North Central Airlines Annual Report 1960

0961
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NORTH CENTRAL AIRLINES, INC.
AMERICA'S LEADING LOCAL AIRLINE
GENERAL OFFICES 6201 Thirty-Fourth Avenue South, Wold-Chamberlain Field
Minneapolis 50, Minnesota
DIRECTORS
Hal N. Carr* Arthur E. A. Mueller*
Werner L. Christensen A. L. Wheeler
G. F. DeCoursin* ** Executive Committee K. B. Willett
OFFICERS
Arthur E. A. Mueller Chairman of the Board
Hal 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 President, Secretary-Treasurer
A. L. Wheeler Vice President and Counsel
John P. Dow Assisiant Secretary
REGISTRAR AND STOCK TRANSFER AGENT
Northwestern National Bank of Minneapolis, Minneapolis, Minnesota
OUR COVER STORY
Our cover depicts the "tale of two cities" -- one, the
farming community of Mid-America; the other, the
great metropolitan center, gateway to the airlanes
of the world.
North Central Airlines performs a vital service by
linking the two and by linking the intermediate cities
with each other. Its fast, frequent, dependable opera
tion gives wings to every Main Street.
Whether it's breakfast in Bemidji or business in
Boston, off to Oshkosh or in from India, the trip can
always start or end on North Central. With its daily
service to 91 cities in 10 Mid-America states and two
Canadian provinces, small wonder that North Cen
tral is America's Leading Local Airline.
NORTH CENTRAL AIRLINES
I960
TO OUR STOCKHOLDERS, EMPLOYEES AND FRIENDS
In recent years, the North Central Airlines
Annual Report has been a journal of continuing
company expansion and industry leadership.
However, 1960 becomes our year of greatest
progress, and includes a record of over one
million passengers and a 30 per cent increase in
the system network.
The 1,035,076 passengers enplaned on the
Route of the Northliners represent one-sixth of
the total carried by the entire local industry
and an eight per cent increase over our 1959
figure. It is the first time any local airline has
carried more than one million passengers in a
single year.
North Central continued to lead the nation's
12 other locals in all classes of traffic. In 1960,
the airline carried a record 5,656,000 pounds of
mail and 12,193,000 pounds of cargo, for a total
increase of 27 per cent over 1959.
The system itself grew to 7,100 route miles,
including 91 cities in 10 states and two Cana
dian provinces. During the year, the company
inaugurated its first international operation with
two routes to Port Arthur/Fort William, On
tario, Canada, and in January 1961 was certifi
cated to Regina, Saskatchewan. Service was
begun to 15 Michigan cities awarded by the
March 17, 1961
Civil Aeronautics Board in its Great Lakes Area
Investigation.
Record revenues of $21,690,000 were realized
during 1960, a 17 per cent gain over 1959. This
increase was the result of intensified scheduling
and the addition of three more Convair 340
aircraft.
Confidence in North Central's progress and
future is shown by the growing number of its
stockholders. In October, over 600 new owners
were added from the ranks of employees alone,
during a special offering to stockholders and
employees of 42,857 shares, which was over
subscribed.
The company's dynamic progress has been
due, in a large part, to the enthusiastic loyalty
of its 2,200 employees, many of whom joined
the airline during its first years of operation. To
our personnel, stockholders, and other friends
for their continuing support; and to our pas
sengers for their confidence and understanding;
the management of North Central Airlines ex
presses its sincere appreciation.
As you read this report, we believe you will
see why we forecast an even brighter future --
with another year of unprecedented progress
ahead for North Central.
Arthur E. A. Mueller
Sincerely,
Hal N. Carr
Chairman of the Board President
1
MILLIONS
NORTH CENTRAL AIRLINES highlighted its
13th year by becoming the first local airline to
carry one million passengers in a single year and
by expanding its system network 30 per cent.
Record revenues of $21,688,628 were realized in
1960, a 17 per cent increase over 1959. Operating
expenses of $21,256,366 left an operating profit of
$432,262 and a net profit of $102,114 after deprecia
tion charges of $787,177.
Since November 23, 1956, North Central has been
on a temporary mail rate. Therefore, the amount of
air mail revenue reported is somewhat less than the
company's claim with the United States Govern
ment. VVdien the final rate is established, it will be
retroactive to November 23, 1956.
On August 26, 1960, the Civil Aeronautics Board
issued its decision in the Rate of Return of the Local
Service Carriers Investigation. It stated that the
"Rate of return heretofore used to fix the profit ele
ment for local service carriers has not been suflBcient
to maintain the financial integrity of the carriers,
attract capital on reasonable terms, and return
reasonable compensation to the investors." The
Board concluded that the investment-return por
tion of the subsidy will, in the future, be calculated
on a sliding scale allowing a minimum of nine per
cent and a maximum of 12.75 per cent.
In addition, on December 23, 1960, the C.A.B.
announced that it intended to place all local airlines
on a "class mail rate" effective January 1, 1961.
