Northwest Airlines Annual Report 1969

NORTHWEST ORIENT AIRLINES
1969 ANNUAL REPORT
I I
FINANCIAL HIGHLIGHTS OF 1969
Total Operating Revenues ...... .. .............. .
Operating Income .............................. .
Net Earnings for the Year .. . ................... .
Per Common Share ........................ .
Stockholders' Equity .. .. ....................... .
Per Common Share .. .. .. . ................. .
Dividends Paid . . .............................. .
Operating Expenses-
Per Available Ton-Mile ..................... .
Per Revenue Ton-Mile .............. . ...... .
Revenue Traffic-
Passengers Carried ......................... .
Passenger-Miles Flown ..................... .
Ton-Miles, Mail , Freight and Express ........ .
Common Shares at Year End ... ........ ........ .
Employees at Year End ......................... .
1969
$ 467,937,999
82,126,009
51,465,531
2.55
426,796,925
20.41
9,117,379
15.2
34.5
7,517,780
6,208,725,000
341,584,000
20 914,272
12,695
1968
$ 416,289,742
97,943,632
50,051,005
2.74
306,717,107
16.76
7,319,702
14.6
30.8
7,173,805
5,458,128,000
308,988,000
18,299,256
11,354
TABLE OF CONTENTS
President's Message ... Pages 4-5
Enter the 747 ... Pages 6-7
financial Review of 1969 ... Pages 8-9
orthwest Orient's Jet Fleet ... Pages 10 & 19
Financial Report. .. Pages 11-18
Sales & Advertising Highlights ... Pages 20-21
R oute Map ... Pages 22-23
ew Routes, Current Cases ... Pages 24-25
Everyone Contributes ... Page 26
43rd Annual Report to the Stockholders
From the President:
Earnings Leadership
For the second con ecutive year, your
company led all U.S. air carriers in net
earnings with an after-tax profit of
$51,465,531. Achieving this in a troubled
year for the industry is gratifying to your
management.
For 1969, record revenue of
467,937,999 were generated. This is a
12.4 per cent increa e over the
416,289,742 revenues of 1968. The 1969
net earnings of $51,465,531 is a 2.8 per
cent increa e over the 1968 figure of
50,051,005.
Fare Increases Granted
Two fare increases were approved in
1969 by the Civil Aeronautics Board
(CAB) that contributed to revenue
growth and helped offset the impact of
rapidly rising costs.
The first increa e in fares became effec-
tive February 20, 1969 and was estimated
by the CAB to be 3.8 per cent for the
industry.
Effective October 1, 1969, the CAB
permitted carriers to revise domestic
fares u inga cost-oriented formula. Thus,
for the first time, passengers travelmg
si milar distances now pay correspond-
ingly similar fares. Fares in many of
orthwest Orient's key markets have
been historically underpriced when com-
pared to fares of other carriers in markets
of like distance. Application 'of the fare
formula , therefore, resulted in a some-
what greater revenue increase for orth-
we t Orient than for other domestic
carriers.
Coincident with this fare adjustment,
the CAB al o permitted carriers to re-
duce discount on certain domestic pro-
motional fare . These adjustments helped
arrest the sharply increasing revenue
dilution which the indu try was experi-
encing due to growing use of promo-
tional fares.
Rising Expenses
Total operating expen es rose from
the 1968 level of $318,346,110 to the 1969
figure of 385,811,990. The inflationary
trends were evident in payroll, rents,
landing fees and in increased costs of
other supplies and ervices. The impact
is evident in landing fees, for example,
which rose from $7,760,478 in 1968 to
$10,520,892 this past year-a 35.6 per
cent increa e.
Offsetting Savings
Helping to partially offset rapid in-
creases in expenses are the savings gener-
ated by effective cost controls, better
utilization of people and operating effi-
ciencies which characterize your com-
pany.
One example of cost savings is the de-
cision to install heavy duty wheel and
brakes on the entire fleet of 32 B-727-100
aircraft. The increased brake life results
in a projected saving of an estimated
180,000 annually.
The application of standardization
wherever possible ha a 'domino effect'
that contributes greatly to orthwest
Orient's operating efficiency-best in the
industry. Use of the same seat in both
the B-727' and B-707's provides savings
in initial purchase and in reupholstery
costs. Standardization in our aircraft
fleet reduces the number of spare engines
needed-a significant item because of the
$330,000 co t for each JT8D engine, as
an example.
Financial Strength
The need for financial strength and
stability has never been greater in the
industry.
Capital requirements for the new gen-
eration aircraft are truly impressive.
Your company, a an example, has com-
mitments of $216 million for 15 Boeing
747's and of $262 million for 14 McDon-
nell Douglas DC-1 O's over the next 48
months.
Because of our prior concern and plan-
ning, your company can approach this
commitment with confidence.
As of February 28, 1970, orthwest
Orient ha s advance depo its of
$ l 31,95 I ,439 on the 747 s and DC- lO's
it ha ordered.
With a long-term debt-to-equity ratio
of .26, lowest in the indu try, orthwest
Orient is al o in an excellent position to
obtain additional line of credit should
the need ari e at ome future date.
Route Expansion
In 1969 orthwe t Orient's route
tructure was improved in two important
areas.
After 4 years of proceeding , the
tran -Pacific service investigation was
concluded. In the dome tic phase, we
were given authority to Ha, aii from a
number of new co-terminal points: ew
York- ewark Philadelphia, Washing-
ton, Cle eland, Detroit, Chicago and the
Twin Cities.
The international phase decision
awarded us central Pacific routes from
San Francisco/Oakland/San Jose and
from Los Angeles Ontario/ Long Beach
to the Orient ia the intermediate point
of Ha\ aii. Service was inaugurated from
San Francisco on Augu t 1, 1969, and
from Los Angeles on January 6, 1970.
The important link from the Twin
Cities to California was forged with new
authority granted us to both San Fran -
cisco and Los Angeles on a non-stop
basis. After just three months operation,
orth, est Orient had obtained a sub-
stantial hare of traffic in these major
markets.
We are al o hopeful of receiving new
non-stop authority from Seattle-Port-
land to San Francisco/Oakland and Los
Angeles in the Pacific o rthwest-Cali-
fornia Service Investigation. This would
permit much more efficient use of our
aircraft because of improved scheduling
pattern . The CAB examiner has recom-
mended orthwest Orient be given this
authority in his Initial Deci ion.
Labor Accord
The ettlement of majo r labor agree-
ments in l 969 without interruption ofour
service wa a noteworthy accomplish-
ment. Contracts, fair to our employees
but\ ithin the pattern ofourcompetitor ,
wer negotiated successfully with our
pilots, mechanics, flight kitchen em-
ployee , plant protection men, meteorol-
ogi t , flight engineers, Japanese and
Philippine per onnel.
Proposed Merger
The success of your management in
dealing with these various areas contrib-
uted to our continuing financial success.
Thi , in turn, placed us in the position
of being able to tender a merger offer to
ortheast Airlines in o ember, 1969.
nder basic term of the merger agree-
ment, which has been approved by the
Board of Director of Storer Broad-
casting, ortheast Airlines and orth-
west Airlines as of this writing:
1. orthwest Orient Airlines ( WA)
will be the surviving company and
the stockholders of ortheast Air-
line ( EA) will receive one share
of WA common stock for each
five shares of EA stock held.
