Northwest Airlines Annual Report 1968

NORTI-IWEST ORIENT AIRLINES
1968 ANNUAL REPORT
FINANCIAL HIGHLIGHTS OF 1968 1968 1967
Total Operating Revenues ... .... . . . . . .. . . ... ... ... . . . . . . .. . . . .. . $416,289,742 $383,979,067
Operating Income ...... . ......... ... .. . ........ . ..... . . . .. . .. . . . 97,943,632 112,757,625
Net Earnings for the Year ... . . . .... .... .. . . . ... ... ... .. ........ . 50,051 ,005 58,715,983
Per Common Share ................ . ..... . ... . . . ... . . . . . . . . 5.47 6.42
Stockholders' Equity .... . ....... . ..... . ... ... . . .. . . . .. . .. . ... .. . 306,717,107 263,986,444
Per Common Share ..... . ........... ... .... .. .. . ......... . . . 33.52 28.85
Dividends Paid . .......... . . . .... . ..... ... ..... . ... . .. . . . . . ... . . 7,319,702 6,404,737
Operating Expenses-
Per Available Ton-Mile ...... . ..... . ..... . ........... . ...... . 14.6 14.5
Per Revenue Ton-Mile ... ..... . ... ... ..... . ... . ......... ... . 30.8 30.3
Revenue Traffic-
Passengers Carried ................. ... . . .. . .... . ....... . ... . 7,173,805 6,489,295
Passenger-Miles Flown ..... . ............ . ..... . ............ . 5,458,128,000 4 901,520,000
Ton-Miles, Mail, Freight and Express .. .. . .... . .. .. . . . . ...... . 308,988,000 235,375,000
Common Shares at Year End ........ . ......... . .... .. . . . . ..... . . 9,149,628 9,149,626
Employees at Year End . .. . ............. . ......... . ... . . . ... . .. . 11,354 10,257
TABLE OF CONTENTS
President's Message .. .. . . . . ... . . . ... . . .... . .. . .. . . . .. . .. . .......... . ... . .. .. ....... . ... . ........... Page 5
A ew Look For orthwest Orient. . ... . ... .. . . .... .. .. . ... . ...... . ........... . . ......... . .. . . . ... Pages 6-7
Financial Review of 1968 ... . . . .. .. .... . ... .. ...... . ....... .. .. .. ... . .. . .. . . .... . ....... . ......... Pages 8-9
orthwest Orient's Jet Fleet . .. .. ...... . ...... . .. . . . . .. ... . .. .. .. . . . .... . . . . . .. .. .. . ... . ...... . . Pages 10-11
New Things For Northwest Orient .. ... . .. . . . . . ....... . . . .. .. .. . . .. ... .. . .. . . .. ............... . . . . .. Page 12
Financial Report .. . . . . . .. . . .... . ........ .. .. . .......... . .. . . . . . . . . .... .. . . .. . . . ........ . . Pages 13-20
Flight Operations in 1968 . . ... . . . . . .. . . . . . . .. . .. .. ... . .......... .. .. . ........... .. .. . ...... . ... . .. . Page 21
Marketing, Sales & Advertising Highlights ...... .. . . . . . . . ..... . ........ . ....... . ... . ... . .......... Pages 22-23
Route Map . . ... .... . . .. .. . . . . . . . .. . ........ .. . .. . .. .. .. . ... . . . . . . .. . ... .. . .... . . . .... . . ... .. Pages 24-25
Routes, Rates & Schedules .. .. . . .... . . . . . . . . ... .. .... . . ... . .. . .............. . ... .. . . . . . .. . . . . .. . Pages 26-27
47 Sites to See . ....... . . .. . .... . . . . ....... . .. . .. . .... . .. . .. . . .... .. . . ... . ..... . . . . . . .... . .. . .. Pages 28-29
orthwest Orient's People . .. ..... . . . .. . . . .. . . .. .... . ...... .. . .. .. . ...... . . . ... . ... . . ..... . ..... ... Page 30
3
42ND ANNUAL REPORT TO THE STOCKHOLDERS
From the President:
De pite a decline in net earning rn 1968,
our management feel 196 , a a year
ofrealachievementfinanciall for orth-
, e t Orient irline . !though ranking
se enth in revenue among . trunk
line air carrier , orth, e t Orient led all
carrier in net earning in 196 -the fir t
time , e ha e been able to accompli h
this prized goal.
Revenues at Peak
For 196 re enue , ere 416,2 9,742-
up 8.4 per cent from S383,979,067 in
1967. Thi i a record performance. et
earning v ere $50 051,005 in 1968 com-
pared to S58 715 983 in 1967.
Thedipinnetearning , a dueto e eral
factor :
The 10 per cent Federal income tax
urcharge.
Ci il di turbance in e eral major
U. S. cities and in Hong Kong.
The dampening effect on Orient tra el
created by the Federal Government'
policy on o er eas tra el.
A decline in Military Airlift Command
rate .
The decrea e in mail rate paid by
the . S.
Co t-Price Squeeze
The entire indu try ha been caught in
the co t-price queeze, hich ha cut into
1968 earnings. Howe er, through the
con plication f ting ffi-
c t control and r utili za-
ti nnel, 1 rth,, ri nt ha
b minimize the impact of th e
f
Opera aYi
n t xa f rder
, ur c n a
range model of c
DC-10 airplan r ent in-
i ted that the j ~ n ed t
the Pratt & \ hitne , JT d -
cided to place our orde the e
air raft. In doing o, , m-
pati bi lity in b t, l
and th 7-'+T ,,. ,
ordered . a\'ing ir
part , training for mechc I
and incr a ed air raft utili I
m t ignificant in future perati n , a
i the econom we pre ently enjoy b , our
abilit to int rchange n th
Boeing 707 and 7 _O' .
Leader hip Role
orth, e t Orient irlin wa the fir t
airline to place an order for the DC-10
erie 20, or 'airbus', a it i t rmed . Thi
leader hip in development of airplan
ince follO\ ed b e eral oth r carrier ,
, a al o e ident in our being Ar t with
the cargo version of the Bo i ng 7 _ 7.
Changes in Officers, Directors
The vacanc on your Board of Direct r
creat d by the untimely death of lonzo
Pette , a filled b Donald G. Mc eel
of St. Paul, Minne ota.
Joining thee ecuti e officer of the com-
pan during the ear , ere Ro K.
Erick on a ice Pre ident-Public Re-
lation and Bryan G. Moon, recently
promoted to ice Pre ident- d erti ing.
Promoted to ice Pre id nt- i tant to
the Pre ident, a Benjamin G. Grigg
Jr. , hile J. William Campion , a
nam d ice Pre ident-Regulator Pro-
ce ding and Roland . Chamb
promot d to i tant
Prop rti .
Main Ba e E pan ion
Recent! announced b
a 12 million e 'pan ion
ur com pan i
f main ba e
Pau l to pro-
, ide n ry h d , rhaul
faciliti . the ll1"'t of
,, hich ,, ill be de! ring 1970.
Thi n , ~ four nc,,
'jumb r -'+ d the
d n I i c the
n tie - bJ ncarh
1969 pr mi c to be a
year of c ntinuing growth and maj r
ch all nge . Th d 111 ti hn.: in re,re
erornutic
yea r.,, hich a,cr-
ag d ut to a . per ent increa e for the
indu try, ,,ill pr ,ide an timated
7,_00,000 in additi nal re, m,~ for
orthwe t Orient.
