Northwest Airlines Annual Report 1949

NORTHWEST AIRLINES, Inc.
annual dUlplnf-fJJS/talldwldilM_
1949
NORTHWEST AIRLINES, INC.
Board of Directors
K. R. Fergu on ..................................... .Vice Pre ident- Operation and Engineering,
orthwe t Airlines, Inc.
Wm. Tudor Gardiner ................ Chairman, Board of Director , Incorporated Investors
Bo ton, Ma .
Robert M . H ardy .............................. Pre ident, Sun hine Mining Co., Yakima, Wah.
Croil Hunter ............. .......... ....................................... Pre ident, Northw t Airlin s, Inc.
Jo eph T. John on ........... ...... ............. Pre ident, The Milwaukee Co., Milwaukee, Wis.
Malcolm . Mackay ... ..................... Special Partner, Laidlaw & Co., ew York, . Y.
Dr. Charle, W. Mayo ......................... ........................... Mayo Clinic, Roche ter, Minn.
Alonzo Pettey .................................. Vice Pre ident and Director, Farmers tate Bank
Brush, Colorado
William tern ......... ............................. Pre ident, Dakota ational Bank, Fargo, . D.
Edwin White ................ Chairman, Board of Director , Kalman & Co., St. Paul, Minn.
E. I. Whyatt ....................... .Vice Pre ident and Comptroller, orthwe t Airline , Inc.
Officers
Croil Hunter ............... ........................................................................ .. ................ . President
E. I. Whyatt ........................................... .... ....... ........ .... .Vice President and Comptroller
K . R . Fergu on ...... ... ...................... ......... Vice Pre ident- Operation and Engineering
Linu C. Glotzbach .................................. Vice Pre ident and A i tant to the Pre ident
Amo Culbert ......................... .... ...................................................... .Vice Pre ident- ale
. E. Floan ............................................... ........................... Vice Pre ident and ecretary
L. . Hol tad ...... .................................................................................................. Treasurer
Frank C. Judd .................................... ........ .. Regional Vice President- Western R egion
D. J. King ................................. ................. ...... Regi.onal Vice President- Orient Region
Wm. J. Eiden .... ......................................................... ......................... A sistant Treasurer
General Office : 1885 Univer ity Avenue, St. Paul 4, Minnesota
The Cha e ational Bank of The City of ew York, ew York, . Y.
Principal R egi trar
Banker Tru t Company, ew York, . Y.
Principal Tran fer Ag nt
Harri ru t and aving Bank, Chicago, Illinoi
Co-Regi trar
he Fir t ational Bank of Chicago, Chicago, Illinoi
Co-Tran fer gent
Annual m eeting of shareholders third Monday in April
PRESIDENT 'S REPORT
YO R compan , during a year which estab-
li hed ne, high record in the amount of
revenues and the volume of bu ine s, made
a net profit, after taxe, of 1 357,679 in 1949. Thi
compares with a net lo s of $787,474 for the
preceding ear.
In m report a year ago I pointed out that
although this company wa faced with many
difficult problem , there were indication of im-
provement; and the shm ing of 1949 bear out
that foreca t. In addition to an increa e in olume
and profit, there were other important develop-
ment . e received and began operation of our
fleet of Boeino- Stratocruisers; and the e planes,
together , ith our fleet of Martins, provide North-
west Airline with the most modern aircraft of
any airline dome tic or international. During the
year , e introduced, or expanded, pecial ervice
which found favorable acceptance by the public.
We continued the expan ion of our freight business.
Contributing to the re ult for 1949 were these
factors:
Improved earnings hown on our Alaska-
Orient operation, de pite the fact that we closed
service to Shanghai when that city was occupied
by the Chinese Communists.
Introduction of coach flights.
Inauguration of Boeing Stratocruiser opera-
tions.
Full utilization of Martin plane .
Expansion of cargo busine s.
Increa ed patronage of such servi e a the
family plan ex ur ions, and package tour .
ervice to H awaii.
Mail re enue for 1949 is computed on the ba is
of the temporary rate effecti e during the period.
It i expe ted that permanent mail rates will be
determined this ear.
Coach Service
In a previous report, I pointed out the need for
a service, without de luxe features, which could
be offered to the public at fares low enough to
attract the ma -travel market. The wide accept-
ance of our coach ervice ha justified this ven-
ture. V
./e started our Seattle-Anchorage coach
flight on Januar 3, 1949. On March 24 1949,
we began coach operations tran continentally be-
tween New York and Seattle-Tacoma on Sep-
tember 25, between Chicago and Portland and on
December 15, between Minneapolis-St. Paul and
Anchorage, Ala ka, via Edmon ton, Canada.
During the summer months, load factors on
coast-to-coast oach flights were over 90 per cent.
A total of 90,896,559 pa senger miles were flown
on the domestic coach flights in 1949. It is ex-
pected that during 1950, our coach ervices will
produce even more volume as they become better
known.
PRESIDENT'S REPORT
\\'e now have eight four-engine Douglas DC-4
aircraft converted to 55-pa enger combination
coach-cargo plane and we are currently convert-
ing two other into high den it 66-passenger
coach-cargo plane .
argo Increa e
Cargo more than doubled_ in ton-miles during
1949 compared with the pre iou year bringing a
ubstantial increa e in revenue. Cargo ton-miles
totalled 9,138;691 compared with 4,448,819 in
1948 an increa e of 105.4 per cent. Revenues were
2,575,689, compared with 1,442 274, an increase
of 78.6 per cent.
