Northwest Airlines Annual Report 1960

ANNUAL REPORT
OFFICERS*
DONALD W. NYROP
President
EMORY T. NUNNELEY, JR.
Vice President and General Counsel
FRANK C. JUDD
Vice President- Maintenance
and Station Operations
PAUL L. BENSCOTER
Vice President- Orient Region
C. L. STEW ART
Vice President- Economic Planning
ROBERT A. EBERT
Vice President- Personnel
A. E. FLOAN
Vice President and Secretary
DONALD H. HARDESTY
Treasurer
M. J . LAPENSKY
Comptroller
F. J. SCOTT
Assistant Secretary
DALE MERRICK
Assistant Vice President- Properties
GENERAL OFFICES
1885 UNIVERSITY AVE.
ST. PAUL 1, MINNESOTA
DIRECTORS*
CRO il HUNTER
Chairman of the Board, Northwest Airlines, I nc.
1885 University Avenue, St. Paul 1, Minn.
JAMES H. BINGER
Vice President, Minneapolis-Honeywell R egu lator Co.
2753-4th Avenue South, M inneapolis, Minn.
HADLEY CASE
President, Case, Pomeroy & Company, Inc.
285 Madison Avenue, New York 17 , New York
MORTON H. FRY
Senior Partner, R iter & Company
40 Wall Street, New York 5, New York
JOSEPH T. JOHNSON
President, The Milwaukee Company
Mitchell Building, 207 E. Michigan, Milwaukee, Wis.
MALCOLM S. MACKAY
President, Foothills Company
Roscoe, Montana
CLYDE B. MORGAN
Chairman of the Board, R ayonier, I ncorporated
161 East 42nd. Street, New York 17, New York
DONALD W. NYROP
President, Northwest Airlines, I nc.
1885 University Avenue, St. Paul 1, Minn.
ALONZO PETTEYS
Vice President, Farmers State Bank
Brush_
, Colorado
C. FRANK REAVIS
Partner, H odges, R eavis, McGrath & Downey
26 Broadway, New York 4, ew York
ALBERT G. REDPATH
Partner, Auchincloss, Parker & R edpath
2 Broadway, New York 4, New York
WILLIAM STERN
President, D akota National Bank
Fargo North Dakota
LYMAN E. WAKEFIELD, JR.
Vice President, First National Bank of ~finncapolis
120 South 6th Street, Minneapolis 2, Minn .
ALBERT J. WEATHERHEAD, JR.
President, The Weatherhead Company
300 East 131st Street, Cleveland 8, Ohio
REG ISTRAR: The Chase Man hatta n Bank, New York, N. Y.
TRANSFER AGENTS: Bankers Trust Compa ny, New York, N. Y.
STOCK LISTED : Common Stock listed on New York Stock Exchange
and Midwest Stock Exchange.
Preferred Stock Ii st ed on New York Stock Exe ha nge.
*As of March 9, 1961
FRONT COVER: New Boeing 7208 Jet aircraft soon to be in service on Northwest's routes.
BACK COVER: Northwest's new terminal facility af ldlewild International Airport.
PRESIDENrs LETTER TO STOCKHOLDERS:
~ orth\,e t Orient Airline ended 1960 \,ith a profit. de pite e\eral
eriou problem with ,diich ,,e \,ere faced.
Included in the e problem ,,ere two trike - totaling 96 day ' duration
m 1960. The latter trike, by flight engineer: extended into 1961 until the
appointment of a Pre idential Emero-ency Board. Hearin into the i ue of
the trike are goino- fon,ard at thi time.
_ -orthwe t recently announced purchase of ix Boeing 720B' at a co t of
36,772,000. The financing of thi equipment ha been arranged on a
favorable ba i \\hich minimize the creation of new debt. Of the total
required; $10;000:000 remain a,ailable a unu ed credit from the 19.58 Bank
Agreement. An additional 9,000 000 become available as a re ult of the
exten ion to 1962 of the initial repayment ,,hich would othenvi e be due
in 1961. The remainder of the purchase price , ill be financed ,vith ne\,. funds
obtained by increa ing the bank credit from 32;500,000 to 42 500,000 and
by i uing ubordinated note to Boeino- irplane Company in the amount
of 7 :.500.000.
,rn anticipated compet1t10n o,er our route was inten ified earl in
1960 a other airline inaugurated jet en-ice . :;'-forth, e t' o, n intro-
duction of jet in the urnmer heightened our ompan)' competitiYe effort .
In 1961, ~orth\ e t, ill further impro\e it equipment po ition in the
indu try. full ear' utilization of the intercontinental-range DC-8 '
tog ther with inauguration of medium-range 720B jet e1Tice \,ill contribute
ub tantially to realization of the o-rowth potential afforded b our well
balanced route y tern.
Tran fer of o,erhaul and other facilitie from Holman Field; t. Paul,
to our ne,v :-.fain Ba e at :Minneapoli - t. Paul International irport wa
accompli hed in late ummer. During 1961, your Company will move it
Executive Office into the ne\, General Office Buildino- at the Ylain Ba e
thu placing all major headquarter function under one roof. The :-1
Iain
Ba e will be completed for less than the , 18,000,000 e timated a it total co t.
