Northeast Airlines Annual Report 1941

ANNUAL REPORT
~t~
YEAR ENDED JUNE 30, 1941
DIRECTORS
HARRY R ON, t. lbans, Vt.
P L F. COLLIN , Winche ter Mass.
DA C. Do GL
I
Portland, M .
GE RGE F. GL Y Bo ton, Mass.
D vrn H. H wrn Bo ton, Mas .
M EL J. OLOMO ilv r pring Md.
E GE E L. Vrn L, w York, . Y.
L URE CE F. WHITTEMORE, Pembrok . H.
OFFICERS
President, M EL J. LO MON
Vice-Pre ident, LA REN E F. WHITTEMORE
General Sales and Traffic Manager, Do ALD A. DUFF
Clerk of Corporation, ARTH R B. ICHOLS
Treasurer, GEORGE F. GLACY
Counsel, WILLIAM . COLE
General Offices: Boston Municipal Airport
Boston, Mass.
Transfer Agent: O ld Colony Tru t Company
Bo ton, M as.
To the Stockholders
of the Northeast Airlines, Inc.:
On behalf of the Board of Directors, there is submitted
herewith a report for the year ended June 30, 1941:
OPERATIONS
Th operations of your Company durin ~ year ended------=?
June 30, 1941, resulted in a deficit of $56,20b :. Earnings - 20~.
increased $158,980.23 over the year 1940, while expenses in-
creased $224,915.79.
The following Condensed Comparative Income State-
ment is submitted for your further information:
Years Ended June 30
1941 1940
Increase or
(Decrease)
Operating Revenue .... $607,649.22
Operating Expenses. . . . 660,097 .66
$448,668.99 $158,980.23
435,181.87 224,915.79
Net R evenue or (Loss)
from Operations ... . .
Deductions .......... .
Net Income or (Deficit)
- before Federal In-
($52,448.44) $ 13,487.12
4,659. 98 2,937.69
($65,935. 56)
1,722.29
come Taxes ........ ($57,108 .42) $ 10,549.43 ($67,657.85)
Provision for Federal In-
COJTle Taxes* ....... . ($900.00) $ 900.00 ($1,800. 00)
Net Income or (Deficit). ($56,208.42) $ 9,649.43 ($65,857.85)
* The provision in the year ended June 30, 1940 was not required and was restored to income
in the following year.
1
(
Revenue Miles Flown. . 1,085,907
Per Cent of Scheduled
Miles Flown . . . . . . . . 8 5 . 24
780,284
87.30
305,623
(2. 06)
The opera ting revenues for the year ended June 30, 1941,
while $158,980 greater than in the previous year, were af-
fected by abnormal conditions, such as restrictions placed on
Canadian residents desiring to travel to the United States and
by unusually poor flying conditions last winter.
The increase in expenses resulted from the fact that the
year was one of expansion and improvement of service and
from a payroll increase of $110, 164 occasioned by necessary
additions to personnel and new wage agreements with our
employees.
NEW FINANCING
On November 19, 1940, the Compa~y's corporate name
was changed from BosTON-MAINE AIRWAYS, INC. to NoRTH-
EAST AIRLINES, INC. On December 10, 1940, the stockholders
authorized a recapitalization, whereby the authorized capital
stock was changed to consist solely of 500,000 shares of com-
mon stock of $1.00 par value. Of the new stock 171,108 shares
were issued in exchange for the outstanding preferred and
common stock on the basis of 22 shares of new common for
each pref erred share, and 8 6 shares of new common for each
share of old common stock.
The sale of 128,892 additional shares of the new stock was
completed on January 10, 1941; 101,796 shares were sold to
five underwriters for public offering, and 27,096 shares were
sold to the Boston & Maine and Maine Central R ailroads.
