North Central Airlines Annual Report 1959

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GENERAL OFFICES: 6201 Thirty-Fourth Avenue South, Wold-Chamberlain
Field, Minneapolis 50, Minnesota
DIRECTORS:
H. N. Carr*
Werner L. Christensen
C. F. DeCoursin*
Charles R. Hood A. L. Wheeler
Arthur E. A. Mueller* K. B. Willett
**Executive Corjiniittee
OFFICERS:
Arthur E. A. Mueller Chairman of the Board
H. N. Carr President and General Manager
Frank N. Buttomer Vice President, Traffic and Sales
R. H. Bendio, Sr Vice President, Maintenance and Engineering
Alvin D. Niemeyer Vice President, Flight Operations
Arthur E. Schwandt Vice President, Industrial Relations
Bernard Sweet Vice Preside7it, Secretary-Treasurer
A. L. Wheeler Vice President and Counsel
John P. Dow Assistant Secretary
REGISTRAR AND STOCK TRANSFER AGENT:
Northwestern National Bank of Minneapolis, Minneapolis, Minnesota
NORTH
CENTRAL
AIRLINES, INC.
6201-34
AVENUE
SOUTH
WOLD-CHAMBERLAIN
FIELD
MINNEAPOLIS
50,
MINNESOTA
March 16, 1960
To Our
Stockholders,
Employees
and Friends;
North Central has
completed
another year of
progress-the
greatest
growth
year in the
company's history.
During 1959, record
revenues of $18,500,000
were attained with the addition of
over 2,000
route miles and the inauguration of service with
new, larger Convair 340
Super
Northliners.
The five Convairs
were added to the fleet of 32 Douglas DC-3's in April, increasing
the
company's
earnings
capacity as well as the
number of seats
available to the
traveling public. During the past 12
months. North Central
offered its airline
patrons
nearly 350,000,000
seat miles, a 35 per cent increase
over 1958. A record
958,000
revenue
passengers
were carried over the Route of the Northliners.
North Central also
continued to lead the local airline industry in volume
of air mail and
express. In June, the
company began air freight
operations. By the
end of 1959, 14,000,000
pounds of cargo had been
carried, including freight, air
mail, express and
expedited
surface mail. Air freight
volume alone was more than
2,000,000
pounds for the
seven-month
period.
Service
was inaugurated
during 1959 to 16 cities
certificated by the Civil
Aeronautics Board to North Central in the Seven States Area case. More than
2,000
route miles, the largest
award in the
company's history, were added to the
system by this decision. It extended North Central's
service in
Minnesota,
Wisconsin,
Illinois, Nebraska, North Dakota and South Dakota.
North Central issued and paid its first dividend this year. A five per cent stock
dividend
was
authorized by the Board of Directors on November 20.
Management
expresses its sincere
appreciation to North Central's
nearly 2,000
employees for their
enthusiastic
contribution to the
company's
greatest year of
progress; the traveling public for its loyalty and
patronage; and its
stockholders
and other friends for their
confidence,
suggestions
and
continued
support.
We look to 1960 as another
outstanding year. The
anticipated
addition of
more Convair
equipment,
expansion of routes in
Michigan, and inauguration of inter
national
service to Canada will assure our
company's
continued
position as
America's
leading local airline.
Sincerely,
Arthur E. A. Mueller
Chairman of the Board
H. N. Carr
President
OXJFl OPIE3-A.TH3ST
YE-A.Fl OE
GnOWTH
I^ORTH Central Airlines in 1959 experienced the
greatest growth in its 12-year history, attainiiag record
revenues with the addition of more than 2,()00 route
miles to its nine state system and the inaiigi^ration of
Convair Super Northliner service. j
Revenues for the year rose to a high of $1^501,121,
a 41 per cent increase over 1958. The com]|iany's ex
panded route network and the new, large^ aircraft
generated substantial increases in all classes! of traffic
--passengers, mail, and cargo. j
Operating expenses were $18,099,083, resulting in
an operating profit of $402,038 and a net profit of
$150,641. However, a non-recurring expens^i item of
$134,673, recorded in 1959, reduced the figure to a net
profit of $15,968, after depreciation charges of $859,102.
This item consisted of route development costs in pro
cessing the Lake Central Acquisition case and the
Chicago-Twin Cities case, both of which wdfe settled
in 1959. Some $104,834 in expenses were! incurred
from 1952 to 1959 in the Lake Central AjBquisition
case, while the balance of $29,839 is a wnte-off of
costs during the past five years in the Chicago-Twin
Cities case.