"\ ,-e are o-rateful to the tockholder , employee and cu tomer of
~ orthwe t for their continued upport durino- 1960. particularly in ome of
the mor difficult time which \\e encountered.
inc rely;
:-far h 2+. J 961
3 4th ANNUAL REPORT TO STOCKHOLDERS
NORTHWEST
NORTHWEST A
FINANCIAL RESULTS
Your Company's financial results from 1960 opera-
tions reflect a profit, despite several factor which con-
tributed to a decline from the higher level of earnings
attained in 1959. These factors included:
1. The Electra accident in March, with resulting loss
of revenues and increased costs arising from re-
stricted operation of this aircraft in the remainder
of 1960.
2. The necessary delay in accepting our eight addi-
tional Electras pending government approval of a
modification to permit a return to normal operat-
ing speeds.
3. Delay in delivery of DC-SC jet aircraft and addi-
tional delay in inauguration of DC-SC re\enue
flights as a result of the pilots' strike in July.
4. The strike of flight engineers which grounded DC-
8C's on October 11 and kept this highly competitive
aircraft on the ground for the remainder of the
year.
5. A temporary softening of total dome tic trunk air-
line traffic in the last half of 1960.
Despite these limiting factors, Northwest Airlines
realized a relatively high level of operating revenues
in 1960 and, by careful control of operating costs, com-
pleted the year with a net profit after taxe of 1;625,765.
Earnings. Profit for 1960 after all charge amounted
to 1,625,765 compared with $5,713 512 in 1959. In-
cluded in these net figures are profits from disposals of
property, after taxes, of $699,852 in 1960 and $1.311.859
in 1959. The net profit figures for both years reflect
interest charges of $2,683,480 in 1960 and $1)94,940
in 1959.
After provision for dividends of $592 244 on preferred
stock earnings for 1960 are equivalent to $.75 per share
of common stock outstanding at the clo e of the year.
Earnings for 1959 were $3.68 per share of common
stock, after provision for preferred dividend in the
amount of $610;559.
Directors, officers and employees of Northwest
Airlines, Inc., were saddened by the sudden death,
May 18, 1960, of Ted R. Gamble, Portland, Ore., busi-
ness executive and a Director of Northwest since 1957.
i1lri - - -
R L N ES, NC.
Revenues. Operating revenue in 1960 were $123,-
-
361,479 or 2.1 per cent les than the all-time high
attained in 1959, reflecting the effects of the several
limiting factors described in detail previously.
Passenger revenues amounted to $97,680,028, a re-
duction of 2.9 per cent from 1959. Despite a greater
reduction in revenue passenger miles-4.84 per cent
less than 1959-the dollar revenues from 1960 pas-
senger traffic were aided by realization of a 2 per cent
increa e in the system average fare per passenger mile.
This increa e resulted from Civil Aeronautics Board
approval of a domestic fare increase approximating 4.5
per cent effective in the last half of 1960. This in-
crease, together with upward adjustment of transcon-
tinental jet coach fares approved late in 1960, will carry
over to improve net fares per mile in 1961.
Cargo revenues, including mail, express, freight and
excess baggage, totaled $22,078,998 in 1960, compared
with $23,098,988 in 1959. Charter and other revenues
reflected gains during 1960.
Expenses. Operating expenses in 1960 totaled $118,-
867,785, an increase of 3.3 per cent compared with the
$115,120,583 so expended in 1959. This increase of
$3,747,202 includes $2,882,471 of additional provision
for depreciation resulting from a full year of operations
with Electra prop-jet aircraft acquired in 1959 and
from introduction of DC-SC pure jet aircraft in 1960.
The remainder of $864,731 reflects an increase of only
8/ 10 of 1 per cent in all other expense categories.
Operating capacity in 1960 included production of
46,670,572 revenue plane miles and 3,073,400,209 avail-
able seat miles, respectively 1.9 per cent and 2 .4 per
cent less than the capacity offered in 1959. Despite these
reductions in service, costs in certain categories were in-
creased by the abnormal factors to which reference was
made in detail earlier. In particular, operating costs
of the Electra aircraft were increased in the last nine
months of the year by restrictions imposed upon the
operating speeds of these aircraft.
Your Company has continued its tightened cost-con-
trol program and concurrently with the strike of DC-SC
flight engineers in October, 1960, took appropriate teps
to reduce the working force to off et insofar as possible
the loss of revenue which resulted from the grounding
of the jet fleet. Total employment of 6;918 on the day
the strike began \\:aS reduced by 1,127 to a taff number-
ing 5 791 by the end of the year. Reduction of ex-
penditure in categories other than payroll were effected.
as well.
Northwest inou gurofed DC-8C
pure iet service on ifs infer-
notional and domestic ro utes
in 1960. Early in 1961 ( pic-
ture af rig hf) NW A began
fhe first scheduled je f airline
service in Minneapo lis-Sf. Paul.
NET WORTH AND DIVIDENDS
The n t worth of our Compan , at th nd of 1960
, a $52 192 566. The common tock eguit portion of
thi total a.mounted to $29.5+ p r hare, on ea h of
the 1 384 903 hare of common tock out tandino at
the end of the year. Thi ompare , ith a 29.59 net
book value per hare on the 1,38+ 903 common hare
out tanding at the clo e of 1959.