To further develop thi cargo bu ine , your
compan ha recently converted two DC-4 aircraft
into all-freighter plane . The e are provided with
pecial double-door. -have a payload capacity of
20 000 pound , and will accommodate ingle pieces
up to 6,000 pound . During the year, priority
handling of cargo in re erved pace aboard trato-
crui er wa inaugurated under the name of "Gold
Ribbon" ervice. Thi fill a demand by shippers
for a pecial priority erv1ce.
tratocruiser
One of the major event of the past year has
been the delivery of our full fleet of ten fa t,
double-deck tratocrui er by the Boeing Com-
pany, and the beginning of ervice by the e aircraft.
We now ar flying tratocrui er coast-to-coa t
between ew York and eattle-Tacoma; between
the Twin Ci tie and Chicago and between the
Pacific orth, e t and Honolulu.
Pa enger approval of the e luxury liners has
been enthu ia tic. Traveler appreciate the com-
forts of the large and well-appointed cabins, and
the speed and omfort of high altitude flying at
ea-level cabin pre ure.
The hakedown period of our tra tocruiser per-
mitted only limited u e of that part of the fleet
put into ervice during 1949. During 1950 the
entire fleet of ten plane will be in u e and it is
anticipated that their utility will be increa ed from
approximately four hour to eight hour per day
per plane. very ub tantial increa e in available
eat mile and ton miles will re ult.
It i planned to tart tratocrui er flight be-
tween eattle-Tacoma, Anchorag Ala ka, and the
Orient in late 1950.
As part of our general promotional program,
one of the tratocrui er wa taken into a number
of the large t citie on our ystem, where it was
open to public inspection and wa u ed for courtesy
hop . It wa al o taken to several off line major
citie in Canada, California and ew England.
The e vi it timulated intere t in our plane and
al o in the territory erved by orthwe t Airlines.
Training hakedown and operating co t for the
tratocrui er are pre ently high. Thi i a com-
parahle ituation to that faced in the pa t by thi
company in the initial operation of ne, t pe of
airplane and one which normall ' ha been faced
b other airline und r imilar cir um tance . Be-
cau e of the ize and co t of the trato rui er fleet,
the e exce i\' expen are urrentl er ub-
tantial in amount and the ituation i likel to
continue durino- much of 1950. The compan_ and
the manufacturer concerned are , orking to elimi-
nat the cau e of the ex e o t . v\Te e, p t that
, e will ub tantiall o ercome thi handicap later
in the ear ,vh n we ha e had more experien e in
maintaining and operating the hip and after
uneconomi al feature are corr cted. t that time
we believe the trato rui er , ith it fine public
acceptan e will ha e ati factory operating co t
profi tabl, in line v ith it revenue producing
potential.
Martin
Our fleet of l[artin ha provided tra eler and
hipper in all itie along our coa t-to-coa t sy -
tern , ith a fa t luxur type of er ice. The aircraft
are ideall uited to the t pe of operations to
which the ha been a igned and to the airport
facilitie . heir pe ial feature uch a built-in
tep rever ible prop Iler and underwino- fueling
contribute to their utility. Performance records
have met expectation .
the fir t airline to u e M artins, your company
i gratified to note that other major airline are
buying Martin or planning uch purcha e . R e-
PRESIDENT 'S REPORT
cently t,\o of the e airlin ha e announ d their
intention to acquire fleet of I fartin .
D ouo-la D -4
Dougla D -4 ar being u d on our oa h and
freight flight and on all la ka and Orient flight .
In addition to the ten DC-+ whi h orthv e t i
u ino- on it oach flight there are two all-freight-
er and one tandard 44-pa eno-er tandb hip
, hich the ompan own . Fi e other DC-4 being
u ed on the la ka-Orient flight are lea ed from
the Go ernment.
D ougla D -3
Durino- th pa t year the la t of our fleet of
Dougla DC-3 airplan which , e o, ned or had
on lea e w re taken out of cheduled operation
and all but t\\ o were di po ed of. One of the tv o
i now u ed a a freight r and the other i u ed
as a tandb hip for variou purpo e . Of tv ent -
four D -3 aircraft which we had in 1947- fifteen
o, ned and nine lea d- w made al to hed-
uled and un heduled airline including the en-
tral ir Tran port ompan of China, , hich
bought ix of th e hip . The la t of the nine
lea ed D -3 were returned to the government.
ale Proo-ram
Inten ifi d effort are beino- made to ell all of
T
orthwe t irline ' ervice .
Conte t to enli t the ma effort of all non-
ellino- mplo ee have been adopted. One of
PRES IDENT 'S REPORT
the e was conducted a year ago, and proved so
succe sful that a second contest-now under way-
wa started thi year. ot only has new business
been generated, but greater intere t in sales has
been timulated among all employees.
During 1949, package tour were conducted to
Hawaii, Japan and Ala ka through our travel
agent . Thi program i being expanded, with
more tours to Alaska; to Wahington, D. C., and
Iew York, and to national park ; and Holy Year
tour to Rome and other part of Europe. timu-
lated largely by these tours, busine through travel
agencie ha been hawing an increa e.
The family plan, under which an adult member
of a family pay full fare and other members of
the family travel at half fare on pecified days of
the week , attracted more than 47,000 pa sengers,
and over 1 000,000 in revenue.
Convention bu ine s, both in number of pas-
senger and revenues, more than doubled.
