North Central Airlines Annual Report 1974

ANNUAL REPORT 1974
NORTH CENTRAL AIRLINES
NORTH CENTRAL AIRLINES
7500 northliner drive, minneapolis, minnesota
board of directors
Hal N. Carr*
Chairman of the Board and
Chief Executive Officer
North Central Airlines
G. F. DeCoursin*
President
April Company
(manufacturer and distributor
of seasoned food products)
Chan Gurney
Retired Member
Civil Aeronautics Board
Samuel H. Maslon*
Partner in law firm of
Mas/on, Kaplan, Edelman,
Borman, Brand & McNulty
management
Jay Phillips
Chairman of the Board
Ed. Phillips & Sons Co.
(wholesale beverage distributor)
Morton B. Phillips
President
Ed. Phillips & Sons Co.
Joseph E. Rapkin
Partner in law firm of
Foley & Lardner
H. P. Skoglund
Chairman, Executive Committee
North American Life &
Casualty Company
Bernard Sweet
President
North Central Airlines
Kenneth B. Willett
Chairman of the Board
First Financial Savings and
Loan Assn. of Stevens Point
* Executive Committee
Hal N. Carr . . .. . .. . ... . .. . ... .. Chairman of the Board and T. M. Needham .. . ........ Vice President-Ground Operations
Chief Executive Officer
J. F. Nixon .. .. . . . . .. . . ..... .. Vice President and Treasurer
Bernard Sweet . ... . ... .... . ... .. . ...... ... ... . President
John P. Dow .. .. . .. . . .. .. . .. . Vice President and Secretary
Robert L. Gren . ... ... .. .... . . . Vice President-Maintenance
G. F. Wallis . ..... . . ...... . Vice President-Flight Operations
Charlotte G. Westberg . . . . Vice President-Staff Administration
and Engineering Joseph W. Ettel . ........ ... . . ..... . ... Assistant Secretary
George J. Karnas . . . .. .. ..... . Vice President-lnflight Service Raymond J. Rasenberger . ... . ..... .... . Assistant Secretary
Daniel F. May . .... . ..... . . .. ..... , Vice President-Finance Walter E. Nielsen . . ...... . . . . .. .. . .. .. Assistant Treasurer
Gowan J. Miller . . . . . . .. . . Vice President-Industrial Relations Michael D. Meyer . ........ .. ...... . ..... ..... . Controller
David E. Moran . . ..... . .. ... Vice President-Traffic and Sales John W. Dregge . . . . .... .. . . .. .. .. Assistant to the Chairman
STOCK TRADING: ANNUAL MEETING:
REGISTRARS AND STOCK
TRANSFER AGENTS:
First National City Bank,
New York, New York
Northwestern National Bank
Common stock and warrants
Traded under symbol NCA
First Wednesday in April
(April 2, 1975)
of Minneapolis
Minneapolis, Minnesota
New York Stock Exchange
Midwest Stock Exchange
Wausau, Wisconsin
AUDITORS:
Alexander Grant & Company
highlights
1974 1973 Change
OPERATING REVENUES $151 ,490,000 $127,983,000 18.4%
OPERATING PROFIT ............................................. . $ 17,994,000 $ 12,001 ,000 49.9
EARNINGS BEFORE TAXES .......... ... . .................... . .... . $ 15,696,000 $ 9,210,000 70.4
NET EARNINGS ... . ........ .... ... ..... ...... .. . .. ..... . ...... . $ 8,204,000 $ 6,447,000 27.3
NET EARNINGS PER SHARE ................................ . ..... . 66 52 26.9
DIVIDENDS PER SHARE .... .. .... .. . . ............ . ............... . 10 5 100.0
WORKING CAPITAL FROM OPERATIONS ..... . .. . .. . ..... . . ... ..... . $ 18,784,000 $ 14,176,000 32.5
WORKING CAPITAL AT YEAR-END ............ . .. . .. . ....... . ... ... . $ 4,834,000 $ 4,654,000 3.9
RETAINED EARNINGS ...... .... .... . .. . .. . ... .. .... .. ..... . .. ... . . $ 27,044,000 $ 20,086,000 34.6
STOCKHOLDERS' EQUITY ........ .. .. ..... . .. . .. ....... . . .. . ... . . . $ 47,152,000 $ 40,611 ,000 16.1
PASSENGERS . ....... . .... . .. .... . ... . ... . . ... .. ........... . .. . . . 4,546,000 4,263,000 6.6
PASSENGER MILES .................... . .. . .. . ... . .... ..... . . .. . . . 1,060,865,000 1,011 ,525,000 4.9
CARGO TON MILES ............. . . . ... . . ........ ... .. . ......... . . . 12,585,000 13,394,000 -6.0
(North Central Airlines' 10K report to the Securities and Exchange Commission may be obtained without charge by writing to the
Secretary of the Company.)
about north central
North Central Airlines is a regional scheduled carrier linking
intermediate-sized cities with major metropolitan areas.
Its principal function is to provide safe, dependable air
transportation.
Incorporated as Wisconsin Central Airlines in 1944, the company
received its Federal operating certificate three years later.
Scheduled service was inaugurated on February 24, 1948. When
headquarters were moved to Minneapolis/St. Paul in 1952,
the name was changed to North Central Airlines. Traffic grew
steadily, setting a regional industry record by 1960 with
one million .passengers, and then doubling every six years to
reach four million in 1972.
The company has operated profitably for 20 of the 21 years
under present management. Its fleet of 50 jet-powered aircraft
makes 600 departures a day over the 10,200-mile route system.
Efficient passenger handling includes computerized reservations
and automated ticketing.
Now in its twenty-eighth year, the airline serves 90 cities- in
13 states and two Canadian provinces-including Chicago,
Detroit, Cleveland, New York, Toronto, Milwaukee, Winnipeg ,
Minneapolis/ St. Paul, Omaha, Kansas City, and Denver.
North Central's 3,360 dedicated employees offer the traveling
public the highest type of regional airline service.
2
to our stockholders, employees and friends:
We are pleased to report that 197 4 was the most
profitable year in North Central's history. Net earnings
reached $8,204,000, and record revenues exceeded
$151 ,000,000. Over 4.5 million passengers were carried
more than a billion passenger miles.
With these achievements, the company maintained
its position as the leader in financial performance
among the regional airlines. North Central has the
highest earnings before taxes, the largest retained
earnings, and the best profit consistency-having
operated profitably for 20 of the 21 years under
present management.
Considering the airline's solid overall financial
condition and 1974 earnings, the Board of Directors
continued its policy of paying an annual cash
dividend. Stockholders of record February 17, 1975
received 1 O cents per share of common stock.
The $151,490,000 in revenues were 18 percent ahead
of the $127,983,000 in 1973. With operating expenses
rising 15 percent and other expenses (primarily
interest offset by interest income) decreasing, the
1974 earnings before taxes were $15,696,000.
This is a 70 percent improvement over the $9,210,000
in the previous year.
Although taxes nearly tripled-from $2,763,000 to
$7,492,000-the company still earned $8,204,000, or
66 cents a share, compared with $6,447,000 and
52 cents a share in 1973.
The record profit boosted North Central 's retained
earnings to $27,044,000 in 1974 and stockholders' equity
to $47,152,000. The company's .69 to 1 debt/ equity
ratio is one of the best among the nation's 19
scheduled airlines.
Passenger boardings for 1974 were a record 4,546,000,
seven percent over the 4,263,000 the year before.
Passenger miles reached 1,060,865,000 for a five
percent increase. The 12,585,000 cargo ton miles
reflect a six percent drop, partially due to a two-month
suspension of air express.
In operating performance, North Central again
ranked with the top carriers in the industry. The airline
completed 99.2 percent of the 28 million scheduled
miles, and 83 percent of its flight arrivals were on time.
Three of these OC-9 Series 50 fan jets are on order for Spring 1976 delivery.
North Central's aircraft will carry 125 passengers and feature the wide-body look
with completely new decor.
The Civil Aeronautics Board awarded the company
a new nonstop route between Winnipeg and
Duluth/Superior, and service was inaugurated on
October 27. With this 314-mile segment, North
Central now has a 10,200-mile system serving 90 cities
in 13 states and two Canadian provinces.
Late in 1974, the company filed an application for
a Chicago-New Orleans nonstop route. Only one of the
two authorized carriers is operating nonstop service.
The company estimates that 40 percent of its projected
passenger traffic on this route would originate or
terminate on North Central flights serving cities
beyond Chicago.
A CAB decision in the North Central Route
Realignment case was released February 5, 1975.
It gives the airline better scheduling flexibility
between city pairs on its system.
Three DC-9 Series 50 fan jets were ordered in 1974
for delivery in the Spring of 1976, and the company has
an option to purchase three more later in that year.
This " stretched " aircraft will carry 25 more people than
the 1 DO-passenger Series 30 jet. North Central now
has 19 DC-9-30s and 31 Convair 580 prop-jets in
its SO-aircraft fleet. Two more DC-9-30s will be received
this April and May.
A variety of improvements were made in services
and accommodations for passengers and shippers.
Among these is the company's new $1-million air
freight facility, added to the headquarters complex at
the Minneapolis-St. Paul International Airport.
Responsible corporate citizenship is demonstrated
by North Central's social action programs. These
promote human development, conserve natural
resources, and help the company operate as a
compatible neighbor.
The financial and traffic records for 1974 are
attributable to the dedication and efficiency of the
airline's employees, the assistance of its stockholders
and friends, and the loyalty of passengers who choose
North Central. With this strong support, the company
can meet the challenges of 1975 and achieve another
profitable year.