Consi tent , ith your ompan 's policy in effect in e
1955 regular quart rly dividend of .20 per hare wer
paid on conunon tock on 1ar h 31 J une 30, ptem-
ber 30 and December 31. Di, idend on the 25 par
alue 5 o Convertible umulati,e Preferred to k
al o were paid on the guarterl due date of March
31 J une 30, eptember 30 and December 31 .
ROUTES
D 1 10n m th Tran -Pa in h. ut a wa an-
noun cd b ' th \\ hit Hou n January 19, 1 61.
In thi int rnaf - r
Ei nho" r di
route author
Orient b au
n n1er
:nied o w I
n w rou
arrier t d
In the am d ci ion the Pr id n t m d
th route authority of T
orthw t \ irline \\'
to Korea Okinawa, Tai" an the Philippine
Kong.
Construction of Northwest Orient A irlines' new G eneral Office building is nearing completion, as porf of the Main
Base of Minneapolis-Sf. Poul ln fernotionol A irport. Design of fh e 259 ,200 square- foot building is o departure from
conventional office design, in thof there are no windows in the 33 foot-high exterior panels of blue-green , por-
celonized aluminum. Th e building will be completely air-conditioned. It adjoins hangars (right, background) via
shops and stores buildings.
orthwe t ha petitioned for recon ideration of this
deci ion in ofar a it fail to certificate orthwest over
the Central Pacific route from California to Tokyo.
During the pa t year the Civil Aeronautics Board
made permanent orthwe t' authority between the ~a-
cific Northwe t and Hawaii. This action, together with
the award of permanent authority on route wet of
Japan mean that all the route operated by your Com-
pany now are permanently certificated. Thi contr~ts
, ith the fact that only 21 per cent of Torthwe t Air-
line ' route miles were operated under permanent au-
thority a recently a six year ago.
\ Vhile there are no other major route matters pend-
ing before the C B your Comp~ny ~a on fi~e. a com-
prehen ive pattern of route application awaiting pr?-
cedural action. The e include reque ts for dome tic
route authority to alifornia points and for improve-
ment of our route tructure in the eastern part of the
nited tates.
EQUIPMENT AND SERVICE
In July 1960 your ompany began pu_re-jet service
with the inauouration of Dougla DC-BC fhght between
eattle-Tacoma and Tokyo. enice with thee inter-
continental-range jet was extended to point beyond
Tokyo, to the Ne, York-Ai:ichorage-T~kyo route and,
in eptember to our dome tic transcontinental markets.
Traffic re pon e wa imm diate and _favorable and
by October ow D -SC fleet was producing one-fourth
of the ompany's total re,enue . Further realization of
thi traffic wa curtailed for the remainder of the year
when the flic,ht engineer truck Octob r 11. However
rein tatement of D -8 jet flic,ht early in 1961 ac,ain
proved the great pa enger appeal and re,enue-produc-
ing ability of the e aircraft.
In December. 1960 the Fed ral ,iation Agency ap-
prO\ed a proc,ram for tructural mod~ficati~n of th_e
Lockheed Electra prop-jet air raft which , ill permit
remo,al of operatinc, re triction impo d in March,
1960, and return of the e plane to original pe~~ and
performance pecification . Th~ Hine Electra onginally
put into en-ice by Northwe t i? 19?9 and early 1960
will ha,e undergone factory modification- at Lockheed
expense- by 1fay 1961.
Northwest Orient Airlines on March
16, 1961 , announced purchase of a
fleet of six Boeing 7208 medium
ief aircraft (/ef f). The same week,
nose section of Northwest's first
7208 was ioined fo fuselage of
Boeing Airplane Company (below).
Delivery of eight additional Electras ordered by your
Company was deferred from summer, 1960, pending
approval and completion of the modification program.
Four of these aircraft are scheduled for March, 1961,
delivery and the last four for summer, 1961, bringing
our total fleet of this type to 1 7. In view of the
proven passenger appeal and favorable economic char-
acteristics of the Electra, the additional aircraft of this
type will make a valuable contribution to our domestic
turbine-powered service.
On March 16, 1961, your Company announced the
purchase of SL"< Boeing 720B jet aircraft at a cost, in-
cluding spare parts and equipment, of $36,772,000.
Defoery of thee aircraft will begin in J une 1961, and
will be completed by October, 1961. Initial service is
scheduled for July, 1961, on a route pattern that will
expand our jet service to a number of the airline's larger
dome tic cities.
The 720B jets, powered with four Pratt and Whitney
JT3D-1 turbo-fan engine, will have improved take-off
thru t a well a better fuel economy and ability to
operate from shorter runway than earlier medium-
range jets. In addition, the 720B will have ufficient
range to fly with a full passenger load on uch long
route as Hawaii-Mainland Iew York-Anchorage and
Anchorage-Tokyo.
Added to our pre ent fleet of five DC-8C's and our
17 prop-jet Electras, the ix 720B jet will permit opera-
tion by the end of 1961 of 8+ per cent of orth, e t'
y tern total seat miles in modern turbine-powered air-
craft.
