Northwest Airlines Annual Report 1956

Northwest Airlines, Inc.
NORTHWEST AIRLINES, I N C . , Annual f!7lejtml
OFFICERS AND DIRECTORS *
OFFICERS
CROIL H TER, Chairman, Board of Directors
DONALD W. NYROP, President
MALCOLM S. MACKAY, E ecutive Vice President
FRANK C. JUDD, Vice President-Operations and Engineering
LINUS C. GLOTZBACH, Vice President-Personnel
GORDON M. BAIN, Vice President ales
PAULL. BENSCOTER, Vice President-Orient R egion
A. E. FLOAN, Vice President and Secretary
PHILLIP T. DROTNING, Vice President- Public R elations
LEO ARD 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
19-56
CROIL HUNTER- Chairman, Board of Directors, N@rthwest Airlines, I nc.
JAMES H. BINGER- Vice President, Minneapolis-Honeywell R egulator Co., Minneapolis, M inn.
A. E. FLOAN-Vice President and Secretary, Northwest Airlines, I nc.
MORTON H. FRY- Partner, R ~er and Company, New York City
ROBERT M. HARDY- President, Sunshine Mining Co., Yakima, Wash.
JOSEPH T. JOHNSON- President, The Milwaukee Co., Milwaukee, W is.
MALCOLM S. MACKAY- E ecutive Vice President, Northwest Airlines, I nc.
DONALD W. NYROP- President, Northwest Airlines, Inc.
ALONZO PEITEYS-Vice President and Director, Farmers State Bank, Brush, Colo.
C. FRANK REAVIS- Partner, H odges, R eavis, M cGrath & Downey, New York City
ALBERT G. REDPATH- Partner, Auchincloss, Parker & R edpath, New York City
WILLIAM STERN- President, Dakota National Bank, Fargo, N. D.
LYMAN E. WAKEFIELD, JR.- Vice President, First National Bank of Minneapolis, Minneapolis, Minn.
ALBERT J. WEATHERHEAD, JR.- President, The Weatherhead Company, Cleveland, Ohio
WHEELOCK WHITNEY- Director and M ember of Executive Committee, Truax -Traer Coal Company, Chicago, Ill.
R egistrar THE CHASE MANHATTAN BANK, NEW YORK, N. Y.
Transfer Agent BANKERS TRUST COMPANY, NEW YORK, N. Y.
* As of March 8, 1957
GENERAL OFFICES : 1885 UNIVERSITY AVENUE , ST. PAUL 1, MINNESOTA
TO SHAREOWNERS OF NORTHWEST AIRLINES , INC .
EARNINGS
The total net income for 1956 was 3,225,595.
Preferred dividends amounted to 304,608 lea ing
$2 920,987 or $2.18 per share for the 1 341,620 outstand-
ing hares of common stock. In 1955 total net income
was $2 116,180 which after preferred dividends left
earnings of $1.80 per share for the 963,135 shares of
common stock then outstanding.
The margin of operating re enues over operating
expenses was 4 593 243 compared with 4 416,634 for
1955. Because of increa ed interest expense combined
with a decline in other income, net income from opera-
tions after taxes but before profits from dispo als of
property was $1,887,978 for 1956 compared with
2,027,3 19 for 1955.
The ear just ended wa the second successi e year
in which your compan operated without any subsidy
payments from the . S. Go ernment. In 1954 subsidy
payments totaled $3,035 000.
Profits from disposals of property, mainly aircraft
, ere 1,337,617, after taxes. In 1955 uch profits were
$88.861.
The company more than two years ago placed orders
with Douglas Aircraft Company for new aircraft that
are now being put into service. The orders for new
equipment total ten DC-6B and fourteen DC-7C air-
craft. }though the first plane was not delivered until
January 19, 1957, total operating revenue in 1956 of
76,672,482 were 7.4o/ o er 1955 and e tabli hed a ne\
high. The record revenues , ere achieved despite the
fact available seat miles increased only 3.5o/ during the
year and despite a continuing increase in pas enger pref-
erence for lower-yield air coach tran portation. Pa -
senger re enue of $60 264 291 was up 5.3% U. S.
mail revenue of $7,192,138 increased 10.4o/ while
foreign mail revenue of 666 287 rose 15.4 . Express
freight and excess baggage re enue of 7,154,612 rose
16.8 c. R e enue of 815)73 from charter and other
transportation service was more than se en time hat it
, a in 1955 primarily due to special government con-
tract volume in the international operations. Inter-
national operating revenues totaled $25,800,000 repre-
enting one-third of otir ystem revenues.
