Northwest Airlines Annual Report 1967

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NORTHWEST ORIENT AIRLINES 1967 ANNUAL REPORT
1967 HIGHLIGHTS
1967 1966t
Total Operating Revenues $383,979,067 $311,318,511
Operating Income 112,757,625 100,654,479
Net Earnings for the Year 58,715,983 53,135,922
Per Common Share 6.42 5.81
Stockholders' Equity 263,986,444 212,726,698
Per Common Share 28.85 23.25
Dividends Paid 6,404,737 5,489,771
Operating Expenses--
Per Available Ton-Mile 14.5^ 15.6jz!
Per Revenue Ton-Mile 30.3^ 30.1jzf
Revenue Traffic-
Passengers Carried 6,489,295 4,963,275
Passenger-Miles Flown .. 4,901,520,000 3,699,851,000
Ton-Miles, Mail, Freight and
Express 235,375,000 175,872,000
Common Shares at Year End 9,149,626 9,149,626
Employees at Year End 10,257 8,875
fOperations in 1966 were curtailed during a strike from July 8 to August
We regret to report the untimely
death of Mr. Alonzo Petteys. Mr.
Petteys served as a Member of the
Northwest Airlines Board of Directors
from April 3, 1945 until his death
on March 21,1968. We are saddened
at the loss of Mr. Petteys, whose
interest and active leadership will
be sorrowfully missed.
41st ANNUAL REPORT TO STOCKHOLDERS
FROM THE PRESIDENT
Northwest Airlines established new
records in all traffic categories dur
ing 1967, i.e. passenger, freight and
mail traffic, and the financial re
sults were the best in the history of
your Company.
Operating revenues increased
23.3%, from $311,318,511 in 1966
to $383,979,067 in 1967. Net earn
ings, a record for the Company,
totaled $58,715,983, representing
$6.42 per share of common stock
as compared to $5.81 in 1966.
To transport the increased passen
ger and cargo traffic, 11 Boeing
aircraft were delivered to Northwest
during 1967, resulting in a total
fleet of 86 at the year end. The cost
of the new aircraft and related spare
parts was $74,000,000. Included in
the delivery were six 727-100's and
five 707-320's.
Additional new aircraft are sched
uled for delivery in 1968 through
1970, including 16 727-200's, two
727-100's, 10 707-320's, and start
ing in March of 1970, 10 Boeing
747's, all of which will be delivered
duringthe balance of theyear. Total
expenditures for these aircraft, with
spare engines, will be approximately
$376 million. Also positions have
been reserved for six Boeing SST's
with scheduled delivery in 1976-
1977.
At the beginning of 1967, your Com
pany had an investment of almost
$442 million in aircraft, plant and
facilities. By the end of 1970, the
projected figure will be approxi
mately $874 million, almost double
the Company's investment as of
January, 1967. Additions and
improvements at our terminals,
hangars and flight kitchens are mak
ing positive contributions to the
effectiveness of your Company. In
addition to the material invest
ments, 1,382 new employees were
added to the Company payroll this
year. Three years ago Northwest's
employees totaled 6,700 through
out the entire route system. During
1967 that figure passed the 10,200
mark.
Continuous efforts are being made
by Northwest to provide new and
improved servicestoadditional com
munities through numerous route
case proceedings. In addition to the
Transpacific and Twin Cities/Cali
fornia Route Cases, your Company
is seeking expanded opportunities
in several other major proceedings.
Increasing competition by domestic
and foreign carriers, continued
reduction in fares, and rising opera
tional costs necessitate vigorous
Company efforts in these route
cases.
Northwest Airlines, a strong, effec
tive competitor with an excellent
growth and performance record, and
with the financial strength to imple
ment these new routes, is qualified
to meet the public need for expanded
service and strengthened competi
tion.
During 1967 the Board of Directors
elected four new executive officers:
James A. Abbott, Vice President
Orient Region; Clayton R. Brandt,
Vice President Purchasing and
Stores; Robert W. Campbell, Vice
President Budgets; and Richard
Kitchen, Vice President Public Rela
tions. William E. Huskins, formerly
Vice President Orient Region, is now
Vice PresidentCommunications and
Data Services.
Clyde B. Morgan, a member of your
Board of Directors since May 20,
1957, resigned his position in
November of this year.
We believe 1968 will be a success
ful year for Northwest Airlines.
