North Central Airlines Annual Report 1961

NORTH CENTRAL AIRLINES 1961 ANNUAL REPORT
NORTH CENTRAL AIRLINES, INC.
AMERICA'S LEADING LOCAL AIRLINE
GENERAL OFFICES
6201 Thirty-Fourth Avenue South, Wold-Chamberlain Field
Minneapolis 50, Minnesota
BOARD OF DIRECTORS
HAL N. CARR*
WERNER L. CHRISTENSEN
D. E. CROOKER
G. F. DECOURSIN*
ARTHUR E. A. MUELLER*
* Executive Committee
A. JAMES MUELLER
A. L. WHEELER
K. B. WILLETT
MANAGEMENT
ARTHUR E. A. MUELLER
HAL N. CARR
R. H. BENDIO, SR
FRANK N. BUTTOMER. . .
A. D. NIEMEYER
ARTHUR E. SCHWANDT. .
BERNARD SWEET
A. L. WHEELER
JOHN P. DOW
L. J. KEELY
T. M. NEEDHAM
G. F. WALLIS
Chairman of the Board
President and General Manager
Vice President, Maintenance and Engineering
Vice President, Traffic and Sales
Vice President, Flight Operations
Vice President, Industrial Relations
Vice President and Treasurer
Vice President and Counsel
Secretary
Director, Maintenance and Engineering
Director, Ground Operations
Director, Flight Operations
REGISTRAR AND STOCK TRANSFER AGENT
Northwestern National Bank of Minneapolis, Minneapolis, Minnesota
TO OUR STOCKHOLDERS, EMPLOYEES AND FRIENDS:
The year 1961 added another chapter to North
Central Airlines' continuing story of progress and
leadership by establishing new records in traffic
and service. For the second consecutive year pas
sengers exceeded the million mark. The company
is still the only local carrier to pass this milestone
--with its record 1,095,904 passengers.
In 1961, North Central also continued to lead
the local airline industry in cargo and mail car
ried. The 15,970,000 pounds of cargo hauled
represented a 31 per cent increase over 1960,
while the 6,444,000 pounds of mail was nearly
14 per cent ahead of last year.
This spectacular traffic growth resulted in the
greatest profit in the company's 14-year history.
Record revenues of $25,210,000 were attained, a
12 per cent gain over 1960. In each year since
1954, when new management took over direction
of the airline, North Central has recorded a profit.
On December 1, the Board of Directors author
ized a four-for-one stock split, with three addi
tional shares of stock to be issued for each share
held.
Because of the company's strong financial posi
tion, management was able, during 1961, to com
plete arrangements for a $2,870,000 loan without
the support of the Federal Government's guaran
teed loan program. This borrowing financed the
purchase of two more Convair 340/440 aircraft
and the three Convairs acquired in 1960, and
also repaid the balance of the company's working
capital loan.
ARTHUR E. A. MUELLER
Chairman of the Board
March 12, 1962
\
North Central's growing fleet now includes
30 DC-3's and ten Convair 340/440's. Future
plans for acquiring more of these larger, faster
Convairs will increase the company's earning
capacity by offering additional seats to accom
modate anticipated traffic growth.
Management continued its aggressive route
development program in 1961 by concluding a
purchase agreement with Frontier Airlines for
nearly 1,400 miles of Frontier's system--subject
to Civil Aeronautics Board approval. Other ap
plications pending before the C.A.B. would ex
tend North Central's service west to Wyoming
and Montana, and south to Kansas and Missouri.
The company also seeks to remove operating re
strictions in its certificate to permit nonstop flights
over certain segments, thereby improving service,
building long-haul traffic, and at the same time,
continuing to serve the intermediate points.
With an enlightened climate of economic regu
lation on the Federal level and a continuation of
the company's intensified cost control program
and expanded traffic development, management
looks forward to substantially increased profits
in 1962.
We would like to express our sincere apprecia
tion to all our employees for the contribution they
have made to the growth and development of
North Central. To our stockholders, we extend
our gratitude for their confidence and loyal sup
port. To our passengers, we say "Thank You",
and to our future passengers, "Welcome Aboard
America's Leading Local Airline".