Your company carried 1 427 063 revenue passengers
on the s stem, an increase of 6.2o/c over 1955. Revenue
pa senger miles totaled 1,094 121,438 for a 7.5 o/c rise
over the pre ious ear. The system pas enger load
factor rose to 60.5 o as load factors impro ed in all of
our major operating regions.
"\'\' e carried more than 16 million ton miles of mail
la t year for an 8.9 improvement o er 1955. Freight
ton miles also rose substantially, 31.2 for the ystem.
Total operating expen es roe 7.7% o er 1955 while
our a,ailable ton miles offered for sale rose 8.5% re-
ulting in a further decline in unit co t. Our dome tic
operating co t per available ton mile is among the very
lo\ e t in the domestic indu try, , hile our international
co t compare fa orably with other international air
carriers.
BANK CREDIT AGREEMENT
Our commitment for new DC-6B and DC-7C aircraft
were revised and increased during the year 1956, and a
new bank credit agreement was negotiated effective
- o ember 15, 1956, to supersede the previous agreement
of June 30. 1955.
The new agreement is with the same group of fifteen
banks as were represented in the previous agreement.
These banks are all located in cities which we serve.
Bankers Tru t Company, ew York i the lead bank.
FORTY-SECOND STREET
The pre ent agreement permits the company to borrow
to a maximum amount of $38,500 000 during the period
through September 29 1958, and to a maximum amount
of 35,000,000 through December 30 1958. During
such period the company may borrow and prepay within
uch limit but the amount o, ed as of December 31,
1958 may not exceed 30 000,000. The balance out-
standing on that date is payable at the rate of an
aggregate amount of 20 thereof each ear for five
year . The loan out tan ding on December 31, 1956
, ere 13 800,000.
The borrowing are not directly related to any par-
ticular aircraft purchase payments of the company but
are limited by covenants which relate the maximum
borrowing to net flight equipment values (including
depo its with manufacturers on the purchases thereof)
and to the net worth of the company. one of the
property of the company is specifically pledged in sup-
port of uch loans but upon request of the banks the
company i obligated to provide a chattel mortgage on
uch flight equipment a may be designated by them.
The intere t rate of 4 % on outstanding loans and
the commitment fee of one-half of 1 % per annum are
\ery favorable for pre ent money market conditions and
reflect a good credit tatus for the company.
NET WORTH
The net worth of the company at the end of 1956 was
30 171 714 of which $21. 79 per share was applicable
to each of the 1 341,620 shares of common stock out-
tanding a of December 31, 1956. This compares with
net worth of $28 228,484 at the end of 1955, of which
21.60 per hare was applicable to each of the 963,135
hares of common stock outstanding a of December
31, 1955. O ur earned surplus was $9,569,339 at the
end of 1956 compared with $7,453 305 at the end of
1955.
DIVIDENDS AND STOCK CONVERSION
Dividend on the 4.60 o Cumulative Preference Stock
were paid regularly on the quarterly due dates of Febru-
ary 1, M ay 1, August 1 and ovember 1. The February
1, 1957 quarterly dividend was also paid, on that date.
Quarterly dividends of 20c per share of common stock
were also paid on the same quarterly dates. The Febru-
ary 1, 1957 quarterly common dividend of 20c was
paid on that date.
Prior to January 1, 1957, each share of the 4.60%
Cumulative Preference Stock was convertible, at the
option of the holder, into one and one-half shares of
common stock. During 1956, 252,323 shares of the Pre-
ference Stock were converted to 378,484 shares of
common. Conversions of Preference Stock had also been
m:11.de in prior years. Furthermore, a number of Pre-
ference shares have been retired in past years through
sinking fund provisions, thus of the 390,000 shares of
such stock issued in May 1947, only 37,577 shares
remained outstanding as of December 31, 1956. Pre-
ference shares will continue to be retired under the
sinking fund provisions.
ROUTES
International and O verseas-O ral argument before
the Civil Aeronautics Board on orthwest's application
for permanent certification of its Seattle-Anchorage-
Tokyo route was held on February 21, 1957. Previously,
the hearing examiner had issued an initial decision
recommending that orthwest be granted a permanent
certificate for this portion of its international route' struc-
ture. This docket is now awaiting Board decision and
approval by the President of the United States who
makes final decision in all international route matters.
Similarly, oral argument was held on February 20,
1957, with respect to the R eopened Trans-Pacific Cer-
tificate R enewal Case covering Pan American World
Airways' request to operate over the orth Pacific route
to Tokyo from its California terminals, as well as from
the Pacific orthwest terminals of Portland and Seattle.
On December 18, 1956, the hearing examiner issued his
recommended decision finding that duplication of North-
west's transpacific service from Seattle-Portland to Tokyo
by Pan American i~ not required in the public interest.
