Northwest Airlines Annual Report 1958

OFFICERS*
DIRECTORS~'
NORTHWEST AIRLINES, INC.
~f!lle/wd
1 9 5 a
Regisfrar:
THE CHASE MANHA TT AN BANK, NEW YORK, N. Y.
Transfer Agenfs:
BANKERS TRUST COM PANY, NEW YO RK, N . Y.
*As of February 25 , 1959
GENERAL OFF I CES : 1885 UNIVERSITY
DONALD W. NYROP
President
MALCOLM S. MACKAY
Executive Vice President
FRANK C. JUDD
Vice President-Operations and Engineering
LINUS C. GLOTZBACH
Vice President-Personnel
GORDON M. BAIN
Vice President-Sales
PAUL L. BENSCOTER
Vice President-Orient Region
A. E. FLOAN
Vice President and Secretary
PHILLIP T. DROTNING
Vice President-Public Relations
C. L. STEW ART
Vice President-Plans
WM. J. EIDEN
Treasurer
AL ROY D. Pl EPGRAS
Assistant Comptroller
DONALD H. HARDESTY
Assistant Treasurer
FRANK J. SCOTT
Assistant Secretary
DALE MERRICK
Assistant Vice President-Properties
CROil HUNTER
Chairman, Board ol Directors, Northwest Airlines, Inc.
JAMES H. BINGER
Vice President, Minneapolis-Honeywell Regulator Co.
2753 4th Avenue So., Minneapolis, Minn.
HADLEY CASE
President, Case, Pomeroy &- Company, Inc.
285 Madison Avenue, New York, New York
MORTON H. FRY
Partner, Rifer & Company
40 Wall Street, New York, New York
TED R. GAMBLE
President, Mount Hood Radio and Television Broadcasting
Corporation
140 S.W. Columbia, Portland, Oregon
JOSEPH T. JOHNSON
President, The Milwaukee Company
207 E. Michigan, Milwaukee, Wisconsin
MALCOLM S. MACKAY
Executive Vice President, Northwest Airlines, Inc.
St. Paul, Minnesota
CL YOE B. MORGAN
President, Rayonier, Incorporated
161 East 42nd Street, New York, New York
DONALD W. NYROP
President, Northwest Airlines, Inc.
St. Paul, Minnesota
ALONZO PETTEYS
Vice President and Director, Farmers State Bank
Brush, Colorado
C. FRANK REAVIS
Partner, Hodges, Reavis, McGrath &- Downey
26 Broadway, New York, New York
ALBERT G. REDPATH
Partner, Auchinc/oss, Parker &- Redpath
52 Wall Street, New York, New York
WILLIAM STERN
President, Dakota National Bank
Forgo, North Dakota
LYMAN E. WAKEFIELD, JR.
vice President, First National Bank
Minneapolis, Minnesota
ALBERT J. WEATHERHEAD, JR.
President, The Weatherhead Co.
300 E. 131st Street, Cleveland, Ohio
AVENUE, ST. PAUL 1, MINNESOTA
NORTHWEST AIRLINES , (NC
1885 UN I VERS I TY A V ENUE
ST . PAUL I , MINNESOTA
Februa ry --+. I 95Q
TO OCR STOCKHOLDERS:
In 195 your Company continued it progre and a compli hment at an accelera ted ra te .
. orthwe t Airlines had record r Yenue a pproxima ting 102.000.000. an increa e of _2 per cent
over 1957. t the ame time operatino- co t increa e wer controlled o that the income before
taxe and property di po al. and the net profit aft r taxe were th e highe t in the Compan ,'s hi tory.
The income. before taxe and property di po a I. wa 10.651,000, an increa e of more than two
and one-half tim e th e l 957 comparabl e fi o-ure. The net income for the yea r ,,a $5.614,000. an
increa e of 16.5 per cent onr 1957: however. 1957 includ ed profit of 2.929.000 from the dispo al
of property. a compared with only 62 .000 in 195 _ The amount of gro revenu e carri ed throuo-h
to income. before taxe and property d i po al. and n et profit place :\'orthwe t Airline among the
leader in the . S. tra n port indu try on a comparative ba i ..
Your Company flew l,-+0 743 .000 re,enu e pa senger mil during the yea r, a gain of 17 per cen
over 1957. I\orthwe t' 195 revenue pas enger mile total for the dom e tic route ''"a up 17 .5
per cent. It was the first tim e in :\1 orthwe t" 3- -yea r hi tory that it generated more than a billion
revenue pa eno-er mile on it dome tic ystem in a ingle ea r. Internationally. , orthwe t fl ew
a record total of 297. 80,000 re,enue pa enger mile in 195 . up 14.7 per cent over 1957. The
increase in the volume of m ail. expre sa nd freight were very o-ood.
The fin ancing program for the acqui ition of Douo-la DC- pure-jet and Lockheed Electra pro p-
jet airplane wa complet d. Contract w ere completed with the manufa cturer for five DC-8
and ten Electra . The e initial purcha e prepare :\Torthwe t for the jet era . The purcha e
contract provide that fourteen pi ton-type airplane will be 'trad ed-in or old to the two manu-
facturer a the new jet equipm ent i received. ;\"orthwe t' ca h generation from th e .. trade-in"
will approxima te 10.-31.000.
The fa ct that :\1orthwe t fin ali zed the jet purcha e contra ct in 195 . rather than two to three
year ea rli er as wa don e by other m ajor airline-. ha re ulted in certain benefit to our Company.