Improved facilities, additional air
craft and controlled operating
expenses will provide strong com
petition in the domestic and orient
markets. Our foundation for growth
is sound and well-established.
We are looking forward to the chal
lenges of 1968, and with the con
tinued outstanding support of our
employees and stockholders, we are
prepared to meet those challenges.
Sincerely,
President
BOEING 727 FAN-JETS. Built to get in and out of smaller airports, the
Northwest 727 takes off in seconds and rides quiet as a breeze. We have
30 of these in our fleet with two additional 727-100's on order for 1968,
and 16 727-200's scheduled for delivery in 1968-69. (727-100 length:
116 feet, 2 inches--range: 3,050 miles--maximum speed: 606 mph.)
BOEING 720B FAN-JETS. Powerful. Versatile. Good for both long and
short trips. Sixteen of these transcontinental Fan-Jets are flying North
west passengers to major cities coast to coast. (Length: 130 feet, 6 inches
-- range: 4,430 miles--maximum speed: 606 mph.)
BOEING 320 INTERCONTINENTAL FAN-JETS. Twenty-six of these long-
range Fan-Jets are now flying Northwest passengers between the U.S.A.
and the Orient--nonstop between Seattle and Tokyo. Another 10 of
these aircraft will be delivered to Northwest in 1968. (Length: 145 feet,
6 inches--range: 6,900 miles--maximum speed: 606 mph.)
COMING IN 1970! THE BOEING 747 FAN-JETS. Northwest has placed
an order for ten of these 370-490 passenger intercontinental Fan-Jets to
be delivered in 1970. This newest addition to the Northwest fleet will
represent significant improvement in passenger and cargo economics,
passenger comfort, cruise speed and operational reliability. (Length:
228 feet, 6 inches--range: 8,290 miles--maximum speed: 657 mph--
gross weight: 710,000 lbs.--payload: 229,200 lbs.)
sition on six United States SST's. These aircraft will make it possible
to fly from the West Coast to Tokyo in 4 hours, 28 minutes.
0'
100'
200'
300'
FLEET, ROUTES AND SCHEDULES
Your Company broadened its opera
tions in all phases during 1967,
indicative of Northwest's construc
tive expansion programs in both
domesticand international markets.
Continued efforts are being made
to compete effectively with foreign
and domestic airlines, and at the
same time maintain our high stan
dard of service and industry
leadership.
FLEET
Service improvements during the
year were made possible through
the addition of 11 Boeing fan-jet
aircraft, which brought our total
fleet to 86 aircraft. A total of 38
jet aircraft are now on order for
delivery within the next three years.
Our present jet fleet includes 26
707-320B's and C's, 16 72GB's and
30 727-100's.
During the year one Electra aircraft
was sold and the last DC-7C piston
airplane was taken out of revenue
commercial service.
ROUTE DEVELOPMENTS
Two important cities were added to
our routes during 1967. Inaugural
flights were made to Osaka, Japan
in April and Hilo, Hawaii in Decem
ber. Northwest's Hawaii flight origi
nates in New York, with one-plane
service to Philadelphia, Cleveland,
Chicago, Seattle/Tacoma and Hilo,
the first one-plane service to Hilo
from any city other than a West
Coast terminal.
Passenger and cargo flights were
increased throughout the system,
including nonstop Billings-Chicago
and nonstop Jamestown-Twin Cities.
Increased service also was provided
New York, Milwaukee, Detroit,
Seattle, Spokane, Portland, Chicago,
Miami and the Twin Cities. Total
Transpacific frequencies were
increased from 25 to 29 weekly
round trips, and all-cargo service
to the Orient was initiated between
New York and Tokyo, Seoul, Oki
nawa and Osaka, with intermediate
U.S. stops at Chicago, Seattle and
Anchorage. Substantial increases
also were made in all-cargo services
throughout the domestic system.
Route cases in which your Company
has requested expanded or new
authority include the Transpacific
Route Case, Twin Cities-California,
Gulf States-Midwest Points, Service
to Omaha, Twin Cities-Denver,
Pacific Northwest-California and
other important route cases. Civil
Aeronautics Board approval has
been requested for one-plane ser
vice to be provided by Northwest
and Pan American between the Twin
Cities and Europe.
Service to Chicago's Midway Airport
will begin in April of 1968, and new
hangar facilities at Cleveland are
under construction.