Thi c ough h lpful, will
proba n t be ufficicnt t
d f at e f quecze in ,, hi h
theit thwe tOrient. nnd
it el p f piraling price i
the i ne which h en fr 111
_3 0,000 in ju ur hort
year . ea ar e. lif1 d by
Ian vhich hit an all-time peak
0,000 in 196 , up 13..., .7 per cent
e 3, _ 1.000 we paid in 196-'+.
Route pplications
ued it application
rout b f re th
Board. Man of th
mad b the C B in the m nth ju t
ahead and, ill have an imp rtant b ar-
ingon ur futur gr , th. \ e remain c n-
fident, whatever th d ci ion , that
rth, t Orient irline \\'ill c ntinue
to be , vital r \\'ith a u-
p rior ~ nd ar record that
, ill co1 ju ti tr faith and
ck holder.
Sincerel
5
6
THE NEW LOOK OF NORTHWEST ORIENT
orthwe t Orient Airlines will have a 'new look' for the fast-
paced l 970's.
Early in 1969, orthwest Orient will begin the change to a new
corporate indentity. lts hallmark will be a new symbol-a con-
temporary derivative of the already well-established red tail.
A newly designed type face will al o be used for the corporate
name- orthwest Orient.
Reason for the deci ion to embark on a corporate indentity pro-
gram were es entially to achieve a consistency in presentation to
the public and to achieve a more contemporary look.
The 'new look' will be applied to everything that the public is
expo ed to a the program is fully implemented. The next Boeing
727-200 will be delivered in the new paint design, which features
largely an all-aluminum exterior. City ticket offices, boarding
pa ses, letterheads, flight bags-and even silverware-will use
the new identity.
orthwe t Orient's new corporate indentity will help underscore
its role as one of the U.S.A.'s largest domestic and international
air carriers.
Designer ... of Northwest Orient Airlines' new
corporate identity mark is 33-year-old Clarence
K. M. Lee of Honolulu. Born of Chinese an-
cestry in Hawaii, he was educated at Pomona
College and at Yale University.' With the close
ties Northwest Orient has with Hawaii and the
Orient, selection of Lee as the designer seemed
most appropriate.
- ' NORTHWEST ORIENT
~ iDitdiri L
00 000 0 NI/A
CO KPANY NAKE
CAR OH OLDER
Explree 4 71
NORTHWEST ORIENT NORTHWEST ORIENT NORTHWEST ORIENT
7
8
FINANCIAL REVIEW OF 1968
Revenues
Operating revenues continued their rec-
ord growth and reached a new high of
$416,289,742, for an increa e of 8.4 per
cent o er the pre ious high in 1967.
Revenue growth was adversely affected
in 1968 by the civil unre t in several
cities and the governmental request to
reduce foreign travel as an aid to the
balance of payments.
Record passenger revenues increased
9.2 per cent to $301,276,511. This passen-
ger revenue growth was diluted by a 2.0
per cent decline in the passenger-mile
yield due to the increased u e of pro-
motional and discount fares, which af-
fected the industry generally. Another
contributing factor to this yield decline
is the increasing utilization of coach
services. Coach service represented 85.4
per cent of the total passenger-miles, a
further increase over 1967 and previous
years.
Freight, express and excess baggage rev-
enues were at a new high of $43,902,321,
up 15.2 per cent from 1967. Primarily,
this reflects the increased emphasis
orthwest has placed in the freight
market.
Mail revenue increased 6.3 per cent to
$28,604,486. This increase was achieved
despite a 20 per cent reduction in inter-
national mail pay effective July 1, 1968,
and a 10 per cent retroactive reduction
amounting to $2,502,338, which was
recorded in 1968 for the period January,
1967, through June, 1968. Mail revenue
ton-miles flown were 139,572,047, or an
increa e of 48.2 per cent over 1967.
Revenues from charter operations
amounted to $41,059,963 in 1968, com-
pared with 41 ,798,533 in 1967. This
decline in revenue was due to decreased
commercial charters, primarily as a result
of the Government's request to reduce
foreign travel. Military charter oper-
ations amounted to $38,066,115, or an
increase of 2.2 per cent from 1967. The
Military Airlift Command contract ex-
tends to June 30, 1969, and we will seek a
renewal contract for the Government's
fiscal year 1970.
OPERATING REVENUES AND EXPENSES
MILLIONS OF DOLLARS
500
REVENUES
400 - EXPENSES
300 I
200 I I
100
I I I
1963 1964 1965 1966 1967 1968
(STRIKE)
Expenses
Operating expenses increased 17.4 per
cent to $318,346,110 in 1968. Deprecia-
tion and amortization amounted to
$49,816,847 in 1968, an increase of 20.8
per cent over 1967. Northwest Afrlines,
as well as the rest of the industry, incurred
increased expenses due to air traffic de-
lays at many major U.S. airports during
the peak summer traffic months. Despite
continued increases in wages, material
costs, airport fees, fuel and oil prices, and
in most other areas, orthwest was able
to substantially maintain its unit cost per-
formance. Unit operating expenses in
1968 were 14.56 per available ton-mile,
or one-one hundredth of a cent over the
1967 level of 14.55. This favorable re-
sult was achieved in spite of these gener-
ally increasing expenses, through ex-
panded fan-jet services of greater capac-
ity and continued attention to the con-
trol of expenses in all categories.
Net Earnings
et profit in 1968 was $50,051,005, or
$5.47 per share of common stock, com-
pared with $58,715,983, or $6.42 per
share in 1967. Operating income
amounted to $97,943,632, down from
$112,757,625 in 1967. Pretax non-operat-
ing costs included $3,893,613 interest ex-
pense and income of $183,816 from the
disposals of property.
The investment tax credit is being
amortized over an eight-year period.
This credit included in net earnings
amounted to $3,975,100 in 1968, up
from $3,117,000 in 1967. Deferred in-
vestment tax credit amounting to
$24,383,400 remains to be amortized to
income in future years. All investment
tax credit available to Northwest to date,
as a result of equipment purchases, has
UNIT OPERATING COSTS
CENTS PER TON-M ILE
50
40
30
COST PER REVENUE TON-MILE
20
10 COST PER AVAILABLE TON-MILE
0
1963 1964 1965 1966 1967 1968
(STRIKE)
been used to reduce current income taxes.
Federal income tax expense increased in
1968 due to the 10 per cent surcharge
which became effective in January of this
year. This surcharge amounted to a
$4,461,500 reduction in net earnings.
BREAK-EVEN AND
ACTUAL PAYLOAD FACTOR
1963 1964 1965 1966 1967 1968
(STRIKE)
Cash Flow
Source of funds in 1968 included genera-
tion of $118,867,352 from net earnings,
depreciation and amortization, deferred
income taxes and investment tax credit.
Other sources of funds included a net in-
crease of $75,000,000 in long-term debt
and disposals of operating property
amounting to $536,169.
Major application offunds included fleet
and property additions of $109,509,921
and advance deposits for aircraft on
order and SST development costs
amounting to $75,419,222. Cash divi-
dends of $7,319,702 were paid to stock-
holders in quarterly payments during
1968 at an annual dividend rate of 80
per common share. This represents the
14th consecutive year that your com-
pany has made dividend payments on its
common stock.
In March of 1969, the annual dividend
rate was increased to 90 per share. This
is the 7th consecutive annual increase in
the dividend rate.
