North Central Airlines Annual Report 1963

NORTH CENTRAL AIRLINES
196) Annual Report
DIRECTORS
HAL N. CARR*
WERNER L. CHRISTENSEN
D. E. CROOKER
G. F. DECOURSIN*
ARTHUR E. A. MUELLER*
A. JAMES MUELLER
K. B. WILLETT
* Executive Committee
MANAGEMENT
AR THUR E. A. MUELLER
Chairman of the Board
HAL N. CARR
President and General Manager
R . H. BENDIO
Vice President, Maintenance and Engineering
FRANK N. BUTTOMER
Vice President, Traffic and Sales
A. D. NIEMEYER
Vice President, Flight Operations
AR THUR E. SCHWANDT
Vice President, Industrial Relations
BERNARD SWEET
Vice President, Finance
JOHN P. DOW
Secretary
CHARLOTTE G. WESTBERG
Assistant Secretary
D. F. MAY
Treasurer
L.J. KEELY
Director, Maintenance and Engineering
T. M. NEEDHAM
Director, Ground Operations
G. F. WALLIS
Director, Flight Operations
GENERAL OFFICES:
6201 Thirty-Fourth Avenue South,
Minneapolis, Minnesota 55450
Registrar and Stock Transfer Agent
Northwestern National Bank of Minneapolis;
Minneapolis, Minnesota
To our stockholders, employees and friends:
March 12, 1964
TH E YE AR 19 6 3 marked the completion of 16 years
in scheduled air transportation for North Central Airlines-America's
Leading Regional Airline. We are pleased to report that it was a year
of significant growth. The company attained new heights in traffic
and revenues and also set the industry pace {n operating performance.
WHILE NORTH CENTRAL carried a record 1,214,532 passengers in 1963, each
month during the year broke its own all-time passenger boarding mark.
The 27,800,000 pounds of cargo-including air express, freight, and mail
-was 10 per cent over 1962, the company's previous best year.
THIS INCREASED TRAFFIC produced record revenues of $28,101,000 for the
year, in spite of a substantial reduction in public service payments. These
revenues, coupled with the company's intensive cost control program,
resulted in a net profit after taxes of $506,000. With $1,521,000 of
depreciation, the cash flow reached an 'all-time high of $2,027,000.
This is 18 per cent-or $302,000- more than in 1962.
THE COMPANY also took great strides in operating excellence. It completed
over 99 per cent of its 14,500,000 scheduled miles for 1963. Of the 175,000
scheduled arrivals, 86 per cent were on time. North Central is proud of this
outstanding operating record. While attaining this enviable industry-leading
status, the airline continued to maintain its perfect 16-year safety record.
A NEW SOURCE OF REVENUE was added with the award of a two-year contract
to North Central by the United States Agency for International Development.
Under this project, the company will provide managerial and technical
assistance to Lloyd Aereo Boliviano, S. A., the national airline of Bolivia.
THE CIVIL AERONAUTICS BOARD'S announced program of strengthening the
regional airlines holds the key to future growth. We are most optimistic that
further advances in our route development program, coupled with the
vigorous traffic promotion, will result in continued progress in the coming year.
AS WE LOOK to record revenues and profits in 1964, we again want to
acknowledge the loyal support of our employees, stockholders, and many
friends who fly along the "Route of the Northliners."
ARTHUR E.A. MUELLER
Chairman of the Board
Sincerely,
HAL N. CARR
President
Financial Review
2
Annual Report) 1963
N ORTH CENTRAL AIRLINES attained record reve-
nues of $28,101,209 in 1963, compared with
$27,159,551 for 1962.
Operating expenses were $26,427,466 and in-
cluded $1,521,376 in depreciation charges. As a
result, the company had an operating profit of
$1,673,743 and a net profit of $505,711, after income
taxes of $775,662. These net earnings, together with
the $1,521,376 of depreciation, resulted in cash
flow of $2,027,087 in 1963.
North Central earned a profit of $505,711
although its public service revenues were reduced
by $658,026. These earnings were achieved by effi-
ciencies of operation and the continuation of an
intensified cost control program. In addition, for
the third consecutive year the company returned
excess profits to the Federal Government under
the class mail rate.
During 1963 North Central sold $851,500 of S
per cent subordinated convertible debentures due
June 1, 1978. The sale of these securities was com-
pleted on favorable terms, without an underwriting
because of the company's strong financial position.