Tran fer of maintenance and stores acti ity to the
ne, Main Base at inneapoli - t. Paul International
irport was begun in June and completed in August
1960. Installation of turbine-engine o erhaul equip-
Huge Northwest Orient Airlines
DC-BC pure iet airliner made its
first Yi sit to Main Base late in
1960, where it was accommodated
comfortably in a large new hangar,
one of fiYe.
ment now is under way to enable complete overhaul of
all flight equipment at the Main Base. Construction
of the new General Office building at the same location
is nearing completion, and the facility will be occupied
by this summer.
Line maintenance hangars are under construction at
Detroit Metropolitan Wayne County Airport and at
O'Hare International Airport, Chicago. Both facilities,
capable of accommodating jet aircraft, will be ready
for use in early 1962. Al o being built is your Com-
pany' unit air terminal at ew York International
( Idlewild ) Airport. Structural steel erection is sched-
uled to be completed in April, 1961, with the terminal
to be ready for use in spring, 1962. Some delay from
original completion date was occasioned by a need for
revision of plans to meet budget cost figures.
Completion of the e and other construction project
will provide your Company with spacious, modern fa-
cilities for jet-age operations.
CREDIT AGREEMENTS
The Bank Agreement and the Insurance ompany
Agreements negotiated in 1958 were in effect through-
out 1960. On December 31, 1960, loans outstanding
aggregated $28,500,000 and $40,000,000, respectively.
In January, 1961 a prepayment of $6,000,000 reduced
the borrowing under the Bank greement to $22,500,000.
Between February 28 and March 9, 1961, both credit
agre ments were amend d to provide financing for pur-
chase of the six 720B medium jet aircraft, with a por-
tion of th financing to b in subordinated promissory
notes i sued to the Boeing irplane ompany, manu-
facturer of the aircraft.
Amendatory Bank Agreement. In addition to permit-
ting the commitment for purchase of the six 720B's, the
amended agreement provide for an increa. e in the total
bank credit from $32,500,000 to , 42,500,000 the ex-
tension of the revolving credit to December 31 196 I
and the maturity to December 31 1966. The amended
agreement also eliminate. inking fund prepaym nt pro-
vi ions and e tabli he a fixed payment chedule of , 2,-
125,000 on each June 30 and December 31 and $4:250,-
000 on each eptember 30 ommencing June 30, 1962
and continuing until all the loans out tanding on D -
cember 31 1961 ar repaid. It also am nds th coven-
ants with respect to debt to net worth and d laration
and payment of dividends.
Insurance Company greement . The agr ments of
~ovemb r 28, 1958 were amended o a to p rmit the
In 1960 Northwest resumed flights to Newark , N. J. ,
and now offers improYed service with a choice
of two terminals in this im portant market area.
Lafe in 1960 Northwest Airlines inaugurated serv-
ice fo and from Baltimore, Maryland's largest city
and an important seaport. Baltimore is well known
as a frcding, financial and manufacturing city
as well as a medical and cultural center. The
city's Friendship Airport is present base for ief
airliner flights to the Baltimore-Washington area.
720B pur ha e and the e..-xclusion of Boeing ubordinated
n t from funded debt ( until they ar payable on a
fi.x d paym nt ch dule comm ncing June 30, 1967 ) .
, rtain definition relating to flight equipment were
al o am nded.
Other Lono- Term Credit. In conne tion with the
p f the rtial payment in the amount
o i by ubordinated promi ory
n t n -half of the total of uch
n 750 been i sued a part of the
down 1t a mainino one-half will be is-
pro rata on f ach air raft. uch notes
in rest payable semi-annually each June 30 and
cm r 3 r 6 per c nt per annum and
pri ipa t da of June, eptember
and De m June 30, 1967 at the rat
of one-third on ird of net earning a
dcfi.n d in th , -ater. Prepayrn nt of
principal wil Jun 30 1962, if per-
mitt d by n the nut s pro ided,
how v r, that at no paym nt of int r t
or principal be made rn nt would create
, d fault under th Ban nt or th In urance
,ornpan Ao-r en1 nt .
Th t rm of the onditional ontracts of al relating
to ight additi nal Lockh ed Ele tra aircraft r quired
a d " n la 1
m nt f 12 per cent of th agreed pur-
e-ha, pri . Th balanc i pa able in ixty equal month-
Imperial Service cumne aboard Northwest's ;et
flights across the Pacific is brought fo passengers
on specially constructed aisle carts. Pictured is
a deluxe breakfast service, featuring fresh straw-
berries, fancy rolls.
ly installments commencing the month following that in
which ea h of the additional aircraft is delivered.
PERSONNEL AND LABOR RELATIONS
Qualified personnel hav been assigned to all d part-
m nt of your Company through the use of established
r cruiting and selection procedures.
Flight and ground training which began in late 1959
continued into 1960 to accommodate the integration
of the DC-8C fl et into erv~ce by mid-year.
Collective bargaining agreements were concluded with
six clifierent classes or crafts of personnel during 1960.