The indu try-wide fare di count of ten per cent
to military personnel generated ome traffic and i
expected to bring an increa ed number of uch
pa engers thi year. Charter flight , undertaken
a aircraft were available, attracted various groups,
including athletic team . ight- eeing flights also
were ucce sfully operated.
orthwe t Airlines travel films of Hawaii and
the Orient were een by many persons. o popular
were the e pictures that prints have been booked
for month in advance by various groups.
ew ale offices were opened during the year
in Los Angeles, an Francisco, Vancouver, British
Columbia, and Japan's industrial city of Osaka.
Navigation Aid
Improvement in the flight performance record
has continued throughout the past year, due to
improved navigation aid , more effective use of
them, and better air traffic control at key terminals.
The radio-telephone network on the Honolulu
run reached an efficiency of close to 100 per cent.
It was placed early this year under full ownership
and operation of Aeronautical Radio, Inc. During
1949 orthwest-owned radio stations at Tokyo and
Seattle were sold to Aeronautical Radio, Inc., and
radio-telephone equipment was added to the An-
chorage station. By mid-1950 we hope to have
full implementation of the radio-telephone air-
ground-air operation between Seattle and Tokyo,
and throughout the Orient by the end of 1950.
Very High Frequency equipment i being in-
stalled in our aircraft for utilization of the new
omni-directional ranges which are being commis-
sioned along the airways of the United State .
The current year, like 1949, should ee steady
progress toward attainment of all-weather flying.
Operation Changes
The tran fer to eattle of the part of our opera-
tions incidental to our Orient flights materially
m'r '. -d thL u.c of u1r faciliti's .1t th' St:1 ttl '-
T.1 'cm;1 :1irport.
Cur Str:1( cru iser scrn ' c intci 1'\\. Yt1rk 1s :11
ldk " ild :1irp 1rt. This h. s pron:d :1 sc(.' i:11 t' ,n-
\cnicnc ' l0 wcr 'c:1s p:1sscnr,"t'rs sini.'' they cn1
nuke - 1nnccti1.1ns th ' re ''"ith . ll tr the f(1 rcigu
r.1rricrs \rhich :1 n' usinQ l dlc,,ild. wthwcst " :1s
the first <lorn 'stit irlin ' to b:1sc ocr:1ti"ns :1 t thi~
:1irplrt. T 'm1 o r.ry r.wilitics h:n- ' been S't up
pending th ' fttrthcr dcYdopm -nt l f l dk,,ild b,
th '" York P 1rt .\ uthority. orth\\cst's othn
cw Y ork flights k,YC continu ' d to 11~c L.1 ,11:1rdi:1
\ irp 1rt.
lmprovcm 'nt
A nc,, 1.150.000 scrncc b:1sc. r:rns1st1ng- cf
three h.rng;11", ''"' st:ntcd . t \\' ld- ; h:1mbul. in
F idd. the Twin itics :1 iq cirt. T\\'L) of th ' h. ng:1rs
a r , now romplclcd :rnd th ' ihird will be re. dy by
surnrnt r. Th 'St' n ' " L cilitics p ' rrnit th ' const1lid:1-
tion of :1irrr:1ft m :1 intcn;1nn ,,. wk in on' loc1ti 111
. rnd should r 'suit in grL J lt'r c rncicnr :1 nd 'ronornY.
, R Proccedin~,
orth, -st's basic rout I :1tt ' rn .. 1s c.-1 bincd in
L.t )Car' r ' t ort, has b ' en .ct ;-ind no rn;-ijor rout '
cxtcnsic ns were s ught in I CJ q_ T h ' iYil Arro-
n, utir Bo;.rd did, hmffY ' r, take :1rtion )n m :1tt ' rs
p ' nding b 'f r it. ':crtif1 ';"It d to 11 into i- :1list rll,
Monona, we bcg.:in f1ight: , ith :1 progr:im to bu il I
up a :1 ti n tr. cl thr ug-h th:it st:1tion, :1s well ;-is
to 111cc t thrr 1 Kal n ed ..
t. P;w\ ,
, 1
-c h ,_~
I
linncs ln
1910
PRESIDENT'S REPOR T
iur ll',wts w rn.11-...c 1ur rh,n11.'s til' t1 pl' r.1tit,ns
rn 1rc nr"ibk h.1, c l'()lltinu ' d.. \\,, .nc :; 'L'k ing- t1..1
rn 1difY c isling l..\ B n strir tl,rns Sl) th.\! it w ill b '
p1.1ssibl t,1 rrd11('1.' unpt\1l11.1 bk 111ik:1\' .rnd t0
,1ller m 1rc d sir.1bl , sd1ed11ks.
.\ pli(.1tit,u h.1 s b , ' n rn.1d.c It) thr C,\ n to
desis:n.1tc ~c.1t tk-T.H1. m .1 .1111 Pnrtl.rnd .1s t't)-ll r-
rnin:ils ou ,,ur d 1nwsti ' n1nks. This \\onld p,'nnit
~r.1ttl -T.w,1rn.1 .1ud P1rtl.1nd !,, bt sl1
n d 11 the
s.rnw t1ights, g-iYing I nrtbnd tr.rns-et1nti1wnt.1\
scrntc 1rnp.H:1bk t 1
th. t tw" gin ' n ~c:1 ttlc -
T.H-orn.1 .
Ednt<.ll\t on. Can:ub
:\utlwri1.1tw11 \\'.lS gr:rntnl. this 11wnth b\' thr
,.1nadi:111 g\w ,'rtilll\l'llt li' r.1rn p.1ssn1.;l'rs. '.11'~'\1
.rnd u1. il in .rnd ,1u t t1!' E -lmontt1n, :\ llwrt.1, which
lwn' to l"cw1. h.1 s scrnd c1nh .1s .1 fn ling st,,p c n
!light s hr h ,'l't' n the Twin <..,itirs .111d :\ndwr. g '.
