North Central Airlines Annual Report 1958

.ANNU.AL REPORT
1958
NORT::B: CENTR.AL .AIRLINES
N ORTH
CE NTRAL
AI RLINES
--1
NORTH
. C ENTRAL - - ; ; ; ; ,
_..........
\
'; .. ~cs, t ii
GENER.AL OFFICES :
6201 Thirty-Fourth Avenue South, Wold-Chamberlain
Field, Minneapolis 50, Minnesota
OFFICERS:
ARTHUR E. A. M UELLER . .. ... . . Chairman of the Board
H. N. CARR . . . .... .. . Preside t and General Manager
FRANK N . BurroMER .. Vice Pre ident, Traffic and Sales
R. H. BENDIO, SR ........ Vice esident, Maintenance
and Engineering
ALVIN D. NIEMEYER ...... Vice resident, Operations
ARTHUR E. ScHW ANDT ......... . .... Vice President,
ndustrial Relations
A . L. WHEELER ... . ...... Vice Pre 'dent and Counsel
BERNARD SWEET ............... S cretary-Treasurer
R,EGI STR,AR, A
STOCK T &ANSF E R,
NORTHWESTERN NATIONAL BANK OF INNEAPOLIS
MINNEAPOLIS, MINNESOTA
DIRECTORS:
H. N. CARR0
CHARLES R. Hoon
WERNER L. CHRISTENSEN ARTHUR E. A. MuELLER0
G. F. DECOURSIN A. L. WHEELER
H. N.
CARR
CHARLES R.
Hoon
K. B.
WILLETT
ALVIN D.
NIEMEYER
K. B. WILLETT
0 Executive Committee
WERNER L.
CHRISTENSEN
----
-
ARTHUR E. A.
MUELLER
R.H.
BENDIO, SR.
ARTHUR E.
SCHWANDT
G. F.
DECOURSIN
A. L.
WHEELER
FRANK N.
BUTTOMER
BERNARD
SWEET
A]Y.[ERIOA!S LEADING LOCAL AIRLINE
To Our Stockholders,
ErnpJoYees and Friends:
The events Which made 1958 th t t
1 I-Year history Will greatly influe :hou sanding Year in North Centra/'s
Doring the Past 12 month t;ce e course of the airline's future growth.
aircraft flew over 11 Ooo OOo s, e company's expanded fleet of 32 DC-3
Passengers. North C~ntr;, co:ten~et1/es and carried nearly 800,000
March 10, 1959
Vofurne of air rnaiJ air express inude ob/ead the loca/ airline industry in
t t / ' an num er of Passenge A
o a revenues exceeded $13,000,000. rs. s a reso/t, our
As the Year drew to a close the c 1 .
decision in the vast Seven Stat;s Are iv1 Aeronautics Board reached a fina/
Route of the North/iners tom th a Investigation Which increased the
states. This Was the largest ore/ an 5,ooo miles With service to 65 cities in nine
singe route award the compan h
On January 9 19
59
$4 3 Y as ever received.
' a , 40,0oo financing
the Purchase of five Convair 340 aircraft Program Was completed for
These larger, faster more efficient a. 1 and other corporate Purposes.
rn th J ' " 1ners Wi// be in sch d /
on nauguration of Convair op t . e o ed service next
earnings capacity, era ion W1// substantially increase our
. Management takes this opportunit to h .
_their contribution to the growth of the :o t ank its l,50o employees for
its loyal Patronage and its t kh mpany, the traveling PLJb/ic for
th . soc O/ders and Other f . d
e,r continued confidence and support. rien s of North Centra/ for
Our strengthened financial POsitio .
Will rnake 1959 an even greater Y nf, new equipment, and extended routes
ear o Progress.
~~
Arthur . A. MueJJer
Chairman of the Board
~~
H. N. Carr
President
NORTH OENTRAL'S
.....: ~~
year in revie-vv
and forecast
NOR
. T.H . CENTRAL .
?,

; "&5fp; ' i] '
CERTIFIED
lMClLEAGE
0--VV-TH
5,228
NmTH CENTRAL AIRLINES, for the fourth consecutive
year, continued to lead the nation's local service industry in
establishing new records in passenger, air mail, and air
express traffic. In addition, a $4,340,000 financing program,
completed January 9, 1959, placed the company in the
strongest financial position in its history.
Traffic generated over the nine-state system resulted in
record commercial revenues of $9,360,416, an increase of
19 per cent over 1957. Total gross revenues for the year
1958 were $13,141,239, with a net profit of $108,184, com-
pared to $80,791 in 1957. The operating profit in 1958 was
$157,850, after depreciation charges of $583,174.
Since November 23, 1956, North Central has been oper-
ating under a temporary mail rate. Therefore, the amount
of air mail revenue reported is somewhat less than the com-
pany's claim with the United States Government. Since the
former permanent rate set in 1954 did not anticipate ade-
quately the company's rapid expansion, a petition for a new
permanent rate was necessary. When this rate is established,
it will be retroactive to November 23, 1956.
