Northwest Airlines Annual Report 1957

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NORTHV\/EST AIRLINES, INC.
ANNUAL REPORT 1957
NORTHWEST AIRLINES; INC. ~ ffle/wu
CROIL HUNTER
DONALD W. NYROP
MALCOLM S. MACKAY
FRANK C. JUDD
LINUS C. GLOTZBACH
GORDON M. BAIN
PAULL. BENSCOTER
A. E. FLOAN
PHILIP T. DROTNING
WM. J. EIDEN
ALROY D. PIEPGRAS
DONALD H. HARDESTY
FRANK J. SCOTT
DALE MERRICK
C. L. STEWART
OFFICERS*
Chairman, Board of Direct10rs
President
Executive Vice President
Vice President- O perations and Engineering
Vice President-Personnel
V ice President-Sales
Vice President-Orient R egion
Vice President and S ecretary
Vice President-Public R elations
T reasurer
Assistant Com ptroller
Assistant T reasurer
A ssistant Secretary
Assistant Vice President- Properties
Assistant Vice President-Plans
DIRECTORS*
CR OIL HUNTER- Chairman, Board of Directors, Northwest Airlines, I nc.
1957
JAMES H. BINGER-Vice President, Minneapolis-Hone'ywell R egulator Co., 2753 4th A venue So., Minneapolis, Minn.
HADLEY C ASE-President, Case, Pomeroy & Company, I nc., 285 Madison Avenue, New York, New York
MORTON H. FRY- Partner, R iter & Company, 40 Wall Street, N ew York, New York
T ED R. GAMBLE- President, Mount H ood R adio and Television Broad,;asting Corporation, 140 S.W. Columbia
Portland, Oregon
JOSEPH T. JOHNSON- President, T he Milwaukee Company, -207 E. Michigan, Milwaukee. Wisconsin
MALCOLM S. MACK AY -Executive Vice President, Northwest Airlines, Inc., St. Paul, Minnesota
CLYDE B. MORGAN- President, R ayonier, Incorporated, 161 East 42nd Street, New York, N ew York
DONALD W. NYROP- President, Northwest Airlines, Inc., St. Paul, Minnesota
ALONZO PETTEYS- Vice President and Director, Farmers State Bank, Brush, Colorado
C. FRANK R EAV IS- Partner, Hodges, R eavi, McGrath & Dou1
ney, 26 Broadway, ew Y ork, ew York
ALBERT G. R EDPATH- Partner, Auchincloss, Parker & R edpath 52 Wall Street, New York, New York
WILLIAM ST ER N- President, Dakota National Bank, Fargo North Dakota
LYMA E. WAKEFIELD, JR.- T-ice President First National Bank, AlinneaJJOlis, Minnesota
ALBERT J. w EATHERHEAD, .JR.- Pr('sid('nt, The Weatherhead Co., 300 E. 131st Street, Cl('veland, Ohio
R egistrar: THE CHASE MA HATTAN BA K, EW YORK, N. Y.
Trans/ n Agents: BA -KERS TR ST COMPANY, EW YORK, N. Y.
GEN ER AL OFFICES : 1 8 8 5 U N IVE.RS IT Y AVE N U E, ST. PAUL 1, MI N N ES OT A
*.As of March 25, 1958
TO SHAREOWNERS
OF NORTHWEST AIRLINES .. INC.
The year 1957, our 31st year of operation, was a
profitable year for orthwe t-a year completing ten
years of successful international operations, record
revenues and expanded services. The trend of rising
cost'i>, as experienced across the nation, continued in
1957. However, in spite of this trend, the year under
review produced a record profit from combined operat-
ing profit and capital gains.
During 195 7 orthwest was the fir t airline to fly
Douglas DC-7C's across the Pacific, and also was the
first domestic carrier to fly this equipment trans-contin-
rntally. It was the year in which the public was first
introduced to "Imperial Service."
On January 24, 1958, the Civil Aeronautics Board
announced that it would approve an interim increase
in domestic passenger fares of 4% plus $1.00 per ticket.
This increase-about 6.3% for Northwest- became ef-
fective on February 10, 1958. While affording some
mea ure of urgently required fare relief, the interim
increa e granted by the Board is not adequate in view
of rapidly rising co ts. Northwest is continuing to urge
in the General Passenger Fare Investigation now in
progres , that the Civil Aeronautic Board appro e, in
lieu of the interim adjustment, a dome tic fare increase
of 13% as the minimum upward fare adjustment re-
quired in the intere t of sound air transportation in
the . S.
EARNINGS
et profit for the year 1957 after taxes was $4 818,971,
or 3.56 per share after preferred dividends of $42,345.
et profit after taxes in 1956 was $3,225 595 or $2.18
per share after preferred dividends of $304,608.
Profit from operations was $4,983,488 compared with
$4,595,583 for 1956. otwithstanding increased in-
terest expense, net income from operations after taxe
but before profit.5 from disposals of property, was
$1,889,876 for 1957, compared with $1,887,978 for
1956.
et profits of $2,929,095, after capital gains taxes,
were realized from the sale of airplane , spare parts
and engines. In 1956 uch profits were $1,337,617.