In Yiew 1r thl innr:1s ' d .1 cti itirs in th F.duwn-
ton :ll'c:1, du- in l.irg 11l '.1 ' lII\' tn th , (1i l ln1.m1 .
opruing this cit\' k1 rrguhr tr:lffo.
,ill h.1n' the
dl'rr t or innc:1sing rn -r1.11cs nn the Twin ; iti1. s-
A11chor:1g-r rout '.
( ,ondnsion
As ,\.l' report the r suits l'r :1nuthcr yc:1r's husi-
urss, I wish to l\T l)r<..l lll\' ;1pprcr i:1tion or th '
strrnuous effor ts 111.1dc by the r nmp:111y's cm -
plo r 'S, o ffi ,ns :1 nd <liru tors. T lwir h:1 r I ,,ork
:rnd roopcr:1tion is l'SSlnti:11 ll1 thl nmtinu:ition of
t lw romp:1 ny's !Jrogrcss . n I service tl1 l lie public.
Cal nda r Mail
Y ar
194 ... .. .. ..
19 18 . ..... .... ..
R venue
.$9,03 ,1. 4
. 8,L
IL
l 1, 10
L I 7.
1946 .. .......... ..
I 9,15
19 11 .. ........ .
!9L
l3 .. .. . , ......... .... .. ..
19 12 .. .......... ....... .. ..
19 11 ........................ .
I 9 IO ..... .
19'.{9. . .. .. ........... ..
I
:rn. . ............... ..
19'.P ....................... .
I% ....... ................ .
I '.!5 .................. .
I '.{ ! .. .. ..................... .
19:n ......................... .
1932 ............. ........... .
\C)'.ll ................. ..
19:rn .................... .
I. 2~. .. ................ ..
1928 ................. .. .
I < 27. .. .............. ..
! I nths, 1926 ........ .
I 0 18 '.HO
1,254 257
1,G49575
1,500,874
1,'.{53,822
1,850,60 I
1,955 82
1,769,735
l,76'.l,288
1,286,549
1,076 293
1,050,639
629,724
25 1, I 33
7 )2,2 8
884 719
17, )35
648,799
\C 5 708
I 5'315
76,029
11,7 0
- NOIIIHW( S I OA:llNI AIIIUN(\
- CONN(CIINO AllllN(\
SlA AIR OMllNI CONNfCIIONi
\
RECORD OF PROGRESS
Pa cngcr
R evenue
'27,873,942
24,074-,778
20, 20 63 l
18,062,492
10,060, 19
6,073, G7
3, 1397 13
2,4 10,5 12
2,52 ),7- I
-, I 5 1,3 I I
1,324-,728
829,554
76 1,8'.{9
7 , 81
48 1,528
19 ,074
188, 66
200,984-
_o5, 16L
I
I I 9,349
I 21,075
2 1,8 0
8 :::
0
E -pre
and Fr ight
R vcnu
$3,16 ,278
2,072,.362
1,0 I 9,497
553,875
<
109,6 1'.l
24 J,0.30
297 94 l
240 800
I I 8,885
79,531
6 1, 18)
4 1,625
33,768
27) 18
12,388
4,3 19
I 873
3 Vl
575
1 JG
ot vail.
Rcvcnu
Pas cngcr
Mil
4 5,114,870
386,509,809
382, 44,382
85,858,473
218,4 9 773
120,834,296
63 787,683
52,06 1,159
59,659, 145
5 1 I 7 ,254
-1,749,246
21,153,258
16,685,852
165-8,401
I 0,342,834
4,301,145
4, 108,3 13
4, 127 800
3,934,093
2, 129600
I , 56,400
40-,400
126.000
0 -
Mail
Pound
1ilc
9,445,597,3 2
8,052 148,6 1
5,4 73,873,8 -1
4,099 31 7 _33
5,3 6,757,0 8
4,900 802,9 17
4,005, 180,807
2,528 04 2 " I
1,87 1) 11 ,1 I
1,370,076,0 I 3
1, I 6,5 I 8,24-1
1,116 75,430
84 1,27 ~
, 3'.l
67 1,0 11 ,789
315,8 I 7,803
44,034,248
82,6 1,3 0'.-12
77,8 7, 6
89,706,330
t vail.
Total
Plan
Mil
Flown
25,908,552
22,288,002
20,824,9 12
19,304,234
12,870,7 14
7 sn, t4G
1,584 766
4 3 I 8 I 5
6,3 '.\ 5
J,07 66
5,399,021
,3 I0,0 15
4 ,-1 62 13
. ,6 9,8 18
2 84 I, 198
1,)43,127
1,82'.-l,8 0
1 63 0 15
l,4 '.!4,555
1,032,'.~40
736 664
3 14 496
2 I 1,667
47,397
F A CIA
OUR n t profit of 1 35 7 679 after taxes rep-
re ent 1.11 for each of the 820 808 hare.
of 10 par value common tock out tanding
at the end of the year, after allowance for divi-
dend on Preference shares.
We have hown by the accompanying table cer-
tain ignificant revenue, expen e and statistical
cornpari ons between 1949 and 1948.
hown in the table, y tern operating revenues
et a new high record with an increase of 15.24%
over 1948, while operating expen e rose but 6.89%.