At the request of the local service airlines, the Civil Aero-
nautics Board in 1956 instituted an investigation to consider
adequacy of the rate of return allowed in mail rate proceed-
ings. Since this case has not been completed, the Board in
the interim increased the allowable return on investment in
all future rates for local airlines from 8 per cent to m~ per
cent. A final decision in the rate of return investigation is
expected this year.
Financial arrangements were completed early in 1959
for the purchase of five Convair 340 aircraft and for other
corporate purposes. The program consists of two loans-the
first, a $2,000,000 working capital loan at 5}~ per cent for
3}~ years, and the second, a $2,340,000 equipment loan to
yield the lenders 5.13 per cent interest over seven years.
Ninety per cent of this loan is guaranteed by the Federal
Government. This financial program is in accordance with
a resolution adopted at the annual stockholders' meeting
of April 2, 1958. At that time, North Central stockholders
authorized two loans totaling $7,500,000. However, the
actual borrowing involves $3,000,000 less than was author-
ized, largely because the new aircraft were acquired under
an extremely favorable purchase agreement.
AGGRESSIVE
ROUTE DEVELOPMENT
North Central's extensive route development program, in-
itiated in 1954 and actively pursued since then, kept pace
with the company's physical growth during 1958.
The year saw a final decision in the Seven States Area
Investigation - one of the most important route cases con-
cerning the local service industry. Because the original ap-
plications by the various airlines were combined into this
far-reaching Seven States Area Case, the C.A.B. decision
directly or indirectly affected every community in the West
and Midwest.
Another important case before the Civil Aeronat1tics
Board- is the- Great Lakes Area Investigation which could
ad<l more than 1,000 route miles and 10 Michigan cities to
North Central's system. Also included in the company's
applications are 1,072 miles of helicopter routes to 37 points
in the metropolitan areas of the system and proposed serv-
ice to five Canadian cities in three provinces.
Seven States Area Decision
The Civil Aeronautics Board, on December 9, issued its
final order in the Seven States Area Investigation which
added more than 2,000 route miles and 18 cities to North
Central' s nine-state system. The decision extended the com-
pany's service in Minnesota, Wisconsin, Illinois, Iowa, Ne-
braska, North Dakota, and South Dakota and increased the
system to more than 5,000 route miles and 65 cities.
This order confirmed the Board's tentative decision an-
nounced in its May 19 press release. The one important
change in the order was that North Central will continue
to serve the entire Grand Forks, North Dakota-Omaha, Ne-
braska route. Intermediate points on this segment are
Fargo, North Dakota; Brookings, Watertown, Yankton, and
Sioux Falls, South Dakota; Sioux City, Iowa, and Norfolk,
Nebraska. The C.A.B. press release had indicated that the
route would be severed at Sioux Falls, with North Central
operating between Grand Forks and Sioux Falls, and an-
other local service carrier between Sioux Falls and Omaha.
The order also extended the company's present Minne-
apolis/ St. Paul-Grand Forks route to Minot, North Dakota,
and added Devils Lake, North Dakota, as an intermediate
point. This award is permanent.
Another permanent route was granted beyond Sioux
Falls to the intermediate cities of Mitchell and Huron,
South Dakota, and beyond Huron to Minot via Aberdeen,
South Dakota, and Bismarck/Mandan, North Dakota, and
to Minneapolis/ St. Paul via Watertown or Brookings, South
Dakota.
Service was authorized on a permanent basis between
Sioux Falls and the Twin Cities via Worthington and Man-
kato, Minnesota.
A five-year temporary award extended North Central's
system as far west as Rapid City, South Dakota. This route
would be operated between Rapid City and Minneapolis/
St. Paul via Spearfish, Pierre, Aberdeen, and Watertown or
Brookings, South Dakota.
Appleton, Wisconsin, was certificated on a permanent
basis on a route between Minneapolis/ St. Paul and Milwau-
kee via Eau Claire and Marshfield, Wisconsin. In a petition
for reconsideration to the Civil Aeronautics Board, the com-
pany requested that Marshfield be eliminated from the
order and Appleton added as an intermediate stop on the
present Twin Cities-Green Bay-Milwaukee route. North
Central then asked the Board for an exemption order to
permit service to this city while the petition is being
considered.
New Northliner service was begun March 1, 1959 to 11
of the cities certificated in the Board's order. Nine of these
were points where Braniff Airways and W estem Airlines had
discontinued operation under Board suspensions. Braniff
was ordered suspended at Minot, Bismarck/ Mandan, Aber-
deen, Watertown, Mitchell> and Huron; while W estem was
suspended at Brookings, Spearfish, and Mankato. Two of
these cities, Brookings and Watertown, were already on the
North Central system. At the same time, North Central
inaugurated service to Devils Lake, North Dakota; Pierre
and Rapid City, South Dakota; and Worthington, Minnesota.
Great Lakes
Area Investigation
The recommendation issued in December 1957 by counsel
of the Civil Aeronautics Board's Bureau of Air Operations
would increase North Central's system by 1,067 route miles
and 10 additional cities in Michigan.