Traffic
Traffic results in 1968 reflect record
growth in all areas. Northwest Airlines
increased revenue plane-miles in sched-
uled services by 15.3 per cent, while avail-
able ton-miles increased by 17.9 per cent.
During 1968 revenue passenger-miles in
scheduled services increased to 5,458,-
128,056 for an 11.4 per cent increase over
1967. On our domestic routes the passen-
ger-miles increased 13.8 per cent. System
passengers carried increased 10.5 percent
over the prior year. The system passenger
load factor declined from 53.29 per cent
in 1967 to 50.35 per cent in 1968.
In 1968 system mail revenue ton-miles
increased 48.2 per cent which is primarily
the r sult of the increased use by the
REVENUE PASSENGER MILES
BILLIONS
6
4
I I I I
1963 1964 1965 1966 1967
(STRIKE)
1968
Post Office of air transportation for non-
priority mail. Freight ton-miles increased
20.7 per cent over 1967, reflecting the
increased emphasis Northwest Airlines
has placed in this market. Express and
excess baggage increased 6.0 per cent
over the prior year.
SOURCE AND
APPLICATION OF FUNDS
11.9%
DEPRECIATION
AND
AM ORTIZATION
6.9%
U.S. AND
FOREIGN
MAIL
58.4%
PASSENGER
COACH
SOURCE
26.7%
MATERIALS
AND
SERVICES
26.0%
EMPLOYEE WAGES
AND BENEFITS
APPLICATION
f
10
NORTHWEST ORIENT'S CURRENT FAN-JET FLEET
Versatile .. . That's the word that best describes
the Boeing 727 fan-jet. Designed to get in and out
of smaller airports, the 727 comes in two sizes:
The 727-100 carries 93 passengers while the 727-200,
some 20 feet longer, carries 122 passengers.
Statistics for 727-200: length, 153 feet; height to
top of tail, 34 feet; range, 1,500 rniles; cruising
speed, 607 mph; cruising altitude, 42,000 feet
maximum.
Powerful ... Most descriptive of the Boeing 720B
fan-jet transport, used by Northwest Orient to
provide service between larger cities coast-to-coast
or mainland-Hawaii. Carries 107 passengers.
Statistics : length, 136 feet; height to top of tail,
41 feet; range, 4,000 miles; cruising speed, 585 mph;
cruising altitude, 42,000 feet maximum.
Intercontinental ... Is the capacity of the Boeing
707-320 fan-jets used by Northwest Orient for
trans-Pacific operation. Also used on long distance
domestic flights, it comes in two versions: the 320B,
which is used exclusively as a passenger airplane
and carries up to 140 passengers in mixed class
service; the 320C, which is a convertible airplane
-capable of use as an all-cargo jet freighter or
mixed class services carrying 140 passengers or all
economy configuration carrying 165 persons.
Statistics: length, 153 feet; height to top of tail,
42 feet; range, 6,000 miles; cruising speed, 585 mph;
cruising altitude, 42,000 feet maximum.
+++++++
+++++++
+++++++
+++++++
+++++++
++
37 BOEING 727 FAN JETS
++++
++++
++++
++++
16 BOEING 720B FAN-JETS
36 BOEING 707-320B/C FA -JETS
TOTAL 89 AS OF DECEMBER 31, 1968
FUTURE ADDITIONS TO NORTHWEST ORIENT'S JET FLEET
15 BOEI G 747 'JUMBO JETS'
Planning for the first of orth\ est Orients 747's, \ hich
\ ill be deli ered in March 1970 has been unden a for
more than a ear. Although nearl t\ ice the size of the
727 the 747 \ ill operate more quietl than an of the
pre ent generation jet aircraft.The 360 passenger 747 v ill
bring a ne\ le el of comfort to passengers on the long di -
tance tran Pacific route operated b orthwest Orient.
Statistics: length 231 feet; range, 6,000 miles; maximum
speed, 657 mph ; maximum cruising altitude 45,000 feet.
14 McDO IBLL-DO GLAS DC-10 'AIR B SSES'
1 orth\ est Orient \ a the first airline in the \ orld to
purchase the long range Series 20 ersion of thi luxury
tri-jet transport. It did o after McD onnell-Dougla agreed
to u e the JT9D-15 Pratt & hitney engine that are
compatible \ ith the 747. orthwest Orient' er ion of
the DC-10 ill carr 268 pas engers.
Statistics: length 180 feet; range 4 900 miles, cruising
speed, 580 mph , cruising altitude 42,000 feet .
6 BOEING 2707 'SST'S'
This 1,800 mph uper onic jetliner v ill make it possible
to fl from the e t Coa t to Tok o in four hour 28
minute . orth\ est Orient ha made depo its for the
deli er of i SST s.
Statistics: length 280 feet , maximum speed, Mach 2.7 or
1 800 mph , cruising altitude 65,000 feet.
19 BOEI G 727-200's
n additional 19 727-200' \, ill be deli ered to orth\ e t
Orient in 1969 bringing the total number in our fleet to 24.
11
12
NEW THINGS FOR NORTHWEST ORIENT IN 1968
In an industry where change is constant
and technology makes giant strides al-
most daily, Northwest Orient more than
kept pace in 1968.
New Programs
Planning and work on the conversion
from the present Univac 490 computer
system to the 494 system continued in
1968. One of the new applications will be
an instant reservations' system which
will provide a passenger name record
and visual display of flight information.
The use of computers to monitor jet
engines on orthwest Orient's fleet was
started May 1, 1968. Data on in-flight
engine performance is fed into the com-
puters housed in the general offices. The
computer produces a picture of engine
performance which permits early detec-
tion of defects. This has resulted in
lengthened periods between engine over-
hauls and a substantial reduction in
maintenance expense.
New Facilities
The $2 million Cleveland hangar and air
freight facility was completed in 1968
with a total of 82,000 square feet being
available. The hangar area occupies
44,000 square feet with the freight facility
and reservations office using the remain-
der.
Two major flight kitchen facilities were
also completed in 1968. A $1 million
kitchen, one of the largest on the West
Coast, was constructed in Seattle. And a
new 40,000 square foot kitchen and cargo
facility has been built in Anchorage.
To accommodate the rapidly growing
air freight business new cargo facilities
have been built and opened in Minne-
apolis/St. Paul, Chicago Midway, Cleve-
land, Anchorage and in Seoul.
Six city ticket offices were also remod-
eled: Tarn pa, Rochester, Minnesota;
Okinawa; Taipei; Olympic Hotel in
Seattle, and Southdale in Minneapolis
and new reservations offices were fin-
ished in Cleveland and New York".
NORTHWEST ORIENT AIRLINES FINANCIAL
CONDITION 1968
Northwest Airlines' financial condition continues to rank among the strongest
in the airline industry. Stockholders' equity amounted to $306,717,107 at year
end 1968, up 16.2 per cent from 263,986,444 at the close of 1967. Book value
per common share increased to $33.52 at the end of 1968, compared to $28.85
per share last year.
Outstanding debt at year end amounted to $163,000,000. During the year,
orthwest's bank credit arrangements were revised to provide a maximum
revolving credit of $290,000,000. Under an existing arrangement with 15 ban ks,
the Company has outstanding $40,000,000, which is the maximum amount of
this revolving credit and which credit reduces $5,000,000 quarterly beginning
January 1, 1970, and terminates October 1, 1971. Under a new credit agreement
with 24 banks, an additional maximum revolving credit of $250,000,000 is
provided, of which the Company has borrowed $92,000,000. This agreement
reduces to $230,000,000 by October 1, 1972, to $210,000,000 by October I, 1973,
to $90,000,000 by October 1, 1974 and terminates July 1, 1975.