Korth,Ye t ha rea liz d a ub tantial aYing in intere t co t on the down paym ent it would have
m ade if th e equipm ent had been ord ered ea rli r. Another ub tantial am ount of money ha been
a,ed on th e interest for progre s payment . :\Torthwe t ,vill receive ad,anced-de ign version of
the DC- and th e Elec tra : both airplane will ha,e impro, d fu el tank ca pacity OYer the original
de ign now being manufa ctured. The ten Elec tra will be deli,ered during the period July-
December 1959. Pre-inaugura tion training i goino- forward a nd thi - fleet will be in operation
thi year on a tim ely ba i _o that tra ffic di,er ion will be nominal. The fiH DC- will be
delivered during the period March- eptember 1960. The fir t advanced-de io-n er ion of the
DC- will be deli,ered to :\'orthwe t in . larch 1960-a pproximately JOO day follo,,ing the delivery
of the fir t certifi ca ted DC- with the J-75 jet engine. The DC- will be in ervice on the long-
haul routes of :'\orthw t in the econd quarter of 1960. The tim e pacing between th e intro-
duction of the t,Yo different jet fl eet m ake for the mo t ord erly and economical tran ition.
On December 6. 19-5 your Company beo-an operation on it new route bet,veen ::vlinnea poli / t.
Paul. ilwaukee and Chicago to T.ampa. t. Peter burg/ Clearwater and . Iiami. Thi new route
extension will do much to correct the probl em of ea onal imbalance ,vhich ha existed for a long
time, and to reduce the fir t quarter lo e experienced by >.orthwe t in the pa t. The additi onal
aircraft r quired on th Florida route durino- the winter vaca tion month will be tran ferred to
the northern tran. continental route during the pea k traffic umm er m onth .
1959 ,,ill be another yea r of good o-rowth fo r :'\orthwe t Airline . The revenue from the ne"
Florida route will be reflected in the re ult for the entire yea r. The entire fleet of ten -1-00-mile-
an-hour Lockheed Elec tra will be int egra t d into the dom e tic route y tern to further improve
en-ice to the m ajor citie . . orthwe t " ill continue it program of impro,ed air en ice which h a,
been well received by it cu tomer .
v\'e are o-ra teful to the tockholder . customers and employee of :'\orth,,e t . .\irline. for heir
continued up port durino- 19- .
Annual Report to Stockholders
EARNINGS
Profit for the year 1958, after taxe v;a 5;613,687.
or 4.06 per hare of common tock out tanding, com-
pared with a profit of 4 818 971; or $3 . .56 per hare on
fewer out tanding common hare in 1957. The e figure
includ profit on di po al of property and equipment,
after taxe ; of 627,5'"4 in 1958 and $2,929;095 in 1957.
REVENUES
Operating re,enue reached an all-time high in 19.58
of 101 957)72, 22 % abO\e your Company' previou
peak year 19.5 7. Pa enger revenue in 19.58 also reached
an all-time high of $81,115,900, an increa e of 22%
over the 1957 total of 66,674 383. . mail revenue
increa ed 22 c to 9,264 889 while foreign mail revenue
increa ed 26 o to 963,319. Expre freight and exces
baggage re, nue wa 8,667,510, up 15 c . Charter and
other transportation re,enue ro e to 1,945,554.
Many factor account for the ub tantial gain made
by your Company in 19.58. Improved pa enger ervice
and the fir t full year of ' Imperial ervice" increased
public acceptance of our en-ice. The addition of more
modern Douala DC-6B and DC-7C equipment provided
greater capacity and expanded chedules. Added
re,enue al o wa aained from the fare increa e granted
b-~, the Civil Aeronautic Board and, during December
from our nev, route to Florida.
Another factor wa the continuing improvement of
your Company' aggre ive program of ale , adnrti ing
Gleaming hotels stretch northward along Miami Beach , one of
the nation's finest winter vacation areas, now served by
Northwest Orient Airlines.
OF NORTHWEST AIRLINES, INC.
and promotion to timulate not only bu ine s tra,cl, but
va ation travel on a year-round ba i . Thi program
emphasized Hawaii and Florida and, with Ala kan tat -
hood a reality, called attention to th 49th State as a
prime vacation area.
All of these factor enabled your Company to lead the
U. . aviation indu try in percentage increase in revenue
pa enger mile flown in 1958 over 1957. During 1958
your Company flew 1,408,742,516 rev nue pa sengcr
miles, a 17% increase over the 1.205. 764,597 rev nuc
pa enger miles flown in 195 7.
EXPENSES
Operating expen e increa ed 1.5 % to $89,918,822 in
1958, compared with $78 448,916 in 1957. Although, a.
in 195 7, co ts of labor and material ro e harply, depreci-
ation charge increa ed 57 %, and available ton mile
flown increa ed ub tantiall , your Company again
reduced unit expen es through efficient operation and
careful cost control. During 1958 the co t per availaLle
ton mile decrea ed to 25.82 cent , a reduction of 6%
from 27.43 cent in 1957.
CREDIT AGREEMENTS
Bank A greement- The Credit Agreement dated as of
ovember 15, 1956 wa liquidated on December 30.
1958 and replaced by a new Credit Agreement dated a.
of ovember 28, 1958 and effective on December 30.
1958. The loans out tanding under the Credit Agree-
ment dated a of November 15 1956 in the amount of
34,250 000 were paid in full out of the proceed of
loan from insurance companies. The new Credit Agree--
ment is with a group of fifteen bank . Banker Tru t
Company ew York, i the lead bank. Under the new
Agreement, the Company may borrow to a maximum
amount of $32,500,000 through J une 30, 1960. The
note i ued bear a final maturity date of December 31.
1965. Your Company i obligated, howev r, to make
payment thereon at the rate of 6,000,000 per year com-
mencing in 1961 ($8,500 000 in 1965), with 25 % of
the annual payment being payable on each .June 30 and
De ember 31, and 50 o on each September 30. In
addition to the annual payment in the event cumulativ
net earning plu flight equipment depreciation after
.January 1, 1958 exceed certain tated dollar amount .
the Compan i obligated to make additional payment.
to a maximum of 3,000 000 on each June 30 in the
year 1961 1962 and 1963, and a ma,-ximum amount of
4,000,000 on June 30 1964. If the maximum additional
payment are made on each J une 30. the loan will be
fully liquidated on J une 30, 1964.
