North Central Airlines Annual Report 1964

NORTH CENTRAL AIRLINES
Annual Report 1964
BOARD OF
DIRECTORS
ARTHUR E. A. MUELLER* Chairman
HAL N. CARR*
WERNER L. CHRISTENSEN
D. E. CROOKER
G. F. DECOURSIN*
A. JAMES MUELLER
H. P. E. SKOGLUND
K. B, WILLETT
* Executive Committee
MANAGEMENT
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
ARTHUR E. SCHWANDT
Vice President, Industrial Relations
BERNARD SWEET
Vice President, Finance
D. F. MAY
Treasurer
JOHN P. DOW
Secretary
DELMAR F. DRUMM
Assistant Secretary
JERROLD SCOUTT, JR.
Assistant Secretary
CHARLOTTE G. WESTBERG
Assistant Secretary
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 15, 1965
WE ARE PLEASED TO REPORT that during 1964 North Central Airlines earned
the largest profit in its 17-year history-$617,000. This was achieved on record passenger,
cargo, and mail revenues of $29,730,000. The net profit, together with depreciation
charges of $1,704,000, developed cash flow of $2,321,000-15 per cent more than in 1963.
The company carried 1,353,301 passengers in 1964, an increase of 11 per cent over last
year's record. In December, North Central became the first regional airline to carry ten
million passengers since inauguration of service. Cargo traffic for 1964 also set new marks.
The 31,300,000 pounds of cargo flown-including air freight, express, and mail-was
13 per cent ahead of 1963, the company's previous best year.
Besides increasing traffic, North Central maintained an excellent operating performance,
one of the most impressive in the industry. During 1964 the airline completed 99 per
cent of its 14,400,000 scheduled miles, and 85 per cent of its 170,000 scheduled arrivals
were on time.
The company added five Convair 440 aircraft in 1964 and one early in 1965 under its
progressive plan of modernizing the Northliner fleet, which now includes 24 Convairs
and 18 DC-3's. By the end of 1965, 85 per cent of the airline's seat miles will be flown
with Convair equipment.
North Central continued to pursue its aggressive route development program and to
support the Civil Aeronautics Board in its efforts to strengthen the regional carriers.
During 1964, the Board granted North Central a nonstop route between Pierre and
Huron, South Dakota, and removed certification of a trunk carrier at Huron. The C.A.B.
also authorized consolidated service at several airports on our system.
To our passengers who flew the Route of the Northliners, we say "Thank you" for your
continued support. We would also like to express our sincere appreciation to our stock-
holders and employees for the contributions they have made to the development of
North Central. With the anticipated traffic growth, producing increased revenues, and
a continuation of the company's cost control program, management looks forward to
1965 as another year of record profits.
AR THUR E. A. MUELLER
Chairman of the Board
Sincerely,
HAL N. CARR
President
2
Annual Report
1964
FINANCIAL REVIEW

NORTH CENTRAL AIRLINES earned record profits in
1964 of $617,359. This was an increase of 22 per cent
over 1963.
Record revenues of $29,730,389 were also attained.
Operating expenses for the year were $27,673,472,
including $1,703,729 in depreciation charges. The
result was an operating profit of $2,056,917, and a
net profit of $617,359 after income taxes of $886,299.
These earnings, combined with depreciation, devel-
oped a cash flow of $2,321,088 for the year.
It is significant that this profit was earned in spite
of a $578,603 decrease in public service revenues.
The reduction was directly related to the company's
1960 '61 '62 '63 '64
having returned $600,000 in excess profits to the
Federal Government under the class rate for regional
carriers. This was the fourth consecutive year the
company reached such a profit-sharing position, as a
result of developing additional commercial revenues
and increased cost control.
Because of North Central's strong financial posi-
tion, a renegotiation of the company's equipment
loan was accomplished in 1964, at a reduced interest
rate of 5 per cent. Additional borrowing was also
secured at the same rate to purchase five more Con-
vair 440 aircraft during the year and one early in
1965.
1960 '61 '62 '63 '64
ROUTE DEVELOPMENT