North Central's aggressive route developpient pro
gram has more than doubled the airline's system since
1954. The company's system included only 2,399 miles
in 1954, while today it has grown to 5,366 miles. Still
pending before the Civil Aeronautics Board are ap
plications which would add another 3,442 route miles.
North Central has been operating under a temporary
mail rate since November 23, 1956 and, as a result, the
amount of air mail revenue reported is somewhat less
than the company's claim with the United States gov
ernment. The permanent rate set by the Board in 1954
did not anticipate adequately the vast expansion of the
company's route system, and a petition for a new per
manent rate was necessary. When the final rate is es
tablished, it will be retroactive to November 23, 1956.
On December 10, 1956, the Civil Aeronautics Board
instituted an investigation to determine whether or not
the rate of return--or profit element--for the local air
lines was fair and reasonable. On July 13, 1959, the
C.A.B. examiner in the Rate of Return case found that
the "rate of return heretofore used to fix the profit
element.
. .
has not been sufficient," and recommended
a rate of 12.25 per cent for future periods. This com
pares with 9.5 per cent which the Board is now using
during the investigation. A final decision in the case
will probably be reached this year.
The company's Board of Directors on November 20,
1959 declared a five per cent stock dividend to be
issued December 21 to holders of record on December
7. This was the first dividend paid by North Central.
The highlight in North Central's fast-paced route de
velopment program came March 1, 1959 when new
Northliner service was extended to 12 of the 18 cities
certificated to the airline under the Civil Aeronautics
Board's vast Seven States Area decision. More than
2,000 miles were added to the system by the order
which extended the company's routes in Minnesota,
REVENUES
1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959
Wisconsin, Illinois, Nebraska, North Dakota, and South
Dakota. !
Cities included in the March 1 jinaugural were:
Minot, Devils Lake, and Bismarck/M4ndan, North Da
kota; Aberdeen, Huron, Mitehell, Rapid City, Pierre,
and Spearfish, South Dakota; and Mankato and Wor
thington, Minnesota.
Added to the Route of the Norihliners under the
same order were Appleton and Ashland, Wisconsin;
and Rockford, Illinois. Operations to these cities were
inaugurated July I.
Fairmont, Minnesota, reeeived new North Central
service beginning December 1, following completion
of an airport development project.
Still pending before the C.A.B. is apother important
case, the Great Lakes Area Investigation, which covers
extensive service in Michigan. Otijer applications
under consideration include routes; from Detroit to
Cincinnati, Omaha to Kansas City, Ki^nsas, and to five
Canadian provinces. A summary of tifie latest develop
ments in these cases follows:
Oreat -A.rea
Inv-estigation
An initial decision September 29 by Civil Aeronautics
Board Examiner Barron Fredericks would increase
North Central's system by approximately 1,200 route
miles, extend service to 19 additional cities in Michi
gan, and add II new airports to the <pompany's opera
tion. I
The decision would provide a route between Sault
Ste. Marie, Michigan, and Chicago via Cheboygan/
Petosky/Pelston/Harbor Springs, Traverse City, Mani-
stee/Ludington, Cadillac/Reed City, Grand Rapids,
and Benton Harbor/St. Joseph, Michigan. The C.A.B.,
in October, authorized North Central to provide in
terim air service to Benton Harbor/St. Joseph on a
Grand Rapids-Chicago route until 90 days after a final
decision in the Great Lakes case. Service was inaugu
rated January 1, I960.
The examiner recommended two routes between
Cheboygan and Detroit. One would run via Alpena,
Saginaw/Bay City/Midland, and Port Huron, Michi
gan; the other by way of Saginaw/Bay City/Midland,
Flint, and Pontiac, Michigan.
Examiner Fredericks said that North Central service
is needed between Green Bay, Wisconsin, and Muske
gon and Grand Rapids, Michigan, and between Mil
waukee and Muskegon with the additional require
ment that any Milwaukee-Detroit service include at
least two intermediate,stops.
The initial decision also called for a North Central
segment between Escanaba and Saginaw, Michigan,
via Traverse City.
The examiner recommended that the Board grant
North Central permanent authority to operate non
stop between Oshkosh, Wisconsin, and Chicago. The
company has been operating nonstop flights between
these points on a temporary interim basis.
Oral arguments in the case were held early in Febru
ary I960, in Washington, D. C. The C.A.B.'s final order
is expected later this year.
3
YEAR APPLIED FOR AWARDED PENDING
1954 2,441 232 2,209
1955 7,837 30 10,016
1956 2,087 0 12,103
1957 0 993 11,110
1958 808 239 11,679
1959 169 2,041 3,442
ROUTE
DEVELOPMENT
PROGRAM
Omalia --
Kansas Oity
-A.pp>lication
On October 5, 1959, the company filed an applieation
with the Board for a route between Omaha, Nebraska,
and Kansas City, Kansas, with two intermediate stops
at Falls City, Nebraska, and Atehison, Kansas.
