Northwest Airlines Annual Report 1947

'po'tecMnd
The past year will probably be remembered as one during which the most
formidable problems in the history of commercial aviation were presented to company
management.
President Truman and the Congress recognized the seriousness of the situation,
particularly the important effect that a strong domestic and international air trans
portation system has on the national economy and security. The President appointed
an Air Policy Commission and Congress, a Congressional Aviation Policy Board, both
bodies exceedingly able. Exhaustive hearings were held and reports of the two com
missions undoubtedly will have far-reaching effects upon the aviation industry.
Pertinent excerpts quoted below from these reports will be of interest to our
stockholders.
The gravity of the world outlook makes it imperative that effectuation, now, of
a strong National Air Policy be vigorously urged and supported.
President and General Man?
11
si
URVIVAL IN THE AIR AGE"
ines are now passing through one ofthemost
;
of their history. This situation issignificant
ons.
If not relieved, it will contribute to the
%
of the air-line service to the public. The
on is that as a potential military auxiliarythe
list be kept strong and healthy.
'h some
air-line problems of 1947 may differ
of the prewar period, the over-all situationis
The revenue from passengers and cargo, will
ue
operations of many of the companies. If
mtinue in operation and start again up the
<elf-sufficiency, the Government willhavetc
revenue
:
operations of many oj m<, -_
atinue in operation and start again up me
self-sufficiency, the Government willhaveto
ail rates." '>mmission Report
self-sufficiency, ...
ail rates."
om
President's Air Policy Commission Report
"NATIONAL AVIATION POLICY"
"The domestic and foreign air commerce oftheUnited
States
should be fostered andpromotedbywhatevermeans
appear most practical untilit reachessuchstatureinpas
senger and cargo capacityas to constituteincrisisanade
quate, logistical air arm oftheNationalDefenseEstablish
ment."
"National security requires a financially sound, opera
tionally efficient, and technically modern air-transportin
dustry. It envisions a large, civil air fleet operatedin
foreign and domestic air commerce withsafetyandcer
tainty. Such an operating air fleet servespeacetimecom
merce and industry while remaining available forimme
diate
conversion to military use in an emergency."
Excerpts from
Congressional Aviation Policy Board Report
^Baasid *Di%ecta%&
NORTHWEST AIRLINES, INC.
Wm. Tudor Gardiner Chairman, Board of Directors, Incorporated Investors
Boston, Mass.
Robert M. Hardy President, Sunshine Mining Co., Yakima, Wash.
Croil Hunter President, Northwest Airlines, Inc.
Thomas E. Irvine President, FI Products Co., St. Paul, Minn.
Joseph T. Johnson President, The Milwaukee Co., Milwaukee, Wis.
Malcolm S. Mackay Special Partner, Laidlaw & Co., N. Y.
Dr. Charles W. Mayo Mayo Clinic, Rochester, Minn.
Alonzo Petteys Vice President and Director, Farmers State Bank
Brush, Colorado
William Stern President, Dakota National Bank, Fargo, N. D.
Edwin White President, Kalman & Co., St. Paul, Minn.
E. Irving Whyatt Executive Vice President, Northwest Airlines, Inc.
General Offices: 1885 University Avenue, St. Paul 4, Minnesota
The Chase National Bank of The City of New York, New York, N. Y.
Principal Registrar
Bankers Trust Company, New York, N. Y.
Principal Transfer Agent
Harris Trust and Savings Bank, Chicago, Illinois
Co-Registrar
The First National Bank of Chicago, Chicago, Illinois
Co-Transfer Agent
Annual meeting of shareholders third Monday in April
SPECIAL ASSISTANT m William Stern
VICE PRESIDENT
SECRETARY &
GENERAL COUNSEL
1 A. E. Floan
PERSONNEL DEPT. 1 PUBLICITY DEPT. t
BOARD OF DIRECTORS
* i
PRESIDENT S GENERAL MANAGER m Croil Hunter
VICE PRESIDENT &
ASSISTANT TO THE PRESIDENT
t Linus C. Glotzbach
EXECUTIVE VICE PRESIDENT M E. I. Whyatt
f
TREASURY DEPT. 1
Linus C Glotzbach J. A. Ferris
REGIONAL VICE PRES.
WESTERN REGION
L. S. Holstad
1
VICE PRESIDENTS
UJ W. Fiske Marshall
K. R. Ferguson
R. 0. Bullwinkel
TREASURER # L. S. Holstad
1 OPERATIONS DEPT. t ENG. & PLANNING
DEPT.
1TRAFFIC DEPT.
W. Fiske Marshall
VICE PRESIDENT
ORIENT REGION
t
K. R. Ferguson R. 0. Bullwinkel
F. C. Judd D. J. King
MANILA OKINAWA SHANGHAI SEOUL TOKYO ANCHORAGE
'P%e4ide*tt &
The year 1947 was one of great significance in the company's
history. The basic program of route development culminated during
1947 in the award by the Civil Aeronautics Board to Northwest
Airlines of an extension of its service to Washington, D. C., from
Detroit, via Cleveland and Pittsburgh. Service on this new segment
was inaugurated on March 15, 1948.
Since the formation of Northwest Airlines twenty-two years ago
(October 1926), its route development program has always involved
the seeking of routes which would logically fit into its plans for the
establishment of an economically sound domestic and international
air transportation system, and the award of the Detroit-Washington
route has now enabled the company to round out a well-integrated
pattern of air service. The completion of a major part of this pro
gram may properly be considered as the outstanding achievement
of the year.
Nevertheless, route expansion was but one of the important fac
tors affecting the company in 1947. During the year the entire avia
tion industry was confronted with numerous serious difficulties
which arose primarily out of conditions characteristic of the postwar
era. At a time when operating costs were rising very sharply, there
was a slackening of public acceptance of air transportation. This
was due to a number of unfortunate factors, such as aircraft acci
dents, unreliable performance, the inadequacies of terminal and
other facilities, and, admittedly, a certain amount of deterioration
Five-tier pagoda near
Imperial Museum in
Tokyo.