Under this plan, carriers operating more efficiently
than the established standards may earn more than
the 12.75 per cent return.
In order to acquire five more Convair 340/440
aircraft and spare parts, the company completed
arrangements on July 26, 1960, with the Prudential
Insurance Company of America, the Northwestern
National Bank of Minneapolis, and the Irving Trust
Company of New York for an equipment loan of
$2,450,000, representing 90 per cent of the purchase
price. Three of these aircraft have been delivered.
It is anticipated that this loan will be guaranteed
by the United States Government to the extent of
90 per cent of the principal amount and 100 per
cent of the interest under Public Law 85-307 and
would, therefore, be subject to approval by the
C.A.B. The Board has previously guaranteed a loan
of $2,340,000 for the company.
In connection with this equipment loan, on Sep
tember 22, 1960, North Central offered 42,857 shares
of common stock to its stockholders, on a pro rata
basis, and to its employees on a seniority basis.
The offering was fully subscribed with an increase
in capital of $300,000.
2
SYSTEM GROWTH
During 1960, North Central continued its program
of aggressive route development begun in 1954.
In these six years of dynamic system growth, 4,497
route miles have been added for an increase of 187
per cent. The past year produced a 30 per cent
increase in the system network.
The list of Northliner cities has grown from 39
in 1954 to 90 in 1960. North Central is now the
second largest airline in the nation in the number
of cities served.
The highlight of 1960's route expansion program
came December 1 when new service was inaugu
rated to 15 Michigan cities. The Civil Aeronautics
Board decision of August 25 certificated these cities
to the airline in the Great Lakes Area Investigation
and was the company's most lucrative route award.
Totaling 1,267 route miles in the heart of Michi
gan's industrial area and adding Ohio to the system,
the Great Lakes order included Cleveland, Ohio;
Alpena, Cadillac/Reed City, Muskegon, Flint, Pon
tiac, Port Huron, Saginaw/Bay City/Midland, Pells-
ton. Traverse City, and Manistee/Ludington, Michi
gan. Cheboygan, Harbor Springs, and Petoskey,
Michigan are served through the Pellston airport.
The company inaugurated Cleveland service on
February 1, 1961, and will operate into Manistee/
Ludington on April 1 when airport development
projects are completed.
North Central service was extended into Canada
at Port Arthur/Fort William, Ontario, by President
Eisenhower on September 6. His approval of a
Citizens turn out for the inauguration of North-
liner service at one of the 19 communities added
to the company's system during the year.
C.A.B. order certificated the company to operate to
the Canadian Lakehead cities on two routes: from
Duluth, Minnesota/Superior, Wisconsin, and from
Hancock/Houghton, Michigan. This international
service was inaugurated December 1 and added 262
miles to the system.
As 1960 came to a close, the company was await
ing Presidential approval of a route from Minot,
North Dakota, to Regina, Saskatchewan, Canada.
On January 16, 1961, President Eisenhower signed
the C.A.B. order awarding the 216-mile nonstop
segment to North Central. The Regina route in
creased the system to 91 cities in 10 states and two
Canadian provinces over a network of more than
7,100 route miles.
Still pending before the Board are applications
to extend service to Wyoming from Chicago through
Wisconsin, Minnesota, and South Dakota; between
Omaha, Nebraska and St. Louis, Missouri; and be
tween Omaha and Kansas City, Kansas; and from
Detroit to Toronto, Ontario, Canada. A summary
of the current status of these cases follows.
THOUSANDS
ROUTE MILES
3
station of the Year honors go to leading
North Central stations for achieving high
on-time performance records and out
standing operations efficiency in 1960.
WYOMING-SOUTH DAKOTA-CHICAGO
INVESTIGATION
On February 4, 1960, North Central filed an appli
cation with the Civil Aeronautics Board to extend
its system to Wyoming and increase its service on
routes linking Chicago with points in South Dakota
and Iowa. This initial application was amended
twice, on February 18 and July 19, 1960, and now
includes the following routes:
Between Sioux City, Iowa and Chicago, via
Waterloo, Iowa.
Between Sioux Falls, South Dakota and Chicago
nonstop.
Between Huron, South Dakota and Chicago via
Brookings, South Dakota; Rochester, Minnesota; and
Madison, Wisconsin.
Between Casper, Wyoming and Chicago via Rapid
City, Pierre, Huron, Sioux Falls, South Dakota;
Worthington and Rochester, Minnesota; and Madi
son, Wisconsin.
And, between Sheridan, Wyoming and Rapid
City, South Dakota via Spearfish, South Dakota.
Hearings before C.A.B. Examiner Richard A.
Walsh were held in Rapid City on November 15
and Washington on December 5. Walsh's initial
decision is expected late in 1961.
OMAHA-ST. LOUIS APPLICATION
On February 23, 1960, the company applied for a
new route which would extend its system from
Omaha, Nebraska to St. Louis, Missouri, via Chilli-
cothe and Moberly, Missouri.