2. The stock to be received by Storer
Broadcasting, 86. l per cent tock-
holder of EA, will be reduced at
the rate of$35.50 per share in accor-
dance with the formula in the agree-
ment based upon ortheast losses
a defined, and will not be entitled
to receive dividends for a period of
three years from the date of merger
consummation.
3. The stock to be received by the mi-
nority EA stockholders will be
WA common stock entitled to
regular dividends.
4. An existing $10 million indebted-
ne owed by EA to Storer for in-
terim loan advance will be repaid
by WA at the consummation of
the merger with interest. WA will
ha e the option to repay this debt
either in cash or in WA comn!on
dividend paying stock at the rate of
S35.50 per share.
5. Storer has advanced and will be ob-
ligated to advance additional funds
as required by orthea t during the
pendency of the consummation of
the merger and WA will cause re-
payment of such additional loans in
cash on consummation.
The combination of route structures
and the operating economies that could
be made by joint operation make this
propo ed merger a sound one in the con-
sidered opinion of your management
and Board of Directors.
There is no question but that much
hard work and dedication will be re-
quired to realize fully the benefits of
such a merger but the potential reward
is also great.
Dividends Increased
As a stockholder, you have several
prime interests in the company-finan-
cial tability, growth and income.
A key indicator in any company's
growth is its dividend record.
Your management wa plea ed that
the company's performance in 1969 war-
ranted continued payment of quarterly
dividends. The rate of quarterly dividend
was increased from 10 per share to 11
per share, an increase of 12.5 per cent.
Your company's record of quarterly
dividends has now reached 59 consecu-
ti e payments.
Since 1969 was a year in which 4 of the
12 trunk air carriers omitted one or more
quarterly dividends, we feel this is a
significant indicator of orthwest
Orient's continued vitality and strength.
We are confident that 1970, although
a year of relative uncertainty, will again
_
iustify your continued faith and support
Lis a stockholder.
Sincerely,
5
6
Preparations for 7 4 7 delivery
has priority in '69 planning;
new routes await new aircraft
Much of 1969's planning and work
was devoted to the impending delivery of
orthwest Orient's fleet of 15 Boeing
747s. Activity centering on this new
generation jet was found in nearly every
department of your company.
Special Needs
Purchasing of completely new equip-
ment for terminal and ground handling
was required in many instances. New
items committed for include specially de-
signed food service trucks, tow tractors,
baggage containers and a host of other
ground support equipment.Total
planned investment in this material to
date is $8,930,000.
Provisioning of spare parts for the 747
that began in 1968 continued through
1969 and commitments currently total
$20,500,000. This represents approxi-
mately 65 per cent of the total spares re-
quirement as planned.
In-Flight Entertainment
A contract was signed with In-Flight
Motion Pictures, Inc. for the exhibition
of in-flight motion pictures aboard all
of the 747 fleet and the DC-10 fleet. The
contract includes provision for stereo-
phonic audio entertainment as well as
motion pictures.
Facilities Expansion
In addition to special requirements for
ground support equipment for the 747,
new and different facilities are also re-
quired for passenger terminals, overhaul
and maintenance.
A new $5 million expansion of our
facilities at Seattle/Tacoma International
Airport includes the first 747 hangar and
is scheduled for April 15, 1970 comple-
tion.
Completion of the $18 million expan-
sion at Twin Cities International Airport,
orthwest Orient's home base, is set for
1971. Included in this project are two
new 747 hangars and a major expansion
of shop facilities.
Overhaul of the 747 will be centered
at the Twin Ci ties base while maintenance
will be performed both at the Twin
Cities and Seattle.
Pilot Training
The first group of747 instructor pilots
attended ground school at the Boeing
Company facility in Seattle in 1969.
Orders for many new pilot training
devices for the 747 were placed, includ-
ing a cockpit procedures trainer, naviga-
tion and instrument procedures trainers
and back lighted systems training boards.
A new $3 million flight services build-
ing, now under construction at Twin
Cities International Airport, will house
the $3 million 747 flight simulator now
being built by the Link General Preci-
sion Division of Singer Corporation.
Present plans call for 747 training
flights to center at Salina, Kansas and
possible use of Moses Lake, Washing-
ton. Both are former Air Force facilities.
New Routes Ideal
Important new routes were granted
orthwest Orient in 1969. Several of
these new routes are ideal for efficient
747 operation.
The new central Pacific routes, for ex-
ample, from San Francisco or Los
Angeles to Tokyo with the intermediate
stop in Honolulu represent a very eco-
nomic use of the 747 because of its long
haul characteristics. Another such route
is the non-stop flight from Chicago to
Honolulu.
Many of Northwest Orient's existing
routes nt nicely with the 747's capabi lities
-Seattle to Tokyo being an excellent
example.
Initial Schedule
First scheduled service of Northwest
Orient's 747s will be between the Twin
Cities and ew York with one flight
daily in each direction initial ly. This
service is tentatively scheduled to begin
in June, 1970. Present plans call for a
second flight daily in each direction on
this same route segment some two weeks
later.
Introduction on this route segment
will permit maximum attention to be de-
voted to this new airplane and the spe-
cial operating procedures it reg uires.
Location of the general offices and the
overhaul and maintenance main base in
the Twin Cities will provide proximity to
both support personnel and equipment.
First trans-Pacific scheduling of our
747 will be from the Seattle/Tacoma
gateway to Tokyo on July 1, 1970. This
flight will operate New York-Chicago-
Seattle-Tokyo.
All planning for orthwest Orient's
introduction of 747 service has been
focussed on the need to make that intro-
duction a pleasant and rewarding ex-
perience for our passengers.
Specially designed jetways for board-
ing passengers on the 747 are also a re-
quirement. These installations have al-
ready been completed in the Twin Cities,
Seattle and Anchorage; programs are
underway in ew York, Chicago, Tokyo,
Hong Kong, Seoul, Honolulu, Los
Angele San Francisco and Miami.
ln-ffight motion pictures {viii be shown on all ortlnvest Orient 747 trans-Pacific ffights .
Overhead compartments above 747 seats
permit carry-on of luggage and other
bulky item .
Two abreast doorways provide easier,
fa fer boarding and deplaning.
Stewardesses find food service easier,
quicker with new galley arrangements
on the 747.
Wider aisles on the 747.
The first class lounge in the upper deck
of the 747 boasts real comfort, elegance.
7
8
Financial review of 1969
Revenues
orthwest Airlines' operating revenue
established a new high of $467,937,999,
for an increase of 12.4 per cent over the
previous record set in 1968.
Pa senger revenues increased to a rec-
ord $350,504,331 , up 16.3 per cent over
the pre ioushighof$301 ,276,511 in 1968.
The system passenger-mile yield in-
crea ed to 5.65 , or 2.4 per cent over
1968. This improved yield i the result of
the fare increases approved by the Civil
Aeronautics Board and placed into effect
in February and October of 1969. The
system passenger-mile yield in the fourth
quarter 1969 increased 6.6 per cent to
5.97 primarily a a re ult of the domes-
tic fare increases which were in effect in
thi quarter.