TLE TACOMA PORTLAND YAKIMA WENATCHEE SPOKANE MISSOULA
in the very high standard of service for which the airlines were so
well known before the war.
In the face of these adverse factors, Northwest, rather than taking
merely a defensive position, has recognized the need of taking
affirmative action to correct its own shortcomings and to meet and
overcome problems arising from external causes. This attitude en
abled the company to achieve numerous positive accomplishments
in 1947.
Service to Alaska and the Orient was inaugurated after extensive
and extremely thorough preparations. The soundness of this ven
ture and its favorable possibilities are clearly evident in spite of the
relatively short time in which the service has been in operation.
During 1947, in order to meet the need for larger, faster and more
efficient aircraft, Northwest Airlines acquired 10 Martin 202 air
planes, and has ordered 15 additional 202 airplanes for delivery in
the spring of 1948. In order to put these new aircraft into service,
it was necessary to set up a training program to qualify personnel
for their use. It has also been necessary to train and qualify per
sonnel for the operation of the additional routes of the company.
The company has been acutely conscious of the basic need for
increasing revenues, as well as for controlling costs. Passenger fares
have been increased and, with the re-establishment of the 10%
round trip discount, are restored to approximately the prewar level.
HELENA BUTTE
Waters of a moat
reflect Dai-1 chi
Building, General
Douglas Mac-
Arthur's head
quarters.
Yoshiwara thea
ter, in suburban
Tokyo, where pic
tures run two
months at a bill
ing.
Nippon Gekijo
theater, the circu
lar .
building, ad
joins a modern
newspaper plant.
(WWl
ilHlUfl
iiumn
'iSpStll'
[EMAN GREAT FALLS BILLINGS MILES CITY BISMARCK ABERDEEN JAMESTOWN FARGO RAND FORKS WINNIPEG DULUTH-SU
s
Application has been made to the Civil Aeronautics
Board for increase in compensation for the trans
portation of mail sufficient to put the company in
a sound earning position.
The company has entered into co-operative ar
rangements with other airlines and with one of the
world's largest steamship lines in order to augment
its sales efforts throughout the world. It has also
devoted a great deal of time and attention to the
development of air cargo business, both domestically
and internationally, and expects to derive substan
tial revenues from this source.
Constantly rising costs have continued to be a
serious problem in this company, as they are to
other airlines. Every effort has been made to effect
economies and to achieve better utilization of all
of the company's facilities and personnel. Thus,
offsetting the adverse factors, there are many fa
vorable factors, such as --
indications of a substan
tial rise in the volume of traffic, both passenger
and cargo; increased mail compensation; a more
productive fleet of airplanes; access to important
new traffic centers, such as the nation's capital and
the two great industrial cities of Cleveland and
Pittsburgh; economies effected and the develop
ment of an organization with a spirit and deter
mination constantly to better its service to the
public.
Therefore, on the basis of what transpired in
1947, the year can well be described as a year of
continued transition, preparation and building for
the future.
Outlook t*t T^ioofoect
The company's activities now extend from New
York and Washington across the country to Seat
tle and Portland and beyond to Alaska, Tokyo,
Seoul, Shanghai and Manila. Various phases of
the entire program will be taken up separately in
brief resume.
/4la4ku Ofienatiou
Service over the first leg of the Alaska operation
commenced on a daily basis September 1, 1946,
thirty days after the certificate was approved by
the President of the United States. Service over
the Minneapolis-Anchorage leg was commenced
on a thrice weekly basis January 1, 1947, and
traffic volumes over both segments have steadily
developed to a point where with the aid of the
IIOR MINNEAPOLIS ST. PAUL ROCHESTER EAU CLAIRE
temporary mail rate of 59c per mile, this operation
is now practically on a self-sustaining basis.
Orient Operation
Scheduled service beyond Anchorage, Alaska to
Tokyo, Shanghai and Manila was commenced on
a thrice weekly basis July 15, 1947, and this has
now been operated long enough to disclose two
facts: First, that the initial operations are satis
factory and with the assistance of the temporary
mail rate of $1.75 per mile, the service already
approaches a self-sustaining basis; and second,
that the long-term prospects are encouraging.
Two factors, however, are important, namely,
(1) the speed with which travel restrictions to
Japan and other occupied countries are lifted;
and (2) the return of stability and rate of eco
nomic recovery in the countries of the Far East.
When travel restrictions to and from the Orient
are considered, traffic has been developing satis
factorily. Government officials, representatives of
UNRRA and other relief organizations, military
personnel, educators, doctors, missionaries, busi
nessmen and others whose missions warranted
passport issuance have made the journey.
Beyond this stone
arch bridge lies the
Imperial Palace.
LAIRE LA CROSSE MADISON MILWAUKEE CHICAGO DETROIT CLEVELAND PITTSBURGH WASHINGTON NEW YORK NEWARK
Japanese statue
broods through
the years.
Actual flying of the company's route to the Orient has demon
strated its dependability. Performance records show that 97.79%
of scheduled miles have been completed, a record surpassing that
on the company's domestic system. In contrast to other transocean,
international routes, this has become known as the "overland"
route due to the number of airports available on both the main
land and the many islands that lie along the "Northwest Passage."
As the operation itself has become routine, attention has been
turned more and more to developments within Japan, China and
the Philippines.