REVENUES
IN Ml ~LIONS OF
DOLLARS
1954 '5.5 '56 '57 '58 '5 9 '60 '61 '62 '63
IN 1963, North Central continued to advance its
route development program by applications to the
Civil Aeronautics Board for new routes, lifting of
operating restrictions, and acquisition of segments
and cities now served by trunk airlines.
During the year North Central participated in
several C.A.B. route proceedings which will signifi-
cantly affect its future operations. The company
presently serves 91 cities in 10 Midwest states and
Canada over its 7,000-mile system.
North Central is currently involved in the
following route proceedings:
SIOUX CITY-NORFOLK-.DENVER-Still pending is the
company's application for a 480-mile route segment
between the co-terminals of Sioux City, Iowa and Norfolk,
Nebraska; and the terminal point of Denver, Colorado.
The addition would strengthen the entire western portion
of the airline and add a major city-Denver-to the system.
OMAHA-ST. LOUIS-North Central has applied for a 400-
mile segment from Omaha to St. Louis, via intermediate
cities of Chillicothe and Moberly, Missouri. Besides add-
ing another major terminal-St. Louis-the route would
be North Central's first entry into Missouri.
OMAHA-KANSAS CITY-Service to three new cities is
proposed in the company's application for a 169-mile
segment south of Omaha. They are: Falls City, Nebraska;
Atchison, and Kansas City, Kansas. This would add the
State of Kansas to the airline's system.
RAPID CITY-OMAHA-Still pending is the company's
amendment to the Omaha-Kansas City application to
include a route between Norfolk, Nebraska and Rapid
City, South Dakota, with nonstop authority between
Rapid City and Omaha.
DETROIT-BALTIMORE-North Central has applied for
authority to operate between Detroit and Baltimore, with
intermediate cities of Cleveland and Pittsburgh. The
415-mile segment would greatly strengthen the entire
eastern portion of the system by adding these two major
cities, Pittsburgh and Baltimore.
DETROIT-TORONTO-Awaiting the reopening of the
Bilateral Treaty between the United States and Canada
is the company's application for a nonstop route between
Detroit and Toronto, Ontario, Canada.
MONTANA-NORTH DAKOTA-SOUTH DAKOTA ROUTES
-1,376 route miles and 12 cities would be added to
North Central's system in the application involving
Montana, North Dakota, and South Dakota.
TRANSFER INVESTIGATIONS-In keeping with the
C.A.B.'s plan to strengthen the regional airlines by the
transfer of segments and cities from the trunk airlines to
the regional carriers, North Central has requested sus-
pension of United Air Lines' authority to serve Saginaw/
Bay City /Midland, Flint, Lansing, and Muskegon,
Michigan. North Central has also applied for suspension
Route Development
of Western Airlines at Pierre and Huron, South Dakota,
and for a direct route between Pierre and Huron.
OPERA TING FLEXIBILITY APPLICATIONS -Also in the
C.A.B.'s program to strengthen the regional carriers is
the relaxation of operating restrictions on existing seg-
ments to permit nonstop and skip-stop authority.
The company seeks authorization between Minneapolis/
St. Paul and Chicago for (1) nonstop service; (2) one-stop
via Milwaukee, Wisconsin; (3) one-stop via Madison,
Wisconsin; and (4) three-stop via LaCrosse, Madison,
and Milwaukee.
North Central also seeks authority to provide nonstop
service between Chicago and Cleveland.
"usE IT OR LOSE IT" PROCEEDINGS-A C.A.B. hearing
was held in October 1963 investigating service to four
Michigan cities under the Board's "use it or lose it"
policy. Cities involved are Pontiac, Cadillac/ Reed City,
and Port Huron. The Examiner's recommendation to
the C.A.B. and a final decision by the Board are expected
later in 1964.
REGIONAL AIRPORT INVESTIGATIONS-In the North
Central Area Airport Investigation a hearing was held in
Four Convair Northliners prepare j or passenger boardings at Chicago's 0' Hare International Airport.
July 1963 to determine whether or not eight combina-
tions of cities should be served through regional airports.