You will note that the increa e in revenue pa -
seng r mile is greater than the increa e in pas-
senger revenue dollar . Thi is a reflection of the
con iderable volume of low fare coach bu ines
developed in 1949. Coach pas enger miles were
21.62 % of all pas enger mile on the company'
route , both domestic and international, while
coach pa enger revenue repre ented 15.46% of
the total sy tern pa enger revenue .
The increa e in mail revenue over 1948 re ul ted
mainly from a full year' operation in 1949 of the
Hawaiian route on which ervice commenced
December 2, 1948. Our domestic mail pay was
13.49 o le than in 1948, while mail pay for
Orient operation howed a 5.72% increa e.
Freight revenue alone amounted to 2 575,689,
and exceeded the previou year' by $1 133,415,
while e pre revenue dropped lightly.
The decrea e in ystern operating revenues per
ton mile old refl ct lower tariff in the form of
R PO T
coach fares, family plan rate , and cargo rate
reductions.
Depreciation charge in 1949 were $2,121,185
le s than in 1948, mainly due to the completion of
write-off of company-owned DC-4 and related
part a of the end of 1948.
A of the end of 1949 your company owed
17,400,000 to a group of fourteen banks who are
partie to our Credit Agreement dated September
1, 1949, covering a $21,000,000 redit. On Febru-
ary 15, 1950, the company borrowed an addi-
tional $2,400,000, and there remain $1,200,000
to be borrowed. The Recon truction Finance Cor-
poration ha a participation agreement with the
banks for a maximum amount of $12,000 000. Our
re-equipment program regarding aircraft was com-
pleted when we received and put into service the
la t of our ten Boeing S tra tocrui ers.
Dividends on the 390,000 hare of $25 par value
4.6% Cumulative Preference tock were paid regu-
larly during 1949. Dividend paid on February
1, 1949, and May 1, 1949, were charged to Capital
urplu . Dividends on Augu t 1, 1949, and No-
vember 1, 1949, were charged to Earned Surplus.
et inve trnent in Property, Plant and Equip-
ment increa ed $11,832 121 during the year prima-
rily due to the acquisition of aircraft.
At the end of 1949, our inve trnent (at cost)
m Property, Plant and Equipment totaled
49,012,964. It wa $31,836,591 a of December
31, 1948.
1949 1948
Increase
or
(Decrease)
Percentage
Increase or
(Decrease)
y tern Operating Revenue .............. ........ ............. .
y tern Operating Expen e ........... ........................ .
Sy tern Pa enger Rev nue ..................................... .
$ 40,501,017
$ 38,988;909
$ 27,873 942
$ 35,145,955
36,475,477
$ 24,074,778
386,509,809
$ 18,420,989
$ 5,653,789
5,355,062
$ 2,513,432
3,799,164
108,605,061
$ 4,076 725
$ (277,561)
15.24
6.89
15.78
28.10
22.13
(4.91)
tern Re enue Pa enger Mile ........................... .
Dorne tic Pa enger Revenu ................................. .
Ala ka-Orient-Hawaii Pa enger Revenue ......... .
Pa enger Load Factor :
y tern ............................................................. .
Dorne tic ......................................................... .
la ka-Orient ............. .................................... .
Hawaiian ......................................................... .
t rn Mail Rev nue ............................................. .
y t rn Expre , Fr ight and Exce Bagg. Rev .... .
tern vailable Ton Mil Flown ...................... ..
) tern Re enue Ton Mil old ........................... .
P rcentag of ailable Ton Mile old ..... ......... ..
y t rn Operating Re enue per Ton Mile old ... .
y tern o t per vailable Ton Mil Flown ......... .
495,114,870
$ 22,497,714
$ 5,376,228
56.34%
56.57%
56.l 4o/(
49.92 0
9,039,154
3,426,022
116,263,847
64,507:466
55.48o/(
62.59
33.47
56.56%
56.31 0
58.25%
38.31%
8,444,106
2,332,453
90,531,952
48.240.510
, 53.29 0
72.22
40.10
595,048
1,093,569
25 731,895
16266956
(9.63 )
( 6.63 )
7.05
46.88
28.42
33.72
(13.33)
(16.53 )
COMPARATIVE STATEMENT OF
0 FI A D 0 S S
Years Ended December 31> 1949, and December 31, 1948
Operating revenues:
Transportation:
Passenger .................................................................................................................. .
Mail ................................................................. .......................................................... .
Express, freight, and excess baggage ........................................................................ ..
Re~~ir~e~da~e~1~~e[~~~~~~--;~~t~,- ~t~:~~~t::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::
1949
$27,873,942
9,039,154
3,426,022
74,626
87,273
TOTAL 0 PERAT11 G REVE ES ............................................................ $40,501,017
Operating expense :
Flying operations ........................................................................................................... .
Ground operations ......................................................................................................... .
Maintenance and repairs ............................................................................................... .
Passenger ervice ........................................................................................................... .
Traffic and sales ........................................................................................................... .
Advertising and publicity ............................................................................................ .
Administrative and general, pay roll taxes, property taxe1>, etc ............................... ..
Provision for depreciation and amortization ............................................................... .
Provision for doubtful accounts, adju tments, recoveries, etc .................................... .
$11,1 39,374
5,710,053
7,970,909
2,252,960
3,608,294
1,353,129
2,961,539
3,956,668
35,983
1918
$24,074,778
8,444,106
2,332,453
282,770
11,848
$35,145,955
$ 8,583,862
5,467,114
7,329,050
2,052,536
3,187,786
882,114
2,878,999
6,077,853
16,163
$38,988,909 $36,475,477
0PERATI. G P ROFIT (Los ) .................................................................. $ 1,512,108 ($ 1,329,522 )
Other income and credits:
Adjustment of prior years depreciation on station communication and motorized
vehicles equipment ................................................................................................... .
