Northwest Airlines Annual Report 1961

Northwest Airlines, Inc.
General Offices
Minneapolis-St. Paul International Airport
Saint Paul 11, Minnesota
OFFICERS*
DONALD W. NYROP
President
PAUL L. BENSCOTER
Vice President-Transportation Services
ROBERT A. EBERT
Vice President- Personnel
A. E. FLOAN
Vice President and Secretary
DONALD H. HARDESTY
Vice President- Finance and Treasurer
WM . E. HUSKINS, JR.
Vice President-Orient R egion
FRANK C. JUDD
Vice President- Maintenance and Engineering
M . JOSEPH LAPENSKY
Comptroller
DALE MERRICK
Assistant Vice President- Properties
EMORY T. NUNNELEY, JR.
Vice President and General Counsel
C. L. STEW ART
Vice President- Economic Planning
ROBERT J. WRIGHT
Vice President-Sales
DIRECTORS*
CROil HUNTER
Chairman of the Board, Northwest Airlines, Inc.
St. Paul, Minnesota
JAMES H. BINGER
President, Minneapolis-Honeywell R egulator Co.
Minneapolis, Minnesota
HADLEY CASE
President, Case, Pomeroy & Company, Inc.
New York, ew York
MORTON H. FRY
Senior Partner, R iter & Company
New York, New York
JOSEPH T. JOHNSON
President, The Milwaukee Company
Milwaukee, Wisconsin
MALCOLM S. MACKAY
President, Foothills Company
Roscoe, Montana
CLYDE B. MORGAN
Chairman of the Board, R ayonier, Incorporated
New York, New York
DONALD W . NYROP
President, Northwest Airlines, Inc.
St. Paul, Minnesota
ALONZO PETTEY$
President Farmers State Bank
Brush, Colorado
C. FRANK REAVIS
Partner, Hodges, Reavis, McGrath & Downey
ew York, New York
ALBERT G . REDPATH
Partner, Auchincloss, Parker & Redpath
ew York, ew York
WILLIAM STERN
President, Dakota National Bank
Fargo, North Dakota
LYMAN E. WAKEFIELD, JR.
Vice President, First National Bank of Minneapolis
Minneapolis, Minnesota
ALBERT J. WEATHERHEAD, JR.
President, The Weatherhead Company
Cleveland, Ohio
*As of March 1, 1962
REGISTRAR: The Chase Manhattan Bank, New York, N. Y.
TRANSFER AGENTS: Bankers Trust Company, New York, N. Y.
STOCK LISTED: Common Stock listed on New York Stock Exchange
and Midwest Stock Exchange.
Preferred Stock listed on New York Stock Exchange.
PRESIDENT'S LETTER
TO O R STOCKHOLDER :
For Torthwest Airlin , the year 196 I " a~ a diffi ult el profitable 11 .
Operations and revenue were curtailed a. a re ult of a trike by flight engin
during the early part of the year. P covery from the January-February . trike
was, of necessity, slow and revenues did not reach prior-year levels until
May, 1961. Even after such re overy, your ompany along with all the dome Lie
trunkline , found a oft market for air tran portation lacking the growth
experienced in earlier year .
De pite redu ed revenue and gr atly increa. ed depreciation and int r L
charge , an effective program of co t control and pecial attention to
customer ervic enabled your 'ompany to earn a ] 961 n t profit of
'3,661,139 more than twice the arning of the previou. year.
Our jet re-equipment program wa completed during the ear- 18 n w
pure jet and jet-prop aircraft wer placed in ervice five pi ton aircraft
received major modification to enhance and extend their revenue
production and 13 surplu pi ton engine aircraft were old.
s a re ult of our re-equipment program, we nter 1962 with nearly 90 p r
cent of our available eat-mile in modern turbine-powered equipment. Only
one year earlier, that percentage wa approximately 30. More than
127,000,000 in capital fund have b en u ed in the acq ui ition of the current
jet and jet-prop fleet-nine Boeing 720B fan-jet , five Douglas D -8 inter-
continental jets and 16 Lockheed Electra II jet-prop . 11-cargo, combination
pa enger-cargo and high den ity touri t pa enger er ice no, are pro ided
in our five recently converted D '-7C/ F aircraft. In addition, our remaining
DC-6B and D -7 fleet augment ervice in many market and provide
the only ervice in the 10 per cent of our citie not capable of
supporting turbine-powered ervice.
Your Company, in addition to the ub tantial hange brought about by it
flight equipment acqui ition, modification and di po ition program, ha taken
important forward teps on th ground. In 1961 " e made internal
organizational change to improve efficiency, technology and r ice. N
maintenance and flying concept have been introduced. All cu tomer
ervice now i concentrated in one department for unified and effecti e
direction. :Move into even new terminal and hangar facilitie , ere comp! ted.
Our new ain Base- integrated General ffice, overhaul, hop , tore
and hangar facility at the Yiinneapoli - t. Paul International irport- no,
is occupied and functioning fficiently and eff ectiv ly.
The 1961 re ults and the economic tability of North, et irline are
the result of your continuing . upport. I appreciate the under tanding,
loyalty and cooperation which have contributed to th favorable
condition outlined in thi report.
incerely,
March l O 1962
FINANCIAL RE SUL TS
,n In 19
0
61, your Company earned a net_ profit of
, .:>.661. l.J9. more than doubl the net earnma of the
pre,iou year. Th 1961 earning were achieved in th
lace of a decline in total re,enue of more than 12 000 -
000, the re ult of an ext nded trike durina the early
part of the year.
nother factor aff ting 1961 re ult wa the lack of
0 -rowth in dome tic pa enaer traffic with all dome tic
trunkline recordino- an increa e of onl 1 per ent over
]960.