DURING 1964, North Central continued its program of route devel-
opment, and a number of important decisions were made by the Civil
Aeronautics Board on pending applications.
At present, North Central serves 91 cities in ten Midwestern states
and Canada over a 7,000-mile route system. No other regional airline
and only two trunk carriers serve this many cities.
One of North Central's 24 Convair 440's
taxies in at Chicago, O'Hare Field.
The following is a summary of the decisions rendered by the C. A. B. affecting North Central during the
year and the status of applications which are still pending:
REGIONAL AIRPORT
INVESTIGATIONS
The North Central Area Airport Inves-
tigation concerns whether or not eight
combinations of cities should be served
through regional airports.
In November 1964, the Board ren-
dered a final .decision in the case to
become effective January 25, 1965. The
Board ruled as follows:
In Wisconsin, Marshfield will be
served through the Wausau airport, and
Wisconsin Rapids will be served through
Stevens Point until a suitable regional
airport can be constructed in the future
to accommodate these four cities. Apple-
ton will be served by the Oshkosh air-
port and Clintonville by the Green Bay
airport. Ashland, Wisconsin will receive
its airline service through the Ironwood,
Michigan airport. In January 1965, the
C.A.B. stayed the effective date of its
November order as it pertained to Apple-
ton, Ashland, and Clintonville, pending
judicial review of the Board's decision.
In the Michigan Area Airline Service
Airport Investigation, the Board is con-
sidering whether or not Battle Creek and
Kalamazoo should be served through
an area airport. A decision on this mat-
ter is expected in 1965.
TRANSFER INVESTIGATIONS
In November 1964, the C.A.B. suspended
Western Air Lines' authority to serve
Huron, South Dakota, giving North
Central exclusive service to this city. The
Board also granted the company a direct
route between Huron and Pierre, South
Dakota.
In line with the C .A.B.'s plan to
strengthen the regional carriers by the
transfer of segments and cities from the
trunk airlines to the regionals, North
Central has an application on file for the
suspension of United Air Lines at Sagi-
naw / Bay City / Midland, Flint, Lansing,
and Muskegon, Michigan.
OPERA TING FLEXIBILITY
APP LI CA TI ONS
The C.A.B.'s program of strengthening
the regional airlines includes the relax-
ing of operating restrictions on existing
segments to permit nonstop and skip-
stop authority.
The company, therefore, has request-
ed authorization between Minneapolis/
St. Paul and Chicago, Illinois for (1)
nonstop service; (2) one-stop via Mil-
waukee, Wisconsin; (3) one-stop via
Madison, Wisconsin; and ( 4) three~stop
via LaCrosse, Madison, and Milwaukee.
"USE IT OR LOSE IT" PROCEEDINGS
Service to four Michigan cities is being
investigated under the Board's "use it
or lose it" policy. Cities included are
Pontiac, Cadillac/ Reed City, and Port
Huron. A final decision by the Board is
anticipated early in 1965.
DETROIT-TORONTO
Renegotiation of the Bilateral Air Trans-
port Agreement between the United
States and Canada was resumed in 1 964,
and the provision of a Detroit-Toronto
route for a U.S. carrier is under consid-
eration. A decision on this matter is
expected in 1965. North Central's ap-
plication for this route will be consid-
ered by the C.A.B. after the execution
of the Bilateral Agreement. North Cen-
tral during 1964 applied for the follow-
ing additional service to Canada: three
nonstop routes - Cleveland-Toronto,
Milwaukee-Toronto, and Chicago-
Toronto-and a one-stop Chicago-To-
ronto route, via Detroit.
DETROIT-BAL TI MORE
North Central's application for author-
ity to operate between Detroit and Balti-
more, with intermediate cities of
Cleveland and Pittsburgh, is still pend-
ing. The 415-mile segment would add
two major cities and strengthen the east-
ern portion of the system.
SIOUX CITY-NORFOLK-DENVER
The Company's application for a 480-
mi le route segment between the
co-terminals of Sioux City, Iowa and
Norfolk, Nebraska and the terminal
point of Denver, Colorado is still before
the C.A.B. If this route is approved, ap-
preciable strength would be gained on
the western part of the airline, and
another major city-Denver-would be
added to the system.
OMAHA-ST. LOUIS
North Central has an application on file
for a 400-mile segment from Omaha to
St. Louis, via the intermediate cities of
Chillicothe and Moberly, Missouri. Be-
sides adding another major city-St.
Louis-to the system, it would give
North Central its first entry into
Missouri.
OMAHA-KANSAS CITY
The company is proposing service to
three new cities in its application for a
169-mile segment south of Omaha. The
cities are Falls City, Nebraska; Atchi-
son, and Kansas City, Kansas. This
would add the State of Kansas to North
Central's system.
RAPID CITY-OMAHA
The company's amendment to the
Omaha-Kansas City application
requests a route between Norfolk,
Nebraska and Rapid City, South Da-
kota, with nonstop authority between
Rapid City and Omaha. The amend-
ment is still on file with the C.A.B.
MONT ANA-NOR TH DAKOTA-
SOUTH DAKOTA ROUTES
North Central has before the C.A.B. an
application which would add 1,376 route
miles to its system, including 12 cities in
Montana, North Dakota, and South
Dakota.
3
4
TRAFFIC GROWTH