HAL N. CARR
Chairman of the Board and
Chief Executive Officer
March 4, 1975
Sincerely,
BERNARD SWEET
President
HAL N. CARR
BERNARD SWEET
3
4
financial review
Record net earnings of $8,204,000
were achieved by North Central in
1974, and revenues climbed
18 percent to reach $151,490,000.
The airline retained its position as
the leader among regional carriers
in financial performance.
Revenues increased for the twenty-
seventh consecutive year. The
$151,490,000 revenues for 1974 are
$23,507,000 greater than the
$127,983,000 in 1973. Operating
expenses, including depreciation and
amortization of $8,017,000, rose 15
percent to $133,496,000 from
$115,982,000. The operating profit
of $17,994,000 jumped 50 percent
compared with the $12,001 ,000 the
year before. Other expenses,
primarily interest offset by interest
income, decreased by 18 percent to
$2,298,000 from $2,791 ,000.
The $15,696,000 earnings before taxes
were the highest in the regional
industry and a 70 percent gain over
the $9,210,000 in 1973. Even with
income taxes of $7,492,000-nearly
triple the $2,763,000 for the previous
year- the resulting net earnings of
$8,204,000 (66 cents per share) set a
record high and were 27 percent
ahead of the $6,447,000 (52 cents
per share) in 1973.
The Variance Analysis table at the
right summarizes factors relating to
the net changes in revenues and
expenses from 1972 through 1974.
Further data on the company's
operations for the last five years is
provided on Page 19.
Total operating revenues climbed
in 1974 and 1973. Scheduled
passenger miles flown, up 60.3 million
for 1974, added $7.4 million
to passenger revenues. In 1973,
scheduled passenger miles were
20.7 million under the previous year
when extra traffic was generated by
a strike against another airline
serving some North Central cities.
This reduction in passenger miles
accounts for the $2.3-million drop in
1973 revenues.
Fare increases were granted
during the last two years to help
offset the effects of increased
fuel costs, overall inflation, and the
passenger security program. As
a result, revenue per scheduled
passenger mile rose in 1974 and
in 1973. These higher yields
improved 1974 revenues by
$12.3 million and 1973 revenues
by $7.3 million.
Public service revenues vary accord-
ing to the Federal government
formula for paying airlines to provide
air transportation to small cities
which cannot fully support such
service. Cargo and other revenue
gains show normal growth.
Under operating expenses, new
labor agreements reflect the rising
cost of living. The increased wages
and fringe benefits, together with
higher payroll taxes, amounted to
$7.1 million in 1974 and $4.8 million
in 1973. A substantial jump of
64 percent in the cost per gallon of
aircraft fuel added $5.2 million to
197 4 expenses. Inflation boosted the
cost of parts, supplies, services,
landing fees and rent in 1974.
In early 1973, the Federal government
required airlines to screen all
passengers board ing flights. For
North Central, the cost of providing
this security amounts to $2 million
a year. Normal cost increases
prevailed for passenger service and
promotion.
Payments to members of the airlines'
Mutual Aid Pact dropped by $1.3
million in 1973, compared with 1972,
a year of prolonged strikes in the
industry. These outlays were reduced
by an additional $200,000 in 1974.
The climb in interest income is the
result of investing the company's
surplus funds generated from oper-
ations. Interest expense increased
$300,000 in 1973 due to higher interest
rates and more outstanding debt.
In 1974, outstanding debt declined,
but because of continuing high rates,
interest expense remained constant.
The income tax jump of $4.7 million
in 1974 reflects the company's record
earnings and the higher tax rate
applicable because little investment
tax credit was available, compared
with 1973. The extraordinary gain on
disposition of flight equipment added
$1 million of nonoperating income
to 1972 earnings. The final item in the
Variance Analysis shows the gain
in net earnings of $1 .8 million for 1974.
The company's long-term debt to
equity ratio is .69 to 1 and continues
to be one of the best among the
nation 's 19 scheduled carriers. The
substantial increase in working
capital from operations provided cash
for short-term investments, averaging
$9.7 million, which yielded $1 ,128,000
in interest income. In addition, the
company implemented a program to
repurchase up to 500,000 shares
of the airline's own stock on the open
market. This decision was made
because the stock was selling at four
times earnings and below book
value. Some 150,900 shares had been
acquired as of December 31 , 1974.
North Central 's $27,044,000 in
retained earnings, highest in the
regional airline industry, is the result
of profitable operations for 20 of
the 21 years under present manage-
ment. Stockholders' equity reached
a record $47,152,000, the equivalent
of $3.83 per share.
VARIANCE ANALYSIS
Net Changes
NET EARNINGS 1974-1973 1973-1972
1974 .......... . .... ... . . .. .. . . . . $ 8,200,000
1973 . . . ... . ........ . ........... . 6,400,000 $ 6,400,000
1972 ....... . . ..... . . . . . . . ...... . 7,500,000
Change in net earnings . ... . $ 1,800,000 $(1 , 100,000)
MAJOR FACTORS OF CHANGE:
Operating revenues
Passenger miles .. . . . . .. .. . ... . .. .
Passenger fares ........ . .... . .. . . .
Public service revenues . .. . . ..... . .
Cargo and other revenues .. . .. . ... .
$ 7,400,000 $(2,300,000)
12,300,000 7,300,000
2,500,000 500,000
1,300,000 1,200,000
Net revenue changes ........ . . 23,500,000 6,700,000
Operating expenses
Labor and other payroll items .. . .. . .
Cost of aircraft fuel .... .. . .. ..... . .
Parts, supplies and services ....... .
Landing fees and rent ....... . ..... .
Security costs (passengers) .. .. .... .
Passenger service and promotion .. . .
Mutual Aid payments .. . . . . .. .. . . . .
Other expenses . .... . . . .... . . .. . . .
Depreciation . .. ...... . ......... . .
7,100,000 4,800,000
5,200,000 900,000
3,500,000 (1 ,000,000)
700,000 800,000
2,000,000
900,000 500,000
(200,000) (1 ,300,000)
(400,000)
700,000 400,000
Net expense changes . . . .... .. . 17,500,000 7,100,000
Change in operating profit .. 6,000,000 (400,000)
Nonoperating items
Interest income and other . ... ... ... .
Interest expense .... .. ..... . . .... .
Income taxes . . ...... .. . . . .. .. . .. .
Extraordinary gain-equipment ..... .
500,000 400,000
300,000
4,700,000 (200,000)
(1 ,000,000)
Net nonoperating changes . . ... . 4,200,000 (700,000)
Change in net earnings . ... . $ 1,800,000 $(1 , 100,000)
The price range of North Central
common stock (from first to fourth
quarter) was 4-25/a, 33/a-31/a, 35/a-2,
3-21/a in 1974 and 5-4, 5-35/a,
43/a-33/a, 41/a-2 in 1973.
During this two-year period, the
composite Airline Industry Stock
Index declined from an average of
76.7 for the first quarter of 1973
to an average of 34.6 in the fourth
quarter of 1974-a drop of
55 percent. North Central common
stock was off 41 percent.
Tentative arrangements have been
made with major banks to finance the
acquisition of the two DC-9-30 and
three DC-9-50 fan jets on order.
These jets are replacing Convair 580s,
two of which were sold in 1974.
More Convairs will be disposed of as
tne new jets are delivered.
Based on the airline's strong financial
position and 197 4 earnings, the
Board of Directors again declared
an annual cash dividend. Ten cents
per share of common stock was
paid March 3, 1975, to stockholders
of record February 17.
Continuing its policies of sound
money management and strict cost
control, North Central expects to
meet the challenges ahead and make
1975 another profitable year.
traffic growth and performance
North Central set new passenger
traffic records in 1974 while contin-
uing to rank among industry leaders
in operating performance.
By carrying 4,546,209 passengers,
the company achieved a seven
percent increase over the 4,263,231
passengers in 1973. Revenue
passenger miles topped one billion
for the third consecutive year,
reaching 1,060,865,304-a five percent
gain compared with the previous year.
Complementing scheduled service,
the airline operated 622 extra
sections to carry an additional 20,084
passengers. The 447 charter flights
accommodated 54,659 passengers.
Destinations included popular vaca-
tion ports in the Caribbean, several
major Canadian cities, and numerous
points in 35 states across the country.
With passenger traffic at record
levels and available seat miles up just
six-tenths of one percent, the
passenger load factor rose 4.3 percent
to 49.3 percent.
North Central completed 99.2 percent
of its 28,212,672 scheduled miles
for 1974. Of the 218,830 scheduled
arrivals, some 82.8 percent were
on time.
The airline's performance has
averaged 99 percent over the last
17 years. This achievement is
particularly significant because of the
severe, adverse weather conditions
which prevail for many months over
most of the 10,200-mile system.
Outstanding operating performance
contributed to the high level of
passenger traffic. Another factor was
the shortage of automobile fuel in
the early part of 1974 and low highway
speed limit whjch prompted many
people to fly rather than drive.
Softening of the general economy,
however, led to reduced business
travel by some depressed industries.
Cargo was affected by the national
economic decline. Cargo ton miles
for 1974 totaled 12,584,535, down
six percent from the 13,393,664 the
year before. Freight ton miles were
off less than one percent, express
d rapped 42 percent because of its
temporary suspension in July
and August, and mail declined
nine percent.
The airline's progressive and exacting
maintenance program, implemented
by skilled mechanics, has proved its
value. Again in 1974, less than one-
tenth of one percent of the scheduled
departures were cancelled for
maintenance reasons and only 1.3
percent were delayed by mechanicals.