Off e_t~ino th~ ~ adver e factor were the improved
compet1tl\e. l?o 1llo:1 affor~ed by integration by North-
\\'e t of add1t1onal Jet and Jet-prop aircraft into our fleet
and a continuance of co t-control policie under , hich
operatino- expen e at e,ery le,el are monitored care-
ft~lly and continually in order that we may provide a
!11gh tandard of ervice at minimum co t.
Earning . The 3,661 139 profit for the y ar 1961
a~11?unted to 2.21 per common hare. after preferred
d1_\'ldend of 592 245. Thi compare mo t favorably
with net earnina of 1,625,765 for 1960 "hich amounted
to .75 p r hare after preferr cl dividend . Your om-
pany' aai~ in net earning wa accompli heel de pite
mcrea eel mtere t charo-e which totaled 4 352 867 in
1961, compared with 2,683 480 in 1960. '
Included in net amino- for both year are profits,
after taxe , on di po al of flight equipment and pare
part - 1,198,035 in 1961 and 699 852 in 1960.
_ O peration in 1961 provided internal ca h generation
of 23,2 1,898, made up of the net earnina of 3 661 139
plu a h flow from depreciation and amortization
( 17,117,959 ) and deferred income taxe ( 2 512,800).
Ca h flow from the ame ource amounted to $16.826,-
330 in 1960.
R ,. nue .
, 111,052.512
Total op 1 a ting re, enue in 1 61 were
r 12 .308.967 le than in 1960. Thi
35th ANNUAL REPORT
STOCKHOLDERS
TO
d~ lin ~a a dire_ L re ult of the prolonged trike by
~1ght_ engmeer which began in October, 1960, on DC-8
Jet aircraft and pread to all type of equipment on
January 9, 1961. Only partial ervice could be con-
du ted during the hutdown, which extended through
January and February. er ice wa re tored on :March
1, 196_1 and chedule were augmented further in the
fol_lowmo- month . By ay revenues again reached
pnor-y ar level .
Operating and traffic figures how similar effects of
the early-1961 strike with total re enue plane miles
down from 46,963,000 in 1960 to 31,658,000 in 1961.
R evenue pa enger-mile declined from 1,654,000 000 to
1 362,000,000 and cargo ton-mile (mail, freight, ex-
p~e ) from 58 528,000 to 51 203,000. De pite uch de-
elm , however, load factors were maintained at rela-
tively favorable le, 1 with the result that a pas enger
load factor of 52.1 per cent wa achieved in 1961. Thi
wa accompli heel de pite the inevitable difficulty en-
countered in eeking to regain Northwe t' comp titive
po 1t10n after a long trike period.
During the la t half of 1961 we obtained revenues of
930,000 from operation of cheduled military charter.
over our_ route to Ala ka. Thi contract, which pro ide a
1:b tant1al revenue ource or utilization of pi ton-engined
aircraft extend to June 30 1962 and renewal beyond
that date i being ought.
The i il eronautic Board ha approved an increa e
of 3 per cent in dome ti pa enger fare effective Feb-
ruary 1 ] 962. Adju tment al o have been made in
dome tic air freight rate to increa e the yield from
II:all-volurne hipm nt and to reduce the rate on large
h1pment o that we will attract a areater volume of
thi type of traffic.
Expen e_. . perating xpen , including depr ciation
a1:d amort1zat10n were $101 330 626 in 1961, compared
, 1th 118,867,785 in ] 960. Thi reduction of 17 537 -
159 more than off et the operating revenue decli~e of
12.308,967, ,,ith the re ult that op rating net income
m 1961 ex eeded that of 1960 b 5.228 192. Deprecia-
lion and amortization charge of 17 117 959 in 1961
w re 2 704 42-1 mor than in 1960. ah op rating
exp n actually \\'er r du ed by 20.241, 83 from
1960 to 1961.
11 cat gorie of operatina expen e
lroll l fully both during the trike and in th month
following. a re ult 1961 unit operating e, p n of
27 .59 per a,ailable ton-mil were le than th
co t of 27. 72 recorded in 1960. de pite th burd n of
fi -ed o t which had to be borne b an extrem Iv low
apa ity rnlume in early 1961. ,
Total company employee numbered 5.803 at the end
of 1 61 a reduction of 1 J 15 from the le\' 1 pr c ding
the tart of the flight engineer ' trike in 1960.
tockholder ' Equity. Th net ,,orth of th ompany
increa ed from 52,192 566 at the end of 1960 to
5+.176.525 a of December 31. 1961. Book \alue of
common tock \\a 30.9+ per hare at D cemb r 31,
1961, an increa e of 1.40 from the book \alue of 29.5+
at De ember 31. 19 0.
From net earnina of 0 .661,139 regular quarterly
dividend totalina .80 per hare for the year were paid
to holder of common tock continuing a poli y follow cl
con i t ml ince 1955. Divid nd on the 25 par value
5 per cent omertibl umulati, Pr ferr d to k
al o \\' re paid on quart rl due dat in 1961. fter
paym nt of di\'idend there remained from 1961 earnina
an amount of 1 960.373 added to retained earnina __
EQUIPMENT AND SERVICE
Durina 1961. ~ orthwe t . ir1ine completed a t\rn-year
proaram for acqui ition of a modern turbine-powered
fleet compo ed of a total of 30 new aircraft and an
outlay of more than 127.000.000.
In th pa t year. your ompan accept d d 1i\ery of
it fifth Doug1a D -8 long-range jet nine Boeina 720B
medium-range fan-jet and eight additional j t-prop
Lockheed Electra II' . Too-ether " ith remainin pi ton
aircraft ,,e now have a di\er ified fleet po e ing a
b1 oad ranae of performance chara teri ti to meet the
,aried enice need of our dome tic and international
route y tern.
11ore than 90 p r c nt of our citie now benefit from
::'-l orthwe t irline en-i e in turbine-po\\'ered aircraft
and more than 50 per ent ha,e D -8 or 720B pure-jet
chedul .
