NORTHEAST AIRLINES ANNUAL REPORT 
 TABLE OF CONTENTS 
Page 
Board of Directors and Officers 1 
Northeast System Map 2 
Letter from the President 3 
Balance Sheet 6 
Statement of Income and Expense 8 
Statement of Deficit 8 
Notes to Financial Statements 9 
Opinion of Independent Public Accountants 10 
Profit and Loss and Statistical Comparison 
January through April - 1962 vs. 1963 11 
Five-Year Statistical Record 12 
 BOARD OF DIRECTORS 
ANNUAL REPORT 
for year ending 
December 31, 1962 
JAMES W. AUSTIN 
Chairman of the Board and President 
DAVID A. STRETCH 
Chairman of the Executive Committee 
President, Atlas Corporation, New York 
JACQUELINE COCHRAN 
President, Jacqueline Cochran, Inc., New York 
PAUL F. COLLINS 
President, Fibremold, Inc., Woburn, Mass. 
JAMES F. FITZGERALD 
President, J. F. Fitzgerald Construction Co., Canton, Mass. 
GEORGE E. GARDNER 
Aviation Consultant, Lake Alfred, Florida 
OSWALD L. JOHNSTON 
Partner, Simpson Thacher & Bartlett, New York 
ALBERT C. MCMENIMEN 
Financial Vice President, Boston Edison Company 
EUGENE L. VIDAL 
Gene Vidal Designs and Processes, Avon, Connecticut 
OFFICERS 
JAMES W. AUSTIN 
Chairman of the Board and President 
RICHARD E. FISHER 
Vice President and Director -- Public Relations 
THOMAS L. GRACE 
Vice President -- Operations 
HAMILTON HEARD (1) 
Vice President -- Administration 
REMBRANDT P. LANE, JR. (2) 
Vice President -- Finance and Treasurer 
EDMUND O. SCHROEDER 
Vice President -- Technical Services 
ALFRED S. WALKER 
Vice President -- Ground Operations 
HENRY E. FOLEY 
Clerk 
TRANSFER AGENT 
Old Colony Trust Company 
REGISTRAR 
The First National Bank of Boston 
AUDITORS 
Lybrand, Ross Bros, and Montgomery 
GENERAL COUNSEL 
Foley, Hoag & Eliot 
GENERAL OFFICES 
Logan International Airport, Boston 28, Massachusetts 
(1) Deceased January 28, 1963. 
(2) Resigned effective May 31, 1963. 
Page 1 
 MONTREAL 
PRESQUE ISLE 
BURLINGTON 
/ERLEBANONWHITE RIVER 
1ANGOR 
BAR HARBOR 
4 LAND 
NEW YORK 
PHILADELPHIA 
BALTIMORE 
WASHINGTON 
JACKSONVILLE 
IURG 
CLEARWATER 
D-FALL RIVER 
NANTUCKET 
4ARTHA S VINEYARD 
Routes of 
HORTHEAST 
FORT LAUDERDALE 
iMIAMl 
Page 2 
 TO OUR SHAREHOLDERS: 
OPERATING RESULTS 
Operating revenues during 1962 were $51,390,561, a slight increase over 
the $51,128,948 reported in 1961. Operating expenses were $57,746,284 
compared with $59,374,079 in the previous year, a reduction of $1,627,795 
or 2.7%. Provision for depreciation and amortization included in 
operating expenses amounted to $4,249,958. Accordingly, the cash loss 
from operations before interest expenses and other non-operating charges 
was $2,105,765. 
Northeast's aircraft flew 19,315,430 miles in revenue service consuming 
86,829 total aircraft block-to-block hours. On the average, approximately 
72 seats were available for sale on each mile flown. This is an aggregate 
productive capacity of 1,381,954,000 available seat miles produced 
during the year. 
On the average, 38.1 passengers were carried on each mile flown, while 
approximately 43.2 passengers were needed to cover operating expenses. 