North Central has grown dramatically
over the years, and the company's
3,360 employees consistently prove
themselves equal to the challenging
demands of providing safe, depend-
able scheduled air transportation.
d
~ ..
goo people make .afr airline great 5
6
new facilities and services
Facilities for passengers and
shippers were significantly improved
through the combined efforts of
North Central and the communities it
serves. Foremost are the impressive
new terminals in Duluth/ Superior
and Thief River Falls and the
company's new air freight facility,
added to the headquarters
complex at the Minneapolis-St. Paul
International Ai rport.
North Central 's $1-million air freight
facility features an expanded
storage area for in-transit freight.
The large walk-in cooler improves
handling of perishable items, and a
new security area is now provided
for international shipments. Half of the
30,000 square feet available will
be used by North Central for air
freight operations and specialized
pilot training. The other half is being
leased to another carrier.
Second-level jet bridges highlight the
futuristic Duluth/Superior terminal.
The four-level structure offers a
variety of passenger conveniences,
from indoor parking to elegant
dining. The $6.2-million building
was dedicated in October.
The new Thief River Falls terminal,
part of a $5.1-million airport program,
opened in August. It is 16 times
larger than the 21-year-old wooden
structure it replaces. A baggage
claim section, spacious lounge, and
concessions area are among the
major attractions.
Larger baggage claim facilities
were completed at Grand Forks, Rapid
City, Rochester, Madison and
Lansing in 1974. Passenger service
counters were renovated at Pierre,
Rochester, International Falls, Alpena,
Kalamazoo and Muskegon.
Terminals are under construction
in Marquette and Sault Ste. Marie,
with completion scheduled for
1975, and renovations at Cincinnati
are nearly finished.
To further accommodate air freight
shippers, North Central is operating
out of new facilities at Madison,
Lansing and Omaha. Also, an air
freight customer service area
has been added at Chicago O'Hare.
Continuing its flight equipment
modernization program, North Central
has ordered three DC-9 Series 50
fan jets for delivery in the Spring of
1976 and has an option to purchase
three more later that year. These
"stretched" versions of the DC-9 will
carry 25 more passengers than
the 1 DO-passenger Series 30 now
operated. DC-9-50 interiors will
have the wide-body look and a com-
pletely new decor featuring
dramatic cabin lighting ; coordinated
colors for fabrics and carpeting;
fold-down center seats ; 15 percent
more legroom ; and enclosed
overhead luggage compartments.
Fold-down seats are also being
installed in the other DC-9s. On the
three-seat side, passengers have
the convenience of a table when the
center seat is unoccupied.
The airline currently has 19 DC-9-30s
and 31 Convair 580 prop-jets in
its fleet of 50 aircraft. Two more of
the 1 DO-passenger fan jets will be
delivered in April and May.
" Quick Tickets", introduced just a
year ago, are now available at North
Central passenger service counters
in 40 locations. This automated system
produces machine-printed tickets
in 10 seconds for passengers with
advance reservations.
A unique customer service, the
Passenger Action Line (PAL), was
begun last fall. Personnel in the
Customer Relations Department act
as ombudsmen, by telephone, for
both passengers and North Central
agents in the field to resolve
travel problems and misunderstand-
ings quickly and amicably. Although
in operation just a few months, PAL
is already a significant part of
the airline's effort to show personal
concern for its customers.
The company's new $1.8-million
DC-9 digital flight simulator for pilot
training is scheduled to be
operational this August. The simulator,
located in the new air freight facility,
employs a six-axis motion system
synchronized with visual equipment to
duplicate actual flight sensations.
It permits realistic emergency training
which cannot be performed in
an aircraft. Briefing rooms for check
pilots and students will be available,
along with offices for simulator
engineers. The simulator can be used
for nearly all DC-9 pilot training,
saving the company many hours of
actual flight time, besides providing
more complete training.
During 1974, the maintenance
department continued its efforts to
have more work for company
personnel to perform. Specialized
equipment was installed for
inspection of jet engines and
components. Other acquisitions
include new tooling, for the complete
testing and overhaul of aircraft
auxiliary power units, and another
precision mill for machining
metal parts. These improvements
expedite production and allow closer
control of reliability and costs.
The computerized data base system
called SCEPTRE is nearing reality.
The cutover is scheduled to begin this
September. The system is designed
to provide "up-to-the-minute"
information on the service records
of all aircraft and components,
the parts inventory, and maintenance
work schedules. Through TV-type
screens, and some hard-copy printers,
personnel throughout the system
will have immediate access to the
real-time data that SCEPTRE
accumulates. Ultimately, the system
may be applied to other departments
in the company.
Through creative planning, North
Central is making prudent use of its
resources to improve the reliability
and efficiency of its service to the
traveling and shipping public.
North Central's new $1-million air freight facility is part of the company's
headquarters complex at the Minneapolis-St. Paul International Airport.
Flight crew
Coordinator, Flight Control
Mechanic
Station Agent Reservationists
Flight Attendant
Passenger Service Agents
Food Service Manager and Chet
~ --
good people make .afT'" airline great 7
8
route development
Winnipeg became the newest and
northernmost city on North Central 's
system when nonstop flights from
Duluth/Superior were inaugurated
on October 27, 1974.
North Central now offers the first
single-plane service between the
Manitoba capital and several
Minnesota, Wisconsin, and
Michigan cities. With this 314-mile
route, the airline's system now
spans 10,200 miles.
The Winnipeg route was awarded
by the Civil Aeronautics Board (CAB)
under an amendment to the 1966
Bilateral Air Transport Agreement
between the United States and
Canada. The amendment, which was
formally ratified in May 1974, also
authorizes Detroit-Montreal flights
after 1978. The company has filed
to serve that route via Toronto.
In a decision issued February 5, 1975,
the CAB ruled in favor of the
company's request that its nine
existing domestic route segments be
redesignated as one. North Central
sought the change to allow greater
scheduling flexibility between city
pairs on its system.
Late in 1974, North Central filed
an application with the CAB for a
Chicago-New Orleans nonstop route
and requested an expedited hearing
because one of the two authorized
carriers has suspended nonstop
service. North Central is proposing
three round-trip flights between the
two cities with 1 OD-passenger DC-9
fan jets.
If approved, the new service would
generate about $8 million in revenues
the first year, with an estimated
$2.6-million operating profit. Approx-
imately 40 percent of the projected
North Central passenger traffic on
this 840-mile segment would
originate or terminate on the airline's
flights serving 25 cities in Michigan,
Wisconsin, Minnesota and North
Dakota. The new route would provide
these cities with single-carrier
service to New Orleans for the
first time.
In addition, passengers from
Milwaukee, Green Bay/Clintonville,
Minneapolis/St. Paul, Grand Forks,
Marquette and Grand Rapids would
have new single-plane service to
New Orleans via North Central.
Four other applications for major
nonstop routes are awaiting Board
action to start proceedings. In
1974, the CAB denied the company's
request for expedited hearings on
the proposed Milwaukee-Philadelphia
and Detroit-Boston service. The
same action was taken earlier on
Milwaukee-Denver and Detroit-New
York. These four long-haul routes
would generate about $25 million
annually in operating revenues and
$6 million in operating profit.
Hearings on one or more of these
filings are expected during 1975.
In recent years, however, the Board
had drastically curtailed the granting
of new routes because of the adverse
economic conditions of some carriers
and the uncertain fuel situation.
In the Detroit, Cleveland , Cincinnati-
Atlanta case, all carriers' applications
were denied by the Board, and one
airline's appeal is pending.
Nonstop service to Winnipeg was inaugurated from this new $6.2-mil/ion terminal
at the Duluth International Airport.
North Central is continuing to pursue
its present applications, totaling 6,647
miles, and to evaluate new routes
that would improve service to the
traveling public and be economically
beneficial to the airline. Principal
cases now pending are summarized
below:
CHICAGO-NEW ORLEANS NONSTOP
The airline requested an expedited hearing
on this application because one of the
two authorized carriers has suspended nonstop
flights . North Central would provide the
first single-carrier service for 25 cities in
Michig an, Wisconsin , Minnesota and
North Dakota. Eight of those cities would
have single-plane service. Three daily round
trips are proposed. (840 miles)
MILWAUKEE-PHILADELPHIA NONSTOP
New nonstop service has been proposed
between Milwaukee and Philadelphia,
providing single-plane service for 10 Minnesota
and Wisconsin communities. Although
two other carriers are certificated on the route,
only one nonstop flight is available in
each direction. (690 miles)
DETROIT-BOSTON NONSTOP
North Central would offer the first competitive
nonstop service between Detro it and Boston
and also the only single-plane service between
Boston and seven Michigan cities, plus
South Bend, Indiana, via Detroit. (632 miles)
MILWAUKEE-DENVER NONSTOP
North Central would provide the first
competitive service in this market, with flights
originating in cities east of Milwaukee.