Thi larae- cal equipment tran ition wa accompli hed
in the hort pan of 28 month from ugu t. 1959 when
::'\ orthwe t introduced it fir t Electra flight . to J anu-
an. 1962 when nearly 90 p r cent of all a,ailablc at-
mile were operat d in turbine-power d aircraft.
:\'"orth\\e t now offer on -plane pur -jet n-ic in / /
eparate city-pair mark t . For. xam_pl Ne" Yo1:k en-
joy X \\ j t fliaht to Detroit; M ilwaukee. ,h1 ago,
One of Northwest Orient A irlines' Boeing 7208 fan-jet
airliners is towed info a Main Base hangar af Minneapolis-
St. Pau l /nfernafiona l A irport for routine work. Hangar
is one of five at the Main Base, each 320 feet wide and
160 feet deep. Each hangar will accommodate fwo huge
iets or three of Northwest's propeller-driven aircraft.
).1inneapo1i - t. Paul. pokan . Portland. eattle-Ta o-
ma. nchorage; Tokyo and ricnt point beyond Tokyo.
1'Iiami ha on -plane jet ervic on N orth"e t to ampa.
, t. P ter bura. tlanta. hicaoo. 1vi ilwauke . 1'1inn -
apo1i - t. Paul Portland and , attle-Ta oma.
In 1961 orth,, t. with it expanded j t Beel, wa
able t in rea e direcl jet n ice betw en citie in th
ea tern part of the 'C nited tate and the rient. ~ ew
York now ha three "polar flight a week to okyo
via n horage; with a re ulting N w York-Tok 10 fly-
ing time of 13 hour - four and a half hour fa ter
than any oth r airlin . ,hi ago ha on polar 0ioht
p r w ek. non top to n horaae and on to the rient.
1n addition both citi . a well a Wa hinaton, D . ,.
!Jetr it, Minneapoli - t. Paul and other major point..
hav daily n-ice to and from the Orient \'ia attle-
Tacoma. hicago' daily rvi e i non top to the latter
point. with the am plane ontinuina on to n horaae
,,ith en-i beyond to th ri nt ,,bile Ne,, York , i.
,ia a non top flight to eattle-Ta oma and a dir t on-
n tion to the hicaao-oriainatin flight.
en-i to Hawaii \'ia the Pacifi Torthwe t ha been
incr a ed to three jet round trip ftiaht a week and on
pre ent chedule pa enoer may for e ample lea e
\ \
1a hington. D . .. at 1 p.m .. Detroit at 2: 50 p.m ..
).1
I inn apoli - t. Paul at +: 05 p.rn. and arri\'e in Hono-
lulu on Northw t' 720B fan-j t hortly after 9 p.m. on
th am day.
Jet en-i e into the important Florida mark t wa
inaugurated late in the year. in time for th height
of ,,inter ,acation tra, l. Xorthwe t now off r a choi e
of e" ral jet flight daily lo ).Iiami and other Florida
ci ti .
Torthwe t irline jet chedule are augmented by
a omprehen i,e pattern of fliaht in the jet-prop Elec-
tra II. Thi aircraft provide hort- egrnent fliaht time~
omparing fa,orabl ,,ith pure-jet time becau e of it
extreme maneuverabilitv in the ,icinit\' of airport -
for e ample. 1 hour. 15 minute from the Twin iti
to ,hicago and 1 hour) 35 minute from Detroit to
ST
\Va. hino-ton. IL ha proved to be an extremely efficient
and conomi al airliner to operate on both hort and
me lium-rano-c flight egm nt and into many of the
. ma! !er citi crv -d by orlhwe t.
notber d \' lopmcnt in the pa L year wa convcr ion
of fi\ NW Dougla D -7 ,' to a nexible DC-7 / f
c nfiguration with a capability for a 37,000 pound all-
caroo !if t or, in varying argo-pa enger combinations, a
maximum of 95 cat in the a ll-pa enger version. This
convcr ion ,viii cnhan c the revenu potential of thi
pi ton- ngined type in a variety of ervice including
dome tic and international freight and mail chcdules.
low fare pa enger ervice , commercial charter and
go\'crnrncnt contract work.
Our exten ive re-equipment program has made a
number of our pi ton aircraft urplu and we have
undertaken to di po e of these aircraft al the mo t favor-
able term po ible. In 1961 we old five DC-6B's and
our remaining fleet of eight DC-4's, a well a additional
pare eno-ine and pare part .
While we move forward in 1962 in g-ood competitive
po ition, we are continuing to evaluate future equipment
needs and are tu dying the various typ s of jet aircraft
v:hich may be uitabl for fleet expan ion in the future.
FACILITIES AND CUSTOMER SERVICE
Your Corn pany ha recognized iL responsibility Lo
prmide cu tom er Cn'ice a advanced and efficient as the
ne,, flight equipment now in the air. To this end a
parallel program of modernization of ground facilities
and ervicc- ba been accelerated during the past year.
In July, 1961, re pon ibility for all customer services
wa pla ed in one department combining the functions
of communication , r ervation , tation operations food
enice and in-flight cabin ervice. In addition, many
irnpro\' d facilitie have been added to make our service
more attracti\e and convenient for the traveling public.
One of th principal f eatur of this program ha been
the occupancy of n w airport facilitie by your Company
in recent month . with more cheduled for the near
future. To date, Northwe t has occupied space in new
terminal at Atlanta M anila Cbicao -O'Hare and Min-
neapoli - t. Paul and in a new terminal concourse addi-
tion al cattle-Tacoma. cbedule::l for completion in
1962 arc your Company' unit air terminal at N ew
York' Idlewild International Airport and the new Dulles
International Airport " hich will en-e " a hington, D. C.
Terminal con truction al o is under way in \1
\ innipeo-
Edrnonton and Honolulu. In the corning year orthwest
will introduce econd-le\el jet pa enger loading facilities
at four of it major dom tic terminal .