Sincerely,
HAL N. CARR
President
1
NORTH CENTRAL AIRLINES, INC.
THE YEAR IN REVIEW
NORTH CENTRAL AIRLINES attained record
revenues of $25,210,459 in 1961, a 12 per cent
increase over 1960.
Operating expenses were $24,193,162, result
ing in an operating profit of $1,017,297 and a net
profit, after taxes, of $480,890. However, a non
recurring expense item of $323,140, resulting from
final settlement of the company's mail pay claim
for previous years, reduced the net profit to
$157,750. This is the largest profit earned in the
14-year history of North Central, and 1961 is the
eighth consecutive year of profitable operations.
The special expense item was recorded in 1961
after the company received a settlement of its
mail pay claim for the period from November 23,
1956 through December 31, 1960, when it was
operating under a temporary rate. Effective Jan
uary 1, 1961, North Central was placed on a
permanent "class" mail rate by the Civil Aero
nautics Board. This class rate was established for
all the local airlines by the C.A.B. to permit them
to earn a reasonable return on investment. The
most efficient carriers are also allowed additional
earnings through a profit-sharing plan with the
Federal Government. During 1961, North Central
reached this profit-sharing position and returned
$237,042 in excess profits to the Government,
retaining $105,382, after income taxes.
In October 1961, North Central completed
financial arrangements with the Northwestern
National Bank of Minneapolis and the Irving
Trust Company of New York for a $2,870,000
loan. This borrowing was accomplished to finance
the purchase of two additional Convair 340/440
aircraft acquired in 1961, and the three Convairs
added to the fleet late in 1960, as well as the
repayment of the balance of the company's work
ing capital loan. With North Central's strong
financial position, this transaction was accom
plished without use of the Federal Government's
guaranteed loan program.
North Central's Board of Directors authorized
a four-for-one stock split on December 1. Three
additional shares of the company's stock were
issued for each share held by stockholders of
record on December 15.
SYSTEM GROWTH
The highlight of North Central's continuing route
development program came in July with the
announcement that the company signed an agree
ment to purchase nearly 1,400 miles of routes
from Frontier Airlines. Service to 16 cities would
be transferred if the Civil Aeronautics Board
approves the purchase.
Cleveland, Ohio was added to the North Cen
tral system in February, while Marshfield, Wis
consin and Manistee/Ludington, Michigan
received Northliner service in April.
North Central added its third international air
route in 1961. Scheduled service was inaugurated
May 1 to Regina, Saskatchewan, Canada from
Minot, North Dakota. This 216-mile segment is
operated with nonstop flights.
North Central now serves 91 cities in 10 states
and two Canadian provinces, over a 7,100-mile
system.
A summary of the route applications pending
before the C.A.B. follows:
2
FRONTIER ROUTE ACQUISITION-In July, a
purchase agreement was completed with Frontier
Airlines which provided that four route segments
in Montana, North Dakota, and South Dakota
would be acquired by the company from Fron
tier. If approved by the C.A.B., this purchase
would add 1,376 route miles, 16 new cities, and
the State of Montana to the North Central system.
Included are the following segments:
Between Rapid City, South Dakota and Bis-
marck/Mandan, North Dakota, via Lemmon,
South Dakota and Dickinson, North Dakota.
Between Bismarck/Mandan and Billings, Mon
tana, via Minot and Williston, North Dakota;
Sidney, Glendive, and Miles City, Montana.
Between Minot and Great Falls, Montana, via
Williston, North Dakota; Sidney, Wolf Point,
Glasgow and Havre, Montana.
And between Great Falls and Billings, via
Lewistown, Montana.
These segments would strengthen the entire
western portion of North Central's system by the
addition of cities contiguous and economically
related to present routes.
The Board has set up an expedited hearing on
this application, and it is hoped that the proceed
ing will be concluded in 1962.
WYOMING-SOUTH DAKOTA-CHICAGO INVES
TIGATION--An application, filed in 1960 to ex
tend North Central's system into Wyoming and
increase service on routes linking Chicago with
South Dakota and Iowa points, still is pending
before the C.A.B. Following public hearings and
an initial decision by Examiner Richard A. Walsh,
A Convair Super Northliner flight crew deplanes
at Detroit's Willow Run airport, a major terminus
on the 91-city system.
the company and the cities and states involved
filed briefs and presented oral arguments to the
Board. The C.A.B. is expected to issue a final
order in 1962.
