North Central Airlines Annual Report 1952

Route of the Northliners
NOBTB CBNTBAL
AIBLINBS
5 years of progress
formerly Wisconsin Central
J!tnnaal~
~952
NOBTH CENTBAL AIBLINES INC.
formerly Wis':onsin Central
General Offices: 3300 University Avenue Southeast
Minneapolis, Minne~ota
DIRECTORS
H. N. CARR FRANCIS M. HIGGINS
GARNET F. DE COURSIN* HOW ARD A. MOREY*
DONALD B. OLEN
R. B. STEWART*
HAROLD H. EMCH ARTHUR E. A. MUELLER* A. L. WHEELER
* Executive Committee
OFFICERS AND OFFICIALS
ARTHUR E. A. MUELLER
HOW ARD A. MOREY .
FRANK N. BUTTOMER .
GROVE WEBSTER . . . .
ARTHUR E. SCHWANDT
BERNARD SWEET ...
ROBERT J. CERONSKY
R.H. BENDIO, SR ....
. . . . Chairman of the Board
. . . . . . . . . . President
Vice President-Traffic & Sales
. . . Vice President
. Secretary-Treasurer
... Asst. Treasurer,
Operations Manager
Director of Maintenance and Engineering
REGISTRAR AND STOCK TRANSFER AGENT
MARSHALL & ILSLEY BANK
MILWAUKEE, WISCONSIN
Report to Stockholders
The year 1952 marks the passing of a milestone in the five-
year history of your airline. The actual physical development
during the year reached a new high, and new records in
many phases of our program were attained.
Revenue and Expenses
Revenue from all sources during the year was $3,220,722,
an increase of $1,127,711, or 54% over the previous year.
Passenger revenue increased 71 % from $860,598 to $1,470,-
536. Mail, express and other operating revenues increased
42%.
Operating expenses totaled $3,307,676, resulting in an
operating loss for the year of $86,954. Net non-operating
expenses were $36,439, and the net loss, $123,393.
This loss was caused principally by adversities in connec-
tion with the move of the maintenance base and general
offices to Minneapolis. This is best indicated by the fact that
operations for the first ten months of 1952 resulted in an
operating loss of $5,274.
Air Mail Compensation
Air mail compensation for the year totaled $1,681,541, or
52% of total revenue, an increase of $499,951 over the
previous year. The company's air mail pay is based on
temporary rates established by the Civil Aeronautics Board
in June, 1951, and adjusted upward in March and Septem-
ber, 1952. The temporary rate is designed to enable the
company to meet only its break-evenneed, whileapermanent
mail rate should enable the company to meet this need plus
a reasonable return on investment. Accordingly, your com-
pany will endeavor to obtain a permanent mail rate in 1953,
as it will enable us to stabilize our financial position and
operate profitably.
Relocating the Company
Throughout the year, negotiations were carried on for the
location of the headquarters of the company. The need for
a change was caused by the requirements of the United
States Air Force, owner of the Madison hangar which had
previously served as our main base. In planning the move,
consideration was given to existing and contemplated
facilities at all locations on the system. Unfortunately, the
notice to vacate gave us less than desirable time and
occurred at an unfavorable season of the year.
In November the maintenance base and general offices
were moved from Madison to the Twin Cities of Minne-
apolis and St. Paul. This new base was selected as it was felt
it best provided existing and contemplated facilities for
housing, servicing and repairing of aircraft. An agreement
with the Minneapolis-St. Paul Metropolitan Airports Com-
m ssion provides that as soon as possible, adequate hangar
and maintenance facilities will be made available. Our move,
however, created a temporary problem of housing. It was
necessary to separate the maintenance fonctions and per-
form daily inspection and repairs in a public hangar; and to
establish aircraft overhaul, stocks and stores at a second
location. This factor, together with a loss of experienced
personnel who did not desire to move to the new location,
caused a disruption in our maintenance program with resul-
tant delay and cancellation of flights.