The following combinations of cities were included:
(1) Ashland, Wisconsin-Ironwood, Michigan; (2) Apple-
ton-Oshkosh, Wisconsin; (3) Clintonville-Green Bay,
Wisconsin; (4) LaCrosse, Wisconsin-Winona, Minnesota;
(5) Land O'Lakes-Rhinelander, Wisconsin; (6) Marsh-
field-Wausau, Wisconsin; (7) Marshfield-Wisconsin
Rapids/Stevens Point, Wisconsin; (8) Wausau-Wisconsin
Rapids/Stevens Point.
A Board decision in the case is expected in 1964.
In the Michigan Area Airline Service Airport Investi-
gation, the Bbard will consider whether or not Battle
Creek and Kalamazoo should receive service through
an area airport.
3
4
New, smartly-styled
uniforms for ticket
counter personnel were
introduced in 1963.
Northliner cargo
compartments carried
a record 10,720,700
pounds of air freight.
Perpetual and exacting
maintenance has
aided North Central
in attaining an
industry- leading
position for operating
performance.
Traffic Growth
NORTH CENTRAL achieved traffic gains in 1963 as
1,214,532 passengers and 27,815,119 pounds of cargo
were flown; greatest in the airline's 16-year history.
The record passenger boardings exceeded 1962-
the previous best year-by eight per cent. Each
month during the year surpassed its own previous
boarding record and December 20 was the airline's
greatest single day when 4,818 passengers were
enplaned. A new mark was set with 203,828,672
passenger miles flown, an increase of seven per cent
over 1962. Much of this growth can be attributed
to the traveling public's enthusiasm for North
Central's pace-setting operating performance.
Substantial gains in air freight and express were
also achieved with 1,240,482 freight ton miles flown,
up 21 per cent from 1962, and 776,535 express ton
miles carried, a 12 per cent gain over the previous
year. Air freight volume reached a record 10,720,700
pounds, an increase of 17 per cent over the previous
high in 1962. Some 10,403,273 pounds of air express
were carried, for a 10 per cent gain over last year.
In 1963, North Central's charter flights increased
72 per cent over the previous year. Some 229 char-
ters were operated, compared to 133 in 1962. In 1963
over 5,000 passengers flew on Northliner charters.
While carrying a record number of passengers
and the greatest volume of cargo in its history, the
company also maintained its perfect 16-year safety
record. The National Safety Council again this year
presented the airline its highest citation, the Award
of Honor. Since inaugurating scheduled service in
1948, North Central has carried 8,700,000 passen-
gers and flown 1,400,000,000 passenger miles with-
out fatality or injury to passengers or crew members.
Operating Performance
NORTH CENTRAL established new records for oper-
ating performance during 1963. Competing with
the nation's 11 trunk airlines and 12 other regional
carriers, as well as combating some unfavorable
weather, the airline achieved one of the most out-
standing records in commercial aviation for sched-
uled miles completed. Of its 14,549,105 scheduled
miles in 1963, the airline completed over 99 per cent.
At the same time, the company maintained one
of the best on-time records in the entire airline
industry. Of North Central's 174,918 flight arrivals,
86 per cent were on time. This compares with an 81
per cent on-time record in 1962.
This enviable operating performance can be
attributed, in part, to North Central's aggressive
cold weather program, "Operation Cold Front."
Long before the start of the winter season, all sta-
tion, maintenance, and supervisory personnel begin
a comprehensive preparatory program to convert
ground support equipment to winter operating con-
dition. Extensive training classes on cold weather
operational techniques are conducted at each of
the 50 overnighting and refueling stations. Equip-
ment at other stations is also completely winterized.
Another factor contributing to the company's
operating reliability is the increased use of the data
collection system which links the airline's Minne-
apolis, Chicago, and Detroit maintenance bases.
The system permits analytical evaluation of daily
work progress. It is now possible to plan work sched-
ules for the greatest efficiency and speed. As a result,
phase overhaul and periodic check times on Con-
vair Northliners have been reduced by 30 per cent
and DC-3 overhaul time cut by 35 per cent.
Improved Services
ONE OF THE MAJOR IMPROVEMENTS in passenger
service was accomplished early in the year when
the company moved its Chicago reservations office
and central reservations-control facilities to Mil-
waukee. The new center with its more efficient
working conditions and improved equipment per-
mits North Central to provide even better service
to the traveling public while effecting substantial
savings. The consolidated reservations center,
occupying 5,500 square feet, includes over 120
employees.