The commitment fee on the unu ed balan of the
credit to and including June 30, 1960. i at th,., rate of
one-half of 11c per annum. Intere t on out tanding
loan i at the rate of 4% up to and including J une 30.
1960. and at the rate of 4% thereafter. There have
been no borrowing again t thi o-reem nt a of the
dc1 te of thi report.
Insurance Com/Jany A areemenl-As of ovember 28,
1958, your ompany al o ntcrcd into a long-term redit
arrang ment with a group of twclv in urancr com-
pani s. The total amount available under this Agre -
mcnt is $40,000,000 against whi h $34-,250,000 had 1 n
borrow cl as of D ecemb r 3], ] 958, and th - balanc on
January ] 5, ] 959. AmorLizaLj n payments will com-
rnenc jn O tobcr 1966, with fin al payment due O Loi er
1, 1978.
NET WORTH
Th ' nc;:L worth of Lhc Company al th end f J 958
was $4-8,224-,344 of whi h $26.77 p 'r share was app licable
Lo each of the 1,373,620 shares of ommon stock ou L-
slanding as of December 31, ] 958. This compares with
a net worth of $33,065,292 at th end of J 957, of whi h
$24.05 p r share was applicabl' to each of the ] ,34-3,120
shar s of common stock outstanding at D ec mb r 3],
1957. Earned surplus was $16,560,267 at the end of
1958, compared with $12,057,070 at the end of ] 957.
DIVIDENDS AND STOCK CONVERSION
R egular quarterly clivicl nds of $.20 a shar w r paid
n common stock on February ] , May 1, August l and
ov mb r ] , 1958. A similar clivid ncl also was paid
on F bruary ] , ] 959. Divid nds on the 4.60% Cumula-
tive Preference tock w r paid regularly on quarterly
clu dates. A final dividend was paid on this stock
c;ulslanding as of ovember 26, 1958, covering the last
Lwo months of the y ar, at which time all of th re-
maining 26,195 shares of the original issue of 390,000
shares were call cl.
In D cemb r ] 958, your Company offered to the
public 457,873 shares of $25 par value 5 o 'onvertible
Cumulativ Pref rr cl SL ck. 'xisLin~ slockhold rs suh-
scrib d 98% of the issu , and your Company re -~v cJ
net pro ceds of $1J,011,337.
ROUTES
Domestic n D c ,mber , 1958, yo11r 1ompany
b ga n perating its n w Flori la ro11L , providing the
first through-plan, s rvi c- I etwnn ScaLLle/Ta oma,
Minn apolis/, 'L. Pau l, Milwauk c and oLh r norlhw 'SL
cjLi s on th, n hand, and T ampa, SL. P Lcrsbur /
Clearwat r and Miam i on th, th r. Initial Lraffi
r spons has clcmonslral cl thaL this major route addition
h Ids gr al promise for in creased rev nu s and a mor
fav rablc s as nal balan in th Corn pany's Lra!Ti . The:
present FJ rida c rLificatc re 1uir<s a slop al Chi ago bul
the Civjl A ronauti s .Boarcl (CA B) has an noun ed, by
Pr ss R l as <lat d D m bcr 5, 19.58, Lh award to
orlhw st of nonstop a u thori Ly I Lwc n th , Twin 1tJCs
and Milwauk , and Lh, iLi 'S of tlanta, Tampa, St.
P t~rsburg/Cl arwat rand Miami. A formal CAB order
on Lh latl r grant has not y t be: n rckas d, but is
xp L d in th n ar f ulure. The final CAB decision
in the r at Lakes-, 'ou thc-ast S -rvi c 'asc in l 958 also
r moved all r stri Lions on our op rations bctwe n
D etroit, CJ vcland, Pittsburgh and W ashington, D. C.,
and orLhw st now is op raling additional lo al fli ghts
ov r th Dtroit-Washingl n, D. C. sgmnL.
In its Pr ss R clcas f D mb r 5, J 9 8, th CAB
als announc cl jts v t Lo giv, unr stricted 1hicago-
Milwauk '-Twin Cities authority L anolher airline and
to p rmiL op~rati n by a third airlin over this s gm nl
subj 'Cl to r stricLjons prcv nting turnaround nights in
this mark t and preventing nonstop servi s between thf:
Twin iti s and Milwauk on th on hand, and
Atlanta, Tampa, St. Pct rsburg/ '] arwat T and Miam i
Norfhwesf will receive delivery on fhe firsf of ifs fleef of advanced-design Douglas DC-8s in the spring of 1960. Norfhwesf's DC-8~
i;1i// be equipped wifh exfra fuel fanks which will enable them fo fly the Pacific non-sfop in bofh direclions on a scheduled ba si~.
on the other. A formal order on these award has not
b en i ued.
In 1958 the ,ivil eronautic Board al o i ued Pre
Rel a decision in lo al effice area ca in ol ing
Montana and Wa hington which would retain Iorth-
we t' er ice in all tation pr cntly ervecl with the
exception of K ali pell_
, Montana where erYice by Iorth-
w t ,, ould be u pended.
H earina were complet d in 1958 on your Company'
application for a non top ew York-San Franci co route.
\ e are awaiting recommendation of the CAB examiner
in thi proceeding.
I nternational-Hearing on orthwe t' application for
renewal of it certificate on the Seattle/ T acoma-Port-
land-Honolulu route were ompleted in J anuary 1959.