The proceeds of these sales were used:
(A) To defray expenses in connection with
sale of stock. . . . . . . . . . . . . . . . . . . . . . $16,653.44
(B) To reduce outstanding bank loans pre-
viously made in connection with the
purchase of Lockheed Aircraft. . . . . . 47,222.56
2
(C) To purchase three 24-passenger Doug-
las DC3 Aircraft, together with neces-
sary instruments, radio equipment,
shop equipment, spare parts and ac-
cessories, including two spare Pratt &
Whitney motors. . . . . . . . . . . . . . . . . . 456,286.00
(D) Added to general funds of the Com-
pany ...... .. . ...... . ........ . ... 72,741.20
$592,903.20
On April 23, 1941, an unsecured loan of $150,000 was
made to be repaid in instalments of $5,000 per month and
carrying interest at the rate of 4 per cent. The proceeds
from this loan were used to discharge outstanding loans carry-
ing a higher interest rate, purchase additional radio equip-
ment, spare parts for planes and motors and increase working
capital.
NEW EQUIPMENT
In May, 1941, delivery was received of three Douglas
DC3 passenger airplanes, each equipped with two Pratt &
Whitney motors, purchased from the funds realized from the
sale of the capital stock referred to above. These air liners, the
largest in service in New England and seating 24 passengers,
were placed in revenue service between Boston and Bangor,
and Boston and Montreal on July 1, 1941. Four Stinson air-
planes were purchased during the year for use in connection
with the Company's pilot training school.
AIRPORTS
The extensive airport development program for North-
ern New England in the interest of National Defense, totalling
in excess of $5,000,000 was undertaken late in 1940, and while
not yet completed, has already increased the number of air-
3
ports in the Company's routes capable of accommodating the
Douglas equipment. Upon completion of work now under
way, or provided for by appropriations already made, it is
expected that all airports which the Company has served with
smaller equipment will be suitable for use by the Douglas
equipment. At present, operations into White River Junction,
Montpelier-Barre, Augusta, Millinocket, Houlton, and Cari-
bou are suspended, while at different periods during the year
airport construction has made it impossible to use the Man-
chester and Concord airports.
The suspension of service and limitations on landings
have caused the Company some loss of revenue, but upon
completion of the airport developments the Company will be
able to furnish a more complete and dependable service than
has heretofore been possible.
PILOT TRAINING SCHOOL
For several years the Company has been operating an
advanced training school for prospective airline pilots, for
which tuition is charged. Income from this source contributes
substantially toward offsetting cost to the company of pilot
flight checks and simulated flight practice, and the training of
its first officers for captaincies.
In the early part of 1941, school facilities were enlarged
and courses of instruction in cross country flights established.
Under government contract in connection with the Civilian
Pilot Training program, students are assigned to the school
and their tuition paid by the government. An intensive course
of instruction is followed to train the students to become in-
structors of similar courses given in various parts of the coun-
try, and many graduates of the school are now instructors at
their respective bases.
Through the operation of this school, the company is con-
tributing substantially to the National Defense training pro-
gram of the country.
4
NEW ROUTE APPLICATIONS
On November 19, 1940, the Civil Aeronautics Board
amended the Company's Certificate of Public Convenience
and Necessity by authorizing service between Bangor and
Moncton, New Brunswick, a distance of 21 7 miles. This service
was commenced on January 3, 1941, by the operation of two
round-trips daily, carrying passengers and mail. The develop-
ment of passenger business on this line has been slow, but is
showing definite improvement.
On November 12, 1938, the Company applied for a
Certificate authorizing operation between Boston and New
York City. Only one air carrier now operates in this area. On
April 24, 1940, the Company applied for a Certificate over a
273-mile route between Portland and New York City, with
intermediate stops at Lawrence and Worcester, Mass., and
Hartford and Meriden, Conn. The important cities of Law-
rence, Worcester and Meriden and their adjacent territories
are now without air transport service. The Company has been
advised that on or about December 1, 1941, hearings will be
conducted by an Examiner of the Civil Aeronautics Board on
these two applications.
PERSONNEL
The extension and improvement of the Company's oper-
ations, traffic development efforts, and enlarged training
school staff have increased the number of employees to 249
on August 20, 1941.
Competition for experienced personnel, particularly from
the Government and National Defense industries, has been
felt, although thus far we have made suitable and satisfactory
replacements, and it is hoped that by reason of present policies
and new wage scales, personnel turnover will be low in the
future.
On September 1, 1940, the Company signed an agree-
s
ment with the Air Line Pilots Association, International, re-
lating to wages, hours of work, working conditions and meth-
ods for the orderly settlement of disputes.