Japan looks forward to the easing of travei
restrictions and the opening of the country to
tourist travel, and also to the signing of a peace
treaty shortly thereafter. Both events should serve
to bring many businessmen and tourists to their
country and the Japanese are making extensive
preparations for them. The Japanese Federation
of Tourists Association has adopted a five-year
plan to rebuild the tourist industry. One of its
projects is to develop the number of foreign type
hotels, which now total 105. With government
aid, the Japanese began improving and electrify
ing railroads, buying much new rolling stock and
.L
MANILA OKINAWA SHANGHAI * SEOUL TOKYO ANCHORAGE
revamping the rails and roadbeds. They are laying out new national
parks in many districts and estimate that during the first year of
unrestricted travel, 36,000 persons will fly to Japan, with another
100,000 coming by boat.
(^Aina,
China has the immense problem of composing its internal differ
ences and restoring order. Yet it, too, is looking forward to the
day when it will be visited by many sightseers and when it can
recover its share of international trade.
Many American firms are already assisting in the rehabilitation of
China by re-establishing branches in China. Thus, despite unsettled
conditions and currency instability, many Chinese are flying via
Northwest Airlines between China and the United States in order
to carry out diplomatic missions, to take up government posts, to
lecture, to attend meetings, or to study in our schools. Also, the
flow of American commercial travel between the United States and
China is steadily increasing.
In the Philippines, economic recovery has progressed farther and
at greater speed than is generally realized in the United States.
Under President Manuel Roxas, the government is proving itself
SEATTLE* TACOMA PORTLAND YAKIMA WENATCHEE
SPOKANE
strong and competent. Its problems are many but it is demonstrat
ing its ability to master them.
One of the most ambitious projects in the Philippines is an 88
million dollar electrification program which its sponsors believe
will revolutionize its industry and attract substantial American in
vestments. The plan is to divide the Republic into 18 power areas
supplied from 7 huge generating plants. The project also includes
construction of a fertilizer plant to supply Island needs and to make
unnecessary present import of nearly 100,000 tons of fertilizer an
nually. President Roxas has recommended the project and it has
the approval of the Philippine Congress.
'Korea and O&ivuuva
Korea has been served by three round trips operating weekly be
tween Tokyo and Seoul. Service between Seoul and Shanghai will
commence May 1, 1948.
Flights have also been stopping at Okinawa between Shanghai
and Manila, twice weekly each way, in order to carry military
personnel, mail and cargo. *
Orient O^icee
Northwest Airlines has opened city ticket offices in the Orient as
follows: Tokyo, Shanghai, Okinawa, Seoul, Manila.
MISSOULA HELENA BUTTE BOZEMAN GREAT FALLS BILLINGS MILE
'Wod/tietytovl xte*t4io*t
Another major route development of the year is service to
Washington, D. C. via Cleveland and Pittsburgh. This route was
awarded by the Civil Aeronautics Board in October 1947. Plans
then were started to inaugurate this service which included estab
lishment of traffic offices in each city to handle sales, ticketing and
reservations; hiring, training and qualifying flight and ground per-
Company officials and other observers who have had an oppor
tunity to compare present conditions in the Orient with those of a
year ago, report vast improvement and are much encouraged over
developments there.
In a further step to promote Orient traffic and to extend its
participation in global travel, Northwest Airlines is co-operating with
other air and surface carriers. Arrangements have been entered
into with Hong Kong Airways and British Overseas Airways Corpo
ration for round-the-world trips with connections in the Orient.
An earlier agreement made between the company and the Amer
ican President Lines by which passengers may journey both by air
and sea, at their option, is developing satisfactorily to both of the
organizations. The company recently opened European headquar
ters under a European director at London to facilitate traffic ar
rangements with the European air carriers.
Shanghai street scene
carries the modern
touch.
Lower Whangpoo
river, from Shang
hai waterfront.
FARGO GRAND FORKS
CITY BISMARCK ABERDEEN JAMESTOWN
sonnel; installing radio stations and other ground equipment, and
arranging for space and necessary facilities at the three airports.
Scheduled service commenced March 15, 1948.
Through this extension these great cities are now linked by one-
carrier service to the important communities served by Northwest
Airlines' transcontinental domestic system, as well as with Alaska,
Japan, Korea, China and the Philippines.
"Ttcw l^oute !PetcU*ty.
Early morning scene
on Soochow Creek.
The company has the following applications for new routes pend
ing before the Civil Aeronautics Board:
(1) Application for service between the Pacific Northwest
terminal points of Seattle-Tacoma and Portland and Honolulu,
Territory of Hawaii. Hearing on this application has been com
pleted and the matter has been submitted to the Board for its
final decision and approval by the President of the United States.
(2) Application to serve Buffalo between Detroit and New
York.
(3) Application to serve Cleveland between Detroit and New
York.
(4) Application for authority to operate between Seattle,
Washington, and Portland, Oregon.
A bus
scene in
MINNEAPOLIS ST. PAUL ROCHESTER EAU CLAIRE LA CROSSE
Hearings have not been held on any of the three applications last
named.
Modern equipment is one of the greatest needs of the airlines.
Experience with the Martin 202 has been satisfactory. Perform
ance of the plane has exceeded expectations. This 245-mile-an-hour
ship, designed for fast, limited-range flights, is serving all stations
An aerial view from the Atlantic seaboard to Billings, Montana, and soon will be
ingMa cross
'the flown coast-to-coast. It originally provided seats for 40 passengers,
but has been modified to provide 36 seats and additional cargo
space.
The Martin 202 is teamed with the Douglas DC-4, which is used
on the Alaska and Orient flights, and on non-stop and limited-stop
domestic flights. When the full fleet of 25 Martin 202's is in oper
ation, about June 1, all Douglas DC-3's will be retired.
Engineering acceptance of the Martin 202 is matched by public
approval of this plane. Questionnaires completed by passengers
revealed an almost unanimous endorsement of its salient features --
its speed, size, comfort, built-in ramp, large observation windows,
loud-speaker system, smoothness in flight. The fact that after ten
of these planes were put into service the company ordered fifteen
more indicates its confidence in the airplane.
