Northwest Airlines Annual Report 1954

Airlines, Inc.
NORTHWEST AIRLINES, I N C . , ~ ~
19 5 4
PROGRESS FOR THE LATEST 10 YEARS
Ca lendar
Tota l
Passenger
Express Revenue Mail Total
Operating and Freight Passenger Ton Plane Mi les
Year Revenue Revenue Revenue Miles Miles Flown
1954 $63,595,851 $51 ,053 ,599 $4,676,190 909,674,550 6,990,462 27,029,860
-
1953 66,140,027 48,652 ,465 4,890,1 53 851 ,174,754 5,002,605 27,816,827
1952 61 ,552 ,380 41 ,962 ,758 4,781 ,08 i 720,046,264 5,017,993 23,210,634
1951 54,685,060 35,192,765 4, 37 1,533 602,220,853 4,571 ,276 19,531,632
- -
1950 52 ,456,700 33,148,395 4,1 22,222 613,446,244 4,987,561 26,868,177
1949 39,970,747 27,873,942 3,163,278 495, I 14,870 4,722,800 25,908,552
1948 34,369,835 24,074,778 2,072,362 386,509,809 4,026,074 22,288,002
1947 26,800,428 20,520,631 1,019,497 382,544,382 2,736,938 20,824,912
1946 19,976,204 18,062,492 553 ,875 385,858,473 2,049,659 19,304,234
1945 I 12,196,652 I 0,060,619 409,613
I
218,469,773 2,698,378 12,870,714
TO SHAREOWNERS OF NORTHWEST AIRLINES, INC.
The r port of the independent auditor and
the financial statement for 1954 ar presented
herewith.
EAR INGS
Net income from operation after taxe and
before prop rty dispo al amounted in 1954 to
'2,203 144 and howed a substantial gain o er
net incom of $1 339 503 in 1953.
Net income from pro pert di po al after
taxes amounted to $212 380 in 1954 compared
with $605,190 in 1953.
The total net income for 1954 wa $2 415 524.
Pr erred dividend amounted to $429 554
lea\ ing $1 985 970 or $2.38 per hare for th
834 933 out tanding shares of common tock.
In 1953 total net income wa $1 944,693 of
which $1,510 482 or $1.84 per har wa ap-
plicable to the common stock.
If we exclude from 1953 operatino- revenu
OTO income deriv d from op rating an airlift
o er the Pacific for the Unit d tate Go ern-
m ent in that y ar, commercial revenue how
an increa e in 1954 of $1640413 ov r 1953.
Combined with the de elopment of re enue
th company put into effect a co t I duction
program which reduced total xp n e below
1953 even though 10.2 ~ more availabl ton
mile were offered for sal in 1954. Our a\ erage
ystem unit operating co t per available ton mile
wa reduced 9.5 ~ from 1953.
Durino- 1954 1 199 193 re\ enu pa enger
"'er carried on the ntire y tern ( <lorn tic,
Ori nt and Honolulu rout ) an incr a e of
9.1 ~ ov r th previou hio-h in 1953. Re nue
pa ng r mile in 1954 total d 909 674,550 an
incr a e of 6.9 ov r 1953.
For the fir t time inc 194 7 our corn pan at
th nd of 1954 had no out tandin bank loan
nor oth r long t rm d bt . Th compan b -
came debt fr on Octob r 29 wh n it paid ofl
in ad anc all oblio-ation to bank . Your com-
th only major trunk arri r hich "' a
a ofth ndof1954.
n $18 million bank r dit a r m ,nt
h b n arran d whi h will pro\ id fund for
th acqui ition of four Lo kh d 1049 ) on-
t Ila ti n aircraft a. w 11 a additional Dou la
D -6B air raft whi h our cornpan ' i
h fir. t l orro, in und r th n bank r dit
agreement wa made on J anuar 28 in the
amount of $2 500 000. A of March 7 1955
your company ha borrowed 6 500 000 under
th new agreem nt.
NET O H
Th net worth of the company at the end of
1954 wa $26 829,107 of which $21.11 per
har wa applicabl to th common tock.
Thi compare with 24;736 702 at the end of
1953 of which 15 359;827 or '18.71 wa ap-
plicable to the common tock. Our arned ur-
plus wa $6275 889 at the nd of the )ear
compar d with $4 289,91 at th end of 1953.