SAFETY
The management and its entire personnel take satisfac-
tion in the fact that from the beginning of the company's
operations its service has been conducted without casualty or
injury to any passenger, and they will strive to continue the
excellent record in this matter of paramount importance.
CONCLUSION
The management is mindful of its obligation to operate
efficient air transport service in the interest of the commerce
and defense of the nation and to do so at a reasonable profit to
its owners. Much depends upon the energetic development of
passenger traffic and such economy in operations as is con-
sistent with safety and good service to our patrons. Efforts to
meet fully all responsibilities will be vigorously continued. On
their part the stockholders can materially assist by their pa-
tronage of the service and in urging its use by others. The
officers would welcome suggestions from them as to any steps
which can be taken to improve the service or increase the
revenues.
By order of the Board of Directors,
August 27, 1941.
6
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I I
-
NORTHEAST AIRLINES, INC.
Boston, Massachusetts
We have examined the balance sheet of
Northeast Airlines, Inc., as at June 30, 1941,
and the comparative statement of profit and
loss and the statement of capital surplus for
the years ended June 30, 1940 and 1941,
have reviewed the system of internal control
and the accounting procedures of the com-
pany and, without making a detailed audit
of the transactions, have examined or tested
accounting records of the company and other
supporting evidence by methods and to the
extent we deemed appropriate.
In our opinion, said financial statements
present fairly the position of Northeast Airlines,
Inc., as at June 30, 1941, and the results of its
operations for the years ended June 30, 1940
and 1941, in conformity with gen er ally ac-
cept d accounting principles maintained by
the company on a consistent basis during the
years under review.
LYBRAND, Ross BRos. & MoNTGOMERY
Boston, Massachusetts
August 27, 1941
~.1111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111111r.
7
BALANCE SHEET AS AT JUNE 30, 1941
ASSETS
Current assets:
Cash in banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 168,887. 63
Accounts receivable:
Airlines and agents.......... $ 51,745.36
United States Post Office De-
partment ................ .
Other, less $700.00 reserve for
doubtful accounts ........ .
Inventories (at average cost or less) :
37,901.70
41,072.30
Aviation fuels and oil . . . . . . . . $
Replacement parts and supplies
2,580.45
82,089.02
Total current assets .. . ................. .
Property and equipment:
Unamortized improvements to
real estate not owned . . . . . . . . . $ 5,402. 14
Aircraft, engines and communica-
tion equipment:
Passenger, mail and express
service .................. .
Training school .. ... . ...... .
Shop and miscellaneous equip-
ment . . . ....... ......... .. .
*Total ... ..... ........... .
Less reserves for depreciation ..
Property and equipment acquisition
adjustment-to be amortized over
the period of ten years beginning
655,414.92
37,358. 19
31,119.30
$729,294.55
165,166 .77
July 1, 1941 . ... ... ....... ....... ......... .
Prepaid expenses and def erred charges:
Prepaid insurance. . . . . . . . . . . . . $ 24,804. 09
Unamortized costs of developing
routes .................... .
Shop orders in process for plant
improvements .......... .. .. .
Other deferred charges and pre-
11,679 .95
7,616.82
130,719 .36
84,669.47
$ 384,276. 46
564,127.78
66,293. 73
payments ......... .. ...... . 6,328 . 02 $ 50,428 . 88
$1,065,126.85
* $600,000 represents cost and the remainder is based on depreciated original cost of tangible
assets acquired from National Airways, Inc., March 1, 1937.
8
BALANCE SHEET AS AT JUNE 30, 1941
LIABILITIES
Current liabiliti s:
Notes payable to banks (instal-
ments due within one year) .. . . ... .. ... .. .
Accounts payable:
Purchases. . . . . . . . . . . . . . . . . . $176,969.06
Airlines ... . .... ... .. .. ... .
Salaries and wages .. . . .. . . . .
24,111. 75
24,164 .67
Accrued taxes . . .. . ... ...... .......... . . . . . .
Other currentliabilities . .. .... .. . . .. .. .. . . .. .
$ 60,000.00
225,245 .48
5,063.16
386.42
Total current liabilities. . . . . . . . . . . . . . . . . . $ 290,695 . 06
Notes payable to banks, 4,' per
cent, due in equal monthly in-
stalments to October 23, 194 3 . . . . $140,000 . 00
Less instalments due within one
year, included in current
liabilities ... .... ......... .