MADIS
Market place, Manila.
MILWAUKEE CHICAGO DETROIT CLEVELAND PITTSBURGH . WASH
As Northwest Airlines steps up the use of the Martin 202's, it
also looks ahead to putting into operation, late this year or early in
1949, another new plane, the double-deck, 75-passenger, 320-mile-
an-hour Boeing Stratocruiser. It will be the first domestic airline
to fly these giant liners, detailed descriptions of which were given
in last year's report.
The Boeing plant has been delayed in its production program.
Northwest Airlines' engineers and technical people have followed
this situation closely and the company has continued an extensive
training program in preparation for the delivery of these planes.
^Kten-Jlute
With routes and aircraft to insure the best of domestic and inter
national service, Northwest Airlines has effected arrangements with
other airlines to reach off-line points. One of these has been com
pleted with the Scandinavian Airlines System, which reaches Scot
land, Norway, Sweden and Denmark. Good connections are made
at LaGuardia Field, New York, with the Scandinavian planes which
bring passengers from, or carry them to, Gander, Prestwick (Glas
gow), Oslo, Stockholm and Copenhagen.
The world-famous
Manila Hotel.
Jones Bridge over the
Pasig River with Post-
office Building in fore
ground.
NWA SERVES LEADING INDUSTRIAL AND AGRICULTURAL AREAS
rO
ALASKA, DOMESTIC
ROUTE CITIES
POPULATION
MET. AREA
NEW YORK 11,676,900
NEWARK 443,000
DETROIT 2,710,000
WASHINGTON, D.C. . .
1,300,000
PITTSBURGH 1,994,000
CLEVELAND 1,357,000
MILWAUKEE 860,300
CHICAGO 5,250,000
MADISON 100,000
LA CROSSE 49,600
EAU CLAIRE 40,000
ROCHESTER 38,300
MINNEAPOLIS
....
600,800
ST. PAUL 410,000
DULUTH-SUPERIOR
. .
145,000
FARGO 51,000
MAJOR BUSINESS ACTIVITIES IN NWA ROUTE TERRITORY
Apparel, printing and publishing, food, iron and steel, textiles
Jewelry, tool and equipment, communications equipment and machinery,
electronics, chemicals
Automobiles, steel, chemicals, machine tools and accessories, paints
and varnishes
Periodicals, newspapers, bakery products, meat products, general
commercial printing
Aluminum products, air brakes, oil products, bituminous coal, plate glass,
steel, electrical equipment
Iron and steel, iron and steel products, machinery, tools, appliances,
motor vehicles and parts, food products
Motor vehicles, tractors, hosiery, footwear, electrical equipment
Iron and steel, metal working, radio and electronics, foods, petroleum refining
Meat packing, machine tools, batteries, surgical supplies, metal
specialties, state government
Air conditioning equipment, electrical equipment, dairy, engraving, rubber
Rubber, pressure cooker, pulp and paper, motors, brewing
Medical, dairy, bakery
Food products, machinery, iron and steel products, printing and
publishing, apparel
Transportation, printing, publishing, state government, advertising
specialties, refrigeration equipment
Iron and steel, refrigerators, tools, weaving
Farm machinery and supplies, wool marketing,'meat packing, dairy
products, agriculture
ALASKA, DOMESTIC
ROUTE CITIES
POPULATION
MET. AREA
GRAND FORKS
....
32,000
WINNIPEG 320,500
JAMESTOWN 11,000
BISMARCK 22,000
ABERDEEN 23,000
MILES CITY 10,450
BILLINGS 39,000
BUTTE 55,000
BOZEMAN 12,400
HELENA 18,500
MISSOULA 30,000
GREAT FALLS
....
43,000
SPOKANE 162,000
WENATCHEE 13,000
YAKIMA 55,000
PORTLAND 534,400
SEATTLE 603,000
TACOMA 139,000
ANCHORAGE, ALASKA 14,000
MAJOR BUSINESS ACTIVITIES IN NWA ROUTE TERRITORY
Mill and elevator, potato sales and products, sugar beets, agriculture
Wheat farming, mining, fishing, hydro electric power development
Railroad division point, livestock and horse market, flour milling
Agriculture, coal mining, state government
Railroading, livestock trading, processing
Livestock, grain, sugar beets, horse market, railroad shops
Livestock, crude oil production and processing, sugar beets production
and processing, wholesaling, tourist
Mining, livestock, meat packing, foundry and metal trades
Agriculture, livestock, tourist
Railroading, mill work and cabinet making, smelting, state government
Agriculture, lumber, tourist
Mining, railroading, milling, oil refining
Agriculture, mining, lumber, light metals, cereal and milling
Fruit production and processing, agriculture, mining, lumber, tourist
Fruit production, packing and processing, agriculture, machinery,
lumber, meat packing
Lumber, pulp and paper, food processing, agriculture, fisheries
Aircraft manufacturing, shipbuilding and repair, heavy steel fabrication,
food processing, textile and apparel manufacturing
Forest products, railroad shops, metals, food products, chemicals
Railroading, fish canning, air transportation, mining
Chart does not include information relating to points served overseas by Northwest Airlines--Tokyo, Seoul, Shanghai, Okinawa, Manila
Population figures estimated.
I " M VwJ
a A
NORTHWEST
AIRLINES
4*orj*07T
<stesr--*
Comparo five
Flight Time**
DC-4 -
Boeing 377
Read from Left to
Right.
*Elapied Flying Tim* Only.
No Ground Time.
Origin
New York
or
O
>-
*
0
Z
c
0
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0

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5:55
4:20
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13:55
10:20
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c
<
19:50
14:25
0
>.