REVENUES
Operatino- re\enue howed continued growth and
de\'elopment for ~ orthwest. Total operating revenues
were , 83 432 404, a gain of 9.1 over 1956, which
had total r venues of 76 479,526. Passenger revenue
of , '66 674,383 wa up 10.6 . mail revenue of
:'7.586 599 incr a ed 5.5 c, while foreign mail revenue
or' $763,436 rose 14.6 c. Expre- freight and exce:
baggage r venue of $7 541,410 increased 5.4 o. R eve-
nue of , 866,576 from charter and other transportation
ervice declined 27.9 % due to termination of a go\ern-
m nt airlift contract in the Orient.
Factor afiecting the a-rowth were the inaua-uration
of Douala DC-7C ervice, both internationally and
DC-7C engine cylinders move through over-
haul base af Sf. Paul on new conveyor system.
domestically, and increa e of the Douglas DC-6B fleet
providing 17.6 more available eat miles and enabling
your Company to carry 1 574,035 revenue passenger.,
an increase of 10.3 o. Revenue pa enger miles totaled
1,205,764 597, an increase of 10.2 o o er 1956. The
system passenger load factor was 56. 7 c .
EXPENSES
Total operating expen e during 1957 were '78,448,-
916 compared with $71,883 943 in 1956, an increase
of 9.1 . Notwithstanding the rising cost of labor and
materials, and the expansion of ervice, by rigid expense
control your Company was successful in reducing the
cost to 27.43 cents per availab.le ton mile. This i a
reduction of 2.6 fc; from 28.15 cent in the y ar 1956.
BANK CREDIT AGREEMENT
The Credit Agreement dated November 15 1956,
between the Company and fift:een bank , all of which are
located in citie we erve, continued in effect during the
year 195 7. Banker Tru t Company ew York, is
the lead bank. nder this agreement the Company is
permitted 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 De-
ember 30, 1958. The loans out tanding thereunder
on December 31, 1957, were $27,000,000, an increase
of :S13;200.000 for the year. While th borrowings
under the agreement are not directly related to specific
aircraft purcha e payment by the Company, all of the
1957 borrowing was used as part of the total payments
due on the seven DC-6B and eight DC-7C aircraft de-
livered in 195 7.
Borrowing under the agreement i limited by coven-
ants which relate loan to net flight equipment values
(including deposits with manufacturer ) and to net
worth. The loan outstanding on December 31, 1958,
may not exceed $30,000,000, and the actual balance
outstanding on that date is payable at the rate of an
aggregate amount of 20% per year for five years. None
of the property of the Company is specifically pledged
in support of loans but, upon request of the banks, the
Company is obligated to provide a chattel mortgage on
such flight equipment a may be designated by the
banks.
Interest on outstanding loans is at the rate of 4 %
per annum, and on the unused balance of the commit-
ment, the fee i at the rate of one-half of 1 % per annum.
NET WORTH
The net worth of the Company at the end of 195 7
was $33,065,292, of which $24.05 per share was ap-
plicable to each of the 1,343,120 shares of common
tock outs tan ding a of December 31, 195 7. This
compare with a net worth of $30,171,714 at the end
of 1956 of which $21.79 per share was applicable to
each of the 1,341,620 shares of common stock out-
standing as of December 31, 1956. Earned surplus
was $12,057 070 at the end of 1957, compared with
9,569,339 at the end of 1956.
DIVIDENDS AND STOCK CONVERSION
Di\idend on the 4.60 o Cumulative Preference Stock
were paid regularly on the quarterly due dates of
February 1 M ay 1, Augu t 1 and ovember 1. T he
February 1, 1958 quarterly dividend on the Preference
Stock was also paid on that date. Quarterly dividends
of 20c per hare of Common Stock also were paid
on the same quarterly dates. T he February 1, 1958
quarterly Common Stock dividend of 20c was paid
on that date.
All conver ion right of Preference Stock into Com-
mon Stock terminated a of December 31, 1956. Con-
\er ion of Preference Stock in prior years, combined
with Preference hare retired in pa t years and those
retired in the year under review, has reduced the
original 390 000 shares of stock issued in M ay 194 7
to 30 527 a of December 31 1957. Preference shares
v,ill continue to be retired under the sinking fund
prov1 10n .
ROUTES
International and Overseas-During the past y ar
two of orthwe t's temporary international routes were
made permanent. On Augu t 2, 1957 the Pre ident
apprO\ed an order of the Civil Aeronautic Board which
made permanent Northwe t's Seattle/ Tacoma-Anchor-
ao-e-Tokyo route. In addition the "inside route" from
ew York to Anchorage via Chicago, Minneapolis/ St.
Paul and Edmonton, was also made permanent in 1957,
a a result of legislation passed by the Congress.
In another important decision the Civil Aeronautics
Board and the President, in February 1958, reaffirmed
their earlier decision which denied another U. S. air car-
rier the right to duplicate Northwest's Portland-Seattle-
Tokyo route.