N ootiation with eight other classes and crafts pro-
gress d normally with the notable exception of the
trike by the flight engineers assigned to the DC-8C's
which commenced October 11, 1960, affecting the jet
equipment. Later, on January 9, 1961, the strike was
expanded to all aircraft.
This strike was the outgrowth of a jurisdictional dis-
pute that has plagued the airline industry since the in-
troduction of jet aircraft in commercial aviation. Presi-
dent Kennedy appointed an emergency board early in
1961 to investigate the dispute. It is hoped that this
board will bring the problem into proper perspective so
that it can be resolved satisfactorily and finally. This
has been the only protracted strike in the Company's
entire history.
Northwest Airlines has moved into the jet age confi-
dent that its staff of qualified and efficient personnel
will assure our continued excellent service and sound
o-rowth in the industry.
STATEMENTS OF INCOME
NORTHWEST AIRLINES, INC. and SUBSIDIARY
Year Ended
December 31,
OPERATING REVENUES 1960 1959
Y:~~e
~~
fr;~~i $
9
~,~
i~
m
~;~i;~tb:!~a!:~~:~;.: :: :: : : : : :: :: : : :: :: :: :: : : : : :::::: :: : : : : :: : : : : : : : : : : : : : : : : : : :: : ::: : : : : :: : : :: : : : : :: :: : : : : :: : : :
16, i~~' 6~t
Charter and other transportation.................................................................... 822 724
Mutual Aid Agreement- net- Iote G.............................. ............................. 922 128
Other ......... ............................................................................................ ............. 1,857 601
$123 361,479
OPERATING EXPENSES
Flying operations ......................................... ...................................................... .
Maintenance ....................................................................................... ............. ..
Pa senger service ................................. ............................................................. ..
Aircraft and traffic servicing ........ ..................... ............... ........... .................... .
Reservations, sales and advertising ..... .. ....................................................... ... .
~1o~f :~!r~~~e d:;1ecY!~~~~~::: :: :: : : :: :: : : :: :: : : :: :: : : :: : : :: :: :: : : : : : : : : : : :: : : : : :: : : :: :: : : :: : : :::: :: : : :: :
OTHER DEDUCTIONS AND INCOME
37 605 697
22,872,426
8 840,13 1
15 421,537
13,789 086
6,521,536
13 817,372
$118,867 785
$ 4 493 694
Interest on long-term debt. ........................ .................................. ..................... $ 2 683,480
111 729
Other income, le mi cellaneous deductions ................................................. .
$ 2 571751
INCOME BEFORE TAXES AND PROPERTY DISPOSALS ............ 1,921,943
TAXES ON INCOME (including deferred tmces $993 030- 1960,
$3,123,770- 1959, arising from accelerated depreciation method ) ........ 996,030
NET INCOME FROM OPERATIONS ....................................................... $ 925,91 3
PROFIT FROM DISPOSALS OF PROPERTY, l applicable in-
come taxes (1960- $10,000 net credit arising from $206 000 reduction
of deferred taxes 1959- 510 000) ................. .. ......................................... 699,852
NET INCOME FOR THE YEAR ................. .............................................. 1,625,765
See notn to financial statements.
$100 641 156
10,173961
1044541
1 349 086
10,531,400
526 166
1 763,191
$126 029 501
$ 37 610 250
21,770 715
8 464,743
15 511 064
14 011037
6 81 7 864
10 934,901
$115 120 583
$ 10,908,918
$ 1,794,940
307 675
$ 1 487,265
$ 9,421 653
5 020 000
$ 4,401,653
1,311,859
5713 51 2
STATEMENTS OF FINANCIAL POSITION
NORTHWEST AIRLINES, INC. and SUBSIDIARY
ASSETS
December 31 ,
CURRENT ASSETS 1960 1959
Cash .................................................................................................................... $ 18,360,434
nited tates Treasury bills- at cost which approximates
mark t price ................................................................................................... .
T rade recei able , less allowance of $100,000 ............................................... .
aintenance and operating supplies-at average cost ............................... .
Prepaid expenses ............................................................................................... .
TOT AL CURRENT ASSETS
INVESTMENTS AND OTHER ASSETS
998,785
12,312,518
3,078,237
1,424,223
$ 36,174,197
Related industry investments and advances-at cost .................................. $ 140,473
FLIGHT EQUIPMENT at cost ........................................................................ $129,001,982
Les allowance for depreciation and ob olescence................................... ... 36,321,382
$ 92,680,600
d ance on purchase contracts-Note E............................................... ..... 4,164,530
$ 96,845,130
OTHER EQUIPMENT AND PROPERTY at cost... ............................... $ 21,399,592
Le s allowance for depreciation................... ............. ................................. ..... 10,61 8,889
$ 10,780,703
DEFERRED CHARGES
namortiz d training and other costs in connection with aircraft
fleet and route .......................................................... ................................... $ 3,385,197
870,719
501,432
Rental
th r
$ 4,757,348
$148,697,851
See notes to financial statements.