The company feels its strongest application in
this case is for nonstop authority between Sioux
Falls, South Dakota and Chicago.
CHICAGO-CLEVELAND CASE--In March 1961,
North Central applied to the Board for a route
between Chicago and Cleveland via South Bend
and Fort Wayne, Indiana, and Toledo, Ohio;
and between Grand Rapids, Michigan and Fort
Wayne, Indiana, via Kalamazoo, Michigan.
Later in the year, the application was amended
to add a route between Chicago and Dayton,
Ohio via South Bend and Fort Wayne.
In July, the company applied for authorization
to operate a segment between Detroit and Indian
apolis, Indiana, via Toledo and Lima, Ohio;
Lort Wayne and Muncie, Indiana. At the same
time, North Central asked the C.A.B. to consoli-
3
>-
--
date all these applications into one case to deter
mine the air service needs of this area.
No action has been taken on either the appli
cations or the motion for consolidation. Prelim
inary Board action may be forthcoming in 1962.
OMAHA-ST. LOUIS APPLICATION--The Board
may act in 1962 on a pending application to ex
tend North Central's service into Missouri.
The 400-mile segment would link Omaha with
St. Louis, via the intermediate points Chillicothe
and Moberly, Missouri.
If approved, the route would add three new
cities and the State of Missouri to the system.
OMAHA-KANSAS CITY APPLICATION--The
company's application for a route between
Omaha and Kansas City, Kansas is still pending,
and a hearing date may be set in 1962.
The 169-mile route with intermediate stops at
Falls City, Nebraska and Atchison, Kansas would
add three new cities and the State of Kansas to
North Central's system.
NONSTOP APPLICATIONS--North Central has
applied for the removal of several operating re
strictions in its certificate to allow nonstop service
between certain terminal cities on existing route
segments. The intermediate cities would continue
to receive their present service on other flights.
The "long-haul" passenger would benefit by
elimination of the several stops now required on
all flights over these segments. More seats would
also be made available to the "commuter" pas
senger flying between these intermediate cities.
In 1961, the C.A.B. gave North Central non
stop authority between Madison, Wisconsin and
Chicago on an interim basis. This service is being
operated on an exemption until the Board reaches
a final decision.
The company has also filed an application for
nonstop authority from Chicago to Cleveland,
and it is hoped that the C.A.B. will consider this
proposal in 1962. If approved, this would permit
the operation of direct flights on the 300-mile
segment between these major metropolitan com
munities.
A third application pending before the Board
would allow the company to operate nonstop
between Minneapolis/St. Paul and Chicago and
to serve the intermediate points on other flights.
Management feels that these nonstop authori
zations are important because they would im
prove the airline's service to the traveling public
by permitting greater flexibility and economies
of operation.
CANADIAN APPLICATIONS--Still on file before
the Board is an application by North Central for
nonstop authority between Detroit and Toronto,
Ontario, Canada. Consideration of this route re
quires a reopening of the Bilateral Treaty between
the United States and Canada, and no action is
expected in 1962.
TRAFFIC LEADERSHIP
North Central again set the pace for the nation's
12 other local airlines by establishing new records
in all classes of traffic in 1961. For the second con
secutive year, the company boarded more than a
million passengers--the only local to reach this
milestone. North Central also led the local airline
industry in cargo and mail carried.
In a typical day, North Central completes as many as
30,000 teletype and phone messages for reservations
service. This automatic teletype transmitter-receiver
handles 100 words per minute, using pre-punched
coded tape.
4
The company's communications center is located in
downtown Chicago. Messages between North Central
stations, as well as direct message exchanges between
North Central and all other domestic and international
carriers, are handled through the modern teletype
equipment.
Passenger volume reached a new high of
1,095,904, leading the second-ranking local car
rier by 30 per cent. This represented nearly one-
sixth the total number of passengers carried by
all the local airlines for the year and was a six per
cent increase over North Central's own record-
breaking 1960 total.