Confirmation information on North Central
flights can be obtained immediately since the space-
control section is in the same location. Since addi-
tional direct phone lines to connecting carriers have
been installed, interline inforrnation requested by
the passenger has also been speeded up. In addition,
a special line between the center and New York
was acquired. A trunk airline reservationist in New
York can now be automatically connected with
North Central's reservations center and obtain
immediate seat-availability information.
Early in 1964 the Minneapolis/ St. Paul reserva-
tions office will be transferred to the consolidated
center in Milwaukee.
Another improved service was inaugurated in
October 1963. North Central then became the na-
tion's first regional airline to be connected to the
Collins Radio Electronic Switching System, estab-
lished for "instant" exchange of teletype messages
,.
North Central's "Operation Cold Front" assures that
personnel are properly trained and that all ground
equipment is in a ready condition for winter operations.
BELOW, The new consolidated reservations control center
in Milwaukee, Wisconsin, provides the traveling public
with a faster and more efficient information service.
5
I
6
on interline reservations. The nationwide hookup
of all the scheduled airlines is expected late in 1964.
The system will permit reservations messages to
flash between the central data processor in Chicago
and the airlines at 100 words per minute over spe-
cial teletype lines. Automatically, the data processor
will read the address of each message and relay it
to the correct airline. The company is expecting
that substantial savings will be realized when the
project reaches its full utilization.
Four new airport terminal buildings were added
in 1963 by communities that North Central serves.
Muskegon and Grand Rapids, Michigan; and
Devils Lake and Grand Forks, North Dakota, all
completed new terminal facilities. Under construc-
tion or in the planning stage are new terminal
buildings at Manitowoc, Madison, Green Bay, and
Appleton, Wisconsin; Detroit and Saginaw,
Michigan; Bismarck, North Dakota; and Hibbing,
Minnesota.
To further promote its services, the company pre-
pared a new 23-minute color movie, "Northliner",
for showing to community groups. It covers North
Central's daily operations and points out the advan-
tages and safety of scheduled air transportation.
During 1963, more than 18,000 personal sales
calls were made on North Central customers by
company District Traffic and Sales Managers and
Representatives. The calls were in addition to the
regular traffic and public relations responsibilities.
The
Bolivian
Project
IN OCTOBER 1963, North Central was awarded an
$800,000 contract by the United States Agency for
International Development to provide managerial
and technical assistance to Lloyd Aereo Boliviano,
S.A. (LAB) the national airline of Bolivia. The
contract covers a two-year period.
North Central's general objective in the project
is to develop LAB into a safe, reliable, self-support-
ing airline operation which will provide the maxi-
mum public transportation benefits, both domestic
and international, to Bolivia.
In administering the contract, the company will
send 20 airline specialists to Bolivia. Key depart-
ment heads of LAB will also visit North Central's
general office and main operations base for on-the-
job training. President Hal N. Carr will travel to
Bolivia periodically to direct the project.
The program for the revitalization and develop-
ment of LAB calls for: (1) Reorganization of the
airline into four operating departments; (2) Grad-
ual expansion of domestic and international service
and acquisition of additional aircraft; (3) Improve-
Bolivia's President, Victor Paz Estenssoro,
left, meets with North Central' s President
Hal N. Carr, second from left, and members
of the company's field staff in Bolivia.
BELOW, left, North Central' s 20 specialists
in Bolivia will provide managerial and
technical assistance to that country's airline.
ment of the airline's schedule completion, on-time
performance, and safety record; ( 4) Development
of a favorable corporate image; (5) Establishment
of an effective accounting system; and (6) Acquisi-
tion of additional working capital.
LAB has approximately 1,000 employees and
operates DC-6B aircraft, C-4 7 /DC-3's, and B-17's,
modified for cargo. At present, the airline serves 30
Bolivian cities and operates international routes to
Arica, Chile; Lima, Peru; Corumba, Brazil; and
Salta and Buenos Aires, Argentina.
Aviation is essential to the economic develop-
ment of Bolivia, as the country is land-locked and
possesses some of the world's highest mountains.
Because of this vital need for air service in Bolivia,
North Central is optimistic about the tremendous
potential which LAB has. With efficient planning
and utilization of personnel and equipment, along
with an aggressive sales and route development
program, LAB should be able to contribute to
Bolivian progress by providing increased services,
while attaining a profitable operation.