P F RED DI
Divid nd on the --1.60 umulati\ e Prefer-
nc tock ar no," paid up to date. The quar-
ter! di id nd which had be n due F bruary 1
and Ma 1 1954 w re t mporaril) ithheld in
the light of the op ratin r ult for the fir t
part of the ear but the , er declared and
paid wh n it became apparent that the general
financial ituation wa impro\'in . The di i-
dend due O\ mber 1 1954 and F ebruar 1
1955 w re paid on their due dat . Pr f rred
dividend are cumulati\e and mu t b paid be-
fore any <livid nd can b paid on common
har
ROU ES
On February 16 1955 the Civil A ronautic
Board i su d d ci ion in the Tran pacific Cer-
tificate Ren wal Ca e and the , t Coa t-
Ha waii Ca in accordance with in tru tion
from th Pr id nt. In th Tran pacific ca
th Board authoriz d your company to r e
Portland attl Anchora e and Japan ov r
th r at Circl Rout for a p riod of \ n
y ar . Th authorization to r\' Okina a
Formo a Hon Kono- and th Philippin "'ill
continu in ff ct for a p riod of fi\ ar , and
the authorization to rve point within Kor a
will continu for a p riod of thr y ar . In th
W t Coa t-Hawaii th Board revi d
ord r authoriz ur omp ny to ontinu
b tw tl a m -Portland nd
Honolulu for a p ri d f thr Y r and 1
authoriz d f ntinuati n
of omp titi, 1Y1 n thi: run by 111 thcr
m n an rn r. Y ur c mpany h1d urg cl
REVENUE PASSENGER MILES
For Latest Ten-Year Period
1945
1946 -
~ - - - - - - -
1947 ~:
----1111!1!
1948
~~
~ ~~!
1950
~-~
1951
~
~9'-i
~--!
1952 . '
1953 ~ - - :
~
~--
100 200
- DOMESTIC
300 400 500 600 700 800
MILUON MILES
~ INTERNATIONAL
(Includes ope rof,ons to Afoslco, the Orient , and HowoiiJ
that the certificates be issued on a permanent
basis inasmuch a it had pioneered and devel-
oped the Great Circle Route to the Orient and
because traffic volumes have shown a very fa-
vorable growth trend and because the cost to the
Government in the form of subsidy requirement
i being rapidly reduced. However, they were
granted on a temporary basis and the matter
of service to Shanghai and other points in Com-
munist China a well as the application ( op-
posed by your company) of a competitive
American carrier for authority to operate over
the Great Circle Route to points in the Orient
were deferred for po ible future consideration.
In the Wet Coast-Hawaii Case your com-
pany offered to operate the route between
Seattle/ Tacoma-Portland and Honolulu on a
non-sub id basis if it were the sole operator on
the route, and the Civil Aeronautic Board
unanimou ly recommended to the President
that your company should be given the sole
rio-ht to operate thi route on a permanent basis.
Deci ion have not yet been rendered on the
recertification of your company's right to op-
rate the o-called "inside" route to Alaska from
ew York and Chicago to Anchorage Alaska
via the Twin Citie of Minneapolis and St. Paul,
and Edmonton, Alberta. Thi decision a well
a that on your company's right to operate
local ervic bet"een Seattle/ Tacoma, Wa hin -
ton and Anchorage laska will be made in the
pending tat -, la ka Ca 'e. Your company i
hopeful that the adrnn tage inherent i 1 th
operation of the "inside" route to Anchorage
will again be recognized as longer range aircraft
are used and transpolar operations become more
prevalent in the future.
Ultimate decision in matters involving inter-
national routes rests in the President of the
United States.
Your company is also seeking certification to
operate between Chicago and ew York and
between Chicago and Detroit, as well as the
removal of restrictions which prevent the op-
eration of local turn around flights between De-
troit and New York. Hearings on this matter,
designated as the ew Yark-Chicago Service
Case, were held in 1953, but decision has not
yet been rendered by the Civil Aeronautics
Board.
Hearings likewise were held in 1953 on your
company's long standing Cleveland-New York
application. No decision on this application
ha yet been made by the Board.
EQUIPMENT AND SERVICE
Three Douglas DC-6B aircraft were acquired
during the year bringing our total DC-6B fleet
to seven. Continuing efforts are being made to
acquire additional DC-6B aircraft.
We have now taken delivery on three new
Lockheed 1049G Constellation aircraft and
expect delivery on the fourth Constellation,
TOTAL REVENUE TON MILES FLOWN
For Latest Ten-Year Period
1945
--
1946
~
--
1947
~
t - - - - -
1948 ~~
.----
1949 ~~!
--
1950 ~~~
--
195 1 ~~~
-
1952 ~~~
t - - - - -
1953 ~~;~
--
1954
~~ .~.~
0 10 20 30 40 50 60 70 80 90
MILLIONS OF MILES
- DOMESTIC
~ INTERNATIONAL
(Includes operot,oru lo Alailco, the Onent, and Ho wo11 }
\ hich complete our order with Lockheed be-
fore April 15, 1955. Thee aircraft po\ ered b
, right Turbo Compound engine , will be flov n
exclusi\ el in international operations. These
luxuriou plane ,, ill enable our compan to
offer it customers the finest and fastest er ice
bet, en the nited States and the Orient and
to Rav aii. All of these aircraft ill offer a
choice of fir t cla or touri t accommodations.
Constellation er ice between eattle/ Tacoma
and Anchorage commenced in F ebruar and
ser ice bet\ een Seattle/ Tacoma and the Orient
started on March 4. By the middle of April
four , eekl round trips will be operated be-
t een the nited State and Tok o and Manila
with Constellations. ,1
\
e expect to ha e Con-
stellations on three weekl round trips betvveen
Seattle/ Tacoma-Portland and Honolulu by
arly ay.