Deferred income and liability .. . .. .
CAPITAL
Common stock, par value $1 per
share, authorized 500,000 shares,
issued and outstanding 300,000
60,000.00
shares. . . . . . . . . . . . . . . . . . . . . . . $300,000.00
Premium on common stock ( excess
over par value of proceeds of
stock issued in 1941, less ex-
penses of issue) . ....... ... .... .
Deficit in earned surplus since July 1,
447,357.76
80,000.00
3,282 .45
1940 . . . ... .. . . . . .. ...... .. .. . (56,208.42) 691,149.34
$1,065,126 .85
9
r/orfheadf Airfined, !Jnc.
COMPARATIVE STATEMENT OF PROFIT AND LOSS
For the Years Ended June 30, 1940 and 1941
Opera ting revenue:
Passengers . . . . . . . ... ... .
Air mail .. .. . ..... . .... .
Express and excess baggage
Gross profit from training
school ....... .. ...... .
O ther ............... . . .
Total operating revenue.
O perating expenses:
Conducting transportation
Maintenance and repairs ..
Provisions for depreciation
Traffic and advertising . .. .
General and administrative
Taxes, other than income
taxes . . .... . .... . .... .
Total operating expenses
Operating income or (loss)
Deductions from income:
Interest ..... .. . .. .. . .. .
Other deductions .. . .. .. .
Total deductions from in-
Years Ended June 30
1941 1940
$270,1 33. 62
299,200 .66
4,332 .90
24,493 .86
9,488.18
$607,649. 22
$370,455 . 96
154,804 .50
50,237 .29
27,272 .75
44,238 .75
13,088 .41
$660,097 . 66
($52,448 . 44)
$ 3,876 .80
783 . 18
$182,258 .31
245,843 .99
3,241 .28
9,865 .14
7,460 .27
$448,668 . 99
$243,195 .33
84,805 .79
39,543 .51
22,607 .25
35,535 .22
9,494.77
$435,181.87
$ 13,487 .12
$ 2,735 .28
202 .41
Increase or
(Decrease)
$ 87,875 .31
53,356.67
1,091.62
14,628 .72
2,027 .91
$158,980 .23
$127,260 . 63
69,998 .71
10,693.78
4,665 .50
8,703.53
3,593 .64
$224,915.79
($65,935. 56)
$ 1,141 .52
580 .77
come. . ... ... .... . . . $ 4,659 .98 $ 2,937 .69 $ 1,722 .29
Profit or (loss) before
federal income taxes.. ($57, 108 .42) $ 10,549 .43 ($67,657.85)
Provision for federal income
taxes t . . . . . . . . . . . . . . . . . (900.00) 900 . 00 (1,800.00)
Net profit or (loss) for
year .......... . .... ($56,208.42) $ 9,649.43 ($65,857.85)
Deficit in earned surplus at
beginning of year . . . . . . . . See * (108,771 .58)
Deficit in earned surplus at
end of year. . . . . . . . . . . . . ($56,208.42) ($99,122 . 15*)
* The deficit in earned surplus as at June 30, 1940 was charged to capital
surplus pursuant to plan of recapitalization adopted by stockholders in December,
1940.
t The provision in the year ended June 30, 1940 was not required and was
restored to income in the following year.
10
STATEMENT OF CAPITAL SURPLUS
Years Ended June 30, 1940 and 1941
Capital surplus at July 1, 1939 . .... ... . . ....... .
Amount paid in March, 1940 . . ..... .. .... . . . .. .
Capital surplus at June 30, 1940 ................. .
Capital surplus resulting from ex-
changes of capital stocks, pursuant
to plan of recapitalization adopted
by the stockholders in December,
1940:
Par value ($100. per share) of
stocks canceled :
Pref erred stock . . .......... .
Common stock . . ....... .. . .
Par value ($1 per share) of com-
mon stock issued . . . . . . . ....