On June 16, a new daily passenger mark was
set by the company when 4,285 passengers were
carried -- nearly 300 more than the previous
single-day high on May 26. All monthly traffic
records for the industry were broken in August
when North Central enplaned 112,111 passengers.
Much of this growth can be attributed to the
overwhelming public acceptance of the Convair
Super Northliner and the increased scheduling
of this 44-passenger airliner on the system.
Cargo volume for the year reached a record
15,970,289 pounds, an increase of 31 per cent
over 1960. Some 8,332,611 pounds of air express
and 7,637,678 pounds of air freight made up this
cargo volume.
The company carried 6,444,012 pounds of mail
during the year, an increase of 14 per cent over
the previous year and exceeded the second-rank
ing local airline by 83 per cent. This included
5,623,999 pounds of air mail and 820,013 pounds
of preferential surface mail carried as a public
service for the United States Post Office Depart
ment.
The company continued this traffic leadership
while maintaining its perfect 14-year safety
record. Again this year, the airline received the
coveted Award of Honor from the National Safety
Council. Since beginning scheduled operations
in February 1948, North Central has flown more
than one billion passenger miles and carried
6,370,000 passengers without a single fatality or
injury to passengers or crew members.
INCREASED SERVICES
North Central offered more service to the travel
ing public in 1961 than ever before. The company
provided 436,318,046 seat miles, an 11 per cent
increase over 1960. This increase was due largely
to the addition of more Convair 340/440 airliners
to the fleet.
While carrying a record number of passengers,
North Central continued to maintain one of the
best on-time performance operations in the air
line industry. Of the 186,139 scheduled arrivals
during 1961, more than 77 per cent were on time,
while over 98 per cent of the airline's 15,287,147
scheduled miles were operated. Passenger miles
flown in 1961 increased 11 per cent to 187,822,806.
1948 '49 '50 '51 '52 '53 '54 '55 '56 '57 '58 '59 '60 '61
5
North Central still held its favorable position
among U. S. airlines in productive use of its air
craft. The DC-3's averaged seven hours, one
minute utilization per day; and the Convairs six
hours, six minutes.
The year saw a revolutionary breakthrough in
the field of communications with the adoption of
American Telephone and Telegraph's TELPAK
tariff. This is a system which allows large volume
users to purchase telephone facilities at bulk rates.
North Central, by sharing TELPAK with other
airlines, can now acquire phone lines between
certain cities at a monthly rate of 19 cents a mile,
compared with the regular charge of S3 a mile.
TELPAK has brought about the consolidation
of reservations offices at centralized locations. The
company is now able to offer greatly improved
reservations service to the traveling public at a
substantially reduced cost.
Further consolidations will be made so that the
system will be served by four central reservations
offices located in Minneapolis/St. Paul, Milwau
kee, Chicago, and Detroit.
IMPROVED FACILITIES
North Central continued to expand and improve
its operational facilities to keep pace with the
tremendous growth of the company.
Construction of a new 11,250,000 hangar at
Chicago's O'Hare Field was completed in the
Fall of 1961. The concrete block building pro
vides 37,400 square feet of space, capable of hous
ing three Convairs and two DC-3's. A vital part
of the facility is its water deluge system, shared
with two other hangars, whereby a brick struc
ture houses pumps and provides storage of 480,000
gallons of water for fire protection.
In December, North Central became the first
local airline to install an electronic computer,
North Central provides convenient schedules to
and from Main Street, U. S. A. Here, a Convair
Super Northliner wings over Green Bay's Packer
Stadium.
International Business Machines' 1401 Data
Processing System. This equipment now processes
payroll; ticket, cargo, and mail billings; statistical
reports; and financial statements. It consists of
three units: the data processor, the card-read-
punch unit, and a high-speed printer.
The computer replaces two accounting ma
chines and supporting equipment. As an example
of its speed potential, the 1401 can complete the
company's entire semi-monthly payroll in two
hours and 45 minutes, compared with the 24
hours previously required. Eventually, it will be
used in such areas as inventory control, ticket
pricing, and daily labor distribution by jobs.
In November, a graphic arts shop was estab
lished to produce the printed material required
by the company. The shop includes the most
modern offset printing equipment and accessories
and is headed by an experienced production man.