(908 miles)
DETROIT, CLEVELAND,
CINCINNATI-ATLANTA
The CAB denied all app lications, and another
carrier's appeal is pending. The company
filed to serve Atlanta from Detroit and
Cincinnati. (968 miles)
MICHIGAN POINTS-DETROIT-NEW YORK
This proposed authority would enable
North Central to provide new, single-plane
service through Detroit to New York City from
ten Michigan cities. (501 miles)
COLUMBUS, DAYTON, CINCINNATI-
PHILADELPHIA NONSTOP
The company's request to serve Philadelphia
from Columbus, Dayton, and Cincinnati
has been consolidated into the CAB 's
Ohio/ Indiana Points Nonstop Service
Investigation. (1,389 miles)
TWIN CITIES-KANSAS CITY NONSTOP
This application would permit North Central
to operate nonstop flights in addition to
the present two-stop service. (404 miles)
DETROIT-MONTREAL, VIA TORONTO
Authority to serve Montreal from Detroit,
via Toronto , was requested under an
amendment to the 1966 Bilateral Air Transport
Agreement between the United States and
Canada. With this route, North Central could
also offer convenient single-plane service
from Minneapolis/St. Paul and Milwaukee to
Montreal. The amendment authorizes
Detroit-Montreal flights by a U.S. carrier
after 1978. (315 miles)
NORTH CENTRAL ROUTE REALIGNMENT
North Central 's request that its nine existing
route segments be redesignated as one
has been approved by the CAB. The airline
now has greater flexibility for scheduling
between city pairs on its system.
social action programs
An expanded, aggressive "Affirmative
Action " program was implemented
by North Central in 1974. The program,
approved by the Federal Aviation
Administration, complements the
equal opportunity policy the
airline has followed for many years.
The company feels that Affirmative
Action is vital to the successful
conduct of business and to basic
human dignity and welfare. This
approach establishes goal-setting
procedures to promote job oppor-
tunities for women and minorities.
Affirmative Action is a commitment
to hire and advance minorities and
women at an accelerated pace until
employee totals reach parity with
the workforce available at each
location.
North Central is conducting a
vigorous recruiting drive to seek
minority and female applicants who
meet the airline's job standards.
Some 30 minority organizations visited
the company in 1974, and applica-
tions are being received directly from
minority employment agencies,
colleges and vocational schools.
The Affirmative Action program
is providing benefits to North Central
and the communities it serves-
through fuller utilization and devel-
opment of people's talents.
The airline is making a concerted
effort to establish mutually profitable
business relationships with
minority vendors who offer needed
goods and services. The objective is
to help these firms develop into
stable enterprises that will be
competitive and reliable suppliers
for years to come.
North Central has 3,360 employees,
90 percent of whom are represented
by one of six unions. Negotiations
are held in a positive atmosphere
which contributes to reaching equit-
the future
North Central, having just completed
the most profitable year in its history,
looks forward to further traffic and
revenue growth in 1975. Final results
will reflect the airline's ability to
capitalize on current market
advantages and participate in the
nation 's economic recovery.
In the past year, reduced highway
speed I imits, along with the scarcity
and high price of gasoline, prompted
many people to fly rather than drive.
Federal programs to spur the
economy should generate more
business and pleasure travel, and
able agreements while considering
employee needs, the company's
financial condition, industry develop-
ments and the general economy.
Du ring 1974, contracts were signed
with three unions for two-year
periods, and discussions are currently
being held with two others. The
sixth agreement expires in
September 1975.
The company believes that high
employee morale is one of its most
important assets. The excellent
working relationship between
management and contract employees
is evidenced by the fact that North
Central has never had a single day
of work stoppage in its 27-year history.
Fuel conservation measures at
North Central saved 200,000 gallons
of aviation fuel monthly-or nearly
two-and-a-half million gallons in 1974.
Revised flight procedures are an
important part of this continuing
program to conserve jet fuel.
Among these are lower cruising speed,
delayed use of landing flaps on
approach, deferred engine-startup
in the gate-hold area, reduced use
of the auxiliary power unit, taxiing
aircraft with one engine, conducting
flight training in simulators when
possible, and absorbing most
departure delays at the gate.
Additional steps taken to conserve
fuel include selective equipment
substitution, some schedule reduction,
and curtailed extra sections and
scenic flights.
Thermostats in company buildings
are at 68 for working hours and
turned down to 60 in off-hours.
General lighting remains at a
lowered level which saved over three
million watts in 1974. Numerous
employee car pools are operating.
" Waste Not" is the theme of
North Central's new paper recycling
vacationers are showing greater
interest in taking domestic trips.
Increased jet service always stimu-
lates traffic, and North Central will
be adding two new DC-9 fan jets to
the Spring schedule. Freight volume
is I ikely to improve as inventories
dwindle and businessmen turn to air
service for quick delivery rather than
keeping large supplies on hand.
program. About 60 percent of all
paper material discarded at the
airiine's headquarters can be
recycled . In less than a year, 54 tons
of material have been sent
for reprocessing.
To minimize the effect of aircraft
noise on th e community, standardized
flight procedures have been
adopted . In addition, all jets on order
will be equipped with acoustically-
treated engine nacelles.
On a more personal note, flight crews
respond to distress calls whenever
they can without jeopardizing the
safety of their passengers.
Recently, a private pilot whose aircraft
had malfunctioning navigational
aids was guided through overcast
skies to safety. Last summer,
a Northliner captain spotted and
reported a disabled boat on
Lake Michigan. The message was
relayed to the U.S. Coast Guard,
which towed the boat ten miles
to shore.
By word and deed, the airline is
operating as a responsib le corporate
citizen-and North Central people
are carrying out social action
programs with individual concern.
Affirma tive Action Program assists
minorities and women.
structure ordered by the Civil Aero-
nautics Board effective April 29, 1975.
Current supplies of aviation fuel are
adequate, although prices continue
to climb at an accelerated rate. Other
expenses are also rising, but at a
more moderate pace.
The company's 3,360 employees
have proved themselves dedicated
These combined factors, which and productive. Their efforts,
influence the demand for air trans- combined with tight cost controls
portation, are expected to increase and additional revenues, should
revenues. Some benefit is also make 1975 another profitable year
anticipated from the new fare for North Central.
~ -.
good people make .atr airline great 9
SAULT STE. MARIE
OUETTE
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INCll,NATI
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NEW ORLEANS~
12
NORTH
balance sheet
ASSETS
CURRENT ASSETS
Cash, including certificates of deposit of $512,000 in 1973 (note B) ..
Short-term investments - at cost, which approximates market . .. .
Accounts receivable, less allowances (note A) . . . . ... .. .. .. . .. .
Flight equipment parts and supplies (notes A and C) . ... .. ...... .
Prepaid expenses and other (note A) .... . . . . .. .. . ... . . .. . . .. . .
PROPERTY AND EQUIPMENT - at cost (notes A and F)
Flight equipment (note C) . .. . ... .... ...... . .. ... .... . ..... . . .
Ground property and equipment . . . . . ... ... . .. . ... . ..... . . . .. .
Improvements to leased property .. .. ... .. ....... ..... ..... . . .
Less accumulated depreciation .. .. ......... . ... .. . . .. . ..... .
Advance payments on equipment . . ... .. .. . .. . ..... .. .. . ... .. .
DEFERRED CHARGES AND OTHER ASSETS
Unamortized development and preoperating costs (note A) ... ... .
Rentals and other (notes A, D and F) . . ........ . ... . ..... . .... .
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt (note C) . . . ...... . .... .. .. .
Trade accounts payable .. .. . .... .. . . ...... . . . .. . .. .... .... . .
Interline payable and tickets outstanding (note A) .. .... ... . .... . .
Accrued compensation and other expenses ... . .. .. .. .... .. .. . .
Income taxes (notes A and J) ... ..... .. .. . .. .- ... . . . .. .. ...... .
LONG-TERM OBLIGATIONS
Long-term debt - less current maturities (note C) .... . ....... . . .
Deferred income taxes (notes A and J) . .. .. .... . .. .. .. . . .. . .. . .
Warrant obligation (note C) . .. ....... . . .. . . .. .. ..... .... . ... .
COMMITMENTS (note F)
STOCKHOLDERS' EQUITY (notes C, G and H)
Common stock - authorized 16,000,000 shares of $.20 par value .. .
Additional paid-in capital . ... . .... . .... . ... .. .. .. ... . .. . . . .. .
Retained earnings ......... .. ... . .... .. . . ..... .. . .. . ....... .
Less treasury stock - 150,900 sh ares at cost ..... . . . .. . . ..... . .
The accompanying notes are an integral part of this statement.
CENTRAL AIRLINES, INC.
December 31
1974
$ 5,055,000
9,750,000
14,764,000
3,998,000
5,030,000
38,597,000
92,452,000
9,741 ,000
3,677,000
105,870,000
(36,962,000)
68,908,000
4,984,000
73,892,000
1,600,000
4,607,000
6,207,000
$118,696,000
$ 8,400,000
6,619,000
8,190,000
8,122,000
2,432,000
33,763,000
32,633,000
4,867,000
281 ,000
37,781 ,000
2,493,000
18,032,000
27,044,000
(417,000)
47,152,000
$118,696,000
1973
$ 3,458,000
8,987,000
13,910,000
3,331,000
4,478,000
34,164,000
93,853,000
7,623,000
3,612,000
105,088,000
(31,026,000)
74,062,000
2,262,000
76,324,000
1,814,000
2,759,000
4,573,000
$115,061 ,000
$ 8,097,000
7,277,000
6,457,000
7,363,000
316,000
29,510,000
42,172,000
2,504,000
264,000
44,940,000
2,493,000
18,032,000
20,086,000
40,611 ,000
$115,061 ,000
statement of earnings
Years ended December 31
OPERATING REVENUES
Passenger (note A) . .. .. . . . . .. . .. .. ..... . . .. .......... . . . .. .
Freight and express ..... . ..... .. . . ........... . .... . . . .... . .
Public service revenues (note I) . .. ..... . .. . ........ : .... .. . . .
Mail ..... . .... . ...... . . . .... . ...................... . ..... .
Non-scheduled service and other ........ . ..... . .. .. . . .. .. . .. .
OPERATING EXPENSES
Flying operations .. . .. . ........ . .... . . . .. .. . . ............. .