Domestic-The Civil Aeronautics Board heard oral
argument in January 1958 on Northwest's applica-
tions in the Great Lakes-Southeast Service Case, which
includes our request to serve the Florida cities of Tam-
pa/ St. Petersburg and Miami via Chicago, Indianapolis,
Louisville, Cincinnati and Atlanta on one routing and
via D etroit, Cleveland and Pittsburgh on another. This
proceeding also includes our application to add a new
egment from Chicago to Washington, D. C., yia Day-
ton, Columbus and Pittsburgh, as well as a request to
Mechanic completes inspection of $20,000
propeller used on Boeing Sfrafocruiser.
conduct operations between Chicago-Cleveland Chica-
~o-Pittsburgh and Chicago-Washington. Also included
m the Great Lakes-Southe~st . Service Ca e i a request
for the removal of the restnct10n on Iorthwe t's service
which prevents "turnaround" service between Detroit
and ~ashington, D. C., either nonstop or via Cleveland
and Pitt burgh. A deci ion i expected at an early date.
During the year. the Chi ago-::.Iilwaukee-Twin me
Ca e wa heard bv an Examiner of the Ci,il Aeronau-
tic Board. Thi ~a e inrnhed the i ue of competitive
_en-ice between hica(Yo and the Twin Citi a ,,ell
a the i "Ue of en-ice betwe n the Twin Citi / Mil-
"aukee and laroe traffic center in the ouchea t. Con-
solidated for hearin(Y in thi proceedino w"-re applica-
tion by rorth\\'e t to prmide the :fir t dire t en-ice
bet-ween N onhwe t citie and Indianapoli ~ in innati.
Loui ,ille. Nash,ille. Atlanta. Jack omille~ Tampa/ St.
Peter bur(Y and ::\Iiami. The Company' appli ation
in both proceeding received acti,e upport from the
itie alon(Y our route.
.Yeu. Applications and Appli ations on File-Durino-
the pa t year. the Company :filed new application re-
que tino:
1. Permanent authority for our tate -Hawaii route.
2. Permanent authority to erYe eoul, Korea.
3. A route egment from Spokane to Calgar '.
+. Addition of Grand Rapid and Flint a intennedi-
ate point" between Chicago and Detroit.
In addition, certain applicatioD" :filed prior to 195 7
al o are awaiting CAB action. The e include:
1. Minneapoli-/ St. Paul to Lo" Angel and an
Franci co ,ia Dennr and Salt Lake Cit, .
2. Billing to an Franci co ,ia alt Lake City.
3. Detroit to e\\' York \ia Clew-land. Pitt burgh
and Philadelphia.
+. hica(Yo to Bo ton \ia Detroit and Toronto.
5. New York to Bo ton via Hanford/ Springfield.
Your Compan) is continuing an a ti,e pro0 -ram to
imprme it route tructure b) eekirw the addition of
new market" \,hich will R ure further growth of
re,enue .
EQUIPMENT AND SERVICE
Eight Dougla DC-7 and even Dougla DC-6B air-
craft were deli,ered to onhwe t and placed in ervice
during the year, both in the nited State and the
Orient. Four additional DC-7C' and two DC-6B'
ha,e b en delinred and placed in enice thu far in
1958.
Your Com pan ,, program of fleet modernization will
continue throu(Yh :\fay of 19-8. by which time an addi-
tional two DC-7C' and one DC-6B \\'ill ha\e been
delinred. to gi\ your Company a pre urized fleet
of +3 aircraft. The e ,,ill continue to pro,ide Top
FliP"ht' Imperial en-i e b t\\een all major citi on
our y tern.
he aircraft dcli,er d in 193 7. combined with thrn;e
deli, red and to be deli,ered in 1958, together with
related pare part and engine will co t approximately
, 38.000.000. The aircraft ha,e r plac d _ome of our
non-pr urized Be t and the fl t of Lo khccd Con-
tellation 10-+9 . T n -+ and fi\'e DC-3 air raft
ar r\'ing point at whi h pr ent airport fa ilitie \\ill
not ac ommodate the laroer. more modem aircraft and
are proviclin(Y freight er~:ice.
During the , ear your Compan completed the in-
"tallation of Bendix Dual X -Band radar on the entire
pre urized fleet, thu prmiding pa n(Yer with n {
tandard of comfort and afet ' during difficult w ather
condition . Thi equipment enable the pilot to ee
\,eather up to 150 mile ahead and a,,oid area of
probable turbulen e.
The ompan i e,aluatin(Y the te hnical and eco-
nomic a-pect of jet and turbo-jet aircraft. Good de-
li\ery po ition for medium and long-ran(Ye jet are
available to the Compan , in 1960. Turbo-jet aircraft
delivery po itions are a\'ailabl in 1959. pproximate-
ly two year ago an order wa placed , ith Pratt &
\\ hitne for twenty-one J-75 jet en(Yine . The e engine
\,ill be required for the long-range jet aircraft to be
u-ed in the trans-Pa i:fic route and for non- top and
one- top tran continental flight . It i expected that
jet equipment will be ordered in the econd quarter of
1958.
Beginnin o- in February 195 7 all in tema.tional pa -
enger flights a well as flights within the Orient, were
flown with pre surized aircraft. This new and modern
equipment i unparalleled in the Pa i:fic. not only being
the fa te t equipment but providing the mo t luxuriou
pa senger comfort and ervice.
Dail pas enger ervice \ inaugurated between
eattle and Tok o on April 28 1957; and. on thi
Overhauled Sfrafocruiser engine moves along.
Crankcase (right) is ready for 28 new cylinders.