Included is a route between Sault Ste. Marie, Michigan,
and Chicago via Cheboygan, Traverse City, Manistee, Grand
Rapids, and Benton Harbor, Michigan. Another segment
would be added between Sault Ste. Marie and Detroit by
way of Cheboygan, Traverse City, Saginaw, Flint, and Pon-
tiac. A further recommendation would permit service by
North Central between Sault Ste. Marie and Detroit via
Cheboygan, Alpena, Saginaw, and Port Huron. The com-
pany also would be authorized to serve Detroit and Mil-
waukee on a route including Lansing, Grand Rapids, and
Muskegon.
The case is now before the C.A.B. hearing examiner, and
his report is expected soon. This will be followed by a final
order from the Board in the Great Lakes Area Case later
this year.
Lake Central Acquisition
The most recent action, in the program which began in
October 1952 to purchase 96 per cent of the outstanding
Lake Central Airlines stock, came in January 1959 when
the U.S. Circuit Court of Appeals, Washington, D. C., up-
held the Civil Aeronautics Board's refusal to allow the North
Central-Lake Central merger.
The Board, in its decision, had said the combined area
would be too large for the type of concentrated local serv-
ice desired for so-called "feeder" carriers. Generally, the
Lake Central system serves an area southeast of Chicago-
Detroit, including Cleveland, Buffalo, and Cincinnati, as
well as smaller cities in Pennsylvania, Ohio, and Indiana.
North Central has petitioned for a Writ of Certiorari in
an effort to appeal the case to the U. S. Supreme Court. The
writ, if granted, would require the Supreme Court to call
up the records in the case for review.
Canadian Applications
In February 1958, North Central filed applications with the
Civil Aeronautics Board to extend its service on three more
routes into Canada, totaling 828 miles.
The new applications propose nonstop service between
the Twin Cities and Winnipeg, Manitoba; Detroit and
Toronto, Ontario; and Minot, North Dakota, and Regina,
Saskatchewan.
Already on file are applications for routes linking Duluth/
Superior and Houghton/Hancock, Michigan, with Fort Wil-
liam/ Port Arthur, Ontario, and International Falls, Minne-
sota, with Winnipeg. These segments would total 463 miles.
Steps are being taken to reopen the Bilateral Treaty be-
tween the United States and the Dominion of Canada. This
is necessary before any action can be taken on the North
Central applications.
1948
1949
1950
2,050,946
1951
1,977,815
1952
2,868,727
1953
4,290,409
1954
1955
1956
1957
1958
19
% OF
GAIN
FL
7,893,532
9,495,624
11,260,865
Chicago-Mil""V'v"aukee-
T""V'v"in Cities Case
The company's applications to operate nonstop flights be-
tween Minneapolis/ St. Paul and Chicago, Twin Cities and
Madison, Twin Cities and Milwaukee, and Madison and
Chicago were filed with the Civil Aeronautics Board in 1955.
The Board, in a press release issued late in 1958, indicated
it has reached a decision which denied the company's appli-
cations. A final order, however, has not been issued.
Erie-Detroit Service Case
This 173-mile route is still under investigation by the Civil
Aeronautics Board, despite C.A.B. action in 1956 awarding
the mileage to two other local service airlines. To maintain
its status as an applicant, North Central has filed a Petition
to Intervene in this case. A decision is expected in 1959.
IMPROVED FACILITIES
North Central added many refinements in its service to the
traveling public during 1958. Major changes were insti-
tuted in baggage-handling, passenger check-in procedures,
communications, and reservations. A systemwide telephone
courtesy program was implemented, and several airport de-
velopment projects were completed during the year.
Improved methods of baggage-handling at various inter-
line connecting cities brought about a considerable saving
of expenses in the delivery of mishandled and misconnected
luggage and a greater convenience to the traveling public.
New passenger check-in procedures at Chicago Midway
Airport and General Mitchell Field, Milwaukee, now pro-
vide a faster, more efficient way of handling the thousands
of passengers who pass through these terminals monthly.
These procedures have materially increased the Row of traf-
fic and decreased passenger complaints.
The company expanded its private line telephone system
by adding more stations to the network, as well as a supple-
mental circuit in several cities. The new communications
facilities have greatly speeded reservations and operations
messages.
Various changes in North Central' s reservations system
have increased the number of passengers who can be effi-
ciently handled to approximately 125,000 a month.
The no-show penalty plan was dropped by all scheduled
airlines during 1958 because procedures proved costly to
administer and resulted in considerable inconvenience both
to the airlines and the passengers. However, two features of
the plan - the minimum time limit for ticket pick-up and the
reconfirmation rule -were retained. The airline industry will
review the entire program during 1959 and consider further
modifications of it.