The route would add 169 route miles and three new
cities to the North Central system.
A hearing date has not yet been set in the case.
Preliminary action is expected late in 1960.
Canadian -A.iDiDlications
During 1959 North Central moved closer to becoming
the first local airline to operate international routes.
On October 21, Civil Aeronautics Board Examiner
Herbert K. Bryan issued his initial decision recom
mending that North Central be certificated to provide
service to Regina, Saskatchewan, Canada, from Minot,
North Dakota, with an intermediate stop at Williston,
North Dakota. The eompany also has applied for a
nonstop segment between Minot and Regina.
Bryan's deeision was followed by a recommendation
from Examiner Ferdinand D. Moran that the company
be authorized to provide serviee to Fort William/Port
Arthur, Ontario, on two new routes. One would oper
ate from Duluth, Minnesota/Superior, Wisconsin; the
other, from Houghton/Hancock, Michigan.
North Central is unopposed in both Canadian ap-
plieations. The deeisions require approval of the Presi
dent of the United States before becoming final.
The recommendations of Examiners Bryan and
Moran would add nearly 750 route miles and four new
cities to the company's system.
Other Canadian applications on file by North Cen
tral include nonstop service linking Minneapolis/St.
Paul and Winnipeg, Manitoba; International Falls,
Minnesota, and Winnipeg; and Detroit and Toronto,
Ontario. No action to reopen the Bilateral Treaty be
tween the United States and Canada is anticipated
during 1960.
Detroit--OincinneLti
Early in 1959, the Civil Aeronautics Board made North
Central a party to the Detroit-Cincinnati Suspension
Investigation case which originated as an application
by a trunk airline to transfer the route to another trunk
line. Intermediates on the segment are Toledo, Dayton,
and Columbus, Ohio.
Examiner Paul Pfeiffer issued his initial decision in
November 1959, recommending that a loeal airline be
certificated to serve the segment.
Briefs have been submitted subsequent to Pfeiffer's
decision, and the Board is expected to set an early
spring date for the oral argument.
4
Twin Cities--Qiaaci Cities
In this proceeding, North Central appealed to the
United States District Court of Appeals the C.A.B.'s
order in the Seven States Case awarding two routes in
Iowa, Illinois and Minnesota to another airline in the
Seven States decision. These consist of a route from
Minneapolis/St. Paul to Davenport, lowa/Rock Island/
Moline/East Moline, Illinois, via Rochester, Minnesota,
and Cedar Rapids, Iowa; and from Madison, Wiscon
sin, to Omaha, Nebraska, via Des Moines, Cedar Rapids
and Dubuque, Iowa.
The Court of Appeals has heard the case, and a
decision is expected in the spring of this year.
TRAFiniC CROW^TH
North Central again led the nation's local airline in
dustry in 1959 by setting new records in passenger,
mail, and cargo volume for the greatest growth in the
company's 12-year history.
The 957,751 revenue passengers enplaned in 1959
was the largest number ever carried by a local airline
and nearly one-fifth the total transported by the entire
local industry during the year. It was a 23 per cent
increase over North Central's own passenger traffic
record of 1958, and exceeded the passenger volume on
the second-ranking local airline by 61 per cent.
Northliners carried 4,856,740 pounds of mail during
1959, an increase of 29 per cent over 1958, and which
was 137 per cent ahead of the second-place local car
rier. This includes the expedited surface mail carried
by the airline.
Cargo volume reached a record 9,195,960 pounds.
This was 18 per cent ahead of the second-ranking local
airline. Air freight service was inaugurated on June 1,
1959 and in September, North Central ranked third
among the local airlines. By the end of the year, the
company had carried 2,112,294 pounds of air freight.
August was North Central's best traffic month. The
company enplaned 95,409 revenue passengers, setting
a new monthly high for the local airline industry.
The eompany held this traffic leadership and also
maintained its perfect safety record. Since inaugurat
ing service in 1948, the airline has flown 662,648,213
passenger miles without a fatality to passengers or
crew members.
REVENUE
MILES
FLOWN
1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959
5
E-A.OILITIEIS
North Central added to its physical plant facilities,
created a new operating department, improved pas-
smger handling'^jrocedures at hlTs^ CTncago Mfdway
Airport, streamlined its system of interline reservations
requests, and increased its sales staff during 1959.