J w hangar facilitie at Detroit M etropolitan Airport
and ,hicago' O'Hare International irport were oc-
cupied by Northwe t in 1961.
Photog raphs, fop to botfom-Norfhwesf Orienf Airlines
occupied n2w facil ities af several airports in 1961 and early
1962:
New terminal af Minneapolis-Sf. Paul, dedicated in
January, 1962.
c, New South Concourse at Seattle-Tacoma, May , 1961.
Chicago-O'Hare , January, 1962. Construction continues
(restaurant buildinq , left background}.
Ne w terminal af Atlanta, dedicated in May , 1961.
ornpletion of our ".\1ain Ba on. trucrion program
wa accompli hed in 1961. In Jun ,,e occupied the
ne,,._. G neral Office building adjac nt to our main-
tenance and o,erhaul facilitie at th Minn apoli - t.
Paul International irport. Operation in thi , e 11-
integrated facilit ' are aided by many improvement in
enic equipment.
The Main Ba erYed by a n \\' tel phone y tern
which permit direct im,ard dialino- to all ~orthw t
irline headquarter office ; ale offi e in the Twin
1t1 and N \\ airport in tallation . he ~fain Bae
al o i inter-conn ct d ,,ith t lephone y t rn in many
citie on our route by mean of economical I a d Tel-
pak circuit, p rmitting prompt and economical phone
communication among ~ orthwe t' headquarter and
major line tation . Exten ion of thi arrangement to ad-
ditional ~ \\ office will b accompli hed during 1962.
ommuni ation ha\e be n impro,ed furth r I y in-
tallation in 19rl of the mo t up-ro-dat automati l I -
type witching-c nt r quipm nt. Thi enter lo ated
in th ompany' headquarter , i onnected by
direct teletype circuit with O office throughout the
.,,nited tate . pproximately 15.000 me ao- are
handled each clay through the enter. with deli\ ry
peeded by the au torn a tic . y t rn for tran fer of incoming
and outgoing me ag;e ,,hich r placed the fonner
manual tape procedure.
Our ne,, headquarter al o hou th T
ni\ac auto-
matic re en"ation y tern en-ing 15 cirie on our d me -
tic route tructure with high peed re enation enice;
toring and controlling the imentory of eat available on
more than 100 flight a day. Pa enger re rrntion may
be accept d on the c ni,ac com put r for any dat up to
11 month in the future. The peed with \\'hich thi
y tern operate pro\ide for greatly impro\ d eni e to
our pa nger .
ir-to-ground radio communication al o ha\ b en
modernized. comprehen i\e proo-ram for centraliza-
tion of air-ground radio facilitie wa plann d during
1961 and \\'iil b implement d on a proQ'"Te ive ba i in
1962. n completion of thi program all of ~ .,,W
dom tic air-around radio tation . tran mitting and re-
cei\ing from r mot location in 25 itie along the air-
line' route , will be linked b) lea ed telephone i.rcuit
to control po ition in the General ffice building.
tralization of radio facilitie will re ult in reduced
and will provide for more efficient en route communica-
tion and more rapid di tribution of flight movement
report to th many office \\'hich r quir uch infor-
mation.
Of pecial note wa the inauguration during 1961 of
a continuou maintenance program for our jet aircraft.
Prior to the introduction of thi program major O\er-
haul , a accompli h d by remo\ino- each aircraft from
er ice for a period of approximate! ' two , eek after
ach 2.500 hour of flying. In the continuou mam-
Photographs , fop to boffom-New Main Base hcuses a
greaf variet y of service fu nctions. Examples:
Efficienf computer room is fh e hearf of North west's
Un ivac electron ic reservations system.
0 Electra II propeller hub checked in propeller shop.
Controls in enqine test build ing duplicafe those in
airplane cockpit .
Modern Right kitchen is capable of producin g 10,000
in-Rig ht meals per do y.
tenance proo-ram, portion of the overhaul work a ign-
ment are allocated to each of the line maintenance
check period , performed every night and during normal
layover . The re ult i increa ed utilization and the
ability to keep the e high-co t aircraft in service during
peak traffic period . 11 14 pure-jet aircraft thus are
kept working and producing re\enue, with maintenance
performed in off-peak hours.
Thi exten ive program of ground facility moderniza-
tion ha been de iQTled, along with our flight equipment
program to provide the utmo t in er ice, comfort and
con\' nience to our cu tomer .
CREDIT AGREEMENTS
Early in 1961 your Company amended prior credit
agi: ement to provide a portion of the financing re-
qmred to purcha e ix Boeing 720B fan-jet aircraft.
The ere di t agreement were amended further in 1961
t~ permit acqui ition of three additional 720B' , one by
dir ct :purcha e and two under lea e from Boeing with
an option to buy. The latter amendment was accom-
pli hed without increa ino- our loan limit and without
change in repayment date under the bank and insur-
ance company agreement .
A of Dec mber 31 1961, the total credit line ex-
tended your company under current loan agreements
had been drawn down. R epayment chedules become
effecti\e in 1962 with re pect to bank loan and repay-
ment \\'ill continue with re pect to the conditional con-
tract of ale on purcha e of the additional Electra II
aircraft. s of December 31 1961, there wa a total of
11.521,560 of debt financing repayable during 1962
\,ith the major portion of thi amount payable on and
after J une 30. 1962.
ROUTES
During the year there were no ignificant additions to
or chano-e in the route tructure of orthwest Airline .
till pendino- before the Civil Aeronautic Board are
the petition of ariou carrier applicant for recon idera-
tion of the Pre iden t' deci ion of J anuary 19, 1961 in
the Tran -Pacific R oute Ca e. That deci ion di approved
all application for additional route authority between
the "Cnited tate and the O rient. mono- the e is
orth,,e t petition for recon ideration of the failure
Conversion of five of Northwest Orient Airlines' DC-7C's
fo freighter configuration , including installation of an 81
by 124-inch forward cargo door, facilitated an increase in
fr eight lift. Piece of paper-making machinery {left) , boarded
af Milwaukee en route fo Gothenburg , Sweden , faxed every
available inch of the huge doorway.
to certificate orthwe t over the Central Pacific route
from California to Tokyo, via H awaii.