Thi year's increase in passenger yield
is the first since the yield started declining
in 1963. The passenger-mile yield was
partially offset by the continued increase
in the use of promotional and discount
fares and the increasing utilization of
coach services. Coach services amounted
to 89. l per cent of the total passenger-
miles, up from 85.4 per cent in 1968.
Re enue from freight, express and
exce baggage were at a new high of
$51 ,006,242, up 16.2 per cent from 1968.
Thi growth reflects the increased ser-
OPERATING REVENUES AND EXPENSES
MILLIONS OF DOLLARS
500
REVENUES
- EXPENSES
400
300
200
100
1965 1966 1967 1968 1969
(STRIKE)
vice orthwest i offering in the cargo
market and was attained despite a drop
in the revenue ton-mile yield from 25.70
to 25.53 .
Mail revenue increased 2.7 per cent
to $29,386,081. Mail revenue ton-miles
flown were 143,089,205 or an increase of
2.5 per cent over 1968.
Revenues from charter operations de-
clined to $35,089,363 in 1969, compared
with $41,059,963 in 1968. Thi reduction
in revenue was due to decrea ed military
charter operations, which amounted to
$30,059,792, or a decrea e of 21 per cent
from $38,066,115 in 1968. The Military
Airlift Command contract extends to
June 30, 1970, and we will eek a renewal
contract for the Government's fiscal
year 1971.
Expenses
Operating expenses in 1969 totaled
$385,811 ,990, representing an increase
of 21.2 per cent compared with 1968.
This increase is, in part, the re ult of in-
creased capacity offered in 1969.
Available ton-miles increa ed 16.0 per
cent over 1968. Depreciation and amorti-
zation amounted to $60,833,257 in 1969,
an increase of 22.1 per cent over 1968.
The continued inflationary trend has
increa_ ed costs _ substantially in wages,
materials, services, and fuel and oil
UNIT OPERATING COSTS
CENTS PER TON-MILE
40 . - - - - - - - ~ - - - - - - - -
30
20 _ _ _ _
0
1965 1966
(STRIKE)
1967 1968 1969
prices. Continued attention to cost con-
trol by your Company has held the unit
co t performance to a modest increase
to 15.2 per available ton-mile, or only
ix tenth of a cent over the 1968 level
of 14.6.
Net Earnings
etearningsin 1969were 51 ,465,531 ,
or $2.55 per average share of common
tock outstanding, compared with
$50,051,005, or $2.74 per share in 1968.
The 1968 earnings per hare are adjusted
to reflect the two-for-one stock split
in 1969.
Operating income amounted to
$82,126,009, down from $97,943,632 in
1968. Pretax non-operating co ts in-
cluded 2,334;634 interest expense, down
from $3,893,613 in 1968, and income of
$751 ,506 from the di posals of property.
Beginning January 1, 1969, a change in
accounting practice was adopted by the
Company under which the flow-through
method of accounting for investment
tax credit was used with respect to all
new asset deliveries. Thi credit against
federal income taxes, amounting to
$9,040,500, has been taken into current
year's earnings.
The deferred investment tax credit
amounting to 24,383,400 at December
BREAK-EVEN AND
ACTUAL PAYLOAD FACTOR
55% r-------.,---
45% ===!::A
BREAK-EVEN PAYLOAD
0% ~==-:~==~===~;;;..:.:~'":....-----
1965 1966
(STRIKE)
1967 1968 1969
31, 1968, continued to be amortized in
acco rdance with pas t practice and
amounted to a credit in net earnings of
4,525,700 in 1969, compared with
$3,975,100 in 1968. All investment tax
credit available to Northwest to date, as
a resu ltofequipment purchases, has been
used to reduce current income taxes.
Cash Flow
Cash flow from operations in 1969 in-
cluded generation of $124,706,388 from
net earnings, depreciation and amortiza-
tion, deferred income taxes, and invest-
ment tax credit. Other sources of funds
included proceeds from the sale of com-
mon tock of $77,731 ,666 and disposals
of operating property amounting to
$2,000,971.
The major application of funds in-
cluded fleet and property additions and
advance deposits for aircraft on order
amounting to $174,006,206 and a reduc-
tion in long-term debt of $48,000,000.
Cash di vidends of $9,117,379 were paid
to stockholders in quarterly payments
during 1969 at an annual di vidend rate
of 45 per common share (adjusted for
the two-for-one stock split in 1969).
Your Company has made consecutive
dividend payments on its common stock
for 15 years.
REVENUE PASSENGER MILES
1965 1966 1967 1968 1969
(STRIKE)
Traffic
Northwest's traffic results in 1969 re-
flected record growth in all areas. Rev-
~nue plane-miles in scheduled ervice
increased by 15.2 per cent, while avail-
able ton-miles increased 19.5 per cent.
Revenue passenger-miles in scheduled
services increased to 6,208,725,219 for
a 13.8 per cent i ncrea e over 1968.
System passengers carried increased
4.8 per cent over the prior year. The sys-
tem passenger load factor declined from
50.35 per cent in 1968 to 45.98 per cent
in 1969. During 1969 system freight, ex-
press and excess baggage revenue ton-
miles increased 16.9 per cent and mail
revenue ton-miles increased 2.5 per cent
over 1968.
Financing Arrangements
Northwest Airlines' financial condi-
tion is one of the strongest in the airline
industry. Stockholders' equity at year
end amounted to $426,796,925, up 39.2
per cent from $306,717,107 at the close of
1968. Book value per common share in-
creased to $20.41 at the end of 1969,
compared to $16.76 per share last year
after adjusting for the two-for-one stock
split in M ay 1969.
Outstandingdebtatyearend amounted
to $130,000,000. Under a credit agree-
ment with 15 banks, the Company has
outstanding $35,000,000, which is the
maximum revolving credit remaining
under this agreement. The revolving
credit maximum continues to reduce by
$5,000,000 quarterly from April 1, 1970
and terminates October I, 1971.
Under a separate credit agreement with
24 banks, an additional maximum re-
volving credit of $250,000,000 is pro-
vided, of which the Company has bor-
rowed $67,000,000. This agreement re-
duces to $230,000,000 by October 1,
1972, to $210,000,000 by October 1,
1973, to $90,000,000 by October 1, 1974
and terminate July 1, 1975. As of Decem-
ber 31, 1969, the agreement makes avail-
able, at any time, $183,000,000 for work-
ing capital and other purposes.
Under a Note Purchase Agreement
with 12 insurance companies, the Com-
pany has outstandi ngdebtof $28,000,000.
This agreement is payable $3,000,000 an-
nually, with a final payment of $4,000,000
on October 1, 1978.
The Company has on order from the
McDonnell Douglas Corporation and
from the Boeing Company, 29 addi-
tional jet aircraft which, with spare en-
gines, will require expenditures of
$597,446,000. These aircraft are sched-
uled for delivery in 1970 through 1973.