Maintenance ..................... . . . .... .... ...... ..... .. .
Aircraft and traffic servicing .. .. ........ ... ..... . . . . . ... . .... .
Passenger service . . .. . . . . . .. . ... . ... . . . . . .. . ........ . . . . . . .
Promotion and sales . . .. . ......... . ............ ... .. ... . .. . .
General and administrative .. . . .. ... .... .... . . .. .... ... . . . . . .
Other transport-related expense . .... . . .. . .. .. . .... . .. . ... ... .
Depreciation and amortization (note A) ... . . .. ........ ........ .
Operating profit . .. . . . .. . .. . . .. .............. . .. . .. .. .
OTHER EXPENSES (INCOME)
Interest expense ....... . .... . . .. .... . . . ............ . ...... .
Less interest capitalized (note A) .. . ..... . ................... .
Interest income and other - net .. . .. . .. . ..... . .............. .
Earnings before income taxes .. . ...................... .
INCOME TAXES (notes A and J)
Currently payable .. . ............................ . .. . . . ... . .
Deferred ..... . ............ . ...... . ..... . . . ........ . ...... .
1974
$124,007,000
8,158,000
12,126,000
2,041 ,000
5,158,000
151 ,490,000
38,077,000
20,983,000
34,923,000
9,028,000
13,912,000--
7,179,000
1,377,000
8,017,000
133,496,000
17,994,000
3,868,000
341 ,000
3,527,000
(1,229,000)
2,298,000
15,696,000
5,348,000
2,144,000
7,492,000
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,204,000
NET EARNINGS PER SHARE (note K) . . . . . . . . . . . . . . . . . . . $ .66
The accompanying notes are an integral part of this statement.
1973
$104,279,000
7,123,000
9,631 ,000
1,789,000
5,161 ,000
127,983,000
30,929,000
17,551,000
32,036,000
8,094,000
11,866,000
6,594,000
1,562,000
7,350,000
115,982,000
12,001,000
3,623,000
142,000
3,481,000
(690,000)
2,791,000
9,210,000
2,530,000
233,000
2,763,000
$ 6,447,000
$ .52
13
14
statement of changes in financial position
SOURCES AND APPLICATIONS OF WORKING CAPITAL
SOURCES
From operations
Net earnings .......... . .. . ... . ...... . ... . .. ... . . .. . ......... .. . .
Charges to earnings not using working capital
Depreciation and amortization (note A) ....... . ............ . .... .
Deferred income taxes (note J) ........ . .. . ..... . . . . . .. . ...... . .
Other .. . ...... .. .. . . .... . .. . . . . .. .. . . . .. .. .... .... .. .... . .. .
Working capital provided from operations . . . .. ... . . .. . . .. . .. .
Proceeds in excess of gain from property and equipment dispositions .... .
Increase in long-term debt . . ...... .. ... . . . . . .. . ... . .. . . . ..... ... .. .. .
Reduction of insurance receivable ... ........ .. . ... ... . . . .. .. .. .. .... .
Other .. . ...... . ...... . .... . .. . ....... . ........ .. ... . ...... .... . . . .
APPLICATIONS
Additions to property and equipment ... .. .... .. ..... . ..... . ... . .. . . . . .
Additions to deferred charges . ... . . . .... . ... ... .... . ..... .. . .. . . . . . . .
Reduction of long-term debt . .. . .... .. .. . .... . ..... . .. . ... . ..... . .. . . .
Purchase of treasury stock .... . . . ...... . .. .... .......... ... .. .. .. . . .
Payment of cash dividend .... .. .. . . . . . ..... . . . ... . . ... . . . . . . . .... . . .
Other .... . ... . ... . . . .. . .. . .. . ...... . . . . .. .. . ... . ....... . .. . . . . .. . .
INCREASE (DECREASE) IN WORKING CAPITAL ... .. . . . . ... .
Working capital at beginning of year .... .. . ...... .... . ........ . ... .. . .
Working capital at end of year . ... . . ...... .. . . . . . .. ... ... .. . ... . .. ... .
NET CHANGE IN WORKING CAPITAL ELEMENTS
Increase (decrease) in current assets
Cash and certificates of deposit . . . .. .. . .. . ..... .. .... ... .. . . . . . .. . .
Short-term investments ...... . ......... ..... . . . . .. . . . . . . ... . ... .. .
Accounts receivable .. . ... . .... . . . . . ... . ..... . . . .. .. ... . . .. .. . .. . .
Flight equipment parts and supplies . .. . . ..... ..... .. . .. .. .... . . . . . . .
Prepaid expenses and other . .. . . .. .... . . .. . .. ... . .. . ... . . .. .. .. .. .
Net change in current assets . . . ..... ... . .... . . .... . . . .... .. . .. .
Increase (decrease) in current liabilities
Current maturities of long-term debt . .. ..... .... . . . . . . . .. ... . . . . . . . . .
Trade and interline payables and tickets outstanding . .. ....... ........ .
Accrued compensation and other expenses ... . . . . . . .. .. . ... . . . .. . . . .
Income taxes .. ...... . .... . . ...... .......... ... . .. ... ... .. .. . .. . .
Net change in current liabilities . .. .... . ... .. . .. .. . . ... ... . .. . .. .
INCREASE (DECREASE) IN WORKING CAPITAL . . . . . . . . . . .. .
tatement of changes in stockholders' equity
Years ended December 31, 1974 and 1973
Common Stock
Additional
Shares Paid-In
Issued Amount Capital
Years ended December 31
1974
$ 8,204,000
8,017,000
2,363,000
200,000
18,784,000
1,061 ,000
19,845,000
5,881 ,000
2,582,000
9,539,000
417,000
1,246,000
19,665,000
180,000
4,654,000
$ 4,834,000
$ 1,597,000
763,000
854,000
667,000
552,000
4,433,000
303,000
1,075,000
759,000
2,116,000
4,253,000
$ 180,000
Retained
Earnings
(note C)
1973
$ 6,447,000
7,350,000
184,000
195,000
14,176,000
799,000
15,105,000
4,300,000
71 ,000
34,451 ,000
24,355,000
730,000
9,260,000
623,000
268,000
35,236,000
(785,000)
5,439,000
$ 4,654,000
$ (5,439,000)
2,487,000
2,825,000
596,000
(111 ,000)
358,000
1,022,000
2,579,000
(494,000)
(1 ,964,000)
1,143,000
$ (785,000)
Treasury Stock
Shares
Held Amount
Balance at January 1, 1973 . . ..... 12,462,752 $2,493,000 $18,032,000 $14,262,000 $
Cash dividend (note H) ........ (623,000)
Net earnings for the year ...... . 6,447,000
Balance at December 31, 1973 .. .. 12,462,752 2,493,000 18,032,000 20,086,000
Cash dividend (note H) . ..... .. (1,246,000)
Purchase of treasury stock . .. .. 150,900 417,000
Net earnings for the year ...... . 8,204,000
Balance at December 31, 1974 ... . 12,462,752 $2,493,000 $18,032,000 $27,044,000 150,900 $417,000
The accompanying notes are an integral part of these statements.
notes to financial statements
December 31 , 1974 and 1973
Note A-Summary of Significant Accounting Policies- The company,
regulated by the Civil Aeronautics Board (CAB), uses the Uniform
System of Accounts and Reports for Certificated Air Carriers as
required by the CAB, which are consistent with generally accepted
accounting principles. The significant policies consistently followed
by the company are:
Flight Equipment Parts and Supplies: These are priced at average
cost. An allowance for obsolescence ($551,000 in 1974 and $465,000
in 1973) is provided for parts expected to be on hand at the date
the related aircraft are fully depreciated by allocating costs of
repairable items over their useful lives.
Prepaid Expenses - Engine Overhaul: Engine overhaul costs are
charged to expense as incurred except for those overhaul costs in-
cluded in the purchase price of Flight Equipment. The company
reclassifies to a current prepaid expense the cost of those over-
hauls estimated to be consumable within the next twelve months
by reducing costs included in Flight Equipment ($2,175,000 in 1974
and 1973).
Capitalized Interest: Interest is capitalized on funds associated
with major project expenditures such as acquisition of flight equip-
ment, construction of ground facilities and expenditures for route
.
development and preoperating costs. Capitalization of interest
ceases when projects become operational. The capitalized interest
is amortized over the useful lives of the related assets for financial
reporting purposes but charged to current period expense for in-
come tax reporting purposes. The effect on net earnings (after
taxes) of capitalizing interest rather than expensing as incurred
for financial reporting purposes was approximately $118,000 in
1974 and $29,000 in 1973.
Depreciation: Depreciation is provided for in amounts sufficient to
relate the cost of depreciable assets to operations over their esti-
mated service lives on a straight line basis for financial and tax
reporting purposes. Prior to 1968, accelerated depreciation methods
were used for tax purposes. Flight equipment is being depreciated
to residual values (15% of cost): Convair 580 based on a common
retirement date of June 1979 and DC-9-30 based on 15-year lives.
Deferred Charges: Expenditures for route development are deferred
and amortized over the life of temporary certificates, or five years
for permanent certificates. Aircraft preoperating costs are amor-
tized over approximately eight years. Certain expenditures are
expensed when incurred for tax reporting purposes.
Passenger Revenues: Revenues are recognized when the transpor-
tation service is rendered. Tickets sold by others and lifted by the
company prior to December 31, are included in accounts receivable
until payment is received. Tickets sold for flights on other airlines,
for which reimbursement has not been made, and tickets sold by
the company for their flights which are unused at December 31, are
included in interline payable and tickets outstanding.