NORTH CENTR AL HAD THE GREATEST passenger
and cargo loads in its 17-year history during 1964.
The 1,353,301 passengers carried on the Route of
the Northliners was an increase of 11 per cent over
1963. Some 230,232,714 passenger miles were flown,
a gain of 13 per cent. During December 1964, the
company carried its ten millionth passenger since
starting operations in 1948, and was the first regional
airline to reach this mark. A new single-day boarding
record was set on December 18 when 5,454 passen-
gers were carried.
The total cargo flown in 1964, which includes air
freight, express, and mail, was 31,345,523 pounds-
13 per cent over the previous record in 1963. Air
freight reached an all-time high for North Central
when 14,064,515 pounds were carried. This is an
North Central's passenger traffic increased 11 per cent in 1964.
impressive 31 per cent increase. Freight ton miles
flown were 1,514,659 last year. The five additional
Convair 440's purchased in 1964 helped boost the
cargo capacity of North Central's fleet, resulting in
these record loads. As more Convairs are acquired,
cargo increases will be even greater in 1965.
The company also experienced gains in charter
flights during 1964. North Central operated 307
charter flights in 1964, compared with 229 in 1963,
for a gain of 34 per cent. Over 7,500 passengers flew
on Northliner charters in 1964. This was 46 per cent
more than last year.
Since inaugurating scheduled service in 1948,
North Central has carried 10,061,477 passengers and
flown 1,644,525,963 passenger miles without fatality
or injury to passengers or crew members.
More tha n 31 mill ion pounds of cargo w ere carried.
OPERATING PERFORMANCE

NORTH CENTRAL CONTINUED to maintain its high
operating performance in 1964, as 99 per cent of its
14,406,757 scheduled miles were flown. The airline
also achieved an outstanding on-time record, despite
the fact that much of the system experiences severe
weather in winter months. Of the company's 169,505
flight arrivals in 1964, 85 per cent were on time.
An important element contributing to the airline's
excellent operating performance is its impressive
maintenance record. In 1964, less than one-tenth of
one per cent of North Central's scheduled flights were
cancelled because of mechanical problems. New and
improved ground equipment was a key factor in get-
ting the aircraft started on frigid mornings after
overnighting in sub-zero temperatures.
In addition to its regularly scheduled flights, the
airline operated 7 66 extra sections to handle passen-
ger traffic at peak times. Some 115,723 miles were
flown by these extra sections.
IMPROVED SERVICES