SOURCE AND DISTRIBUTION OF REVENUES
6.3%
U.S. AND
F
SOURCE DISTRIBUTION
9
10
Northwest Orient jet fleet
grew 21% in '69;
now numbers 108 aircraft
Delivery of 19 Boeing 727-200 jet air-
craft in 1969 brought orthwest Orient's
Jet fleet from a total of 89 to 108 aircraft.
Thi repre ented an increa e of 21 per
cent in number of aircraft; an increase
of 21 per cent in terms of additional lift
capacity.
Balanced Fleet
With its mix of short, medium and
long range aircraft, orthwest Orient
has one of the finest fleets in the world
today.
Standardization on an all-Boeing fleet
has provided many significant benefits
to the company.
Today, on ly two types of engines are
needed for the four types of aircraft. The
Pratt & Whitney JT3D engine is used in
both the Boeing 7208 and in the Boeing
707-320; the JT8D engine in both the
Boeing 727-100 and 727-200.
Standardization Important
Thi standardization in aircraft and en-
gines results in many ubstantial savings:
l. Fewer spare engines and spare parts
required; each JT8D engine costing
$330,000 today.
2. Training of mechanics is speeded
and their productivity is greater be-
cause they need only work on two
types of engines.
3. Pilot transition training is more
rapid because of the similarity in
aircraft and engines.
The benefits obtained from this man-
agement approach have been obvious in
the past. This was a prime reason for in-
sisting that McDonald Douglas provide
us with the Pratt & Whitney JT9D en-
gine rather than the General Electric
engine, in the DC-10 aircraft before we
placed our order.
This decision insured commonality
with the engine used in the Boeing 747
and the continuance of the savings bene-
fits achieved through standardization.
Future Deliveries
The first of 15 Boeing 747's ordered b
Northwest Orient will be delivered in
May, 1970. By year end, ten 747's will be
delivered with the remaining five to be
delivered in 1971. With spare en gin es and
parts, these 15 aircraft represent an in-
vestment of $350 million.
Fourteen DC-lO's have been ordered
with initial delivery expected to be made
in late 1972. Total investment in these
aircraft, with spares, is $280 million. An
additional 14 DC-lO's are on option.
Delivery positions for six Boeing 2707
SSTs have been reserved by Northwest
Orient, and secured by deposits on and
payments for research and development
costs totaling $6,300,000.
Aircraft Sale
We have been successful in selling six
of our Lockheed Electra L-188 aircraft.
The remaining six aircraft will be sold
after certain airport improvements have
been completed later this year on our
route system so that pure jet service can
be initiated.
Fourteen DC-J0's have been ordered; 14 are on option. Northwest Orient has reserved six positions for the SST.
STATEMENT OF EARNINGS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Year Ended December 31
Operating Revenues 1969 1968
Passenger .......................................... . $350,504,331 $301,276,511
Cargo ......... . ................................... . 51,0b6,242 43,902,321
Mail ............................................... . 29,386,081 28,604,486
Charter and other transportation ...................... . 35,089,363 41,059,963
Nontransport ....................................... . 1,951,982 1,446,461
467,937,999 416,289,742
Operating Expenses
Flying operations ................................... . 117,876,029 98,870,867
Maintenance ....................................... . 52,362,726 44,222,599
Passenger service .................................... . 41,074,486 34,787,990
Aircraft and traffic servicing ......................... . 59,009,092 46,030,034
Reservations, sales and advertising .................... . 42,735,394 34,351,091
Administrative and general ........................... . 11,921,006 10,266,682
Depreciation and amortization-Note F ............... . 60,833,257 49,816,847
385,811,990 318,346,110
82,126,009 97,943,632
Other Income and (Deductions)
Interest on long-term debt ............................ . (2,334,634) (3,893,613)
Disposals of property ... _
............................. . 751,506 183,816
Other income ...... , ................................ . 429,850 489,970
(1,153,278) (3,219,827)
Earnings Before Taxes .................................. . 80,972,731 94,723,805
Taxes on Earnings, including deferred taxes
and investment credit-Note D ....................... . 29,507,200 44,672,800
Net Earnings for the Year ............................... . $ 51,465,531 $ 50,051,005
Earnings per share of Common Stock-Note D S2.55 $2.74
See notes to financial statements.
11
12
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 (1969-$5,267,576;
1968-$4,430,479) ............................... . .
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
1969 1968
$ 26,819,462 $ 29,940,240
44,587,468 36,231,208
10,885,810 13,707,079
3,744,291 3,210,903
1,686,939 1,409,690
87,723,970 84,499,120
697,937,880 582,646,236
205,696,727 158,124,438
492,241,153 424,521,798
120,654,204 82,860,068
612,895,357 507,381,866
56,189,979 45,341,561
22,268,715 19,362,555
33,921,264 25,979,006
646,816,621 533,360,87:
3,300,000 4,700,000
2,420,845 2,300,875
2,470,217 2,677,069
8,191,062 9,677,944
$742,731,653 $627,537,936
LIABILITIES AND STOCKHOLDERS' EQillTY
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 .................................... .
Stockholders' Equity-Note B
Common Stock (after giving effect to two-for-one
stock split in 1969) $1.25 par value; authorized
40,000,000 shares; issued and outstanding
1969-20,914,272 shares; 1968-18,299,256 shares ..... .
Capital surplus ...................................... .
Retained earnings .................................... .
Commitments-Note C
See notes to financial statements.
December 31
$
1969
48,649,676
13,619,054
1,130,925
5,843,370
7,581,603
18,000,000
94,824,628
112,000,000
89,252,400
19,857,700
109,110,100
26,142,840
113,843,996
286,810,089
426,796,925
$742,731,653
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
$627,537,936
13
14
STATEMENT OF STOCKHOLDERS' EQUITY
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Two Years Ended Decern ber 31, 1969
Common Stock
Shares Amount
Balance January 1, 1968. . . . . . . . . . . 9,149,626
Net earnings for the year ..... .
Cash dividends-$.40* a share ..
Miscellaneous. . . . . . . . . . . . . . . . 2
Balance December 31, 1968 ....... . 9,149,628
Sale of shar~s, less expenses .... 1,307,508
Two-for-one stock split. ....... 10,457,136
Net earnings for the year ..... .
Cash dividends-$.45 a share .. .
- - - -
Balance December 31, 1969 ........ 20,914,272
*Based upon two-for-one split in 1969.
See notes to financial statements.
$22,874,065
5
22,874,070
3,268,770
$26,142,840
Capital
Surplus
$ 39,381,745
( 645)
39,381,100
74,462,896
$113,843,996
STATEMENT OF SOURCE AND APPLICATION OF FUNDS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Retained
Earnings
$201,730,634
50,051,005
( 7,319,702)
244,461,937
51,465,531
( 9,117,379)
$286,810,089
Year Ended December 31
1969 1968
Source of Funds
Net earnings ....................................... . $ 51,465,531 $ 50,051,005
Depreciation and amortization ....................... . 60,833,257 49,816,847
Deferred income taxes ............................... . 16,933,300 14,510,800
Deferred investment credit ........................... . ( 4,525,700) 4,488,700
Total from Operations 124,706,388 118,867,352
Proceeds from sale of Common Stock, less expenses ..... . 77,731,666
Increase in long-term debt. ....................... . .. . 75,000,000
Disposals of operating property ...................... . 2,000,971 536,169
Total of Sources 204,439,025 194,403,521
Application of Funds
Flight equipment and other property additions ......... . 117,340,010 109,509,921
Advance deposits on aircraft ......................... . 56,666,196 69,919,222
SST development costs .............................. . 5,500,000
Decrease in long-term debt .......................... . 48,000,000
Cash dividends ...... . ............. . ................ . 9,117,379 7,319,702
Other ............................................. . 796,889 2,036,825
Total of Applications 231,920,474 194,285,670
Increase (Decrease) in Working Capital-Note A . ........... . ($ 27,481,449) $ 117,851
See notes to financial statements.