. ame date. pre urized ervice was tarted on the Min-
nea poli -Edmonton-Anchorage "inside route." On Sep-
tember 29, 1957. your Company became the first air-
line to tart lu. urious DC-7C nonstop tran continental
ervice; al o. on thi ame date, the Company tarted
ew York-Edmonton-Anchorage through service with
DC-6B equipment. Service between Seattle/ Tacoma
and H awaii wa operated during 1957 with DC-6B
aircraft four time per week. On J anuary 1, 1958, thi
er\'ice was increased to five flights per week.
Your Company continue to u e Boeing Stratocruiser
in fir t-cla luxury ervice on many important domestic
route egment including the New York-Twin Cities
non top Wahington, D . C.-Twin Cities, Chicago-Twin
Citie and coast-to-coast.
The Eastern Air Line interchange continues to pro-
vide dail through ervice between the Twin Cities and
:viiami \'ia Chicago. Your Comp an is presently fur-
nishing Boeing Stratocruisers on this segment. During
the ummer months Eastern Air Lines' equipment
i u ed.
Durino- 1956 the Company reached an agreement by
which the Minneapolis/ St. Paul Metropolitan Airports
Commission will finance and construct a complete over-
haul operation and general headquarters facility at
Wold-Chamberlain Field. The new facility is being
de igned and planned according to the needs of your
Company and upon completion, will be occupied under
a thirty-year lea~e. Because of unfortunate delays, no
actual con truct10n has begun. Lawsuits contesting
airport expansion have been settled in the courts, and
future uits have been rendered improbable by legisla-
tion enacted by the lv[innesota Legislature. In D ecem-
ber of 1957 and .January of 1958, the Minneapolis/St.
Paul Metropolitan Airports Commission old general
obligation bond to certain investors at a composite
average net interest cost of 2.7437 %. A substantial por-
tion of these funds is now available for your Company's
facility, and advertising for bids to start construction is
in process.
The facility, when completed in 1960, will be one of
the finest of its type in the world. The realization of
the full advantage of this facility is expected to create
sub tantial economies and improved service.
A long-term lease also was arranged in 1957 for
hangar facilities at ew York International Airport,
and negotiations continue with the New York Port
Authority for terminal facilities at this same location.
PERSONNEL
The employees of the Company continue to display a
sincere intere t in the welfare of the Company.
At the end of 1957, your Company employed 5,933
men and women, of whom 5,523 were located in the
continental United States, its territories and Canada.
First ship of Northwest's DC-7C fleet completes 2,300 hours and gets fhorough inspection .
A
Radar on all NWA pressurized planes assures smoofh flying ,n cloudy weafher.
In the Orient Reaion. 89 rc o{ our 410 mplo ere
foreign national .
During 195 7 coll ti, e baraaining negotiations i th
variou labor oraanizations w r con lud d in a
moniou and co-op ra ti,e tmo pher .
and ring ben fit v,r r extended to mplo e ub-
. tantially in line with compen ation han~e, made bY
other air carrier of comparable ize.
Th emplo p ration rat for th ar ,, as b low
th a,eraa for th air tran portation indu try and far
belov,' th eparation rate for indu tr in a n ral.
Through pre- mploym nt. la room and on-the-job
training, all departm nt of th Compan w re- provided
with employee who ar amon th mo t skilled and
proficient in th airline' indu try.
Excell nt parti ipation ontinu d in th Company's
twge tion and ward Plan, a indi atcd by th 600
wgge tions r i ed from cmplo e . During 195 7
nearly $9,000 wa. paid for . uga tion . which r ulted
in tanp;iblc Company co. t rrduction. and . a,ing-. of
mor than 75,000 p ear.
Th . p~ ar mad v ur ompany 111 th pa t 31
ar 1 rn rg th r ult of the l alt . kill
and xperien of its , md and Right p rs nnC'l.
MANAGEMENT CHANGES
Hadl y Ca and Cl de w York
,it ' , ere I rt d dir tor pan) at t~1c
May 20. 195 7, annual sha ng.
:Mr. a e is pre idcnt of ,a . y and , m-
pany. Tnc .. and 1\1.fr. l\1organ i. pr of Ray mer,
lnc.
. re id nt f Mt. H ocl R c1dio and
T n a rp., Portland. reg- n. w::is
el dir 8. 1957.
M. Hardy. pre,ident of un hine :Mining
Comp::rny. akima. Wa -hingt n_
, and A. E . Floan, N\\ A
vi e pre id<:>nt -1nd s r<:>tarY, resit'n<:>d from th Ro:1rd of
Dirf'ctor . .
Rv uthoritv of the Board of Director~
Chairman of thr Board
March 25, 1958
, aint Paul. Minne ota
ST A TEMENTS OF Fl ANCIAL POSITION
NORTHWEST AIRLINES, INC.