Company forms, bulletins, manuals, direct mail
advertising pieces, booklets, and THE NORTHLINER
will be produced in the shop. The installation of
this graphic arts section will result in substantial
savings in printing costs.
MANAGEMENT DEVELOPMENT
The company expanded the functions of two
supervisory positions in 1961 to improve its ad
ministrative efficiency.
6
L. J. Keely was promoted from Manager to
Director of Maintenance and Engineering. He
will supervise the system-wide maintenance and
engineering activities under the direction of Vice
President R. H. Bendio, Sr.
At the same time, Captain G. F. Wallis ad
vanced from Manager to Director of Flight Oper
ations, overseeing the day-to-day operation of the
department under the supervision of Vice Presi
dent A. D. Niemeyer. The responsibilities of
directing crews and flight control operations have
greatly increased as the company has grown.
The Ground Operations Department enlarged
its management training program to include all
senior station agents, as well as managers. This
three-day course is conducted periodically during
the year at North Central's General Office.
The company's District Traffic and Sales Man
agers and Representatives made 18,126 personal
sales calls over the system during 1961 in addition
to their public relations and traffic responsibilities.
LOOKING TO THE FUTURE
North Central today is the recognized leader
among the nation's local airlines in traffic genera
tion and public service. Its potential, however,
has just begun to be realized.
Future system growth will be characterized by
the acquisition of routes and cities from other air
lines, nonstop authorizations on existing segments,
and new route awards. The Civil Aeronautics
Board has shown a willingness to consider the
transfer of certain short-haul routes from trunk
lines to local carriers, such as North Central. As
more jets are added, such transfers are inevitable,
for these larger, faster aircraft were designed for
peak operating performance on long-haul flights.
Recently, the Board has also acted favorably on
one merger in the airline industry and several
others have been under consideration. North
Central management is actively engaged in the
investigation of possible mergers. Because of its
leading position in the industry, the company
would benefit greatly from the successful conclu
sion of any merger.
North Central's tremendous growth requires a
continuous fleet modernization program. Equip
ment plans call for the acquisition of five to seven
Assisting the U. S. State Department and the Federal
Aviation Agency in an international aviation training
program, North Central hosted several air executives
from other nations in 1961. Here, Jean-Claude Dela-
fosse, second from left, of Air Afrique, Africa, studies
the company's operations.
Convair 340/440 aircraft each year and the even
tual replacement of all Douglas DC-3's. Manage
ment is still evaluating the feasibility of convert
ing its Convairs to turbo-prop aircraft. However,
North Central may be the first local airline to
move directly from piston-engine equipment to
pure jets.
The company is on the threshhold of its most
dramatic period of growth. Technological im
provements and a favorable regulatory climate
will greatly assist management in its program of
cost control and traffic development designed to
assure North Central's continued leadership in
the industry. The company, now in the strongest
financial position of its 14-year history, will be
able to pursue its aggressive expansion plans on
an accelerated basis.
With more Convair aircraft, new routes, and
increased traffic, North Central looks to record
profits in 1962.