Amounts written off in connection
with said plan of recapitalization:
Deficit in earned surplus at June
$191,400 .00
150,000 .00
$341,400.00
171,108 .00
30, 1940.. ............ .... $ 99,122.15
$ 14,706.34
1,397.56
$16,103.90
170,292.00
$186,395.90
Portion of property and equip-
ment acquisition adjustment .. 87,273.75 $186,395.90
11
NORTHEAST AIRLINES, INC., STATISTICS
Years ended June 30 Increase or (Decrease)
1941 1940 Amount Per Cent
PLANE MILES SCHEDULED ........ 1,273,990 893,768 380,222 42 .54
PLANE MILES FLOWN
Revenue Miles Flown Scheduled Service 1,085,907 780,284 305,623 39 . 17
Other Revenue Miles .. . . .. ... .... ... . 2,774 2,482 292 11. 76
T otal Revenue Miles ............... 1,088,681 782,766 305,915 39.08
Non-Revenue Miles ................. . 112,850 102,381 10,469 10 .23
Total Plane Miles Flown ... . ........ 1,201 ,531* 885,147t 316,384 35 . 74
Per Cent of Scheduled Service Performed .. 85 .24 87 .30 (2 .06) (2 .36)
PASSENGERS CARRIED
R evenue . . . ... .......... . .. ...... ... 31,947 21,605 10,342 47 .87
Non-Revenue .. .. .... . ....... . . .. . . . 4,669 2,614 2,055 78 .62
Total Passengers Carried . . .. . ... .. . 36,616 24,219 12,397 51.19
PASSENGER MILES
Revenue .. . .. .......... ..... ........ 4,908,354 3,325,058 1,583,296 47 .62
Non-Revenue ..... .......... . .. . ... . 648,696 357,971 290,725 81. 21
Total Passenger Miles . . ..... .. .. ... 5,55 7,050 3,683,029 1,874,021 50 .88
Revenue Seat Miles Operated ........... 11,068,994 7,816,356 3,252,638 41 . 61
Revenue Passenger Load Factor ........ . 44 .34 42 .54 1.80 4.23
Average Length of Passenger Trip (Miles) 154 154
MAIL
Pounds Carried . ... .. .......... ... ... 115,748 95,552 20,196 21.14
Pound Miles ........................ 18,836,873 13,719,997 5,116,876 37 .30
EXPRESS and FREIGHT
Pounds Carried ... . ...... . 46,684 34,506 12,178 35 .29
Pound Miles ... 6,309,182 4,580,975 1,728,207 37 . 73
EXCESS BAGGAGE
Pounds Carried . .......... . .. 23,202 7,196 16,006 222 .43
Pound Miles .... 3,352,707 1,288,510 2,064,197 160 .20
OPERATING REVENUES PER REVENUE MILE FLOWN (cents)
Passenger ......... . ..... .. .. ... .. ... . .
Mail ........ . ................. .... .
All Other . ..... . . ... ... .. ... .... . .... .
Total .
Years ended June 30
1941 1940
24.81
27 . 48
3 .52
55 .81
23.28
31 . 41
2.63
57 .32
Increase or (Dec;ease)
A mount Per Cent
1 .53 6 .57
(3 .93) (12 .51)
.89 33 .84
(1 .51) (2 .63)
OPERATING EXPENSES PER TOTAL MILES FLOWN (cents)
Conducting Transportation ............ .
Maintenance and Repairs ...... .. ...... .
Depreciation . . . . . . ........ .
Traffic and Advertising ..... . .... ... .. . .
General and Administrative ... . ........ .
Taxes (other than Federal Income) ...... .
T otal Operating Expenses ....
Years ended June 30
1941 1940
30 .83
12 .88
4.18
2 .27
3 .67
1 .09
54 .92
27 .48
9.58
4 .47
2 .55
4 .01
1.07
49 . 16
* Does not include 402,340 miles flown in school operation.
t Does not include 4,644 miles flown in school operation.
12
Increase or (Decrease)
Amount Per Cent
3 .35
3 .30
( .29)
(.28)
(.34)
.02
5 . 76
12 . 19
34.45
(6 .49)
(10 .98)
(8 .48)
1 .87
11. 72
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LEGEND
- PRESENT ROUTES OF NORTHEAST AIRLINES
_ _ ROUTES OPERATED BY OTHER AIR CARRIERS
PATH OF THE PILGRIM PLANES