The 400-mile route would add three new cities
and the State of Missouri to the system.
A date for the hearing in the case has not been
set by the Board, but preliminary action is expected
in the fall of 1961.
OMAHA-KANSAS CITY APPLICATION
Application for a route between Omaha and Kansas
City, Kansas by way of Falls City, Nebraska and
Atchison, Kansas was filed on October 5, 1959. A
hearing date has not yet been set by the C.A.B.
This route would add 169 miles, three new cities,
and the State of Kansas to North Central's system
network.
CANADIAN APPLICATIONS
Still on file before the Civil Aeronautics Board is
North Central's application for nonstop authority
between Detroit and Toronto, Ontario, Canada.
This application requires a reopening of the Bilat-
erial Treaty between the United States and Canada.
TRAFFIC RECORD
orth Central set a new traffic record for the
nation's local airlines by becoming the first in
the industry to carry more than one million pas
sengers in a single year. The company also led the
12 other local airlines in mail and cargo volume
during 1960.
There were 1,035,076 passengers enplaned and
this number was 52 per cent ahead of the passenger
volume of the second-ranking local airline. It repre
sented one-sixth of the total passengers carried by
the entire local airline industry during the year, and
an eight per cent gain over the company's 1959
record.
In August, North Central carried 101,705 passen
gers, breaking all monthly traffic records for the
local airline industry.
The company carried 5,655,640 pounds of mail
during 1960, an increase of 16 per cent over 1959
and exceeding the second-place local by 123 per
cent. This included 1,031,085 pounds of surface mail.
Cargo volume reached a record 12,193,000 pounds,
a 33 per cent increase over 1959 and 17 per cent
ahead of the second-ranking local airline. Included
are 7,316,920 pounds of air express and 4,876,080
pounds of air freight.
North Central maintained this traffic leadership
and also received the National Safety Council's
coveted Award of Honor for an outstanding safety
record. Since beginning scheduled operations in
February, 1948, North Central has flown 831,529,015
passenger miles and carried 5,274,347 passengers
without a single fatality to passengers or crew
members.
4
New stewardesses in smart new cocoa brown uni
forms attend graduation ceremonies at Minne
apolis/St. Paul. The Northliner stewardess corps
now numbers 160.
MANAGEMENT DEVELOPMENT
Thecompany made several organizational changes
during 1960 designed to strengthen the efficiency
of its management and supervisory teams.
Early in the year new managerial positions were
created in the Maintenance and Engineering De
partment and in Flight Operations.
L. J. Keely was named Manager of Maintenance
and Engineering in April to supervise the company's
over-all maintenance activities under the direction
of R. H. Bendio, Sr., Vice President, Maintenance
and Engineering.
In May, Captain G. F. Wallis was promoted from
Chief Pilot to Manager of Flight Operations to
direct the day-to-day operation of the department
under the supervision of A. D. Niemeyer, Vice
President, Flight Operations. Flight crews, flight
control personnel, and stewardesses are under
Wallis' direction.
At the same time, the position of Supervisor of
Flight Training was established to implement the
company's increased emphasis on pilot and equip
ment-transition training.
The airline's 30 per cent system growth during
1960 necessitated a realignment of station super
visory personnel in the Ground Operations Depart
ment. Two new regional Superintendents were
added in October.
North Central's airport stations now total a record
73 and are grouped in four main regions: western,
central, northern and eastern. Each is supervised
by a regional Superintendent who reports to the
Director of Ground Operations through the Super
intendent of Stations.
The first management training program for station
managers was inaugurated in June by the Ground
Operations Department. The three-day basic orien
tation course in human relations and supervision
was designed to improve and develop airline man
agement techniques in all station managers. It is
conducted at North Central's Training Center in
Minneapolis and is the first such program in the
local airline industry.
The company's sales staff also increased during
the year because of the system and traffic growth.
A new district office was opened in Traverse City,
Michigan, to serve the northern Michigan territory.
During the year. North Central's traffic and sales
staff made more than 14,800 personal sales calls
in addition to their other duties.
MILLIONS
5
Among the important innovations in 1960 was the
creation of a stockholder relations program. In
August, R. William Hughett was named staff assist
ant to Arthur E. A. Mueller, Chairman of the Board,
to direct this new activity.
Hughett supervises the operation of an informa
tion and educational service to give present and
prospective stockholders a better understanding of
the function and operation of the local airlines and
North Central's leadership in the industry.
In August, President Hal N. Carr was honored by
North Central's master executive council of the Air
Line Pilots Association for the "excellent company-
pilot working relationship" maintained between the
union and the airline and for his "keen interest in
pilot opinion."
This special recognition culminates 13 years of
amiable union-management relations with all North
Central employee groups.
A citation also came from the American National
Red Cross in April for the company's five-year rec
ord of 100 per cent stewardess qualification in the
Red Cross' standard first aid course. North Central
is the only U. S. scheduled airline to receive the
award.