A telephone courtesy program, unique in the airline in-
dustry, was designed to improve North Central's "voice of
service." Two speech experts were hired to instruct public
contact employees in proper speech, voice techniques, and
telephone courtesy. These instructors traveled over North
Central' s system, working with personnel of the general
office, the stations, and the three reservation centers. They
concentrated on improving the diction, enunciation, voice
modulation, and language of these employees. Individual
evaluation, group instruction, check calls, tape recordings,
and movies were used in the program which attracted
national attention.
SER.VICE INCREASED
North Central continued to pace the nation's local airlines
in service offered to the traveling public. In 1958, the com-
pany's 32 DC-3 Northliners flew 11,260,865 revenue miles-
a 19 per cent increase over 1957.
Service was inaugurated between Duluth/ Superior and
Sault Ste. Marie April 1. Intermediate points on this seg-
ment are Ironwood, Houghton/ Hancock, and Marquette,
Michigan. The new service links the two campuses of the
Michigan College of Mining and Technology at Houghton
and Sault Ste. Marie.
The company continued to maintain one of the best per-
formance records in the airline industry. During 1958 North
Central operated with a performance factor of 98.2 (per
cent of scheduled miles flown). This is the highest operat-
ing performance the company has achieved in any year
since it started service in 1948. North Central's on-time
performance during the year was also outstanding in the
industry with 78.7 per cent of all flights arriving on sched-
ule. This record is especially significant because of the ad-
verse flying conditions encountered over the North Central
system.
TRAFFIC LEADERSHIP
North Central maintained its lead over the 12 other local
airlines in all classes of traffic during 1958.
A total of 777,140 revenue passengers were carried on
North Central's system during the year, for a 14 per cent
increase over 1957 and 59 per cent above the second-rank-
ing local service airline. Plane miles flown increased 19 per
cent and passenger miles totaled 125,905,671, for an in-
crease of 18 per cent.
North Central also led the other local airlines in charter
revenue. This revenue totaled $384,957 in 1958, a 41 per
cent increase over 1957.
Northliners carried 2,900,313 pounds of air mail during
1958, an increase of 9 per cent over the previous year. This
was 70 per cent ahead of the second-place local carrier.
In addition, 878,986 pounds of regular surface mail were
boarded, a 31 per cent increase over 1957.
Air express volume reached a record 5,319,426 pounds,
surpassing 1957 by 9 per cent and the second-ranking local
by 89 per cent.
August was North Central' s best traffic month. The com-
pany boarded 76,011 revenue passengers, setting a new
rycord for the local airline industry.
The three-millionth Northliner passenger boarded a flight
on August 26. The company's tremendous growth can be
easily shown by the fact that the first million passengers
were carried during the first 7}f years of operation, while
the second million were carried in the next two years, and
the third million in just 16 months.
EQUIPMENT FR.OGRAM
The Civil Aeronautics Board, in January 1959, approved a
government guarantee of 90 per cent of the $2,340,000
equipment loan for the purchase of five Convair 340 air-
craft and related spare parts.
The first Convair was delivered to North Central's main
operations base at Minneapolis/ St. Paul on January 9. Pres-
ent plans call for delivery of one Convair each month until
April when the last two are expected. This will bring the
company's fleet to 32 DC-3 Northliners and five Convair
Super N orthliners by April 26 when service with the larger
aircraft will be inaugurated.
The Convair 340 is a twin-engine, 44-passenger airliner,
equipped with radar to seek the smoothest routes and avoid
rough weather. The pressurized cabin insures passenger
comfort at high altitudes and also when the plane is ascend-
ing or descending. A tricycle landing gear keeps the cabin
level when the plane is on the ramp.
An integral air-stair door, forward of the left wing, is
another feature of the Convair. The door folds into the
fuselage when not in use. A spacious carry-on baggage
rack is located on the left side, just ahead of the passenger
compartment.
The Convair is the fastest aircraft ever operated by North
Central. Cruising speed is 284 miles an hour at 20,000 feet,
compared with 160 miles an hour for the DC-3, which oper-
ates at lower altitudes. The flight range of the Convair 340
is 2,200 miles, while the DC-3 is limited to 900 miles.
Present equipment plans call for the use of Convairs on
the long-haul, high density segments of Minneapolis/ St.
Paul-Chicago via Eau Claire, Wausau, Green Bay, Oshkosh,
and Milwaukee, Wisconsin; Duluth/ Superior-Chicago non-
stop; Duluth/ Superior-Chicago via Green Bay and Milwau-
kee; Milwaukee-Chicago commuter flights; Minneapolis/
St. Paul-Duluth; Madison-Chicago via Janesville/Beloit,
Wisconsin; and Detroit-Chicago via South Bend, Indiana,
and Battle Creek, Michigan.
Convair service will be extended to other segments as
rapidly as traffic develops and airports are made adequate
for Convair operation.
The new Convairs will make DC-3' s available for service
on the segments granted in the Seven States Area decision.
Currently, the present fleet is adequate to serve the ex-
panded system, but future route awards in pending cases
may necessitate the acquisition of additional DC-3's, as well
as Convairs.