On January 1, 1953, a lease was concluded with North-
west Airlines for the use of a service hangar at Wold-
Chamberlain Field. Since that time, steady improvement
has been experienced in our maintenance service and
scheduled performance. Plans are now moving forward for
the erection of permanent facilities.
Management Changes
During the year 1952, several important management
changes occurred. In May, Donald A. Duff was employed
as Executive Vice President and General Manager. Most
unfortunately, Mr. Duff was taken seriously ill and his un-
timely death occurred late in the year. In October, Francis
M. Higgins resigned as President, and Arthur E. A. Mueller
was elected to this position. On January 1, 1953, Mr. Mueller
relinquished his office as President in favor of Howard A.
Morey, who was also made General Manager. Mr. Morey
has been active in aviation for over thirty years and has ac-'
quired extensive practical operating experience. He has been
closely associated with the company, having served as a
director and a member of the Executive Committee of the
Board of Directors since the start of scheduled operations.
New Services
During the year the Airline's certificated unduplicated route
mileage increased from 1,589 to 2,573, an increase of 62%,
with service to fourteen new cities. This extended the operat-
ing pattern as far east as Detroit and as far northwest as
Grand Forks. Service to these communities, with the excep-
tion of Detroit, Lansing, and Grand Rapids, Michigan; and
International Falls, Minnesota, was begun during the year.
First of the new routes to be operated was the non-stop
segment between the Twin Cities and Duluth-Superior,
which your management regards as a very valuable exten-
sion. Four flights daily were started over this segment Feb-
ruary 10, and early in the summer a third round trip was
added. A route between Minneapolis-St. Paul and Chicago
via Winona, Minnesota; LaCrosse, Wisconsin; and Madison
was put in operation on April 27 with two round trips daily
to each of the intermediate cities. Service to Fargo and
Grand Forks, North Dakota, via five intermediate cities
was inaugurated June 22, with one trip a day scheduled in
each direction.The second round trip was added September 1.
In addition to the new mileage, increased daily schedules
were offered to the Wisconsin cities of Green Bay,Milwau-
kee, and Madison. As a result of service to new cities and
heavier scheduling, daily aircraft miles reached a new
record of 10,654 a day compared to 5,502 the previous year.
In 1952 a total of 2,859,158 scheduled miles were flown.
Traffic Gains
A certain continuity of operation over a period of time with
continued advertising and sales effort is required to develop
a new route. Load factors on the new extensions, therefore,
were somewhat lower than those on the established routes.
Despite the 94% increase in operating mileage, the overall
system load factor showed a slight increase from 42.12% to
42. 58%. This indicates chat passenger traffic on the original
route structure increased substantially to compensate for
the deficiency of the new segments.
Passengers carried in 1952 increased 59% from 96,265 in
the previous year co 153,047. Revenue passenger miles, in-
dustry measure of growth, increased 65% to a new high of
25,236,332. This means the Airline not only carried more
passengers, but carried them farther.
Impressive gains were recorded in transportation of mail
and express. Mail ton-miles rose from 60,292 in 1951, to
94,696 in 1952, an increase of 57%. Express increased 29%
to 138,341 ton-miles as compared to 107,408 in 1951.
In the year 1950 your company ranked twelfth in relation
to all local service airlines in passengers carried; in 1951,
eighth; and in 1952 advanced to fifth position. All carriers
had marked increases during these years, but your airline
gained at a considerably faster race.
Route Extensions
In addition to the Lake Central acquisition described later
in this report, the Airline has two route extension applica-
tions pending before the Civil Aeronautics Board. One pro-
poses service between cheTwin Cities and Sioux City, and
tl;ie Twin Cities and Des Moines via a number of cities in
Minnesota and Iowa. The second would extend your com-
pany's operations from Chicago to Sioux City via five im-
portant cities in Illinois and. Iowa. This route is presently
served by another airline with a temporary certificate. Deci-
sions on these two applications are expected within the year.