SERVICE INCREASE
The company continued to pace the nation's 13
local airlines in service to the traveling public.
Besides carrying a record number of passengers.
North Central maintained one of the best on-time
performance operations in the industry. Of the
174,624 scheduled arrivals during 1960, 74 per cent
were on time, as compared with 68 per cent in 1959.
Passenger miles flown in 1960 increased by 10 per
cent to 168,880,802 due to intensified scheduling and
the addition of new routes.
The company held its favorable position as one
of the nation's leading airlines in productive use of
its flight equipment. Average daily aircraft utiliza
tion was seven hours, 14 minutes. The DC-3's aver
aged seven hours, 24 minutes; the Convairs, six
hours, nine minutes.
More than 391,000,000 available seat miles were
offered to Northliner travelers, a 12 per cent in
crease over 1959. This was made possible by the
addition of three more Convair 340's.
Connecting business at Chicago's O'Hare Inter
national Airport took on tremendous importance
with the increase in trunkline jet travel. In 1959
O'Hare ranked 25th among North Central stations
in passengers enplaned, while it soared to fourth
place during 1960.
With this growing demand for service. North
Central increased its flight frequency at O'Hare
from three daily departures in January 1960 to 18
by the end of December. Over 52,400 passengers
enplaned at O'Hare in 1960, compared with 5,700
the previous year -- a nine-to-one increase.
Personalized service assisting passengers with
travel arrangements is offered by North Central
at Chicago's busy terminals.
6
CORPORATE DESIGN
PROGRAM
The company completed several interior and exte
rior design changes in aircraft and ticket oflBces
during the year under its new "corporate image"
program launched in October, 1959. The project is
under the direction of Industrial Designer Karl
Brocken of Riviera Beach, Florida, who created the
airline's mallard duck insignia in 1948.
Brocken has been retained to develop a compre
hensive program to standardize and improve North
Central's corporate image of a modern, progressive
company and a leader in the industry. All items
viewed by the public will be redesigned so they
will be readily identified with the airline. These
include aircraft, ticket offices, uniforms, ground
equipment, advertising and company publications,
and such promotional items as flight bags and food
service materials.
The basic trademark --
"Herman," the duck --
is
one of the outstanding in the airline industry and
will be retained.
The over-all program with its standardization of
design and simplification of purchasing will result
in more economical operation, as well as improved
service. Several years will be required before the
During 1960, North Central set a new record by becoming the first
of the nation's 13 local airlines to carry more than one million
passengers in a single year.
entire project has been studied, evaluated and com
pleted.
FORECAST
The greatest challenge facing North Central is to
adequately predict and prepare for the spectacu
lar growth it will continue to experience.
The next few years will be the most important
phase in the company's development. North Cen
tral's past growth rate and future potential, the
changing economic factors, and the new philosophy
of the regulatory agencies all indicate an end to the
era of "profitless prosperity" which has characterized
the first dozen years of the local airline industry.
The Civil Aeronautics Board's new formula for
calculating the investment-return portion of mail
pay on a sliding scale should increase North Cen
tral's profit potential substantially. The adoption of
a new class mail rate for all the local airlines should
bring about a more realistic approach to the de
termination of subsidy. The service provided by the
local carriers to the smaller, intermediate-size com
munities will become increasingly significant as to
day's shifting economy moves away from the large
metropolitan centers.
Record revenues of $21,900,000 in 1960 are pro
jected to $26,000,000 for 1961 and $50,000,000 for
1965. These estimates are based on several factors --
growth in traffic, additional route awards, and the
increased capacity of more Convair aircraft.
This traffic growth will depend on the expansion
of passenger, mail, and cargo volume over an en
larged and strengthened system network. This will
be accomplished by additional route awards and
more nonstop authorizations between major points
on the present system.
The possibility of mergers with other local airlines
will also be thoroughly investigated and actively
pursued.
North Central's future has never been brighter.
The company looks forward to another year of
unprecedented progress.
7
International Falls
Port Arthur-Ft. William
Minot
Grand Forks
Devils Lake
Hibbing,
Chisholm
Hancock-Houghton
SaultSte.Marie
Bemidji
BismarcK
Mandan
Marquette
DULUTH ^
SUPERIOR,
Fargo
Ironwood
Ashland
Wd O' Lakes
Pellston
Brainerd
RhineL
jMenominee
Marinette
Aberdeen Traverse City
Eau Claire l^istee
T_udington^
'\J Cadillac
^ Reed City
Watertown tWausau
Sheridan
Clintonville iagmaw>
City
Brookings Toronto
iwoc
Rochester
Grand
Rapids
Port Huron
Mitchell 'orthington tnont
Pontiac
orthington
Lansing
Sioux Falls
TROIT
MADISO
^Benton Hai bor
St. Joseph^^^ Jackson
Yankton Beloit-Janesville
Battle Creek
Sioux Lify
Waterloo
CHICAG South Bend
Norfolk
CLEVELAND
Atchison Chillicothe
Moberly
Kansas Cit/
PRESENT ROUTES
PROPOSED ROUTES
8
1960 ADDS ANOTHER YEAR TO NORTH CENTRAL'S
UNBROKEN RECORD OF GROWTH AND PROGRESS
PASSENGERS MAIL IN POUNDS CARGO IN POUNDS
10
AMERICA'S LEADING LOCAL SERVICE AIRLINE...