Looking to the future
NoRTH CENTRAL LOOKS FORWARD to 1964 with
enthusiasm following a year of solid growth and
improvement in passenger and cargo traffic, as well
as operating performance. With revenues of
$28,101,000, the company has attained the strong-
est financial position in its 16-year history.
Future traffic growth, new routes, additions to
the Convair fleet, and a continuing, intensive cost
control program will result in further gains for
the airline.
Management will continue to support the Civil
Aeronautics Board's program aimed at strengthen-
ing the regional airlines. This includes: (1) Regional
airport concept which encourages use of a single
airport to serve adjacent communities; (2) Transfer
of segments and cities from trunk airlines to the
regional earners; (3) Relaxation of operating
restrictions to permit nonstop and skip-stop author-
ity on existing routes; and ( 4) The "use it or lose it"
policy aimed at eliminating unprofitable cities and
marginal routes. North Central has, therefore, filed
applications with the Board in accordance with
this program.
In 1964, increased revenues will be realized from
the company's Bolivian contract. North Central
expects this project to contribute to substantial
profits in the coming year.
The company plans to purchase additional Con-
vair 440 aircraft early in 1964. This is in accordance
with the airline's program to phase out the entire
DC-3 fleet.
Investigations into merger possibilities with other
regional airlines will continue. North Central's
financial strength and industry-leading position
assure the airline of substantial gain in any merger
agreement.
As to the future, management is most optimistic.
With the C.A.B.'s announced program for strength-
ening the regional carriers, coupled with expected
increases in company revenues and the application
of sound management techniques, record earnings
for North Central are anticipated in 1964.
7
HAVRE .
GLASGOW
WOLF POINT
GREAT FALLS

SIDNEY

GLENOIVE
DICKINSON
LEWISTOWN
MILES CITY


BILLINGS

DENVER
ROUTES OF THE NORTHLINERS
PRESENT ROUTES PROPOSED ROUTES ...

MOBERLY
NON STOP
ROUTE
APPLICATIONS
PITTSBURGH
Minneapolis to Chicago
Minneapolis to Milwaukee
Chicago to Cleveland
10
1,2 50
1,000
(f)
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750
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<(
(f)
::,
0
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I-
500
250
500
400
C/l 300
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200
100
PASSENGERS
,__ - -
,__ ,__ ,__ >-- >--
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- - -
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>-- >--
,__ ,__
-
-- - L-- L--
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L-- L--
-
1954 '55 '56 '57 '58 '59 '60 '61 '62 '6 3
SEAT MILES
- .._
>--
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- - -
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1954 55 '56 '57 '58 '59 '60 '61 '62 '63
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CARGO IN POUNDS
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>---
INCLUDES FREIGHT,
EXPRESS AND MAIL
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1954 '55 '56 '57 '58 '5 9 '60 '61 '62 '63
America's Leading
Regional Airline continues its
record growth and progress ...
For the fourth consecutive year, boardings have
exceeded the million mark as 1,214,532 passengers
flew the " Route of the Northliners." Greater
emphasis on air cargo resulted in a traffic increase
of 11 per cent for the year. The expanding fleet
of Convair Super Northliners provided the traveling
public with a record 493,058,136 seat miles.
Additional Convairs will be added early in 1964.
North Central maintained its position as an industry
leader in operating performance. In addition,
the airline's on-time reliability is also considered one
of the most outstanding in commercial aviation.
100%
SCHEDULED MILES--
COMPLETED
Average 1,200,000
99% t----------------,1
plane miles per month
98% t-----------l
97%
96%
1959 1960 1961 1962 1963
100%
FLIGHT ARRIVALS - -
ON TIME
Average 15,000 landings a month
90% t - - - - - - - - - - -----------1
80% - - - - - - - - - -
1959 1960 1961 1962 1963
SCHEDULED AIRLINES COMPLETION RECORD* FOR YEAR 1963
COMPLETION COMPLETION
RANK AIRLINE FACTOR RANK AIRLINE FACTOR
1 Trans World. 99.3% 13 Western 97.7%
2 Bonanza . 99.3 14 Trans-Texas. 97.5
3 North Central 99.1 15 National 97.2
4 Northwest 99.0 16 Delta 97.1
5 Central 98.7 17 Lake Central 96.6
6 Frontier 98.6 18 Eastern 96.6
7 Braniff . 98.6 19 Allegheny 96.6
8 Continental . 98.4 20 United . 96.6
9 American. 98.3 21 Southern . 96.4
10 Ozark 98.0 22 Mohawk . 96.0
11 Pacific . 97.9 23 West Coast . 93.6
12 Piedmont. 97.9 24 Northeast 91.3
*Source: Civil Aeronautics Board Form 41
11
12
NORTH CENTRAL AIRLINES, INC.