MILITARY
Northwest is continuing its policy of
providing service for our country's
military efforts. Revenue passenger-
miles for the military in 1967
increased 36% over the preceding
year with a total of 1,675,391,000
miles flown. Your Company flew
11,989,000 revenue plane-miles in
1967, approximately 26% increase
over last year.
FINANCIAL RESULTS AND TRAFFIC GROWTH
REVENUES AND EXPENSES
Operating revenues reached a new
high of $383,979,067, an increase
of 23.3 per cent over the previous
high of $311,318,511 in 1966, a
strike year.
System passenger revenues
increased 27.6 per cent to
$275,873,101. This increase was
achieved despite a 3.6 per cent
decline in the average revenue per
passenger-mile in 1967. The decline
was the result of the Company's
reduction in Transpacific economy
fares and expansion of the Orient
off-season fare period. Thedomestic
fare yields were lower and showed
the effect of liberalization and
increased popularity of the Discover
America fares, increased use of mili
tary and youth standby fares,
and a greater share of traffic in
coach service. Coach service
accounted for 84.4 per cent of the
total passenger-miles, up from 82.9
per cent in 1966.
Revenue from freight, mail, express
and excess baggage totaled
$65,016,385 in 1967, up 24.9 per
cent from 1966.
Increased revenues were received
from Northwest's extensive com
mercial and military charter opera
tions with a total of $41,798,533--
an increase of 6.6 per cent over
1966. The Military AirliftCommand
contract extends to June 30, 1968,
and we will seek a renewal contract
for fiscal 1969.
Operating expenses increased to
$271,221,442 in 1967, up 28.7 per
cent from a total of $210,664,032
EARNINGS & INCOME TAXES PER SHARE
in 1966. Expenses include depre
ciation and amortization of
$33,194,660 in 1966 and in 1967
$41,252,146. Unit operating ex
penses continued to decline from
15.6^ per available ton-mile in 1966
to 14.5^ in 1967. This favorable re-
sultwas achieved through expanded
fan-jet services of greater capacity,
increased utilization of our flight
equipment and continued atten
tion to the control of expenses in
all categories.
NET EARNINGS
Record net earnings were achieved
in 1967 amounting to $58,715,983
or $6.42 per share of common stock
compared with $53,135,922 or
$5.81 per share in 1966. Operating
income was a record $112,757,625
in 1967, up 12.0 per cent from
$100,654,479 in 1966. Pretax non
operating items included $3,724,-
766 interest expense and $431,214
gain on disposals of property. The
latter figure compares with $1,358,-
702 in 1966.
All investment tax credit available
to Northwest as a result of equip
ment purchases has been used to
reduce the current income taxes.
We are continuing to amortize over
an eight-year period the net income
benefit of the investment tax credit.
Such credits included in net earn
ings amounted to $3,117,000 in
1967, up from $2,292,000 in 1966.
There remains an unamortized
investment credit of $19,894,700
to be reflected in income in future
years.
Cash flow from 1967 opera
tions included generation of
$116,271,129 from net earnings,
depreciation and amortization,
deferred income taxes and invest
ment credit. Additional funds of
$1,509,862 were derived from the
disposals of operating property.
Major application of funds included
fleet addition sand advance deposits
for aircraft on order, totaling
$92,242,686, reduction of long
term debt of $11,000,000 and
repayment of 1951 mail pay settle
ment of $1,051,500 net after taxes.
In addition, cash dividends of
$6,404,737 were paid in 1967, at
an annual rate of 70^ per share.
With the March 1968 quarterly div
idend, increased to 20^, your Com
pany will have completed 13 years
of consecutive quarterly cash div
idends.
RECORD GROWTH
During 1967, Northwest Airlines
increased revenue plane-miles in
scheduled services by 37.8 per cent
and available ton-miles increased
by 41.8 per cent.
In 1967 Northwest Airlines
approached the 5 billion revenue
passenger-mile mark, recording a
total of 4,901,520,246 revenue
passenger-miles in scheduled ser
vices--an increase of 32.5 per cent
over 1966. Our domestic passenger-
miles increased 32.8 per cent.
System passengers carried
increased from 5.0 million in 1966
to almost 6.5 million in 1967.
In 1967 system freight and express
ton-miles increased 29.6 per cent
and system mail ton-miles increased
40.7 per cent over 1966.