FIRST IN PASSENGERS, MAIL AND CARGO
PASSENGERS
North Central
Allegheny
MAIL IN POUNDS CARGO IN POUNDS
Trans-Texas 322,921
Bonanza 266,041
Southern 260,760
Lake Central 231,572
Central 172,537
1,035,076 North Central
Allegheny
Lake C
|tx S
Trans-Texas 2,234,840
Southern 1,928,940
Piedmont 1,655,100
Lake Central 1,561,220
West Coast 1,472,840
Central 1,150,840
Bonanza 713,740
Laxe
Central
Pacific
Frontier 5,600,220
Mohawk 5,140,560
Trans-Texas 4,876,640
Piedmont 3,874,840
Southern 3,074,420
West Coast 2,342,740
Lake Central 2,285,440
Central 2,243,500
Pacific 2,021,960
Bonanza 1,856,840
11
NORTH CENTRAL
BALANCE SHEET
ASSETS
CURRENT ASSETS
Cash on hand and in banks
Accounts receivable
Mail $ 580,483
Mail --
additional claim (Note 1) 1,697,083
Traffic 1,672,471
Other (including $97,045 of employee common stock subscriptions)... 314,526
Maintenance and operating supplies -- at the lower of qost
(determined by the first-in, first-out method) or market
Prepaid expenses and sundry deposits (including $89,035
temporarily deposited in U.S. Treasury bills)
Total current assets
$ 528,728
4,264,563
855,491
/
498,623
6,147,405
INVESTMENTS -
at cost 10,821 ^
OPERATING PROPERTY AND EQUIPMENT ( at cost)
Flight equipment (Notes 2 and 3)
Ground equipment
Hangar buildings and improvements to leased property.
Furniture and fixtures
Total
Less accumulated depreciation
8,252,857
900,237i^
186,187*^
259,024
9,598,305
4,572,808 5,025,497
DEFERRED CHARGES
Route development expense
Other `
178,678
^
79,880/" 258,558
The accompanying notes are an integral part of the financial statements.
$11,442,281
12
AIRLINES, INC.
DECEMBER 31, 1960
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term notes
Accounts payable
Trade $1,867,485
Traffic 1,292,767
Unearned transportation revenue
Employee payroll and tax deductions
Accrued Habilities
Salary and wages 669,165
Transportation, payroll and property taxes 301,407
All other 286,694
Total current liabilities
$ 944,925
3,160,252
189,825 ^
155,371-^
1,257,266
5,707,639
NONCURRENT LIARILITIES
5/2 and 6% notes payable to bank, due in monthly or semi-annual
installments to January 1, 1966 (Note 2) 2,922,000
6% promissory notes due May 31, 1961 (Note 3) 1,217,070
Other notes payable, partially secured by pledge of certain equipment,
due in monthly installments 649,796
4,788,866
Less current maturities 944,925
3,843,941
Deferred credits 12,889
Total noncurrent habihties 3,856,830
CAPITAL
Common stock (3,750,000 shares of $.20 par value authorized,
2,143,871 shares issued and 17,710 shares reserved
on stock subscriptions)
Paid-in in excess of par value of stock issued and subscribed...
Retained earnings (after transfer to paid-in capital of $129,416
in connection witb stock dividend)
$11,442,281
429,128 ^
1,317,221-^
1,746,349
131,463/" 1,877,812
13
NORTH CENTRAL AIRLINES, INC
STATEMENT OF EARNINGS
Year ended December 31, 1960
TRANSPORTATION REVENUE
Passenger
Mail
Express
Freight
Excess baggage
Non-scheduled transport service
Other
$12,660,869
8,141,205
286,626
293,511
105,639
129,089
71,689 $21,688,628
OPERATING EXPENSES
Flying operations
Flight equipment maintenance. , .