The percentage of capacity occupied (passenger load factor) was 
53.23% compared with 50.23% in 1961. 
FLORIDA SERVICE 
In 1962 Northeast accounted for 22.8% of the total traffic flown over 
its routes to Florida. This penetration level produced 449,218 Florida 
passengers. In the markets Boston - Miami, Philadelphia - Miami, and 
New York - Tampa, Northeast accounted for 37.2% of the total traffic 
flown. A penetration of this magnitude in the major New York - Miami 
market would have produced profitable operations for the entire Northeast 
system. In the New York - Miami market, which accounts for approximately 
55% of the total volume of traffic moving over the East Coast - Florida 
route, Northeast's penetration was 18.6% and growing by the month. 
Management believes that the Florida operation in its entirety generated 
a profit in 1962 but not of sufficient magnitude to offset the losses 
inherent in the Company's short haul services in New England and the 
Middle Atlantic commuter markets. Future earnings are dependent 
upon the Company's continued growth in the Florida market, and 
more specifically on the New York - Miami segment. 
Page 3 
 COMMUTER SERVICE 
Your Company continued its well-established penetration of the high 
density commuter markets between Boston, New York, Washington and 
Philadelphia despite the debilitating effects of the air shuttle provided 
by our chief competitor during 1962. In three of these markets, 
Boston - New York, Boston - Washington, and Boston - Philadelphia, 
Northeast showed an aggregate gain in passengers handled over the 
previous year of 5.3% with a total volume in excess of 550,000 air 
travelers carried. Nevertheless, your Company has lost commuter 
passengers, particularly on the New York - Washington segment as a 
result of excessive competitive service. In this market a virtually limitless 
number of aircraft provide high frequency service at depressed fare levels. 
Your management has consistently maintained that this service is 
inherently uneconomic and has published equalizing fares only 
because of competitive necessity. 
NEW ENGLAND SERVICE 
New England operations continued to sustain sizable losses due to the 
low density, short haul nature of Northeast's route structure in this 
region. During 1962 a total of 194,163 passengers was enplaned at 
Northeast's twenty-seven New England cities (exclusive of Boston), a 
decrease of 11% from 1961 and 27% from six years earlier. 
The Initial Decision of a Civil Aeronautics Board Examiner has been 
handed down in an investigation instituted to determine the needs of 
various smaller New England communities for certificated air service. 
The Examiner's Decision, which is substantially in accord with the 
position taken by the New England Council and supported by Northeast, 
would result in the transfer of service at eight of your Company's 
low density New England stations to designated regional airports 
already served by the Company; and in the permanent suspension, except 
during the summer vacation season, of service at three other stations 
presently being served. It is hoped that the Examiner's Decision will 
be adopted by the Civil Aeronautics Board in the near future. 
FLORIDA ROUTE CASE 
A Civil Aeronautics Board decision in the all-important Florida Renewal 
Case is expected during 1963. The growth of Northeast's Florida traffic 
during the seven years of operation has been outstanding. From meager 
beginnings of fewer than 90,000 Florida passengers carried during the 
first year of Northeast's operations, traffic figures have climbed steadily, 
with over 400,000 Florida passengers carried by Northeast during 
1962, and forecasts for nearly one-half million passengers 
to be carried during the current year. 
Your management believes the record of Northeast's accomplishments 
during this time justifies its being awarded a permanent certificate to 
Florida. In the meantime, the Company continues to operate under 
the inhibitions which the uncertainties of a temporary franchise 
inevitably bring about. 
Page 4 
 CONTROL CASE 
On June 19, 1962 the Civil Aeronautics Board approved the acquisition, 
from Atlas Corporation, of the controlling stock interest in Northeast 
by Hughes Tool Company. The Board subsequently denied petitions 
for reconsideration filed by two competitors. One of these competitors 
later appealed the entire matter to the courts and at this writing 
a decision has not yet been handed down. 
