Northeast Airlines Annual Report 1948

. ~NNUAL ~PORT
1948
NORTHEAST AIRLINES, INC.
"The Yanlcee Fleet"
NORTHEAST AIRLINES
INC.
'Board of 'Directors
JACQUELINE CocHRAN
New York, N. Y.
JAMES F. FITZGERALD
Boston, Mass.
GEORGE E. GARDNER
Boston, Mass.
GEORG
E E. GARDNER.
A. A. LA
NE
R. H. HERRNSTEIN .
HENRY E. FoLEY
FoLEY, HoAG AND ELIOT
LYBRAND, Ross BRos. & MoNTGOMERY .
OLD COLONY TRUST COMPANY .
PAUL F. CoLLINs, Chairman
EUGENE L. V !DAL
New York, N. Y.
Officers
THE FIRST N A
TIONAL BA
NK OF BosTON
GRENVILLE L. HANCOCK
Boston, Mass.
RADU lRIMESCU
New York, N. Y.
ALBERT C. McMENIMEN
Boston, Mass.
President
. Vice President
Assistant Treasurer
. Clerk of Corporation
General Legal Counsel
Auditors
. Transfer Agent
. Registrar
General Offices, LoGAN AIRPORT, BosToN 28, MAss.
* NORTHEAST AIRLINES, INC.
The President's Report to
The Stockholders and Employees
I. F OllEWORD
*
There is submitted herewith Northeast Airlines' Balance Sheet as of December 31, 1948 and Profit and
Loss Statement for the year 1948, certified by the Company's auditors, Lybrand, Ross Bros. & Montgomery.
A table of comparative statistics is also submitted.
The statements submitted present the Company's operating record during the past calendar year and
also the financial condition of the Company at the end of the year. They do not, however, give a true picture
of the current status of Northeast Airlines. A great many changes have taken place between December 31,
1948 and the time of this report which have, or could have, an important bearing upon the Company's finan-
cial condition and future outlook. A report to you with respect to these changes should not be delayed until
the next annual report. Your attention is, therefore, called to the footnotes accompanying the financial state-
ments and to the comments herein regarding changes which have occurred in 1949 and the outlook for the
year as a whole.
II. REVIEW OF 1948
Financial
The balance sheet as of December 31, 1948 indicates a decidedly stronger condition than that of the
previous year. Current assets, including cash of $998,669 amounted to $1,478,999 compared with current
liabilities of $289,588. As of December 31, 1947 current assets amounted to $772,137, and current liabilities
were $2,670,475. The major factors in the improvement were the sale of 83,333 shares of convertible preferred
stock, which provided funds for the payment of shorMerm notes and working capital, and the receipt,
during 1948, of retroactive mail pay for prior ye~rs in the amount of $1,184,770.
Largely as a result of the sale of three airplanes and the interruption of equipment utilization incident to
mandatory fire prevention maintenance, schedules were reduced and operating revenue declined from
$5,042,723 in 1947 to $4,646,886 in 1948. The operating loss, however, as shown by' the 1948 profit and loss
statement, was reduced to $462,340 in 1948* from $505,630 (as adjusted to reflect retroactive mail pay received
in 1948) in 1947 and the net loss to $531,250 in 1948 from $601,424, as so adjusted, in 1947. Moreover, these
figures, shown in the 1948 profit and loss statement, are, of necessity, not final. Mail pay accruals shown in
the statement reflect the temporary mail rate then in force. This rate has been further increased and addi-
tional mail pay has been received since the 1948 year end. Under a March 18, 1949 order of the Civil
Aeronautics Board, a further retroactive increase in the Company's temporary mail rate produced air mail
revenue of approximately $374,000 additional, of which approximately $238,000 represents additional mail
pay earned in 1948, and the balance, $136,000 earned in 1947. If the $238,000 received in 1949 were reflected in
the 1948 statements, the operating and net losses for that year would be reduced to $224,340 and $293,250
respectively. There may be further adjustment relative to 1948 operations when final airmail pay for that
year is determined.
After downward revision of net depreciation expense as indicated in footnote F to accompanying Financial Statements.