The Civil Aeronautic Board approved the merger of
nited Air Line and Capital Airlines during the year.
orthwe t and other affected carrier vigorously pro-
tested thi action which made United the largest of all
nited tates carriers. s a consequence orthwest has
been ubjected to ub tantial diversion of trnffic in im-
portant market erved by it. Both the establishment of
new one-carrier and one-plane competition in certain
market and more inten ive competition by United in
market in which orthwe t previously competed with
Capital have had adver e effects on orthwest revenues.
ub eq~ent to the nited-Capital merger, the Civil
Aeronautic Board in tituted the United Air Lines, Inc.
Competitive Service Inve tigation to consider authoriz-
ing_ competition in the Tew York-Cleveland; Cleveland-
Chicago, Cleveland-Philadelphia and Detroit-Philadel-
1:hia market - tho e in which United acquired monopo-
he a the result of the merger. 1 orthwest is an appli-
cant for uch route authorizations. The proceeding still
1s m a preliminary tage before the Civil Aeronautic
Board.
orthwe t also ha on file with the Board a number
of other application for new route authorities to im-
prove and trengthen its route structure. These are
awaiting procedural action before the Board.
PERSONNEL
Northwe t Airline ' 5,803 employees, assigned to 55
location in the nited tates Canada and the Orient
are working as a team under i~proved policies and pro~
cedure designed to erve the public better and meet the
challenge of increa ed competition.
The employee who joined orthwe t during the year
were able .to adju t themselves rapidly to their new
a signm~n~s through cla sroom training in the Company's
ne-w trammg center and to perform their work with
speed and efficiency. Empha is i being placed on im-
prove~ on-the-job training for all employees, to maintain
proficiency and to develop new kills and techniques in
lin with technological advance in the airline industry.
. Durin~ the year collective bargaining agreements were
1gned with three group of personnel repre enting more
than 2 000 employee . egotiations with six other units
of employee were in progre s during the year and settle-
ment are expected early in 1962.
The co tly trike by flight engineers, which com-
menced on a partial ba is on October 11 1960 and
wa _expanded to all equipment on Janu~ry 9, '1961
contmued through February, 1961. All aircraft includ-
ing jet , now are being operated by a cockpit' crew of
three men.
Your Company i proud of the fact that more than
60 per cent of it 5 803 employees have more than five
ear of ervice. During 1961, the list of those with 25
or more year of ervice increased to 92 employees.
STATEMENT OF EARNINGS
NORTHWEST AIRLINES, INC. and SUBSIDIARY
Year Ended December 31 .,
OPERATING REVENUES 1961* 1960
Passenger ........................................................................................... ......... ....... .
United tates mail. .......................................................................................... .
Foreign mail. .......................................................................... ............................ .
Excess baggage ................................................................................................... .
Freight and ex pre ......................................................... .................................. .
Charter and other tran portation ............................................ ....................... .
Mutual Aid Agreement- net- T
ote G ..................... ..................................... .
Other ................................................................................................................. .
OPERATING EXPENSES
Flying operations ...................................................................... ......................... .
Maintenance .............................................................................. ................. .... .. .
Passenger servic ............................................................................................... .
Aircraft and traffic servicing ....................... ................ .................... ................ .
Reservations, sales and advertising .. ............................................... .......... ...... .
Ad . . . d 1
D ;~:\~;i~t~ v:n~n ar!:~~;:ti~~ ... . . . .. . . . ." ." ." ." ." ." ." ." . ." ."."." ."."."."." ." .... ." ."."." ." ."." ." ." ." ." ." ." ." ."." ." ." ." ." ." ." ." ." ." ." ." ." ." .... ."." . ." ." ." ." ... ."
85,970,900
10,473,605
1 22 7 259
914 423
7 528 793
1 481 ,883
2 563 150
892 499
111 052,512
29,268 829
17 252,807
7 178 262
12,445,830
11 ,973 343
6,093 596
17,117,959
101 330,626
$ 9,721,886
OTHER DEDUCTIONS AND INCOME
Interest on long-term debt. ............. ........... .................. ........................ ...... ....... $ 4,352,867
Other income, les miscellaneous deduction ....................... .................... .... ... 6,385
$ 4 346 482
EARNINGS BEFORE TAXES AND PROPERTY DISPOSALS .............. ............. $ 5,375 404
TAXES ON EARNINGS (including deferred taxe $2,868 900--1961 ;
$993,030- 1960 ari ing from accelerated depreciation methods ) .......... 2,912,300
NET EARNINGS FROM OPERATIONS ... ........................................................ ... $ 2,463 104
PROFIT FROM DISPOSALS OF PROPERTY, le applicable income taxe
(1961- $320 500; 1960- $10,000 net credit) ............... ............................. 1198 035
NET EARNINGS FOR THE YEAR ..................................... ................................. $ 3,661,139
$ 97,680,028
9,680,298
1,0Q0,507
1,183 124
10,185 069
822,724
922,128
1 857 601
$123,361 479
$ 37,605 697
22 872 426
8 840,1 :H
15,421,537
13 789 086
5 925.373
14,413,535
$118 867,785
$ 4,493,694
$ 2,683,480
111,729
$ 2,571,751
$ 1921943
996 030
$ 925 913
699 852
$ 1,625 765
,'<Operation w re curtailed in the first quarter of 1961 a a result of a flight ngineers strike.
See notn to financial statem ents.