In addition to the Constellation schedules
your company plans to continue its present
twice weekl cargo and mail service between
the United State and Tok o with DC-4 or
DC-6B aircraft. In addition to the three eekl
Constellation schedules to Honolulu there will
be one DC-6B eekly schedule.
Boeing Stratocrui ers are being u ed in first
clas operations on man segment of our do-
me tic routes. In addition, our compan pro-
ides first cla Douglas DC-6B er ice, and
coach chedules are flown by both Douglas DC-
6B and Dougla DC-4 aircraft. Coa t to coast
one top Dougla DC-6B coach service be-
tween ew York and Seattle v a inaugurated in
1954. e ha e al o inaugurated an O\ ernight
freight er ice between ew York and Minne-
apolis/ St. Paul ia Mil aukee to provide earl
morning deli erie of cargo to customers in the
mid est. e ha e entered into an interchange
agreement v\ ith Ea tern Air Line , effecti e
Dec mber 15, 1954 hich provides dail
Bo ing Stratocrui er r ice between 1inneap-
oli / t. Paul and Miami via Chicago. Under
the arrangem nt tratocruiser manned b your
compan er on the Twin Cities-Chicago
egment and by Ea tern ir Line ' er w on th
Chicago- iami egment are flo n one round
trip each da from inneapoli / St. Paul to
Miami. During the ummer month Eastern
ir Line ' Con t llation equipment will b
flo n on th int r h n ervice. It i xp cted
that additional frequenci s will be provided -on
the interchange er ice a the olume of bu i-
ne grow.
eve1 al month go om compan mad
a\ ailable a means of financing th ale of pa -
enger air transportation on an installment pa -
ment ba is. Thi plan i popularly known a
Fly ow Pay Later. The plan enable a
prospecti air traveler to make a trip by air
after ha ing made a mode t dm n pa ment
\ ith the pri ilege of pa ing the balance of the
price of the ticket over an extended period of
time thu allo'wing man person to enjoy the
advantage of air tra el VI ho \,vould not other-
wise do o.
MAIL RATES
International- The Civil Aeronautic Board
reopened our international mail rate a of Jan-
uary 1, 1954. To date only preliminary di cu-
sions ha e been held regarding settlement of
thi 1 ate. Pending uch finalization a temporar
rate of 4,913,000 per ear has been establi hed
b the Board for all of the compan ' interna-
tional services. The actual payment of thi
amount is di ided into two parts-service pa
and ubsidy. Service mail pa is calculated on
the ba i of U. S. mail ton miles carried and is
paid by the Po t Office Department. The re-
mainder is considered ubsid and is paid b the
Civil Aeronautics Board.
During the past ear ub tantially increa ed
olumes of U. S. mail carried by orth\Ne t in
its international ser ices ha\ e resulted in a harp
decline in ub id pa ment from the nited
State Government. In December 1953 th
total ub idy mail pay for our entire interna-
tional operation as $381 000 and in Decemb r
1954 this total had declined to $92,434 a de-
cline of 76%. The reduction , as accomplished
in spite of the fact that the ser ice mail rate
for int rnational mail wa lm ered b the CAB
in December 1954. Had the pre iou mail rat
V)
LONG TE RM DEBT
Including Current Liabilit y Portio n
20 ~~-.-..-....--.---r-,-::::r-..-,-....--.--.-,~.--.-.--:--
. '. --,--,----:---:--:--r-r-i 2 0
~ 15 _.-..:~ ~..:.....,..~~.:-+~ ~~;.._.;._+--:-' --:-' ~-+--:---:-' -t-
' --t---T-115
0
a
0 10 -i---i~ t-+++-+-i-+--+-++-+--+-i-t-'~y+
-+
' -+
0
-t-t-T--
' :' 1:1 10
~ s ~~.i-.:...~~~~~~~;.._;_+--:-~-+--:---:-~-:-1
~
0 : : : : : : : : : : : : : ' 0
- 1948 - 1949 - 950-1 5 -1952- 953 --1 954 -
been in effect during December, the reduction
in ub idy would have been 86% .
Thi downward trend in Government subsidy
paym nts wa accompli hed before the Govern-
m nt announced it policy of increasing the vol-
ume of Army Po t Office and Fleet Post Office
mail for commercial airlines. The trend toward
lower ubsidy will be greatly accelerated by the
Government's decision to divert large volumes
of air mail from military planes to the commer-
cial airlines. Your company will be one of three
. international airlines to which the bulk of
this increa ed mail will be a signed. Thus, it is
po ible that in the near future your company
may completely eliminate its need for subsidy.
The volume of mail carried in international
ervice in February 1955 resulted in subsidy free
operation for that month.
Domestic- As of April 1, 1954 the Board
reopened domestic mail rates of all trunk car-
rier . Under the terms of rates proposed by the
Board our domestic mail revenues would be re-
duced approximately $192,000 or 13 % an-
nually. Domestic mail pay for the industry
would be reduced about 11 % . We have re-
duced our domestic mail revenues on the books
to agree with the rates indicated by the Board.