* NORTHEAST AIRLINES, INC. *
The following table shows the effect on 1947 earnings of temporary retroactive mail pay so far re-
ceived:
1947 Net Loss as Previously Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,380,832
Less Retroactive Mail Pay Received in 1948 ............. .. ..... .
Net Loss for 1947 as restated in accompanying statement of Profit
and Loss ..................................................... .
Less Retroactive Mail Pay Received in 1949 ... ... .... . ......... .
Net Loss for 1947 reflecting above adjustments ............ . ..... ... ... .
779,408
601,424
136,000
$465,424
The following is a tabulation of all of the C.A.B.'s retroactive mail pay orders since the last Annual
Report:
Date of Order
February 26, 1948
November 12, 1948
March 18, 1949
RETROACTIVE MAIL PAY ORDERS
Period Covered Additional Cash
May 1, 1945 - April 30, 1947 $ 546,806
May 1, 1947 - June 30, 1948 912,194
May 1, 1947 - December 31, 1948 374,000
Total $1,833,000
Allocated by Years
1945- $ 94,637
1946- 310,725
1947- 141,444
1947 -- 637,963
1948- 274,231
1947 - 136,000
1948- 238,000
$1,833,000
For further clarification, the Company received during 1947 an average temporary mail rate of 16.7
cents per revenue "
plane mile. During most of 1948, the Company received a temporary rate of 25 cents per
airplane mile until the order of November 12, 1948, which fixed the temporary rate at 40 cents. The March 18,
1949, order of the Civil Aeronautics Board provides for a temporary mail rate of 45 cents per airplane mile
calculated on a daily mileage base of 13,000 miles after January 1, 1949.
The constant effort of management to hold expenses in line has resulted in the further reduction in
personnel during 1948. There were 651 employees at the end of the year compared to 864 at the beginning,
whereas there has been a reduction of less than ten per cent in available seat miles flown and only about fif-
teen per cent in revenue passenger miles performed. While personnel numbers were thus materially reduced,
net economies in personnel costs were lessened by the necessity of wage increases for practically all remaining
employees. A very sharp increase ~n the price of gasoline during 1948 increased costs $167,000 over what the
same quantity would have cost in 1947.
* NORTHEAST AIRLINES, INC. *
Operations
During 1948, there was, for reasons stated above, a reduction in scheduled mileage. There was, however,
at the same time an encouraging increase in the Company's operating factor and it reached the highest point
in the Company's history. As may be seen from the Statement of Comparative Statistics submitted herewith,
87.86% of scheduled miles were completed in 1948 as compared with 83.81 % in 1947. This was due partly
to the establishment by the Civil Aeronautics Authority of more appropriate minimum requirements at
various airports, as well as to the installation by the Company of additional navigational aids over its route.
These aids facilitated flying under instrument conditions. The use of Instrument Landing System proce-
dures at Boston, New York, Worcester and Montreal, together with the installation by the Company of four
non-directional type H homing stations at locations where the C. A. A. has not seen fit to provide naviga-
tional aids, has materially improved the dependability of service to the traveling public.
While the load factor over Northeast's system showed a decline from 51.24% in 1947 to 48.02% in 1948,
the industry, generally, had a similar experience and a number of lines experienced a materially greater
decline.
The sale of three 29-passenger DC-3 aircraft early in 1948 and the conversion of one 29-passenger DC-3
to 24-passenger capacity resulted in the Company operating for the greater part of the year with flying equip-
ment consisting of three DC-4 four-engine Douglas Skymasters with 60 seats each, seven 24-passenger DC-3
planes and one 29-passenger DC-3 plane, all with an adequate supply of spare engines, propellers, and
accessories. Substantial progress was made during the year in improving and refurbishing these aircraft and
mandatory fire prevention work was accomplished on all planes.
Your Company, conscious of its responsibility to provide modern service to the New England area,
decided upon the purchase of five new Convair Model 240 "Convairliner" aircraft, manufactured by Consoli-
dated V ultee Aircraft Corporation of San Diego, California. The first of these five aircraft was received by
the Company on February 25, 1949, the second and third on April 15 and April 18, 1949, respectively, and
the remaining two are expected to be on hand by early May. Convairs will be placed in revenue service
during April, replacing the DC-4's. The Company is considering possible sale of the DC-4's after full-scale
Convairliner operation has been accomplished. Several inquiries from interested parties have already
been received.