ACCOUNTANTS'REPORT
To the Stockholders and Board of Directors
Northwest Airlines, Inc.
Saint Paul, Minnesota
We have examined the statement of financial position of
Northwest Airlines, Inc. and subsidiaries as of December
31, 1969 and the related statements of earnings, stock-
holders' equity and source and application of funds for
the year then ended. Our examination was made in accor-
dance 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.
In our opinion, the accompanying statements of financial
position, earnings, stockholders' equity and source and
Saint Paul, Minnesota
February 14, 1970
APPLICATION OF INVESTMENT TAX CREDIT
Period
1962-1968
1969
Total
To Net Earnings
To Be Amortized
Available and
Utilized*
Reflected in
Net Earningst
$35,945,000 $11,561,600
9,040,500 13,566,200
$44,985,500 $25,127,800
25,127,800-<---'
$19,857,700
*All investment credit amounts generated 1962-1968 have been
utilized to reduce income taxes.
tlncome benefits of investment credit generated in 1962-1968
amortized over eight year period. The flow-through method of
accounting was adopted for investment credit generated after 1968.
See notes to financial statements.
application of funds present fairly the consolidated finan-
cial position of Northwest Airlines, Inc. and subsidiaries
at December 31, 1969 and 1968 and the consolidated re-
sults 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, except for the
change (which we approve) in practice for '1969 to an
accepted alternative method of accounting for the invest-
ment credit as described in Note D to the financial
statements.
Certified Public Accountants
NORTHWEST AIRLINES FLEET
December 31
Aircraft Type 1968 1969 On Order
JET:
707-320B & 320C 36 36
720B 16 16
727 & 727C-100 32 32
727-200 5 24
747 15
DC-10 14
-
Total Jet 89 108 29
PROP-JET: Electra 12 9
Total Fleet 101 117 29
15
16
10 YEAR SUMMARY
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
(Dollars in thousands except per share figures)
Operating Revenues
Passenger . . ...................................... .
Cargo .. . ........................................ .
Mail ............................................ .
Charter and Other Transportation .......... ........ .
Non transport .................................... .
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 Average Share As Reported Each YearC1
)
Cash Dividends .......... . .......................... .
Dividends per Share As Paid Each Year . .............. .
Stockholders' Equity ................................. .
Number of Shares Outstanding at End of Year ......... .
Book Value per Share at End of YearCI) ................ .
Recomputed per Share Figures After Stock Splits :C2
)
Earnings per Average ShareC
2
)
Dividends per ShareC2
)
Book Value per Share at End of Year cz~ ............. .
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) ........ . ................ .
t Affected by major strikes in 1961 and 1966.
$
$
$
$
$
$
$
$
$
$
1969
350,504
51,006
29,386
35,090
1,952
467,938
60,833
324,979
385,812
82,126
(1,153)
80,973
29,507
51,466
2.55
9,117
.45
426,797
20,914,272
20.41
2.55
.45
20.41
697,938
492,241
742,732
112,000
15.2
34.5
82.4%
123,966
13,504,111
6,208,725
46.0%
7,517,780
198,494
942,050
135,563
2,535,137
(1) Per share figures reflect the increase in outstanding shares resulting from stock issues in
1964 and 1969 and from the conversion of preferred stock as applicable in years prior to 1963.
1968 1967
$ 301,277 $ 275,873
43,902 38,118
28,605 26,898
41,060 41,799
1,446 1,291
$ 416,290 $ 383,979
$ 49,817 $ 41,252
268,529 229,969
$ 318,346 $ 271,221
$ 97,944 $ 112,758
(3,220) (2,391)
$ 94,724 $ 110,367
44,673 51,651
$ 50,051 $ 58,716
$ 5.47 $ 6.42
7,320 6,405
.80 .70
306,717 263,986
9,149,628 9,149,626
$ 33.52 $ 28.85
2.74 3.21
.40 .35
16.76 14.43
$ 582,646 $ 467,859
424,522 346,029
627,538 481,206
160,000 85,000
14.6 14.5
30.8 30.3
76.5% 70.6%
107,646 93,395
10,840,758 9,198,150
5,458,128 4,901,520
50.3% 53.3%
7,173,805 6,489,295
169,416 141,175
836,085 709,165
121,077 106,197
2,186,234 1,864,128
(2) The stock was split'' two-for-one" in 1964, 1966and 1969. The recom putations in this section are shown to provide comparability on an adjusted basii
and fo llow the form recommended by the Accounting Principles Board. These figures, of course, do not reflect the way the corporation was operated.