Other maintenance
Passenger service
Aircraft and traffic servicing
Promotion and sales
General and administrative
Depreciation
Operating profit
OTHER DEDUCTIONS
Interest
Extension and development
Sundry
NET EARNINGS (Note 4)
6,315,651
3,047,212
1,452,812
1,104,096
6,195,172
1,519,591
834,655
787,177 21,256,366
432,262
205,206
100,866
24,076 330,148
$ 102,114
STATEMENTS OF RETAINED EARNINGS AND PAID-IN CAPITAL
Year ended December 31, 1960
RETAINED EARNINGS
Retained earnings --
December 31, 1959 $ 158,765
Net earnings for the year 102,114
Reclassification of 1959 common stock dividend (129,416)
Retained earnings, December 31, 1960 $ 131,463
PAID-IN CAPITAL
Paid-in capital --
December 31, 1959 $ 894,975
Excess of proceeds from sale of common stock over par value thereof 292,830
Reclassification of 1959 common stock dividend 129,416
Paid-in capital, December 31, 1960 $1,317,221
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
1. It is the policy of the Civil Aeronautics Board to provide a sched
uled airline on a temporary mail rate (the company has been on such
a rate since November 23, 1956) with sufficient mail pay on settle
ment of its final rate to meet its break-even need and also to provide
for a reasonable return on recognized investment. In accordance
with this policy the company has determined that for 1960 an
amount of $1,061,089 of additional mail pay will be applicable under
these two categories. An amount of $1,697,083 is shown as an ac
count receivable at December 31, 1960, which includes the 1960
item and $635,994 which is the unpaid portion of the 1956-1959
break-even need and return on investment.
2. The company has a Q% working capital loan with two banks which
is repayable in monthly installments totaling $390,000 per year, with
a final payment due on September 15, 1963. As security for this loan
the company has pledged twenty-three DC-3 aircraft including re
lated flight equipment. Among other things, the loan agreement pro
vides that the company maintain current assets (excluding unap
proved mail pay claims) that are at least equal to current liabilities,
excluding any liability to the banks under this working capital loan
or the loan described in the following paragraph.
There is also an equipment loan and related agreement with the
same two banks. The unpaid balance at December 31 was $1,837,000.
This loan bears interest at the rate of 5/2% and is repayable in semi
annual installments of $167,000 to January 1, 1966. Five Convair 340
aircraft with engines and parts are pledged as security. In addition,
the U. S. Government has guaranteed 90% of the loan principal and
100% of interest.
3. In order to acquire five additional Convair 340/440 aircraft and
related spare parts the company completed arrangements on July 26,
1960, with two banks and an insurance company for a seven-year 6%
equipment loan of $2,450,000, representing 90% of the purchase price.
It is anticipated that this loan will be guaranteed by the United
States Government to the extent of 90% of the principal amount and
100% of the interest. It is therefore subject to the approval of the
Civil Aeronautics Board.
In November three of these aircraft were obtained under two lease
agreements, with options to purchase. The leases are for forty-five
months with the full lease costs of $1,352,300, payable in advance.
This amount represents the total cost of the three aircraft and will
become payment in full when the company exercises its option to
purchase. To comply with the prepayment provisions, the company
entered into an agreement with Northwestern National Bank and
Irving Trust Company whereby the banks would advance $1,217,070
to the leaseholders in return for assignments of the leases to them.
The company advanced $135,230 simultaneously with the bank ad
vance of $1,217,070 and has signed a six percent (6%) promissory
note, due May 31, 1961 for the latter amount. This note is secured
by the three Convairs, an assignment of retroactive Federal mail pay
and the personal guarantee of a company officer of up to $500,000.
It is anticipated that this note will be paid by the $2,450,000 guar
anteed loan, repayable in installments over seven years. Accordingly,
the $1,217,070 note is shown as a long-term obligation with the first
installment (of $86,934 to be paid on October 15, 1961) shown under
current maturities of long-term notes. The asset value of this leased
equipment (in the amount of $1,352,300) is included under the flight
equipment caption in the balance sheet.
4. Net operating loss carry-overs from prior years are sufficient to
absorb taxable income for 1960 and accordingly no provision has
been made for Federal and State income taxes. The United States
Treasury, the Wisconsin and Minnesota Departments of Taxation
have reviewed the company's tax returns through the year 1958.
5. The company has entered into a lease with the City of Chicago
for use of a hangar and facilities to be constructed at O'Hare Inter
national Airport. Monthly payments of $7,333 are to be made, start
ing on January 1, 1962, and are to continue for forty years or until
$1,000,000 of bonds, which the City is to issue to finance the project,
are retired. North Central has advanced $89,035 towards the total
construction cost and it is obligated to pay an additional $135,965
toward such costs.
CHICAGO
NEW YORK
LOS ANGELES
Alexander Grant & Company
CERTIFIED PUBLIC ACCOUNTANTS
312 EAST WISCONSIN AVENUE
MILWAUKEE 2, WISCONSIN
OTHER
PRINCIPAL
CITIES
Board of Directors February 28, 1961
North Central Airlines, Inc.
We have examined the balance sheet of NORTH CENTRAL AIRLINES, INC. (a Wisconsin corporation) as of De
cember 31,1960 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 circumstances.