H e did recommend, however, that a Great Circle author-
ity for Pan American from the co-terminals San Fran-
cisco/ Los Angeles be granted. Northwest continues to
oppose all applications of Pan American for North
THE DC-7C-NEWEST AND FASTEST
Pacific routes. Thi ca e i now awaiting Board decision
and Presidential a ppro\'al.
In connection with international and overseas routes,
orthwest has on file with the Board the following
applications which await hearing:
1. Service by orthwe t between Los Angeles and
San Francisco California and Tokyo Japan over
the Great Circle route.
2. Service by orthwest between Honolulu and Tokyo.
3. Request for authority to serve Winnipeg, Mani-
toba, and Edmonton, Alberta, on the same flight.
4. Service by Northwest between Anchorage and
Fairbanks.
EDMONTON WHEAT AND OIL
Domestic-In February 195 7, orthwest filed its brief
to the hearing examiner in the Great Lakes-Southeast
Service Case, which includes our applications to serve
the Florida cities of Tampa/ St. Peter burg and :Miami
ia Chicago, Indianapolis Louisville, Cincinnati and
Atlanta on one routing and via Detroit, Cle\eland, and
Pitt burgh on another. This proceeding also includes
our application to add a new egment from Chicago to
ashington D. C. via Dayton, Columbus and Pitts-
burgh as well as a request to conduct operations between
Chicago-Cleveland Chicago-Pittsburgh and Chicago-
\ ashington. Al o included in the Great Lakes-Southeast
Ser ice Case is a reque t for the remo al of the restric-
tion on orthwest's er\'ice " hich prevents ' turn
around" service between Detroit and \ ashington, D. C.,
either non top or \ia Cle,eland and Pittsburgh. In this
proceeding your company is placing particular emphasis
on it Florida application , approval of which would
pro\ide improvement to our finztncial results through
access to the rapidly growing southeast markets and
relief from our pre ent winter seasonal traffic decline.
In 1956 the Ci,il eronautic Board set do, n for
hearino- a proceeding known a the Chicago-:Mih aukee-
Twin Cities Ca e which will hear applications for com-
pet1tlve service on the Chicago-Twin Cities segment.
The scope of this proceeding has not been fully defined
and hearing dates have not as yet been established.
ew Applications and Applications on File-During
the year your company filed with the Civil Aeronautics
Board a number of new route applications to enable
::-lorthwest to render improved service. These include
the following :
1. Addition of Baltimore, Maryland, as a co-terminal
with Washington: D. C.
2. Application to elimi_
nate the restriction prohibiting
Northwest from operating "turn around" flights
between Chicago and New York.
3. Application for service to Flint and Grand R apids,
Michigan.
4. Application for service from Detroit to Boston via
Buffalo, Hartford/ Springfield.
Your company had previously filed applications with
the Civil Aeronautics Board to improve its route struc-
ture. These applications have not yet befln assigned for
hearing. These include the proposals for service as
follows :
1. Minneapolis/St. Paul to Los Angeles and San
Francisco via Denver and Salt Lake City.
2. Billings to San Francisco via Salt Lake City.
3. Detroit to ew York ia Cleveland, Pittsburgh
and Philadelphia.
4. Chicago to Boston via Detroit and Toronto.
5. ew York to Boston via Hartford/ Springfield.
As in prior years, your company will continue to seek
those route impro ements which will expand our revenue
sources and assure further financial strength.
ANGLING IN ROCKIES
EQUIPMENT AND SERVICE
Your company continue to add the most modern
aircraft to its growing fl et to provide it u tomer with
the fine t and fa t t ervice both within the nited
tate and to the O rient. During 1957 ev n new Doug-
la D -6B' and eight Douglas DC-7C will be put in
operation.
Thi program of fleet modernization will continue into
th early month of 1958 when three additional DC-6B'
and ix DC-7C' will be received. The e aircraft com-
bined with the ten DC-6B's and nine Boeino- Strato-
. . b
crm er. operated m 1956, will give your company a
pre unzed fleet of forty-three aircraft which will pro-
vide 'top-flight" luxury service between all major cities
on our y tern. Thi compare with seventeen pressurized
aircraft operated on J anuary 1, 1955.
The plane being delivered this year and next, to-
gether with pare engine and part will cost approxi-
mately 58 million. They , ill gradually replace our
older non-pres urized unit which are being disposed of
as the needs of th ervice require. Fourteen non-
pre urized DC-4 and DC-3 aircraft will be retained to
erve point in which airport facilitie will not accommo-
date the larger more modern aircraft.
The effect of the delivery of the fir t four DC-6B's
were already being ob erved as this report went to the
printer. A of February 1957, all international pa -
enger flight as well a flight within the Orient are
flown with pre urized equipment. Thi modern equip-
ment provides not only greater passenger comfort, but
ignificant reduction in flight time, a well. On flight
between Tokyo and H ong Kong the DC-6B aves one
hour forty minute and between Tokyo and eoul thirty
minute a compared with the older DC-4 unpre urized
plane.