Routes and Services
There were no changes in the Company's route structure during the year. The inauguration of service
from the Maritime Provinces to Boston in 1947 by a Canadian carrier greatly reduced the public need for
the Company's operation from Bangor, Maine, to Moncton, New Brunswick. The Board, accordingly,
authorized a one-year suspension of service over that foreign segment, and service was actually suspended at
the end of July, 1948.
Lack of suitable navigation facilities caused a short suspension, during the early part of 1948, of service
over the Connecticut Valley route between New York and Keene, New Hampshire, via Springfield, Massa-
chusetts. Service was resumed, however, on May 28, 1948, and the operation extended beyond Keene to
Burlington, Vermont and Montreal.
E. W. Wiggins Airways, Inc. advised the Company, in October, 1948, that it chose to terminate the
agreement relating to the transfer to it of the so-called local or feeder-type portions of the Company's
domestic operations. '
Hearings in a proceeding before the Civil Aeronautics Board relating to additional feeder service in
New England (known as the Service in New England States case) were held beginning March 28, 1949 in
Boston before an Examiner of the Board. In this proceeding your Company is seeking, at the request of
certain local public authorities, to make possible direct service between Concord and Manchester, New Hamp-
shire on the one hand, and New York and Portland, on the other. On the other hand, abandonment is sought
of service to Islip and Riverhead on Long Island, New York. These points are certificated to the Company but
* NORTHEAST AIRLINES, INC. *
have not as yet been served. The Company has also requested the Board to decide whether the public interest
calls for the continued certification of this Company to serve New London, Connecticut.
In September, 1948, the Civil Aeronautics Board ordered a hearing to investigate the desirability of
possible changes in the ownership and operation of the routes of National Airlines, Inc. Your Company has
participated in the proceeding and submitted information and testimony relating to the public advantages
of a combination of National's New York to Miami-Havana route segment and Northeast's system. The
hearing opened March 7, 1949 before Examiners of the Board and continued to March 30, when further
hearings were postponed because of certain joint proposals of National, Pan American, Pan American-Grace
Airways and W. R. Grace & Co.
Recent Civil Aeronautics Board Orders
No public action was taken by the Board during 1948 with respect to the Special Report submitted by
the Company to the Board in August, 1947. This report was filed pursuant to order of the Board entered in
1947 in an investigation proceeding concerning your Company's route structure. On February 21, 1949,
however, the Board issued a further order amending its original order instituting that proceeding so as to
provide for "a comprehensive survey through public hearings (a) of the relationship of these routes to an
over-all domestic air transportation pattern, and (b) of what action, if any, may be required in the public
interest with respect to the routes and operations of Northeast by Northeast alone or in conjunction with
any other air carrier or air carriers or by the Board .... "
On February 21, 1949, the Board also ordered general investigations "respecting the need for additional
joint use of facilities" and "in the matter of the cost of transporting mail". Your Company and all other
domestic trunk lines were made parties to these investigatory proceedings.
The foregoing orders were announced by the Board to be incident to a broad policy program embarked
upon by it.
Equipment Financing
An application was filed with the Reconstruction Finance Corporation in September, 1948, for a loan to
aid in paying the cost of the five new Convairs and related spare parts, spare engines, and equipment. The
Directors of the R. F. C. have recently approved a loan to the Company of $1,750,000, at four ( 4) per cent
interest, with maturity in five years. Civil Aeronautics Board approval is required for such loans and was
secured by orders of that Board approved March 11th, and 30th, 1949. Formal consummation of the R. F. C.
loan is expected shortly. The loan as approved is subject to various conditions which restrict Company
action. Among the restrictions is a provision that no dividends shall be declared on the stock of the Com-
pany without prior approval of the R. F. C. uritil the R. F. C. loan has been paid in full.
Management Changes
The resignation of General L. W. Miller as Director and Treasurer on January 23, 1948 created two
vacancies. That on the Board of Directors was filled by the election of Mr. Grenville L. Hancock of Boston
to the Board on June 29, 1948. Mr. Hancock is connected with Associated Plywood Corporation and other
industrial interests. The office of Assistant Treasurer was created, to which Mr. Robert H. Herrnstein was
elected on January 8, 1948.