Jr
0
1--
39:10
30:7 5
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to
45:00
35:10
_o
`E
o
51:05
39:30
5:30 13:30 19:25 38:45 44:35 50:40
Washington
4:00 7 0:00 7 4.05 29-55 34:50 39:10
2:05 10:05 16:00 35:20 41:10 47:15
Chicago
7:35 7:35 7 7:40 27:30 32.25 36:45
5:30 5:10 2:00 8:00 13:55 33:15 39=05 45:10
Minneapolis 3:35 3:20 7:25 6:00 7 0:05 25.55 30:50 35:10
12:45 12:25 9:15 7:15 7:50 27:10 33:00 39:05
Seattle 8:15 8:00 6:05 4:40 5:75 21:05 26:00 30:20
17:40 17:20 14:10 12:10 7:30 19:20 25:10 31:15
Anchorage 7 7 .-50 7 7:35 9:40 8:75 5:7 5 7 5:50 20:45 25.05
35:35 35:15 32:05 30:05 25:25 17:55 5:50 1 1:55
Tokyo 23:7 0 22:55 2 7:00 19:35 7 6:35 7 7 .-20 4:55 9:15
41:10 40:50 37:40 35:40 31:00 23:30 5:35 6:05
Shanghai 26:40 26:25 24:30 23:05 20:05 7 4:50 3:30 4:20
47:10 46:50 43:40 41:40 37:00 29:30 1 1:35 6:00
Manila 30:40 30:25 28:30 27:05 24:05 7 8:50 7:30 4:00
'mrns&sr

, ,H.
IUBOPE AND
AROUND WORLD
CONNECTIONS
-
'
NWA ROUTE
NWA ROUTE APPLICATION
NWA CERTIFICATED, NOT YET tl4r
%^ChX)NOLULU
derating JJa
}**
MM
/
NGTON NEW YORK NEWARK MANILA OKINAWA SHANGHAI
Martin 2-0-2 airplanes
on the assembly line.
In spite of expense control, rising costs demand that revenues be
increased by higher passenger and mail rates. The industry raised
passenger fares 10% in April, 1947. In October of that year North
west raised its passenger fares another 10% but re-established the
10% round-trip discount. Several months later the industry fol
lowed with a 10% increase but did not give round-trip discounts,
although years of experience have demonstrated this to be a sound
sales policy. We again raised our passenger fares on March 15,
1948, in the amount of 8%. Even after giving effect to these in
creases, our fares domestically will average only about 5.6 cents
per mile.
The company applied for an increase in rate of mail pay, empha
sizing the need to maintain strong domestic airlines for national
defense--a view stressed in the reports of both President Truman's
Air Policy Commission and the Congressional Aviation Policy
Board.
In order to overcome the flood of criticisms the airlines have re
ceived the past year for delays and poor ground-handling of pas
sengers, Northwest Airlines has exerted every effort to correct the
situation. Furthermore, to impress on the public the fact of its
determination to find a solution of these problems it has adopted a
%
Boeing Stratocruiser in
production for NWA.

TOKYO ANCHORAGE SEATTLE* TACOMA PORTLAND YAKIMA
plan which provides for a refund of 5% of the fare to passengers
on all flights that arrive at their destinations over 30 minutes late.
Much favorable public reaction and extensive publicity on this plan
has already been received and it has been effective in encouraging
company employes to increased efforts, for on-time performance
and the speedy handling of passengers and their baggage.
As the airline seeks higher fares and mail pay, it also finds cargo
carrying an important source of revenue. This is no longer just
an adjunct to passenger traffic; it has reached a volume where the
company plans, at the appropriate time, to use all-freight planes on
domestic, Alaska and Orient routes.
During the past year income from freight and express increased
substantially, with Alaska and the Orient accounting for more than
one-third, despite the fact that the Orient operation did not open
until after the middle of the year. Air express income showed an
increase of more than $100,000 over the 1946 figure. Together,
the revenue from freight and express exceeded $1,000,000.
During 1947 the training division of the airline, through the
medium of 67 courses offered at several places on the system, carried
2,266 employes on its records in formal training. A complete ap
prenticeship training program is being established.
WENATCHEE
Martin 2-0-2
Boeing
Stratocruiser
Douglas DC-4
POKANE MISSOULA - HELENA BUTTE BOZEMAN GREAT FALL
Apart from this program the training division's objec
tives will continue to include thorough indoctrination of
new employes, together with training to give them the
necessary skills to perform highly efficient work in a mini
mum of time; training of older employes and supervisors
by way of refreshing them in current and accepted methods
in learning new procedures, equipment methods, and skills.
Advantages that accrue from more competent person
nel benefit both the company and the public through im
proved service.
'Jfetv Squifimettt
Northwest Airlines has installed Instrument Landing
System (ILS) equipment on its airplanes and is now au
thorized for ILS landings over its entire route. It will
be possible to complete a large percentage of flights now
cancelled by weather, bringing completion of annual
schedules to approximately 99%.
The airline has adopted a "visual sales" reservations
system by which a passenger may receive flight informa
tion within a few seconds. This is made possible by setting
up a master station through which all messages clear;
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Union Terminal Tow
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BILLINGS MILES CITY BISMARCK ABERDEEN JAMESTOWN
posting reservations on boards at this and other key
stations; speeding up messages by means of 3,300 miles of
leased telephone lines, 6,900 miles of teletype circuits and
3,400 miles of radio networks.
S(Mt**t4VUf
In summary it should be noted that the expansion of
the company's route pattern and the start of the Orient
service mark 1947 as an outstanding year in its history.
Its route mileage increased to a total of 17,761 miles,
12,448 being foreign and 5,313 domestic. Other events of
the year include: start of the "inside" route from the
Twin Cities to Anchorage to supplement the "outside"
coastal route from Seattle-Tacoma to Anchorage; acqui
sition and placing in service the Martin 202 airplanes;
completion and occupancy of the company's newly con
structed $1,350,000 hangar at the Seattle-Tacoma airport:
Pittsburgh's Golden
Horseshoe from the
air.