In the latter part of 1953 the Post Office
Department inaugurated an experimental pro-
gram of flying 3c first class mail between certain
major cities via commercial airlines. The first
phase of the program did not include any of
the pair of cities served by Northwest. How-
ever, m ovember 1954 the experiment was
extended to include north-south service to sev-
nteen Pacific coast cities in California, Oregon
and Wa hington. Your company has joined in
that program and participates in the lift of 3c
first clas mail between Portland and Seattle as
a part of the west coast mail operation between
an Diego and Seattle. Success of this type of
mail operation in the areas tested thus far indi-
cat that further expansion can be expected.
Prior Years- Our mail rates, both interna-
tional and dome tic for the calendar year 1951
ar till open and therefore, are subject to set-
tl m nt with the CAB. Rate for the years
1952 and 1953 and for all year prior to 1951
ar clo ed.
PERSONNEL
Cooperative relations and understanding be-
tween management and its 5,000 employee
have reached a new high.
Contract negotiation during 1954 were con-
ducted within an excellent employee relation
.1.tmosphere in which atisfactory understand-
ings were reached providing for fair and equi-
table working conditions and rates of pay.
The company training program is continually
being strengthened and improved. Increased
on-the,..job and off-the-job training was pro-
vided to technical, maintenance and flight per-
sonnel with particular emphasis on training
needs relative to the integration of new types of
equipment into our fleet. Intensive training of
sales and station personnel made a substantial
contribution to improved service to our custom-
ers. Special stress will be placed on administra-
tive and supervisory training during 1955.
Your management believes that it has one
of the finest groups of employees in the airline
industry. It is proud of their work performance
and their demonstrated interest and loyalty to
their company. This fine attitude on the part
of our employees has been a great factor in the
increased efficiency of our operation.
MANAGEMENT CHANGES
Your directors elected Donald W. N yrop a
president of Northwest Airlines, Inc. effectiv
September 2 7. Mr. N yrop comes to your com-
pany with an extensive background in aviation
affairs having been chairman of the Civil Aero-
nautics Board, counsel for the Conference of
Local Airlines, and having served in other
executive capacities in the aviation industry.
Two Minneapolis business executives Lyman
E. Wakefield, Jr., Vice President of First a-
tional Bank of Minneapolis, and James H.
Binger, Vice President of Minneapoli -Honey-
well Regulator Company, both of Minneapoli ,
Minnesota, were named to the Board of Direc-
tors. Leo G. Jacques, President and General
Manager of Motor Products Corporation of De-
troit, Michigan, re ign d from the Board of
Director .
By authority of the Board of Director
Mar h 7, 1955
, t. Paul Minne ota Chairman of the Board
FIVE YEAR STATEMENT OF INCOME
( mounts shown in thousands)
NORTHWEST AIRLINES, INC.
Five years ended December 31 , 1954
OPERATING R E F
,NUE 195-1
Pa ng r ......... ... ..... ... ....... ...... ............... ..... ................ .. ..... $51,054
Unjted States mail .............................................................. 6,282
For ign mail ........ .. ........ ... .. .............................. .............. .. .. 504
Expre , freight, and xce s baggage .. .. . . . .. . . .... . . . ... .. . . ... .... 5 296
Charter and other transpo'l"ta tion.. ... ... . . .. . . . . .. . . ... .. . . .. ......... !"
0
Pacific airljft for United Sta t Go ernment ... ................ .
Repair and 6ervi income rent~ etc. net
OPERATING EXPENS ES
10
$63,596
Fl ing an d ground operations .......................................... $30 OH
M aint nan and repair .... ............................................... 11 ,672
Pro j ion for depreciation............. ................................... .606
Traffic, sales, and adverti ing ............ ........ ... .. ..... ............ 7 383
Admini trative and general (including pay r ll taxe
proptrty taxes, etc.) . . .. .. .. . . . .. . .. . .. . . .. . .. . .. . .. . . . . .. . . .... .. . . . .. . .. 4 180
OTHER D EDUGT10 ET ............ ........ ,,,,,, ................... ,., ... .