Three buildings were added to the company's phy
sical layout in the General Office area of Wold-Cham
berlain field, Minneapolis/St. Paul. A new $.350,000
Convair maintenance hangar and office building was
completed in March. Located here are Convair line
maintenance, inspection dispatch, the automotive shop,
overhaul maintenance, and the welding, fabric and
paint shops. The second floor houses offices for the
Maintenance and Engineering department, and the
Industrial Relations department.
Across from the Convair hangar is a new one-story
building which provides office space for the chief en
gineer and his staff.
The third addition was that of the Training Center.
This building is located near the airport and is leased
from the Minneapolis-St. Paul Metropolitan Airports
Commission.
The facility was required for the extensive Convair
training program which the company instituted early
in 19.59. At that time, all training activities for stew
ardesses, pilots, maintenance and station personnel
were centralized in this building. More than 750 North
Central employees spent 20,500 ground school man
hours and 1,500 in-flight man-hours of Convair train
ing before the new aircraft went into service in April.
A management training program has also been es
tablished covering such subjects as personnel super
vision, administration, and human relations.
In June, a new company department --
Ground Op
erations -- was established to provide broader, more
direct supervision of stations, fleet service, telecom
munications, and such ground services as security, lost
North Central's careful inspection and maintenance of flight equipment
resulted in remarkably few maintenance delays and cancellations.
and found, and claims. These functions formerly were
included in the Traffic and Sales and Flight Operations
departments. The new department is headquartered in
the Training Center and headed T. M. Needham
as Director of Ground Operations.
The growing volume of passenger traffic at Chicago
Midway airport has made it necessary to increase the
company's ticket counter staff by about 40 per cent to
insure more efficient handling of air travelers. In ad
dition, North Central instituted an intensive on-the-job
training program for all Midway ticket agents covering
schedules, tariffs, and ticketing procedures.
The company has also introduced a new, streamlined
check-in system for the convenience of Chicago-board-
ing passengers. Agents can now check in passengers
with confirmed reservations at about 60 per minute, pro
viding more time for the customer with an unusual
travel problem.
"White-glove" treatment of passengers was inaugu
rated by North Central at Midway in 1959 when three
specially-trained passenger relations agents were
placed in front of the ticket counter to handle uncon
firmed reservations, standbys, elderly or incapacitated
persons, and travelers with small children. This system
allows the company to give individual attention to such
persons and alleviates confusion at the counter.
The company has centralized control of all com
munications (local phones and leased facilities) under
a Telecommunications section in the Ground Opera
tions department. One of the major improvements in
handling interline reservations requests has been the
installation of a "Z" circuit teletype at the Chicago
reservations center. This has resulted in faster, more
efficient processing of interline reservations. In addi
tion to other improvements in communications and
telephone procedures. North Central plans to expand
its private line teletype system to handle interline
reservations exclusively at certain larger cities.
Downtown ticket offices were opened at Green Bay
and Madison, Wisconsin, during the year. City ticket
offices also are maintained at Minneapolis and Duluth
and shared with other airlines at Milwaukee, Chicago,
Detroit, and St. Paul. During the year, district sales
offices were opened at Chicago and Sioux Falls, South
Dakota.
The company established the positions of Military
Sales Representative and Agency and Interline Sales
Representative in 1959. Both are located in the Minne
apolis District Sales office.
During: l:959rNorth Centtai's staff: of trafficrandrsaies"
representatives made nearly 16,000 personal sales calls
in addition to their other duties.
SERVICE IlSTCRE^SEID
North Central continued to provide more service to
the traveling public than any of the 13 other local
6
airlines. The company oflFered airline patrons nearly
350,000,000 seat miles, a 35 per cent increase over 1958.
This increase was due largely to the addition of Con-
vair equipment.
North Central flew 153,893,721 passenger miles in
1959, a 22 per cent increase. Of the 167,922 scheduled
arrivals during the year, more than 68 per cent were
on time, a remarkable achievement considering the
addition of new equipment and the short-haul nature
of the operation.
In February, the company established a fleet service
section in the newly-created Ground Operations de
partment. Meal service and snacks were added on cer
tain long-haul, Convair segments.
Last year. North Central's customer correspondence
section answered more than 3,450 customer letters
from the nearly 1,000,000 passengers carried over the
Route of the Northliners.
Every passenger letter goes first to President Hal N.
Carr and then to the Traffic and Sales department for
investigation and reply by the customer correspond
ence section.
Compliments are acknowledged and forwarded to
the employee or station mentioned. Complaints are in
vestigated, and the passenger is advised of the results.
Deliciously-prepared meals are served on selected Super Northliner flights.