Other Important Developments
During the year, Management negotiated two important
contracts which will have far-reaching beneficial effects on
the Airline. In a special meeting held in September, the
stockholders ratified a contract with Purdue Research Foun-
dation whereby the company borrowed $190,000 from the
Foundation and contracted for the purchase of nine aircraft
at a total cost of $810,000. The $190,000 was received in
October and used to liquidate certain indebtedness and
provide working capital. Three of the aircraft have been
delivered, and the remaining six are scheduled for delivery
by July 1, 1953. The aircraft fleet will then consist of nine-
teen DC-3's, two of which are leased from Trans World
Airlines. Further information relative co the Purdue contract
will be found in Note Three in the statement, "Notes to
Financial Statements.''
In October the stockholders approved a contract for the
purchase of 96% of the outstanding stock of Lake Central
Airlines, a local service carrier whose route pattern is shown
on the system map. The purchase price will be the net book
value of the Airline after settlement of a pending mail rate
case with the government, plus the sum of $10,000. Such
price will be largely determined by the mail rate settlement
obtained from the government, the net book value of the
airline as of the dace of the contract being inconsequential.
This is subject co Civil Aeronautics Board decision which is
anticipated within twelve to eighteen months. Favorable
decision would materially extend your company's operations.
Last year your directors recommended a change in cor-
porate name to better identify the company's rapidly ex-
panding route pattern which now extends into five states.
The new name "North Central Airlines, Inc." was approved
by the stockholders and became effective in December, 1952.
Financing
Toward the end of the year, arrangements were completed
with Brew Emch Jenkins Co. of Milwaukee, to underwrite
91,851 shares of common stock as sec forth in the Purdue
Research Foundation agreement. Early in February, 1953,
this issue of stock was offered co the investing public and
met with a favorable response; the stock was sold within a
few days after the offering. Your management feels that chis
was reassuring, considering the fact that the offering was
made in the winter months when airline securities generally
are not in favor with the investing public because of sea-
sonal factors.
Personnel
One of your company's greatest assets not reflected in the
balance sheet is its loyal and conscientious personnel. Now
entering our sixth year, many of our employees have been
with the Airline since it starred. At the beginning of 1952,
the company had 289 employees, and at the present time
chis number has increased to 525. Cordial relations were
maintained throughout the year with all the employee
groups, and management congratulates our personnel for
their contribution to the year's achievement.
Looking at 1953
We have every reason to believe that previous traffic records
will be broken in the coming year. Service between the
Upper Peninsula of Michigan and Detroit will be inaugura-
ted on April 4. Seasonal service to International Falls is
planned to start in June. Additional plans include one round
trip daily between Chicago and Duluth, and another flight
between Chicago and the Twin Cities via LaCrosse and
Winona.
Management faces the coming year with confidence and
enthusiasm. Our policy will be vigorous and aggressive. We
will strive to maintain a high standard of operation, further
improve our position in the industry, and render the finest
local airline service possible to the public.
Accomplishments reflected during the year are the result
of cooperation of resourceful employees, and an under-
standing public whose patronage makes our continued
growth possible. The Board of Directors joins management
in expressing its appreciation for their support.
Respectfully yours,
AR THUR E. A. MUELLER
Chairman of the Board
March 15, 1953.
How ARD A. MOREY
President
years of progress
Revenue Passenger
% of
- 1,952,591
Gain 1948
HII
1949
1950
1951
1952 25,236,332
Number of Revenue Passengers
1948 - 11,398
HII 1949
1950
1951
153,047
Ton-Miles of Mail
1948 - 11,520
1949
1950
1951
1952 94,696
Ton-Miles of Express
1948 - 13,908
--~- 1949
HII 1950
E!l
1951
.. j.
1952 138,341
r
Scheduled Miles Flown
1948
ll
1949
1950
1951
*Operations commenced February 24, 1948
N. D.
LAKE SUPERIOR
..
SYSTEM MAP
SHOWING PROPOSED EXTENSIONS
~~~\~-~-~
'
,:
<U-... ,~~~ 7:.
f '..
~
.... .
~~--:
... :.