Hughes Tool Company has agreed to "provide Northeast with funds to 
support a program of advertising and sales promotion and to cover 
Northeast's operating cash deficits." This commitment continues 
unless and until Toolco concludes "that the rehabilitation of Northeast 
is no longer practicable." In accordance with this undertaking, Toolco 
made available to Northeast during 1962 the sum of $4,350,000 for 
working capital support. It has alsd leased two Convair 880 aircraft to 
the Company for use during the peak winter season affording a maximum 
of eight jets for service in the Florida market. 
FUTURE OUTLOOK 
It seems appropriate to report briefly on the progress that has been 
made in the first four months of 1963 compared with the same period 
last year. Page eleven contains financial and statistical information 
which we feel will provide an up-to-date evaluation of your 
Company and show the results of our insistence on greater 
efficiency and productivity. 
After a slow start the current Florida season has been excellent. 
Northeast's penetration of the important New York - Miami market 
climbed from 15.5% in the first quarter of 1962 to 23.0% in the first 
quarter of the current year. An increase of 11.3% in total Florida 
passengers was recorded during the first quarter of 1963 over the same 
period last year. Continued high participation levels on the long 
haul routes should bring about substantial improvement in operating 
results throughout the year. 
Significant cost-cutting techniques have been instituted in 1963 and 
a number of operational procedures have been changed in order to 
deliver our product at the lowest possible cost while retaining the 
highest possible standards of safety, dependability and service. 
On behalf of the directors and management of Northeast Airlines, 
I extend sincere thanks to you -- our stockholders, employees and 
friends -- for your loyalty and understanding during the past year. 
RESPECTFULLY SUBMITTED, 
James W. Austin 
CHAIRMAN OF THE BOARD 
AND PRESIDENT 
 NORTHEAST AIRLINES, INC. BALANCE SHEET As at December 31, 1962 
ASSETS LIABILITIES 
CURRENT ASSETS: 
Cash $ 373,582 
Accounts receivable 4,472,954 
Flight equipment expendable parts, at cost (note B) . 2,617,557 
Prepaid insurance and other expenses ...... 177,939 
Miscellaneous supplies, at average cost 407,430 
TOTAL CURRENT ASSETS 8,049,462 
It 
Special deposits and other assets 185,299 | 
Equipment and property, at cost: 
Flight equipment and related spare parts (note B) . . 32,842,667 
Ground property and equipment 4,946,271 
37,788,938 
Less allowances for depreciation, amortization 
and aircraft maintenance 21,356,061 
16,432,877 
Jet flight equipment, ground equipment and 
facilities under long-term leases (note C) 
Deferred charges, less amortization: 
Jet aircraft integration program 1,765,250 
Route renewal, terminal development and other .... 1,051,860 
$27,484,748 
CURRENT LIABILITIES: 
6% note payable to bank (guaranteed by Hughes Tool Company) 
Debt instalments due within one year (note A) : 
434% notes payable to banks 
under credit agreement (note B) 
Equipment trust certificates 
Obligations for past due rentals of 
jet flight equipment 
Obligations for spare parts 
6% trade obligations 
Collections as agent 
Trade accounts payable 
Accrued compensation, 
vacation pay and pension costs 
Provision for sick leave (note H) 
Unearned passenger revenue 
CURRENT LIABILITIES (see below and note A) . 
Debt due after one year (subject to accelerated payment -- note A) : 
Equipment trust certificates, 5j4%-7%, 
due 1964 to 1967 (note B) 5,284,760 
Obligations for past due rentals of 
jet flight equipment, 
due 1964 to 1971 3,013,147 
Instalment obligations for spare parts, 
7%, due 1964 to 1968 863,433 
6% trade obligations, 
due 1964 10 1967 (note E) 5,416,583 
Long-term lease commitments (note C) 
Subordinated debt due Hughes Tool Company (note D) : 
6/2 
% notes payable due 1964 to 1967 
5j4% notes payable 
Other (non-interest bearing) 
CAPITAL 
Amounts paid in on common stock, 
par value $1.00 per share: 
Authorized -- 6,500,000 shares (notes D and F) 
Issued and outstanding -- 1,783,688 shares .... 