1966t 1965 1964 1963 1962 1961t 1960
$ 216,239 $ 198,457 $ 163,807 $ 135,222 $ 121,781 $ 85,971 $ 97,680
29,515 24,779 18,402 13,745 11,828 8,443 11,368
22,557 17,421 15,313 14,233 14,228 11,701 10,711
39,205 21,851 12,965 6,442 2,646 1,482 823
3,803 490 1,123 (854) (30) 3,456 2,780
$ 311,319 $ 262,998 $ 211,610 $ 168,788 $ 150,453 $ 111,053 $ 123,362
$ 33,195 $ 24,011 $ 22,852 $ 19,159 $ 18,445 $ 17,118 $ 14,413
177,469 153,140 135,627 123,713 112,802 84,213 104,455
$ 210,664 $ 177,151 $ 158,479 $ 142,872 $ 131,247 $ 101,331 $ 118,868
$ 100,655 $ 85,847 $ 53,131 $ 25,916 $ 19,206 $ 9,722 $ 4,494
(1,243) 224 (1,125) (4,166) (4,578) (2,828) (1,882)
$ 99,412 $ 86,071 $ 52,006 $ 21,750 $ 14,628 $ 6,894 $ 2,612
46,276 40,377 25,220 11,297 7,398 3,233 986
$ 53,136 $ 45,694 $ 26,786 $ 10,453 $ 7,230 $ 3,661 $ 1,626
$ 5.81 $ 9.99 $ 5.86 $ 5.73 $ 3.97 $ 2.01 $ .89
5,490 3,657 2,602 1,823 1,702 1,701 1,700
.60 .80 .60 1.00 .80 .80 .80
212,727 I 65,081 122,960 68,436 59,712 54,177 52,193
9,149,626 4,574,813 4,568,634 1,824,452 1,820,714 1,820,214 1,818,715
$ 23.25 $ 36.08 $ 26.91 $ 37.51 $ 32.80 $ 29.76 $ 28.70
2.90 2.50 1.47 .72 .50 .25 .11
.30 .20 .15 .12 .10 .10 .10
11.62 9.02 6.73 4.69 4.10 3.72 3.59
$ 401,476 $ 304,072 $ 219,523 $ 176,655 $ 169,413 $ 170,772 $ 121,441
311,803 233,858 160,925 127,074 122,980 133,485 86,957
422,040 333,311 237,226 196,765 186,887 189,103 148,698
96,000 72,000 45,000 64,996 74,968 90,286 68,500
15.6 16.4 18.5 21.7 23.9 27.6 27.8
30.1 33.0 39.7 46.8 50.2 54.2 54.2
67.7% 67.4% 74.9% 84.6% 87.2% 91.2% 96.4%
67,780 61,653 52,157 45,356 41,821 31,143 46,671
6,773,257 6,140,717 5,129,944 4,305,147 3,697,796 2,611,840 3,073,400
3,699,851 3,303,809 2,668,812 2,179,208 1,904,112 1,361,790 1,653,966
54.6% 53.8% 52.0% 50.6% 51.5% 52.1 % 53.8%
4,963,275 4,593,462 3,663,077 2,911,914 2,437,342 1,723,667 2,139,547
108,914 82,715 55,100 39,417 35,179 23,035 32,480
533,556 452,553 351,886 284,732 254,033 182,704 217,722
77,715 67,125 55,477 47,207 42,718 31,658 46,963
1,348,983 1,079,832 856,612 657,761 548,159 367,301 428,782
17
18
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
December 31, 1969
Note A-Long-Term Debt
Under Note Purchase Agreements with twelve insurance
companies the Company has borrowed $28,000,000 at 6%
payable $3,000,000 annually and $4,000,000 on October 1,
1978. Certain optional 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 Fourth Amendatory Credit Agreement with
fifteen banks the Company has outstanding $35,000,000
which is the maximum amount of the revolving credit pro-
vided in the Agreement and which credit reduces $5,000,000
quarterly beginning April 1, 1970 and terminates October
1, 1971. Interest on funds borrowed is at 4%.
Under a credit agreement with twenty-four banks the
Company has borrowed $67,000,000. This agreement pro-
vides for a revolving credit of $250,000,000 reducing to
$230,000,000 by October 1, 1972, to $210,000,000 by
October 1, 1973, to $90,000,000 by October 1, 1974 and
terminating July 1, 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.
As of December 31, 1969 the agreement makes available
at any time $183,000,000 for working capital and other
purposes.
At December 31, 1969 the Company had complied with
the covenants of the debt agreements.
The aggregate repayment of long-term debt outstanding
at December 31, 1969 over the years 1970 through 1975
is $18,000,000, $23,000,000, $3,000,000, $3,000,000,
$3,000,000 and $70,000,000, respectively.
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, 1969 options were outstanding for the
purchase of71,768 shares of Common Stock by Company
officers and employees at prices not less than 100% of
the market at date of grant. Options for 19,866 shares be-
came exercisable during 1969 and options for 19,134
shares were exercisable at December 31, 1969.
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, 1969 there were 1,028,232 shares of Com-
mon Stock reserved for additional stock options and/or
the Employee Stock Purchase Plan described above.
Note C-Commitments
At December 31, 1969, the Company has contracted to
purchase jet aircraft for delivery in 1970 through 1973,
which with spare engines, will require expenditures of
$597,446,000. Of this amount, $119,854,000 has been de-
posited with manufacturers at December 31, 1969 and
approximately $160,608,000, $89,382,000, $67,408,000
and $160,194,000 become payable during the next four
years, respectively.
Annual rental payments of approximately $5,500,000 are
required under various lease agreements for periods up to
forty years covering airport facilities, ticket offices, etc.
Note D-Taxes on Earnings
Effective January 1, 1969 the Company adopted the flow-
through method of accounting for the investment credit.
No change has been made in accounting for credits arising
in prior years which will continue to be amortized over
eig11t years from the dates the credits arose. The invest-
ment credit for 1969 was $9,040,000 and the change to the
flow-through method decreased taxes on earnings and in-
creased net earnings for 1969 by $8,492,700 or $.42 per
common share.
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 years .............. .
Total ............. .
Note E-Pension Plans
Year Ended December 31
1969 1968
$17,099,600 $25,673,300
16,933,300 14,510,800
8,463,800
34,032,900 48,647,900
4,525,700
$29,507,200
3,975,100
$44,672,800
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, 1969 and all past service costs have been
funded. Total Company contributions to the plans were
$6,360,218 for 1969 and $5,078,348 for 1968.
Note F --Depreciation Policy
Provision for depreciation of aircraft and related flight
equipment approximated $55,473,000 for 1969 and
$45,495,000 for 1968 and was computed on the straight
line method assuming ten year lives and 15% residual
values. $5,500,000 of SST development costs are being
amortized over five years.
Note G.
-Proposed Merger
Under terms of an agreement which would merge North-
east Airlines, Inc. into the Company, Northeast stock-
holders would receive one share of Northwest stock for
each five shares of Northeast held, an exchange for approx-
imately 1,337,000 Northwest shares. The number of shares
may be adjusted downward contingent on Northeast
losses based on a formula contained in the merger agree-
ment. At its option, Northwest may issue an additional
281,690 shares in payment of notes payable owed by
Northeast. The merger is subject to approval by stock-
holders of the respective companies and the Civil Aero-
nautics Board. If accomplished it will be accounted for
as a pooling of interests.
Northwest Orient's current fan jet-fleet
36 BOEING 707-320B/C FAN-JETS
Statistics: length, 153 ft.; range, 5,620 miles with 142 passengers; cruising speed, 550 mph ; cruising altitude, 42,000 Ji. max.
32 BOEING 727-100 FAN-JETS
Statistics: length, l 33 ft.; range, 2,380 miles with 93 passengers; cruising speed, 570 mph ; cruising altitude, 42,000 ft . max.
++++++++++++
++++++++
24 BOEING 727-200 FAN-JETS
Statistics: length, 153 ft.; range, 1,760 miles with 122 passengers; cruising speed, 570 mph ; cruising altitude, 42,000 ft . max.
++++++++++++
16 BOEING 720B FAN-JETS
Statistics: length, 137 ft.; range, 3,600 miles with 109 passengers; cruising speed, 565 mph ; cruising altitude, 42,000 ft . max.
TOTAL 108 AS OF DECEMBER 31, 1969
19
20
Sales revenues hit
$467.9 million in '69;
marketing big factor
Total revenues set a new record in 1969
with a figure of$467.9 million, compared
to $416.3 million revenue in 1968-an
increase of 12.4 per cent.
Leading ale gain were registered in
Hawaii pas enger revenue, up 38.3 per
cent, Alaska passenger revenue up 37.3
per cent and Orient pa enger re enue
up 25.3 per cent.
Fare Introductions
Helping achieve the e higher revenue
were everal new innovative fares intro-
duced by orthwest Orient to stimulate
acation travel.
Of particular ignificance were the new
trans-Pacific excursion fares which be-
came effective October l. ew excursion
fares were also made available over cer-
tain of orthwest Orient's intra-Orient
routes in 1969.