Under the exjsting ote Purchase Agreement with 12 insurance companies, the
Company has outstanding debt of $31,000,000. This agreement is payable
$3,000,000 annually, with a final payment of $4,000,000 on October!, 1978.
The Company has on order from the McDonnell Douglas Corporation and
from the Boeing Company, 48 additional jet aircraft which, with spare engines,
will require expenditures of $653,286,000. These aircraft are scheduled for
delivery in 1969 through 1973.
13
14
STATEMENT OF FINANCIAL POSITION
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
ASSETS
Current Assets
Cash ............................................... .
Accounts receivable .................................. .
Flight equipment spare parts, at average cost, less
allowances for depreciation (1968-$4,430,479;
1967-$3,629,343) ................................ .
Maintenance and operating supplies at average cost ...... .
Prepaid expenses ..................................... .
Total Current Assets
Property and Equipment
Flight equipment at cost .............................. .
Less allowances for depreciation ....................... .
Advance payments on new flight equipment-Note C ..... .
Other property and equipment at cost .................. .
Less allowances for depreciation ....................... .
Def erred Charges and Other Assets
Aircraft (SST) development costs-Note F .............. .
Rentals ............................................. .
Other .............................................. .
December 31
1968
$ 29,940,240
36,231,208
13,707,079
3,210,903
1,409,690
84,499,120
582,646,236
158,124,438
424,521,798
82,860,068
507,381,866
45,341,561
19,362,555
25,979,006
533,360,872
4,700,000
2,300,875
2,677,069
9,677,944
$627,537,936
1967
$ 20,688,578
36,584,754
11,204,320
3,123,356
2,778,914
74,379,922
467,859,160
121,830,443
346,028,717
36,771,136
382,799,853
35,874,898
16,559,197
19,315,701
402,115,554
1,917,854
2,793,096
4,710,950
$481,206,426
LIABILITIES AND STOCKHOLDERS' EQUITY
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 tax credit ................................ .
Other ............................................. .
Stockholders' Equity-Note B
Common Stock-$2.50 par value; authorized
20,000,000 shares; issued and outstanding
1968-9,149,628 shares; 1967-9,149,626 shares ........ .
Capital surplus ...................................... .
Retained earnings .................................... .
Commitments-Note C
See notes to financial statements.
December 31
1968
$ 37,850,144
12,239,025
1,142,825
4,820,273
5,066,062
3,000,000
64,118,329
160,000,000
72,319,100
24,383,400
96,702,500
22,874,070
39,381,100
244,461,937
306,717,107
$627,537,936
1967
$ 31,188,772
7,307,207
I , 153,450
4,388,028
7,079,525
3,000,000
54,116,982
85,000,000
57,808,300
19,894,700
400,000
78,103,000
22,874,065
39,381,745
201,730,634
263,986,444
$481,206,426
15
16
STATEMENT OF EARNINGS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Operating Revenues
Passenger .......................................... .
Cargo ............................................. .
Mail ............................................... .
Charter and other transportation ...................... .
Nontransport ................ . ...................... .
Operating Expenses
Flying operations ................................... .
Maintenance ....................................... .
Passenger service .................................... .
Aircraft and traffic servicing . ........................ .
Reservations, sales and advertising .................... .
Administrative and general ........................... .
Depreciation and amortization-Note F ............... .
Other Income and (Deductions)
Interest on long-term debt ............................ .
Disposals of property .............................. . . .
Other income ....................................... .
Earnings Before Taxes ................... . .............. .
Taxes on Earnings, including deferred taxes
and investment credit-Note D ....................... .
Net Earnings for the Year . .............................. .
Earnings per share of Common Stock ..................... .
See notes to financial statements.
STATEMENT OF RETAINED EARNINGS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Balance at beginning of year ............................. .
Add net earnings ........... . ........................... .
Deduct:
Cash dividends on Common Stock-1968-
$.80 a share; 1967-$.70 a share .......... . ..... . .. .
Repayment in final settlement of mail compensation for
1951, less related income taxes of $1,004,500 .......... .
Balance at end of year .................................. .
See notes to financial statements.
Year Ended December 31
1968 1967
$301,276,511 $275,873,101
43,902,321 38,118,101
28,604,486 26,898,284
41,059,963 41,798,533
1,446,461 1,291,048
416,289,742 383,979,067
98,870,867 83,703,528
44,222,599 37,264,533
34_, 787,990 31,074,898
46,030,034 39,257,146
34,351,091 29,795,392
10,266,682 8,873,799
49,816,847 41,252,146
318,346,110 271,221,442
97,943,632 112,757,625
(3,893,613) (3,724,766)
183,816 431,214
489,970 902,910
(3,219,827) (2,390,642)
94,723,805 110,366,983
44,672,800 51,651,000
$ 50,051,005 $ 58,715,983
$5.47 $6.42
Year Ended December 31
1968 1967
$201,730,634 $150,470,888
50,051,005 58,715,983
251,781,639 209,186,871
7,319,702 6,404,737
1,051,500
7,319,702 7,456,237
$244,461,937 $201,730,634
STATEMENT OF SOURCE AND APPLICATION OF FUNDS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Year Ended December 31
1968 1967
Source of Funds
Net earnings ........................................ . $ 50,051,005 $ 58,715,983
Depreciation and amortization ........................ . 49,816,847 41 ,252,146
Deferred income taxes ..... ........... ... .. . ........ .. . 14,510,800 14,064,400
Investment credit .................................... . 4,488,700 2,238,600
Total from Operations 118,867,352 116,271,129
Increase in long-term debt ............................ . 75,000,000
Disposals of operating property ........................ . 536,169 1,509,862
Total of Sources 194,403,521 117,780,991
Application of Funds
Flight equipment and other property additions .......... . 109,509 921 62,407,728
Advance deposits on aircraft .......................... . 69,919,222 29,834,958
SST development costs ....... ... ..................... . 5,500,000
Decrease in long-term debt ............................ . 11,000,000
Cash dividends ............................. . ........ . 7,319,702 6,404,737
Repayment of mail compensation for 1951 .............. . 1,051 ,500
Other .............................................. . 2,036,825 1,539,537
Total of Applications 194,285,670 112,238,460
Increase in Working Capital .............................. . $ 117,851 $ 5,542,531
See notes to financial statements.
NORTHWEST AIRLINES FLEET APPLICATION OF INVESTMENT TAX CREDIT
December 31 Available and Reflected in
Aircraft Type 1967 1968 On Order Period Utilized* et Earningst
JET:
1962-1967 $27,481,200 $ 7,586,500
707-320B & 320C 26 36
720B 16 16 1968 8,463,800 3,975,100
727 & 727C-100 30 32 Total 35,945,000 $11,561 , 600
727-200 5 19 I
747 15 To Net Earnings 11,561,600 ~
DC-10 14
To Be Amortized $24,383,400
Total Jet 72 89 48
PROP-JET: Electra 12 12 *All investment credit amounts generated 1962-1968 have been
PISTON: DC-7C 2 utilized to reduce income taxes.