Certificated routes. All routes thus shown are now served,
except the Green Bay-Detroit segment. Service between
these cities, with intermediate stops at Grand Rapids and
Lansing, will be inaugurated April 4.
----
Certificated routes not activated due to inadequate air-
ports or operated on a seasonal basis (June I-Sept. 30).
MMMM A
Routes proposed on Docket No. 4052. This application
underwent public hearing in Nov., 1952, and decision by
the Civil Aeronautics Board is pending.
Routes proposed on Docket No. 5888. This application
awaits public hearing and CAB decision .
. ......... ,
Lake Central Airlines, Inc. The purchase of this airline by
North Central awaits approval by the CAB.
Balance Sheet
ASSETS
CURRENT ASSETS
Cash ....... . .. .. ..... . .............. . . . . .. ........ . ... .
Accounts receivable
United States Government .......... . .... . ...... . . . . . . . . $210,688.56
Traffic .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,218.25
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,603.13
Inventories- at cost
Parts and supplies . . ... .. . . . ........ . ... .. . . .. . .. . .... .
Gasoline and oil ..... . .. . ................ . .... . . ... .. .
Prepaid expenses and sundry
deposits ....... .. . . . .. . . ............... .. . .. ........ . .
INVESTMENTS- AT COST
Aeronautical Radio, Inc. .. . ....... . . . . . ...... . ...... . .. . . .
Airlines Clearing House, Inc. ... .. . . ..... . .. ... . . .... . . . .. .
OPERATING PROPERTY AND EQUIPMENT
Flight equipment (equipment
costing approximately $648,000.00
~~~!i1:) ~~
_s~~~~i? . ~o_
r.
~~~~s-
..... .. ..... .. . . . .. ....... .
Ground equipment ... . .. ... ...... ... . . .. . ..... . . . ... . .. .
Hangar and office building .. ........... . ........ . . . ..... .
Furniture and fixtures . .. .. ... . ........ . .............. . .. .
Total- at cost . . .. . .. . . ... . . ..... . .... . ............. . .
Less depreciation to date ...... . ..... . ................... .
DEFERRED CHARGES
Certificate renewal expense . . . . . .... .. ....... . .. . .... . ... . .
Route development expense .. . ....... . .. ..... . . . .... .... .
Other . ........ . ..... . ......... . .... . ........... . ...... .
63,474.11
6,035.41
$ 62,908.62
454,509.94
69,509.52
40,185.47 $ 627,113.55
1,000.00
101.00
1,137,987.61
219,574.35
62,427.23
45,962.67
1,465,951.86
1,101.00
388,325.47 1,077,626.39
8,533.67
6,311.39
55,708.92 70,553.98
$1,776,394.92
December 31, 1952
LIABILITIES
CURRENT LIABILITIES
Notes payable (secured by pledge
of flight equipment)
8% installment notes, including
interest ... . ....... . ...... . ............. . ....... . . $156,799.84
Current maturities of long
term 5% installment notes .. . . .. . . .. .. . . ......... . . .
Accounts payable ................. . . . .... .. ...... . . . .... .
Unearned transportation revenue . ........... . ... . .. . . . .... .
Income taxes withheld from
employees .. . ... ... .. .. . ................. . ........... .
Accrued liabilities
Salaries and wages ... . .... . ..... .. . . . . . . . . . .. .. . .... . . .
Taxes ( other than income taxes) ....... . .. . ....... . ... . . .
Other .. .. ................... . . . .. . ...... . . . . . . . ..... .
NONCURRENT LIABILITIES
5% notes payable, secured by pledge
of flight equipment, due in monthly
installments including interest
starting on October 1, 1953 ..... . ...... . ........ . ...... .
Less current maturities .. . . . .... . .. . ....... . .. .. . .. ...... .
CAPITAL
Common stock
Authorized, 750,000 shares of $1.00
51,750.00
101,917.75
12,242.34
38,245.02
par value; issued 208,149 shares . .. . .. . ........ . ....... 208,149.00
Paid-in in excess of par value of
stock issued, less organization
and capital stock expense
written off ..... . . .. ..... .. ..... .. .... .. ... . ... . ..... 479,681.82
Earned surplus (deficit) ... ..... . ... .. . .... . . . .... . . . . . .. . .