$58 885
$ ~
108
I coME FROM OPER Tio BEFORE I Nco11rn T ,F.s ...... .. $ 4,603
INCOME TAXE , on jncorne from opera tion ........................ 2,400
ET INCOM E FRO I PF.RATION ...... ............................. .... .. $ 2,203
I COME FROM Di PO AL _ OF PROP ERTY ..................... ...... $ 28 7
L es applicaJble incom taxes ....... ..... ............. .. .... .. ... ... ... 75
NET IN COME (Los ) FROM Di, PO, AL OF PROPERTY ...... $ 21 (
P r ent
Increa e
(De rease )
195 '.l
1954 to 1953
4.9 0
$+8 65-
( 8.5 ) 6,869
I .6 496
( 1.4 ) 5,373
( 72.2 ) 180
( 100.0 ) 4,1 85
6.5 385
( 3.8 ) $66.1 +o
( 5.5 ) $31 ,801
( 15.9 ) 13,886
( 2.2 ) 5,731
.8 7,324
( 1.8 ) 4,255
( 6.5 ) $62 997
49.9 $ 3, 143
68.0 338
64.I $ 2 805
63.8 t 465
64.4 $ 1,340
( 64.8 ) $ 815
( 64.3 ) 210
( 65.0 ) $ 605
1952 1951 19~0
$-
H 6.1 $ 5 193 $33 1-18
6,767 7 789 9,9..>8
706 620 ".3 2
5,116 4,648 t.j. 388
1,055 '.105 _27
5,464 5. 72-1 3, 70
481 40 25..J
$61 552 $54.685 $"2 45 7
$28 37 1 $-5 - -6 $2+,94-1
15 061 11 ,837 I_ 025
5.816 5,429 5.87:1
6 504 5,482 5 ,1-26
4 294 3,651 , 386
$60,0 1-6 $51 625 $51 654
$ 1,506 $ 3,060 $ 803
3 1 67 73~
$ I 195 $ 2,393 $ 68
640 601 ( ) (A)
$ 555 $ 1,792 $ 68
$ 1.709 $ 592 $ 199
475 599(A) (A )
$ 1 234 ($ 7) $ 199
ET INCOME FOR THE YEAR .. ... ........................... $ 2,415 24.2 $ 1 945 $ 1 789 $ 1,785 $ 267
NOTE A- Ta.xes on incom we-re red u c-d as a re, ult of th e arry-f0rward of the 1948 operating loss: $225. 1951, $135,00 1950.
Income from disposals of pr pcrty dl!ring the years 1948 th rough 1950 reduced by $836,487 .the operating loss rnrry-fon.vard
t,,
195 1. In om c taxe of $429,000 apphc hle theret o have bce :1 trentt:d 111 195 1 as allocable to ,n omc fr m disposals of p,opC'rt .
NORTHWEST (),ci,e"1,t AIRLINES
SYSTEM MAP
Routes Operated
Proposed Routes
- - - - - Routes Certified but not Operated
Connecting Airlines
Through Plane Service
PEI Pl MG
/\
/
/ ~
MUKDE N
CHINA /
/
tJ
J
11 TH
E PHILIPPINES
V
- , HARBIN
:=i
r.l
..
:!:
'
'+:
!
PICKLE LAH
CANADA
SIOUX LOOKOIH
STATEMENTS OF FIN ANCIAL POSITION
NORTHWEST ~ AIRLINES, INC.
ASSETS
December 31,
CURRENT ASSETS
1954 1953
,::i.sh ... ................................................................................................................. , 8,26, 77 5
Accou nt. 1
T civ::i.ble, k .. allow, n c r , 70,000 195-1 and L 53............. ..... 5,2 19,396
1faint n, n 'C and I era ting su p1 lies, ::i. t avn , gc cos t... ............................... 99 1,327
Pr aid ir su r , nc , r n t tax s, etc................... ......... ..................................... :~gr: J -18
TOT AL CURRENT ASSETS .' lI .869,8,1
6
INVESTMENTS AND OTHER ASSETS
R l~1 t d industr , inv . tmr nt s .1 nd adv:-inccs,, t ost. ...................................... . 216,02 l
FLIGHT EQUIPMENT a t co~t. ...................................................................... .'11,357,39 1
( Tncluding fully , rnortized a1noun ts .'. ,0 )1 ,:3 _:) 195-~
, 7,9;')9 915
l 3)
L " . 11 wan s fo r ckpnc i:1tion :rncl oh~olcs c 1
H't' ........................................ 2-1,560,976
." I (),7. 6; 11 8
, d\Jn s on pu r ha:c rnn l rarls N Ole's .'\ a. n I E..................... .......... ........... 1,7 J2, H 0
, ' I 8,558,558
OTHER EQUIPMENT, BUILDINGS, AND LAND, :1 1 rnst ................. .' I1 ,688,67
(In ludini-, fullv , rnortizt d :.1 111 un ts "'.1.00-1
,022 - 195-~, 2 9H,"70 -
1 53 )
L : , llow, nc s fo r dep r ci, tion ...................................................................... 6,773,r. 07
,' 1,91 5, 169
DEFERRED CHARGES
T r.1ining .rnd thcr costs in co nn ection "'ith .1ircraft n 'c ts, J ,ss a -
umul a t dam rtiz, ti n of 37,61 1
~ 1 1 -1-85 0 8 l9 r.3 .................. ,''
th r ................................................................................................................ .
cc acco m J1a111i11g :\ ofts lo F i11a11cial tale mc11I ..
$ 1 J 212 100
4 764 14-1
1 2-1-9 084
499,557
$17,724 882
24-7,790
, 37,642,757
, 1 l ,30c.l-,038
6,262,152
5,011 ,886
$+0,608, l 1
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES

V ...... . ................................ .. .......................... . .... . .
, roll d 'ducti ns, etc .................................. .
C ................................ . ............................................. .
1 t aXC' ............................... .. .................... ................ .
rr t ........................................ .......... ... ........................ .
Inco1nc t ................................................... ............ .................. .