- t Income benefits of investment credit amortized over eight-year
Total Fleet 86 101 48 period.
17
10 YEAR SUMMARY
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
(Dollars in thousands except per share figures)
Operating Revenues 1968 1967 1966t 1965 1964 1963 1962 1961t 1960 1959
Passenger ....... . .......... ............. . ...... ... $ 301,277 $ 275,873 $ 216,239 $ 198,457 $ 163,807 $ 135,222 $ 121,781 $ 85,971 $ 97,680 $ 100,641
Cargo ......... . .................................. 43,902 38,1 18 29,515 24,779 18,402 13,745 11,828 8,443 11,368 11,881
Mail ............................................. 28,605 26,898 22,557 17,421 15,313 14,233 14,228 11,701 10,711 11,219
Charter and Other Transportation ................ ... 41,060 41,799 39,205 21,851 12,965 6,442 2,646 1,482 823 526
ontransport ..................................... 1,446 1,291 3,803 490 1,123 (854) (30) 3,456 2,780 1,763
Total Operating Revenues $ 416,290 $ 383,979 $ 311,319 $ 262,998 $ 211,610 $ 168,788 $ 150,453 $ 111,053 $ 123,362 $ 126,030
Operating Expenses
Depreciation and Amortization ...................... $ 49,817 $ 41,252 $ 33,195 $ 24,011 $ 22,852 $ 19,159 $ 18,445 $ 17,118 $ 14,413 $ 11,310
Other . . .......................................... 268,529 229,969 177,469 153,140 135,627 123,713 112,802 84,213 104,455 103,811
Total Operating Expenses $ 318,346 $ 271,221 $ 210,664 $ 177,151 $ 158,479 $ 142,872 $ 131,247 $ 101,331 $ 118,868 $ 115,121
Operating Income ................. ..... ......... ..... $ 97,944 $ 112,758 $ 100,655 $ 85,847 $ 53,131 $ 25,916 $ 19,206 $ 9,722 $ 4,494 $ 10,909
Other Income and (Deductions)-Net. .................. (3,220) (2,391) (1,243) 224 (1,125) (4,166) (4,578) (2,828) (1,882) 335
Earnings Before Taxes .. . ............................. $ 94,724 $ 110,367 $ 99,412 $ 86,071 $ 52,006 $ 21,750 $ 14,628 $ 6,894 $ 2,612 $ 11,244
Income Taxes ............................... ......... 44,673 51,651 46,276 40,377 25,220 11,297 7,398 3,233 986 5,530
Net Earnings . . ....................................... $ 50,051 $ 58,716 $ 53,136 $ 45,694 $ 26,786 $ 10,453 $ 7,230 $ 3,661 $ 1,626 $ 5,714
Earnings per Share as Reported Each Year* ............. $ 5.47 $ 6.42 $ 5.81 $ 9.99 $ 5.86 $ 5.73 $ 3.97 $ 2.01 $ .89 $ 3.14
Recomputed Earnings per Share After Stock Splits* ...... 5.47 6.42 5.81 4.99* 2.93* 1.43* .99* .50* .22* .79*
Cash Dividends ...................................... 7,320 6,405 5,490 3,657 2,602 1,823 1,702 1,701 1,700 1,714
Dividends per Share as Paid Each Year* ................ .80 .70 .60 .80 .60 1.00 .80 .80 .80 .80
Recomputed Dividends per Share After Stock Splits* ..... .80 .70 .60 .40* .30* .25* .20* .20* .20* .20*
Stockholders' Equity .................................. 306,717 263,986 212,727 165,081 122,960 68,436 59,712 54,177 52,193 52,267
Book Value per Share as Reported Each Year* ........... 33.52 28.85 23.25 36.08 26.91 37.51 32.80 29.76 28.70 28.74
Recomputed Book Value per Share After Stock Splits* ... 33.52 28.85 23.25 18.04* 13.46* 9.38* 8.20* 7.44* 7.17* 7.18*
Assets and Long-Term Debt
Flight Property at Cost ................................ $ 582,646 $ 467,859 $ 401,476 $ 304,072 $ 219,523 $ 176,655 $ 169,413 $ 170,772 $ 121,441 $ 104,389
Flight Property at Net Book Value ..................... 424,522 346,029 311,803 233,858 160,925 127,074 122,980 133,485 86,957 76,647
Total Assets . ................................... . .... 627,538 481,206 422,040 333,311 237,226 196,765 186,887 189,103 148,698 130,097
Long-Term Debt ........ ... .......................... 160,000 85,000 96,000 72,000 45,000 64,996 74,968 90,286 68,500 50,000
Unit Expenses
Per Available Ton-Mile ...... .... .................. 14.6 14.5 15.6 16.4 18.5 21.7 23.9 27.6 27.8 26.5
Per Revenue Ton-Mile ........................ .. ... 30.8 30.3 30.1 33.0 39.7 46.8 50.2 54.2 54.2 51.0
Per Cent of Operating Revenues ..................... 76.5% 70.6% 67.7% 67.4% 74.9% 84.6% 87.2% 91.2% 96.4% 91.3%
Statistics-Scheduled Services
Revenue Plane Miles (000) ................... . ...... 107,646 93,395 67,780 61,653 52,157 45,356 41,821 31,143 46,671 47,568
Available Seat Miles (000) .......................... 10,840,758 9, 198,150- 6,773,257 6,140,717 5,129,944 4,305,147 3,697,796 2,611,840 3,073,400 3,149,000
Revenue Passenger Miles (000) ...................... 5,458,128 4,901,520 3,699,851 3,303,809 2,668,812 2,179,208 1,904,112 1,361,790 1,653,966 1,738,138
Passenger Load Factor ...................... ....... 50.3% 53.3% 54.6% 53.8% 52.0% 50.6% 51.5% 52.1% 53.8% 55.2%
Revenue Passengers Carried . ... ..... ............... 7,173,805 6,489,295 4,963,275 4,593,462 3,663,077 2,911,914 2,437,342 1,723,667 2,139,547 2,138,970
Freight and Express Ton-Miles (000) ................. 169,416 141,175 108,914 82,715 55,100 39,417 35,179 23,035 32,480 31,377
Total Revenue Ton-Miles (000) .. .. .................. 836,085 709,165 533,556 452,553 351,886 284,732 254,033 182,704 217,722 225,110
Statistics-Total Operations
Revenue Plane Miles (000) .......................... 121,077 106,197 77,715 67,125 55,477 47,207 42,718 31,658 46,963 47,732
Available Ton-Miles (000) .......................... 2,186,234 1,864,128 1,348,983 1,079,832 856,612 657,761 548,159 367,301 428,782 435,977
t Affected by major strikes in 1961 and 1966.
*Per share figures each year reflect the conversion of preferred stock as applicable
in years prior to 1963. Recomputed per share figures reflect two-for-one
stock splits in 1964 and 1966 and the conversion of preferred stock.
18
19
20
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
December 31, 1968
Note A-Long-Term Debt
Under Note Purchase Agreements with twelve insurance
companies the Company has borrowed $31,000,000 at
6% payable $3,000,000 annually and $4,000,000 on
October I, 1978. Certain optional prepayments at par are
permitted. The Agreements contain certain other provi-
sions with respect to redemption as a whole, but not from
borrowed funds, at premiums ranging from 5% to I%.
Under the Fourth Amendatory Credit 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 I, 1970 and
terminates October I, 1971. Interest on funds borrowed is
at 4% .