NORTH CENTRAL made substantial improvements
in the services offered to its passengers during 1964.
In line with its equipment modernization program,
the company purchased five more pressurized, Con-
vair 440 aircraft during the year and one early in
1965, bringing the Northliner fleet to 24 Convairs
and 18 DC-3's. This permitted increased Convair
schedules and the inauguration of Convair service to
several cities.
Further consolidation of facilities and improve-
ments in equipment were made in the company's
Reservations Center at Milwaukee. As a result, the
center now processes nearly 60 per cent of North
Central's total reservations bookings. In 1964, Minne-
apolis, St. Paul, Duluth, Minnesota and Superior,
Wisconsin were connected by long distance lines to
Green Bay was one of five cities on North Central's system
which completed new terminal facilities during the year.
New electric ticketing machines were introduced
to speed passenger check-ins.
The Traffic and Sales Department developed new lighted window
displays and a series of multi-color posters.
the Reservations Center, thus bringing to those cities
the advantage of immediate seat-availability infor-
mation.
Another improvement which will facilitate pas-
senger handling at the ticket counters was the in-
stallation of new electric ticketing machines. This
equipment permits the inclusion of routing, fare, tax,
credit card number, station validation, and date of
issuance information in one single operation. In addi-
tion, this machine has also reduced ticketing costs.
The company joined other air carriers in 1964 in a
nation-wide cooperative program for locating mis-
directed baggage and speeding its return to the pas-
senger. This central electronic operation, located in
Chicago, is called the Airline Baggage Recovery
Clearing House.
To increase the passenger capacity of its Convairs,
the company began a conversion program in 1964 to
add four more seats to each aircraft. When the proj-
ect is completed, each Convair will accommodate 48
passengers; and the total available Convair seats will
be increased nine per cent.
An improved method of communication between
operations headquarters and aircraft crews in flight
was established last year. The system combines re-
liable short-range radio with long distance telephone
lines and permits direct coordination between flight
control and crews. During 1964, Distance Measuring
5
6
Equipment was installed in all North Central Con-
vairs. This device provides an additional aid to flight
crews in determining the distance of the aircraft from
known locations.
Five communities served by North Central com-
pleted new terminal buildings: Green Bay and Mani-
towoc/ Sheboygan, Wisconsin; Hibbing/ Chisholm,
Minnesota; Grand Forks, North Dakota; and Port
Arthur/ Fort William, Ontario, Canada. The com-
pany and several other airlines are planning to move
to Detroit Metropolitan Airport when enlarged ter-
minal facilities are completed in 1965. Planning and
construction continues on new terminal buildings at
Saginaw / Bay City / Midland, Michigan; Bismarck/
Mandan, North Dakota; and Madison, Wisconsin.
The Traffic and Sales Department conducted an
aggressive program of sales and service during 1964.
North Central's sales force made 19,770 personal
sales calls, besides giving speeches and participating
in civic meetings and educational programs. Over
60 film presentations were made to 1,600 airline
reservations people throughout the United States. A
new lighted window display and a series of multi-
color travel posters were developed to promote the
areas served by the Route of the Northliners. As part
of this new program, North Central increased its ad-
vertising in the Wall Street Journal and other news-
papers throughout its system.
This modernized DC-6B of Lloyd Aerao Boliv-
iano (LAB) is one evidence of North Central's
progress in rehabilitating the Bolivian airline.
THE BOLIVIAN PROJECT
NORTH CENTRAL's FIELD STAFF in Bolivia contin-
ued to make progress in 1 964 in assisting the airline,
Lloyd Aereo Boliviano (LAB). The United States
Agency for International Development awarded the
company an $800,000 contract in 1963 to provide
managerial and technical assistance to LAB for a
two-year period.
The company's general objectives are to develop
LAB into a safe, reliable, self-supporting operation
that can yield maximum public transportation bene-
fits for domestic and international travelers in Bolivia.
With North Central's assistance, improvements are
being made in many areas of LAB's operation. Some
of these achievements are: increased pilot proficiency,
greater aircraft utilization, modernization of tools
and equipment, increased maintenance production,
establishment of approved accounting and purchas-
ing procedures, and better utilization of personnel in
all departments. These accomplishments are aimed
at reducing costs. At the same time, advertising,
sales, and public relations activities have been ini-
tiated in an effort to promote traffic; and substantial
increases in LAB's passenger and cargo boardings
have resulted.
With the continuance of the improved manage-
ment and operations program established by North
Central, LAB should soon be able to contribute to
Bolivia's economic progress, while attaining a profit-
able operation.
MANAGEMENT DEVELOPMENT

IN SEPTEMBER 1964, H.P. E. Skoglund was elected
to North Central's Board of Directors. Mr. Skoglund
is President of North American Life and Casualty
Company, Minneapolis. He is a director of a number
of corporations and also Chairman of the Board of
Regents of St. Olaf College in Northfield, Minne-
sota. His extensive business experience will be impor-
tant to North Central's further development.
The Board of Directors also named two Assistant
TOWARD THE
FUTURE