Experience during the first eight months of Con
vair operation indicates that the new equipment not
only improves service to the traveling public but also
generates new business. The Convairs are more effi
cient than the relatively high-cost DC-3 because of a
lower seat-mile cost.
EQXJIT=1MCE]^TT FROO-RAIM: FORECAST
North Central launched its third major equipment
change April 26 with the inauguration of service with
Convair Super Northliners, bringing the fleet to 37
aircraft, including five Convair 340's and 32 Douglas
DC-3's.
Delivery of the 44-passenger, radar-equipped Con
vairs began in January 1959, after the Civil Aeronautics
Board approved a government guarantee of 90 per
cent of the $2,340,000 equipment loan for purchase
of the five aircraft and related spare parts.
During the remaining eight months, the Convairs
were integrated into the operation with speed and
efficiency. Average daily aircraft utilization for the
year was 6 hours, 32 minutes. The company's DC-3
utilization rate of 7 hours, 20 minutes a day is the
highest in the local airline industry.
The Convairs flew 95.6 per cent of their 1,659,183
scheduled miles in 1959. The company's DC-3's oper
ated 97.4 per cent of their 11,963,522 miles to produce
a system performance factor for the year of 97.2 per
cent.
Initially, Super Northliner service has been reserved
for the long-haul, high density segments. Future equip
ment plans call for the addition of five more Convairs
during 1960. Service with the larger, faster airliners
will then be extended to other segments and additional
cities as rapidly as traffic demands and airport develop
ments permit.
North Central looks forward to the new decade as a
period which will bring unprecedented opportunity
and progress. The dynamic record of the local airlines
and the company's emergence as the leader in this im
portant segment of the nation's transportation system
will be reflected in North Central's continued growth
during 1960.
The next year will see North Central become the
first local airline to operate international routes when
the final approval is given to the company's applica
tions to serve points in Ontario and Saskatchewan,
Canada. The system also will be expanded to include
new cities in Michigan.
This strengthened route structure in the midwest
and Canada will be augmented by the addition of
more Convair equipment to serve the growing air
transportation needs of this vital section of the nation.
The company has for some time been evaluating avail
able turbo-prop engines with a view toward convert
ing its Convair aircraft within the next three to five
years.
a million passengers will board^ North
Central airliners in 1960, and the new air freight serv
ice will be further developed to match the company's
leadership in mail and express volume.
The inereased traffic potential, new equipment, and
an expanded route system will result in record revenues
to North Central during the coming years.
7
DEVILS LAKE
WILLiSTON
GRAND FORK^
NORTH DAKOTA HIBBING-CHI
HpUGHTON-HANCOCK
BISMARCK
MANDAN
ASHLAND T^-j^IRON mountain
LAND O LAKt^ X
WIS^NSIN R^ELANDER
FARGO
UPPER MICHIGAN/
BRAINEI
ESCANABA
MINNESOTA \ r^amoYGAu roz
p/;^PETOSKEY \ i
1^ PELSTON I
HARBOR SPRINGS
fMENOMINEE
MARINETTE
^ABERDEEN
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tLlMTONVILLE
Oappleton
OSHKOSH
t>
SOUTH DAKOTA EAU CfcAlRE
Q JiKVINS
j POINT \
I Wise. RAPIDi
MINNEAPOLIS
Watertown OREEN BAY
SPEARFISH MICHI< TORONTO
KSAGI^AW
/*!|AY iCITY
\^dl|lnd
P HURJ5N SROOKINGS
PIERRE
\ A^NITOW^
\0 RAPID CITY
lU^^N
irthingtoh^ '
- 7^ Q FAIRMONT
MITCHELL 10 MILWAUKEB^ LANSING;
MADISOjH
SIOUX FALLS
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I^AN-DEEJANOb I
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SIOUX CITY
ROCKFORD IOledo
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NORFOLK
davenport
ROCK ISLAND
MOLINE
E. MOLINE
FORT WAYNE
DES MOINES
SANDUSKY
ILLINOIS
INDIANA
:OLUMBUS
MISSOURI
ROUTE
OF
THE
NORTHIINERS
NORTH CENTRAL.