NORTHWEST AIRLINES, INC
FINANCIAL REPO
1967
FINANCIAL CONDITION
Northwest Airlines' financial condi
tion continues to rank among the
strongest in the airline industry.
Stockholders' equity at year end
amounted to $263,986,444, up from
$212,726,698 at December 31,
1966. Book value per common
share increased to $28.85 at the
close of 1967 compared to $23.25
per share last year.
Outstanding debt at the close of
the year amounted to $88,000,000.
During 1967 bank credit arrange
ments were revised to provide maxi
mum revolving credit of $135,000,-
000. Under the revised original
agreement, the Company has out
standing $40,000,000 which is the
maximum amount of the revolving
credit and which credit reduces
$5,000,000 quarterly beginning
January 1, 1970 and terminates
October 1, 1971. A new agreement
provides for an additional maximum
revolving credit of $95,000,000 of
which the Company has borrowed
$14,000,000. This new agreement
reduces $6,000,000 quarterly effec
tive April 1, 1970 and terminates
with a final $5,000,000 reduction
on January 1, 1974.
The Note Purchase Agreements with
insurance companies reflect $34,-
000,000 in outstanding debt. This
loan is payable $3,000,000 annually
with a final payment of $4,000,000
on October 1, 1978.
The Company has on order 10 Boe
ing 747 and 10 Boeing 707-320
aircraft which are intercontinental
range fan-jets, and two Boeing 727-
100 and 16 Boeing 727-200 short-
to-medium range fan-jets. Financ
ing for these orders is available
from existing credit arrangements
and from internal cash generation.
Northwest Airlines' strong financial
position is further evidenced by a
most favorable debt ratio amount
ing to 33.3 per cent of stockholders'
equity at year end.
NORTHWEST AIRLINES, INC. AND SUBSIDIARY
(Dollars in thousands except per share figures)
Operating Revenues
Passenger
Cargo
Mail
Charter and Other Transportation
Nontransport
Total Operating Revenues
Operating Expenses
Depreciation and Amortization
Other
Total Operating Expenses
Operating Income
Other Income and (Deductions)--Net
Earnings Before Taxes
Income Taxes
Net Earnings
Earnings per Share*
Stockholders' Equity
Book Value per Share*
Cash Dividends
Assets and Long-Term Debt
Flight Property at Cost
Flight Property at Net Book Value
Total Assets
Long-Term Debt
Unit Expenses
Per Available Ton-Mile
Per Revenue Ton-Mile
Per Cent of Operating Revenues
Statistics--Scheduled Services
Revenue Plane Miles (000)
Available Seat Miles (000)
Revenue Passenger Miles (000)
Passenger Load Factor
Revenue Passengers Carried
Freight and Express Ton-Miles (000)
Total Revenue Ton-Miles (000)
Statistics--Total Operations
Revenue Plane Miles (000)
Available Ton-Miles (000)
tAffected by major strikes in 1961 and 1966.
'Per share figures reflect two-for-one stock split in 1964 and again in 1966
and conversion of preferred stock as applicable in years prior to 1963.
1967 1966f 1965
$ 275,873 $ 216,239 $ 198,457
38,118 29,515 24,779
26,898 22,557 17,421
41,799 39,205 21,851
1,291 3,803 490
$ 383,979 $ 311,319 $ 262,998
$ 41,252 $ 33,195 $ 24,011
229,969 177,469 153,140
$ 271,221 $ 210,664 $ 177,151
$ 112,758 $ 100,655 $ 85,847
(2,391) (1,243) 224
$ 110,367 $ 99,412 $ 86,071
51,651 46,276 40,377
$ 58,716 $ 53,136 $ 45,694
$ 6.42 $ 5.81 $ 4.99*
263,986 212,727 165,081
28.85 23.25 18.04*
6,405 5,490 3,657
$ 467,859 $ 401,476 $ 304,072
346,029 311,803 233,858
481,206 422,040 333,311
85,000 96,000 72,000
14.5^ 15.6^ 16.4jz!