Profit from sale of surplus inventories ........................................................................... .
Di counts and interest earned ....................................................................................... .
Overaccrual for prior years rentals .............................................................................. ..
R eduction in reserve on . S. Government war contracts less applicable recover-
able income taxe (1 949- $17,000, 1948-$102,000 ) ........................................... .
Profit from disposal of depreciable assets .................................................................... .
undry ........................................................................................................................... .
Other deductions:
Interest on long term debt ........................................................................................... .
Other intere t expense............................... . .................................................... .
Route expension and d,evelopment. ............................................................................. .
Sundry .......................................................................................................................... .
$
137,248
120,210
78,780
52 47
26 635
19,737
34,909
1,982,274
377,101
5,187
5,369
43,438
431,095
PROFIT (Lo ) B EFORE T AXE o, L co:-vn: ...................................... $ 1,551 J79
Provision for taxes on income of the year-e tirnated:
Federal ........................................................................................................................... $
tate ............................................................................................................................... .
$
Reduction in taxes payable on income of the current year arising from carry-over
of operating loss of prior y ar -e timated ............................................................ .
530,000
35,500
5 5,500
372,000
193,500
?\ET PROFIT (Lo ; .............................................................................. s 1.'.i57.679
( 1
lndicat s red figures.
ee accompanying notes to financial stat-ments.
.................
76,036
53,9 0
.
167,006
421,224
68,227
($ 543,0691
193,723
1,435
34,753
14,494
$ 244,405
($ 787,4741
$
$
$
($ 787,474
ASSETS
.. 1,h
ll Crrtifir.1t1s of l ndcbtLdncss at rost plus., rued
interc,t (rnb,t.111ti.1lh equiv;1il'nt to m:irkct )
.\ ccounts rcccivabh-:
FLH' tr.111,JHH t.1tion ( in luding- ,OVl'rlHllL'll( ,I(-
rounb of 1,379,8'.l9 ) ................................... .
L ther cu1TL'nt .1crounts
lm'L'n to1 iL's Llf rquir m;1ttri.1ls .rnd pn:itin supplil's- !1,L't\L'rall: at lo, -
er f co,t (first-in, fi1st-out ) or repl:i emcnt market.
2 7--1 ,018
--168,1-4 3,217,--1-42
25,000
BALANCE
1,617,484
1,0 l l,320
Decembe r
r T \ L ~ l ' RRI, ' T . \ S:SFT:-- ............................................................................................... ..
7--16, 30
,568, 176
(_ fllFR . ~:--FT.S
Estim.1trtl incrnm ta , es which will be recover:iblc upon
s1ttil'nwnt L f ,, .11 c 1nt1.1ct, ..
:und1 ,. 1\'l,1t1d bu. ines. im c,tmcnts (.1t
quoted markct \ dtposits, :ind notes
st n
PROl'I RI 'I. P 1 .\ NI. , , n E )llJP:'11 I<'. r ( 11 till' ba is of rost
(mduding .1sscts of ~).801.'.1!'.2 compktrh amorticd
t 1 rrsi lu.11 ,1 111ount of ~
':2::!8,060 ) 1otl' .\
L.111d ............................................ .
\in r.1ft ,11\d restnL' t'quipml'nt ..................................... .
C\1m11,io11 L
' lsh Llll kasrd .1irrr:-ft .............................. .
Huildin(!'~ l n I.ind not ow1wd. .. ............................. ..
tlll'r building-. . rnd rquipmcnt ............................. .
llllJHO\ 'llll'nts t0 11',bl'd pror l'l t, . . . . ...... ..
l\1,t of .1i1c1.1ft cq111p111c11t, building-s :1 11d nthn cquip-
llll'lll in proc,n~,
on-orr.1tm~ propl'rt\
I l'I R1'.1 I l . 11 \ l' l~ I ~
Prep.1id i11,u1 .111('1', n n t, t., L'S, l11c~. et .
l'fnrcd l'1lsh in r1,n1we tio11 " ith JH'\, ,1irrraft fleet
It" .111101ti;.1t in11 nf '25.101 , oil' B
,o t
30,1 37
J8,200,8'.?6
1.60 ,808
1,9 6,001
l.96+,578
1,099,809
I, 111, I. 9
10,006
; 19.0 I '.?.~)-1
108,700
7,500
Reen '
10,--158,60 l
I. 09.808
180,635
1,9--18.810
806 80
...............
'.:!.161
' 15,306,8_--I
86 000
101,200
Balan ~
30,--137
_ 7, 742,-25
.............
1,505,J 6
3,015,768
_93,000
I, 111,-199
7,8-15
''.1'.) ,70 ,I.JO
6 6, 1--15
765 .05 7
187,'....00
''3 ,706,140
SHEET
31, 1949
LIABILITIES
URRE T LIABILlTIE
count pa able and accru d xp n c :
Trade ac ount ........................................................................................................ .
alarie , wage and va ation compen ation ............................................................... .
ir trav 1 ontract depo it - gro .......................................................................... ..
Pay roll taxes and taxe withheld from employee ' wages ............. .......... .
R ti rement plan contributions, including amount withheld from emplo e
wag - ote ........................ .................. ............. .............................................. ..
aving bond and other deduction from employee \\'age ................................. .
crucd local taxes ....................................... ............ .. .............................................. ..
crued r nt .............................................................................................................. ..
n arned tran portation r v nue- timated ............................................................... .