Mr. Alfred A. Lane became Operations Manager on November 1, 1948, having had many years of
employment with the Company as a pilot. On December 10, 1948, the resignation of Vice President and
Director M. H. Anderson was accepted and Mr. Lane was elected Vice President.
The vacancy created on the Board of Directors by Mr. Anderson's resignation was filled, on December 10,
1948, by the election to the Board of Mr. Albert C. McMenimen, a Vice President of the Boston Edison
Company.
* NORTHEAST AIRLINES, INC. *
Hangar Dedication
The new hangar and office building on Logan Airport at Boston was publicly dedicated, on Febru~ry 27,
1949, as the Amelia Earhart Hangar by Hon. Paul A. Dever, Governor of The Commonwealth of Massa-
chusetts. Thus, just tribute was paid to the First Lady of Aviation who aided in the founding of )'Our
Company.
Safety Record
The Company continued in 1948 to maintain its perfect safety record of no passenger injury since the
commencement of operations in 1933.
III. OUTLOOK FOR 1949
Your management looks to the future with confidence.
It is true that wages and total gasoline costs will show sharp increases in 1949 over those of 1948 and that
in 1949 the Company must absorb a portion of the costly Convair training program for flight and maintenance
personnel. It is further true that at least one item of ground operations expense will increase materially
since takeoff fees charged this Company have been doubled at both Logan and LaGuardia Airports since the
beginning of the year 1949.
I should like, however, to repeat that, notwithstanding these increases, your management looks to the
future with confidence, for there are highly encouraging signs. In the first place, with the help of the
R. F. C., the Company is adding five new Convairs to its fleet. It is believed that these new planes will
require a much lower load factor in order to produce break-even revenue than the equipment the Company
has heretofore been obliged to operate . . These planes should also stimulate passenger traffic, for they are
designed to provide the maximum in comfort and speed and to facilitate the expeditious handling of the
traveling public. In the second place, a further encouraging feature for 1949 lies in the recognition by the
Civil Aeronautics Board of your Company's problems as a short-haul carrier, which recognition is believed
to be implicit in the recent March, 1949 establishment of a temporary mail rate of 45 per airplane mile. Al-
though it is my earnest desire to increase the Company's efficiency and economy of operation to the point
where it does not need such a high subsidy, financial assistance during the interim period is most welcome.
I am also encouraged by the improvement in dependability of the Company's service to the public,
reflected by the increased operating factor for 1948. Performance should be further improved during 1949,
as the Instrument Landing System now installed at New Bedford should be placed in operation in June of
this year. Greater dependability ought to prove particularly important this summer, when, I believe, this
Company will be in position to provide a far more complete service to the vacation spots in the mountains
and along the seashore of New England. Vast numbers of people come to New England for their summer
vacations, and it is the responsibility of your Company to provide them with the finest possible air trans-
portation.
Sometime this summer or early fall, it is expected that all the airlines serving Boston -will move into
their new ticket and passenger handling space at the new apron building at Boston's Logan International
Airport. The construction is of the most modern design and should increase the pleasure and comfort of
Northeast's passengers who pass through Boston.
In the final analysis, the results of 1949 will depend upon greater efficiency and dependability in opera-
tions and upon careful reduction of expenses. Every effort is being made to accomplish. these objectives by
the entire organization. . , .
I wish to thank the stockholders for their continued loyal support and I trust that stockholders as well
as employees will continue their fine efforts to sell Northeast Airlines to the travelling public.
April 'lJ, 1949.
For the Board of Directors
GEORGE E. GARDNER,
President.
CURRENT AssETs:
Cash in banks
Receivables:
Airlines and agents
ASSETS
United States Post Office Department ( note A)
Other receivables
Total receivables
Miscellaneous supplies ( at average cost)
Total current assets
PROPERTY AND EQUIPMENT, AT CosT:
Flight equipment .
Hangar and service building, pledged against long-term debt at December
31, 1948 (note B)
Flight equipment spare parts
Ground and shop equipment
Improvements to real estate not owned
Construction in progress
Land ( nonoperating property) .