30.3jzi SO.ljzf 33.0^
70.6% 67.7% 67.4%
93,395 67,780 61,653
( 9,198,150 6,773,257 1 5,140,717
4,901,520 3,699,851 3,303,809
53.3% 54.6% 53.8%
1 6,489,295 4,963,275 2
4-,593,462
141,175 108,914 82,715
709,165 533,556 452,553
106,197 77,715 67,125
1,864,128 1,348,983 1,079,832
1964 1963 1962 196 If 1960 1959 1958
$ 163,807 $ 135,222 $ 121,781 $ 85,971 $ 97,680 $ 100,641 $ 81,116
18,402 13,745 11,828 8,443 11,368 11,881 8,667
15,313 14,233 14,228 11,701 10,711 11,219 10,228
12,965 6,442 2,646 1,482 823 526 1,237
1,123 (854) (30) 3,456 2,780 1,763 709
$ 211,610 $ 168,788 $ 150,453 $ 111,053 $ 123,362 $ 126,030 $ 101,957
$ 22,852 $ 19,159 $ 18,445 $ 17,118 $ 14,413 $ 11,310 $ 8,638
135,627 123,713 112,802 84,213 104,455 103,811 81,281
$ 158,479 $ 142,872 $ 131,247 $ 101,331 $ 118,868 $ 115,121 $ 89,919
$ 53,131 $ 25,916 $ 19,206 $ 9,722 $ 4,494 $ 10,909 $ 12,038
(U25) (4,166) (4,578) (2,828) (1,882) 335 (559)
$ 52,006 $ 21,750 $ 14,628 $ 6,894 $ 2,612 $ 11,244 $ 11,479
25,220 11,297 7,398 3,233 986 5,530 5,865
$ 26,786 $ 10,453 $ 7,230 $ 3,661 $ 1,626 $ 5,714 $ 5,614
$ 2.93* $ 1.43* $ .99* $ .50* $ .22* $ .79* $ 1.02*
122,960 68,436 59,712 54,177 52,193 52,267 48,224
13.46* 9.38* 8.20* 7.44* 7.17* 7.18* 6.69*
2,602 1,823 1,702 1,701 1,700 1,714 1,110
$ 219,523 $ 176,655 $ 169,413 $ 170,772 $ 121,441 $ 104,389 $ 90,608
160,925 127,074 122,980 133,485 86,957 76,647 56,461
237,226 196,765 186,887 189,103 148,698 130,097 105,061
45,000 64,996 74,968 90,286 68,500 50,000 34,250
18.5^ 21.7^ 23.9^ 27.6{ 27.8^ 26.5jzf 26.1jz$
39.7^ 46.8^ 50.2jzf 54.2^ 54.2sz bl.Oi 49.0^
74.9% 84.6% 87.2% 91.2% 96.4% 91.3% 88.2%
52,157 45,356 41,821 31,143 46,671 47,568 39,113
5,129,944 4,305,147 3,697,796 2,611,840 3,073,400 3,149,000 2,574,848
2,668,812 2,179,208 1,904,112 1,361,790 1,653,966 1,738,138 1,408,743
52.0% 50.6% 51.5% 52.1% 53.8% 55.2% 54.7%
3,663,077 2,911,914 2,437,342 1,723,667 2,139,547 2,138,970 1,827,129
55,100 39,417 35,179 23,035 32,480 31,377 22,285
351,886 284,732 254,033 182,704 217,722 225,110 181,678
55,477 47,207 42,718 31,658 46,963 47,732 39,670
856,612 657,761 548,159 367,301 428,782 435,977 348,235
NORTHWEST AIRLINES, INC. AND SUBSIDIARY
ASSETS
Current Assets
Cash
Accounts receivable
Flight equipment parts, at average cost, less
allowance for depreciation (1967--$3,629,343;
1966 $2,958,212)
Maintenance and operating supplies at average cost
Prepaid expenses
$ 20,688,578
36,584,754
11,204,320
3,123,356
2,778,914
Total Current Assets $ 74,379,922
Property and Equipment
Flight equipment at cost $467,859,160
Less allowances for depreciation 121,830,443
$346,028,717
36,771,136
Advance payments on new flight equipment
Note C
$382,799,853
Other property and equipment at cost $ 35,874,898
Less allowances for depreciation 16,559,197
Deferred Charges and Other Assets
Rentals
Unamortized training and other costs in connection
with aircraft fleets
Other
$ 19,315,701
$402,115,554
$ 1,917,854
564,882
2,228,214
$ 4,710,950
$481,206,426
$ 18,909,883
33,775,339
7,922,256
2,639,637
2,387,181
$ 65,634,296
$401,476,043
89,673,047
$311,802,996
23,726,852
$335,529,848
$ 29,477,098
14,613,625
$ 14,863,473
$350,393,321
$ 1,403,442
1,641,734
2,967,705
$ 6,012,881
$422,040,498
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31
Current Liabilities
Accounts payable
Employee compensation
Air travel card deposits
Unredeemed ticket liability
Income taxes
Current maturities of long-term debt
Total Current Liabilities
Long-Term Debt--Note A
Deferred Credits--Note D
Income taxes--arising principally from
accelerated depreciation methods
Investment credit
Other
Stockholders' Equity--Note B
Common Stock $2.50 par value; authorized
20,000,000 shares; issued and outstanding
9,149,626 shares
Capital surplus
Retained earnings
Commitments--Note C
1967 1966
$ 31,188,772 $ 24,821,375
7,307,207 7,625,084
1,153,450 1,173,000
4,388,028 3,627,578
7,079,525 10,666,850
3,000,000 3,000,000
$ 54,116,982 $ 50,913,887
85,000,000 96,000,000
$ 57,808.300 $ 43,743,900
19,894,700 17,656,100
400,000 999,913
$ 78,103,000 $ 62,399,913
$ 22,874,065 $ 22,874,065
39,381,745 39,381,745
201,730,634 150,470,888
$263,986,444 $212,726,698
$481,206,426 $422,040,498
See notes to financial statements.