$ 10,206,460
13,804,267
3,012,417
655,598
$ 27,678, ~!~
$ 145,107
$109,542,617
28,979,487
$ 80,563,130
11,442,896
$ 92,006,026
$ 18,889,956
10,653,805
$ 8,236,151
$ 1,357,729
489,502
l 84,059
$ 2,031,290
$130,097,316
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31 ,
CURRENT LIABILITIES
1960 1959
Accounts payabl , collections as agent, etc ..................................................... $ 11,342,208
4,953,407
1,184,475
834,534
574,861
Salaries, wages and vacations ................................ ........................ ............. .... .
Air travel card deposits ............................................................. .............. .... .... .
Unredeemed ticket liability ............................................................................. .
Income tax s-estimated ....... ................................... .................. ................. .... .
TOTAL CURRENT LIABILITIES $ 18,889,485
LONG-TERM DEBT - Note A
Notes payable to insurance companies ... ........ ............................................... $ 40,000,000
Notes payable to banks............................................................. ...... ................ . 28,500,000
$ 68,500,000
DEFERRED INCOME TAXES
arising from accelerated depreciation m thods .............................................. $ 9,115,800
STOCKHOLDERS' EQUITY - Note C
Cumulative Preferred Stock, $25 par value j
authorized 1,000,000 shares issuable in series:
5% Convertible Series; authorized 457,873 shares; issued and
outstanding 451,234 shares- Note ;s .................................................. $ 11,280,850
Common tock, $10 par value; authorized 4 500,000 share ;
issued and outstanding 1,384,903 shares-Note D... ................ ......... ...... 13,849 030
Capital surplus................................................................................................. ... 6,577,695
Earned urplus......................... ............ ...................................... ............ ...... .... .. 20,484,991
$ 52,192,566
COMMITMENTS AND CONTINGENT LIABILITIES- Note E
$14-8,697,851
See notes to financial statements.
$ 11,026,752
4,291,033
1,170,875
989,138
2,023,888
$ 19,501,686
$ 40,000,000
10,000,000
$ 50,000,000
$ 8 328,770
$ 11,280,850
13,849,030
6,577,589
20,559,391
$ 52,266,860
$130,097,316
STATEMENTS OF SURPLUS
NORTHWEST AIRLINES, INC. and SUBSIDIARY
Year Ended
December 31 ,
CAPITAL SURPLUS 1960
Balance at beginning of year ................................................... .............. ........... $ 6,577,589
Additions ( deduction ) ari ing from:
ale of shares of Common Stock under option agreements in excess
of par value ....... ....... .................. ... .......................... ............................ ...... .
Cost of issue of 5 0
Convertible Series, Cumulative Preferred Stock ..
Com ersion of shares of Preferred Stock into share of Common Stock. ...
Balance at end of year ............................... .................. .. .......................... ........ .
EARN ED SURPLUS
106
6,577,695
Balance at beginning of year ......................................... ........ ...... ..................... $20,559,391
Add net income for the year. ............ ................ .............. ........................ ...... . 1,625,765
$22,185,156
Deduct cash dividends on:
5 % Preferred Stock- annual rate of $1.31 a share ............. ......... $ 592,244
Common Stock- $.80 a share.. ......... .................. .. .......... .. ......... ............. . 1,107,921
$ 1 700,165
Balance at end of year ............................................................... ....... ... ..... ... .... $20,484,991
T o the Stockholders and
Board of Directors
N orthwest Airlines, Inc.
Saint Paul, M innesota
See notes to financial statem ents.
ACCOUNTANTS' REPORT
1959
$ 6,481,052
27,808
33,409 )
102 138
$ 6,577,589
$16,560,267
5 713,512
$22,273 779
$ 610,559
1,103,829
$ 1,714,388
$20,559,391
We have examined the statement of consolidated financial pos1t1on of orthwest Airlines, Inc. and
subsidiary as of D ecember 31, 1960 and the related statements of consolidated income and surplu for the
year then ended. Our examination was made in accordance with generally accepted auditing standa rd ,
and accordingly included such tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances. We have made similar examinations for prior years.
I n our opinion, the accompanying statement of financial position and income and surplus pre ent
fairly the consolidated financial position of orthwest Airlines Inc. and subsidiary at December 31, 1960
and the consolidated results of their operations for the year then ended, in conformity with generally
accepted accounting principles applied on a ba is consistent with that of the preceding year. Further. it
i our opinion that the fi\'e year summary of income presents fairly the information stated therein .
ain t Paul Minnesota
M arch 9, 1961
ER ST & ER1 T
Certifi ed Public A ccountants
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC. and SUBSIDIARY
December 31, 1960
Note A- Long-Term Debt
For the purpose of equipment financing ( ote E) the Com-
pany, as of ovember 28. 1958. entered into ote Pur ha e
Agreement with tweh-e insurance companie and a Bank
Credit greement with fifteen banks. The e agreement , ere
amended between February 28 and farch 9, 1961.
The ote Purchase greement provide for aO'greO"ate bor-
rowings of 40 000 000 which are payahle 3 000 000 annual!,
beginning O ctober 1, 1966 with the balance of +.000.000 due
October 1, 19 7 8. Gertain optional prepa m nt at par are
permitted. The Agreements ontain other prO\i ion with
re pect to redemption a a whole ( but not from borrowed
fund ) at premium ranging from 7 o to 1 o .