It i xpected that a CAB deci ion in this proceeding
will be rendered by the end of the current year. orth-
w t ha filed for perm anent renewal of it certificate to
erve eoul, Korea, and the matter i pre ently awaitina
CAB action.
ew Applications and Applications on File-During
the pat year the Company augmented it li t of new
route application with the following:
1. Chicago to San Francisco via Omaha and alt
Lake City
2. Milwaukee to an Franci co via Omaha and alt
Lake City
3. Minneapoli / St. Paul to an Franci co via Salt
Lake City
+. eattle/ Tacoma and Portland to San Franci co/
O akland and Lo Ano-ele .
The above nev route application added to applica-
tion filed prior to 1958 con titute a comprehen ive pat-
tern of route reque t now awaiting CAB action. Among
applications filed prior to 1958 and al o awaiting CAB
action ar tho e involving:
1. A route egment from Spokane to algary
2. Variou rout exten ion from Minneapoli / St.
Paul to Lo Ano-ele and :San Franci co ia D f'nver and
alt Lake City
3. D etroit to ew York via Cleveland Pitt burgh
and Philadelphia
4. Chicago to Bo ton via Detroit and Toronto
5. ew York to Boston via Hartford/ pringfield
6. D etroit to Bo ton via Buffalo and New York.
In addition, orthwest has on file with the CAB
an application to add the California citie of Lo
Angele and San Franci co as co-terminals on it.
orth Pacific route to Alaska an::l the Orient. Col-
lectively, your Company s route applications con titutc
an aggre ive program to improve the traffic potential
of it domestic and international route tructure.
EQUIPMENT AND SERVICE
During 1958 your Company completed its pi ton fleet
modernization program with the delivery of th last of
24 DC-6B and DC-7C aircraft purcha ed from the
Dougla Aircraft Company, and the lease of three addi-
tional DC-7C and the purchase of two additional DC-6B
aircraft to meet the requirement of the new Florida
route.
Coach and first-clas service was inaugurated to the
new Florida point on December 6 with DC-6B and
DC-7C equipment, and imultaneou ly your Company
introduced a new concept in airborne luxury by pro-
viding "R egal Imperial Service" with Boeing Strato-
crui er on thi ame route.
The fir t daily ervice to H awaii was inaugurated on
December 15, 1958, with DC-6B equipment, and your
The versatile Lockheed Electra will be Rying Northwest's routes this summer. Northwest has placed an initial order for fen
Elecfras with the Lockheed Aircraft Corp. Northwest's Electra-an ex/ended range version-will be capable of non-sfop frans-
confinenfal operation,
Consfrucfion on Norfhwesf's new $18,000,000 sysfemwide general office and overhaul base of Wo ld Chamberlain Field , Minneapolis-
Sf. Paul, is on schedule. The above framework, which will house fhe engine overhaul shops, covers only ONE-FIFTH of fhe fofa l
ground area thcrf eventually will be under construction . Base will be complefed in the summer of 1960.
Company continued to increa e it dominance of the
eattle/Tacoma - Portland - H onolulu market. DC-6B
ervice to v\ innipeg Canada and morning and e ening
pre urized en-ice to la ka were inaugurated during
the year.
"\'\ ith the di po al of the la t fiye DC-3 aircraft, our
Company became the fir t dome tic airline to operate
exclu i,ely with four-enITT.ne equipment. D C-4 aircraft
continue erving point "ith restricted airport facilitie ,
and are al o u ed in freight en-ice.
ir-truck freight enice ,,a expanded from coa t to
coa t off erina- expedited en-ice at rate comparable to
rail expre . Your Company al o expanded it cargo
capacity through modification of some DC-6 equipment
into a nr atile combination cargo-pa enger aircraft.
fter completina- the ernluation of the technical and
economic a pect of jet and prop-jet aircraft referred
to in the Annual Report for 195 7, your Company con-
tracted with the Douala Aircraft Compan' and the
L ockh ed ircraft Corporation for ad anced de ign
\'Cr ion of the pur -.iet Douala DC-8 and the prop-jet
Lockheed Electra. Contract agreement with the two
manufacturer all for your Company to r cei e fi\e
DC-8 and ten Electra at a co t of approximately
, '67 .500;000.
Both manufacturer ao-reed to accept pi ton-engine
aircraft now operated by I\orthwe_t on a trade-in' or
ale ba i . " hich enabled your Company to det rmine.
at the time order \,er placed. the exact ca h generation
of exi ting equipm nt at the time the jet are deli\ er d.
Doug-la ,,ill accept fi,e of. Torthwe f DC-7 and L ock-
herd ,,ill ace pt all nin of ~ orthwe t' Boeing trato-
crui er . Your Company \,ill recein approximateh
, '10.231.000 for the fourteen aircraft. and deli\-erY \,ill
he mad0
coincidentally \\"ith the rece:pt of the, new
equipment.
The contra t pro\id for th deli, ry of the fir t
El ctra in July 1959. "ith dcli\erie continuing through
D ember. al!d deli\Tr\' of th fir t DC-8 in ::\farch
1 60. ,,ith the final airc.rafl arrivin~ in ept mher.
The purcha contract w re comp! t d in June and
July 1958, and thi permitted a more thorough technical
e aluation of both type of aircraft. a re ult, both
aircraft ,,ill be modified by the manufacturer dming
production to pro,ide greater ranae than that of the
initial production model . Your ompan will be the
fir t to recei e aircraft , ith added fuel capacity , hich
v,ill make po ible reliable non top tran -Pacific opera-
tion ,,ith the DC-8 and non top tran continental opera-
tions , ith the Electra . In addition, the Compan '
action produced ub tantial a,ing in intere t on down
pa -ment and proo-re payments.
The Lockheed Electra powered by lli on turbine
engine will gi,e ~ orth,,e t' pa eng r fa t, mooth
and reliabl en-ice on medium-range dome tic flight ,
wherea the DC-8 , po,,ered by the Pratt &. '.1\
hitne)
J-75 enaine, will pro,ide non top en-ice on the tran -
Pacific route, between Seattle/ Tacoma and Tok)O
b tween Portland and H onolulu> and between Seattle/
Tacoma and Ne\, York.