Other devices under study for the convenience or en
tertainment of passengers include plane-ground telephone
service; plane-ground telegraph service; and motion pic
tures aboard planes on long flights.
FARGO GRAND FORKS WINNIPEG DULUTH -
SUPERIOR Ml
inauguration of service to Eau Claire and LaCrosse, Wis
consin; Aberdeen, South Dakota; Jamestown, North Da
kota and Bozeman, Montana; and certification of the route
to Washington, D. C.
1947 was indeed a year of important events for the
company, as well as a year of preparation for even greater
progress in the years ahead.
The Nation's Capitol.
TZec&id, 'Pioyiete,
Calendar Mail Passenger
Express
and Freight
Revenue
Passenger
Mail
Pound
Total
Plane
Miles
Year Revenue Revenue Revenue Miles Miles Flown
1947 > 4,018,340 20,520,631 1,019,497 382,544,382 5,473,873,894 20,824,912
1946 ..^^254,257 18,062,492 553,875 385,858,473 4,099,317,238 19,704,234
1945
-
1>4&575 10,060,619 409,613 218,469,773 5,396,757,098 12,870,714
4^44 1,500>74 6,073,967 246,030 120,834,296 4,900,802,947 7,523,146
1943^ 1,353,822^v 3,139,713 297,941 63,787,683 4,005,180,807 4,584,766
1942 1,850,601 ^410,512 240,800 52,061,159 2,528,042,954 4,931,815
1941 1,955,826 2,5^721 118,885 59,659,145 1,871,311,191 6,353,659
1940 1,769,735 2,151,3LN 79,531 51,175,254 1,370,076,043 6,079,669
1939 1,763,288 1,324,728 61,186 34,749,246 1,166,518,244 5,399,024
1938 ^... 1,286,549 829,554 44^25 21,153,258 1,116,975,430 5,310,015
1937 ...\l,076,293 761,839 33,7^s. 16,685,852 841,274,933 4,462,439
1936 1^0,639 759,981 27,318 ^\ 16,528,401 671,011,789 3,699,818
1935 62^4 481,528 12,388 ^'HQi342,834 315,817,803 2,841,198
1934 251,13>\ 199,074 4,319 434J45 44,034,248 1,643,127
1933 762,208 \ 188,966 1,873 4,108>3. 82,613,032 1,823,850
1932 884,719 ^200,984 343 4,127,800^\ 77,867,566 1,639,015
1931 917,635 I
(M 575 3,934,093 ^^39,706,330 1,434,555
1930 648,799 119,349s.
146 2,129,600 S"
1,032,340
1929 -
495,708 121,075 \ ' 1,956,400 736,664
1928 195,315 24,890 402,400 " N
v.
314,496
1927 76,029 $ 8,663 126,000 " ^\11,667
3 Months, 1926 $ 11,790 --0-- Not AvailNv --0-- Not Avail. 47rd97
X
I
i
FINANCIAL
For the year 1947 your company sustained a net loss of $1,141,340 after depreciation expense of $4,496,239,
and after tax credits of $673,889. This loss amounts to $1.39 for each of the 820,755 shares of common stock
of the par value of $10 per share outstanding at the end of the year.
Total operating revenues of $26,579,398 are 32.27% above 1946, for an all-time high.
Passenger revenue of $20,520,631 exceeded the previous year by 13.61%, even though revenue passenger
miles flown were 0.86% less. This results from two fare increases on our domestic system and the higher fares
charged internationally. During the year approximately 65.45% of all seats on your company's system were
filled.
Mail revenue of $4,018,340 exceeded last year by $2,732,437, due almost entirely to revenue received for
carrying mail in international operations. Mail revenue for the domestic service remained at about the 1946
level. Average domestic mail loads increased substantially and were 251.17 lbs. compared with 206.77 lbs. in
1946.
Express, Freight and Excess Baggage revenues totaled $1,203,948 and exceeded last year by 73.28%. It is
gratifying to note that revenues from these sources have now reached a significant amount.
Charter and other operating revenues of $786,742, including $746,178 for non-scheduled revenue flights
to the Orient increased $775,738.
Available ton miles in scheduled service were 73,970,282 compared with 57,664,544 for 1946, while ton
miles sold were 42,744,821 compared with 41,181,283 for 1946. Thus, in the year just past your company sold
57.79% of its capacity offered for sale, while in 1946 it sold 71.42%.
REPORT
Total operating revenue per ton mile sold increased from 48.79 cents in 1946 to 62.18 cents in 1947.
The prices of labor and materials, as well as the general costs of doing business continue to increase.
Although revenues increased, reflecting more business at high rates, expenses have risen even more. The
average operating cost of making available a ton mile of transportation increased from 34.55 cents in 1946 to
38.21 cents, while the average per ton mile of transportation sold increased from 48.38 cents to 66.12 cents.
On April 21, 1947, your company entered into a bank credit agreement with a group of fourteen banks,
whereby such banks agreed to make available an aggregate of $18,000,000 to be borrowed for the purchase of
flight equipment up to April 30, 1949. The amount borrowed is to be repaid in quarterly installments during
the following five years. As of the end of 1947 your company had not borrowed under this agreement, however,
since then borrowings totaling $6,100,000 have been made to meet new equipment commitments.
In May, 1947 your company offered to the public 390,000 shares of $25 par value 4.6% Cumulative
Preference stock. As a result your company received net proceeds of $9,028,538, which were used to pay off bank
loans totaling $5,300,000, for the purchase of additional equipment and for working capital.
During the year the excess of current assets over current liabilities increased $1,187,880. Net investment
in Property, Plant and Equipment increased $6,360,659, primarily due to the acquisition of aircraft.
Our investment, at cost, in Property, Plant and Equipment totaled $28,261,607 as compared with
$17,868,939 as of December 31, 1946.