The mended Bank Credit 0
-reement provide for a loan
to the Company of $42.500,000 on a re olving er dit ba is
throu O'h December 31. 1961 and as a term loan thereafter at
5% . The loan payable 8,500,000 in each ear 1962
through 1966.
The Company ha agreed. among other thin that it will
not permit: (a) its working capital at an' time to be Jes
than certain spe ified amount and (b ) it funded debt to
exceed certain percentage of net tangible a ts. net worth.
and depreciated value of fliO'ht equipment. a the e term are
defined in the greement . t December 31. 1960 the Company
had complied with the ovenant then in eff ct.
Note B-5% Convertible Cumulative Preferred Stock
This Stock eries ha voting right ; i entitled upon ,oluntary
liquidation to 25 a hare plus accumulated unpaid dividends ;
is comertible at any time on the ba i of 25 a Pref erred
Share into Common Stock at a conver ion pri e of $26 a
share. subje t to adju tment in ertain event and is redeem-
able as a whole or in part at pric ranging from $26.25 a
hare before J anuary 1 1962 to 25 a hare after D cember
31, 1973 . tog ther in each a e with accrued divid nd
ote C- Res-triction on Stockholder ' Equity
The ote Purcha e gr ements and the Bank Credit gre -
ment tabli h an agO'regate dollar ma,ximum for the de lara-
tion and payment of cash divid nd on Common to k. and
for the di tribution on. redemption. purcha e or other a qui i-
tion of hares of any ela of Capital Stock. Under the terms
of the mended Bank Credit Agreement the amount of earned
urplus available for such purpose would have been $2,500,000
at December 31, 1960.
The greem nt do not prohibit the payment of sto \.::
<livid nds and do not r strict dividend payments on the 5 ('
Convertible Serie . Cumulative Pref rred Stock.
Note D- Common Stock Re er ation and Option.
At the end of the year 2 600 hares of Common to k
were subject to out tandinO' options exercisable b ,ompany
offi er at price not le than 95 % of market at the dates of
grant. 1,600 hares ar ex rci ab! not lat r than July 29 1961
at $15.675 a hare and 1.000 hare are exerci ab! not lat r
than October 30 1965 at 13.42 a bar . n additional 10 000
share ar resen:ed for option whi h may b granted in the
f utur to officer and employee and 433.878 shares ar r se1Ted
for is uance upon conver ion of the 51/.i C:o Convertible S ri s,
Cumulati,e Preferred Stock.
ote E- Commitment and C ontingent Liabilitie
At December 31, 1960 commitments for the purcha e of
one DouO'la D C-8 turbojet air raft and eight Lockheed Electra
prop-jet aircraft, to be delivered in 1961 and other flight and
O'round equipment amounted to approximately 2+,412,000. Of
thi amount. +,164 530 was on d po it , ith manufa turer at
De ember 31, 1960 +.330,366 is due in 1961 and $15 917 104
become pa able o,er ixty month periods from date of de-
liHr of the Lo \.::heed Electra prop-jet aircraft under ondi-
tional ale contract .
On farch 9. 1961 the ompany contracted to purchase
ix Boeing 720B turboj t air raft which together with other
related fliO'ht and ground equipment to be delivered in 1961
will amount to 37.008.000 payable $29,508.000 in 1961 and
7,500,000 of ubordinated note pa 1
abl 1 500,000 in ea h
year 196 7 through 1971. Prepa 1
ment ba ed on net earninO's
of the Company ma be required annual!, and hall be applied
to the late t maturities of the ubordinat d not .
Annual payment of approximate! $1.590.000 from date of
oc upancy will be requir d under the ompany s agreements
for lea over 25 to 30 year of o, rhaul ba e, hangars and
administrative facilitie at , old-Chamberlain Field Twin
Citie ; International irport. ew York and O'Har~ Inter-
national Airport. Chicago.
The ompany wa contingently liable at Dec mber 31, 1960
in the amount of 2 7 .109 for the repur ha e of trav 1 contract
old. Other ontingent liabilitie include tho e inherent in the
Company' operation . , bile the amount of these contingent
liabilitie i not now determinable the management of the
Company i of the opinion that it i not material with respect
to the Compan ' financial po ition.
Note F-M ail T ran portation Compen ation
o final d termination of total mail compen ation have
be n made by the Civil Aeronauti Board on int rnational
and dome tic route for 1951 and on international route for
195+. The ultimate effect of an redetermination ar not
known at thi time.
In J anuary 195 7, the Board i u d an order a king the
Comp, ny to how cau e why temporary ompensation for 195+
hould not tentative! be reduc d $1.406,000 pending final
h aring . The Compan ha refunded thi amount and re-
orded the adju tment in prior ear .
In J anuary 1960. the Board i ued an order propo ing to
c tab Ii h a final ub id -free mail rat for 1954 and asking the
Company to how cnu e why th remammg 1,833,000 of mail
compensation ub idy hould not b ref uncled. No effect ha
been gi,en in the ac ompanyinO' finan ial tatem nts to this
propo ed reduction whi h would approximat $843,000 net
aft r income taxes of $990,000.