REGINA
WINNIPEG
0JNTERNATIONAL FALLS
0 YHIEF fiver FAL^;^
FT. WILLIAM-PORT ARTHUR
NEBRASKA
FALLS CITY
ATCHISON \
KANSAS
KANSAS CITY
PRESENT rtOUTES ;
EROEOSEE E.OXJTES
STE. MARIE
CLEVELAND
OHIO
8 9
-A. ]M: E n, IO-Au'S ILi E-A. DI 3sr GS- J^inLINE
FASSHI]SrC3rBK,S
IlST FOXJnSTDS iisr FOUNDS
1959
^Includes Air Mail, Surface Mail
**lncludes Air Express, Air Freight
12 TTE-A-PIS OF OplSTTIlSrUOUS FFOOFIESS
1959: GREATEST YEAR OF GROWTH
NORTH CENTRAL AIRLINES
NORTH CENTRAL
FASSDNOEF/S
North Central 957,751
Mohawk 594,410
West Coast 407,894
Frontier 333,873
Trans Texas 294,034
Southern 256,599
Lake Central 228,964
Bonanza 227,349
Central 168,665
IN FOUNDS
CA.F,0-0^^
IN FOUNDS
North Central North Central
Ozark 2,006,420
Trans Texas 1,955,980
Allegheny 1,941,240
Pacific 1,768,520
Piedmont 1,693,040
Southern 1,417,840
Mohawk 1,348,840
Central 1,200,060
West Coast 925,580
Lake Central 819,580
Trans Texas 4,413,140
Piedmont 3,504,800
Southern 3,227,800
Lake Central 2,816,900
Central 2,173,600
Pacific 2,044,720
West Coast 1,733,060
Bonanza 1,513,580
*lncludes Air Mail, Surface Mail
^ **lncludes Air Express, Air Freight
FIFIST F-A.SSENPEI=i-S. 19S9
li^M^-A-IX-i, 1S9
'fifist insr ojlfigi-o, iss
ASSETS
CURRENT ASSETS
Cash
Accounts receivable
Mail
Mail --
additional claim (Note 1)
Traffic
Other
$1,594,512
635,994
1,589,133
175,622
Maintenance and operating supplies -- at the lower of cost
(determined by the first-in, first-out method) or market
Prepaid expenses and sundry deposits
Total current assets
INVESTMENTS -
at cost
OPERATING PROPERTY AND EQUIPMENT (at cost)
Flight equipment (Notes 2 and 3)
Ground equipment
Hangar buildings and improvements to leased property
Furniture and fixtures
6,382,742
730,661
227,965
211,984
Total
Less depreciation to date
7,553,352
3,633,485
DEFERRED CHARGES
Route development expense. ;
Other i
252,317
83,171
$ 545,845
3,995,261
611,434
365,188
5,517,728
10,821
3,919,867
335,488
$9,783,904
The accompanying notes are an integral part of the financial statements.
5
m^BILITIES
CURRENT LIABILITIES
Current maturities of long-term notes
Accounts payable
Trade
Traffic
Unearned transportation revenue
Income taxes withheld and other employee payroll deductions..
Accrued liabilities
Salary and wages
Taxes (including $4,542 of income taxes)
All other
Total current liabilities P
NONCURRENT LIARILITIES
5/2% notes payable to bank, due in monthly or semi-annual
installments to January 1, 1966 (Notes 2 and 3)
Other notes payable, partially secured by pledge
of certain equipment, due in monthly installments
Less current maturities
Deferred rental
Total noncurrent liabilities
CAPITAL
Common stock --
authorized, 3,750,000 shares of
$.20 par value; issued and outstanding, 2,113,724 shares
Paid-in in excess of par value of stock issued
Retained earnings
$ 875,613 1
$2,078,567
1,108,820 3,187,387 1
151,060 1
133,973 1
525,004
282,051
225,692 1,032,747 1
5,380,780 1
3,692,000
105,255
3,797,255
875,613
2,921,642
5,000
2,926,642
422,745
894,975
1,317,720
158,762 1,476,482 1
$9,783,904 1
13
STJLTEn^EISTT OE E KRISTI ITOS
Year* endecl Decemloer* 31, 13 5^
TRANSPORTATION REVENUE
Passenger $11,388,135
Mail 6,322,896
Express 216,725
Exeess baggage 95,039
Non-scheduled transport service 310,382
Freight 116,667
Other :
51,277
OPERATING EXPENSES
Flying operations
Flight equipment maintenance
Other maintenance
Passenger service
Aircraft and trafhc servicing
Promotion and sales
General and administrative
Depreciation (Note 5)
Operating profit
OTHER DEDUGTIONS
Interest
Extension and development
Income taxes (Note 4)
Net earnings before special charge
SPEGIAL GHARGE
Prior years extension and development costs (Note 6)
Net Earnings
5,561,764
2,362,266
1,208,030
956,850
5,065,347
1,376,895
708,829
859,102
183,364
63,491
4,542
The accompanying notes are an integral part of the financial statements
$18,501,121
18,099,083
402,038
251,397
150,641
134,673
$ 15,968
OF
FET^iKTEiD EA.E,:isri:isra-s ipj^zid
Year ended Deoemtoer* 31, 13 5^
RETAINED EARNINGS
>I3Sr
Retained earnings --
December 31, 1958
Net earnings for the year
Retained Earnings, December 31, 1959
PAID-IN GAPITAL
$142,794
15,968
$158,762
Paid-in capital, December 31, 1958
Excess of proceeds from sale of common stock j
over par value thereof -- j
Treasury stock j $92,150
Previously unissued stock j 5,438
Stock dividend --
100,654 shares
(1 share for each 20 outstanding)
Paid-In Capital, December 31, 1959
The accompanying notes are an integral part of the financial statements!