Pension Costs: The company has pension plans for substantially
all of its employees, and funds its current expense of normal costs
and amortization of prior service costs over periods ranging from
25 to 40 years. Asset appreciation or depreciation is applied to the
unfunded prior service cost. Pension funding is determined pri-
marily by using the Unit Credit Method (note E).
Income Taxes: The company uses the flow-through method of ac-
counting for investment tax credit which reduces income tax ex-
pense when the related liability is reduced. The company recognizes
deferred income taxes resulting from differences in financial and
income tax reporting (note J).
Note B - Compensating Cash Balances - The company maintains
compensating cash balances in connection with its long-term debt
financing (note C) and for general operating purposes. Such bal-
ances averaged approximately $2,000,000 during 1974 and 1973
and are not legally restricted.
Note C - Long-Term Debt - Long-term debt at December 31 con-
sists of the following: 1974 1973
Quarterly ins ta I lment notes (a) . . . . .. . . . .. .. $25,566,000 $31,247,000
Semi-annual installment notes (b) . . . . . . . . . . . 1,705,000
Semi-annual installment notes (c) . . . . .. .. .. . 13,800,000 15,000,000
Tota I due banks and
insurance companies (d) . . .. . . . . .. . . 39,366,000
Semi-annual subordinated notes (e) . . . . . . . . . 900,000
Subordinated convertible debentures (f) . . . . . . 690,000
Sundry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,000
Total long-term debt .. .... . ... . .... . . 41,033,000
Less current maturities (g) . . . . . . . . (8,400,000)
$32,633,000
47,952,000
1,500,000
692,000
125,000
50,269,000
(8,097,000)
$42,172,000
(a) Payable as follows: a regular quarterly payment of $1,420,000
plus interest, in January 1975, and a required prepayment of
$1,058,000 plus interest, in March 1975 resulting from the sale
of two CV-580 aircraft which were collateral for the obligation; the
remainder in quarterly installments of $1,358,000 plus interest,
from April 1975 through April 1976 and alternating quarterly install-
ments of $1,358,000 and $1,811,000 plus interest, from July 1976
through October 1978; interest at 7%.
(b) Fully paid in November 1974; effective rate at December 31,
1973 was 11 %.
(c) Payable in semi-annual installments of $600,000 plus interest,
through July 1978 and quarterly installments of $2,250,000 plus
interest, from January 1979 through October 1979; interest at
% above bank's prime rate; effective interest rate at Decem-
ber 31 was 10%-11 % in 1974 and 10% in 1973 (note B).
(d) Total due banks and insurance companies is collateralized by
substantially all flight equipment and spare aircraft parts owned
by the company. Two equipment manufacturers partially guarantee
these loans. Included in the loan agreement provisions are restric-
tions on dividend payments, capital expenditures, additional bor-
rowings and requirements related to minimum working capital and
net worth. The company has a commitment to retire 259,511 war-
rants at $1.50 per warrant within 30 days after the expiration date
of October 31, 1979 for any of these warrants not then exercised.
These warrants were issued to loan holders in consideration of de-
ferring certain debt repayments. The obligation is being accrued as
additional interest expense through 1979.
(e) Payable in semi-annual installments of $300,000 plus interest
at 7% through March 1976. Stock purchase warrants issued in con-
nection with this debt enable the holders to purchase a total of
200,000 common shares (note H).
(f) Convertible into common shares at $8.55 a share to maturity,
June 1, 1978; interest at 5%.
(g) Current maturities of all long-term debt due in each of the next
five years following December 31, 1974 are as follows:
1975 ....... . ....... . . . ... . .......... . ....... .
1976 ..... . .... . .. . . . . . ................. . .... .
1977 . . .. .. ...... . . .. ...... . .. . . . . . ... . ..... . .
1978 . . .... . ... . ........... . ......... . . . ..... .
1979 .. .. ..... . .. . . . . .. .. . . ... ... . . . . ... . . . . . .
$ 8,400,000
7,867,000
7,538,000
8,228,000
9,000,000
$41,033,000
Note D - Investment Leasing - During 1974, the company entered
into lease agreements as a lessor. These leasing activities are
recorded under the finance method of accounting. At December 31,
1974, investment in leased equipment, net of the $1,500,000 note,
totals $1,255,000, which includes estimated residual values of
$267,000. -
Under the terms of a leverage lease transaction, the company re-
ceived approximately $1,500,000 on a 10% note and has assigned
future lease payments and the associated equipment, costing ap-
proximately $1,880,000, as collateral. The loan agreement provides
that the company's liability is limited to its remaining investment
in this equipment. The 10% note is recorded as an offset against
the receivable from lessee.
15
16
notes to financial statements
December 31, 1974 and 1973 (continued)
The leases contain renewal options and transfer essentially all costs
of ownership to the lessees.
Note E - Pension Costs - Total pension expense was $4,150,000
for 1974 and $3,014,000 for 1973. At January 1, 1974, th'e latest
actuarial valuation date, the actuarially computed value of vested
benefits for all plans exceeded the total market value of fund assets
by approximately $5,523,000. Changes in funding methods for cer-
tain of the plans did not have a material effect on pension expense
for 1974. Market value declines and improvements in benefits ac-
count for the major portion of the increase of vested benefits over
the market value of fund assets.
The Pension Reform Act of 1974 is not expected to have a sig-
nificant future effect on the amount of the company's pension ex-
pense, funding or unfunded vested benefits.
Note F - Commitments - Total rent expense, including landing
fees, was $12,876,000 in 1974 and $12,177,000 in 1973, including
rentals under "financing leases" (as defined by the Securities and
Exchange Commission) of $6,375,000 in 1974 and $6,523,000 in
1973.
The company has lease commitments for various airport facilities
based upon usage and landings, subject to adjustment depending
upon the needs of the airport operating authority. These leases ex-
pire over varying periods, and future annual lease commitments are
not determinable due to the usage and adjustment factors.
At December 31, 1974, the company's minimum rental commitments
under non-cancellable leases with initial or remaining terms of
more than one year were as follows (in thousands of dollars):
DC-9-3O CV-58O Computer
Period Aircraft Aircraft Equipment Facilities Other Total
1975 $2,088 $1,715 $1,227 $1,634 $283 $ 6,947
1976 2,088 392 1,227 1,634 283 5,624
1977 2,088 1,227 1,634 215 5,164
1978 2,088 1,227 1,634 48 4,997
1979 2,088 1,023 1,634 28 4,773
1980-1984 4,045 8,170 28 12,243
1985-1989 8,105 8,105
1990-1994 7,500 7,500
1995-2000 3,852 3,852
The lease commitments for CV-580 aircraft and various facilities
included in the above tabulations reflect both the current period
expense and the rental prepayment required under the terms of
the leases. Since the DC-9-30 leases are related to the prevailing
prime interest rate, the 1974 expense was approximately $600,000
in excess of the minimum commitment. Nearly all leases contain
renewal or extension options which are to be negotiated within
specified periods prior to the expiration of the leases.
The present value of the noncapitalized financing leases and the
related interest rates at December 31 are (in thousands of dollars):
Interest
Rate 1974
Five DC-9-30 aircraft ................ 6% .. . . . . $11,520
Nine CV-580 aircraft ................ 5 % . . . . . . 2,344
Co~~~ter equipment . . . . ........... 8 % . . . . . . 5,050
Fac1l1t1es ....... .. .. ... ........... 4% .. . ... 16,436
Other ...... .. .. . ....... . .... . . ... 6 % . . . . . . 724
Total ....... .. . ........ .. . . .. . . ... .... $36,074
1973
$12,828
3,611
5,628
16,909
~
$40,005
The impact on net earnings by capitalization of such leases would
have been immaterial. The company, regulated by the CAB, is un-
able to determine what impact the above capitalization might have
on the rate base and any consequent rate adjustments.
At December 31, 1974, the company had purchase commitments on
two new DC-9-30 aircraft and three new DC-9-50 aircraft for which
it has ~~vanced $3,638,000 and capitalized interest of $216,000.
~n. add1t1onal $29,~61,000 will be expended by the company in ful-
filling these commitments. The two DC-9-30 aircraft are scheduled
for delivery in April and May, 1975 and the three DC-9-50 aircraft are
to be delive~ed in 1976. The total purchase price of $32,799,000
could be adJusted upwards since it is based upon an agreement
which allows for changes in specifications. In addition, the com-
pany also purchased an option for $75,000 to buy three additional
DC-9-50 aircraft. If this option is exercised prior to May 1975, the
total purchase commitment for the three aircraft would be an
additional $21,673,000 and would be expended prior to delivery in
December 1976.
A spare engine for the DC-9-50 aircraft, with a cost of $588,000, is
scheduled for delivery in March 1976, for which the company has
advanced $29,000.
At December 31, 1974, the company had a purchase commitment
for a digital flight simulator and visual system for Douglas DC-9
aircraft which amounted to $1,750,000 of which $984,000 had been
paid in advance deP,osits. The company has capitalized interest of
$42,000 on these deposits. The scheduled delivery date is July 1975.
Under provisions of the Mutual Aid Agreement, the company would
pay struck carriers who are a party to this agreement. The com-
pany would receive such payments in the event of a strike by its
employees.