ASSETS
December 31 ,
CURRENT ASSETS
1957 1956
Ca h .................................................................................................................. $ 8,002,747
role and account receivable, le s allowance of $85 000............................ 8,296,953
~Iaintenance and op rating upplies- at average cost................................ 2,608,957
Prrpaid expense ............................................................................. .................. 394,910
TOT AL CURRENT ASSETS $19,303,567
INVESTMENTS AND OTHER ASSETS
Rrlatrd indu try imestmrnt and advances-at cost.. ............................... $ 278 960
FLIGHT EQUIPMENT at co t.. ..................................................................... $77,176,315
Le allowan . for depre iation and obso1e cence- ate G ...................... 31,089,273
$46,087,042
. dvanc on purcha contract - Not E.............................. ..................... 4,552,067
$50.639 109
OTHER EQUIPMENT AND PROPERTY at co t... ................................ i14,587,498
Le. allowance for depreciation.. .................................................................. 9,136,373
$ 5,451,125
DEFERRED CHARGES
namortized trainina and othPr co. t. in connection with aircraft fleets ..... ' 327,606
221 ,857
:-f i cellaneou. . ............................................................................................... . ..
$ 549,463
$76,222,224
Sn notes lo financial statements.
$ 7,432,277
7,636,567
1,896,061
452,416
$17,417,321
$ 226,973
$56,746,888
32,669,005
$24,077,883
10,565,169
.i34.643.052
$13,639,538
8,356,906
$ 5,282,632
$
510,814
255,741
766,559
$58,336,537
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31 ,
CURRENT LIABILITIES
1957 1956
Accounts payable, collections as agent, etc ................................................... $ 8,J 44,099
Salaries, wage and vacation .......................................................................... 3, ] 39,606
Air travel card depo its.................................................................................... l ,121,5 75
Unredeemed tick t liability.............................................................................. 763,5] 7
Incom taxe - stimated.......................................... ........................................ 1,728,135
TOTAL CURRENT LIABILITIES $14-896,932
LONG-TERM DEBT ote A
4 % notes payable to banks........................................................................ 27,000,000
DEFERRED INCOME TAXES- arising from ace I rated depreciation
m thods less mail pay in dispute............ ........... ........................................ J ,260,000
STOCKHOLDERS' EQUITY - Note c
Cumulativ Preference tock, $25 par value; authorized 600,000 shares
issuable in series: 4.6% eries; authorized 375,125 shares; outstand-
ing share 30 527-1957, 37,577- 1956- ote B ...................................... $ 763,175
Common Stock, $10 par value; authorized 3,000,000 shares; issued and
outstanding shares 1,343, 120- 1957, 1,341,620- '19-56- ote D ............ 13,431,200
Capital surplu ...................................................................................... ............ 6,813,847
Earned surplus ............................................................................. .................... 12,057,070
$33,065,292
COMMITMENTS AND CONTINGENT LIABILITIES - ote E
$76,222,224
See notes to financial statements.
$ 6,806,737
2,568,034
1,03 1,900
901,405
1,556,747
$12,864,823
13,800,000
J ,500,000
$ 939,425
J 3,416,200
6,246,750
9,569,339
$30,171,714
$58,336,537
STATEMENTS OF INCOME
NORTHWEST AIRLINES, INC.
Year Ended
December 31 ,
OPERATING REVENUES 1957 1956
Pa no-er ......................................... .. ...................... ............................ ............. .. $66,674,383
nited tate mail. ............................................................................ ........... .... 7,586 599
For io-n mail............................... ...................................... ................................. 763,436
Expr fr ight and cxc bagga0 e.. ........................... .... ..... ........................ 7,541,410
harter and oth r tran portation.. ........... .. .......... .. .. .. .. . ... . . .. . . . . . . . . . . . . . . . . . . . . . . . . .. . 226,100
th r ......... ............... ............ ............ .. ................. ......... ..... ..... .... ..... .. ..... ............ 640,476
83,432,404
OPERATING EXPENSES
Fl ing op ration ......................................... ..... ......... .................................. .. ... , 25,555,392
aintcnan c .................. ....... ........................ ..................... ........ ........................ 16,037,141
Pa ener r i e ............. ...... .............................. ................. ......... .. ............ ..... 5,060,805
ir raft and traffi erv1 mg........ .... . . .. . . . . . . . . . .. . . . .. .. . . . . . . . . . ... . . . . .. .. . . . .. . . . . . . . . . .. . . . . . l l 688,894
R e ervation , ale and adverti ing.............................................. ........... ......... 9 218,554
dmini trativ and general... .... .......... ................................ ........ ..................... 5,451,922
Pro i ion for dcpr iation le amounts charged to other account.
82 157- 1957, 140.439- 1956 " ......... ................... 5,436,208
$78 448,916
. 4.983,488
OTHER DEDUCTIONS AND INCOME
Int r t on lono--term debt... .. .......... ............... .......... ........................... ........... $ 1,084,127
thrr incorn<'. le.. mi. crllaneou dedu tion ...... ..... ......... .......... ................. 90,515
993,612
INCOME BEFORE TAXES AND PROPERTY DISPOSALS ............ $ 3,989,876
TAXES ON INCOME (including def rred taxe 1,750,000- 1957.
81 .000- 1956. ari ino- from ac elerat d depr ciation method.) ....... . 2 100,000
NET INCOME FROM OPERATIONS....................................................... 1,889.876
PROFIT FROM DISPOSALS OF PROPERTY, le applicabl in-
come ta. e 12,210 ( 1,550 000 le adju tm nt of deferred taxe. of
. 1.237.790) 1957. +90.000- 1956 .......................................................... 2.929.09.i
NET INCOME FOR THE YEAR.......... ... . .. . .. .. . . . . . ......... ... 4 818.971
. fr notf. t o finan cial ,tat em en ts.