FORECAST
North Central's progress in 1958 and the important events
which increased the company's capacity for growth should
enable it to carry one million passengers in 1959. This would
further extend its leadership in the local service industry
and Hlake it possible for the airline to realize record earnings.
The Convair 340, North Centrars third major equip-
ment change in 11 years of scheduled operation, fea-
tures weather radar to seek the smooth routes and
pressurization to insure passenger comfort at high
altitude and when ascending or descending. More
than 20 cubic feet of fresh air per minute, conditioned
for temperature, is supplied to each passenger
through individual controls. The hydraulically-
operated stairway folds into the fuselage after load-
ing. A spacious carry-on baggage rack is located ahead
of the passenger compartment on the left side. The
increased wingspan-105 feet, 4 inches-coupled with
a new flap system, gives the Convair outstanding per-
formance for operation into smaller airports. North
Central' s special exhaust system modification reduces
the Convair engine noise level by more than 40 per
cent.
0 0 0
" 0
Q
0 0 0
Main passenger cabin, richly furnished with 44 wide, upholstered
seats, thick carpeting, individual controls for air conditioning.
AMERICA'S
REGINA
MONTANA
NORTH DAKOTA
SOUTH DAKOTA
""'"'
'
IAPID CITY
WYOMING
NEBRASKA
PRESENT ROUTES----
PROPOSED ROUTES~---
LEADING
MISSOURI
LOCAL
. ,on AUNUI
. o'
DAYIIPOIT
IOCII ISLAND
MOLINE
I. Ollll
ILLINOIS
AIRLINE
STE. HIE
PENN,
1958
1957
1956
1955
1954
1953
1952
1951
1950
1949
1948
11
.A. ]Y.[ E :RIC .A.' S LE.A.DIN""G LOC.A.L
R.EVENUE
PASSENGERS
48,797
-

2,625
11,398
777,140
680,930
549,654
430,445
283,556
217,663
153,047
96,265
AIR. MAIL
: . . in pounds
2,900,313
2,666,408
2,174,801
1,840,458
1,461,090
1,324,693
1,172,620
761,030
503,235
263,696
-
144,358
AIR. EXPRESS
... inpounds
5,319,426
4,884,429
4,959,925
4,298,169
2,584,160
1,963,886
1,762,488
1,612,602
-
638,915
-
294,244

201,367
YEARS OF CONTINUOUS PROGRESS
NORTH CENTRAL .A.IRLIN"ES
A.IRLIN""E
REVENUE
PASSENGERS
North Central 777,140
Allegheny 488,597
Mohawk 485,981
Piedmont 448,005
Ozark 426,188
Pacific 375,718
West Coast 294,200
Frontier 260,582
Trans- Texas 248,571
Southern 225,175
Lake Central 186,617
Bonanza 180,770
-
Central 136,752
I
~
*
-FIR
_J
AIR MAIL AIR, EXPRESS
... in pounds ... in pounds
North Central 2,900,313 North Central 5,319,426
Allegheny 1,705,028 Ozark 2,818,897
Ozark 1,427,211 Allegheny 2,784,902
Pacific 1,397,455 Lake Central 2,362,720
Trans- Texas 1,379,961 Mohawk 1,785,027
Piedmont 1,250,396 Piedmont 1,565,126
Southern 1,192,109 Southern 1,305,513
Mohawk 1,028,754 Trans- Texas 965,353
Frontier 943,608 Pacific 824,498
Central 768,304 Frontier 595,772
-
lake Central 660,760 Central 493,345
1111
West Coast 571, 111 Bonanza 374,872
- -
Bonanza 377,775 West Coast 357,342
]Y.[.A.IL, 1958
.A.IR EX:PRESS, 1958
NORT:H: CENTRA.L I A.IRLINES, INC.
- - - - - - - - - -1
E.A..L.A..NCE
.ASSETS
CURRENT ASSETS
Cash .................................................... .
Accounts receivable
Mail .................................................. .
Mail - additional claim (Note 1) ......................... .
Traffic ................................................. .
Other ....... ...................... .. ..... ........ ..... .
Inventories - at the lower of cost
( determined by the first-in, first-out method) or market
Parts and supplies .... .. . .... . ...... .................... .
Gasoline and oil ........................................ .
Prepaid expenses and sundry deposits ............. ........ .. .
Total current assets ........ .. . . ..................... .
INVESTMENTS - AT COST ................................ .
OPERATING PROPERTY AND EQUIPMENT
Flight equipment (Note 4) ................................ .
Ground equipment ........................................ .
Hangar buildings and improvements to leased property . .. ..... .
Furniture and fixtures ..................................... .
Total - at cost ..................................... .
Less depreciation to date ................................... .
DEFERRED CHARGES
Route q.evelopment expense ............................... .
Other . . ........... . ........... . ........ . ................ .
DECEMBER
$ 314,260
475,232
1,255,154
181,104
253,615
16,943
4,595,893
495,059
155,032
160,721
5,406,705
3,110,292
295,895
28,873
$ 178,508
2,225,750
270,558
83,357
2,758,173
10,601
2,296,413
324,768
$5,389,955
l
I
i'
S:H:EET
311858 LI.ABILITIES
CURRENT LIABILITIES
Notes payable
5~f% note to bank payable on demand (Note 4) ........ ..... .