NORTH CENTRAL'S RECORD profits for 1964 are an
indicator of the company's earnings potential. The
airline has achieved the best financial position in its
entire history. New routes, elimination of unprofit-
able segments and cities, further cost control, and
more Convair aircraft will all contribute to a success-
ful future and continued record earnings in 1965.
The company's flight equipment program is pro-
gressing according to schedule. Convairs are being
added as rapidly as the airports on the system are
improved to accommodate the larger aircraft and
traffic develops to justify their use. By the end of 1965,
85 per cent of the total seat miles will be with Convairs;
and by the Spring of 1966, this will increase to over 90
per cent. North Central's experience with the Convair
indicates that this aircraft will continue to produce
increased revenues from passenger and cargo traffic.
Management is optimistic about the effect the
Civil Aeronautics Board's policy of strengthening the
regional carriers will have on North Central. The
Board's program includes: relaxation of operating
restrictions to permit nonstop and skip-stop authority,
the " use it or lose it" policy of eliminating marginal
cities: the regional airport concept, and the transfer
of routes and cities from trunk airlines to regional
carriers. North Central anticipates future gains as a
result of this program and will continue to file appli-
cations related to these policies.
North Central management is pursuing the possi-
bility of mergers with other regional carriers. The
company's strong financial position and its leader-
ship in the regional airline industry give assurance
Secretaries of the company during 1964. These are:
Delmar F. Drumm, Staff Assistant to the Chairman
of the Board; and Jerrold Scou tt, Jr., North Gen tral' s
legal counsel in Washington, D.C.
During the year North Central continued its
executive development program designed to make
available from within the organization managerial
personnel necessary to accommodate the company's
future growth.
North Central has the largest flight-crew corps
of any regional airline.
that any future merger would substantially benefit
the company.
Even though the gains in all categories of traffic in
1964 were substantial and produced record profits,
1965 will be an even greater year for the airline.
With improvements in the company's route structure
and the scheduling of more Convairs, North Central
anticipates further traffic increases. The additional
revenue from this growth, along with the company's
continued cost control program, should result in
record profits again in 1965.
7
8
HAVRE.
GLASGOW
WOLF POINT DEVILS LAKE
GREAT FALLS

SIDNEY

GLENDIVE
DICKINSON
LEWISTOWN
MILES CITY


BILLINGS

DENVER
Routes of the N orthliners
PRESENT
ROUTES.
PROPOSED
ROUTES ....
INTERNATIONAL FALLS

MOBERLY
Nonstop
Route
Applications
MINNEAPOLIS TO CHICAGO
MINNEAPOLIS TO MILWAUKEE
CHICAGO TO TORONTO
PITTSBURGH
9
1
2
3
4
TEAMWORK
KEEPS NORTH CENTRAL
GROWING
North Central's well trained personnel take pride in pro-
viding exceptional service to their passengers. Many kinds of
specialists are needed to keep the Northliners flying. Every
employee plays an important part in making North Central a
leader in the industry.
1 New uses for the company's 1401 IBM data processing equipment provide
improved methods for carrying out the cost control program.
2 Thorough and exacting maintenance helps North Central retain its out-
standing record in performance, reliability, and safety.
3 The efforts of efficient ground operations personnel contribute sub-
stantially to maintaining North Central's excellent operating performance.
4 The consolidated reservations center at Milwaukee handles 60 per cent of
the company's reservations.
5 Added to the Convair pre-flight check is newly installed Distance Measur-
ing Equipment, which improves navigation precision.
6 Employee teamwork makes North Central's aircraft a welcome sight across
10 Midwest states and Canada.
5
ANOTHER FIVE YEARS OF RECORD PROGRESS
1.4
1.3
1.2
1.1
1.0
PASSENGERS
f1lj
CARGO
(IN POUNDS)
SEAT
MILES
MILLIONS MILLIONS
35 500
30 450
25 400
20 350
15 300
1960 '61 '62 '63 '64 1960 '61 '62 '63 '64 1960 '61 '62 '63 '64