$60,264,291
7,192,138
666,287
7,154,612
815 773
386,425
$76,479,526
$22 665 450
14,095,105
4,501,951
10,846 508
8,169 060
4,833,918
6,771,951
$71,883,943
$ 4,595,583
582 745
60,140
522 605
$ 4,072,978
2 185 000
, 1.887 .978
1.337617
3,225.595
.NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC.
December 31 , 1957
ote A- Bank Credit Agreement
For the purpose, of equipment financing ( ote E ) a Bank
Credit Agreement dated ovember 15, 1956 and subsequent
amendments establishes credits of which the outstandin~
amount may not exceed $38,500,000 through September 29,
1958, $35,000 000 thereafter through December 30, 1958 and
$30,000,000 on December 31, 1958.
Repayments aggregating 20% of the borrowings outstanding
as of D ecember 31, 1958 are required during each year 1959
through 1963.
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 specific amount .
ranging from $3,000,000 through J anuary 31, 1958 to
$6,000,000 after J une 30, 1960 ; (b ) the unpaid principal
balance of the notes outs tan ding to exceed certain percentage
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 December 31 1958.
ote B-4.6o/c Curnulati e Preference Stock
This Stock eries is entitled upon voluntary liquidation or
redemption to $25 a share plus accumulated unpaid divi-
dends : and is ubject to retirement by the purchase, if prac-
ticable. of such tock on the market : ( 1) at not exceeding
$25 a hare from a non-cumulative market fund expiring
March 31, 1958, and (2) thereafter from a oumulative sinkinp;
fund at not exceeding $25 a share.
At Y.farch 31, 1958 any balan e remaining in the non-
cumulative market fund ($101.853 at D ecember 31. 1957 )
will revert to the general fund of the Company.
On or before March 31 1958 and ea h y ar thereafter,
the Company i required to et a ide a cumulative sinking
fund for which $292,500 i required at March 31, 1958.
Y.fonies of thi fund not expended by the Company by Decem-
ber 31st of each year through pure ha e on the market of
shares of this tock hall th ereafter be exhau ted by the
Company' call for redemption.
During any period whi le the Company i in clefaul t in the
payment of dividends on Cumulative Preference Stock, the
Company may not purcha e any of such tock except pursuant
to an offer to all holder thereof and may not redeem !es
than all of uch tock then out tanding. Dividends accruing
to February 1, 1958 ha\'e been paid.
Note - Re triction on Earned Surplu
nder pro,i ion of the Bank Credit greement, the Com-
pany i not permitted to de !are or pay any cash divi-
dends on it capital tock during any fi cal quart r of 1958
unless net worth at the beginning of uch quarters i at least
,$31 700,000. 30,000,000 33.300.000 and 34,800,000, re-
spectively. The total of such declarat:on and pa ments may
not exc ed 700.000 prior to June 30, l 958 and 700,000
thereafter during su h year. Re tri tion in cliff rent amount
will af)ply to futur year .
Th Agrecm nt prohibits 1 epurc ha e
capital tock except that -1-. o/r Cumulati
may b retired through rxi ting inking
(Note B) and out of procPcds of th
ommon tock.
of th t Company'.
e Prefere nce to k
fund requir ment
ale of additional
Th term of th 'umulativ Pr ferenc tock al o ont in
p1ovi ions relaLing to di\'idend on and reput ha of ommon
tock which arc le restricci,e than tho e abo e.
Note D-Common Stock Option and Re ervations
At the end of the year 39,000 shares of Common Stock were
subject to outstanding options exercisable by Company officers
and employees not later than J uly 1, 1961. 18,000 share
were exercisable at $12.125 a share and 21,000 at $15.675,
such option prices being 95 % or more of the fair market
prices at the dates of grant. During the year, options for 1,500
shares were exercised and 1,000 were canceled. An additional
9,000 shares were reserved for options which may be granted
in the future to officers and employee .
ote E-Commitments and Contingent Liabilitie
At December 31 1957 commitments for the purchase of
three Douglas D C-6B and six D C-7C aircraft (to be delivered
in 1958 ) and other equipment amounted to approximately
$26,700,000 on which $4,552,067 had been depo ited with
manufacturers and approximately 18,000,000 becomes payable
in 1958.
Annual payments of approximately $1 ,085,000 from date of
occupancy will be required under the Company's agreements
for lease (from 20 to 30 years) of overhaul bases, hangars and
administrative facilities at Wold-Chamberlain Field, Minne-
apolis, and I nternational Airport, 1 ew York.
The Company was contingently liable at the end of the
year for repurchase of travel contracts old of 267,639 and
for other notes discounted of $2 30,250.
ote F-Mail Tran portation Cornpen ation
o final determinations of total mail compen ation have
been made by the Civil Aeronautics Board on international
and domestic routes for 1951 and on international route
for 1954.
For 1951 the Company has accrued income on the ba is
of temporary rates set by the C ... B., the ultimate effect of
any redetermination not being known at thi Lime.