Th ompany i ont ting both of the abo\' action .
ote G-- Iutual id greem nt
In 1960 the ,ompany nt red into a [utual Aid Agreement
with certain airline und r whi h an part to the ag;rcemcnt
ufTcring- a trike a defined th rein i to r cci,e from the
other airline an amount equal to the in rca in their r ,c11t1c.
attributable to th trike le applicable added dire t e.pen e .
The ,i, ii .\ eronauti Board i in\'c ligating the agreement
a.nc\ in th c, ent of it di appro\'al. [utua.l .\ id payments arc
to be refunded to the paying airlines to th e C'xtcnt afferlecl liy
urh di :.ppro,al.
FIVE YEAR SUMMARY OF INCOME
( Amounts Shown in Thousands )
NORTHWEST AIRLINES, INC. and SUBSIDIARY
Five years ended December 31 , 1960
OPERATING REVE NUE 1960 1959 1958 1957 1956
Passenger . . . . . . . . . . . . .. . . . . . . . . . ........................... ............. ......... $ 97,680 $100,641 $ 81,116 $66 674 $60,264
United tates mail.. .... ...................... ....... .. . 9,680 10,174 9,265 7,587 7,192
Foreign mail. ............. .......... .. . . ... ..... ........ .. ... ........ . 1,031 1,045 963 763 666
Exce baggage............. . ......... .. ... .. ........ ... ......... ........... .... . 1,183 1,349 1,230 1,004 728
Freight and express ............................................................... . 10,185 10,532 7,437 6,537 6,427
Charter and other transportation .................... .................. ... . 823 526 1,237 226 816
Mutual Aid Agreement......... ... . ..................... ..... .... . 922
Other .................... . .................................... .. . 1,858 1,763 709 641 386
$123,362 $126,030 $101,957 $83,432 $76.479
OPERATING EXPENSES
Flying operations ...... ....... ........
. 37,606 $ 37,610 $ 29,747 $25,555 $22,665
M aintenance .................. . . . . . .
. . . . . .... . . . .
. . . . . . . . . . . . . 22,872 21 ,771 17,090 16,037 14,095
Pa senger service .......... ........... ............ ............... ............... ..... 8,840 8,465 6,034 5,061 4,502
Aircraft and traffic servicing ... ...... ..... .. .... ...... ..... . 15,422 15,511 12,207 11 ,689 10.847
R eservations, ales and adverti ing .... 13,789 14,011 10,753 9,218 8,169
dmini trative and general. ....... ...... . 6,522 6,818 5,573 5,452 4,834
Provi ion for depreciation .. .... . .. .. .. ..... 13 817 10,935 8,515 5.436 6,772
$118,868 $115,121 $ 89,919 $78 448 $71 ,884
$ 4,494 $ 10,909 $ 12 038 $ 4,984 $ 4,595
OTHER D EDUCTIO s, ET .... ....... ........ ......... ........... ....... 2.572 1,487 1,387 994 522
I NCOllIE BEFORE TAXES Ai D PROPERTY DISPOSALS ......... 1,922 $ 9,42 2 $ 10,651 $ 3,990 $ 4,073
TAXE ON l NCOl\IE ...................... . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . 996 5,020 5,665 2,100 2.185
NET l NCOllIE FROM OPERATIO NS .......... ... $ 926 4,402 $ 4,986 $ 1.890 1._
888
PROFIT FROl\I DISPOSALS OF PROPERTY. 690 $ 1,822 $ 828 $ 3,241 $ 1,828
Le applicable income taxes ............. ....... ... ( 10 ) 510 200 312 490
ET PROFIT FROl\I Dr PO AL OF PROPERTY. ... $ 700 $ 1,312 $ 628 $ 2.929 $ 1.338
ET INCO llIE FOR THE Y EAR ....... .... . $ 1,626 $ 5,714 $ 5,614 $ 4,819 $ 3.226
NORTHWEST AIRLINES , I NC. ANNUAL REPORT
Calendar
Year
1960
1959
1958
1957
1956
1955
1954
1953
1952
1951
-==-
Pfflll'PIIES
NORTHWEST o.wd AIRLINES
SYSTEM MAP
PROGRESS FOR THE
Total
Passenger
Express
Operating and Freight
Revenue Revenue Revenue
$123 ,361,479 $97,680,028 $ I 0, I 85,069
126,029,50 I I 00,641 , 156 I 0,531 ,400
101 ,957,172 81,115,900 7,437,293
83,432,404 66,674,383 6,537,452
76,479,526 60,264,291 6,426,502
71,088,043 57,252,957 5,539,095
62,138,312 51 ,053 ,599 4,676,190
66,042,488 48,652,465 4,890,153
61,474,153 41 ,962,758 4,781,081
54,593,420 35,1 92,765 4,371,533
- -
LATEST 10 YEARS
Revenue Mail Total
Passenger Ton Plane Miles
Miles Miles Flown
1,653 ,966,431 24,424,036 48,765,657
1,738,138,265 24,435,745 49,282,475
1,408,742,516 21 ,892,299 40,721 , 143
1,205,764,597 17,803,356 35,629,289
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 4,571 ,276 19,53 1,632
-- -- -
35 years of superior Airmanship