The fir t of the D -7C aircraft was received in March.
and crew training i in progr . With the April 28
chedule, the transpacific flight between S attle/ Port-
land and Tokyo will be converted to this equipment,
and increased frequencies of ervice will be provided
betwe n major points in the domestic sy tern.
Radar equipment has now been in talled on the
entire fleet of Boeing Stratocruisers and on all but four
of our presently operating DC-6B's. Radar on these
aircraft will be installed by June 1 of this year. All of
the new aircraft will be delivered with radar equipment.
T~e initial experience with this equipment, which per-
mits safer and more reliable operation of aircraft during
all flight conditions, ha demon-3trated that pas enger
comfort i ubstantially increased by the ability of the
captain to "see" thunderstorm activity miles ahead and
elect a clear path around it. R adar is also an im-
portant navigational aid in revealing characteristic of
the terrain over which the aircraft is flying, thus assi t-
ing in determining the exact po ition of the plane.
In preparation for acquisition of jet aircraft an' ord r
~vas pl~ced with Pra~t & "Yhitney for twent;-one J-75
Jet eng_mes._ The engmes will be required for the long-
range Jet aircraft eventually ordered and a substantial
aving in cost was effected by placing the order at this
time. The company continues technical and economic
studie of jet aircraft, but no decision has yet been made
as to ~he t~pe to be ordered. Good delivery positions for
new Jet aircraft for early 1960 are available to the
company.
Six flights weekly with pressurized equipment are
bei1:g. flown between Seattle/ Tacoma and Tokyo. In
addit10n we 012erate . a we~kly cargo and mail flight
and, thus, provide daily ervice to the Orient.
Serv~ce between Seattle/ 1:acoma and Hawaii is oper-
ated with Dougla DC-6B aircraft four times per week.
DUDES FOLLOWING THE LEADER
WA IKIKI-DIAMOND HEAD
First class luxury service with Boeing Stratocruisers is
being provided on many important domestic route seg-
ments, such as our Chicago-west coast nonstop, New
York-Twin Cities, New York-Chicago, Washington,
D. C.-Twin Cities and coast-to-coast.
Our interchange agreement with Eastern Air Lines
provides daily through service between the Twin Cities
of Minneapoli and St. Paul and Miami via Chicago.
During winter months our aircraft manned by your
company's crews on the Twin Cities-Chicago segment
are flown one round trip per day from the Twin Cities
to Miami. During the summer month Eastern Air
Lines' equipment is used.
On March 5, 1956 your company entered into a long-
term agreement with the Minneapolis-St. Paul Metro-
politan Airports Commi sion whereby the Commi ion
would build and your company lease a complete over-
haul, operations and general headquarters facility at
Wold-Chamberlain Field on a basis that will amortize
the Commi sion's cost plu interest over the thirty-year
p riod of th lease. More than a quarter of a million
dollars worth of engineering work has been done on the
project inc that time. o actual construction has
berrun because of variom lawsuits that have been filed
by t:>certain groups who object to th expansion of Wold-
Chamberlain Field and who have challenged the legal
tatu of th development of the airport. Legi lation
cl irrned to enabl the Commi ion to proceed with the
pro:ram i now und r con ideration by the Minnesota
Legi laturc. Your company i in ne d of uch a fa-
ility in order to ervice the large number of new air-
craft to be deljvered this year and next.
PERSONNEL
Management i grat ful for the cooperation of its
employees and proud of the intere t they display in their
company's welfare.
On D cember 31 1956, your company employed 5,568
men and women of whom 5 151 wer located in the
nited State , Alaska, Hawaii and Canada. Four
hundred seventeen emplo}' e were located in the Orient
of whom 85 o were foreign nationals.
Contract negotiation during 1956 wer conducted
within an excellent mployee relations atmosphere in
which satisfactory agreement were reached providing
for rat of pay and fringe benefit equal to the be t
among the trunklin air carriers of comparable size to
your company.
The company training program is continually being
strengthened and improved. On-th -job and off-the-job
training was provided to technical, maintenance and
flight personnel with particular emphasis on training
needs relative to th integration of new quipment into
our fleet. Increa ed training of ales and customer
service personnel made a ub tantial contribution to our
improved ervice.
Employee interest in the growth of your company is
particularly hown by the ugge tions submitted by em-
ployee under the company's sugge tion and award plan.
During 1956, more than $10 000 wa paid to 259 em-
ployee for sugge tion which resulted in tangible com-
pany cost reduction and savings of more than $156,000
per year.