STATEMENT OF FINANCIAL POSITION
NORTHWEST AIRLINES, INC. and SUBSIDIARY
ASSETS
December 3 I,
CURRENT ASSETS 196 1 1960
,ah ................................................................................... ........... ...................... $ 15,991,175 $ 18,360,434
nit cl t t . Treasury bill at cost , .
._,hich approximate.
1narket pri ..... ..... .' .................... ..................... ................................ ............. .
Trade rec i\'ahlc .. le .. allowanc of 19 1- $105,000 1960- '] 00 000 ..... . 12,532,949
Flight equipment part.. at a, rag o t. le. s allowance for d pr iation
( I 61 , 1,793.5 8: 1960 $1 ,837.907 ) ........................... . 5 880 199
Maintenan and opera ting uppli .-at av rag co l ........ ... ....... ...... ......... . 2,377,4-24
Pr paid exp ns ... ............................................................................................ . 2,064,7 21
TOTAL CU RRENT ASSETS $ 38,846 468
INVESTMENTS AND OTHER ASSETS
R latC'd in lu ll: inwstm nts and acl\'an c. at cost.. ..... ....... ................ ..... . 154 890
PROP ERTY AND EQUIPMENT - at c . t
Fli<Tht qui pm nt ................................................................... .......................... $170,772, 1 6
Le .. allowan c. for deprecia tion <1ncl obsolescence ........................ ... 37,286,701
133 4-85,435
d\'an c. on p11r ha. e on tract. .................... ........... ........................... .......... .
133,4-8 435
th r pr perty nd quiprnent .......................... ................. .................... ....... $ 21 429,995
Le. allowan c. fo r deprecia tion .................................. ................................... 10,919,266
DEFERRED CHARGES
T
namortiz cl training and other o. t. in onncction wiLh air rafl
$ 10,510,729
$143, 96 164
n t. and routc-.................................................. .............. ........................... $ 4,930,453
1,057,525
117,7 16
R. ntal. ......... ........ ....................... ..... ......................................... .... ..................... .
0th 1 ....
$ 6,105 694
$189,103 216
ec no/f's to finan cial statements.
998,785
12,312518
5,723,247
3,078,237
1,424 223
- - -
$ 4-1 897,444
$ 140,473
$121,440,828
34,483,475
$ 86,957,353
4 164-,530
$ 91 121 ,883
$ 21,39 ,592
10,618,889
$ 10,780 703
$101,902,586
$ 3,385 197
870,7 I 9
501 432
4 757,348
$14-8,697 ,851
LIABILITIES AND STOCKHOLDERS' EQUITY
CU RR ENT LIABI Lill ES
December 31,
1961 1960
Accoun ts payable, collections as agent, etc .......................................... .... ....... $ 12,021,592 $ 11,342,208
alaries, wage and vacations ......................................................................... . 5,416,706 4,953,407
Air travel card deposits ....................... ........................ ..................... ............... . 1,176,400 1,184,475
Unredeemed ticket liability ... ...................... ....... ...... .... ................................... . 1,012,669 834,534
Incorn tax s- estimated ............... ......................... .. ........................... ....... . 663,338 574,861
urrrnt rnaturitie of long-term debt .................. ............................... ........... . 11 ,521,560
- - - - -
TOTAL CURRENT LIABILITIES $ 31,812,265
LONG-TERM DEBT, I urr nt maluritie - ote A
Notes payable to insurance companies ....... ........................................... ........ $ 40,000,000
ote payable to banks.......................... ....... .......................... ......................... 34,000,000
ubordinal d note payabl .......................... .............................. .................. ... 7,032,285
onditional al on tract .......................... ................. .. ........... ............... ....... . 9,253,541
$ 90,285,826
DEFERRED CREDITS
In om tax arising from accelerated depreciation m ethods ...... ....... ...... $ 11,628,600
th r .................................................................................................................. 1,200,000
STOCKHOLDERS' EQUITY ote
umu lative Pref rred tock, $25 par value;
authorized 1 000,000 hare i uablc in seri s:
5% Convertible Series; authorized 457,873 share ; i ued and
$ l 2 828,600
outstanding 4-51 234 hare - ote B ...................................... ..... ....... $ 11 ,280 850
ommon tock, $10 par value; authorized 4,500 000 shares;
i u d and outstanding 1961- 1,386,403 har ;
1960- 1 384,903 hare - ole D .......................................... ............. .. ....... . 13 864,030
apital urplus ................................................................ ............. ............. . 6 586,281
R L
ain d earnings ............................................................................................ . 22,445,364
$ 54,176,525
COMMITMENTS AND CONTINGENT LIABILITIES - te E
-- - -
$189 103,216
See notes lo fin ancial statements.
$ 18,889,485
$ 40,000,000
28,500,000
$ 68,500,000
$ 9,115,800
$ 9,115,800
$ 11 280,850
13,849 030
6,577,695
20,484,991
$ 52,192,566
$148 697,851
ST A TEMENTS OF CAPITAL SURPLUS
AND RETAINED EARNINGS
NORTHWEST AIRLINES, INC. and SUBSIDIARY
Year Ended December 31 ,
CAPITAL SURPLUS 1961 1
960
Balance at beginning of year .................................................................... ....... $ 6,577 695 $ 6,577,589
Additions arising from:
Sale of shares of Common Stock under option agreement , in excess
of par value ................................................................................ .... .... .. .... . 8 512
Conversion of shares of Preferred Stock into shares of Common Stock. .. . 74 106
Balance at end of year ...................................................................................... $ 6,586,281 $ 6,577 695
RETAINED EARNINGS
Balance at beginning of year ........................................................................... $ 20,484,991
Add net earning for the year................. .. .............. ....................................... 3,661,139
$ 24,146,130
Deduct cash dividends on:
5 % Preferred Stock- annual rate of $1.31 a share .......................... , 592,245
Common Stock- $.80 a share......................................... ....................... 1,108,521
$ 1,700,766
Balance at end of year ............................ ......................................................... $ 22 445,364
To the Stockholders and
Board of Directors
Northwest Airlines, Inc.