North Central's passengers and cargo have increased
each year. During 1964, the company experienced an 11
per cent increase in passenger traffic and a 13 per cent gain
in cargo. The public was offered 513,226,000 available
seat miles in 1964. This is more than in any other year of
the company's history. North Central became the first
6
regional airline in the country to carry 10 million passen-
gers since inauguration of service. Five additional Convair
440's joined the Northliner fleet in 1964. With the acquisi-
tion of more Convairs in 1965, North Central should
realize even greater gains in passenger and cargo traffic.
11
12
North Central
Airlines, Inc.
ASSETS
CURRENT ASSETS
Cash . . . ... .
Accounts receivable
Public service revenue (Note 1)
Traffic
Other .
Flight equipment parts, at average cost (less
deterioration reserves of $276,041)
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
$ 863,163
2,499,066
451,037
14,285,169
1,376,434
626,950
357,418
16,645,971
Less accumulated depreciation . . .. . . .. . ... ... . . . . . __ . 7,215,851
DEFERRED CHARGES
Route development costs
Rentals . . . . . . .. .
Unamortized discount and expense on debt
Other . ... . . . . _ _ _ . . .. . .. .
The accompanying notes are an integral part of this statement.
127,648
205,366
70,593
56,260
BALANCE . SHEET, December 31, 1964 ~ ---
$ 1,253,874
3,813,266
951,414
277,354
786,610
7,082,518
9,430,120
459,867
$16,972,505
LIABILI11IES
CURRENT LIABILITIES
Current maturities of long-term debt
Accounts payable
Trade .
Traffic .. .
Unearned transportation revenue
Taxes withheld or collected as agents
Income taxes (Note 5) .. . .. . . .
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 . . . .
CONTINGENT LIABILITY (Note 3)
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
$ 1,085,290
1,690,118
737,180
122,866
594,907
6,631,000
330,115
851 ,500
7,812,615
1,348,065
1,746,408
295,246
2,041,654
1,818,841
$ 1,348,065
2,775,408
161,465
368,792
538,777
1,454,953
6,647,460
6,464,550
3,860,495
$16,972,505
13
14
North Central
Airlines, Inc.
Statement of Earnings/ Year ended Dece1nber 31,1964
TRANSPORTATION REVENUE
Passenger ..... . .. .
Mail . . . . ...... .
Public service revenue (after excluding $600,000
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 $77,514 of
extension and development expenses)
Operating profit . . . . . . . . . . . . .
OTHER (INCOME) AND DEDUCTIONS
Interest .......... . .
Prior years' adjustment (Note 1) . . .
Sundry-net . . .... .
Earnings before income taxes
INCOME TAXES (Note 5)
States . . ....... .
Federal, less current year investment credit-$47,201
NET EARNINGS .. . . ... .. ... .
The accompanying notes are an integral part of this statement.
$20,002,281
476,454
7,289,982
1,370,356
140,315
358,200
92,801
29,730,389
$ 7,456,027
6,210,115
1,440,949
7,358,512
2,297,751
1,206,389
1,703,729 27,673,472
2,056,917
413,605
242,817
(103,163) 553,259
1,503,658
46,500
839,799 886,299
$ 617,359
Statement of Retained Earnings/ Year ended December 31, 19 64
Retained earnings-December 31, 1963
Net earnings for the year
Retained earnings-December 31, 1964
The accompanying notes are an integral part of this statement.
. $ 1,201,482
617,359
. $ 1,818,841
NOTES TO FINANCIAL STATEMENTS
December 31, 1964
1. PUBLIC SERVICE REVENUE-Under the profit sharing provision of the class rate
a settlement was reached during the year with the Civil Aeronautics Board for 1961
which resulted in a net charge to income of $86,000. Years 1962 through 1964 are
open to review by the C.A.B. and the company has provided $258,500 for possible
1962 and 1963 adjustments. Of this amount, $200,000 is included in this statement
of earnings as prior years adjustments and the balance was provided for in 1963.
The $242,817 shown as prior years' adjustment consists of the above profit shar-
ing adjustments of $286,000 less deferred investment tax credits for 1962 and
1963 in the amount of $44,000.
2. LONG-TERM DEBT-Debt originating primarily from the acquisition of flight equip-
ment and related spare parts aggregates $7,812,615. The equipment and parts are
pledged as security to two banks under the loan agreement in existence. The unpaid
balance of $6,631,000 consists of two 5 % notes with balances of $5,631,000 and
$1,000,000. Final payments are due in 1969 in which year monthly payments aggre-
gating $1,381,000 become payable. Interest on all notes is payable monthly; principal