Durina 1958 contract \,ere awarded for the con-
truction of the major portion of the new O\erhaul>
operation and headquarter facility at I\ old-Chamber-
lain Field> and ,,.-ork i on _,.hedule ,,ith occupancy of
J-75 jet engine ready for fina l inspecfion of the Praff and
Wh itney facfo ry. The J-75 , larger than the J-57 , will give
Northwest's DC-Bs added powe r and performance.
Phenomenal growfh-fypical of Florida-is i!lusfrafed in fhis aerial view of Sf. Petersburg. The cify now sfrefches from Tampa
Bay (fop) fo fhe Gulf of Mexico. Dredged fi lls (foreground) rapidly are filling wifh waferfronf homes.
maintenance and merhaul areas planned for October
of this year. Th General Office building now under
design will be under construction by mid-summer and,
when completed in 1960 will permit consolidation of all
Twin Cities operations at the new location. Careful
pace planning and election of building material have
produced ubstantial contruction saving .
An agreement with the Port of Tew York Authority
ha been executed, an architect selected, and the design
i in progres for a terminal facility at ew York Inter-
nati?nal Airport which will be shared with two other
earner.
PERSONNEL
The excellent progress made by your Company during
the year 1958 wa due in large mea ure to the devoted
effort of Iorthwe t killed and loyal employees. In
Norfhwesf 's strikingly handsome Miami
sales and fickef office is an im portant
archifecfural addition fo that city's
downfown area. If is located in the
new First National Bank building af 300
Southeast First Sfreef.
1958, as in the past several years, the turn-over rate for
all employees was far below the separation rate for
industry in general and lower than the average for the
air transportation field.
Of the total employment 6,081 employees were
located in the United States and Canada. Over 90%
of the 414 employees assigned to overseas stations were
foreign nationals.
Although the industry experienced a number of pro-
longed work stoppage , Northwest reached amicable
collective bargaining ao-reements with all segments of
its work force without loss of a single man-day due to
labor disputes. These contracts provide for rates of pay,
rules, working conditions and fringe benefits in line with
other carriers of comparable size, and orthwest con-
tinues to maintain and improve its relations with its
personnel.
Tampa's International Airport is one of the finest in the
nation. Terminal was enlarged during pasf year fo handle
increasing traffic out of th is im portant Florido indusfrial and
vocation city.
STATEMENTS OF INCOME
NORTHWEST AIRLINES, INC.
Year Ended
December 31,
OPERATING REVENUES 1958 1957
[~~i ~;dgc\~ ~
~ .1
.
;1;;
i::: :: : : : : : : :: : : : : : : : :: :: :: :: : : :: : : :: : ::: :: : : : : : : : : ::: : : : : : :: :: :: : : : : : : ::: : :: : : :: : : ::: : : : : ::'l
F reign ma ii ..................................................................................................... .
E:--.:c , bag_;ag .............. ......... .................. .................................... ...................... .
Freight and xpr s, ......................................................................................... .
Ch rt r and oth r tr. n~ I ort tion ................................................................... .
Other .................. ............................................................... ............................... .
OPERATING EXPENSES
flying tion_ 'l _9,7+7 .029
!\ ' 1t 17.089. 70
P 1 \ic ........... .... ............................................................................... .0,),).9_9
. \ a traffi \icino-.. .......... ............................................................... 12.-07 .2 ~9
R n , ale. \. rti, ine>.................... .............................................. 10.75,).+89
Admi an ,d. ............................................................................. 5.5 7 ,).O_ l
Prc)\is r dep n. 1 __ amount harg d to oth r account
29,, _- 1 ->8, 'l 7- l "7 ................................................................. ..
'l l 2.0 8.3 0
OTHER DEDUCTIONS AND INCOME
Tnt r , t on lonrr-tcrm debt. ............................................................................. l,+18.715
th r incom . I mi,c lbn ou. dcdu tion ........... .................................... 3 1.-+98
INCOME BEFORE TAXES AND PROPERTY DISPOSALS ............ 10. l,Lu
TAXES ON INCOME (in ludinrr d err d l , :-.:cs '.1.98-1.550 1958.
" 1.7 0,000 1957. ari ing from a 1 rated dq rcci;1tion m thod,) ...... 1.1 5.000
NET INCOME FROM OPERATIONS....................................................... ~-9 1.1 :n
PROFIT FROM DISPOSALS OF PROPERTY, I .-_ applicabl in-
come laxc, 200.000- 1958. 312.2 10- 19 7............................................ _7 .55~
NET INCOME FOR THE YEAR ................................ 'l
s. 13.687
c, notes to (i 11a11 cia/ .,tat c111 e 11t .
.39_
.l+l
.8o-
.8<H
G.218.- 5+
5.+51.9_2
$ +. 83.488
l. 84.12 7
0." 1
9 3,6L
, ,989. 7
__ 1 0.000
; 1.8 9.87
~. 18,, 71
STATEMENTS OF FINANCIAL POSITION
NORTHWEST AIRLINES, INC.
ASSETS
December 31 ,
CURRENT ASSETS 1958 1957
Ca.h ....................... .................................................................. ......................... ,
C ni tcd . ' tatc GO\ rr n rrlf'nt sr-curitiC's at cost which approximal s
rnarkct pric< ........................... ................................ ...................................... .
'lradr rr<ivablcs. less allowance of , 100,000- J958, $85/JOO- 1(57 ..... .
~fair1t<'nan,c and ope-rating supplies at average ost. .............................. .
Prrpaid <
xr){ns<
,. ............ .................................................................................. .