Agency and Tour Sales
The important relationship orthwest
Orient enjoys with travel agents was
demonstrated again in 1969 with revenue
of $120.4 million derived from this source
-a 23.5 per cent increa e over 1968.
Seminar promoting orthwest
Orient's new routes were held for 3,100
travel agent and commercial account
personnel in Los Angeles, San Francisco,
Oakland, San Diego, Honolulu, Twin
Cities, Fargo, Madison and Winnipeg.
An advanced multi-media film presenta-
tion featuring the new corporate image
and the new routes late in 1969 will have
been shown to over 10,000 travel agency
employees by mid-1970.
Merchandising Program
After careful analysis and preparatory
work, orthwest Orient's 'Sky Shop'
merchandising program has been
launched.
The program offers our passengers the
opportunity to purchase exclusive mer-
chandise ranging from glassware to golf
balls and towels to TV sets through a
mail order brochure found in every seat
pocket of orthwest Orient aircraft.
The program is planned to be a self
I iq uida ting venture.
Advertising Highlights
Implementation of the new corporate
identity proceeded extremely well in
1969. By year end , orthwest Orient's
'new look' was reflected in stationery
and all printed material, uniforms of
cabin attendants and ground personnel,
in-flight service items aircraft exteriors,
Birth Mark:
11,),,,tofl'lllllrt. W.: J\1ilokl
k,:uOtltftl :,,a1111t>ll-
8.o-1''rc-!IJla,p"'\w'ro:
at.~ ll-<r11""-t><.iN1 00,1
~l..--..--lllr>ff)fh'1$11t ',,:,,"1. ~
~1 .. c"a'l''!I ...,1"'1.1)\'>C"O
l"l>l<>ffll-~'-t'Offillnl<
'--JP.-1111<1'"'
V.t'"lill!IP'h""'-1,,.
,,,....,~,_.,..nt-t11r.~a......i
_,.t nwnk>rt lllu4 "'"''' ol
--
...,ff:.) .'tff,(,c!Nl,rt'f'Ud
""""""-',.,., .. """'
....,Wf~W -,_.V,,;,,,,,ttrbl -
~Oncntstam hln.
liii)
- ~
-- =.:E"..'.:?
~~'=i::..= .=.:"~ .
==-=--
-
city ticket offices, selected terminal depar-
ture lounges and in advertising.
The Advertising division also provided
design guidance for the 747 and DC- I 0
interior decor.
'Mini-Vacations'
Northwest Orient became the first air-
line to introduce the 'Mini-Vacation'
concept. Five different destinations were
featured in full page black and white
newspaper ads in ten major market .
Coupon response was excellent.
Emphasis Switched
Advertisingemphasis in the westbound
trans-Pacific campaign was switched
from ' ot So Far East' to a broader
appeal which encompasses North Pacific
and mid-Pacific routes. The new cam-
paign, based on orthwest Orient's ex-
pertise in the Orient, started in December.
'Corporate Look'
The new corporate 'look' was launched
to the trade press in March and to con-
sumers in April. A four-page, four-color
insert was prepared for key trade pub-
lications and two-color newspaper ads
were scheduled in all major and minor
markets.
Kickoff with us
~~~-
FLY NORlHWEST~
Two color nell'spaper pread introducing
the nell' corporate image.
Examples of newspaper route and fore advertising.
Left and right, neiv stewardess winter and summer
uniforms. Center, reservations agent uniform.
Florida color ad-Chicago newspaper.
Welcometo
Northwest's Orient.
-
-""""'~"'"' :
.:.::-:f-J_(
:_: .. ..
:Ji~~ ',
Now Los Angeles can fly
Northwest to Hawaii and Tokyo.
~.,..,._.,&Ot,. ~----,-
.. -- .::;.:.::::.:::-:
---. .- . ~~:;;@
'ew route newspaper ad. ,'V/ini vacation ad.
21
22
New services inaugurated in 1969
lmp)rtant ne, s rvi was inaugurated by
orthwcsl ricnt to b th Eu rope a nd Asia
in 1969.
F'ir::,t n , cn icc to be initiated du rin g the
)e,1r, as daily scrvi c to and rr m L nd n rr 111
the win itic: , ia the )rlhwest Ori nl- Pan
mcrican interchange. he first night came on
Jun I.
inaugural fli ght to the
Paci fic rout arn on
ugusl I. Thi, new crvic opcral s n daily
in each di re tion l'rom . an Francisco lo Tokyo
, ith an intcrrnc liate stop in l lonolulu.
on- top hicago-l lono lulu ervice was
TAIPEI
MANILA

OKINAWA
begun n cpl 111ber I under new aulh rity
obtain din the trans Paeif1c case.
Then, n Oct bc r 4, th rull pall rn r er-
vie rrom th Twin Citic lo Calif' rni a wa
begun. F urn n- top night daily wcr initiated
rrom the Twin itic lo Lo Angeles and thr
n n-st p nights daily l an Franci co. The
a111 rvi e pall rn i op rated a. tbound.
The O l b r 4 hcdulc al o aw the in-
augural r pure jct scrvi e to Helena, Montan '1
and t Mi ula , M nlana, n Oct bcr 26.
. horlly before year end, Mi lwaukee re-
c ivcd non-slop scrvi lo Miami as th Ii max
to a bu y yea r r ro ut and crvicc expansion.
RT W -ST ORIENT
SYSTEM MAP
The 53 cities served by Northwest Orient:
Anchorage Ft. Lauderdale Madison
Atlanta Grand Forks Mandan
Billings Great Falls Manila
Bismarck Helena Miami
Bozeman Hilo Milwaukee
Butte Hollywood Minneapolis
Chicago Hong Kong Missoula
Clearwater Honolulu Moorhead
Cleveland Jamestown New York
Detroit Long Beach Newark
Fargo Los Angeles Oakland
Okinawa
Ontario
Osaka
Philadelphia
Pittsburgh
Portland
Rochester
San Francisco
San Jose
St. Paul
St. Petersburg
Seattle
Seoul
Spokane
Tacoma
Taipei
Tampa
Tokyo
Washington,
Winnipeg
BOSTON
EW YORK
NEWARK
HILADELPHIA
D
URGH
O.C.
23
New trans-Pacific, California authority
given Northwest Orient
in 1969 route case awards
T o route ca e a ards ere made to
orth, est Orient in 1969: a ne, central
Pacific route from Lo Angele and San
Francisco/Oakland to Tok o ia an
intermediate stop in Honolulu and T, in
Cities non- top authorit to both Los
Angeles and San Francisco/Oakland.
"-
HONOLU~
New trans-Pacific Routes
The addition of routes from California
cities to Tokyo ga e orthwest Orient
a vital mid-Pacific link with the Orient.
This authority pro ided new gate, a
from the continental U.S. and the oppor-
tunity to be more competiti e ith other
U.S. air carriers.
On August 1 1969-more than 20
years after its pioneering of ser ice to
Tokyo ia Anchorage, orthwest Orient
inaugurated ser ice to Tokyo from San
Francisco. On January 6, 1970, service
was inaugurated from Los Angeles to
Tokyo. Both flights operate daily both
eastbound and westbound, making an
intermediate stop at Honolulu.