is payable in varying monthly installments. Among other provisions, the company is
required to maintain current assets of at least $1,000,000 in excess of current
liabilities, exclusive of the amount due noteholders.
The 5% subordinated convertible debentures are subject to redemption in whole
or in part at the election of the company at any time prior to maturity, June 1, 1978.
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 on notes payable.
3. LONG-TERM LEASES AND CONTINGENCIES-The company has major lease com-
mitments at Chicago's O'Hare Field, Minneapolis/St. Paul Metropolitan Airport, and
Detroit's Willow Run and Metropolitan Wayne County Airports. O'Hare's lease expires
in 1999, Minneapolis in 1978 and 1989, Willow Run in 1967 and Wayne County in
1989. Management anticipates the annual cost of these locations, including landing
fees, to approximate $600,000.
Under the 'provisions of current union contracts, the company is obligated to pro-
vide paid vacations to its employees which constitutes a continuing liability of approxi-
mately $400,000.
4. PENSION PLANS-The company contributes annually to a Pilots' Retirement Plan
which was established in 1956. The contribution charged against income for the year
1964 amounted to $417,985 and at December 31, 1964, all unfunded past service
liability had been paid.
As of January 1, 1964, a pension plan was established for salaried employees not
covered under union contract. Funding requirements and other expenses for 1964
totaled $97,526. Unfunded past service requirements are estimated by management
at $371,000.
5. INCOME TAXES-Federal and Minnesota income tax returns have been examined
through 1963 and there exists no unpaid assessments resulting therefrom. A refund
claim is currently pending with the State of Wisconsin for 1961-1963.
The current year's provision of $886,299 is based upon earnings before the deduc-
tion of the $200,000 described in Note 1, above.
FIVE-YEAR Fl NANCIAL SUM MARY
OPERATING REVENUES 1964 1963 1962
Passenger . . $20,002,281 $18,064,524 $16,799,514
Mail and Public Service Revenue . 7,766,436 8,335,335 8,992,093
Other . . . . . . . . . . . . .. .. . .. . .. . .. . . . . 1,961 ,672 1,701,350 1,367,944
TOTAL .. . . .. . . . . . . . . .. .. . .. . . . .. $29,730,389 $28,101,209 $27,159,551
OPERATING EXPENSES
Direct Expenses .. . . ... $13,666,142 $13,100,309 $12,873,796
Indirect Expenses .. 12,303,601 ll,805,781 11,570,053
Depreciation and Amortization . 1,703,729 1,521,376 1,190,630
TOTAL ... .. . .... . . .. . . . $27,673,472 $26,427,466 $25,634,479
Operating Profit . .. . 2,056,917 1,673,743 1,525,072
Non-operating Income and Expenses, Net . (553,259) (392,380) (335,014)
Net Profit Before Taxes . . . $ 1,503,658 $ 1,281,363 $ 1,190,058
Income Taxes .. . . .... . . ... . 886,299 775,652 655,725
Net Profit After Taxes .... ....... $ 617,359 $ 505,711 $ 534,333
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, INC. (a Wisconsin
corporation) as of December 31, 1964 and the
related statements of earnings and retained
earnings for the year then ended. Our exami-
nation 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 con-
sidered 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 receivables by means of other auditing
procedures.
In our opinion, the accompanying balance
sheet and statements of earnings and retained
earnings present fairly the financial position of
North Central Airlines, Inc. at December 31,
1964 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.
Alexander Grant & Company
Milwaukee, Wisconsin
February 17, 1965
1961 1960
$15,631,735 $12,660,869
8,466,678 8,054,111
1,ll2,046 886,554
$25,210,459 $21,601,534
$12,405,644 $10,815,675
10,766,044 9,653,514
1,ll0,398 888,043
$24,282,086 $21,357,232
928,373 244,302
(269,483) (229,282)
$ 658,890 $ 15,020
305,776 -0-
$ 353,ll4 $ 15,020
15
*~--.. --
o::::;:;:-:::;,.-::.:
1)-4
-~
""~'a
an--where
are you going with
at package?
If Herman could talk he'd iay-9 1 Midww citiea in 10 llatea and C.nada. Every
day. And that someof1hc:sccities(thellarstellwhich)are1erveduclusivelybyNorth
Central Air C.rgo. The rest have connecting air freight 1ervice with other domestic and
international carriers. So, via North Central your freight, express, parcel post, or mail
a~l,.ftyiogdrtoaywh,~h,wodd.C.llyo"""~
NorthCentralofficeforschedule1andratea.