TOTAL CURRENT ASSETS
INVESTMENTS AND OTHER ASSETS
R<"latr d indu try im rstmcnts and ad van cs at co<;t.. ......... ....................... $
8/J 7,721
4,443,794
11 ,72 1, lfll
2; 1'15,Bl 7
411 ; '.j ()
27,690, I '1
272,8.58
FLIGHT EQUI PM ENT at cost. ...................................................................... $ r6, l56;76
Lr a I IO\\ an,rs for dr pHc iation and <Jbsol sccnc ...................................... 36,'H4,795
.\d \anus on purchas contra ts
.59;8l1/7l
otc E................... ................................. l 0,4~
:>8,765
70)50,736
OTHER EQUIPM ENT AND PROPERTY at cost .................................. $ 15,728.646
I.rs all0\, anrf' for ckprr-,iation.................................................................... :J.9 l 2.'1~H
$ 5,H l ,3 12
DE FERRED CHARGES
narnr,rti/rd trainiwr and <Jthr-r u1sts in conn<'ction with aircraft
fl,.c and 1r1 1tr ........................................................................................ ~ 619,03]
17l)M
2~
'.i9J122
namr,r ti/rd ]r,n~-trr rn ckb c-xpr;n r .......................................................... .
. Ii ( lh.trJ'"() l ..........
l /J''.i(J,617
$1 rriJJn(J.nn9
SPe notes ti) financial statements.
$ 8/)02,747
8,2c 6,C 53
2,608 9'J7
~
:19'1 r I 0
, 'l 9,303,567
$ 278,%()
p7, l 7 ~
ffj
31 /J89;27~)
~'1- /JH7/J1.2
4,1;2/J67
. '50,63:J, l ()9
~14yn_1.ryJ
rJ: I % ,'17'1
~ 1/ Vil ,1 2::i
109,8 4
$ )49;46'>
, '7 ,222,224
LIABILITIES AND STOCKHOLDERS1 EQUITY
December 31 ,
CURRENT LIABILITIES 1958 1957
Acrnunts payahk, collc;cliom as agr-nt, etc .................................... ., ............... $
Salaries, wag s and va a Lions ........................... ........... ................................... .
Air travd ard drpfJsits ................................................................................... .
nredc::erntd Lick<;t liability ...................... ... ............. ....................................... .
fncornr taxes cstirnatcd ............ .................. .................................................. ..
TOTAL CURRENT LIABILITIES
LONG-TERM DEBT , ote A
9,TH ,51F3
3,77''.i,fJn2
1, 164,, 5()()
1,0'1-H,600
2/J6(J,6 I >
>% notcs payable to ins1 1rance cornpanics .................................................. $ ~H.2S0.(J(J(J
4 o/c. notes payabl to banks ................................................. ...................... .
DEFERRED INCOME TAXES
arising gcncra lly frorn accrl('ratcd drpr<< i,J tir,n rnrthr1ck ....................... $ ::i.2(fj.()(J()
STOCKHOLDERS' EQUITY -. <Jl<- I
Curr11tlativ< Prr-frrr<d St<1ck, $2S par value;
ai11l,r1rizrd 1.()()().()()() sh;,ins iss11 al>l < in sr rirs:
51/4.o/r '<Jf1
vrrtilJlr S1ri<'s a11th<,riz1d. isswd (in 19SH;
and (JIILSlanding 4S7,87'-$ sharrs ."\oll B ....... ................................... $ 1 l,'14 f,.Hr,
Curnulativr: J1 rcfrr<n('c Strwk, $2::i p<.1r val11 : 4. >% Sr-rir<; ''.i(J,S2 7
shans ( rrdrrrnrd dw ing 1918 ; .... : .. ......................................... ..
Cc1rnrn<m St<Jc k -~I() p,H v<.1 lur ; a 11tl1()r izn.l -,harr;s 4,5()(),(J(J()- I 9Sg,
~
'.i,CJ(J(),()()() I ~JS7; iss1wd and <JutstandirrK shan:s I ,'17'1/J2(J I ~fjfl.
l,'YV1, l20 1957 .\'cit< 1) .......................................................................... 1'1,7%.2(J(J
',q,i td.l surplus................................... ............................................................... fi,4H I /J':i2
Ea1 ncd surpl U'>.................................................................................................. l r,,)f,(J)f-';7
COMMITMENTS AND CONTINGENT LIABILITIES
See 11oter lf) finan cird .statnnent c
$ a, 111,099
''.i 13( ,l)
I , l 21 ,'J7S
7)9>,5 17
1,72H, 1~1 ~
27/J()(J.()()()
~ l .2f';(J,(J(J()
I '1,'1 '1 1,2()()
t>.H f
'1.M 7
I 2JJj7/J7(J
$'11.(Jf/i,292
. 7(,,222.224
STATEMENTS OF SURPLUS
NORTHWEST AIRLINES, INC.
Year Ended
December 31,
CAPITAL SURPLUS 1958 1957
Balance at beginning of year ........................................... .' ......................... ..... $ 6 813,847
Additions (deductions ) arising from:
Sale of shares of Common Stock under option agreements in exces
of par value .............. ............ ........ ..... .......... ........................................... .
Redemption of shares of 4.6% Series Preference Stock. ......... ... .... ......... (
Cost of issue of 5 % Convertible Series, Cumulative Preferred Stock .. (
Transfer from earned surplm to restore deduction in prior years for
part of dividends paid on 4.6% Preference Stock ... .. .. ...... ................ .. .