Note G - Stockholder Disclosure of Ownership - The company is
required by 245.16 of the Civil Aeronautics Board Economic Regu-
lations to include in its annual report to stockholders the following
notice:
(1) Any person who either owns, as of December 31, of the year
preceding issuance of such an,nual report, or subsequently ac-
quires, beneficially or as trustee, more than 5 percent, in the
aggregate, of any class of the capital stock or capital of the air
carrier, shall file with the Board a report containing the infor-
mation required by 245.12, on or before April 1, as to the
capital stock or capital owned as of December 31, of the pre-
ceding year, and in the case of stock subsequently acquired, a
report under 245.13, within 10 days after such acquisition or
ownership;
(2) any bank or broker covered by (1), to the extent that it holds
shares as trustee on the last day of any quarter of a calendar
year, shall file with the Board, within 30 days after the end of
the quarter, a report in accordance with the provisions of
245.14; and
(3) any person required to report under this subpart who grants a
security interest in more than 5 percent of any class of the
capital stock or capital of the air carrier shall within 30 days
after granting such security interest file with the Board a report
containing the in_
formation required in 245.15. The notice shall
also state that any stockholder who believes that he may be
required to file such a report may obtain further information by
writing to the Director, Bureau of Operating Rights, Civil Aero-
nautics Board, Washington, D. C. 20428.
Note H - Common Stock - Under a qualified plan, 350,000 shares
of unissued common stock were reserved for officers and key em-
ployees. When options are exercised, the excess of the option price
over par value of the shares is credited to additional paid-in capital.
The company makes no charges to income in connection with the
shares issued under the stock option plan.
Options Outstanding
Option Price and Fair Market Value at Date of Grant
Year Year Per
December 31, 1974 December 31, 1973
Granted Exercisable Share Shares Amount Shares Amount
1969 1969 $4.125 - $ 18,000 $ 74,250
1970 1970 4.125 47,500 195,937
1970 1970 3.25 95,000 308,750 105,000 341,250
1971 1971 3.1875 36,100 115,069 38,050 121,284
1972 1972 6.375 2,500 15,937
1973 1973 4.25 31,875 7,500 31,875
1974 1974 3.375 8,525 28,772
1974 1974 2.75 23,925 65,794
1974 1975 2.75 45,000 123,750
1974 1977 2.75 2,500 ~
218,550 $680,885 218,550 $780,533
Options exercised 131,450 131,450
350,000 350,000
All options granted expire five years after date of granting. There
were no additional options available for granting as of December
31, 1974 or 1973.
At December 31, 1974 and 1973, there we.re outstanding warrants
to purchase 2,649,061 shares of common stock. These warrants
resulted from public offerings prior to 1973 and from financial
transactions as discussed in note C(d) and (e). All warrants enable
the holder to purchase common stock at $5.50 per share and must
be exercised by October 31, 1979.
During January 1975, the Board of Directors declared a $.10 per
share dividend payable on March 3, 1975 to shareholders of record
on February 17, 1975. The company paid cash dividends to its share-
holders during the first quarter of 1974 and 1973, of $.10 and $.05
per share, respectively.
Note I - Public Service Revenues - As a local service carrier, the
company receives public service revenues for serving small and
intermediate size communities which do not generate sufficient
traffic to fully support profitable air service. The amount of such
payments is determined by the CAB on the basis of its evaluation of
the amount of revenue needed to meet operating expenses and
provide a reasonable return on investment with respect to eligible
routes. The amount so determined is reduced by a portion of the
company's earnings on routes not eligible for public service reve-
nue. The CAB adopted Class Rate VII effective as of July 1, 1973. It
provides for semiannual review of the company's public service
revenue rate and has no specified expiration date.
Note J - Income Taxes - Income tax expense for the years ended
December 31 is made up of the following components:
1974
Currently payable income taxes
Federal .............................. $7,214,000
Investment tax credit . . ................ (2,798,000)
4,416,000
State and local . . . . . . . . . . . . . . . . . . . . . . . . 932,000
5,348,000
Deferred income taxes
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000
Investment tax credit .................. 1,933,000
2,123,000
State and local . . . . . . . . . . . . . . . . . . . . . . . . 21,000
auditors' report
Alexander Grant
& COMPANY
CERTIFIED PUBLIC ACCOUNTA NTS
Stockholders and Board of Directors
North Central Airlines, Inc.
2,144,000
$7,492,000
1973
$4,413,000
(2,275,000)
2,138,000
392,000
2,530,000
396,000
(200,000)
196,000
37,000
233,000
$2,763,000
We have examined the balance sheet of North Central
Airlines, Inc. (a Wisconsin corporation) as of December 31, 1974
and 1973, and the related statements of earnings, changes in
stockholders' equity and changes in financial position for the
years 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.
The income tax expense of $7,492,000 in 1974 and $2,763,000 in
1973 (effective rates of 47.7% and 30.0%, respectively) are less
than those expected to result by application of the Federal income
tax rate of 48% to income before taxes. For the years ended
December 31, the reasons for these differences are:
1974 1973
Computed "expected" tax expense . . ... ... . ... $7,534,000
Increase (decrease) in income taxes
Investment tax credit utilized . . . . . . . . . . . . (865,000)
State and local income taxes . . . . . . . . . . . . 953,000
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (130,000)
Actual tax expense . ........................ $7,492,000
$4,421,000
(2,475,000)
429,000
388,000
$2,763,000
The deferred income taxes resulted from the reversal of pre-
viously deferred investment tax credit and the tax effect of the
following timing differences for the years ended December 31:
1974 1973
Increase (decrease) in deferred income tax expense
Excess of tax over book depreciation ....... . $ 98,000
Interest capitalized for book, not for tax . . . . . . 181,000
Vacation pay expensed for tax,
previously expensed for book . . . . . . . . . . . . 86,000
Amortization for book ,of items
already expensed for tax
Training and development . . . . . . . . . . . . . . (248,000)
Extension and development . . . . . . . . . . . . . (73,000)
Capita I ized interest . . . . . . . . . . . . . . . . . . . (56,000)
Gain on sale of equipment . . . . . . . . . . . . . . . . . . (59,000)
Lessor leasing activities . . . . . . . . . . . . . . . . . . . 61,000
Deferred investment tax credit ... ........... 1,933,000
Adjustment to previously deferred tax . . . . . . . . 221,000
$2,144,000
$ 71,000
43,000
48,000
(140,000)
(40,000)
(30,000)
(41,000)
322,000
$233,000
The company has no remaining investment tax credit available to
offset future income taxes payable.
Note K - Net Earnings Per Share - Net earnings per share is based
on the weighted average number of shares outstanding for the year
(12,431,869 in 1974 and 12,462,752 in 1973). Conversion of de-
bentures into common stock, exercise of stock options and warrants
to purchase stock would not result in material dilution of net earn-
ings per share for the years ended December 31, 1974 and 1973.
Note L - Reclassifications - Certain of the 1973 figures have been
reclassified where appropriate to conform with the financial state-
ment presentation used in 1974.
MIDWEST PLAZA BUILDING MINNEAPOLIS, MN 55402
FIRST NATIONAL BANK BUILDING ST. PAUL, MN 55101
INTERNATIONAL FIR M
ALEXANDER GRANT TANSLEY WITT
In our opinion, the financial statements referred to above
present fairly the financial position of North Central Airlines,
Inc., at December 31, 1974 and 1973, and the results of its opera-
tions and changes in its financial position for the years then
ended, in conformity with generally accepted accounting prin-
ciples applied on a consistent basis.