December 31,
1954 1953
4 938,465
1 946 800
969 383
865,725
" 22 69
757,367
2 575 456
$ 4 277 826
2,584, 142
1,079,832
811,325
377,449
660,785
urr nt n , , -t rm debt. .................................. ........................... ___ _
1 785 850
3 340,000
TOTAL CURRENT LIABILITIES
LONG-TERM DEBT - at
-1:<i o tc_ I a a l l lo banks, i 'ss am oun ts m a lu rin within n y ar.. ........
STOCKHOLDERS' EQUITY - a t
umul enc t ck, 25 1 ar valu ; authorized 600,000 share
ua :
-1-.6 uthoriz d sh a res 375, l 2r.-19 --1, 0- 1
, . ; ,h are's 3 8,1 10 195+, 3 75,075-19 a te B ..........
omrnon 10 p, r v, lu ; ::iuth riz ' 3,000,000 h cl and
ut tan r ' 814". 33 195-l, )_Q,933-19c::3 ............... .
mm n t ck su b.cripti n fr 3,650 sh are' (i u d J anu, r 1955) ....... .
C a pi ta l surplus a ft rd ducli n f ":)60 625 in ri r ~ars f r 1 a rt of
di id nd. paici on 4. ) urnub ti\' ' Prdcr 'n ee tock . ................... .. . .
E arn d urplu .................. . .
CONTINGENT LIABILITY for r pur ha - of tr \' 1 on tra ld-
$84 048
COMMITMENTS - r t E
9 202 750
8,349 330
36 500
2 96L
t 638
275 889
."39,204,996
ec acco m pall'yinr; ate to Financial tat ments.
$149 17,209
955 000
9 376 875
8 209 330
2 860 578
4 289 919
$ 0, 08,911
T ATEMENTS OF INCOME
NORTHWEST AIRLINES, INC.
Year Ended
December 31,
1954 1953
OPERATING REVENUES
Pa senger ........................................................................................................... .
United States mail- Note F ............................................................................. .
Foreign mail. ...................................................................... ................................ .
Expres , freight, and exce baggage ............................................................... .
Charter and other transportation ....................... ............................................ .
Pacific airlift for United States Government. ................................................ .
Repair and ervice income, rents, etc., net ..................................................... .
OPERA TING EXPENSES
Flying and ground operations ......................................................................... .
~~~
tf;na~~: ad:!r:d:J~~: :::::: :: :: :::: :: :::: :: :: :::: :: :: :: :: :::::: :: :: :: ::: : :: :::::::: :::::::::::::::::
Traffic, ale , and adverti ing ......................................................................... .
Administrative and general (including pay roll taxe , property taxe ,
etc.) ............................................................................................................... .
Employee ' retirement plan ............................................................................... .
OTHER DEDUCTIONS (INCOME), NET
$51,053,599
6,282,057
504,334
5,295,694
50,406
409,761
$63,595,851
$30,043,761
1 l j672,122
5,606,174
7,383,113
3,764,202
415,182
$58,884,554
4,711,297
Intere t on long-term debt... ........................................................................... $ 172,600
17,137
81,584)
Other long-term debt expen e ........................................................................ ..
Other, net. .......................................... ........................................................ ......... (
$ 108,153
INCOME FROM OPERATIONS BEFORE INCOME TAXES .......... $ 4,603,144
INCOME TAXES, e. timated federal and other taxe on income from
op ration ............... .............. .. ............................................................ ............... 2,400,000
NET INCOME FROM OPERATIONS ..................................................... $ 2,203,144
INCOME FROM DISPOSALS OF PROPERTY ................................... $ 287,380
Le applicable income taxe ............................................................................ 75,000
NET INCOME FROM DISPOSALS OF PROPERTY ... ............. 212,380
NET INCOME FOR THE YEAR ................................................................ 2 415,524
ee accompanying N otes to Financial. Statem ents.
(
$48,652,465
6,869,219
495,843
5,373,113
179,947
4,184,589
384,851
$66,140,027
$31,801,108
13,885,447
5,730,820
7,324,210
3,811,411
444,000
$62,996,996
$ 3,143,031
$ 282,229
59,651
3,352)
$ 338,528
$ 2,804,503
1,465,000
$ 1,339,503
$ 815,190
210,000
$ 605,190
$ 1,944,693
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC.
December 3t 1954
Note A-Bank Credit Agreement
The long-term loan outstanding at D ecember 31 1953, was
paid during 1954, and the related bank credit agreement ter-
minated.
On o\ember 1, 1954, the Company entered into a new Bank
Credit Agreement under which it may borrow, subject to cer-
tain conditions, on or before August 31, 1955, for the purpose
of equipment financing (Note E ) not to exceed $18,000,000.
At M arch 7, 1955, $6,500,000 had been borrowed under the
Agreement. Loans made under this Agreement are unsecured
and bear interest at a rate of 3% per annum. The Company
has agreed to pa a commitment fee of of 1 % on the av-
erage daily unused portion of the commitment. The Agree-
ment requires repaymen::s aggregating $3,000,000 annually
beginning in 1955.