109,188
6,495 )
435,488 )
Balance at end of year ........................... .. .. .......... ........ ......................... ........ $ 6,481,052
EARN ED SURPLUS
Balance at beginning of year- ote F ........ ........... ................ .... .......... .. ....... $12,057,070
Add net income for the year.. ......... .................. .. .................. .. .......... ............. 5,613,687
$17,670,757
Deduct:
Ca h dividends on:
4.6% Preference Stock- $1.3417 a hare in 1958, $1.15 in 1957 ...... $ 36,003
Common Stock- $.80 a hare ... ............ ........................... ........ ............. . 1,074,487
$ 1,110,490
Transfer to capitttl surplus- ee abo\'e ........ ......... ....... ... ........................ .. .
$ 1,110,490
Balance at end of year. ...... ..... ................................ ............ .. ................... ..... $16,560,267
To the Sto ckh olders and
Board of D irectors
orthw est Airlines, Inc.
Saint Paul, Minnesota
S ee notrts to finan cial statem ents.
ACCOUNT ANTS' REPORT
$ 6,246,750
3 187
3,285
560,625
' 6 813,847
$ 8,915,549
4,818,971
$1 3 734520
$ 42 345
1,074,480
$ 1,116,825
560,625
$ 1 677,450
'12,057,070
We have examined the financial statements of orthwest Airlines, Inc. for the year ended
December 3 1, 1958. Ou r examina tion was ma de in accordance with generally accepted auditing
standards and accordingly included such tests of the accounting records and such other auditing
procedur~s as we considered necessary in the circum tance . \Ve had made imi'ar examina tions for
preceding year .
In our opinion. the accompanying statement of financial position and statements of income and
surplus present fairly the financial position of orthwest Airline . Inc. at December 3 1, 1958
and the results of its operations for the year then ended, in conformity with generally accepted
ac ounting principle applied on a ba i con istent with that of the preceding year. Furth r, it i
our opinion th at the five year summa ry of income present fa irl y the informa tion ta ted therein .
Saint Paul, Minnesota
February 13. 1959
ER ST & ER1 ST
Certified Public A ccountant 1
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC.
December 31, 1958
ote A-Long-Term Debt
For the purpose of equipment financing (Note E) the Com-
pany, a of ovember 28, 1958. entered into l ote Purcha e
greement with twelve insurance companies and a Bank
Credit Agreement with 11.fteen bank .
The ote Purchase Agreement provide that the insurance
companies will loan the Company $40.000,000 ( of which
$34,250,000 wa taken down in 1958 and $5,750.000 on Janu-
ary 15, 1959). The note are payable $3,000,000 annually
beginning O ctober 1, 1966 with the balance of 4 000,000 due
October 1, 1978. Certain optional prepayments at par are
permitted. The Agreements contain other provision with
respect to redemption as a whole ( but not from borrowed
funds) at premium ranging from 7% to 1 %.
The Bank Credit greement prO\ide for a loan to the
Compan of $32,500,000. on a revohing credit basi through
June 30 1960 at 4% and thereafter as a term loan <1t
4%. The loan i pa\able $6 000.000 annually in -years
1961 through 1964 and $8 500,000 in 1965. The . greement
may require additional inking fund prepayments ba ed on
income of the Company.
The Company has agreed, among other thing . it will not
permit (a) its working capital at any- time to be le than
certain specified amounts (excess amount approxima ted
$6,810,000 under the mot re trictive provi ion of the Agree-
ment at D ecember 31. 1958 ): and (b) it funded debt to ex-
ceed certain percentages of net tangible a et , net worth. and
depreciated value of flight equipment.
ote B-5 % Convertible Cumulative Preferred Stock
This tock eri s has ,oting right : i entitled upon olun-
tary liquidation to $25 a hare plu a<;cumulated unpaid di,!-
dend ; i convertible on or after . pnl 1, 1959 on the baSIS
of 25 a Preferred hare into ommon tock at a conver ion
price of 26 a hare, subject to _adju tment i_n certai1; event
and i redeemable a a whole or 111 part at pnce rangmg- from
$27 a har before January 1. 1960 to $25 a hare ;ifter
D e ember 31. 1973. togethrr in each case with ,iccrued
dividend .
otc - R trictions on tockholder Equity
Th 1 'ote Purcha e . greem nt and the Bank redit gree-
nwnt e tabli h an aggregate dollar maximum for the declarn-
tion and payment of ca h divid nd on Common to k. and
for the di tribution on. redemption. purchas or other acqui i-
tion of hare of any cla of apital tock. . t Decf'mber
'31, 1958 approximately 4,794,000 of earn d urplt1. wa
available for <livid nd on ommon to k and th f' othrr tock
provision .
The . greement do not prohibit th pa, ment of tock di, i-
dends and do not re trict dividf'nd pa) m nt. on the 51/1 f'"r
Convertible erie . umulati, e Pr f erred tock
ote D-Common tock Option and R e ervation
At the end of the year 6,500 hares of Common Stock were
subject to out tanding options exercisable by Company offi ers
and employees not later than July 1, 1961 at $15.675 a share,
a price not le s than 95 % of market at date of grant. During
the year, options for 30,500 hares were exercised and 2,000
were cancelled. An addi tional 11 ,000 hares are re erved for
option which may be granted in the future to officer and
employees and 457,87 3 shares are reserved for i uance upon
conversion of the 5 o Con ertible Serie , Cumulative Pre-
f erred tock.
ote -Commitment and Contingent Liabilitie
At the present time, the Company' commitment for the
purchase of five Douglas DC-8 turbojet aircraft ( to be delivered
in 1960 ) and ten Lockheed Electra prop-jet aircraft (to be
delivered in 1959) and other flight and ground equipment
amount to approximately $67,234 000 after credit for five
Douglas DC-7C and nine Boeing 377 aircraft to be traded
on aircraft purcha es. Of this amount $10,438,765 had been
depo ited with manufacturers at December 31, 1958 and
approximately $33,146,235 and $23,649,000 become payable
in 1959 and 1960. respective] .