$ 208,549.84
655,621.60
24,754.95
47,922.72
152,405.11
280,000.00
51,750.00
687,830.82
$1,089,254.22
228,250.00
228,940.12 458,890.70
$1,776,394.92
The accompanying notes to financial statements are an integral part of this balance sheet.
NORTH CENTRAL AIRLINES INC.
Statement of Income
Year Ended December 31 , 1952
TRANSPORTATION REVENUE
Mail. ..................................... . .......... . ...... . ....... . ...... $1,681,541.47
Passenger. ............... . ........... . ............................. . .. . .... 1,470,536.00
Express. . ......... . ......................... . ......... . .................... 55,861.17
Excess baggage and other.............. . ................... . ............ 12,783.22
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 and obsolescence ........... .
Operating loss ..................... .
OTHER INCOME
Incidental revenue and cash discounts earned . . ......... .
OTHER DEDUCTIONS
Interest ....... .
Amortization of debt expense.
Amortization of extension and
development expense. . . . . . . .................... . ............... .
910,778.83
483,291.68
631,215.95
288,406.96
137,651.63
313,469.88
60,030.18
277,638.21
205,192.44
25,732.48
1,177.34
6,325.77
$3,220,721.86
3,307,675.76
86,953.90
2,981.67
83,972.23
Sundry....... . ......... . ... . . . ..... . 6,185.00 39,420.59
NET LOSS...................... . . . . . . . . . . .............. . . . $ 123,392.82
The accompanying notes to financial statements are an integral part of this statement of income.
Statement of Capital Accounts
Year Ended December 31, 1952
Capital stock
common
$1.00
Paid-in in
excess of
par value
of stock
COMMON STOCK par value issued Total
Common stock-January 1, 1952... . . . . . . . . . . . . . . . . . . . . . . . ......... $208,149.00 $492,632.36
12,950.54
$700,781.36
12,950.54
Capital stock expense written off. . . . . . . . . . . . . -0-
COMMON STOCK-DECEMBER 31, 1952 ..... . ... . ...... .. .... . . $208,149.00 $479,681.82 $687,830.82
EARNED SURPLUS (DEFICIT)
Earned surplus (deficit)-January 1, 1952 ...... . .. . ...... . . . ..... . $105,547.30
123,392.82
Net loss for the year ended December 31, 1952 . . . ..... . ........... .. . .
EARNED SURPLUS (DEFICIT)-DECEMBER 31, 1952 ....... . $228,940.12
The accompanying notes to financial statements are an integral part of this statement of capital accounts.
NOTES TO FINANCIAL STATEMENTS (December 31, 1952)
1. The company is operating under a temporary certificate of public
convenience and necessity granted by the Civil Aeronautics Board
for a period of five years terminating on September 30, 1955.
2. Mail revenue for the period since June 14, 1951 has been based
on amended temporary rates established by the Civil Aeronautics
Board.
3. The company has an agreement with the PURDUE RESEARCH
FOUNDATION to purchase nine DC-3 aircraft at a total price of
$810,000.00. The Foundation is financing the purchase of the air-
craft, and, in addition, has loaned the company the amount of
$190,000.00 which was used to liquidate the indebtedness of
$100,000.00 to Equitable Reserve Association and to provide
working capital. The indebtedness to the Foundation will total
$1,000,000.00, will bear interest at 5'!(, per annum, and the princi-
pal will be payable in varying monthly installments, such pay-
ments to start not later than October 1, 1953. The amount of
monthly principal payments shall be an amount not less than the
allowable monthly depreciation of aircraft in scheduled service,
plus the monthly net income realized from charter or lease of
aircraft not in scheduled service. The agreement also provides
that no dividends will be declared or paid except out of earnings
accruing after January l , 1954. At December 31, 1952 the com-
pany had taken delivery of one aircraft, with one additional air-
craft being delivered in January, 1953.