Less allowance for depreciation and amortization
Total property and equipment .
Deposits on proposed purchase of flight equipment (note G) .
Stock purchase contract (note C)
Unexpired insurance and other prepaid expenses and deferred charges
Expenses in connection with issuance in 1948 of preferred stock
Franchise and route extension costs, less amortization .
$
NORTHEAST AIRLINES, INC.
'Balance Sheets
1948
998,669 $
122,486
223,791
77,741
424,018
56,312
1,478,999
2,285,070
658,686
475,432
426,613
113,892
26,465
8,225
3,994,383
2,132,011
1,862,372
153,900
31,875
52,777
5,562
As at December 31, 1948 and 1947
1947
294,760
121,221
152,784
121,240
395,245
82,132
772,137
2,430,030
649,008
430,076
409,879
133,066
22,911
8,300
4,083,270
1,723,952
2,359,318
1
25,000 J
31,875
61,686
10,119
23,340
LIABILITIES
CURRENT LIABILITIES:
Notes payable
Accounts payable - vendors and others .
Accrued salaries and wages .
Taxes withheld and other payroll deductions, not yet remitted .
Accrued social security and other taxes
Interest accrued on notes payable .
Unearned transportation revenue
Total current liabilities
Long-term debt:
4% note payable to Atlas Corporation in monthly instalments of $4,000 each
beginning January 1, 1950, balance due December 31, 1954 (note B) .
Reserve for self-insurance (workmen's compensation) .
Reserve for aircraft overhaul (note D) .
Stock purchase contract (for 10,000 shares of authorized, unissued common
stock) ( note C)
Commitments and contingencies ( note G) .
CAPITAL STOCK AND SURPLUS
CoNVERTIBLE PREFERRED STOCK of no par value (note E):
Authorized 85,000 shares
Issued and outstanding 80,312 shares ( after conversion of 3,021 shares into
common shares)
CoMMON STocK, par value $1.00 per share:
Authorized 2,000,000 shares ( note C)
Issued and outstanding: 1948, 519,624 shares; 1947, 500,000 shares .
CAPITAL SURPLUS
DEFICIT IN EARNED SuRPLUS (since July 1, 1940) (note A) .
Total capital stock and surplus
$3,585,485 $3,283,475
The accompanying notes are an integral part of the above balance sheets.
$
1948
174,864
52,208
11,901
19,930
30,685
289,588
320,000
29,030
82,420
31,875
1,606,240
519,624
1,515,227,
(808,519)
2,832,572
$3,585,485
1947
$1,847,005
615,540
80,946
23,740
21,010
49,684
32,550
2,670,475
11,964
32,653
31,875
500,000
1,498,547
(1,462,039)
536,508
$3,283,475
* NORTHEAST AIRLINES, INC.
Statements of Profit and Loss
For the Year Ended December 31, 1948
For the Year Ended December 31, 1947 Restated as Explained in Note A
OPERATING REVENUE:
Passengers
Air mail ( note A) .
Express, freight and excess baggage .
Other, net
Total operating revenue
OPERA TING EXPENSES:
Conducting transportation
Maintenance and repairs ( note D)
Provision for depreciation and amortization ( note F)
Traffic and advertising .
General and administrative
Taxes other than income taxes
Total operating exp~nses
Operating loss
INTEREST EXPENSE
NET Loss from sales and retirements of property and equipment .
OTHER CHARGES, net .
Net loss for year ( note A)
1948
$3,241,912
1,272,398
120,020
12,556
4,646,886
2,122,676
1,319,008
579,370
610,144
367,488
110,540
5,109,226
462,340
29,665
37,418
1,827
$ 531,250
*
1947
Restated
$3,468,913
1,449,831
93,454
30,525
5,042,723
2,088,061
1,302,329
851,423
730,544
464,474
111,522
5,548,353
505,630
52,589
29,204
14,001
$ 601,424
The accompanying notes are an integral part of the above statements of profit and loss.
* I NORTHEAST AIRLINES, INC.
Statement of Deficit in Earned Surplus
(Since July 1, 1940)
For the Year Ended December 31, 1948
(See note A)
BALANCE at beginning of year as previously reported .