Annual payment of approximately $1,085 000 from dat of
occupancy will be required under the Company's agr ements
for lease (from 20 to 30 years) of overhaul ba e . hangar
and administrative facilities at Wold-Chamberlain Field Min-
neapolis, and International Airport, ew York.
Federal income tax return of the Compan , hav been
examined through 1954 by the Internal Revenue ervice.
Examinations for 1955 and 1956 are now in progre but final
determination are not known at thi time.
The ompany wa ontingently liable at December 31. 1958
in the amount of $88,012 for the repurcha e of travel contracts
old.
ote F-Mail Tran. portation ompen ation
o final determination of total mail comp n ation have
been made b rh Civil . eronautic Board on int rnational
and dome tic rout for 1951 and on international route for
1954. The ultimate eff ct of an , redetermination are not
known at thi time.
In J anuary 1957. the ... B. i ued an ord r a king the
ompany to how cau e wh, temporary compensation for' 1954
hould not tentatively be reduced 1 406,000 pending fin J
hearing . The Company i onte ting- the C. .B. action but
originall recorded th e adju tment ($653,790 net after income
ta, e of 752 210) a a charg to arned urplu in 1957. In
the accompanying finan ial tatem nts u h adju tm nt ha.
been reflected in the ummary of in om for 1954 :1 , ell a
earned urplu. at th beginning of 1957.
---
FIVE YEAR SUMMARY OF INCOME
( Amounts Shown in Thousands)
NORTHWEST AIRLINES, INC.
Five years ended December 31, 1958
OPERATlNG REVENUES
Pa senger ................. . ...................... .. ........ .............. ... $
United States mail. .............................. ...................... ........... .
Foreign mail. ........................... .............................................. .
Exces baggage ............................................... ........................ .
Freight and express ................................................. .............. .
Charter and other transportation .................. .... ............. .. .. .
Other- net ............................... ........................................... .
1958
81,116
9,265
963
1,230
7,437
1,237
709
$101 ,957
OPERATING EXPENSES
Flying operations ....................................... ............................. $ 29,747
17,090
6,034
12,207
10,753
5,573
Maintenance ................................................. ........................ .
Passenger service ..................... ..... ......................................... .
i rcraf t and traffic servicing .............................................. . .
R eservations, ales and advertising ... .................................... .
dministrative and general. ............................................. -
Provision for depreciation .... ................................................. . 8,515
$ 89 919
12 038
OTHER DEDUCT(ONS, NET. ....................................................... 1,387
I NCOME BEFORE TAXE A D PROPER'I"Y DISPOSALS ............... 10,651
TAXES 0 I COME ...................................................................... 5,665
ET I COME FROM OPERAT[ONS ..... .......................... ............... 4,986
PROF[T FROM D1 PO AL OF PROPERTY ............................ .. ...... $ 828
Le a pplicable income taxes ............ ..................... ...... ......... 200
ET PROFIT FROM D1 PO AL OF PROPERTY .......................... 628
1
ET I COME FOR THE YEAR ..... ..... ..... ............. ........................ 5,61-t-
Per C ent
Increase
l 958 to 195 7 195 7
21.7% 66,674
22.l 7,587
26.2 763
22.5 1,004
13.8 6,537
447.3 226
10.6 641
22.2 $83.432
16.4 $25,555
6.6 16,037
19.2 5,061
4.4 11 ,689
16.7 9,2 18
2.2 5,452
56.7 5,436
14.6 $78,448
141.5 +.984
39.5 994
166.9 3,990
169.8 2, 100
163.8 $ 1.890
3,2+1
312
2.929
16.5 4,819
1956 1955
$60,2 64 $57,253
7.192 6,513
666 577
728 585
6.427 5,539
81 6 111
86 510
$76.+ 79 $71,088
$22,665 $21.694
14,095 12. 707
4 502 4,139
10,847 9.718
8,169 7. 761
4,834 4,..H7
6. 772 6,205
$71 ,884
$ 4.595
5_ 2 250
4,073 4.167
2,1 85 2, 140
1,828 $ 119
490 30
1.338 89
$ 3,22
195+
$51 05+
4.876
504
620
4,676
50
58
$62. I 38
18,556
11 ,79+
3,596
8,205
6,868
4.227
5,575
3.31 7
120
3. 197
1,648
1.549
287
75
212
1.761
NORTHWEST AIRLINES, INC. u:innual ~Old 1958
NORTHWEST O_,ii,(,#d AIRLINES
SYSTEM MAP
_ _ . . . ROllt1 1 Ope,ated
_ _ _ - - Ro,,,lr1 Cer1,f.ed but l'IOt Operoled
CHINA
HAWAII
PROGRESS FOR THE
Calendar
Total
Passenger
Express
Operating and Freight
Year Revenue Revenue Revenue
1958 $101 ,957,172 $81 ,115,900 $7,437,293
1957 83,432,404 66,674,383 6,537,452
1956 76,479,526 60,264,291 6,426,502
1955 71 ,088,043 57,252,957 5,539,095
1954 62,138,312 51 ,053 ,599 4,676,190
- -
1953 66,042,488 48,652,465 4,890,153
- -
---- --
1952 61,474, 153 41 ,962,758 4,781 ,081
--- - -
1951 54,593 ,420 35,192,765 4,371 ,533
- - -
1950 52 ,401 ,767 33 ,148,395 4,122,222
~
--- -- -
. 1949 39,945,987 27,873 ,942 3,163,278
LATEST 10 YEARS
Revenue Mail Total
Passenger Ton Plane Miles
Miles Miles Flown
1,408,742 ,516 21 ,892,299 40,721 ,143
1,205,764,597 17,803,356 35,629,289
1,094, 121 ,43-8 16, 780,40-6 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 4,571 ,276 19,531 ,632
- - -----
613 ,446,244 4,987,561 26,868,177
- "
- - -
495,114,870 4,722,800 25,908,552
-
-