ASSETS
CURRENT ASSETS
Cash
Accounts receivable
Mail (Note 1)
Traffic .
Other .
Flight equipment parts, at average cost (less deterioration
reserves of $186,753) . . . . . .
Maintenance and operating supplies .
Prepaid expenses and sundry deposits.
Total current assets . . .
OPERATING PROPERTY AND EQUIPMENT-at cost
Flight equipment (Note 2)
Ground equipment . . .
Hangar buildings and improvements to leased property .
Furniture and fixtures . . . . . . . . . . . . . . .
Less accumulated depreciation
DEFERRED CHARGES
Route development and aircraft preoperating costs .
Rentals . . . . . . . . . . . . . . .
Unamortized discount and expense on debt
Other . ... . . . .... . . . . . .
The accompanying notes are an integral part of this statement.
$ 667,764
2,240,477
543,396
12,309,517
1,230,614
590,202
328,494
14,458,827
6,460,891
181,918
162,338
76,884
34,838
$ 996,975
3,451,637
1,016,748
254,659
620,043
6,340,062
7,997,936
455,978
$14,793,976
Balance Sheet December 31) 1963
LIABILITIES
CURRENT LIABILITIES
Current maturities of long-term debt .
Accounts payable
Trade .
Traffic
Unearned transportation revenue
Taxes withheld or collected as agents
Income taxes . . . .
Accrued liabilities
Salaries and wages
Payroll and property taxes
Other . . . . . . . . .
Total current liabilities .
LONG-TERM DEBT (Note 2)
Notes payable to banks
Other notes payable, collateralized in part by pledge of certain
equipment, payable in monthly installments .
5% subordinated debentures . . . . . . .
Less current maturities .
DEFERRED CREDIT
Deferred Federal investment tax credit
STOCKHOLDERS' EQUITY
Common stock~authorized, 10,000,000 shares of $.20 par value;
issued and outstanding, 8,732,038 shares
Paid-in capital . .
Retained earnings .
$ 953,330
1,642,581
678,487
105,698
307,451
5,571,000
159,070
851,500
6,581,570
1,274,778
1,746,408
295,246
2,041,654
1,201,482
$ 1,274,778
2,595,911
171,725
364,842
701,381
1,091,636
6,200,273
5,306,792
43,775
3,243,136
$14,793,976
--
13
14
NORTH CENTRAL AIRLINES, INC.
~-- STATEMENT OF EARNI GS Year ended December 37, 7963
TRANSPORTATION REVENUE
Passenger
Mail
Public Service Revenue (after excluding $100,000
profit-sharing to Government) (Note 1)
Freight and express . . . . .
Excess baggage . . . . . . .
Non-scheduled transport service
Other .. . . . . . . .. .
OPERATING EXPENSES
Flying operations
Maintenance . . . . .
Passenger service . . .
Aircraft and traffic servicing
Promotion and sales . . . .
General and administrative .
Depreciation and amortization (including $97,814 of
extension and development expenses)
Operating profit . . . . . . . . . . .
OTHER (INCOME) AND DEDUCTIONS
Interest . . . . . . . . . . . . . .
Sundry-net . . . . . . .. ... .
Earnings before income taxes
INCOME TAXES (Note 5)
States . . . . . . . .
Federal, less current year amortization of
investment credit-$7,251
NET EARNINGS . . . . . .
The accompanying notes are an integral part of this statement.
$ 7,088,430
6,011 ,879
1,318,058
7,248,906
2,209,514
1,029,303
1,521 ,376
410,776
(18,396)
45,000
730,652
$18,064,524
466,750
$
7,868,585
1,157,917
132,074
258,217
153,142
28,101,209
26,427,466
1,673,743
392,380
1,281,363
775,652
505,711
~-- STATEMENTS OF RETAINED EARNINGS AND PAID-IN CAPITAL
RETAINED EARNINGS
Retained earnings-December 31, 1962
Net earnings for the year . . . . . .
Retained earnings-December 31, 1963
PAID-IN CAPITAL
Paid-in capital-December 31, 1962 .