RETROACTIVE INCREASES in air mail revenue received in 1948 under orders of the
Civil Aeronautics Board dated February 26, 1948 and November 12, 1948,
applicable, on a revenue mile basis, to the years ended December 31
1945
1946
1947
NET Loss for the year
BALANCE at end of year .
Statement of Capital Surplus
For the Year Ended December 31, 1948
BALANCE at beginning of year (premium on common stock) .
Exc~s of amount paid in on 3,021 shares of convertible preferred stock surren-
dered for conversion over par value of 19,624 shares of common stock issued
in exchange therefor
ExPENS~ of issue of convertible preferred stock ( charged to capital surplus ac-
count pursuant to instructions of Civil Aeronautics Board) .
BALANCE at end of year
$ 94,637
310,725
779,408
*
$1,462,039
1,184,770
277,269
531,250
$ 808,519
$1,498,547
40,796
1,539,343
24,116
$1,515,227
* NORTHEAST AIRLINES, INC. *
Notes To Financial Statements
A-EFFECT OF RETROACTIVE INCREASES IN AIR MAIL REVENUE:
During 1948 the company received retroactive increases in air mail revenue with respect to the 32-month period
from May 1, 1945 to December 31, 1947, under orders of Civil Aeronautics Board dated February 26, 1948 and
November 12, 1948, aggregating $1,184,770 as set forth in the accompanying statement of deficit in earned
surplus. For purposes of comparison, air mail revenue in the accompanying 1947 statement of profit and loss has
been restated to include the portion of this additional revenue applicable to that year. Air mail revenue in-
cluded in the accompanying financial statements is subject to such increase or decrease as may result from
order of Civil Aeronautics Board fixing final mail rates for the period subsequent to April 30, 1947.
Retroactive increases in air mail revenue for the 20-month period May 1, 1947 to December 31, 1948 to be received
under order of Civil Aeronautics Board dated March 18, 1949, aggregating approximately $374,000 ( subject to
possible adjustment as aforesaid when final mail rates are fixed by order of Civil Aeronautics Board), are not
reflected in the accompanying financial statements. Of this amount, on a revenue mile basis, approximately
$238,000 would apply to the year 1948 and approximately $136,000 to the year 1947.
B-PROPERTY PLEDGED AGAINST NOTE PAYABLE:
The 4% note payable to Atlas Corporation is secured by an instrument of mortgage on the company's hangar
and service building, the leases of the site thereof and all fixtures attached to and constituting part of the
real estate. Other mortgages and liens on the company's property and equipment were discharged in 1948 on
payment of all but $400,000 principal amount of notes payable which aggregated $1,847,005 at December 31,
1947.
C-CoMMON STOCK RESERVED FOR SALE To EMPLOYEES AND OFFICERS:
On November 24, 1947 stockholders voted to reserve for sale to full time employees, including officers, of the com-
pany 100,000 shares of authorized and unissued common stock at a price, payable in instalments, not less
than the market value thereof on the date of purchase contract. On that date the president of the company
entered into a contract to purchase 10,000 of the shares so reserved at the then market price, $31,875, payable
in two instalments, one of $5,000 upon subscription, and the balance on or before May 24, 1951.
D--RESERVE FOR AIRCRAFT OVERHAUL:
The company charges certain major periodic overhaul costs against a reserve provided by charges to maintenance
expense. Provisions for aircraft overhaul reserve charged to maintenance expense amounted to $80,411 in
1948 and $70,917 in 1947. The costs of aircraft overhaul charged against the reserve were $30,644 in 1948
and $39,274 in 1947.
E-CoNvERTIBLE PREFERRED STOCK IssuED IN 1948:
Dividends on convertible preferred stock, cumulative at the rate of $1.00 per share per annum, are in arrears
$80,312 at December 31, 1948.
All or any part of the convertible preferred stock may be called for redemption at any time at $22.00 per share
plus dividends accrued thereon to the redemption date. In case of any liquidation, whether voluntary or in-
voluntary, the convertible preferred stock shall be entitled to receive $20.00 per share plus dividends accrued
thereon to the day of payment.