Deficit 
The accompanying notes are an integral part of this balance sheet. 
$ 4,000,000 
714,664 
1,763,083 
392,760 
207,729 
2,714,887 
1,967,566 
2,540,073 
2,163,725 
1,405,412 
1,116,695 
18,986,594 
14,577,923 
9,500.000 
16.251,745 
1,014,639 
11,085,223 
(43,931,376) 
$27,484,748 
Page 6 Page 7 
 NORTHEAST AIRLINES, INC. 
STATEMENT OF INCOME AND EXPENSE 
For the Year Ended December 31, 1962 
OPERATING REVENUES (note G): 
Passengers $48,082,078 
Express, freight and baggage 1,974,069 
Air mail 698,709 
Other 635,705 
TOTAL OPERATING REVENUES 51,390,561 
OPERATING EXPENSES : 
Flying operations 18,603,048 
Maintenance and repairs . . . 13,458,667 
Aircraft and traffic servicing 9,421,654 
Reservations, sales, advertising and publicity .... 6,403,136 
Depreciation and amortization 4,249,958 
Passenger service 3,773,663 
General and administrative 1,836,158 
TOTAL OPERATING EXPENSES (note H) . . . 57,746,284 
OPERATING LOSS 6,355,723 
NON-OPERATING CHARGES: 
Interest expense (note D) 1,057,357 
Other 827,335 
NET LOSS FOR YEAR $ 8,240,415 
STATEMENT OF DEFICIT 
For the Year Ended December 31, 1962 
Deficit at beginning of year $34,481,514 
Provision for sick leave which relates to 
prior periods (note H) 1,209,447 
Net loss for year 8,240,415 
Deficit at end of year $43,931,376 
The accompanying notes are an integral part of these statements. 
Page 8 
 NORTHEAST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS 
A DEFAULTS ON DEBT AND LEASE 
OBLIGATIONS : 
In January, 1962, holders of the 4%% 
notes payable, the equipment trust certi- 
hcates, and tne instalment obligations tor 
spare parts, and the lessors ol jet flight 
equipment, agreed to defer unpaid prin 
cipal, interest and lease instalments which 
had become due between June 1, 1961 
and January 31, 1962. By agreements 
and arrangements made later in 1962 
further relief was provided for payments 
due on equipment trust certificates and 
lease payments on jet flight equipment. 
Due dates and defaults shown in the bal 
ance sheet and notes are based on these 
agreements and arrangements. 
At December 31, 1962 the company was 
in default on instalments due in 1962 of 
$536,000 on the 4%% notes payable to 
banks under credit agreement and of 
$47,000 on obligations for spare parts. 
The company is also in default under 
provisions of certain of its notes payable 
and lease agreements which relate to 
maintenance of minimum amounts of 
working capital and net worth. The com 
pany has made some but not all of the 
payments falling due between January 1, 
1963 and April 30, 1963 on its equip 
ment and trade obligations and its leases. 
Because of these defaults the holders of 
the equipment obligations and certain 
trade obligations have the right to accel 
erate the due dates of their debt and the 
lessors of flight equipment have the right 
to terminate their leases. As of April 30, 
1963 no such action has been taken, and 
the company is negotiating for extensions 
of time to pay past due amounts. 
B 4%% NOTES PAYABLE AND EQUIP 
MENT TRUST CERTIFICATES: 
The 4%% notes payable to banks under 
credit agreement are secured by a mort 
gage on company-owned flight equipment 
and related spare parts, subject to prior 
rights of the trustee under equipment 
trust certificates in Vickers Viscount air 
craft and Rolls-Royce engines and to 
prior rights of the vendor under instal 
ment obligations for spare parts. 
Equipment trust certificates are secured 
by title to Vickers Viscount aircraft and 
Rolls-Royce engines and by a second 
mortgage on certain of the company's 
other flight equipment and related spare 
parts. 