Your management incerely believes that it has the
finest group of employee in the airline indu try and our
recruitment program i being trengthened to the end
that we will continue to attract the highe t possible
type of employee.
MANAGEMENT CHANGES
At the annual meeting of har holders held on M a
21, 1956, Albert E. Floan, Vice Pre ident and Secretary,
was elected to the Board of Director filling a vacancy
caused by a re ignation in 1955.
On Iovember 15, 1956 Phillip T . Drotnino- was
elected to a new position Vice Pre ident-Public R la-
tion . For the past eight year Mr. Drotning has erved
as Executive Secretary to the Governor of vVisconsin.
H e has also had extensive experience a . a new paper
and magazine writer.
With deep regret we report th death of a
Director of your company, Wheelock Whitney,
who pa ed away on M arch 23 1957. He had
b en elected Director on M ay 18, 1953 and had
erved ince that tim with gr at ability and
di tinction. We hall mi him k enly.
By authority of the Board of Directors
Chairman of the Board
M arch 25, 1957
Saint Paul, Minnesota
Pre idcnt
STATEMENTS OF FINANCIAL POSITION
NORTHWEST AIRLINES, INC.
ASSETS
December 31 ,
CURRENT ASSETS
1956 1955
$ 7,432,277
ount r c i able le allowance of $85,000- 1956, $75,000- 1955........ 7,636 567
Iain t nan and op rating upplie, at av rage co t...... ................ .... ........ 1,896,061
Pr paid .xp n,c .. ........... ................................................................. ............... 452,416
TOT AL CURRENT ASSETS $17,417,321
INVESTMENTS AND OTHER ASSETS
R lat d indu try inve tm nts and advance - at o t. ................................. $ 226,973
FLIGHT EQUIPMENT at cost ...................................................................... $57,124,808
Le allowanc for depr ciation and ob" ole cence ........................................ 32,838 728
$24,286,080
d\'anccs on purchase contracts- ote ...................................................... 10,565,169
$34,851,249
OTHER EQUIPMENT AND PROPERTY at cost ............................... $13,261,618
Le allowance for d prccia tion............ ........................................ ....... .... ..... 8 187,183
$ 5,074 435
DEFERRED CHARGES
Trainina and oth r co t. in onnc tion with air raft fie t , I accu-
mulat d amortization $235,707- J 956. 637 644- 1955 ... ...................... $ 510 814
M ice llan ous .................. ........ ...................................................................... .... 255,745
$ 766 559
$58,336.537
ee notes to finan cial statem ents.
$ 6,042,984
6,566,861
1,832 533
379,793
$14822,171
$ 231,450
$56 332 679
29,564,507
$26,768,172
7,509 182
$34,277,354
$12 584,570
7,476,867
$ 5 107,703
$ 709,761
366,269
$ 1,076,030
$55.514, 708
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
CURRENT LIABILITIES 1956 1955
Accounts payable, collections as agent etc ........ ............................................ $ 6,806,737
Salaries, wages and vacations.......................................................................... 2,568,034
Air travel card deposit ..................................................... .. ........... .... ............... 1,031,900
Unredeemed ticket liability.......................................................................... .... 901,405
Income taxes timated .................................................................................. 1,556,747
TOTAL CURRENT LIABILITIES $12,864,823
LONG-TERM DEBT- Note A
4 % otes payable to bank .......................................................................... 13,800,000
3 % ote payable to bank ................................................................... ...... .
DEFERRED INCOME TAXES- arising from accelerated depreciation
method
STOCKHOLDERS' EQUITY - Note C
Cumulative Preference Stock, $25 par value ; authorized 600,000 shares
is uable in series: 4.6% Series; authorized 375,125 shares; outstand-
1,500,000
ing hares 37,577- 1956, 296,975- 1955- Note B .................................... $ 939,425
Common Stock, $10 par value authorized 3 000 000 hare ; is ued and
out tanding share 1 341,620- 1956, 963,135- 1955- Note D .......... 13 416 200
Capital urplu , after deduction of $560,625 in prior years for part
of dividends paid on 4-.6 o Cumulative Pref _
rencc Stock.... .................... 6,246 750
Earned urplu ................................................................................................... .
CONTINGENT LIABILITY - for repurchase of travel contracts sold-
$233,524
COMMITMENTS- ote E
See notes to financial statements.
9,569 339
$30,171,714
$58,336,537
$ 6,784,360
2,186,530
940,525
778,453
1,411,356
$12,101,224
14,500,000
685 000
$ 7,424,375
9,631,355
3,719,449
7,453,305
$28,228 484
$55 514,708
STATEMENTS OF INCOME
NORTHWEST AIRLINES, INC.