7
Port Arthur-Ft. William
International Falls
Grand Forks
o
Devils Lake
Thief River Falls
Glendi
Hancock-Houghton
Hibbing,
Chisholm
Lewistown
Bismarck
Mandan
DULUTH
SUPERIOR
Marquette
Ironwood
Ashland Escanaba Pellston
Iron Mt^
Kingsford
'Aenommee
^Marinette
^ Aberdeen Traverse City
Manistee
Ludington
O Cadillac
Reed City
Wausau
iCIintonville
Toronto
lanitowoc
Oshkosh
Huron Grand
Rapids
Port Huron
Mitchell
Pontiac
^Worthington
Lansing
Benton Harbor
St. Joseph
Yankton
Battle Creek
Kalamazoo
CHICAGO
Muncie
Indianapolis
PRESENT ROUTES
PROPOSED ROUTES St. Louis
Regina O
Havre
^^^^^^Wolf Point IWilliston Mmot
Glasgow IA O
Great Falls
Sault Ste. Marie
Dickinson
Lemmon
Billings
Alpena
Watertown
A'
Sheridan Pierre
Brookings o
Sioux Falls t
Casper ^
lie
Beloit-Janesvi
Sioux City
Norfolk Q
Waterloo
Lima
OMAHA
Dayton
Falls City
Atchison Chillicothe
Moberly
Kansas City
CLEVELAND
ROUTE OF THE
NORTHLINERS
8 9
&>- AMERICA'S LEADING LOCAL AIRLINE
AGAIN IN 1961
PASSENGERS MAIL IN POUNDS CARGO IN POUNDS PASSENGERS MAIL IN POUNDS CARGO IN POUNDS
1961
1960
1959
1,095,904
1,035,076
957,751
6,444,012 15,970,289
12,193,025
1948
11,398
263,696
144,358
9,195,960
1,762,488
1,612,602
638,915
294,244
201,367
Lake Central 407,413
Frontier 404,219
Southern 401,711
Trans-Texas 338,720
Bonanza 320,220
Central 253,219
Trans-Texas 2,240,020
Lake Central 2,029,740
Central 1,969,100
Piedmont 1,918,540
West Coast 1,624,500
Bonanza 733,020
Cl
North Central 15,970,289
15,097,360
10,176,120
CONTINUING RECORD OF GROWTH AND PROGRESS FIRST IN PASSENGERS, MAIL AND CARGO
10 11
NORTH CENTRAL AIRLINES, INC.
BALANCE SHEET December 31, 1961
ASSETS
CURRENT ASSETS
Cash
Accounts receivable
Mail $ 1,155,300
Traffic 1,761,757
Other 217,567
Maintenance and operating supplies--at average cost, less deterioration
reserves of $80,368
Prepaid expenses and sundry deposits
Total current assets
$ 793,964
3,134,624
1,000,068
424,596
5,353,252
OPERATING PROPERTY AND EQUIPMENT-at cost
Flight equipment (Note 1) 8,653,877
Ground equipment 943,822
Hangar buildings and improvements to leased property 197,759
Furniture and fixtures 261,624
10,057,082
Less accumulated depreciation 4,455,742
5,601,340
Deposit on construction in progress--leased facilities 89,035 5,690,375
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt .
Accounts payable
Trade $ 1,160,125
Traffic 1,409,934
Unearned transportation revenue
Taxes withheld or collected as agents
Income taxes
Accrued liabilities
Salaries and wages 598,831
Payroll and property taxes 75,443
Other 335,225
Total current liabilities
LONG-TERM DEBT
5Vi and 6% notes payable to banks (Note 1) 4,298,000
Other notes payable, collateralized in part by pledge of certain
equipment, payable in monthly installments 653,940
4,951,940
Less current maturities 1,104,965
DEFERRED CHARGES
Route development and aircraft preoperating costs 301,426
Unamortized discount and expense on debt 45,542
Other 49,126 396,094
$11,439,721
STOCKHOLDERS' EQUITY (Note 2)
Common stock--authorized, 10,000,000 shares of $.20 par value; issued
and outstanding, 8,646,324 shares 1,729,265
Paid-in capital 17,085
1,746,350
Retained earnings 289,213
The accompanying notes are an integral part of this statement.
$ 1,104,965
2,570,059
223,972
470,688
178,000
1,009,499
5,557,183
3,846,975
2,035,563
$11,439,721
12 13
NORTH CENTRAL
STATEMENT OF EARNINGS --Year ended December 31, 1961
TRANSPORTATION REVENUE
Passenger
U.S. Mail
Public Service Revenue (after excluding $237,042 profit-sharing to
government)
Express
Freight
Excess baggage
Non-scheduled transport service
Other
OPERATING EXPENSES
Flying operations $ 7,027,757
Flight equipment maintenance 3,508,467
Other maintenance 1,869,420
Passenger service 1,220,451
Aircraft and traffic servicing 7,024,866
Promotion and sales 1,588,966
General and administrative 931,761
Depreciation 1,021,474
Operating profit
OTHER DEDUCTIONS
Interest 240,960
Extension and development 88,924
Sundry 28,523
Earnings before income taxes
INCOME TAXES (after application of prior years' tax credits)
States 13,000
Federal 165,000
Net earnings
SPECIAL ITEM
Mail pay settlement (Note 3)
NET EARNINGS AFTER SPECIAL ITEM
$15,631,735
434,383
8,032,295
333,814
463,562
130,976
64,293
119,401
25,210,459
24,193,162
1,017,297
358,407
658,890
178,000
480,890
(323,140)
$ 157,750
STATEMENT OF RETAINED EARNINGS AND PAID-IN CAPITAL --Year ended December 31, 1961
RETAINED EARNINGS
Retained earnings--December 31, 1960 $ 131,463
Net earnings for the year 480,890
612,353
Special charge resulting from settlement of retroactive mail pay (Note 3) (323,140)
Retained earnings--December 31, 1961 $ 289,213
PAID-IN CAPITAL
Paid-in capital--December 31, 1960 $1,317,221
Adjustment for common stock subscribed for in prior year 3,188
1,314,033
transfer to common stock the par value of 6,484,743 shares issued in a 4 for 1 stock split and
distribution 1,296,948
Paid-in capital--December 31, 1961 ~$ 17,085
The accompanying notes are an integral part of this statement.