NORTHWEST AIRLINES, INC. AND SUBSIDIARY
Note A--Long-Term Debt
Under Note Purchase Agreements with twelve in
surance companies the Company has borrowed
$34,000,000 at 6% payable $3,000,000 annually
and $4,000,000 on October 1, 1978. Certain op
tional prepayments at par are permitted. The
Agreements contain certain other provisions with
respect to redemption as a whole, but not from
borrowed funds, at premiums ranging from 5%
to 1%.
Under the Third Amendatory Agreement with
fifteen banks the Company has outstanding
$40,000,000 which is the maximum amount of
the revolving credit provided in the Agreement
and which credit reduces $5,000,000 quarterly
beginning January 1, 1970 and terminates Oc
tober 1, 1971. Interest on funds borrowed is at
4%%.
Under a Credit Agreement with eighteen banks
the Company has borrowed $14,000,000. This
Agreement provides for a revolving credit of
$95,000,000 reducing to $71,000,000 by Janu
ary 1, 1971, to $47,000,000 by January 1, 1972,
to $23,000,000 by January 1, 1973 and terminat
ing January 1, 1974. Interest on funds borrowed
is at the prime commercial loan rate (not to ex
ceed 6VA%) to December 31, 1969 and at the
prime commercial loan rate plus VA% thereafter
(not to exceed 6V2
%).
At December 31, 1967 the Company had com
plied with the covenants of the long-term debt
agreements.
Note B--Stockholders' Equity
The Company is authorized to issue 1,000,000
shares of Cumulative Preferred Stock, $25 par
value, none of which are outstanding.
At December 31, 1967, 300,000 unissued shares
of Common Stock are reserved for options which
may be granted to officers and key employees in
the future at prices not less than 100% of the
market price of Common Stock at the date of
such grant.
After applying the most restrictive provisions of
the long-term debt agreements, $70,483,009 of
retained earnings was available for cash dividends
on Common Stock at December 31, 1967.
Note C--Commitments
The Company has contracted to purchase from
The Boeing Company ten 747, ten 320, sixteen
727-200 and two 727-100 turbo-jet aircraft for
delivery in 1968 through 1970, which with spare
engines will require expendituresof $375,727,000.
Of this amount, $35,971,000 had been deposited
with manufacturers at December 31, 1967 and
approximately $140,493,000, $99,868,000 and
$99,395,000 become payable in 1968, 1969 and
1970, respectively.
Annual rental payments of approximately
$4,225,000 are required under various lease
agreements for periods up to thirty-one years
covering airport facilities, ticket offices, etc.
Note D--Taxes on Earnings
The provision for taxes on earnings consists of
the following:
Year Ended December 31
1967 1966
Current provision $35,348,000 $29,568,200
Deferred taxes 14,064,400 11,123,300
Deferred investment credit 5,355,600 7,876,000
$54,768,000 $48,567,500
Less amortization of deferred
investment credit over eight
years 3,117,000 2,292,000
$51,651,000 $46,275,500
Note E--Pension Plans
The Company has several pension plans covering
substantially all of their employees. The plans'
assets are sufficient to cover the vested benefits
for all plans at December 31, 1967 and all past
service costs have been funded. Total Company
contribution to the plansfor 1967 was $4,339,872.