Saint Paul, Minnesota
See notes to financial statem ents.
ACCOUNT ANTS' REPORT
$ 20,559 391
1,625,765
$ 22,185 156
$ 592 244
1,107,921
$ 1,700 165
20,484,991
We have examined the statement of consolidated financial position of orthwest Airline , Inc. and
subsidiary as of D ecember 31, 1961 and the related tatements of consolidated earnings, capital surplu
and retained earning fo r the year then ended. O ur examination was m ade in accordance with generall y
accepted auditing standa rds, and accordingly included uch te t of the accounting records as we on-
sidered necessary in the circumstances. We have made imilar examinations for prior ear .
In our opinion, the accompanying statement of fin ancial po ition. earni nQ: . ap ital urplu an::! re-
tained earning present fairly the consolidated finan cial po ition of or thwe t irlines, Inc. and sub idian
at December 31, 1961 and the con olidated results of their operations for the ear then ended, in on-
formity with generally accepted accounting principles which (except for the inclusion of flight equipment
part in urrent a set whi h we approve) have been applied on a ba i consi tent with that of the pre-
ceding year. Further it is our opinion th at th e five year urnmar of earning pre ent fa irly the infor-
mation stated therein.
aint Paul Minnesota
F bruary 14, 1962
ER T , E T
Ce,tified Public A ccountants
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC. and SUBSIDIARY
December 31, 1961
Note A- Long-Term Debt
ote Purchase Agreement with twelve insurance companies
provide for agfsrcgate borrowings of $40,000 000 at 6o/ which
are payable $3,000,000 annually commencing October 1, 1966
with the balance of $4,000,000 due October 1, 1978. Certain
optional prepayment at par are permitted. The Agreements
contain other provisions with respect to redemption as a whole
(but not from borrowed funds) at premiums ranging from
7% to 1 %.
The mendatory Credit Agreement with fifteen banks pro-
vides for a term loan of $42,500,000 at 5% payable $8,500,000
each year 1962 through 1966. Optional prepayments at par
are permitted except from borrowed funds in which event a
premium of % is required.
The $7,500,000 Promissory otes were issued in connection
with the purchase of ix Boeing 720B turbojet aircraft and are
ubordinate to the notes payable to insurance companies and
to banks. These notes bear interest at 6% and are payable
$1,500,000 annually 1967 through 1971. Certain prepayments
based on "net earnings" as defined are provided for and,
computed on 1961 net earnings, are due in 1962 in the
amount of $467,715.
Conditional sales contracts for the purchase of seven Lock-
heed Electra prop-jet aircraft bear interest at 5 % and are
pay able over sixty monthly periods ending in 1966.
The Company has agreed, among other things, that it will
not permit: (a) its working capital at any time to be less than
certain specified amounts and (b) its funded debt to exceed
certain percentage of net tangible as et , net worth, and de-
preciated value of flight equipment, as these terms are defined
in the Agre em en ts. At D ecember 31, 1961 the Company had
complied with the covenants then in effect.
ote B- 5% Convertible Cumulative Preferred Stock
This tock erie has voting rights; is entitled upon voluntary
liquidation to ,$25 a share plus accumulated unpaid dividends;
is convertible at any time on the basis of $25 a Preferred
Share into Common Stock at a conversion pric:e of $26 a
hare, subject to adjustment in certain events; and is redeem-
able in whole or in part at prices ranging from $26 a share be-
fore J anuary 1, 1964 to 25 a share after December 31, 1973,
together in each case with accrued dividend .
ote C-Re trictions on Stockholder ' Equity
The ote Purchase greements and the Bank Credit Agree-
ment establish an aggregate dollar maximum for the declara-
tion and payment of ca h dividend~ on Common Stock, and
for the distribution on redemption purchase or other acquisi-
tion of shares of any class of Capital Stock. The amount of
retained earning available for such purposes at D ecember 31,
1961 was $2,794,622.
The Agreements do not prohibit the payment of stock
dividends and do not restrict dividend payments on the 5 %
Convertible Series Cumulative Preferred Stock.
ote D-Common Stock Re er ation and Options
t the end of the year, 1,000 shares of Common tock were
ubject to an outstanding option exercisable not later than
October 30, 1965 by a Company officer at $13.42 a share
which was not less than 95% of market at the date of grant.
During the year option for 1,500 hares were exercised.
An additional 10,100 shares are reserved for options which
may be granted in the future to officers and employees and
433,878 share are reserved for issuance upon conversion of
the 5 % Convertible Series, Cumulative Preferred Stock.
ote E- Commitment and Contingent Liabilities
The Company had leased for twenty-three months, with
renewal option for twent months, two Boeing 720B turbojet
aircraft at $80 000 per month each. The lease agreements
provide for purchase at an option price of $5,249,366 less
50 % of rental paid.
Annual payments of approximately $1,700,000 from date of
occupancy will be required under the Company's Agreements
for lease over 25 to 40 years of overhaul bases, hangars and
administrative facilities at W old-Chamberlain Field, T win
Cities I nternational Airport International Airport, ew York
and O 'H are International Airport, Chicago.
The Company was contingently liable at D ecember 31, 1961
in the amount of $8,521 for the repurchase of travel contracts
old and in the amount of $967,114 for discounted notes receiv-
able arising from the sales of assets. O ther contingent liabili-
ties include those inherent in the Company's operation. While
the amount of these contingent liabilities is not now deter-
minable, the management of the Company is of the opinion
that it is not material with respect to the Company's financial
po ition.
ote F- Mail Tran portation Compensation
o final determinations of total mail compensation have
been made by the Civil Aeronautics Board on international and
domestic routes for 1951 and on international routes for 1954.
The ultimate effect of any redeterminations are not known at
thi time.