Expenses in connection with sale of common stock in 1962
Paid-in capital-December 31, 1963 . . . . . . . . . .
The accompanying notes are an integral part of this statement.
Year ended December 31, 1963
$ 695,771
505,711
$1,201 ,482
$ 298,548
3,302
$ 295,246
NOTES TO FINANCIAL STATEMENTS
December 31 , 1963
1. PUBLIC SERVICE REVENUE
Operating results for the years 1961 , 1962 and 1963 are open to review
by the Civil Aeronautics Board which administers the program under
which subsidy payments are made to local service carriers. Provision
has been made in the accounts for estimated profit sharing refunds
in the aggregate amount of $100,000.
2. LONG-TERM DEBT
Flight equipment and related spare parts are pledged as security to two
banks under a loan agreement dated September 15, 1961, with sub-
sequent supplemental agreements. The unpaid balance of $5,571,000
consists of two 6% notes with unpaid balances of $3,341,000 and a
5% note having an unpaid ba!ance of $2,230,000. Final payment
under the loan agreement is $460,000 due on March 15, 1968.
Interest on all notes is payable monthly and principal in varying
monthly installments. Among other provisions, the company is re-
quired to maintain current assets in excess of _
current liabilities of at
least $1,000,000, exclusive of the amount due noteholders.
During the year, the company issued $851,500 of 5% subordi-
nated convertible debentures due June 1, 1978. These bonds are
subject to redemption in whole or in part at the election of the com-
pany at any time prior to maturity. The holders have the option to
convert the principal into common stock at stipulated conversion
prices during the same period. These debentures are subordinate as to
principal and interest payments to the notes due the two banks.
3. LONG-TERM LEASES
The company has a forty-year lease covering hangar and terminal
facilities at Chicago's O'Hare International Airport. A lease at Detroit's
Willow Run Airport expires in 196 7, and the leases for terminal and
hangar facilities at Minneapolis-St. Paul are being negotiated. Man-
agement anticipates the cost of leased facilities at these three major
locations, including landing fees, where a long-term contingency exists,
to approximate $600,000 annually.
4. PENSION PLAN
The company contributes annually to a Pilots' Retirement Plan which
was established in 1956. The company contribution charged against
income for the year 1963 amounted to $199,882 and at December 31,
1963, all unfunded past service liability had been paid.
5. INCOME TAXES
Federal, Wisconsin and Minnesota income tax returns have been
examined through the year 1959 by the respective taxing authorities.
There exist no unpaid assessments resulting from any examination.
10-YEAR FINANCIAL
OPERATING REVENUES 1963 1962 1961 1960
Passenger .............................. $18,064,524 $16,799,514 $15,631,735 $12,660,869
Mail and Public Service Revenue . . . . . . . . 8,335,335 8,992,093 8,466,678 8,054,111
Other ... .......... .. .. ~ ............... 1,701,350 1,367,944 1,112,046 886,554
TOTAL ............................... . $28,101,209 $27,159,551 $25,210,459 $21,601,534
OPERATING EXPENSES
Direct Expenses ........................ $13,100,309 $12,873,796 $12,405,644 $10,815,675
Indirect Expenses . ....... .. .... ......... 11,805,781 11,570,053 10,766,044 9,653,514
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,423,562 1,098,060 1,021,474 787,177
TOTAL ............................... . $26,329,652 $25,541,909 $24,193,162 $21,256,366
Net Operating Profit .................... . $ 1,771,557 $ 1,617,642 $ 1,017,297 $ 345,168
Amortization of Route
Development Expense ................. (97,814) (92,570) (88,924) (100,866)
Non-operating Income and Expenses, Net. . (392,380) (335,014) (269,483) (229,282)
Net Profit (or Loss) Before Taxes .... ..... $ 1,281,363 $ 1,190,058 $ 658,890 $ 15,020
Income Taxes .......................... 775,652 655,725 305,776 -0-
Net Profit After Taxes ........ ...... ..... $ 505,711 $ 534,333 $ 353,114 $ 15,020
ALEXANDER GRANT & COMPANY
Certified Public Accountants
811 East Wisconsin Avenue
Milwaukee 2. Wisconsin
Stockholders and Directors
North Central Airlines, Inc.