Under the provisions of the convertible preferred stock, the company shall not declare any dividend or redeem
or retire any shares of stock or make any distribution to stockholders if immediately thereafter the net worth
of the company would be less than $20.00 for each share of convertible preferred stock immediately thereafter
outstanding.
* NORTHEAST AIRLINES, INC. *
Notes To Financial Statements (Continued)
F-DEPRECIATION OF FLIGHT EQUIPMENT:
Depreciation rates on flight equipment for the year 1948 were revised from the previous basis of an estimated
three-year life to that of an estimated four-year life from dates of acquisition ( or dates placed in service)
as to DC4 equipment and to a basis of an estimated service life extended to December 31, 1949 as to DC3
equipment; also depreciation charges for flight equipment spare parts were increased in 1948 on account of
obsolescence. The net result of these revisions was to decrease depreciation expense for 1948 by approximately
$146,000.
G-COMMITMENTS AND CONTINGENCIES:
At December 31, 1948 the company had deposited $153,900 in connection with purchases of flight equipment pres-
ently expected to cost approximately $1,745,000. Commitments for the purchase of related equipment
amounted to approximately $43,000 at December 31, 1948.
The Loan Agency of the Reconstruction Finance Corporation has approved, under certain conditions, a com-
mitment for a 5-year loan to the company in the amount of $1,750,000. The proposed loan was approved by
the Civil Aeronautics Board on March 11, 1949. The company has requested certain modifications in the
terms of the loan agreement, which are subject to acceptance by the Loan Agency. Proceeds of this loan arc
expected to be applied to the purchase of aircraft and related equipment.
The company may have additional _liability for Massachusetts corporation excise taxes not determinable until
its federal income tax returns subsequent to 1945 have been examined.
The Civil Aeronautics Board has directed investigation of the routes and operations of the company, including
inquiries whether the public interest would be furthered by merger, by sale of routes or properties or by
agreements with other air carriers.
AUDITORS' REPORT
NoRTHEAST AIRLINES, lNc.
Boston, Massachusetts
\Ve have examined the balance sheet of Northeast Airlines, Inc. as at December
31, 1948 and the related statements of profit and loss, of deficit in earned surplus and
of capital surplus for the year then ended. Our examination was made in accord-
ance with generally accepted auditing standards, and accordingly included such
tests of the accounting records and such other auditing procedures as we considered
necessary in the circumstances.
In our opinion, the accompanying financial statements present fairly the finan-
cial position of Northeast Airlines, Inc. at December 31, 1948, and the results of its
operations for the year then ended, in conformity with generally accepted account-
ing principles applied, except as to changes in depreciation rates described in note
F, on a basis consistent with that of the preceding year.
Boston, Massachusetts
March 23, 1949
LYBRAND, Ross Baos. & MONTGOMERY
COMPARATIVE STATISTICS
1942 1943 1944 1945 1946 1947 1948
z
0
Revenue Miles Flown ...... 750,278 727,713 1,023,737 2,287,366 4,177,375 3,947,030 3,386,881 ~
-I
:::c
Completion of Scheduled "'
Miles .. . ...... . ........ 79.45% 79.10% 83.87% 83.61% 82.46% 83.81 % 87.86% >
Ill
-I
Passenger Revenue ......... $309,813 $533,972 $759,623 $1,945,444 $4,256,115 $3,468,913 $3,241,912 >
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Revenue Passengers Carried 26,446 36,263 53,766 175,608 417,095 325,172 272,292 r-
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Revenue Passenger Miles . .. 5,383,171 9,090,063 12,848,222 38,939,107 83,848,737 62,143,281 52,091,160 Ill
System Load Factor ....... 35.94% 59.52% 59.14% 74.47% 65.76% 51.24% 48.02 %
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Passenger Revenue Per
Plane Mile ............. .4129 .7338 .7420 .8505 1.0189 .8789 .9572
Revenue Per Passenger Mile .0576 .0587 .0591 .0500 .0507 .0558 .0622
Fly the Friendly Yankee Fleet
NORTHEAST AIRLINES
"The Yankee Fleet"
CENERAL OFFICES:
LOCAN AIRPORT
BOSTON 28, MASSACHUSETTS