$817,518
97,588
915,106
20,131
$894,975
msro.
isro*i'ES TO FiNA.nsrciA.rj sta^temients
1. It is the policy of the Civil Aeronautics Board to provide a scheduled air
line on a temporary mail rate (t^e company has been on such rate since
November 23, 1956) with sufTicitnt mail pay on settlement of its final rate
to meet its break-even need ant^ also to provide for a reasonable retu.n
on recognized investment. In accordance with this policy the company has
determined that for 1959 an ambunt of $160,762 of additional mail pay
will be applicable under these f^o categories. An amount of $635,994 is
shown as an account receivable jat December 31, 1959, which amount in
cludes the 1959 item and $475,232 which is the unpaid portion of the
1956-1958 break-even need andj return on investment.
2. On January 9, 1959 the company borrowed $2,000,000 from two banks
for a working capital loan. It is .repayable, with interest at 5V2% on the
unpaid balance, in monthly installments totaling $480,000 per year, with
a final payment of $370,000 dup on June 15, 1962. As security for the
loan the company has pledged twenty-three DC-3 aircraft including re
lated flight equipment. Among other things, the loan agreement provides
that the company maintain curient assets (excluding unapproved mail
pay claims) that are at least equal to current liabilities, excluding any
liability to the banks under thi^ working capital loan or the equipment
loan mentioned in Note 3. |
3. The company has also borrowed $2,340,000 from the same two banks in
order to complete the transaction* relative to the purchase of five Convair-
340 aircraft, spare engines and Darts. The loan is secured by the Convair
aircraft, engines and parts as described above and is to be repaid, to
gether with interest at 5V2% on the unpaid balance, in semi-annual in
stallments of $167,000 to January 1, 1966. The U.S. Government has guar
anteed 90% of the loan, with such guarantee not to exceed $2,106,000.
4. A net operating loss carry-over from prior years is sufficient to absorb
taxable income for 1959 and accordingly no provision has been made
for Federal and State income taxes. During 1959 the United States Treas
ury and the Wisconsin Department of Taxation reviewed the company's
tax returns through the year 1958. The examinations resulted in additional
State of Wisconsin assessments totaling $4,542 but no additional Federal
tax.
5. Depreciation deductions included in the accompanying statement of earn
ings are approximately $28,000 more than the related amount allowable
for tax purposes because of a redetermination of useful lives of aircraft
and engines made by taxing authorities.
6. In 1959 the United States Supreme Court refused to review a decision of
the Circuit Court of Appeals, which denied the company the right to
purchase 96% of the outstanding stock of Lake Central Airlines, Inc. As
a result the company has charged off against current earnings the ac
cumulated costs applicable to this application. These costs were incurred
from 1952 to 1959.
CHICAGO
NEW YORK
LOS ANGELES
Alexander Grant & Company
CERTIFIED PUBLIC ACCOUNTANTS
312 EAST WISCONSIN AVENUE
MILWAUKEE 2. WISCONSIN
OTHER
PRINCIPAL
CITIES
Board of Directors
North Central Airlines, Inc.
We have examrfied the balance sheet of NORTH CENTRAL AIRLINES, INC. (a Wisconsin corporation) as of
December 31, 19591 and the related statements of earnings and retained earnings and paid-in capital 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 cilcumstances.
In our
opinionJ the accompanying balance sheet and statements of earnings and retained earnings and
paid-in capital preient fairly the financial position of North Central Airlines, Inc. at December 31, 1959 and
the results of its operations for the year then ended, in conformity with generally accepted accounting prin
ciples applied on a] basis consistent with that of the preceding year.
Milwaukee, Wisconsfn
February 15, 1960 Alexander Grant & Company
001f/fl::FA.F,A.TIVE FI2SrA.nsrOIA.L SXJlvll^A.K.Y
Operating Revenues
Excess Baggage
Non-scheduled Transport Service.