Year Ended
December 31,
OPERA TING REVENUES 1956 195~
Panitendo-
\~
~~~ii=~~j;::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::$6~
,~~t}~t
For io-n mail ...................................................... .. ..... ...... .... ............................... 666 287
Expr fr ight and xc bao-o-ao .............................................................. 7,154 612
hart r and oth r tran portation............... ..................................................... 815,773
th r ... .... .... .... .... .. . ... .. .... .... .... .. . . .... .... ... . ... . .... ...... .. .. ..... ........ ...... ........ .............. 579,381
$76 672,482
OPERATING EXPENSES
Fl ino- z
md o-rotmd p ration ......................................................................... . $3 7 265,983
~~~\~na~o~ d~~~
rfftfo
1
~ ::::::::::::::::::::::::::: :: :::::::::: :: :::::::::::: ::::: ::::::::::::::.._-_-: :::::
1~
'~6~:i~~
Traffi al and ad rti ino-........... .... .... ........ ........ ........ ................ ............... 9 026,449
dmini tra ti and n ral (in ludino- pay roll taxe prop rty ta e, etc.) 4 390,449
Empl r tirem nt plan.............................................................................. 670 991
$72,079,239
$ 4,593,243
OTHER DEDUCTIONS AND INCOME
Int re t on lono-t rm debt. .... .......... ...................................... ..................... ...... $ 582,745
th r in om l mi llan u deduction.. .... ............................................. 62 480
$ 520 265
INCOME BEFORE TAXES AND PROPERTY DISPOSALS ............ $ 4 072 978
TAXES ON INCOME (includino- d fcrr d tax $815,000- 1956,
'-l 685 000- 1955 ari ino- from a cl r~ted d prcciation method ) ............ 2 l 85 000
NET INCOME FROM OPERATIONS ....................................................... , 1,887 978
PROFIT FROM DISPOSALS OF PROPERTY, 1 appli abl in-
om taxc +90,000-19 6 30,000- 1955.................................................. 1 337 617
NET INCOME FOR THE YEAR ................................................................. , 3,225 595
note to financial tatements.
$57,252,957
6,512,846
577,383
6,123,606
111,127
785,575
$71,363,494
$35 056 409
12,538,345
6,370,354
8,419,929
4,085,957
475,866
$66,946,860
$ 4 416,634
350,651
101 336
$ 249,3 15
$ 4 167,3 19
2,140 000
$ 2,027,3 19
88 861
2 116 180
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC.
December 31 , 1956
ote A-Bank Credit Agreement
For the purpose of equipment financing (Note E ), a Bank
Credit Agreement dated ovember 15, 1956, establishes credits
of which the outstanding amount may not exceed $38,500,000
through September 29, 1958, $35,000,000 thereafter through
December 30, 1958, and $30,000,000 on D ecember 31, 1958.
R epayments aggregating 20% of the borrowings outstanding
as of D ecember 31, 1958, are required during each year 1959
through 19 63.
The Company has agreed that, among other things, it will
not permit (a) its working capital (computed as defined in
the Agreement) at any time to be less than certain specified
amounts, ranging from $3,000.000 through Ylarch 31. 1958
to $6,000,000 after Jt:ne 30, 1960 ; (b) the unpaid principal
balance of the notes outstanding to exceed certain percentages
of net worth and certain percentages of the depreciated value
of flight equipment ; and (c) its net worth to be less than
$34,000,000 after D ecember 31, 1958.
ote B-4.6 o Cumulati e Preference Stock
This Stock Series is entitled upon voluntary liquidation or
redemption to $25 1/4 a share plus accumulated unpaid di i-
dends and is subject to retirement through market or sinking
fund provisions. At D ecember 31, 1956, 337,548 of the
authorized shares had been redeemed and converted and were
not reissuable.
On or before :March 31 . 195 7 the Company is required to
set aside $274,818 in a non-cumulative fund for the purchase,
if practicable, on the market of shares of such Stock at not
exceeding $25 a share. . ny unused balance after the ensuing
twelve-month period reverts to the general funds of the Com-
pany. fter 1957, other, and cumulati e, sinking fund pro i-
ions become applicable.
During any period while the Compan is in default in the
payment of dividends on Cumulative Preference tock, the
Company may not purchase any of such tock except pursuant
to an offer to all holders thereof and may not redeem less
than all of such Stock then outstanding. Di idends accruing
to February 1, 195 7 ha\e been paid.
ote C-Re triction on Earned urplu
nder pro isions of the Bank Credit Agreement, the Com-
pany is not permitted to declare or pay any cash dividends on
its capital stock during any fiscal quarter of 1957 unle s net
worth at the clo e of the preceding fiscal quarter is at least:
30 100 000 on D ecember 31 1956. 29,300 000 on M arch
31 '1957, $30,000 000 on June 30, 1957, and 31_,700,000
on eptember 30, 1957. The total of such declarat10ns and
payments for 1957 may not exceed $1,057,267, an amount
based on net earnings for the year 1956. Similar restrictions
in different amounts will apply to 19513 and future years.