Current maturities of long-term notes ..................... .
5~f% unsecured notes ( Note 5) . ........ . ....... ... ........ .
Accounts payable
Trade . .................... ... ...... ..... .... ... ....... .
Traffic ................................................. .
Unearned transportation revenue ....... ...... ..... ..... .... .
Income taxes withheld and other employee payroll deductions ..
Accrued liabilities
Salary and wages .. . .............. ........... . ..... ..... .
Taxes ( other than income taxes) .......................... .
Other . . ....... ..... .... ..... . .... .. .. ................. .
Total current liabilities ... .. ....... ... .. . . ........ ... .
NONCURRENT LIABILITIES
5% notes payable to bank, due in monthly installments to
December 10, 1960 ( Note 4) ............................. .
Other notes payable, secured by pledge of certain equipment, due
in monthly installments ................................. .
Less current maturities ... .. ... ..... .. ........... ...... ... .
Deferred rent payable ..................................... .
Total noncurrent liabilities .................... . ...... .
CAPITAL
Common stock - authorized, 3,750,000 shares of $.20 par value;
issued 1,998,070 shares ... ... . . ................... ........ .
Paid-in in excess of par value of stock issued ..... .. .. , ......... .
Retained earnings ....................................... .. .
Less 13,250 shares of common stock reacquired and held in the
treasury - at cost ....................................... .
$ 100,000
287,926
162,500
1,210,279
1,016,189
469,272
31,347
251,078
485,000
129,888
614,888
287,926
326,962
14,600
399,614
817,518
1,217,132
142,794
1,359,926
7,225
$ 550,426
2,226,468
71,793
95,308
751,697
3,695,692
341,562
1,352,701
$5,389,955
The accompanying notes are an integral part of the financial statements.
STA.TE1V.J:ENT
OF EARNINGS
Year ended December 31, 1958
TRANSPORTATION REVENUE
Passenger ....... . ....... . .......... .. .................... .
~1ail . . . ................. .. . . ..... . ..................... . .
Express ................. . ..... . .. .. .............. .. ..... .
Excess baggage ......... . .... . .... .. . . ............ . ....... .
Non-scheduled transport service . .... . ...... . .. . ...... .. ... .. .
Other ... ... . . ........ . .... . ...... .. . . ....... . ........... .
OPERA TING EXPENSES
Flying operations ............ . ... . ...... . . . ............ . . . .
Flight equipment maintenance ......... . . . ..... . .... . . . ... .. .
Other maintenance ............... . .. .. .... . ........ ... . . .. .
Passenger service ...... . . . ........ .. . . . . .. . . . ..... ... ... . . .
Aircraft and traffic servicing .... ... ... . . ... . .. . . .. .. ........ .
Promotion arid sales . . . ..... . .. . .. . ... . .. . ... . .......... . .. .
General and administrative ... .. .......... . .. ..... .......... .
Depreciation (Note 2) . ............. . . . . .. . ....... ... . ..... .
Operating profit
OTHER DEDUCTIONS
Interest .. . ... ... . . ... .. .. ... ....... .... .. . ... . ... . . .. .... .
Extension and development .... . ..... . . . .. .. . .. .. . . . . ... .... .
INCOME TAXES (Note 3 ) . ... . . . . . ... . . . . . . . ...... . ........ .
NET EARNINGS .. . . . ..... .. . ...... ....... .. ... .... ... .
The accompanying notes are an integral part of the financial statements.
$8,702,455
3,780,823
164,615
73,455
384,957
34,934
4,191,826
1,657,479
815,676
703,598
3,629,142
839,866
562,628
583,174
43,472
6,194
STA.TE1V.J:ENT
OF RETAINED EARNINGS
Year ended December 31, 1958
Retained--earnings - January 1, 1958 . ... . . . .. ... .. . . . .. . . . ..... .
Net earnings for the year ended December 31, 1958 .. ... .. . ...... .
RETAINED EARNINGS- DECEMBER 31, 1958 ... ... . . .. .. .. .
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
$13,141,239
$
12,983,389
157,850
49,666
108,184
$ 34,610
1-08,184
$142,794
1. It is the policy of the Civil Aeronautics Board to provide a scheduled Aryiong other things, the loan agreement provides that the company main-
a_irline on a temporary mail rate (the company has been on such rate tam current assets (excluding unapproved mail pay claims) that are at
since November 23, 1956) with sufficient mail pay to meet its break-even least equal to current liabilities excluding any liability to the banks under
need and also to provide for a reasonable return on recognized invest- the working capital loan or the equipment loan mentioned in Note 5.
ment. In accordance with this policy the company has determined that At the time of effecting the new loan, the balance of $585 000 due at
for 1958 an amount of $287,505 of additional mail pay will be applica- December 31 to one of the participating banks was repaid. '
ble under th~se two categories. An amount of $475,232 is shown as an
account receivable at December 31, 1958, which amount includes the 5. The company has contracted to purchase five Convair-340 a ircraft spare
1958 item and $187,727 which is the unpaid portion of the 1957 and 1956 engines, and other parts, with the total price not to exceed $2 325 000.