C LONG-TERM LEASE COMMITMENTS: 
In 1960, the company leased six Convair 
jet aircraft and thirty-four engines (in 
cluding ten spares) for a period of seven 
years from dates of delivery in December, 
i960 and January, 1961. Rental pay 
ments were based on the value ($27,167,- 
470) of the equipment as established by 
the leases, plus 7% interest. 
In 1962 the engine lease was amended to 
extend the lease period to December 31, 
1970, and options to terminate the lease, 
purchase the equipment and renew the 
lease were eliminated. 
In 1962, by informal arrangements, the 
annual rental payments under the air 
craft lease were recalculated on the basis 
of an extended lease term and a payment 
schedule extended to December 31, 1971 
without an option to terminate the lease. 
Under the new payment schedules, air 
craft and engine rentals will aggregate 
$3,714,000 in each of the years 1963 
through 1970 and $2,824,000 in 1971. 
Costs of taxes, insurance, maintenance 
and repairs are to be borne by the com 
pany. 
Annual rentals under long-term leases for 
hangar, terminal and reservations facili 
ties will approximate $1,500,000 in 1963. 
In addition to the annual rentals, certain 
of the leases obligate the company to pay 
maintenance and operating costs. 
D SUBORDINATED DEBT: 
The debt due Hughes Tool Company is 
subject to certain prior rights of the 4%% 
notes payable, the equipment trust certi 
ficates and the 6% trade notes payable. 
Under certain circumstances the princi 
pal amount of the 6^% and 5J 
% notes 
may be satisfied or discharged by issue or 
sale of common stock of Northeast Air 
lines, Inc. 
Hughes Tool Company has agreed to 
waive all interest on its notes for the 
years 1962 and 1963. Atlas Corporation, 
the prior holder of the 5>% notes, had 
previously agreed to waive interest on 
these notes for the year 1962. 
E TRADE OBLIGATIONS : 
Certain suppliers and other trade credi 
tors have agreed to defer payment of 
accounts payable to them as at June 30, 
1962 principally on the basis of 36 mon 
thly payments commencing January 31. 
1963, with 6% interest. 
F EMPLOYEE STOCK OPTION PLAN: 
At December 31, 1962, 100,000 shares of 
authorized and unissued common stock 
were reserved under the company's stock 
option plan for key employees. Options 
are granted at prices not less than 85% 
Page 9 
 of the fair market value of the stock on 
the dates granted. At December 31, 1962 
options to purchase 26,000 shares were 
outstanding, of which 21,000 shares were 
exercisable at prices aggregating $89,250, 
and 5,000 shares will become exercisable 
in 1963 at prices aggregating $21,250. 
G FLORIDA ROUTE RENEWAL : 
The company has applied to the Civil 
Aeronautics Board for permanent author 
ization to operate its route south of New 
York City and, accordingly, under the 
law, pending final disposition of the ap 
plication, is permitted to serve the route 
beyond the November 27, 1961 expiry of 
its original five-year authorization. In 
1962 the route generated a major portion 
of the company's revenue. 
H CHANGES IN ACCOUNTING: 
In 1962 the company changed its method 
of accounting for costs of major over 
hauls of leased engines from the reserve 
method to an actual expenditure basis. 
The effect of the change was to reduce 
maintenance costs and net loss for the 
year by approximately $1,000,000. 
In 1961 the company provided for costs 
of sick leave on a cash basis and in 1962 
adopted the accrual basis with a resulting 
increase in costs and net loss for the year 
of approximately $200,000 and an in 
crease in deficit applicable to prior years 
of approximately $1,200,000. 
The net effect of the two changes was to 
reduce the net loss for the year by ap 
proximately $800,000. 
LYBRAND, ROSS BROS. EL MONTGOMERY 
ACCOUNTANTS AND AUDITORS 
COOPERS C. LYBRAND 
Northeast Airlines, Inc. 