The Company has co enanted that, among other things,
(a) it will not permit the excess of current assets and ad ances
on certain flio-ht equipment, over current liabilities ( excluding
current maturities under the Agreement ) to be less than
3,000,000 ( ubj ect to reduction in the event and to the extent
of optional prepayments on amounts due within one year)
and (b) it will not permit its capital and surplus to be le s
than $20,000,000.
ate B-4.6% Cumulati, e Preference Stock
This Stock Series is entitled upon liquidation (voluntary) or
redemption to 25.25 per share plus accumulated unpaid
dividends; is convertible per share into one and one half
shares of Common Stock to January 1, 1957; and is subject to
retirement through market or sinking fund provision . 7 015
of the authorized hare at December 31, 1954, had been per-
n:ianently retired through market fund purchases and conver-
sion.
So Jong as any of this Stock Series is outstanding, the Com-
pany i required to set aside on or before March 31 in each
year to and including 195 7 a non-cumulative fund, for the
purcha e of shares of uch Stock on the market at not exceed-
ino- $25 per share exclusive of brokerage charges and taxes. On
or before March 31, 1955, $184.774 will be required to be set
aide for this purpo e. After 1957, other, and cumulative,
sinking fund provision become applicable.
During any period while the Company is in default with
re pect to payment of dividends on the Cumulative Preference
Stock, the Compan may not purchase any of such Stock ex-
cep t pursuant to an offer to all holders thereof and may not
redeem le s than all of such Stock then outstanding. D ividends
accruing to February 1, 1955 have been paid.
ote C-Restrictions on Earned Surplu
At D ecember 31. 1954 under pro ision of the Bank Credit
grecment and Cumulative Preference Stock, 5,019,792 of
earned urplus wa re tricted a to payment of cash dividends
on capital stock. The . greement prohibits repurchase of the
Compan ' capital tock. except that 4.6o/c Cumulati e Prefer-
ence tock may be retired through market fund purcha e
(:\"ote B ). The term of the Cumulati e Preference Stock al o
contain r triction relating; to repurchase of Common tock
which were le Jimi ting a t D ecember 31 1954.
ate D-Common Stock Reservations and Options
Of the 2, 165,067 shares of authorized but uni sued Common
Stock at D ecember 31, 1954:
(a) 552,165 shares ma be required for coD\er ion of 4.6%
Cumulative Preference Stock ;
( b) an aggregate of 37,350 shares ( of which 1 7 .350 shares
were exercisable at December 31, 1954) , ere subject to
outstanding options held by two of the Company's officers
and a fo~mer officer. The option prices approximated,
or were ~1gh er than, market at the date of grant. D uring
1954, opt10ns for 17 150 shares (at $14.375 per share) and
for 500 shares (at $12.125 per share) were exercised by
the optionees, at which time market price ranged from
$17.25 to 19.75 per share. Options for 17,850 shares
(10,000 at $11.25 per share an d 7,850 at $14.375 per
hare, including 5,000 share which became exercisable
in 1955 ) were exercised prior to February 25 1955.
Options for 19 500 shares (at $12.125 per hare), 'includ-
ing 15,000 shares which will become exercisable during
1955, 1956, and 195 7, will expire in O ctober, 1959; and
( c) 30,000 hares were re erved for options which may be
g:ran ted in the future to officers and employees.
Tote E--Com.mitments
t December 31, 1954, the Company had on order four
Lockheed Super Conste;Jation aircraft and spare parts at an
approximate cost of $9,400,000 on \, hich advance payments
of $1762140 had been made. At March 7, 1955, three of
these aircraft had been delivered and paid for and the re-
maining aircraft is expected to be delivered in April.
In addition the Company e:>..l)ansion and replacement pro-
gram at this time relating to aircraft and spare parts, includ-
ing purcha e contracts placed in Yiarch, 1955. will require
expenditures of approximately $18,300.000 prior to 1958.
R eference is made to :\"ote A with re pect to the Bank Credit
Ao-reement for initial borrowino- to finan ce the e transactions.
ate F-Mail Transportation Compensation
Mail rates for all years through 1953. except 1951, have been
ettled and made permanent by the Civil Aeronautics Board.
~o determination for 1951 has been made.
Mail compen ation from the nited tate Government for
international routes for the calend ar year 1954 ha been opened
for redetermination. The ultima e effect of thi i not known
at thi time.
M ail compensation for dome tic route for the first three
months of 1954 ha been settled and made permanent. As
to the remainder of the calendar yea r 1954. the Civil Aero-
nautics Board ha issued an order to the Company and all
other dome tic trunk carriers to ho\\' cau e why proposed
rate (\ hich reduce the Company' permanent rate from 45
cent to an estimated yield of 39.12 cent per ton mile) should
not be made permanent. The Company i accruing income on
the ba i of the le er of the two rate .
STATEMENTS OF SURPLUS
NORTHWEST AIRLINES, INC.