Additional Convair spare parts will be acquired costing $275 000 re'sult-
break-even need and return on investment.
ing in a total expenditure of approximately $2,600 000. Th~se 'aircraft
2. The amount of depreciation included in the accompanying statement of will be del ivered during the first four months of 1959: As down-payment,
earnings is approximately $33,000 greater than the related amount allow- the company gave the s,eller fivi; unsecure? 5% notes totaling $162,500.
able for tax purposes because the change in useful lives of aircraft and Each note of $32,500 w1 II be paid at the time of delivery of each aircraft.
engines was made on the company's books of account at a date later The company has arranged with two banks to borrow an amount not to
than a similar change was made by the Internal Revenue Service. exceed $2,340,000 to finance the purchase of this equipment which is to
3. A net op~rating loss carry-over from a prior year is sufficient to eliminate
be pledged as security for the indebtedness. In addition, the United States
taxable income for 1958. Accordingly, no provision has been made for
Government has guaranteed 90% of the loon with such guarantee not to
exceed $2, l 06,000. The loan is repayable in semi-annual installments to
Federal and State income taxes. January l , 1966 with interest at 5.125% and a guarantee fee of 0.375%.
4. On January 9, 1959 the company borrowed $2,000,000 from two banks 6. The Circuit Court of Appeals for the District ~f Columbia has determined
for a working capital loan which is repayable with interest at 5% in that the compa~y shoul,d not be allowed to acquire 80,054 shares (96%)
monthly installments totaling $480,000 per year, w ith a final payment of of the outstanding capital stock of Lake Central Airlines, Inc. The com.-
$370,000 due on June 15, 1962. As security for the loon the company has pony's legal counsel is preparing a petition for certiorari to be filed in
pledged twenty-three DC-3 aircraft including related flight equipment. the United States Supreme Court for a review of the above decision .
NORTH
FRO-FORMA BALANCE SHEET
Decembe.r 31, 1958*
ASSETS LIABILITIES
CURRENT ASSETS CURRENT LIABILITIES
Cash .... .. .. .. . . ..... . .. .... ... ... $1,593,508 Notes Payable . ... .. .......... . .... $ 710,426
Accounts Receivable .. . ..... .. .. .... 2,225,750 Accounts Payable ..... .. . .. ... . .... 2,226,468
Inventories . . ... . ... .. . .. . .. . ... . . . 270,558
83,357
Unearned Transportation . . . . . . . . . . . . 71,793
Prepaid Expenses .. . .. . ... .. . . . ... . Payroll Taxes Payable . . . . . . . . . . . . . . . 95,308
- - - - -
Total Current Assets . ...... . ... . ... 4,173,173 Accrued Liabilities . . . . . . . . . . . . . . . . . 751,697
INVESTMENTS .................... . 10,601
2,296,413
324,768
Total Current Liabilities ........... 3,855,692
OPERATING PROPERTY AND LONG-TERM DEBT .. . ........... ... 1,581,962
EQUIPMENT (NET ) . .. . . . ... . ... . DEFERRED RENT . . . . . . . . . . . . . . . . . . 14,600
DEFERRED CHARGES . .. . . .. . . .. . . . CAPITAL .......... .. . ........ ... . .. 1,352,701
$6,804,955 $6,804,955
* After giving effect to $2,000,000 working capital loan from which proceeds were received on January 9, 1959.
( See footnote 4 to Financial Statements.)
CHICAGO
NE W YORK
LO S AN G ELES
Board of Directors
North Central Airlines, Inc.
ALEXANDER GRANT & COMPANY
CERT I FIED PUBLIC ACCOUNTANTS
312 EAST WISCONSIN A V ENUE
MILWAUKEE 2 , WISCONSIN
OT HER
PRINC I PAL
CIT! ES
We have examined the balance sheet of NORTH CENTRAL AIRLINES, INC. as of December 31, 1958 and the re-
lated statements of earnings and retained earnings for the year then ended. Our examination was made in accordance
with generally accepted auditing standards, and accordingly included such tests of the accounting records and such
other auditing procedures as we considered necessary in the c ircumstances.
In our opinion, the accompanying balance sheet and statements of earnings and retained earnings present fairly
the financial position of North Central Airlines, Inc. at December 31, 1958 and the results of its operations for the year
then ended, in conformity with generally accepted accounting principles applied on a, basis consistent with that of the
preceding year.
Milwaukee, Wisconsin
February 16, 1959 Alexander Grant & Company
Operating Revenues 1951 1957 1956 1955 1954 1953 1952 1951 1950 1949
$ 8,702,455 $ 7,372,333 $6,137,216 $4,933,487 $3,351,782 $2,303,738 $1,470,536 $ 860,599 $ 427,278 $ 271,576 $
Passenger .