We have examined the balance sheet of NORTH CENTRAL
AIRLINES. IN C. (a Wisconsin corporation) as of December
31, 1963, and the related statements of earnings, retained
earnings and paid-in capital for the year then ended. Our
examination was made in accordance with generally ac-
cepted auditing standards and accordingly included such
tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
Since it was not practicable to confirm receivables from
United States Government departments and agencies. we
satisfied ourselves with respect to such receiv,ables by means
of other auditing procedures.
In our opinion, the accompanying balance sheet and
statements of earnings, retained earnings and paid -in capital
present fairly the financial position of North Central Airlines.
Inc. at December 31, 1963, and the results of its operations
for the year then ended. in conformity with generally ac-
cepted accounting principles applied on a basis consistent
with that of the preceding year.
Alexander Grant & Company
Milwaukee, Wisconsin
February 27, 1964
SUMMARY
1959 1958 1957 1956 1955 1954
$11,388,135 $ 8,702,455 $ 7,372,333 $6,137,216 $4,933,487 $3,351,782
6,239,756 3,698,395 2,839,163 1,538,215 1,689,890 2,328,921
790,090 657,961 504,017 324,910 194,628 148,622
$18,417,981 $13,058,811 $10,715,513 $8,000,341 $6,818,005 $5,829,325
$ 7,924,030 $ 5,849,305 $ 4,811,661 $3,538,274 $2,853,134 $2,448,640
9,315,951 6,550,910 5,426,616 4,020,375 3,271,207 2,702,111
859,102 583,174 452,993 301,161 470,169 535,557
$18,099,083 $12,983,389 $10,691,270 $7,859,810 $6,594,510 $5,686,308
$ 318,898 $ 75,422 $ 24,243 $ 140,531 $ 223,495 $ 143,017
(98,295) (16,869) (17,124) (48,055) (57,540) (7,665)
(183,364) (43,472) (54,709) (36,085) (50,051) (55,130)
$ 37,239 $l5,08l $ (47,590) $ 56,391 $ 115,904 $ 80,222
4,542 -0- (60,11)3) 45,700 18,000 -0-
$ 32,697 $ 15,081 $ 12,513 $ 10,691 $ 97,904 $ 80,222
15
North Central's stewardess
training center in Minneapolis
features a mock-up of an aircraft
cabin and bu.ff et. Extensive
training in passenger service
makes North Central' s stewardess
corps among the nation's finest.
All North Central flights
en route are under the constant
monitoring of the airline's flight
control center in Minneapolis.
Direct communications with the
control center provide Northliner
pilots with the latest weather
advisories for computing the most
time-saving and smooth-flying
routes between cities.
Stewardess candidates gain a thorough
knowledge of aircraft galley equipment under
the supervision of the airline's chief stewardess.
Sixteen years of continuous service to the midwest.
NORTH CENTRAL, in sixteen years of scheduled air transportation, has truly
earned the title-America's Leading Regional Airline. Inaugurating service
in 1948, the company operated in Wisconsin, Minnesota, and northern Illinois
with three small nine-passenger Lockheed 10-A's and had 112 employees .
In 1963, the famed mallard duck, "Herman," was seen on a fleet of 18 Convair
Northliners and 29 Douglas DC-3's serving 91 cities in 10 mid west states and
Canada. The employee force now numbers 2,000. Technological progress,
refined training programs to keep pace with those advances, cost control, and
sound management all hold promise for even greater growth in future years.
The hangar area shown below is one of three such facilities at North Central' s main operations base in
the Twin Cities. The Company's other Main Bases are located at Chicago, Detroit, and Omaha.
I,
0 l
'
The modern data processing
center, located at the general
effices in Minneapolis/St. Paul,
provides management with
up-to-the-minute progress reports
on every phase of its operations.
Long before the winter
season, North Central' s
"Operation Cold Front" has begun
its comprehensive program of
converting ground equipment to
a winter operating condition.
AWARD OF HONOR
NORTH CENTRAL has maintained a per-
fect 16-year safety record and, every year
of its operation, has been awarded a citation
by the National Safety Council. Since start-
ing scheduled service in 1948, the airline
has carried 8,700,000 passengers and flown
1,400,000,000 passenger miles without a
single fatality or mJury to passengers or
crew members.
NORTH CENTRAL
AIRLINES, INC.
6201 THIRTY FOURTH AVENUE SOUTH
MINNEAPOLIS
MINNESOTA 55450