Year Ended
December 31 ,
1954 1953
CAPITAL SURPLUS l aft r deduction of $560,625 in prior year for part
of dividend paid on 4.6% Cumulative Preference Stock )
Balance at beginning of year ............................................................................ $2 860,5 78
Add:
Exce of par Yalue o\er co t of 4.6 Cumulative Preference Stock
permanently retired through market fund purcha e .......................... 35,892
Exce of proceed ov r par value of 17 650 hare of Common
20,415
tock _old under option agreement , le expen e ( 7,926 ) of
i __ uance ...................................................................................................... 68,168
Exce __ of par Yalue of 4.6% Cumulative Preference Stock, upon
comer ion over par value of Common tock ........................................ 500
Balance at end of ear...................................................................................... 2,964,638 $2,860,578
================
EARNED SURPLUS
Balance at beginning of year.. ......................... ................................................. $4,289 919 $2,779,437
$1,339,503
605,190
Add:
);et income from operation ................... .................................................... . $2,203 144
212,380
~ et income from di po al of propert ...................................................... ..
X et income for the year ....................... ........................... ............................. .
Deduct di,idend on 4.6% Cumulative Preference Stock for the year
ended Xovember 1-$1.15 per hare ......................................................... ..
Balance at end of ear. .......................... .............................................. ............ .
$2,415,5 24
$6 705,443
429,554
$6.275.889
ee accompan
yina Notes to Financial Statements.
Board of Directors
7orthwest Airlines, Inc.
aint Paul Minnesota
ACCOUNTANTS' REPORT
$1,944,693
$4,724,130
434,211
$4,289,919
v\'e ha\e examined the tatement of financial po 1t10n of >IORTHWE T AIRLI:\'E , I c. a of D e-
cember 31. 1954, and the related statements of in come and urplu for the year then ended. Our
examination wa made in accorda nce with generally accepted auditing tandard , and accordingly in-
cluded uch re t of the accountinO' record and uch other auditing procedure a we con idered
nece ary in the circum tance . I t wa not pos ible to confirm by communication account receivable
from certain U. . Government department and aO'encie , a to which account we a ti fied our-
ehe_ by other auditing procedure .
In our opinion. the accompan ing tatement of financial po ition and tatemen t of income and
urplu pre ent fairly the financial po ition of NoRTH\ E T AIRLINES, Ixc . at D ecember 31, 1954,
and the re ult of it operation for the year then ended, in conformity with O'enerally accepted ac-
ountinO' principle applied on a ba i con i tent with that of the preceding year.
ain Paul, ~inne ota
?\farch 7, 1955
ER ST & ER1 T
Certified Public Accountant
NORTHWEST AIRLINES, I N C . , ~ ~
OFFICERS AND DIRECTORS*
OFFICERS
CROIL HUNTER, Chairman, Board of Directors
DONALD W. NYROP, President
MALCOLM S. MACKAY, Executive Vice President
FRANK C. JUDD, Vice President- Operations
LI US C. GLOTZBACH, Vice President-Personnel
JAMES W. MARI 1ER, Vice President ales
LA WRE CE B. KI PORTS, Vice President- Orient R eaion
A. E. FLOAN, Vice President and Secretary
LEONARD S. HOLSTAD, Comptroller
WM. J. EIDEN, Treasurer
ALROY D. PIEPGRAS, Assistant Comptroller
DONALD H. HARDESTY, Assistant Treasurer
FRANK J. SCOTT, Assistant Secretary
DALE MERRICK, Assistant Vice President-Properties
C. L. STEWART, Assistant Vice President- Plans
DIRECTORS
19
CROIL H T ER - Chairman, Board of Directors, orthwe.st Air:ines, In c.
5 4
JAMES H. BI GER- Vice President, Minn eapolis-H oneywell R egulator Co., M :nnea/Jo!is, M i1111.
MORTO H. FRY- Partner, R iter and Company, ew York City
ROBERT M. HARDY- President, unshine Mining Co., Yakima, Wash.
JOSEPH T. JOH SO - President, The Milwaukee Co., Mil waukee, Wis.
MALCOLM S. MACKAY- Executive Vice President, orthwest Airlines, I nc.
DO ALD W. YROP- President, orthicest Airlines, I nc.
ALO ZO PETTEYS--Vice President and Director, Farmers State Bank Brush, Colo.
C. FRA K REA VIS- Partner, H odaes, R eavis, ,\1 cGrath, Pantaleoni & Downey, ew York City
ALBERT G. REDPATH- Partner, Auchincloss Parker & R edpath, ew York City
WILLIAM STER - President, Dakota ational Bank, Fargo, . D.
ALBERT F. TEGE - President General Public tilities Corporation, ew York City
L YMA E. WAKEFIELD, JR.- Vice President, First ational Bank of Minneapolis, Minneapolis, Minn.
ALBERT J. WEATHERHEAD, JR.- President, Th e W eatherhead Company, Cleveland, Ohio
WHEELOCK WHIT EY- Director and M ember of Executive Committee Truax-Traer Coal Company, Chicago Ill.
R egistrar THE H E TIO AL B K OF THE CITY OF NEW YORK, . Y.
Transfer Agent BA KER TR T COMPANY, EW YORK, . Y.
* A s of March 7, 1955.
GENERAL OFFICES: 1885 UNIVERSITY AVENUE, ST. PAUL 1, MINNESOTA
NORTHWEST