Mail. . 3,780,823 2,925,645 1,522,211 1,689,890 2,328,921 2,468,685 1,681,542 1,181,596 1,355,145 1,036,243
Express .. 164,615 146,287 149,640 126,476 75,630 68,117 55,861 45,173 18,637 8,364
Excess Baggage . . .. .. . . . . .. .. 73,455 54,986 40,506 30,477 20,975 15,739 12,783 5,643 2,419 1,519
Non-scheduled Transport Service 384,957 273,077 119,419 28,711 46,734 25,436 -0 -0- -0- -0
Other Revenue . 34,934 29,667 15,345 8,964 5,283 5,682 2,982 5,781 2,953 8,301
.1941
113,648
580,968
5,963
1,012
-0-
2,133
TOTAL . . $13,141,239 $10,801,995 $7,984,337 $6,818,005 $5,829,325 $4,887,397 $3,223,704 $2,098,792 $1,806,432 $1,326,003 $ 703,724
Operating Expenses
. $ 4,191,826 $ 3,455,867 $2,578,253 $2,007,381 $1,695,384 $1,413,489 939,931 $ 612,060 476,572 361,254 $ 200,030
Flying Operations . ..
Flight Equipment Maintenance . 1,657,479 1,384,841 960,021 845,753 724,209 690,589 483,292 275,469 267,105 229,946 127,966
Indirect Maintenance .. 815,676 644,693 287,978 342,276 373,222 368,406 293,682 157,014 136,205 lll,736 '51,164
Passenger Service . . . . . . . . . 703,598 560,934 443,243 325,669 256,872 211,520 140,983 82,967 16,096 6,791 3,294
Aircraft and Traffic Servicing .. 3,629,142 3,095,105 2,400,946 1,866,574 1,485,796 1,320,671 898,372 575,368 458,618 347,628 218,162
Promotion and Sales 839,866 621,829 456,537 369,452 270,129 228,028 122,724 101,881 37,697 25,696 19,033
General and Administrative . 562,628 504,055 431,671 367,236 316,092 270,391 223,500 159,580 129,794 120,850 80,919
Depreciation . 583,174 452,993 301,161 470,169 535,557 428,308 205,192 143,722 120,329 99,599 54,645
TOTAL. . .. $12,983,389 $10,720,317 $7,859,810 $6,594,510 $5,657,261 $4,931,402 $3,307,676 $2,108,061 $1,642,416 $1,303,500 $ 755,213
Net Operating Profit (or Loss) . . 157,850 81,678 124,527 223,495 172,064 (44,005) (83,972) (9,269) 164,016 ~ (51,489)
Amortization of Route Development
Expense . . . . . .. . (6,194) (6,281) (8,566) (26,995) (5,227) (10,618) -0 -0- (65,015) (86,292) (73,525)
Non-operating Income and
Expenses, Net . (43,472) (M,709) (36.085) (50,051) (55,130) (59,965) (39,421) 15,536 (6,888) (12,094) (3,030)
Net Profit'(or Loss) before Taxes . 108,184 20,688 79,876 .146,449 7TI]of (114,588) (123,393) -s;m- ~ (75,883) (128,044)
Income Taxes -0 (60,103) 45,700 18,000 -0- -0 -0 -0- -0 O -0
Net Profit (or Loss) . $ 108,184 $ 80,791 $ 34,176 $ 128,449 f7TDOT $ (114,588) $ (123,393) $ 6,267 $ 92,113 $ (75,883) $ (128,044)
CENTRAL .AIRLINES
1958
ANOTHER YEAR OF PROGRESS
In 1958, we celebrated our l 0th anniversary at Clintonville
. . . trained and graduated many new stewardesses
... welcomed new, modern terminals in severat cities
on the Northliner system
. . . extended our route from Duluth to Sault Ste. Marie
. . . started construction on a Convair maintenance hangar
at Minneapolis/St. Paul.
_J
I
~ ~
~iliiiliii~~n
Capacity: nine passengers, Captain, First Officer. Cruising speed: 145 mph. Range: 713 miles.
Powerplant: Twin Pratt & Whitney Wasp 400-hp. engines. Gross weight: 10,500 pounds.
TH CEN
Capacity: 26 passengers, Captain, First Officer, Stewardess. Joined fleet 1950, replaced Lock-
heed 1951. Cruising speed: 160 mph. Range: 900 miles. Powerplant: Twin Wright Cyclone
l 200-hp. engines. Gross weight: 25,346 pounds.
1
NORTH CENTRAL
. ~
~
~====~--
Capacity: 44 passengers, Captain, First Officer, Stewardess. Added to fleet 1959. Cruising
speed: 284 mph. at 20,000 feet. Cabin pressurized and air conditioned. Radar-equipped.
Range: 2,200 miles. Powerplant: Twin Pratt & Whitney R-2800 engines, 2,400-hp. each. Gross
weight: 47,000 pounds.
I -