On January 10, 195 7 the C.A.B. issued an order asking the
Company to show cau e why temporary ompensation for 1954
should not tentatively be reduced $1,406,000 pending final
hearings. The Company is onte ting the C ... B.' action but
has recorded the liability at December 31, 195 7 ( 653,790
net after income taxes of $752.210), howin({ the adjustment
as a charge to earned surplu .
ote G- niform ystem of Account
A new uniform system of account and report for air carrier
wa prescribed by the Ci,il eronautic Board for 1957. To
the extent practicable, the finan ial statem nts for 1956 pre-
ented herein for compa1 i on were rcvi d to conform to th
new classifications.
In addition. the new rule and regulation of th , . .-\.B.
made certain change in the arcountin pra tice of th om-
pany, includino-: ( 1) di continuan e of providing for depr -
ciation and obsole ence of flight equipment exp ndabl part :
and (2) without retroactive effe t, incrca ing re idual \ alu"
of four motored pre surized cabin airframe and no-ine pur-
hased aft r 1954 from 10 r of the cot ba i to 150". plu.
one-half the timated cost of a complete o, rhaul.
a result of th for goin , th provi ion for depreciation
and ob ole cencc for 1957 i approximate!) 630.000 le than
what would hav b en charg d to op I ation n th ba i of
previous y ar a counting practice .
FIVE YEAR SUMMARY OF INCOME
( Amounts Shown in Thomands)
NORTHWEST AIRLINES, INC.
Five years ended December 31 , 1957
Per Cent
Increase
(Decrease)
1957 1957 to 1956 1956
OPERATI 1 G R EVENUES
Passenger ....................... ....... .............. ... ............ .......... ........... $66,674
United States mail... ........ ........................ ....... ........... .. ........... 7,587
Foreign mail.. ............. .......................... .. .. .... .. ....... ........... ....... 763
Ex pre s, freight and excess baggage.... . . . . . . . . . . ... . . . . . . . . . . . . . ... . . 7,541
Charter and other transportation.. .. ...... ..................... ......... 22 6
Pacific Airlift for United States Governmen t ................... .
Other-net ............... ............................................................. 641
$83,432
OPERATI G ExPENSES
Flying operations ...... ..... .. ...... ........... ...................................... $25,555
Maintenance .................. .. .................... ..... ...... ............... ...... 16,037
Pas enger service..... .. ....... ................................ .. .. ............ .. .... 5,061
Aircraft and traffic servicing ... .... .. ............................... .. .. ... 11,689
R eservations, ales and advertising................. .. . .. .. .. .. ........ ... 9 218
Administrative and general. .... ..... ....... .. .. ...... ..................... ... 5,452
Provision for depreciation................... .............................. ..... 5,436
10.6% $60,264
5.5 7,192
14.6 666
5.4 7,155
(72.3) 816
66.] 386
9.1 $76,479
12.8 $22,665
13.8 14,095
12.4 4 502
7.8 10,847
12.8 8,169
12.8 4,834
(19.7) 6,772
1955 1954 1953
$57,253 $51,054 $48,652
6,51 3 4,876 6,869
577 504 496
6,124 5,296 5,373
111 50 180
4,1 85
510 358 288
$71,088 $62,138 $66,043
$21,694 $18,556 $19,868
12,707 11,794 14,120
4,139 3,596 3,944
9,71 8 8,205 8,491
7,761 6,868 6,677
4,447 4,227 4,159
6,205 5,575 5,727
- - - - -
$78,448
$ 4,984
OTHER DEDU CTIO K , ET ....... .. .. ..... ..... , .. ,,,,., .. ,,,,,,.,., ... ... ,...... . 994
L 'COME BEFORE TAXE AND PROPERTY DISPOSALS ...... ........ $ 3,990
TA ' E ON I NCOME .. ...... 2 100
. ET I NCOME FROl\I OPERATI0 ............................ .................. $ 1,890
PROFIT FROM Dr PO ALS OF PROPERTY ............................ ....... $ 3,241
L e s applicable income taxe ................. ............................... 312
NET PROFIT FROM Dr PO AL OF PROPERTY .......... ................ 2,929
T ET I NCO IE FOR THE YEAR ............. .. .. ................... $ + 819
9.1
8.5
90.4
( 2.0)
( 3.9)
. 1
49.4
$71,884 $66,671
$ 4,595 $
522
$ 4,073 $
2,185
$ 1 888 $
$ 1,828 $
490
- - - - -
$ 1,338 $
$ 3,226 $
4,417
250
4,167
2,140
2,02 7
119
30
89
2. 116
$58,821 $62,986
$ 3,317 $ 3,057
120 252
$ 3,197 $ 2,805
1,648 1,465
- - - -
$ 1,5+9 $ 1,340
$ 287 $ 815
75 210
$ 212 $ 605
$ 1,761 1,945
i\ote : To the extt'nt pra ticable, the amount for prior years wer re,i ed to conform to ne, cla ification pre-
cribe<l by the i,il Aeronautic Board for 1957. Alo the amount for 195+ ha,e been adjusted to reflect
the reduction of mail compen ation ( 1 406,000 le applicable income tax of 752,210) harged to Earned
urplu in 1957.
STATEMENTS OF SURPLUS
NORTHWEST AIRLINES, INC.