Fed ral and tate taxe on in om ................................................................................ .
urrent maturities of long term debt. ..... ............... .. ................................................... .
TOTAL RRE T LIABILITIE
ER r D EBT- e ured- ot
Bank redit agreement dated eptember 1. 194 :
I 000,000 payable on the fir t da of J anuar
pril July, and ctober of each year beginning
July 1, 1950:
2,271,105
1,313,688
443,275
333,050
71,857
55,448
240,213
88,94-1-
B:ilan e De ember 31 1949 ................................................................................... 17400000
L curr nt maturitie hown above a current
liabilitie , in luding +,6 7 paid on February
3 1950, and applied to notes in inver e order
of due date ......................................................................................................... ... 2,004 637
PIT L T CK ND RPL and D
apital tock:
+. c-o umulati e preference sto k, par valu 25 per
hare: entitled upon liquidation or redemption to
26.25 per har at D e ember 3 1, 19--l-9, redu ing
to 25.25 per hare after fay 1 1953. plu ac-
umula ted unpaid <livid nd : onv rtibl into com-
mon to k to De emb r 0 1, 1956 at the rate of
one bar of common for ea h $16 2 '3 of the par
alu of th 4.6% umulative preferen e to k:
u th rized 600 000 hare : i u ed and ou L ta nd-
ing 390 000 hare .......................................................................................... 9.750.000
mmon to k, p r value 10 per hare:
.\ uthorized 3.000.000 hare : uni ued 2,179,1+2
85 000 har are re erved for
conver ion of +.6c-, umulntive preference tock,
5.1--l-7 h, r are re,en d for option at 10 per
. hare nd 2+ 800 hare arc re erved for i u-
conn cti n with future option which
granted to offi er and mployce : in
treasur 50 hare ; out tanding 820,808 hare 8.208.080
,:.ipi ta 1 urpl u
Earned urplu ............................................................................................................ ..
TIN E T LL\ BlLITTE -- Jot E
ee a companying not to finan ial tatement .
2 782 992
20,741 072
1.242.207
4 817,580
493,236
198,623
2,004,637
7,514,076
15,395,363
21.983.279
44,8 2,718
NOTES TO
F I A CI AL s TEME s
December 31, 1949
ote A- of December 31, 1949, the Company was authorized under the terms of its Credit Agreement with
certain banks (with which the Reconstruction Finance Corporation has a participation agreement) to
borrow additional funds not exceeding $3,600,000 at any time or times prior t<;> _April 30, 1950, subject
to certain condition . On February 15, 1950, the Company borrowed an add1t10nal $2,400,000. The
Company has agreed to mortgage as security for all loans under the Credit Agreement, its hangars and
other improvements located at airports at Minneapolis, Minnesota, and Seattle, Washington, and _c~m-
pletion of such mortgages is a condition precedent to the Company's right to borrow the remammg
$1,200,000 under the Credit Agreement.
The loans under the Credit Agreement at December 31, 1949, were secured by a chattel II.IOrtgage on
all Douglas DC-4, Martin 202, and Boeing 377 flight equipment consisting of complete aircraft and
spare engines, propellers, major assemblies and parts, having a depreciated cost of $25) 11,112.
Under terms of the Credit Agreement applicable to these loan , the Company has agreed, among other
things:
(a) to maintain a cash collateral account as security for the payment of principal and interest of the
loans which shall at all times be equal to that amount by which the unpaid balance of the loans
exceeds 80% of the depreciated cost of all flight equipment;
(b) to maintain current assets in excess of current liabilities ( exclusive of current maturities owing
on the principal of the loans under the Credit Agreement) in the amount of $3,000,000 prior
to July 1, 1950; $.3,500,000 from July 1, 1950 to July 1, 1951; and $4,000,000 thereafter;
( c) to encumber or mortgage as security for the loans under the Credit Agreement, uch other
properties as the banks or R econstruction Finance Corporation shall elect;
(d) to limit additional borrowing, mortgages and liens, capital expenditures and commitments, lea_s-
ing of properties, investment in and guarantees and endorsements for others-all as s~t fo~th m
the Credit Agreement; not to enter into any merger or consolidation or to sell or otherw1 e dispose
of substantially all of its assets; and
(e) not to declare or pay any dividend (other than stock dividends) on its capital stock and not to
purchase, retire, or redeem any of its capital stock except that (a) 4.6% cumulative preference
stock may be retired under the provisions of the Amended Articles of Incorporation, and (b) div-
idends on 4.6% cumulative preference stock may be declared and paid to the extent that the net
improvement in earned surplus since March 31, 1949, exceeds $224,250. At D ecember 31, 1949,
such improvement in earned surplus amounted to $2,280,024 after deduction of all dividends
chargeable against the same for the purpose of the foregoing restriction.
B-The Company has deferred the direct costs of training personnel, familiarization, and pre-operation in
connection with its new fleet of Boeing 377 aircraft. These co ts are being amortized over the esti-
mated seven-year ervice life of the fleet beginning on the dates such aircraft were placed in sched-
uled operation.
C-The Company provides for an unin ured employees' retirement plan which is contributory on the part
of both the employees and the Company. Charges to profit and loss on the part of the Company for
past service and future service benefits for the year ended December 31, 1949, aggregated $257,300
of which $11,531 was for the benefit of officers and directors. The actuaries' report as of September
30, 1949, the end of the third plan year, indicates a maximum aggregate liability of the Company
for unfunded past service benefits estimated at $699,125 which may be paid, at the discretion of the
Company, in variable amount each year and which is presently being funded over a period estimated
not to exceed twenty-five years from October 1, 1946, the effective date of the plan.