In J anuary 195 7, the Board issued an order asking the
Company to show cause why temporary compensation for 1954
should not tentatively be reduced $1 ,406,000 pending final
hearings. The Company has refunded this amount and re-
corded the adjustment in prior years.
In J anuary 1960, the Board issued an order proposing to
establish a final subsidy-free mail rate for 1954 and asking the
Company to show cause why the remaining $1,833,000 of mail
compensation subsidy should not be refunded. N o effect has
been given in the accompanying financial statements to this
proposed reduction which would approximate $843,000 net
after income taxes of $990,000.
The Company is contesting both of the above actions.
ote G-Mutual Aid Agreement
In 1960 the Company entered into a Mutual Aid Agreement
with certain airlines under which any party to the agreement
suffering a strike as defined therein is to receive from the
other airlines an amount equal to the increase in their revenues
attributable to the strike less applicable added direct expenses.
The Civil eronautics Board is investigating the agreement
and in the event of its disapproval, Mutual Aid payments are
to be refunded to the paying airlines to the extent affected by
such disapproval.
FIVE YEAR SUMMARY OF EARNINGS
(Amounts Shown in Thousands)
NORTHWEST AIRLINES, INC. and SUBSIDIARY
Five years ended December 31 , 1961
OPERATING REYE UES
P assenger ..................... ................ .... ........ ... ... ............... .... .. .. . $
United States mail. ....... ........................................................ .
Foreign mail. ... ................................ . . . . . ... ............. ................ .
Excess baggage ............... .............. ... ......... ..... .......... ... ........... . .
Freight and express .... ......... .............. ...... .......... ................... ..
Charter and other transportation ........................ ... .. ............ .
Mutual Aid Agreement.. .............. . .. .......... .. ... ....... .
Other ........................................ .. . ............. .... ........ .
1961
85,971
10,474
1,227
914
7,529
1,482
2,563
893
$111 ,053
OPERATING EXPENSES
Flying operations ...... ....... ........ ... .. ................ ...... ... .......... ... ... $ 29,269
Maintenance 17,253
Passenger service .......... ... ................. ........ ... ... .... ......... .... ..... .. 7,178
Aircraft and traffic servicing ... .. ........ ..... ... ...................... .. ... 12,446
Reservations, sales and advertising ... ... ........... .....
11,973
Administrative and general. .. .. ..................... ..... .... 6,094
Depreciation and amortization ......... ................. ... .. 17,118
$101,331
$ 9,722
OTHER DEDUCTIONS, NET ................................ ........... ... . ......... . 4,347
EAR INGS BEFORE TAXES AND PROPERTY DISPOSALS ............. $ 5,375
TAXES ON EAR INGS .......... ........ ..... ...... .................. ................... 2,912
NET EAR1 I GS FROM OPERATIONS .............. ..... .................... .... $ 2,463
PROFIT FROM DISPOSALS OF PROPERTY .......... 1,518
Less applicable income taxes ........... .. ............ .. . 320
ET PROFIT FROM DISPOSALS OF PROPERTY ....................... .... $ 1,198
.~ET EARNI GS FOR THE Y EAR ...................................... .......... .$ 3 661
1960
$ 97,680
9,680
1,031
1,183
10,185
823
922
1,858
$123,362
$ 37,606
22,87 2
8,840
15,422
13,789
5,926
14,413
$118,868
$ 4,494
2,572
$ 1,922
996
$ 926
$ 690
( 10)
$ 700
$ 1,626
1959 1958
$100,641 $ 81,llG
10,174 9,265
1,045 963
1,349 1,230
10,532 7,437
526 1,237
1,763 709
$126,030 $101,957
$ 37,610 $ 29,747
21,771 17,090
8,465 6,034
15,511 12,207
14,011 10,753
6,443 5,450
11 ,310 8,638
$115,121 $ 89,919
$ 10,909 $ 12,038
1,487 1,387
$ 9,422 $ 10,651
5,020 5,665
$ 4,402 $ 4,986
$ 1,822 $ 828
510 200
$ 1,312 $ 628
$ 5,714 $ 5,614
1957
$ 66,674
7,587
76}
1,004
6,537
226
641
$ 83,432
$ 25,555
16,037
5,061
11 ,689
9,218
5,037
5,851
$ 78,448
$ 4,984
994
$ 3,990
2,100
$ 1,890
$ 3,241
312
$ 2,929
$ 4,819
NORTHWEST AIRLINES, INC. ANNUAL REPORT 19(fHl
Calenda r
Year
196 1*
1960
1959
1958
1957
1956
1955
1954
1953
1952
NORTHWEST o,.wit, Al RLI NES
SYSTEM MAP
PROGRESS FOR THE
Total
Passenger
Express
Operating and Freight
Revenue Revenue Revenue
$ I I 1,052 ,5 12 $85,970,900 $7,528,793
123 ,36 1,479 97,680,028 I 0, I 85,069
126,029,50 I I 00,641 , I 56 I 0,53 I ,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
7 1,088,043 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 4,78 1,081
LATEST 10 YEARS
Revenue Mail
Passenger Ton
Miles Miles
1,36 1, 789,877 26,954,774
I ,653 ,966,43 1 24,424,036
I ,738, 138,265 24,435,745
1,408 ,742 ,516 21 ,892,299
1,205,764,597 17,803 ,356
1,094,121,438 16,780,406
1,017,400,443 15,407,054
909,674,550 6,990,462
85 I, 174,754 5,002,605
720,046, 264 5,0 I 7,993
*O perations were curta ile d in the first qua rter of 1961 as a result of strike by flight engineers.
...
JMORE
HlliGTOH
10ft
U.UDleO.H(
ARWA.T li'1A.ltU
- - -
Total
Plane Miles
Flown
33 ,837,570
48,765,657
49,282,475
40,72 1, 143
35 ,629,289
32,46 1, 321
30,909,6 10
27,029,860
27,816,827
23 ,2 10,634
Print ed in U.S.A .