Year Ended
December 31,
CAPITAL SURPLUS 1957 1956
Balance at beginning of year .......................................................................... $ 6 246,750 $ 3,719,449
Additions ari ing from:
Transfer from earned surplus to re tore deduction in prior years for
part of dividends paid on Preference Stock........................... ............. 560,625
Retirement of 7,050 shares-1957, 7,075 shares-1956 of Preference
Stock through market fund purcha es........ ................. ........ ................... 3,285 4,071
Sale of 1,500 shares of Common Stock under option agreement, in
excess of par value.................................................................................... 3,187
Conversion of 252,323 shares of Preference Stock into hares of
Common Stock ( 1 shares of Common for each share of Pref-
erence) ..................................................................................................... .
- - - - -
Balance at end of year ................................................................................... $ 6,813,847
2,523 230
$ 6,246,750
EARN ED SURPLUS
Balance at beginning of year .. ........................................................................ $ 9,569,339
Transfer to capital surplus-see above ............. ............................................ ( 560,625)
Reduction in mail compensation for 1954-Note F ................................... ( 653,790 )
Add net income for the year ........................................................................ .
$ 8,354,924
4,818,971
$13,173 895
Deduct:
Cash dividend on:
Preference Stock for the year ended ovember 1- 1.15 a share .... $ 42,345
1,074,480
Common Stock-$.80 a hare ................ .................. .
$ 1,116,825
Balance at end of year. .......... ....................................... .... . $12,057,070
( ) Indicates deduction
Board of Directors
orthwest Airlines, Inc.
Saint Paul, Minnesota
See notes to financial statements.
ACCOUNTANTS' REPORT
$ 7,453,305
$ 7,453,305
3 225,595
$10,678,900
$ 304,608
804 953
$ 1 109,561
$ 9,569 339
V-le have examined the financial statements of Northwest Airlines, Inc. for the year ended
D ecember 31, 195 7. Our examination was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and such other auditing
procedures as we considered necessary in the circumstances. We had made a similar examination
for the preceding year.
In our opinion, the accompanying statement of financial position and statements of income and
surplus present fairly the financial position of orthwe t Airlines, Inc. at D ccmber 31 1957
and the results of its operations for the year then ended, in onformity with generally accepted
accounting principles which ( except for the revisions in depreciation policy required by the Civil
eronautics Board as described in otc G to the financial statements) have been applied on a basis
consistent with that of the preceding year.
The five year summary of in ome was examined by us and, in our opinion, presents fairly the
information stated therein.
Saint Paul, Minneota
February 18, 1958
ER ST & ER ST
P ASSEN GER SERVICE During 1957 Norfhwesf placed special emphasis on improving service fo passengers
bofh in flight and on fhe ground, with encouraging results as measured by comments and Jeffers from passengers.
" Imperial Service ," including complimentary champagne, reserved seating and hors d 'oeuvre frays, was sfarfed in 1957.
Reservaf ions sales agents
provid e information on
seafs available fhrough-
ouf fhe sysfem . Minne-
apolis/Sf. Paul reservation
office shown here handles
up fo 4 ,500 incoming calls
in 24 hours. New Univac
electronic computer sys-
fem will ease and speed
work of agents in 1958.
Fasf ticketing and check-
in of Norfhwesf passen-
gers is provided through
special techniques and
training programs for
ticket agents. Newly de-
signed sectional counter
unifs have been patented
by Norfhwesf.
Comfortable fwo abreast
seating is provided on all
Norfhwesf' s DC-6B coach
flights , as if is on this DC-
68 Hawaii Tourist flight.
NORTHWEST AIRLINES, INC. J/nnual f/lunt 1957
NORTHWEST ().,;,ut,t AIRLINES
SYSTEM MAP
- - - RoutttOperaled
- _ - - - lo.,te, Cer1ilied bl/I "01 Opuotl'd
--c.c-.ectil',gAfrf-"'e1
c::::::::::=::: Thro,,,gh Pio.-.e Se,..,ic.e
1tlf'OIC
CHINA
PROGRESS FOR THE
Calendar
Total Express
Operating Passenger and Freight
Year Revenue Revenue Revenue
1957 $83,432,404 $66,674,383 $6,537,452
1956 76,479,526 60,264,2'9 I 6,426,502
1955 71 ,088,043 57,252 ,957 5,539,095
1954 62 ,138,312 51 ,053 ,599 4,676,190
1953 I 66,042,488 48,652,465 4,890,153
I
1952 61,474, 153 41 ,962,758 4,781 ,081
1951 54,593,420 35 ,1 92 ,765 4,371 ,533
I
1950
I 52,401 ,767 33,148,395 4,1 22,222
1949 I 39,945,987 27,873 ,942 3,163,278
I
1948 34,412,170 24,074,778 2,072 ,362
LATEST 10 YEARS
Revenue I Mail Total
Passenger Ton Plane Miles
Miles Miles Flown
1,205,764,597 17,803 ,356 35 ,629,289
I ,094, 121 ,43-8 16,780,406 32,461 ,321
I ,017,400,443 15,407,054 I 30,909,610
909,674,550 6,990,462 I 27,029,860
I
851 ,174,754 5,002,605 I 27,816,827
720,046,264
I
5,017,993 I 23 ,210,634
602,220,853 4,571 ,276 19,531 ,632
I
613,446,244 4,987,561
I
26,868,177
--i--
495,114,870 4,722,800 25,908,552
I
- -
386,509,809 4,026,074
I 22,288,002