Other Revenue.
1959 1958 1957 1956 1955 1954
$11,388,135 $ 8,702,455 $ 7,372,333 $6,137,216 $4,933,487 $3,351,782
.
6,322,896 3,780,823 2,925,645 1,522,211 1,689,890 2,328,921
216,725 164,615 146,287 149,640 126,476 75,630
95,039 73,455 54,986 40,506 30,477 20,975
310,382 384,957 273,077 119,419 28,711 46,734
116,667 -0- -0- -0- -0- -0-
51,277 34,934 29,667 15,345 8,964 5,283
$18,501,121 $13,141,239 $10,801,995 $7,984,337 $6,818,005 $5,829,325
Operating Expenses
Flying Operations $ 5,561.764
Flight Equipment Maintenance 2,362,266
Indirect Maintenance 1,208,030
Passenger Service 956,850
Aircraft and Traffic Servicing 5,065,347
Promotion and Sales 1,376,895
General and Administrative 708,829
Depreciation 859,102
total $18,099,083
Net Operating Profit (or Loss) 402,038
Amortization of Route Development
Expense (198,164)
Non-operating Income and
Expenses, Net (183,364)
Net Profit (or Loss) before Taxes ..
20,510
Income Taxes 4.542
Net Profit (or Loss) $ 15,968
$ 3,455,867
1,384,841
644,693
560,934
3,095,105
621,829
504,055
452,993
$ 4,191,826
1,657,479
815,676
703,598
3,629,142
839,866
562,628
583,174
$12,983,389 $10,720,317
$2,578,253
960,021
287,978
443,243
2,400,946
456,537
431,671
301,161
$2,007,381
845,753
342,276
325,669
1,866,574
369,452
367,236
470,169
$1,695,384
724,209
373,222
256,872
1,485,796
270,129
316,092
535,557
1953
$2,303,738
2,468,685
68,117
15,739
25,436
-0-
^682
$4,887,397
$1,413,489
690,589
368,406
211,520
1,320,671
228,028
270,391
428,308
$5,657,261 $4,931,402
1952
$1,470,536
1,681,542
55,861
12,783
-0-
-0-
_
2.98^
$3,22^704
$ 939,931
483,292
293,682
140,983
898,372
122,724
223,500
205,192
$3,307,676
1951
$ 860,599
1,181,596
45,173
5,643
-0-
-0-
5,781
$2,098,792
$ 612,060
275,469
157,014
82,967
575,368
101,881
159,580
143,722
$2,108,061
1950
$ 427,278
1,355,145
18,637
2,419
-0-
-0-
2,953
$1,80M32
$ 476,572
267,105
136,205
16,096
458,618
37,697
129,794
J20,329
$"1,642,416
1949
$ 271,576 $
1,036,243
8,364
1,519
-0-
-0-
8,301
"$U26,0^ $
$ 361,254 $
229,946
111,736
6,791
347,628
25,696
120,850
99,599
$1,303,500
1948
113,648
580,968
5,963
1,012
-0-
-0-
2,133
703^4
$ 200,030
127,966
51,164
3,294
218,162
19,033
80,919
54,645
$ 755,213
157,850
(6,194)
(43,472)
81,678
(6,281)
(54,709)
108,184 20,688
JT (60,103)
$ T08,184 $ 80,791
l2"4,y2f 2,4"95 172,064 (44,005) (83,972) (9,269) 164,016 22,503 (51,489)
(8,566) (26,995) (5,227) (10,618) -0- -0- (65,015) (86,292) (73,525)
(36,085) (50,051) (55,130) (59,965) (39,421) 15,536 (6,888) (12,094) (3,030)
79,876
45,700
146,449
18,000
111,707 .
-0-
(114,588)
-0-
(123,393)
-0-
6,267
-0-
92,113
-0-
(75,883)
-0-
(128,044)
-0-
34,176 $ 128,449 $ 111,707 $ (114,588) $ (123,393) $ 6,267 $ 92,113 $ (75,883) $ (128,044)
15
1959--A busy year for North Central. During the first few months,
the company's entire training program was geared to the intro
duction of the Convair 340's
. . .
. . .
and on April 26 five of these 44-passenger, radar-equipped
Convairs were added to the fleet's 32 DC-3's to bring the best in
air service to the Northlifier system.
New service was started to 16 cities in North Dakota, South
Dakota, Illinois, Wisconsin and Minnesota. The 2,000 additional
route miles constituted the largest award in the company's ' '
Throughout the year new employees were added to meet these
rapid developments of the airline. At the year's end, employment
figures approached the 2,000 mark.
...
J
y V V