The Agreement prohibits repurchase of the Company's
capital stock, except that 4.6% Cumulative Preference Stock
may be retired through market fund purchases (Note B) and
out of proceeds of the sale of additional Common Stock.
The terms of the Cumulati e Preference Stock also contain
provisions relating to dividends on and repurchase of Common
Stock which are less restrictive than those above.
ote D-Common Stock Options and Reservations
Of the unissued Common Stock at December 31, 1956,
41,500 shares were subject to various outstanding options
exercisable by Company officer and employees over five-year
periods from dates of grants and expiring not later than
July 1, 1961. 36,500 shares were exercisable at D ecember
31, 1956 (14 500 at 12.1 25 a share and 22,000 at $15 .675
a share) and the option prices were 95% or more of the
fair market prices at the date of grant.
An additional 8,000 shares of unissued Common Stock are
reserved for options which may be granted in the future to
officers and employees.
Note E-Commitment
At December 31. 1956 commitments hr the purcha e of
ten Douglas D C-6B and fourteen D C-7C aircraft (to be
deli ered January, 1957 to June, 1958) and other equipment
amounted to approximately $62,460,000 on which $10,565,169
had been deposited with manufacturers. Payments of approxi-
mately $28,510,000 will be required iJ;J. 1957.
Note F-i\lail Tran portation umpen ation
); o final determinations of total mail compensation ha e
been made by the Civil eronautics Board on international
and domestic routes for 1951 ;,i.nd on international routes
for 1954. For these uns@ttled periods the Company has
accrued income on the ba i of temporary rates set by the
Board.
On J anuary 10 195 7 the Board i ued an order a king
the Company to show cause why temporary compen ation for
1954 should not tentatively be reduced 1,400,000 pending
final hearing . The Company is contesting the Boards actions
and cannot predict the outcome at thi time. ~feanwhile no
effect has been given in the accompanying financial statements
to the proposed reduction \ hich would approximate 650,000
after applicable income taxes.
FIVE YEAR STATEMENT OF INCOME
( Amounts shown in thousands)
NORTHWEST AIRLINES, INC.
Five years ended December 31, 1956
Per cent
Increase
(D ecrease )
1956 1956to1955 1955 1954
OPERATING REVENUES
Passenger ........................................... ................... ................. $60,264
United States mail... ................... ........................................... . 7,192
Foreign mail... ....................................... .................................. 666
Express, freight, and excess baggage................................ .... 7,155
Charter and other transportation.......................................... 816
Pacific Airlift for United States Government ..........
Repair and service income, rents, etc., net ....................... ..
OPERATING EXPENSES
579
$76,672
Flying and ground operations .............................................. $37,266
M aintenance and repairs........................................................ 13,819
Provision for depreciation.................................................... 6,906
Traffic, sales, and advertising.............................. .................. 9,027
Administrative and general ( including pay roll taxes,
property taxes, etc. )................... ...................... ................. 5,061
$72,079
$ 4,593
OTHER DEDUCTIO s, Net.. ............................................ . 520
I 'COME BEFORE TAXES AND DISPOSALS OF PROPERTY .......... $ 4,073
TAXES O INCOME.................................................................... 2,185
NET I coME FROM OPERATro s .............................................. $ 1,888
PROFIT FROM DISPOSALS OF PROPERTY ................. .................. $ 1,828
Less applicable income taxes ............................. 490
ET PROFIT FROM DISPOSALS OF PROPERTY ......... ................. $ 1,338
ET INCOME FOR THE YEAR ........................... .........................
$ 3,226
5.2%
10.4
15.4
16.8
635.1
( 26.2 )
7.4
6.3
10.2
8.4
7.2
10.9
7.7
4.0
108.8
( 2.3 )
2.1
( 6.9 )
52.5
$57,253 $51,054
6,51.3 6,282
577 504
6,124 5,296
111 50
785 410
$71,363 $63,596
$35,057 $30,044
12,538 11 ,672
6,370 5,606
8,420 7,383
4,562 4,180
$66,947 $58,885
$ 4,416 $ 4,711
249 108
$ 4,167 $ 4,603
2,140 2,400
$ 2,027 $ 2,203
$ 119 $ 287
30 75
$ 89 $ 212
$ 2,116 $ 2,415
1953
(1952
$48,652 $ 1,963
6,869 6,767
496 706
5,373 5,116
180 I 1,055
4 185 \5,464
385 481
$66,140 $61,552
$31,801 $28,371
13,886 15,061
5,731 5,816
7,324 6,504
4,255 4,294
$62,997 $60,046
$ 3,143 $ 1,506
338 311
$ 2,805 $ 1,195
1,465 640
$ 1,340 $ 555
$ 815 $ 1,709
210 475
$ 605 $ 1,234
$ 1,945 $ 1,789
STATEMENTS OF SURPLUS
NORTHWEST AIRLINES, INC.