14
AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS-December 31, 1961
1. The company has a 51/2% equipment loan with two banks
having an unpaid balance at December 31 of $1,503,000.
This loan is secured by five Convair 340/440 aircraft and
related spare parts, and is payable in semi-annual install
ments of $167,000 with final payment on January 1, 1966.
Among other things, the loan agreement provides that the
company maintain current assets at least equal to current
liabilities excluding any liability to the noteholders under
this or the following note agreement. The Civil Aeronautics
Board has guaranteed 90% of the principal and 100% of the
interest on the equipment loan only.
During the year, a new loan agreement was made with the
same two banks in the amount of $2,870,000 for the purchase
of five additional Convair 340/440 aircraft and related spare
parts, and the retirement of $770,000 which remained on a
working capital loan. This 6% note, having an unpaid
balance of $2,795,000, is payable in installments totaling
$500,000 per year with a final payment of $295,000 in
December, 1966. These five Convairs and twenty-four DC-3
aircraft along with related spare parts constitute the security
for this loan. Among other things, the loan agreement pro
vides that the company maintain current assets in excess of
current liabilities by at least $250,000 after April 1, 1962,
exclusive of amounts due the noteholders.
2. Authorized capital stock of the company was increased on
April 5, 1961 from 3,750,000 to 10,000,000 shares of common
stock. On December 1, 1961, a distribution in the nature of
a stock split of four shares for every one outstanding was
authorized. The effect of this transaction was to increase the
number of shares outstanding from 2,161,581 to 8,646,324
and to increase the common stock account from $429,128 to
$1,729,265 with a comparable reduction in the paid-in
capital account.
3. A settlement was reached during the year with the Civil
Aeronautics Board on additional mail pay for the period
November 23, 1956 through December 31, 1960. The excess
of the company claim over the final settlement ($323,140)
is shown as a special charge against earnings in the year
1961. In arriving at this settlement, the C.A.B. required
several other adjustments, principally in the amortization of
certain route development and aircraft preoperating costs,
and their effects are netted in the retroactive mail pay as
finally determined.
4. The company has a 40-year lease covering hangar and
terminal facilities at the Chicago O'Hare International Air
port. The lease at Detroit's Willow Run Airport expires in
October, 1962 and is expected to be renewed. The company
is currently negotiating a long-term lease with the Minne-
apolis-St. Paul Metropolitan Airports Commission. Manage
ment anticipates the lease cost of facilities at these three
locations, including landing fees, will approximate $550,000
per year.
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 14, 1962
North Central Airlines, Inc.