Minneapolis, Minne~
c;,J 1~0
February 17, 1975
17
NT
(MILLIONS) (BILLIONS) (BILLIONS)
1.05 - - - - - - ----l 2.00 - - - -
4.25 - - - - ' .95 - - -- 1.75 -
4.00 - - - -i .85 - - 1.50 -
.75 - 1.25 -
five-year summary
EARNINGS
OPERATING REVENUES 1974 1973 1972 1971 1970
Passenger ............ .. ............ .. . $124,007,000 $104,279,000 $ 99,260,000 $ 83,821,000 $ 76,954,000
Public service revenues ........ . . . . .... . . 12,126,000 9,631 ,000 9,090,000 6,885,000 5,131 ,000
Other ....... . ........ . .. . . .. . . . . ... ... 15,357,000 14,073,000 12,903,000 10,905,000 10,345,000
151 ,490,000 127,983,000 121 ,253,000 101,611,000 92,430,000
OPERATING EXPENSES
Flying operations and maintenance . . . . .... 59,060,000 48,480,000 46,732,000 43,360,000 39,133,000
Other operating expenses .. . . . . ..... . . ... 66,419,000 60,152,000 55,176,000 45,196,000 38,353,000
Depreciation and amortization . ... . . .. .... 8,017,000 7,350,000 6,990,000 7,240,000 6,779,000
133,496,000 115,982,000 108,898,000 95,796,000 84,265,000
OPERATING PROFIT . . . . . ... . ..... . . . ... . . 17,994,000 12,001 ,000 12,355,000 5,815,000 8,165,000
OTHER EXPENSES (INCOME)
Interest expense . . . . . . .. . ... . .... . .. . ... 3,868,000 3,623,000 3,229,000 4,252,000 5,055,000
Capitalized interest ... .. . . .... . . . . .... . .. (341 ,000) (142,000) (14,000) (23,000) (156,000)
Interest income and other-net . . ........ . . (1 ,229,000) (690,000) (256,000) (183,000) 20,000
2,298,000 2,791 ,000 2,959,000 4,046,000 4,919,000
EARNINGS BEFORE TAXES . . ... . .. . . . . . . .. 15,696,000 9,210,000 9,396,000 1,769,000 3,246,000
Income taxes ... ... .. ..... .. ..... . . . . . .. 7,492,000 2,763,000 2,903,000 544,000 451 ,000
EARNINGS BEFORE EXTRAORDINARY GAIN
AND ACCOUNTING ADJUSTMENT . ... .... 8,204,000 6,447,000 6,493,000 1,225,000 2,795,000
Extraordinary gain on disposition of
equipment (net of income taxes) . ...... 1,043,000
Prior years' adjustment due to accounting
change (net of income taxes) . . .... . . . (617,000)
NET EARNINGS .. . . . . . ... .. . . . . . .. ... ... . $ 8,204,000 $ 6,447,000 $ 7,536,000 $ 1,225,000 $ 2,178,000
NET EARNINGS PER SHARE ..... . . $.66 $.52 $.60 $.11 $.21
DIVIDENDS PER SHARE . ...... . ... $.10 $.05
BALANCE SHEET ITEMS
Current assets . .. .. . .. . ... .. . . ... . .. . . .... $ 38,597,000 $ 34,164,000 $ 33,806,000 $ 25,725,000 $ 24,606,000
Working capital from operations .. . . . .. . . .. .. $ 18,784,000 $ 14,176,000 $ 14,263,000 $ 9,204,000 $ 9,980,000
Working capital at year-end . . . ... .. ... . .... . $ 4,834,000 $ 4,654,000 $ 5,439,000 $ 3,900,000 $ (8,368,000)
Property and equipment-net . . .. .. . .. . ... . . $ 73,892,000 $ 76,324,000 $ 59,143,000 $ 62,891 ,000 $ 73,038,000
Total debt . ... . . . . .. . .. . .. . . . ... . .. ... . . . . $ 41 ,033,000 $ 50,269,000 $ 43,402,000 $ 50,496,000 $ 66,651 ,000
Retained earnings .. . . .. . .. .... .... .. . . . . . . $ 27,044,000 $ 20,086,000 $ 14,262,000 $ 6,726,000 $ 5,502,000
Stockholders' equity .. . . ... .... ... ..... .. . . $ 47,152,000 $ 40,611 ,000 $ 34,787,000 $ 27,192,000 $ 17,823,000
Shares outstanding . ..... . .. . .. . .. . . .. . .. . . 12,312,000 12,463,000 12,463,000 12,446,000 10,463,000
Book value per share . . . . . .... .. . .. . . ... . .. $3.83 $3.26 $2.79 $2.18 $1 .70
STATISTICS
Passengers . . ... . ....... . . . . ... . . .. . . . ... 4,546,000 4,263,000 4,319,000 3,793,000 3,753,000
Passenger miles (000) . . . .. . ... .. . . . . ... . ... 1,061 ,000 1,012,000 1,029,000 866,000 806,000
Available seat miles (000) . .. . . . . . .. . . .. ... . . 2,151 ,000 2,139,000 2,048,000 1,961 ,000 1,810,000
Passenger load factor ...... ... . ... ..... . . .. 49.3% 47.3% 50.3% 44.2% 44.5%
Cargo ton miles .. .. . . ... ... .. . . . ... . . . .. . . 12,585,000 13,394,000 12,180,000 9,473,000 10,985,000
Revenue plane miles . . ... . ... . ... . .... .. ... 29,055,000 29,422,000 29,200,000 28,204,000 26,693,000
Number of employees . . . ... . . . ... . . . . . . . ... 3,360 3,250 3,120 3,020 3,150
19
20
communications
A dramatic advertising campaign
introduced North Central's
" Explorer's bill of fare" food service.
Full-page newspaper advertisements
in color highlighted the new
cuisine now being offered on long-haul
nonstop flights. This exclusive
culinary adventure features savory
dishes from around the world.
Portuguese specialties were used
first in this series of uniquely prepared
foods. The ad text carried the various
menus, along with flight schedules
and special tour packages. The
impact was particularly noticeable
in the Denver-Minneapolis/St. Paul
market, where traffic increased
15 percent in 1974.
Another major advertising theme,
" Get up on Cloud Nine", encouraged
passengers to try North Central's
DC-9 custom-jet service. This series
promotes the three-and-two seating
with fold-down center seat and
complimentary meals on selected
flights at regular coach fares.
Passengers were told of savings,
through " interline" joint fares, when
they start a trip on North Central
and then transfer to another carrier.
Popular give-away items, such as
the "Frostbite Kit" and Ski Tips
brochure, were again available, and
a Fishing Tips booklet with a lure
was added for travelers to major
summer vacation spots.
A new skiing film was produced for
groups interested in winter fun on the
slopes and shown extensively. For
the third consecutive year, reduced-
rate "Broadway Show" tours were
offered to New York travelers who fly
North Central.
Media emphasis is reflected by
audience figures. Advertising reached
an estimated 8.1 million newspaper
readers, 7.1 million television viewers,
4.4 million radio listeners and 1.5
million magazine subscribers. Ads in
the different media are coordinated
to reinforce each specific campaign.
The financial public relations
program, expanded when the com-
pany was listed on the New York
Stock Exchange in 1973, is continuing.
Company officers periodically
address major security analyst groups
around the country about the airline's
achievements and current news.
Stories are regularly carried in The
Wall Street Journal and on the
Dow Jones and Reuters wire services.
Communications with stockholders
included distribution of the 1973
Annual Report-selected by Financial
World for an award in its industry
class-and quarterly statements.
Some 50 news releases reported
financial results, traffic records and
other North Central developments
to media outlets. About 12,000 com-
pany history booklets, aircraft
information sheets, and DC-9
postcards are given away annually.
Sales people made nearly 25,000
personal calls on principal industrial
accounts and travel agencies over
the airline's 13-state area and
Canada. North Central personnel
participated in 800 meetings with
civic, industry, and special interest
groups.
The Northliner Museum at the General
Office officially opened in June
1974 and has already attracted more
than 1,000 guests. Nearly 4,000
people, ranging from grade school
children to adults, took conducted
tours through the airline's facilities.
Another public relations activity
brought over 9,000 Twin Cities resi-
dents to the company's headquarters.
good people make :airline great
These visitors, who attended public
functions in the cafeteria, saw part of
the airline's operation and were
introduced to food service from the
North Central Flight Kitchen.
Company people at other cities
around the system also hosted
groups interested in aviation.
Aboard the aircraft, the Northliner
Magazine and the Northliner Gifts
catalog are carried in each seat
pocket. The 32-page magazine has
entertaining articles about areas
served by North Central and some
phase of the airline's operation,
as well as stories on travel and busi-
ness. The catalog offers merchandise
of interest to passengers, and many
items carry the company name and
mallard duck insignia.
The Northliner newspaper, judged
in 1974 as the top paper published for
regional airline employees, keeps
personnel informed of company news
on a monthly basis. Memos and
bulletin board announcements
provide interim communications.
Corporate officers personally meet
with employees at each station for
an informal visit at least once a year.
As in the past, North Central receives
additional support and publicity from
many individuals and organizations.
This invaluable assistance contributes
measurably to the company's
progress and is greatly appreciated.
rllWICW.WDU
He. of"
lndusfr)'
.\n.anl
....... "'_
..........
1973 Annual Report and The Northliner
newspaper received awards.
The Northliner Museum opened
at the airline's headquarters.
GYours only on North Central nonstop to Minneapolis/St. Paul
Exotic foods gathered from around the world, menus and recipes
from internationally renowned restaurants and hotels. Our Explorer's
Bill of Fare puts world-famous foods right in front of you on our
evening nonstop to Minneapolis/ St. Paul.
Right now, feast on Lombo De Vaca Com Yinho De Madeira
(tenderloin steak with Madeira wine) from the Hotel Savoy of
Madeira, Portugal. Or Peito De Frango A Portuguesa (chicken breast
Portuguese style). Sip complimentary Isabel Rose wine. Relax just
as you would on board TAP, the intercontinental airline of Portugal
... where you eat like this all the time. In short, sit back and enjoy
one of the four different Portuguese menus we rotate on our 7:00 p.m.
nonstop to Minneapolis/ St. Paul.
Hearty Breakfast
EYE-OPENER
(A 16-oz Bloody Mary
or Screwdriver ava1
lablc}
BLUEBERRY PANCAKES AND SAUSAGE
CHEESE OMELET AND SAUSAGE
SCRAMBLED EGGS AND SAUSAGE
FRENCH TOAST AND SAUSAGE
(Above menus rotate
on our mommg night)
All Breakfasts Include
Juice, Fruit Cup. Muffin
or Sweet Roll. Coffee
Magellan Wine Basket
HOT HAM & CHEESE SANDWICH
REUBEN SANDWICH
CHEESEBURGER
HOT PASTRAMI SANDWICH
SMOKED TURKEY ON
DELI ROLL
(Above menus rotate
on our luncheon flight)
All Luncheons Include
Cheese, Fresh Fruit,
Complimentary Rose Wine
A Taste of Portugal
ALCATRA A MODA DA MADEIRA
(S1cak Madeira S1ylc)
LOMBO DE VACA COM V(NHO DE MADEIRA
(Tenderloin Steak w11 h Madeira Wine)
PEITO DE FRANGO A PORTUGUESA
(Chicken Breast Portuguese Style)
ESPETADA
(Shish J:(ebabl
(Above menus rotate
on our evening night)
All Oinn~rs Include
Salad. Vcge1ablc. Ho1 Rolls
and Butter. Dessert and CoHce
Call 398-5566 or your travel agent.
Nonstop to Minneapolis/St. Paul
9:00 a. m.
1:55 p.m.
7:00 p.m.
good people
;m
~ -
~
AIRLINES .._
NORTH CENTRAL AIRLINES, INC.
7500 NORTHLINER DRIVE
MINNEAPOLIS, MINNESOTA 55450