Year Ended
December 31 ,
1956 1955
CAPITAL SURPLUS ( after deduction of 560 625 in prior year for
part of dividend paid on 4.6% Cumulativ Preference Stock)
Balance at b ginning of ear............................................................................ 3,719 449
Addition ari ing from:
Retirement of 7 075 hare of 4.65~ Cumulati\e Prefer nee Stock
through market fund purchase .............................................................. 4 071
Sale of 17 850 hare of Common Stock under option agreements ......... .
Comer ion uf 252 323 har - 1956 71 135 hare - 1955 of +.6 0
Cumulati Preference Stock into hare of Common Stock ( 1
hare of Common for each hare of Pref rence) ................ ................ 2 523 230
Balance at end of year ...................................................................................... 6 2+6,750
EARN ED SURPLUS
Balance at b ginning of ear ........................................................................... .
dd net income for the year. .......................................................................... .
Deduct ca h dividend on:
4.6 a Cumulative Preference Stock for the year ended November 1
- 1.15 a hare .......... ........................................................... .......... ... ....... .
Common Stock- .80 a har - 1956 .60 a hare- 1955 .......................... ..
7 453 305
3 225 595
10,678 900
30+ 608
804 953
1 109 561
Balance at end of ear...................................................................................... 9,569,339
Board of D irectors
orthwest Airlines In c.
aint Paul, Minn esota.
S ee notes to financial statemeT.lts.
ACCOUNTANTS' REPORT
2 964 638
43 461
711 350
$ 3 719,+49
6 275 889
2 116)80
$ 8 392 069
387 031
551 733
938,764
7 453 305
We ha,e examin d the fin ancial tatements of oRTHWE T . IRLINE , I NC. for th year Qnded
D ecember 31, 1956. Our examination was made in accordance with generally a epted auditing
tandard , and ac ordinrrly included such tests of the ac ounting records and uch other auditing
procedures a we considered nece sary in the circum tance .
In our opinion the accompanyinrr statement of financial po ition and tatement of income ancl
surplu present fairly the financial po ition of ORTHWE T AIRLI Es, I ;-.;c. at D e mb r 31 1956 and
the result of it operation for the year then ended , in conformit , ith g n rall y accepted a ount-
ing prin iplcs applied on a basi consi tent with that of the pre eding year.
aint Paul, M inne ota
ERN T ER:'\ T
farch 8, 1957
ONE OF MINNESOTA'S TEN THOUSAND LAKES
NORTHWEST AIRLINES, I N C . , ~ ~
NORTHWEST 0'1,/,L,"'t AIRLINES
SYSTEM MAP
_ _ . . Routei Ope,aled
- - COl'V'lechngA,rl,ne\
~ Throvgh Pio""' ~ rv,ce
P[ll't HC
CHINA
PROGRESS FOR THE
Calendar
Total
Passenger
Express
Operating and Freight
Year Revenue
Revenue Revenue
1956 $76,672,482 $60,264,291 $6,426,502
1955 71 ,363,494 57,252 ,957 5,539,095
-
1954 63,595,851 51 ,053,599 4,676,190
- -
1953 66,140,027 48,652,465 4,890,153
- - - - - > - -
1952 61 ,552,380 41 ,962,758 4,781,081
1951 54,685,060 35, 192,765 4,371 ,533
1950 52 ,456,700 33,148,395 4,122,222
1949 39,970,747 27,873,942 3,163,278
- - - -
1948 34,369,835 24,074,778 2,072,362
- - - - - - - - -
1947 26,800,428 20,520,631 1,019,497
9
- 5 6
LATEST 10 YEARS
Revenue Mail Tota l
Passenger Ton Plane Miles
Miles Miles Flown
1,094,121 ,438 16,780,406 32,461 ,321
1,017,400,443 15,407,054 30,909,610
909,674,550 6,990,462 27,029,860
851 ,174,754 5,002,605 27,816,827
720,046,264 5,017,993 23 ,210,634
602,220,853 I
4,57 1,276 19,53 1,632
I
I
613,446,244
I
4,987,56 1 26,868,177
495, I 14,870
I 4,722,800 25,908,552
- ~-
386,509,809 4,026,074 22,288,002
- -
382,544,382 2,736,938 20,824,912
Q
NORTHWEST AIRLINES, INC.
Printed in U.S.A.