In our opinion, the accompanying balance sheet and statements of earnings and retained earnings and paid-in
capital present fairly the financial position of North Central Airlines, Inc. at December 31, 1960 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 Alexander Grant 6- Company
COMPARATIVE FINANCIAL SUMMARY
Operating Revenues ''*0 ""
Passenger J12,660,869 $11,388,135 $ 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 $ 113,648
Mail 8,141,205 6,322,896 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 1,036,243 580,968
Other 886,554 790,090 657,961 504,017 324,910 194,628 148,622 114,974 71,626 56,597 24,009 18,184 9,108
TOTAL $21,688,628 $18,501,121 $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
Direct Expenses $10,815,675 $ 7,924,030 $ 5,849,305 $ 4,840,708 $3,538,274 $2,853,134 $2,419,593 $2,104,078 $1,423,223 $ 887,529 $ 743,677 $ 591,200 $ 327,996
Indirect Expenses 9,653,514 9,315,951 6,550,910 5,426,616 4,020,375 3,271,207 2,702,111 2,399,016 1,679,261 1,076,810 778,410 612,701 372,572
Depreciation 787,177 859,102 583,174 452,993 301,161 470,169 535,557 428,308 205,192 143,722 120,329 99,599 54,645
TOTAL $21,256,366 $18,099,083 $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)....$ 432,262 $ 402,038 $ 157,850 $ 81,678 $ 124,527 $ 223,495 $ 172,064 (44,005) (83,972) (9,269) $164,016 $ 22,503 (51,489)
Amortization of Route
Development Expense (100,866) (198,164) (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 (229,282) (183,364) (43,472) (54,709) (36,085) (50,051) (55,130) (59,965) (39,421) 15,536 (6,888) (12,094) (3,030)
Net Profit (or Loss) Before Taxes.$ 102,114 $ 20,510 $ 108,184 $ 20,688 $ 79,876 $ 146,449 $ 111,707 (114,588) (123,393) $ 6,267 $ 92,113 (75,883) (128,044)
Income Taxes -0- 4,542 -0- (60,103 ) 45,700 18,000 -0- -0- -0- -()- -0- -0- -0-
Net Profit (or Loss) $ 102,114 $ 15,968 $ 108,184 $ 80,791 $ 34,176 $ 128,449 $ 111,707 (114,588) $(123,393) $ 6,267 $ 92,113 $(75,883) $(128,044)
14 15
NORTH CENTRAL'S GROWTH STORY... FRONT PAGE NEWS IN ROUTE CITIES
N. C. Airlines
Scores First
in Passengers
; North Central Ranks as
I First Local Carrier to
Transport Million
(AIM --
North Central Sets Record,
l^st^en^er More Large Planes Coming
Passengers Up 12 Pet., First Dividend Paid
Milestone Noted
By North Central
I million pawoRerj! l
Kellogg Field's new ter
lai- rninat butlding erected ii
1958 as the gateway for i
r imII. In 135.784 Svslemwldr
xpffts. Ill 214 753. wnfler
Service North Central's Secret
Aero Club Hears St^ry
Of Fast-Growing Line
thastasis Wednesday night heard the phenomenal growth
C Airlines
of the sf^aker. Arthw* p * ' v /
Records Greatest Growth Year
North Central Sets
Air Treiffic Mark INAUGURATES SERVICE HF.RF TOMORROW
rnsW='
TV aifport
raporum c
airf ^ v^'nur4t 'Ni>rth '
North Central Comes Long Way from '48
-T- I> KIM. HIT ! IK'sr THKht. ` jl af
~
Ceotral Sees More GrowUrAhead
,
bH
' wn-iivi AbrnJ..ij
Pas^nger Record
fSLNorth Central
North Central
Takes Millionth
--
Itfapdi J. 1359
Fare In '60
K.-, ^Sfdij
No"th Central Hits
`r
Record in Green Bay
Qrouth
Air se
5
Airline Passes P
Service: ,
lolsUor First h
alffTW'O pjgpg
srovt.^poLis
-
.v,,-
viPPrt
r^*i >dusti
1960--bcci
"ciuding a
feotlJ ..
*< lirst local aalmc
' '
Single ypoj
'fr'cight for
n**^ni'ifw 'otnJed 49V
passengers
increase
'I Prleot. .,,p,,TMSf"-.(^ward . (.
^Ihit jwepl I
offieiais vi 1
yXortb CeRtxAl|
orth Central Sets
ecord Growth Rate;
By ANGELO COaN
f you want i'
Is," said Hat
nle. "business is,
president
itrat leads the field of
it service companies,
forth Central reported
outstanding year"
and ;
breaking *11; a
rtr**" .
ords this year, according! \ T'-
the president's estimates.! f\
of srowth
t\SevV^^
ly for the M
based company bi
the booming busi ^r'i*'**
der'' airlines. Soy'*' 1*'*'* ''rr'*"
t the end of NoveiyeY^'_^^itve*
,
trted*^795r*wlll go .
"'`/lets Passenger Record
records as "someth 7**; ' vW* ^
dal."
Art's estimates for t ;9e o'vl the nation t local airline to Port Anhur end Hrt
r are. if anything, mo .*nccT ^ :r en^^* -tYv by stiung a new pas- Ontario Canada and the
-
North Central Hauls
'
8% More Passengersy
' PjNV?n;;er i-affic Oi> N > ' Central a;ilv/Us. .^llnne.poT
NC Airlines Over MilUon
Passenger Mark for I960
North Central sjd it corned I.