We have examined the balance sheet of NORTH CENTRAL AIRLINES, INC. (a Wisconsin corporation) as of De
cember 31, 1961 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, 1961 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, Wisconsiri Alexander Grant <b Company
COMPARATIVE FINANCIAL SUMMARY
Operating Revenues 1961 1960 1959 1958 1957 1956 1955 1954 1953 1952
Passenger $15,631,735 $12,660,869 $11,388,135 $ 8,702,455 $ 7,372,333 $6,137,216 $4,933,487 $3,351,782 $2,303,738 $1,470,536
Mail and Public Service Revenue . 8,466,678 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
Other 1,112,046 886,554 790,090 657,961 504,017 324,910 194,628 148,622 114,974 71,626
TOTAL $25,210,459 $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
Operating Expenses
Direct Expenses $12,405,644 $10,815,675 $ 7,924,030 $ 5,849,305 $ 4,840,708 $3,528,274 $2,853,134 $2,419,593 $2,104,078 $1,423,223
Indirect Expenses 10,766,044 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
Depreciation 1,021,474 787,177 859,102 583,174 452,993 301,161 470,169 535,557 428,308 205,192
TOTAL $24,193,162 $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
Net Operating Profit (or Loss) $ 1,017,297 $ 432,262 $ 402,038 $ 157,850 $ 81,678 $ 124,527 $ 223,495 $ 172,064 $ (44,005) $ (83,972)
Amortization of Route
Development Expense (88,924) (100,866) (198,164) (6,194) (6,281) (8,566) (26,995) (5,227) (10,618) -0-
Non-operating Income and
Expenses, Net (269,483) (229,282) (183,364) (43,472) (54,709) (36,085) (50,051) (55,130) (59,965) (39,421)
Net Profit (or Loss)Before Taxes . ..$ 658,890 $ 102,114 $ 20,510 $ 108,184 $ 20,688 $ 79,876 $ 146,449 $ 111,707 $ (114,588) $ (123,393)
Income Taxes 178,000 -0- 4,542 -0- (60,103) 45,700 18,000 -0- -0-
Net Profit (or Loss) After Taxes ....$ 480,890 $ 102,114 $ 15,968 $ 108,184 $ 80,791 $ 34,176 $ 128,449 $ 111,707 $ (114,588) $ (123,393)
Special Item . . . . (323,140) -0- -0- -0- -0- -0- -0- -0- -0-
Net Profit (or Loss) $ 157,750 $ 102,114 $ 15,968 $ 108,184 $ 80,791 $ 34,176 $ 128,449 $ 111,707 $ (114,588) $ (123,393)
15
WINGS FOR MID-AMERICA
THE AIRLINE
THAT GREW
168,000,000
MILES TALL!
Only thirteen years ago North
Central Airlines took off on an
operational flight that has carried
it to remarkable heights.
Beginning with just three 9-pass
enger planes -- logging about
1,953,000 passenger miles in 1948
-- the Route of the Northliners
has grown into the leading system
in its class. Today it operates more
aircraft, flies more miles, carries
more passengers and more cargo
than any other local service airline.
Proof that North Central is
really going places (and more
often): last year Northliners and
Super Northliners flew over 168
million passenger miles. An in
crease of 86 times over its first
year of operation.
When you want to go places,
choose the airline that's going
places -- North Central. Now fly
ing daily to 91 cities in 10 states
and Canada -- connecting with
national and international airlines
for world-wide destinations.
NORTH CENTRAL AIRLINES
America's leading local airline. Serving 91 cities
in 10 midwest states and Canada
North Central's advertising
portrays company's growth,
service and spirit
I n the fall of 1961 and carrying over
into January, 1962, North Central
sponsored a series of six "corporate
image" advertisements which
appeared in newspapers in all route
cities. The objective was to build
increased public understanding and
recognition of the company. Each
advertisement featured an interesting
and important facet of North
Central's character and service --
presented the airline in terms other
than the usual airline advertisements.
The program was highly acclaimed
through the North Central region.
DU WISH YOU COULD SPROUT WINGS .
{ NORTH CENTRAL S
16
<
1961
ANOTHER YEAR
OF PROGRESS
In 1961, we inaugurated service to Regina, Saskatchewan, our
third route into Canada . . .
. . . graduated several stewardess training classes and proudly
added them to Northliner service . . .
. . . established the "Crew of the Year" award to honor flight
crews for achieving the highest standards in the performance
of duty . . .
. . . continued an aggressive, informative sales program through
out the system . . .
. . . welcomed many distinguished passengers on the Route of
the Northliners, among them Swedish Prime Minister and Mrs.
Tage Erlander.
Z0]S tsrg'
NORTH CENTRAL AIRLINES, INC.
6201--34 AVENUE SOUTH
MINNEAPOLIS 50, MINNESOTA