4. The company has an agreement with FRONTIER AIRMO-
TIVE, INC., NATIONWIDE AIRLINES, INC., JOHN V.
WEESNER and W . W. WEESNER, to purchase 80,054 shares,
or approximately 96% of the capital stock of LAKE CENTRAL
AIRLINES, INC. The purchase price of the stock will be equiva-
lent to the net book value of Lake Central Airlines, Inc. plus
$10,000.00 as of the date of settlement of all United States Gov-
ernment mail rate claims and the book value will include the
award to be received from such settlement. Approval of this
agreement has not yet been granted by the Civil Aeronautics
Board.
5. Commitments for purchase of flight equipment parts and sup-
plies aggregated approximately $144,000.00 at December 31,
1952.
6: During the month of October, 1952, the company moved its
maintenance base and general offices from Madison, Wisconsin
to Minneapolis, Minnesota. At December 31, 1952 the company
has expended the amount of $30,567.00 for such move and
expenditures subsequent to that date are expected to be nominal.
These expenses are being amortized over the period ending on
December 31 , 1954.
7. In February, 1953, the company sold an additional 91 ,851 shares
of common stock. The proceeds to the company for such sale
were approximately $258,000.00.
NOB--
Comparatiue Operating Statistics
1952 1951 1950 1949 1948
Operating Revenues
Passenger . .. ..... .. ... . . . .. . . ... $1,470,536.00 $ 860,598.47 $ 427,278.43 $ 271,575.86 $113,648.51
Mail.. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,681,541.47 1,181,596.40 1,355,145.00 1,036,243.00 580,968.00
Express . ...... . . . ... . . .. ... . .... 55,861.17 45,172.61 18,636.56 8,363.95 5,962.67
Excess Baggage . . . . . . . . . . . . . . 12,783.22 5,643.14 2,418.65 1,519.04 1,012.27
TOTAL. ... .. . . . . . . . ... . . .. . ..... .. $3,220,721.86 $2,093,010.62 $1,803,478.64 $1,317,701.85 $701,591.45
Operating Expenses
Flying Operations ... . . .. . . . . .. ... $ 910,778.83 $ 591,244.85 $ 459,643.25 $ 350,180.45 $190,630.20
Flight Equipment Maintenance .... . 483,291.68
Ground Operations . . . ... .... . ... . 631,215.95
275,469.03 267,105.13 229,945.55 127,966.18
417,329.17 418,593.97 321,057.28 201,761.50
Ground & Indirect Maintenance . . . . 288,406.96 153,247.64 133,142.06 110,236.03 50,414.32
Passenger Service . . . .. .. . .... . .. . . 137,651.63 80,588.72 14,160.56 6,791.19 3,294.22
Traffic and Sales .. .. . . . . . . . . . . . . . . 313,469.88 182,929.45 38,138.56 26,964.07 16,749.99
Advertising and Publicity . . . . . . . . . . 60,030.18 65,295.07 30,069.09 20,302.56 15,682.92
General and Administrative .. . . . . . . 277,638.21 198,235.10 161,234.03 138,423.88 94,069.39
Depreciation and Obsolescence . . . . . 205,192.44 143,722.21 120,329.42 99,598.50 54,645.15
TOTAL. .. ..... .. . . .. . .. . .. . .. .. ... $3,307,675.76 $2,108,061.24 $1,642,416.07 $1,303,499.51 $755,213.87
Net Operating Income (or Loss) . ... (86,953.90) (15,050.62) 161,062.57 14,202.34 (53,622.42)
Amortization of Route Develop-
ment Expense. . . . . . . . . . . . . . . . . . -0- -0- (65,014.65) (86,291.77) (73 ,525.07)
Other Income or Expenses, Net.. . . (36,438.92) 21 ,317.61 (3,935.17) (3,793.61) (896.51)
Net Profit or (Loss) . ..... . ... .. ... $ (123,392.82) $ 6,266.99 $ 92,112.75 $ (75,883.04) $(128,044.00)