To the Stockholders and Board of Directors
Northwest Airlines, Inc.
Saint Paul, Minnesota
We have examined the statement of financial position of North
west Airlines, Inc. and subsidiary as of December 31, 1967 and
the related statements of earnings, retained earnings and
source and application of funds for the year then ended. Our
examination was made in accordance with generally accepted
auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as we
considered necessary in the circumstances. We previously
made a similar examination of the financial statements for the
Saint Paul, Minnesota
February 14, 1968
preceding year.
In our opinion, the accompanying statements of financial
position, earnings, retained earnings and source and applica
tion of funds present fairly the consolidated financial position
of Northwest Airlines, Inc. and subsidiary at December 31,
1967 and 1966 and the consolidated results of their opera
tions and source and application of funds for years ended
those dates, in conformity with generally accepted accounting
principles consistently applied.
Certified Public Accountants
NORTHWEST AIRLINES, INC.
General Offices
Minneapolis-St. Paul International Airport
St. Paul, Minnesota 55111
DIRECTORS*
JAMES H. BINGER
Chairman of the Board, Honeywell, Inc.
Minneapolis, Minnesota
HADLEY CASE
President, Case, Pomeroy & Company, Inc.
New York, New York
A. E. FLOAN
Secretary, Northwest Airlines, Inc.
St. Paul, Minnesota
MORTON H. FRY
Senior Partner, Piter & Company
New York, New York
CROIL HUNTER
Chairman Emeritus, Northwest Airlines, Inc.
St. Paul, Minnesota
MALCOLM S. MACKAY
President, Foothills Company
Roscoe, Montana
DONALD W. NYROP
President, Northwest Airlines, Inc.
St. Paul, Minnesota
ALONZO PETTEYS
President, Farmers Realty Company
Brush, Colorado
0. FRANK REAVIS
Partner, Reavis and McGrath
New York, New York
ALBERT G. REDPATH
Partner, Auchincloss, Parker & Redpath
New York, New York
LYMAN E. WAKEFIELD, JR.
Vice President, First National Bank of Minneapolis
Minneapolis, Minnesota
REGISTRAR: The Chase Manhattan Bank,
New York, N.Y.
TRANSFER AGENT: Bankers Trust Company,
New York, N.Y.
STOCK LISTED: Common Stock listed on New York
Stock Exchange and Midwest Stock Exchange
OFFICERS*
DONALD W. NYROP
President
JAMES A. ABBOTT
Vice President-Orient Region
CLAYTON R. BRANDT
Vice President-Purchasing and Stores
ROBERT W. CAMPBELL
Vice President-Budgets
ROBERT A. EBERT
Vice President-Personnel
A. E. FLOAN
Secretary
BENJAMIN G. GRIGGS, JR.
Vice President-Flight Operations
DONALD H. HARDESTY
Vice President-Finance and Treasurer
WM. E. HUSKINS, JR.
Vice President-Communications and Data Services
FRANK 0. JUDD
Vice President-Maintenance and Engineering
RICHARD KITCHEN
Vice President-Public Relations
M. JOSEPH LAPENSKY
Vice President-Economic Planning
RONALD McVICKAR
Assistant Vice President
BRYAN G. MOON
Assistant Vice President-Advertising
EMORY T. NUNNELEY, JR.
Vice President and General Counsel
ROBERT J. PHILLIPS
Comptroller
0. L. STEWART
Vice President-Transportation Services
ROBERT J. WRIGHT
Vice President-Sales
*As of March 1, 1968
CUSTOMER SERVICES AND OPERATIONS
PERSONNEL
In order to improve customer services in
Northwest's communities, and to main
tain the high standard of leadership in
every phase of operations, your Company
selected, trained and placed 1,382 new
employees in all classifications. The
total year-end personnel complement
exceeded 10,200.
Northwest, a member of the Plans for
Progress, continued to provide equal
employment opportunity for all qualified
applicants regardless of race, color,
creed or national origin.
Your Company hired and trained 271
new pilots and provided transition flight
training to upgrade and qualify 665
currently employed pilots to new posi
tions on our expanding fleet of jet aircraft.
Our annual awards banquet honored 309
employees who completed 25 years of
service with Northwest, which is indica
tive of the invaluable experience
possessed by personnel of your Com
pany, and a substantial factor in North
west's ability to maintain leadership in
the airline industry.