035.0T6 pasxengrrs last vi ii .gam
toppmj: t'-r r.Lf.m's other J2 local
ly fleet, the airh
<9 is the fastest we've c
^orth Central Airlines-
Its Fabulous Growth
provide equipment at most of the
iQtermediale points
rx*fte of Chlriiolm .
Hibhing j about $100,009.
^viatiuo Week. In fact, ChsshoJm- j Installation of a ttatic-fre* VHF
dibbing was one of the oa^io^ I (very high trequency) radi
Uatiotm
sably the
'
l.^.evs patecnjcf*," miles of cargo dunne 1760, m
he taial carried b> all ' '* 493,32t loii i~ t
crtii.Kig
Cenf-fji hum
Michigan Thti^lder Fa- \x
in this, the Ore; IQs,. a 40(
still is pendmgifo;7^'''5APof re
^ he and
North Centror .1,." '`tenrf a' ^'orih r-
ated nonstop car^. i/,p (;!? '***^ **
Twin Ports >hao M
*'
fo IM
^ ^irteU ,^dUnH o
*''* "Od
apcoL" ^
AikllNE TO SERVE CIEVEUND, EORT WIUIAM
North Central Expands
Into Ohio and Canada
[H North Crmr.xl .<till held
01,458 in August
h
(^iral now grating
I'les*
WdA *
dir- Centrt, '
*n\ of 1.250.000 pj'
1^'* a-boH, ?,*' V
^ Cenfral .tddt-d
^aton,.,, V* Convatr 340s during
'^;p.d .he m.l!imn pa*.;
!'
U W''''Yv'i9 was boarded Sun-: f'Cht Conkairv on
.V.r.,,,:Tp."; >'
.
l>'UCl. nc:-., Vc ,,l
..r .tufi-; AeraZ'`r"'f'car4C0tt*`\ aP^milestone, not , ..Jd Conw.i^ ,it tlie ri
.''n>-, .r* bouefc.'**^fioa r c
*'.Company bat . ,,
local carrier |
.
^^thov said- "and | 'vieu MM ard
NoHh Central Sef$
Passenger Record
trim,
frafflc
.aid
asengers) be(
_
system wlr*a theunn and the private network
airline began scheduled V^'^-^inavigational aids was completed
lions in 1948- /V^ fleet of
Today America's lea< !
alrUne. North Ceatr > ^ Jf't^
humble beginning ? ^ '***/*A"
growth of a private f ^
of the FWD Corpor O /.
air service but rec
liiskey Cenli
firms tor uavel /
able basis convi- (\ */ Cf/
of the need fo . 4^ *
service.
_
%jf. , ^
June 1944. i /o,^e St. Cloud and h
sin Centra) ^ ,,t Paul, Mmnes
Aeronautic ^ ^ r. Eau Claire, Stei
pubUc CO- fl-f'oft jaau, ClmlonvUle. Osh
5 ^Jera a cine-Kenosha and Mil
for pas hr Wiscotislo.
^
`W operational problem
/
"Thi. thj,,
**''" became apparent was
^ tg *4, -vere weather encountered
lewt
anO^ * north central region. By
nie order 'for ^ m i
service wettf-- ^mpaiu f'""*'
North Da '<nuod {- "i
line to s- of ifte
to s> of ifte
u w ffotfo,
the* M m.n ,
j-sy 'ilS:' Arthur, Caruida. .
Tfiesc l.irdir.^is
3 headquarters
munitie |f
Centrals
Carr Sees

Big Growth
of
remarkable
growth companies of the Up-
Mifcejt
....,, .,,
flight a dozen years ago.
Toduy It has 2.100 em
ployes. Its revenues exceed
-0 million dollure a year. It
carries over a million passen-
coincidence.
mmtcrt-sl The temp*'^
,
rWGU
r*' 'AMI. ana 1
'
North Central Airi(nf||^A'ea; Routes Boost NCj
Sets Passenger Record
,
(-pOU
3 tel e..,..r,catf'^. 1960
tile company i
,
hr-'-
'tUi` 111 the iodust cat^.
,,
c-'f-' . .-
I-Uied HU vir'a'-f"'^ rf.-H''''-\ S I
nt the Vii.n.-.rL'V't'
carri..r to -
million Passengers
North Cenfrai
Carries Millionth
1960 Passenger
MILESTONES IN NORTH CENTRAL'S PROGRESS...
SINCE 1948, NORTH CENTRAL ROUTE MILES AND CITIES
SERVED HAVE MULTIPLIED FIVE TIMES.
2,573 Route Miles Serving 36 Cities in 5 States
1956
3,240 Route Miles Serving 43 Cities in 9 States 6,896 Route Miles Serving 90 Cities in 10 States and Canada
NORTH CENTRAL AIRLINES,
6201 -34 AVENUE SOUTH
MINNEAPOLIS 50, MINNESOTA
INC