D-On or before M arch 31, 1950, the Company is required by it Amended Articles of Incorporation to
set aside $90,918 for the retirement of shares of its 4.6% cumulative preference stock under provi-
sions ummarized as follows:
(a) The Company shall et aside on or before each March 31st to and including March 31, 1957, the
les er of ( 1) 3% of the par value of the total number of shares of 4.6% cumulative preference
tock at any time theretofore issued, or ( 2) an amount equivalent to 10% of the net income ( as
defined for thi purpose) for the preceding calendar year for the purchase and retirement of the
4.6% cumulative preference stock, at prices not to exceed $25 per share, exclusive of brokerage
and taxes. Any amount not so applied during the twelve-month period following the date of its
having been set aside hall be returned to the general funds of the Company; and
(b) Beginning on M arch 31, 1958, and on each March 31st thereafter so long as any 4.6% cumulative
preference tock shall be outstanding, the Company shall set aside an amount equivalent to 3% of
the par value of the total number of shares of 4.6% cumulative preference stock at any time
theretofore issued, plus inking fund arrearages, if any; provided that if the net income ( as de-
fined for this purpo e) for the preceding calendar year hall have been less than such 3%, then
the Company shall set aside an amount equivalent to such net income. Sinking fund arrearages
are defined as the excess of such 3% above such net income and are to be cumulative. The
Company is required to apply such funds in each twelve-month period subsequent to March 31st
to the purchase, or redemption, and retirement of shares of 4.6% cumulative preference stock at
prices not to exceed $25.25 per share plus unpaid accumulated dividends.
Du-ring any period while the Company is in default with respect to the payment of dividends on
cumulative preference stock, the Company shall not purcha e any of its cumulative preference stock
except pur uant to an off er to all holders thereof and shall not redeem less than all of the cumulative
preference tock at such time out tanding.
The terms of th, ck cont. in ert:iin rctrict1on rebti,e to dividends n ;11d
repurcha~ of the pr hibition und r th ' ...,redit Agre nwnt.
E-The inYoh-ed in a number lawsuits , hi h re outline 11 ws: (. ) th sc in which
am b, tl . nY will be fullY reimbursed bv the crnmcnt under ,ari us war
cont
og , h ur uits t th . ul 1f dific ti nter and aircr:-ift t
at l\ _-. A.l d Billin_,:. 1fonL th se in wh 1. ims p. id bv t 1-
pany will be fully reimbur ed under insur:-ince imr :::i a cidents :it 1ft. .
. la-k . nd Fountain 'is on-in : ( ) s n of ppro.imateh
, hich are n t ,er 1r:111 e or ther in h belieYCS the ultir -
position- will ha,e n adYerse effect up p . In Yie" f the
outlined. n n m:::ide f r anY p n t: i1w h- d.
F- The ,omp ny ommitment f r . pit.l exp nditure at De ember 31. 1 ~9. :1mounted t appro.im. t ' -
ly 1.780.000 f which approximateh ~1.t+0.000 w:-i- f r -Pere p:-irt and :::issemblie- for flight quip-
rnent.
E E F PLU
Ye r nded e mb r '11. 1 4
, PITAL URPL .:
Balance at January 1, 1 4 ............ ........... ................................. .................................................................... $3.00 7.:..+_
Dedu t a h dividend on --1-.6 % umulati,e pref ren e
to k d clared nd harged to apital urplu a" per-
mitted by prO\i ion of finne-ota tatutes-57.50
ents p r hare for the two quarter - endincr .May 1.
1949, during whi h time there wa n earned ur-
plus available for d.i,-id nd ........................................................................................................... ............ . '.!24.250
Balance at Decen1ber ~
11. 1949 ....................................................................... ............................................... ti2,782,992
EARNED URPL
Balance at J:inuarY 1, 19+ .......................................................................................................................... .. 108,778
,\dd net profit for th ,e r. .... .... .................... .... .......... .. ...... ................................... ..................................... .
Deduct ca h di,idend - n 4.6C". umulatiw pr ference
stock-5 7 .50 ent per hare for the two quart rs
ending ovemb r 1. 1 4 (divid nd payable F bru-
arv 1, 1950, , er declared from earned urplus on
Januar 6 150 ) .... ....... ........ ...... ................... ........... ................................................. ............................... . 22.-1,_r.o
Balan e at Decemb r 31,
Board of Dire tor
Northwest irlin . Inc.
aint Paul, finne ota
l,2+2,207
ac mp n incr note to finan ial tatement.
TA ' REP R
We have xamined the b Ian heet of r O R TR\ E T AIRLI1 E . I r ,., a ember 31, 1 49, and
the related tatement of profit and lo a !l'plu for the year then ended.
accordance with generally a cepted andard , and a c rdin Iv included
mad m
ountin re ord
and su h other uditin procedur . idered nece ar .in th ir um. tan c .
In our opinion the a ompan ing balan e h et and tatem nt of profit and l s and surplu pre ent foirl
the finan ial po ition of r R TH E T IRLI E , I . at D c mbcr 1, 1949. and th rt ult of it per-
tions for the ear then ended, .in conformit with generally ac cptcd ac ountin prin iples applied n ba is
consi t nt , ith that of the pre eding ear.
a.int Paul, finne
M ar h 10, 1950
ER T" ER T
,crtifi d Publi :\ countant.