Collective bargaining agreements were
negotiated and signed with labor organi
zations representing2,900clerical, office
and agent personnel and 1,400 cabin
attendants. Foreign national steward
esses were assigned to flight operations
between the United States and the
Orient to provide bilingual service to
passengers.
Your Company successfully negotiated
all pending labor agreements prior to the
end of the year, and there were no man
hours lost due to strikes. During the
first quarter of 1968, negotiations will
commence with unions representing
flight deck crews.
OPERATIONS
In order to provide the most efficient
training equipment available, a Boeing
707/727 dual cockpit digital computer
flight simulator was installed in the
general office training center, providing
our pilots with the most modern equip
ment available for initial transition train-
ingas well as required annual proficiency
checks. Purchased at a cost of
$2,560,000, the flight simulator will
substantially reduce our flight training
costs, provide morecomprehensive train
ing for our pilots and reduce the number
of required training flights.
Continuing efforts to improve community
services resulted in increased reliability
due to our fog dispersal program in Spo
kane, Portland, Seattle, Anchorage and
Missoula during conditions of low visi
bility by "supercooled" fog. Additional
research is being sponsored to expand
this program to disperse warm fog and
control other meteorological conditions
affecting visibility.
Your Company purchased a new multi
million dollar computer system. This
electronic information network will pro
vide entirely new and instantaneous
reservations procedures for the Com
pany. It will also improve both the quality
and quantity of information to our cus
tomers, improve cargo service and
accounting functions and maintain
inventory records for millions of dollars
worth of spare parts. With the unprece
dented growth in air travel predicted for
the next few years, including the intro
duction of the 747 and SST, Northwest
will be in a position to provide for the
increased capacity through faster data
processing.
MARKETING
Du ring the year just ended, new emphasis
on sales promotion, air freight, conven
tion solicitation and group tour sales
resulted in a number of ambitious
improvement programs. Schedules were
established for convention solicitation in
sales districts, thereby developing
increased convention travel to the Orient,
Hawaii and key domestic cities. Orient
promotions were held in San Francisco,
Los Angeles, Seattle, Detroit, Cleveland,
Atlanta, New York, Washington and other
cities. Hawaii promotions and Florida
seminarswereheld inseveral majorcities
throughout the U.S. Group tour passen
ger sales to Hawaii and the Orient
increased 73 per cent over 1966, and
major sales promotions featuring Hawaii,
the Orient and Florida were presented
to 6,000 travel agents during 1967.
Jet all-cargo schedules, increased
capacity and improved ground services
have permitted Northwest to keep pace
with industry cargo growth this year.
Rate reductions and convenient
schedules for air freight between the
Orient and the U.S. will encourage addi
tional traffic during 1968. Available
cargo pallet-miles per day increased from
126,000 at the beginning of the year to
298,000 at year-end 1967, an increase
of 137 per cent.
Freight and express ton-miles flown in
scheduled services during 1967 indi
cated a 29.6 per cent growth, from
108,914,000 in 1966 to 141,175,000 in
1967. Mail ton-miles were up 40.7 per
cent, from 66,958,000 in 1966 to
94,200,000 in the year just ended.
ALASKA
Anchorage
CHINA
Hong Kong
TAIWAN
PHILIPPINES
Seoul
KOREA
NORTHWEST ORIENT
AIRLINES
SYSTEM MAP
***
*
Honolulu
HAWAII
NORTHWEST ROUTES
PROPOSED ROUTES
Boston
is-St. Paul ;
* New York
* Newark
Philadelphia
Washington
St. Petersbur
Tampa
Clearwater
k A Fort Lauderdale
Miami
NORTHWEST ORIENT AIRLINES' ROUTES SERVE:
Anchorage Hollywood Philadelphia
Atlanta Hong Kong Pittsburgh
Billings Honolulu Portland
Bismarck Jamestown Rochester
Bozeman Madison St. Paul
Butte Mandan St. Petersburg
Chicago Manila Seattle
Clearwater Miami Seoul
Cleveland Milwaukee Spokane
Detroit Minneapolis Tacoma
Fargo Missoula Taipei
Ft. Lauderdale Moorhead Tampa
Grand Forks New York Tokyo
Great Falls Newark Washington, D.C.
Helena Okinawa Winnipeg
Hilo Osaka