Thi new route authority gi e us the
opportunity to offer the tra eler an en-
larged selection of routings to and from
the Orient. Formerly a number of one
way tran -Pacific tickets were old be-
cause of our inability to route ia the
Tokyo-Honolulu segment.
Implementation of the e new er ices
brought the number of orthwe t Orient
flight to the Orient to 46 flight \ eekly
including 11 cargo flight .
New Hawaii Service
In the dome tic pha e of the tran -
Pacific ca e rth, e t Orient receiYed
both ne, competition and ne, authorit '.
A third carrier wa add d between
Seattle-Portland and Hawaii d pite the
lm pre ailing load factor of incum-
bent carriers.
e , ere gi en right to operate from
a number of ne, co-term.inal to Hawaii.
Included, ere e ork- rn ark Phila-
delphia a hington Cle eland, Detroit.
Chicago and the T, in Citie .
Thefir tne, ser iceunderthi author-
it wa inaugurated on September 1.
1969 with non- top er ice from Chicago
to Honolulu.
California Authority
Fir t acce to the major market of
California came in 1969 \ th route
authorit given u in the Twin Citie -
California Ser ice In e tigation.
On October 4, orth, e t Orient began
ser ice v ith four non- top flight dail
to Los Angeles and three non- top flights
dail to San Francisco.
By year end , e had obtained a ver
ignificant share of the market.
London Interchange
Through-plane ser ice between the
T in Cities and London, as inaugurated
on June 1 upon receipt of Ci il Aero-
nautic Board appro al of the orth est
Orient-Pan American interchange agree-
ment.
In ummer months the daily flight
operates from the Twin Ci tie to London
ia Detroit. In the winter Bo ton is
added as an intermediate point to
provide additional traffic.
Decisions yet to come
in other route cases;
Examiner recommends NWA
rthwe t Orient i a participant in
a number of other CAB proceeding
which ha n t et reached final deci ion.
Principal in pending include:
Pacific orthwest-California
The mpany i eeking e. ten i n f
it r u te fr m ea ttle/P rtland to San
Franci c / Oakland. L ngele and
an Dig .
n E aminer f the Civil er nautic
B ard ha r c mmended that rth-
we t Orienf r ute be amended b add-
ing a new egment b t\\'een the terminal
point eattle/Tac ma. the intermediate
p int P rtland and an Franci c /Oak-
land. and th t rminal p int L ngele /
Ont ri . California.
Omaha-Des Moines Imestigation
rthwe t i eeking ne, rout
tending fr m Omaha and De M
t .__, f the principal termina
t an a t. t the
nd t City.
Twin Cities-Milwaukee Long-Haul
he e ten i n f
the Tv in Citie
n and the im-
pro g a
permit n und
t\ een Philadelphia and Mil
the T, in e r u
impr vem en re mmended
b an E, a Ci il nautic
B ard for rien t.
Pacific Islands Local Senrice
rthw ti eeking an expan i n f
xi ting Ha, aii-Okina, a auth rit
t include ervice to the Tru t T rrit r
f the nited State and Guam.
Salt Lake City Case
Thi pr ceedin tituted
CAB in March, e, ami
need for er i alt La
an o, e,
a
in thi
ca ation
at rk and
S Lak
Cit .
25
All departments contributed
to successful 1969;
new ideas fight inflation
Financial ucce in 1969 wa again
due to the combination of effort by all
p r nnel and new management ap-
proache from every department in
orthwe t Orient.
The challenge of combatting greatly
increa ed inflationary e p nse was met
to a con iderable degr by innovativ
thinking and increa ed productivity.
Her are highlight from elected
department :
Purchasing & Stores
Direct aving to your company 111
xce of $199,000 re ulted from a 'make
or bu 'program and a standard equi a-
lent purcha e project.
Arrangement v ith Heath-Teena for
repair of radome used on our Boeing
jet aircraft re ulted in aving of $40,000
on the fir t 20 uch unit , as another
e, ample of avings.
Flight Operations
A total f 393 new pilot were hired
and trained , bringing to 1,925 th num-
b r of pilot pre ently employed by
orth e t Orient.
In addition to the 1,34 com_p_any
pilot who were pro ided tran 1t1on,
ground and flight training, pilots from
nion of Burma Airway and Inter-
national Jet Air of Canada were al o
trained.
All training i centraliz din the Twin
Citie to pro ide maximum use of in-
truct r , imulator and other equip-
ment.
Maintenance & Engineering
Devel pment of a new 'modular main-
t nance' program for the Boeing 707 and
720 aircraft engine ha resulted in ub-
tantial economie for the company. Thi
program re ognize that the level of
maintenance on various ub-as emblie
nth JT3O engine diff r to the degree
that man ub-a emblie remain idle
in the hop v hile a ub-a embl that
require exten i e maintenance i in work
tatu.
Th m dular concept allow inter-
hangeabilit of ub-a emblie b tween
engine - h rtening proce time and
utting d , n n th pare part require-
ment.
Communications ervice
When operatio1nl, orth c t Orient'
ne,, computerized re en ation tem-
l I
T -R -will great!:, peed and
improve the accuracy of the re ervation
proce .
1 n another effort, a computer program
ha been acquired and adapted to our
sy tern requirement which is used in
developing more efficient flight crew
'chedule .
Personnel
Total employment of orthwest
Orient at 53 station throughout the
stem grew to 12,695 employee , an
increa e of 1,341 over the I l ,354 em-
ployee of a year ago.
Total wage , alarie and related em-
ployee benefit expen es for such per-
sonnel ro e 23 per cent to $133 million,
equal to 2 .5 cents of each re enue dollar.
De pi te the e e cal a ting personnel
co t , however, orthwe t Orient re-
tained it excellent record of produc-
t1, 1t v ith a factor of 38,743 revenu
d liar per av rage employee in 1969
compared with 38,667 in 1968.
Transportation Services
Consolidation of all North Dakota
offices into the Twin Cities reservation
office and of all Montana offices into
the Seattle re ervation office provided
greatly improved customer service at
reduced expen e.
A new tacker structure for storage of
freight at our John F. Kennedy airport
facility in ew York provided storage
for five time as much cargo within
existing floor pace.
Two new, ultra-modern flight kitchen
were constructed in 1969-a $1.5 million
facility of 60 000 square feet in Seattle
and a $1.3 million facility of 28,800
quare feet in Anchorage. The e facilities
not only contributed to vastly increased
capacity but also to more efficient
method of food preparation with atten-
dant saving .
NORTHWEST ORIENT AIRLINES
General Offices
Minneapolis-St. Paul Intern ati on al Airport
St. Paul , Minnesota 55111
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
R oscoe, 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, Minnesota
REGISTRAR: The Chase 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 idwest Stock Exchange
*As of March 1, 1970
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 CAMPIO
Vice President-Regulatory Proceedings
ROLA D 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 Computer 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. M OO
Vice President-Advertising
ROBERT J. PHILLIPS
Vice President-Comptroller
C. L. STEWART
Vice President-Transportation Services
ROBERT J. WRIGHT
Vice President-Sales