Earned Surplus totaled $896,252.
Your company is owned by 4,147 holders of Common shares with average holdings of 198 shares and by
2,098 holders of Preference shares with average holdings of 186 shares.
NWA
BALANCE
December
ASSETS
SETS
s receivable:
ransportation (including U. S. Government accounts of $1,248,561) ....$2,483,967
r current accounts 481,274 $ 2,965,241
reserve 15,000
bursed costs on contracts with the U. S. Government--$1,398,878,
ents of $369,379 and reserve of $840,837--Note A
dable income taxes arising from operating loss carry-back
tories--at lower of cost (first-in, first-out) or replacement market:
.$ 3,492,371
less advance
2,950,241
188,662
673,890
ir materials and operating supplies $
soline and oil
TOTAL CURRENT ASSETS '
438,364
93,840 532,204
.$ 7,837,368
r Assets
coverable income taxes upon utilization of reserve for contracts with the U. S. Gov
ernment--estimated--Note A
undry related industry investments (at cost--no quoted market) and deposits
Allowed claims for prior year unemployment taxes applicable against future unemploy
ment tax liability
Advances and other charges to employes less reserve of $500
205,000
74,676
63,164
13,334 356,174
Property, Plant, and Equipment--on the basis of cost--Note B
Land
Improvements to leased property
Cost of aircraft, buildings, and equipment in progress; prelim-
Non-operating property
Cash deposits in connection with acquisition of aircraft and
aircraft engines
Deferred Charges
Prepaid insurance and rent
Deferred training in connection with new aircraft fleets
Supplies, expenses, etc
1 Cost Reserve Balance
.$ 40,229 $ 40,229
13,962,903 $6,222,254 7,740,649
2,154,294 1,092,450 1,061,844
,
1,905,770 226,061 1,679,709
.
3,717,870 1,102,368 2,615,502
830,079 394,303 435,776
.
1,791,706 1,791,706
14,307 1,090 13,217
$24,417,158 $9,038,526 $15,378,632
3,844,449 19,223,081
.$ 262,749
81,057
67,053 410,859
$27,827,482
E E
,
7947
LIABILITIES
Current Liabilities
Accounts payable and accrued expenses:
Trade accounts $ 1,753,775
New aircraft and aircraft conversion 1,163,817
Salaries, wages, and vacation compensation 1,279,766
Air travel deposits--gross 418,200
Pay roll taxes and taxes withheld from employes 296,052
Dividends payable February 1, 1948 112,125
Retirement plan contributions including amounts withheld from employes 40,340
Savings bond and other deductions from employes 35,514
Accrued rent 96,008
Accrued local taxes 77,780
Income taxes of prior years 8,000 5,281,377
Unearned transportation revenue--estimated
TOTAL CURRENT LIABILITIES
Capital Stock and Surplus--Note C
Capital stock:
4.6% cumulative preference stock, par value $25 per share; entitled upon
liquidation or redemption of from $26.75 per share at December 31, 1947,
to $25.25 per share after May 1, 1953; convertible into common stock to
December 31, 1956, at the rate of one share of common stock for each $16^
of the par value of the 4.6% cumulative preference stock:
Authorized 600,000 shares; issued and outstanding 390,000 shares
Common stock, par value $10 per share:
Authorized 3,000,000 shares; unissued 2,179,195 shares of which 585,00 shares
are reserved for the conversion of 4.6% cumulative preference stock, 10,000
shares are reserved for options at $14 per share, and 20,000 shares are reserved
for issuance in connection with future options which may be granted to officers
and employes; in treasury 50 shares; outstanding 820,755 shares
Capital surplus
Earned surplus
Contingent Liabilities--Note D
Commitments--Note E
...
348,686
.$ 5,630,063
$ 9,750,000
8,207,550
3,343,617
$21,301,167
896,252 22,197,419
$27,827,482
See accompanying notes to financial statements.
A COMPARATIVE STATEMENT
OF
and
* The comparative figures for the six
months ended December 31, 1946, re
flect the most recently audited period
following amendment of the by-laws
adopting December 31 as the closing
date of the company's fiscal year.
Operating revenues:
Transportation:
Passenger
Mail
Express, freight, and excess baggage
Charter and other
Repair and service income, rents, etc.--net
TOTAL OPERATING REVENUES
Operating expenses:
Flying operations
Ground operations
Maintenance and repairs
Passenger service
Traffic and sales
Advertising and publicity
Administrative and general, pay roll taxes, property taxes, etc
Provision for depreciation and amortization--Note B
Provision for doubtful accounts, adjustments, recoveries, etc..
Other deductions:
Route extension and development
Retroactive pay adjustments applicable to prior periods
Interest and loan commitment expense
Loss on disposition of leasehold improvements and depreciable assets
Sundry
NET LOSS
) Indicates red figures.
See accompanying notes to financial statements.
OPERATING LOSS
Other income and credits:
Profit from disposal of depreciable assets
Unemployment tax credits for prior years
Discounts and interest earned
Insurance refunds (based on three years experience to November 1, 1946)
Statutory cancellation of prior year war risk unemployment taxes
Sundry
LOSS BEFORE INCOME TAX CREDITS
ncome tax credits:
Taxes recoverable on operating loss carry-back--estimated
Overprovision for prior year
Year Ended
December
31, 1947
..$20,520,631
..
4,018,340
...
1,203,948
786,742
49,737
..$26,579,398
..$ 6,512,077
..
4,359,264
..
5,277,201
..
1,770,163
..
2,706,866
593,506
..
2,530,743
..