Under a credit agreement with twenty-four banks the
Company has borrowed $92,000,000. This agreement pro-
vides for a revolving credit of $250,000,000 reducing to
$230,000,000 by October I, 1972, to $210,000,000 by
October I, 1973, to $90,000,000 by October I, 1974 and
terminating July I, 1975. Interest on funds borrowed is at
the prime commercial loan rate to December 31, 1970 and
at % above the prime commercial loan rate thereafter.
At December 31, 1968 the Company had complied with
the covenants of the 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, 1968, options were outstanding for the
purchase of 30,400 shares of Common Stock by Com-
pany officers and employees at prices not less than 100%
of the market at date of grant. No options became exer-
cisable or were exercised during 1968.
The Northwest Airlines 1968 Employee Stock Purchase
Plan provides for the sale of Common Stock to eligible
employees through payroll deductions of up to 10% of
their salary not to exceed $3,000 a year. The sales price
is 90% of the highest price of the Stock on the New York
Stock Exchange on specified annual dates.
At December 31, 1968, there were 519,600 shares of Com-
mon Stock reserved for additional stock options and/or
the Employee Stock Purchase Plan described above.
There were no changes in the common stock and capital
surplus accounts during 1967. During 1968 two shares of
ACCOUNTANTS' REPORT
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 subsidiaries as of December 31 , 1968 and
the related statements of earnings, retained earnings and source
and application of funds for the year then ended. Our examin-
ation 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 preceding year.
Saint Paul, Minnesota
February 15, 1969
Common Stock were issued for old outstanding rights
and miscellaneous transactions reduced capital surplus
by $645.
At December 31, 1968 approximately $100,598,000 of
retained earnings were not restricted under provisions of
the long-term debt agreements.
Note C-Commitments
The Company has contracted to purchase jet aircraft for
delivery in 1969 through 1973, which with spare engines,
will r:equire expenditures of $653,286,000. Of this amount,
$82,060,000 had been deposited with manufacturers at
December 31, 1968 and approximately $144,653,000,
$152,822,000, $79,451,000, $55,864,000 and $138,436,000
become payable during the next five years, respectively.
Annual rental payments of approximately $4,900,000 are
required under various lease agreements for periods up to
forty years covering airport facilities, ticket offices, etc.
Note D-Taxes on Earnings
The provision for taxes on earnings consists of the
following:
Current provision .......... .
Deferred taxes ............. .
Deferred investment credit ... .
Less amortization of deferred
investment credit over eight
Year Ended December 31
1968 1967
$25,673,300 $35,348,000
14,510,800 14,064,400
8,463,800 5,355,600
48,647,900 54,768,000
years . . . . . . . . . . . . . . . . . . . . 3,975,100 3,117,000
$51,651,000
Total . . . . . . . . . . . . . . $44,672,800
Note E-Pension Plans
The Company has several pension plans covering sub-
stantially all of their employees. The plans' assets are
sufficient to cover the vested benefits for all plans at
December 31, 1968 and all past service costs have been
funded. Total Company contributions to the plans were
$5,078,348 for 1968 and $4,339,872 for 1967.
Note F -Depreciation Policy
Provision for depreciation of aircraft and related flight
equipment approximated $45,495,000 for 1968 and
$37,735,000 for 1967 and was computed on the straight
line method assuming ten year lives and 15% residual
values. $4,000,000 of SST development costs are being
amortized over five years.
In our opinion, the accompanying statements of financial posi-
tion, earnings, retained earnings and source and application of
funds present fairly the consolidated financial position of
Northwest Airlines, Inc. and subsidiaries at December 31. 1968
and 1967 and the consolidated results of their operations, the
changes in stockholders' equity, and source and application of
funds for years ended those dates, in conformity with generally
accepted accounting principles consistently applied.
Certified Public Accountants
FLIGHT OPERATIONS IN 1968
Installed in February, 1968, the 707 and
727 flight simulators have been used in
our pilot training program seven days a
week, seventeen hours per day. The
simulators, which are programmed to
simulate aircraft navigational and me-
chanical functions, duplicate actual
equipment motion in the approach and
landing procedural patterns of all major
orthwest Orient Airlines' cities.
$3 Million Saved
The cost of ome $3 million for the simu-
lators will be saved in a period of three
years by relea ing aircraft for revenue
scheduling purposes as well as greatly
reducing the noise factor over metro-
politan areas near the main base.
High Standards
Your company has been commended for
its high standards in pilot training, pro-
cedures and standards. In 1968, we con-
tinued and impro ed on this record by
the addition of such new program as the
turbulence plot which provides e ery
operating flight crew with the current
location and intensity of thunderstorm,
and e ere weather areas through dis-
semination of data obtained from the
U.S. Weather Bureau.
Co-Captain Program
In the Co-Captain program, e ery new
and recently rated Captain gets an addi-
tional period on the line following train-
ing, alongside a thoroughly experienced
Check Captain.
New Pilots
During 1968, we hired and trained 2 8
new pilots and provided tran ition,
ground and flight training to up-grade
and qualify 831 currently emplo ed
pilots to new po ition or new t pe of
equipment.
21
Do it up brown.
22
ORTHWEST
Cl~ll 'i
Put on a happy face.
We're going
after your
cargo
business.
NORTHWEST
O~ll'l
W[l[p~
CARGO SE RVICE
-...
--------
Co m e to Ja pa n ...
wh e re age is bea ut y.
lt"s Not-So- Fa r East -::a....;' ~
o n o rth west.
Come
our way
to
California.
\'\,',\(' gol
connc-cllons
_
_ ,,
,oRTH\ \rSrf.l.8J',I
We've got
a leg up
to
C~i~~o
" e" Y
ork.
j
MARKETING, SALES
AND ADVERTISING HIGHLIGHTS
Another record year in revenues was
achieved in 1968, aided by a vigorous
marketing, sales and advertising effort.
Increases ranged from 6% in mail reve-
nue to 9% in passenger revenue to 15%
in freight revenue. And credit card sales
rose 32% to $18,684,000.
Hawaii M arket
Northwest Orient's penetration of the
important Hawaii market improved sub-
stantially, with a passenger boarding in-
crease of 19.6% .
Travel Agent Partnership
Underscoring our belief that the travel
agent is our most important partner,
.orthwest Orient's revenue from this
group reached nearly $100,000,000 in
1968-an 8.8% increase over 1967. To
strengthen even further our relationship
with them, 6,600 U.S. travel agency per-
sonnel participated in promotions con-
ducted at various key locations by the
Agency Sales Division. In an allied area,
group tour passengers exceeded 23,000
persons-a l 5o/c increase over the prior
year.
New Concepts
Led by Northwest Orient's new Mini-
Vacation concept, several new tour area
promotions were introduced, such as the
Ski Tour, Dude Ranch and ational
Parks program.
A new approach to an in-flight merchan-
dising program was also finalized during
1968 and will be started shortly. The pro-
gram will be self-sustaining and will give
passengers an opportunity to purchase
quality items with Northwest Orient
identification and exclusive items from
areas served by the airline.
Advertising Impact
The impact of Northwest Orient's adver-
tising was increased by changing the
format of domestic newspaper advertis-
ing, featuring people rather than destina-
tion or aircraft illustrations.
A most successful newspaper advertising
campaign in mid west and eastern markets
resulted in some 20,000 coupons being
clipped and received by travel agents.