WhenMidwestbu,ine.,calls, lly NORTH ~
CENTRAL
AIRLINES --
Talk about repeat "Good morning, Mr. Jones."
business! This North
Central stewardess could
be on a first-name basis
with most of her passen-
gers ... if we encouraged
that sort of thing!
Whenbusinesscalls,call NORTH~
CENTRAL
AIRLINES -
We can introduce you to the
world's foremost authorities
on airport.s
(
Your North Central flight
crew really gets around.
They fly into just about
every size of airport .. .
from small municipal
fields to the biggest, like
O'Hare in Chicago.
Versatile. Skillful. On-the-ball. It's all a
part of what makes up Northliner service
to 91 cities in 1
0 midwestem states
and Canada.
~
When Midwest business calls. fly NORTH
~
CENTRAL --
AIRLINES
OurHerman
~~=duck
Hell do anything for you.
Get you to a business appointment hun-
dreds of miles away .. . fresh and relaxed.
Bring you back the same day. No problem.
Herman brings air-travel accessibility
to 91 cities in 10 midwestern states
and Canada.
~
When Midwest business calls, fly NORTH ~
CENTRAL --
AIRLINES
0 ttl O MICUICAI',' INDl4NAll..UN0 IS WI SC0NSINMINNE50TA rO"' Ac.llllASU.-50 0 O ,0l41'00 0 U ,0T4C4NA04
We flyover
some of the country's
greatest scenery
... but practically nobody watches it!
Most of our passengers tend lo be strictly business ... enroute
to meetings, sales calls and the like. It is reported that one
gentleman, completely absorbed with the contents of his brief-
case, absent-mindedly asked the stewardess to "take a letter."
We're sorry we can't do that-but we do everything else we
can lo get you lo your destination relaxed and ready lo go lo
work ... in any of 9 1 cities in 10 midweslern slates and Canada.
When Midwest business calls. fly NORTH
CENTRAL
. ,
.,,. ,u ~''""'
i?5E~~""~~., .. ~ .. ~
NORTH CENTRAL'S NATIONAL
ADVERTISING PROGRAM
Promotes North Central} service to business travelers
and shippers from all over the United States
A series of advertisements currently appearing in the
Wall StreetJournal remind businessmen that North Central
links all metropolitan areas with the 91 cities it serves in the
Midwest. The ads are designed to emphasize the capabilities
of the airline's experienced personnel and the company's
efficient operating performance.
se ts e
for your next
person-to-person call!
A ny businessman knows that person-to.person selling is the
best way to close any deal. Trouble is, he'll tell you, a personal
call isn't always the most practical. We hasten lo add ... it is
practical in the Midwest if you fly North Central. We'll take
you to 91 cities in 1
0 midwcst stales and Canada. You'll arrive
relaxcdan.dreadytoclosethosedeals.Makinga ~
personal call soon? Use our li ne!
When M,dwest business calls, fly NORTH
~
CENTRAL --
AIRLINES
I'd love to slip out and go shop-
ping with you. But my boss
_ ; usually gets back the same day
~hen he flys North Central. And
if I know him, he'll probably snooze on the
plane ... so he'll bounce in here ready to take
care of a full afternoon's work. There's a rumor
he's going to make Vice President .. .
When Midwest business calls, fly NORTH~
CENTRAL --
AIRLINES
0 H t0 MICHICAN INDl4N~ IWNOIS WISCONSl"' MIN"'r
.50UIOWA Nl;llll..t.t .50 0 U ,Ol4 "'0 0.0.~0U CANA0 A
Safety

THE NATIONAL SAFETY COUNCIL'S
coveted A ward of Honor was pre-
sented to North Central in 1964 for
having no fatal accidents during the
previous year, and an accident rate
lower than the average for its group
in the preceding three years. The air-
line has won a safety citation every
year since it began scheduled opera-
tions in 1948.
North Central was also given the
"Marsh & McLennan Safety Award"
in 1964. This award was based on the
company's management participation
in accident-prevention activities, self-
inspection programs, training of
personnel in accident prevention, and
a minimum of three years' statistical
data attesting to its safe operation.
North Central received the award in
recognition of its safety record which
the insurance brokerage firm called
"one of the most enviable in the air-
line ind us try."
Since inaugurating service February
24, 1948, North Central has carried
10,061,477 passengers and flown
1,644,525,963 passenger miles with-
out a single fatality or injury to
passengers or crew members.
NORTH CENTRAL AIRLINES, INC.
NORTH CENTRAL AIRLINES, INC.
6201 Thirty{ourth Avem,e South, MINNEAPOLIS, MINNESOTA 55450