Boston, Massachusetts 
We have examined the balance sheet of Northeast 
Airlines, Inc. as at December 31, 1962 and the related 
statements of income and expense and of deficit for the 
year 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 circum 
stances. 
In our opinion, the accompanying statements 
present fairly the financial position of Northeast Airlines, 
Inc. at December 31, 1962 and the results of its operations 
for the year then ended, in conformity with generally accepted 
accounting principles applied on a basis consistent with that 
of the preceding year, except for the changes, in which we 
concur, in accounting methods described in note H to the 
financial statements. 
Boston, Massachusetts 
April 30, 1963 
Page 10 
 NORTHEAST AIRLINESf 
INC. 
PROFIT AND LOSS AND STATISTICAL COMPARISON 
Period: January 1 through April 30, 1962 vs 1963* 
PROFIT AND Loss 1963 1962 
REVENUE: 
Passenger . . . $18,697,154 $17,575,098 
Other . . . 1,401,784 1,160,656 
TOTAL REVENUE . . . . . . $20,098,938 $18,735,754 
EXPENSE: 
Direct Operating Expense $10,700,614 $10,437,378 
Indirect Operating Expense .... 9,236,713 9,258,000 
TOTAL OPERATING EXPENSE . . $19,937,327 $19,695,378 
Net Operating Profit or (Loss) $ 161,611 ($ 959,624) 
Non-Operating Charges 465,228 309,803 
Net Profit or (Loss) ($ 303,617) ($ 1,269,427) 
STATISTICAL 
Scheduled Plane Miles 7,078,943 7,717,061 
Performance Factor 93.57% 91.64% 
Revenue Plane Miles 6,623,882 7,071,776 
Available Seat Miles (000) 509,500 516,620 
Passenger Load Factor 58.15% 52.57% 
Revenue Passenger Miles (000) 296,271 271,563 
Convair 880 Passenger Load Factor .... 64.02% 56.65% 
Viscount Passenger Load Factor 61.23% 54.85% 
*The above statement is unaudited. The source of these data is the Form 41 
Reports which are filed with the Civil Aeronautics Board, except 
April, 1963 which is estimated. 
Page 11 
 FIVE YEAR STATISTICAL RECORD 
19 6 2 19 6 1 19 6 0 19 5 9 195 8 
Revenue Miles Flown 19,315,430 21,273,364 18,405,778 18,634,712 15,079,659 
Passenger Revenue $48,082,078 $48,012,195 $35,366,220 $29,595,435 $22,803,445 
Other Revenue 3,308,483 3,116,753 2,564,701 1,854,799 3,935,151* 
Total Revenue $51,390,561 $51,128,948 $37,930,921 $31,450,234 $26,738,596 
Revenue Passengers Carried 1,551,059 1,644,581 1,437,723 1,239,309 955,955 
Available Seat Miles 1,381,954,000 1,495,026,000 1,096,762,501 1,031,545,734 860,689,541 
Average Passengers per Mile 38.08 35.30 30.73 27.88 27.05 
Passenger Load Factor 53.23% 50.23% 51.52% 50.32% 47.30% 
Revenue Passenger Miles 735,561,000 750,955,000 565,030,520 519,122,839 407,116,418 
Available Ton Miles 172,088,705 186,100,260 130,988,374 128,251,103 106,722,236 
Revenue Ton Miles 76,716,209 77,921,116 58,908,520 52,880,795 41,890,682 
Operating cost per Available Seat Mile 4.18* 3.99* 4.01* 3.60* 3.54* 
Operating cost per Available Ton Mile 33.55* 31.90* 33.56* 30.83* 28.57* 
Wages and Salaries $20,898,641 $21,297,576 $17,552,745 $15,463,760 $12,664,019 
Number of Personnel 2,700 2,918 2,612 2,553 2,411 
^Includes $2,386,257 of Federal Subsidy. 
Page 12 
  NORTHEAST AIRLINES 
Logan International Airport Boston, Massachusetts