Greater impact in advertising aimed at
trans-Pacific customers was achieved by
moving from black and white to four-
color advertisements. The campaign was
backed by four-color posters and folders
in the same format.
VIP Cargo
A new and contemporary advertising
campaign was launched for the VIP Cargo
program. Appropriate collateral ma-
terial was developed in the same format.
In-Flight Magazine
Plans were completed, and a contract
signed, for a new in-flight magazine, ten-
tatively titled East-West. This magazine
will be introduced into the seat pockets
ofall orthwest Orient aircraft in March,
1969 and will replace a public relations
brochure formerly carried.
23
CHINA
PHILIPPlNES
24
NORTI-IWEST ORIENT
AIRLINES
SYSTEM MAP
NORTHWE T ROUTES
P~OPOSED ROUT[S
SERVICE HIGHLIGHTS
The com pan)\ fleet \\a i ncrc[L ed by 17
fan-jct aircraft during the pa t yea r. With
th additional equipment, your com-
pany\ program or improving its service
continued at the s,ame rapid rate of recent
)Cars. Highlights include:
l On pril I, 1968, a new nomtop
Lr\ 1cc between f'argo and hicago wa<;
inaugurated.
2. On pril I, 1968, orth\\"e. t ricnt
rcinauguratcd '>Cl"\ ice to the comenient
1id,\a) \1rport in hicago.
J. On April 2.7, 1968, ortlrnest ricnt
h gan its fir<-;t non top scnicc bct\\een
\l1h,aukcc and tlanta.
4. n June l, 1%8, '\ortlmc<-,l Orient rc-
1n-.,tatcd scnicc to l ,t(iuardi<t irport
111 C\\ York.
5. Lale in 1968, Northwest Orient beg8n
the following:
irsl nonstop erviee in both direction
betweenM innea pol i / t.Paul andMiami.
First nonstop , ervice between Minne-
apolis / t. Paul and Atl8nta.
First nonstop service between Minne-
ap Ii / t. Paul and Tampa/ t. Peter -
burg.
6. o keep pace with the rapid growth in
cargo shipments, the 727 aircraft u ed in
al l-cargo erviee were replaced with the
larger 320 aircraft on October 30.
Trans-Pacific all-cargo ervice wa in-
creased from 6 L
o 11 round trips week ly
during ovcmbcr. In addition, all-carog
service between orthwcsl Orient'
eastern cities and caltlc/ Portland wa
supplemented with an exten ion of c.111
e\isti ng er ice from the Twin itie lo
, cattle/ Portland .
OPERATING
HIGHLIGHTS OF 1968
Northwe t Orient led all U.S. airline
in net pr fit- fir t time in company'
history.
Accepted delivery of 17 Boeing jets at
total purchase cost of $114 mill ion.
E tabli hed revo lving rund cred it
agreement of $250 million with group
of 24 banks.
In itiated an employee tock option
plan and enrolled over one-third of
eligible employee .
Rein tat d ervice by No rth we t
Orient lo La G uardia Airport in New
York and Mid way Airport in Chicago.
Increa cd number of T ran -Pacinc all-
cargo night from ix to eleven round
trip weekly.
ALASKA
THE 47 CITIES SERVED BY NORTHWEST ORIENT:
Anchorage
Atl anta
Billings
Bismarck
Bozeman
Butte
Chicago
Clearwater
Cleveland
Detroit
Fargo
Ft. Lauderdale
Grand Forks
Great Falls
Helena
Hilo
Hollywood
Hong Kong
Honolulu
Jamestown
Madison
Mandan
Manil a
Mi ami
Mil waukee
Minneapol is
Missoul a
Moorhead
New Yo rk
Newark
Okinawa
Osaka
Phil adelphi a
Pittsburgh
Portl and
Roch ester
St. Paul
St. Petersbu rg
Seattl e
Seoul
Spokane
Tacom a
Tai pei
Tampa
Tokyo
Wash ington, D.C.
Winni peg
25
26
ROUTES, RATES AND SCHEDULES
The past year has been one of the most
active in the field of route proceedings in
your company's 42-year history. Here is
a capsuie review of 1968's proceedings
and their status as of March 1, 1969:
Trans-Pacific Route Investigation
On January 24, 1969, President ixon
directed the Civil Aeronautics Board to
rescind their decision, subjecting the
matter to his further review. Pursuant to
a second letter from the President, the
Board issued an Order on February 14
vacating the decision and certificates in
the international phase of the case. The
Board has also stayed the effective date
of dome tic (Hawaii) authorities until
April 14, 1969. At this time there is no
indication when the President will issue
further instructions with regard to the
Trans-Pacific Case nor is there any indi-
cation of the form such further action
will take.
In the Trans-Pacific Case, orthwest
Orient has been recommended for the
following new authority:
A new Central Pacific route from the
California cities of Los Angeles (served
through Ontario and Long Beach Air-
ports) and San Francisco (served through
Oakland and San Jose Airports) to
Hawaii and beyond Hawaii to Japan
and beyond.
On the California-Hawaii segment,
local turnaround right between the
above-named airports in the San Fran-
cisco Bay area and Hawaii. Our flights
proceeding from the Los Angeles area
could carry Hawaii passengers but would
be required to continue through Hawaii
to the Orient.
amed for coterminals ew York/
e ark, Philadelphia, Wa hington /
Dulle , Cleveland, Detroit, Chicago,
Twin Citie , Seattle/Portland and the
California points mentioned above for
authority to fly to the Orient either via
Hawaii or over the Great Circle. This
authority would permit routings such as
ew York-San Francisco-Seattle-Tokyo
or New York-Chicago-Hawaii-Tokyo.
The Eastern cities mentioned above
were also named coterminals on North-
west's present orth Pacific route, giving
us the right to fly by any combination of
such coterminals direct to Japan. This
will be of significance in future years
when flying between Chicago and the
Orient on a nonstop basis will be feasible.
SAN FRANCISCO/
OAKLAND
LOS ANGELES/
LONG BEACH
WINNIPEG
GRAND FORKS
FARGO
ROCHESTER
TWIN CITIES
MILWAUKEE

MADISON
CONNECTING
California Case
The Civil Aeronautics Board (CAB) Ex-
aminer recommended on March 18, 1968
that orthwest Orient be granted a non-
stop route between Minneapolis/St. Paul
on the one hand and Los Angeles and
SAN FAfe
1
S'AN ~~AKLANO
OETflOff
C'HtcAG
NEWVORK
E O NEWARK
~
WASHINGTON
San Francisco/Oakland on the other. All
procedural steps in this proceeding have
been completed and it is now before the
CAB for decision.
Gulf States Case
In the CAB Examiner's initial decision
in the Gulf States-Midwest Points Ser-
vice Investigation issued August 1, 1968,
Northwest Orient was recommended for
an extension of its existing routes be-
yond Chicago to Nashville. While the
company is pleased with this recommen-
dation, it will continue to seek authority
to serve Memphis and New Orleans as
an extension of its route south of Chicago
as well. The matter is awaiting Board
decision.
ST. LOUIS
CHICAGO

.
NASHVILLE
NEW ORLEANS
Pan Am Northwest Interchange
Approval has just been given by the CAB
for an inter-change agreement between
orthwest Orient and Pan American
World Airways providing the first one-
plane service between the Twin Cities and
Europe via the route junction point of
Detroit. Both companies aircraft will be
used with orthwest's crews and ground
control operating over Twin Cities -
Detroit segment and Pan American
operating Detroit-Europe.