4,496,239
18,442
$28,264,501
.($ 1,685,103)
85,257
62,307
38,249
21,041
($ 1,478,249)
.$ 123,638
109,955
81,928
21,459
$ 336,980
($ 1,815,229)
..$ 673,889
$ 673,889
($ 1,141,340)
Six Months
Ended
December
31, 1946 (*)
$10,607,112
687,711
469,102
2,815
14,119
$11,780,859
$ 2,543,388
2,206,338
2,407,519
864,270
1,135,506
316,037
956,407
1,607,691
( 3,462)
$12,033,694
($ 252,835)
17,105
200,000
71,736
3,629
$ 39,635
$ 99,360
7,109
24,075
13,911
$ 144,455
($ 104,820)
$ 42,000
7,702
$ 49,702
($ 55,118)
TUtes fo 0?6tatciaC Statements
December 31, 1947
Note A--Settlement of the company's accounts under its U. S. Government war contracts has progressed to the poh.t where the
company has received payment of approximately 98% of its aggregate expenditures made in connection wit^Buch con
tracts. The remaining amounts aggregating approximately $1,400,000 are in process of examination and negotiation and
while it is expected there will be unallowable items and the related income tax questions are still unsettled the ^company
believes that the reserve provided therefor during the periods affected is ample to cover losses and adjustments anticipated
at this time.
B--As of July 1, 1947, the company changed its depreciation and amortization policies, without retroactive effect, asyto DC4
type aircraft to recognize an increase in the expected useful life thereof occasioned by delays in delivery of ne^Bypes of
aircraft contracted for. This change resulted in a decrease in the depreciation and amortization provisions for the year
ended December 31, 1947, in the amount of approximately $560,000.
C--The company has in effect a bank credit agreement with a group of fourteen banks for a maximum amount of $18,010,000.
This credit is at present on a revolving basis but not later than April 30, 1949, it is to be converted into installment notes
which will be payable in twenty equal quarterly amounts. At March 15, 1948, the outstanding liability under the agree
ment amounted to $6,100,000. The agreement contains certain restrictions relating to mortgage or other borrowings,
dividends on or repurchase of common stock, maintenace of net current assets, commitment limits, ratio of note^fcider
agreement to book value of flight equipment, expenditure for non-current assets outside of the United States, investments
or loans, and merger or disposition of substantially all of its assets. The terms of the cumulative preference stoc^Bjdso
contain certain restrictions relating to dividends on and repurchase of common stock.
D--The company is defendant in a number of lawsuits involving substantial amounts resulting from (1) claims for overtime
compensation to employes on war contract operations at the Saint Paul Modification Center and, (2) accidents on Sep
tember 18, 1944, and December 8, 1945, resulting in death of, or injury to, military and civilian personnel who
being transported in government-owned airplanes operated by the company under contract. These actions are being de
fended by the United States Department of Justice; as to (1) the Comptroller General of the United States has rul d
that any amounts paid in satisfaction of final judgment and reasonable costs and expenses of litigation as approved bB
the Army Contracting Officer constitute allowable items of cost under the contracts and as to (2) under the wording oft
the pertinent Government contracts the company is entitled to reimbursement for any losses or expenses therefrom. Trials
of certain of the lawsuits under (1) above have resulted in the rendering of three judgments against the company by
the trial court. The Department of Justice has appealed one of these judgments and advises that it is considering
appealing the others. Trial of one of the lawsuits arising out of the accident of September 18, 1944, has resulted in
the rendering of a judgment for the company by the trial court. Appeal therefrom by the plaintiff is now pending. In
a suit brought against the company for injury allegedly suffered on January 6, 1947, by a passenger on board one of
the company's aircraft, the company's insurance will cover the amount of any loss therefrom. Another suit has been
brought against the company for injury allegedly suffered on June 7, 1947, by a passenger on board one of the com
pany's aircraft. Any loss resulting to the company from the latter suit will not be covered by insurance but it is believed
not to be material. In view of the circumstances as outlined, including the amount sought to be recovered in the suit last
mentioned, no provision has been made for any portion of the amounts involved.
As a part of its insurance coverage, the company assumes a maximum loss of $100,000 on each accident or occurrence
involving passenger and public liability, property damage and aircraft damage and carries excess coverage on these risks
for an aggregate amount of $6,000,000 for each accident or occurrence.
E--The company's proposed expansion program involves expenditures of approximately $39,500,000 of which approximately
$15,177,000 had been expended as of December 31, 1947, and of which approximately $12,459,000 is expected to be
expended prior to January 1, 1949.
Statement Surplus
Year Ended December 31, 1947
CAPITAL SURPLUS
Balance at (January 1, 1947 $4,065,979
Deductions:
Exces^Bf cost over par value of 50 shares of common stock repurchased $ 900
ExpeiBs incurred in connection with sale of 4.6% cumulative preference stock 721,462 722,362
mj Balance at December 31, 1947 $3,343,617
EARNEWURPLUS
Balance pt January 1, 1947 $2,367,737 _/
Deductions:
Net loss for the year $1,141,340
CaB dividends declared on 4.6% cumulative preference stock--86.25 cents per share
less 1.60 cents accrued at date of sale of preference stock 330,145. 1,471,485
Balance at December 31, 1947 $ 896,252
J See accompanying notes to financial statements.
M stfecectntanU TZefoont
^Bard of Directors
Northwest Airlines, Inc.
foaint Paul, Minnesota
We have examined the balance sheet of NORTHWEST AIRLINES, INC., as of December 31, 1947, and the
statements of profit and loss and surplus for the year then ended, have reviewed the system of internal control and
the accounting procedures of the Company 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. Our examination was made in accordance with generally accepted auditing standards and
included all procedures which we considered necessary in the circumstances.
In our opinion, the accompanying balance sheet and related statements of profit and loss and surplus present
fairly the position of NORTHWEST AIRLINES, INC. at December 31, 1947, and the results of its operations for
the year, in conformity with generally accepted accounting principles applied on a basis consistent with that of
the preceding year.
ERNST & ERNST
Saint Paul, Minnesota
March 15, 1948 Certified Public Accountants