . . . .
Traffic and sales . . . . .
Advertising and publicity .
General and administrative
Provision for depreciation
Operating loss
OTHER INCOME
Incidental revenue and cash
discounts earned
OTHER DEDUCTIONS
Interest . . . . . . .
Amortization of debt expense
Miscellaneous .
NET LOSS ..... .
$582,500.00
113,648.51
5,962.67
1.012.27 $703,123.45
190,630.20
126,966.18
201,761.50
50,414.32
3,294.2_
2
16,749.99
15,432.92
94,169.39
40.229.47
2,118.33
333.66
577.36
739,648.19
36,524.74
2,132.84
34,391.90
3,029.35
$ 37,421.25
The accompanying notes to financial statements are an integral part
of this statement.
WISCONSIN CENTRAL AIRLINES, INC.
Notes to Financial Statements
December 31, 1948
1. Route development expense in the amount of $224,831.49 con-
sists of net costs incurred in securing and developing the route
awarded to the company by the Civil Aeronautics Board under
a temporary certificate of convenience and necessity authorizing
engagement in scheduled air transportation for a period of three
years from October 3, 1947. No provision has been made for
amortization of this deferred charge because, in the opinion of
the Board of Directors, based upon past rulings of the Civil
Aeronautics Board, the current temporary mail rate will be
changed to a permanent mail rate by the Civil Aeronautics
Board which will include an amount sufficient to provide for
amortization of the allowable expense plus a return on the
investment.
2. Net income is for the period from February 24, 1948, date of
commencement of scheduled flight operations, to December
31, 1948. Expenses incurred prior to February 24, 1948 were
capitalized as Route Development Expense. Mail revenue is
based upon a temporary mail rate order issued by the Civil
Aeronautics Board. The Board reserves the right to increase
or decrease this rate and such change may be made retroactive
to February 24, 1948.
NEW YORK
ALEXANDER GRANT & COMPANY
MEMBER AMERICAN INSTITUTE OF ACCOUNTANTS
CERTIFIED PUBLIC ACCOUNTANTS
303 BELLIN BUILDING
GREEN BAY, WISCONSIN
Board of Directors
Wisconsin Central Airlines, Inc.
CHICAGO
GREEN BAY
LA CROSSE
We have examined the balance sheet of WISCONSIN CEN-
TRAL AIRLINES, INC. (a Wisconsin corporation) as of December
31, 1948 and the related statement of income from February 24,
1948 ( date of commencement of scheduled flight operations) to
December 31, 1948. Except that it was not practical to confirm the
accounts receivable from the U. S. Government, as to which we
satisfied ourselves by means of other auditing procedures, our
examination was made in accordance with generally accepted audit-
ing standards, and accordingly included such tests of the accounting
records, and such other auditing procedures as we considered neces-
sary in the circumstances.
Scheduled flight operations commenced February 24, 1948
under a temporary certificate of public convenience and necessity
granted by the Civil Aeronautics Board for a period of three years
from October 3, 1947. Expenses incurred prior to February 24, 1948
have been capitalized as Route Development Expense. No pro-
vision has been made for amortization of this deferred charge be-
cause, in the opinion of the Board of Directors, based upon past
rulings of the Civil Aeronautics Board, the current temporary mail
rate will be changed to a permanent mail rate by the Civil Aero-
nautics Board which will include an amount sufficient to provide
for amortization of the allowable expense plus a return on the
investment.
In our opinion, subject to the explanation contained in the
preceding paragraph, the accompanying balance sheet and related
statement of income present fairly the financial position of Wiscon-
sin Central Airlines, Inc. at December 31, 1948, and the results of
its operations for the period from February 24 to December 31,
1948, in conformity with generally accepted accounting principles
applied on a consistent bas s.
Green Bay, Wisconsin
h
March 5, 1949
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