Other Proceedings
orthwest also pressed its claims to a
SeattleiPortland-Kansas City-St. Louis
route in the Oral Argument before the
Civil Aeronautics Board on the Pacific
orthwest-California Ser vice In vestiga-
tion held on October 23, 1967.Thi Case is
now also awaiting Board determination.
The Company continues also to press
for a T win Cities-Denver route in the
Denver-Twin Cities Service Investigation.
Thi proceeding is also before the Board
for final decision.
CONNECTING
There are a number of other proceedings,
all in an earlier stage of processing, in
which the Company is pro ecutingclaims
for additional route authority. Among
the e are:
1. Ser vice to Omaha and Des Moines
Case. In this proceeding, the Company
seeks a network of routes extending out
of Omaha and Des Moine to a number
of cities in the Mid we t, East Coast and
West Coast markets.
SEATTLE
.

LOS ANGELES
TWIN CITIES

ST. LOUIS
2. Service to White Plains and Islip Case.
orthwest seeks extension of its route
from it ex1stmg tation of Chicago,
Cleveland and Pittsburgh to White
Plains and Islip, serving the Westchester
and Long Island areas.
3. orth Carolina Points In vestigation.
An extension of orthwest's existing
routes through Chicago and north from
Miami/Fort Lauderdale to the orth
Carolina cities of Charlotte, Greensboro/
High Point and Raleigh/Durham is be-
ing applied for in this proceeding.
CHICAGO
RALEIGH
FORT
LAUDERDALE
MIAMI
4. TH in Cities/Milwaukee Long-Haul
In vestigation. orthwe t seek exten ion
of its northern tran continental route
from the Twin Citie and Milwaukee to
Bo ton. Al o, it seek improvement of it
present authority to permit non- top
flight between the Twin Ci tie and Phila-
delphia and Milwaukee and Philadel-
phia.
TWIN CITIES BOSTON
MILWAUKEE
5. Pacific orthll'est-Ca!ifornia In vesti-
gation. At issue for orthwe t in this
proceeding i a route between San Diego,
Los Angele , San Franci co/Oakland
(and the satellite airports for each of
these citie ) and Seattle/Portland.
SEATTLE/ TACOMA
PORTLAND
SAN FRANCISCO/
OAKLAND/
SAN JOSE
LOS ANG ELES/
ONTARIO/
LONG BEACH
SAN DIEGO
6. Mihmukee Short-Haul Imestigation.
orthwe t eeks an exten ion of its
exi ting routes from Milwaukee to Cin-
cinnati, Columbu , Dayton, Indianapoli
and Louisville.
MILWAUKEE
COLUMBUS
.
INDIA APOLIS
DAYTON
CINCIN ATI
LOUISVILLE
27
28
SITES TO SEE ... ALL ON NORTHWEST ORIENT
Floating restaurant at Aberdeen, Hong Kong
One of Japan's many beauties
St. Augustine-
the oldest church in the Philippine
An ancient sculpture in Taipei's
ational Gardens
A stately Okinawan dancer
Stone figure at Kyong-bok Palace-
Seoul, Korea
Majestic Mt. Rainier watches over
Seattle and Tacoma
Sunny Miami Beach-
on America's ' Gold Coast"
A true flower of beautiful
Hawaii
Peach Tree Center in
Atlanta, Ga.
29
30
THE PEOPLE OF NORTHWEST ORIENT
To keep pace with the growth of North-
west Orient's business, your company's
system employment grew from 10,200
to 11,385 persons-an increase of 1,185
over 1967. Total salaries paid in 1968
were $98,151,000. With related employee
benefit cos ts, the total came to
$108,313,000 or 26 of each revenue
dollar.
Employee Stock Plan
Over one-third of all eligible employees
elected to become participants in the
Employee Stock Purchase Plan adopted
by the shareholders in July, 1968 and are
investing an average of 7% of their pay
in their company as an expression of con-
fidence in Northwest Orient's continued
growth.
Personnel Highlights
One indication of the stability of the
orthwest Orient employee 'family' is
the group of 259 persons with 25 years
of service who were feted in 1968.
Another sign is that sound employee
relations were maintained throughout
the year with the labor organizations
representing more than 11,000employees
and covered by 18 different agreements.
Currently, negotiations are being con-
ducted for renewal of nine employment
agreements.
As a member of the Plans for Progress
and a participant in the ational Alliance
of Businessmen program, orthwest
Orient also increased its employment of
minority and disadvantaged persons in
1968.
NORTHWEST ORIENT AIRLINES
General Offi ces
Minneapolis-St. Pau I International Airport
St. Pau l, Minnesota 5511 1
Area Code 612 726-2111
DIRECTORS*
JAMES H. BI GER
Chairman of the Board, Honeywell Inc.
Minneapolis, Minnesota
HADLEY CASE
President, Case, Pomeroy & Company, Inc.
ew York, ew York
A. E. FLOA
Secretary, orthwest Airlines, Inc.
St. Paul, Minnesota
MORTO H. FRY
Senior Partner, Riter & Company
ew York, ew York
CROIL HU TER
Chairman Emeritus, orthwest Airlines, Inc.
St. Paul, Minnesota
MALCOLM S. MACKAY
President, Foothills Company
Roscoe, Montana
DO ALD G. Mc EEL Y
President, Space Center, Inc.
St. Paul, Minnesota
DO ALD W. YROP
President, orthwest Airlines, Inc.
St. Paul, Minnesota
C. FRA K REA VIS
Partner, Reavis and McGrath
ew York, ew York
ALBERT G. REDPATH
Partner, Auchincloss, Parker & Redpath
ew York, ew York
L YMA E. WAKEFIELD, JR.
Partner, Piper, Jaffray and Hopwood
Minneapolis, Minne ota
REGISTRAR: The Chae Manhattan Bank,
ew York, ew York
TRANSFER AGE T: Bankers Trust Company,
ew York, ew York
STOCK LISTED: Common Stock listed on ew
York Stock Exchange and Midwe t Stock Exchange
*As of March 1, 1969
PAGE 31
OFFICERS*
DO ALD W. YROP
President
JAMES A. ABBOTT
Vice President-Orient Region
CLA YTO R. BRA DT
Vice President-Purchasing and Stores
ROBERT W. CAMPBELL
Vice President-Budgets
J. WILLIAM CAMPI 0
Vice President-Regulatory Proceedings
RO ALD W. CHAMBERS
Assistant Vice President-Properties
ROBERT A. EBERT
Vice President-Personnel
ROY K. ERICKSO
Vice President-Public Relations
A.E.FLOA
Secretary
BE JAMI G. GRIGGS JR.
Vice President-Assistant to the President
DO ALD H. HARDESTY
Vice President-Finance and Treasurer
WILLIAM E. H SKI S, JR.
Vice President-Communications and Data Services
FRA KC. JUDD
Vice President-Maintenance and Engineering
M. JOSEPH LAPE SKY
Vice President-Economic Planning
RO ALD McVICKAR
Assistant Vice President
BRYA G. MOO
Vice President-Advertising
EMORY T. 1 ELEY, JR.
Vice President and General Counsel
ROBERT J. PHILLIP
Vice President-Comptroller
C. L. TEWART
Vice President-Transportation Services
ROBERT J. RIGHT
Vice Pre ident-Sales
31