' . l NORTI-IWEST OR ENT AIRLI ES 1971 ANNUAL REPORT ND RTHVVEST ORIENT AIRLINES GENER AL OFF I CES : M I NNEAPOLIS - ST. PAUL INTERNATION A L A I RPORT ST, PAUL, M I NNESOTA 551 1 1 AREA C O DE 612/72 6 -2111 DIRECTORS * .JAMES H. BINGER Chairman of the B oard , H oneyw ell Inc. M inneapolis, Minneso ta H AD L EY CASE President, Case, Pomeroy & Company, Inc . New York, New York A . E . F L OAN Sec retary , N o rthwest A irlines, Inc . St. Paul , Minnesota DONA L D H . HARDESTY Vice President, N orthwest A irl ines, Inc . St. Pa"ul , M innesota MA L COLM S. MACKAY President, Foothills Company Rosc oe, Montana DONALD G . M c NEELY President, S p ace C ent er, Inc. St. Paul, Minne so t a DONALD \N. NYROP President, N orthw est A irl ines, Inc. St. Paul, M inneso ta C . FRANK REAVIS Partner, Reavis and M c G rath N e w Y ork, N ew York ALBERT G. REDPATH Vice President, Thom son a n d M cKinnon , Auchincloss , Inc . New York , New Y ork LYMAN E. \NAKEFIELD, .JR . Vice President, Piper, Jaffray & H o p wood Min n ea polis, M innesota OFFICERS * DONALD \N. NYROP President .J AMES A . ABBOTT V ice President - L egal C L AYT ON R . B RAND T Vice President-Purchasing and Stores RO B ER T \N. CAMP BELL V ice President-Budgets .J . \NILLI AM CAMPION Vice President-Regulatory Proceedin gs ROLAND \N. CHAM B ERS Assistant Vice President-Properties RO B ERT A . EBERT V ice President-Personnel ROY K. ER ICKSON V ice President-Public Relations A . E . F LOAN Sec retary B EN.JAMIN G . GRIGGS, .JR . V ice President-Assistant to the President DONALD H. HARDESTY Vice Pre s id e nt-F inanc e a nd Trea surer \NILLIAM E . HUSKINS, .JR. Vice President-C omm u n icat ions and Computer Services REGINALD C . .JENKINS Vice President- O rie nt Region FRANK C . .JUDD Vice President-Mainten ance & Engineering M . .JOSEPH LAPENSKY Vice P resident-Economic Pla nning RONALD M c V ICKAR V ice Presid ent BRYAN G. MOON Vice President-Advertising ROBERT .J . PHILLIPS Vice President-C o m ptroller C . L. STE\NART Vice President -Transportation Services ROBERT .J . \/I/RIGHT Vice Presid ent-S ales REG I STRAR: T he Chase Manhattan Bank, New York, New York TRANSFER AGENT: Bankers Trust Company, New York, New York STOCK LISTE : Common Stoc k listed on New York Stoc k E xchange , Pacif ic Coast Sto ck E xchange a n d M idwest S t o c k Exchange * As o f M arch 1, 1972 Front Cover: A No rthwest Orient 747 and its f light crew an d ca b in attendants at Tokyo Int ern at ion al A irport. TABLE CF CONTENTS PRESIDENT'S MESSAGE ........... .. .... .. . . . .. . .. ...... .... .... .. .. . PAGES 4 -5 MERG E R PROPOSED BRINGS BENEFITS .. . . .. ... . ....... .. .... . ... .. . P A G ES 6 - 7 F INANC IAL REVIEW OF 1971 . .. .. ... . ... .......... .. . . ... .. .. .. .. . . ... P A GE S S - 9 F INANCIAL REPORTS . ..... . .. . .. .. .. .... ....... ... .. . . ... .. ... . . .... PAGES 10 -19 H IGHLIGHTS OF 1971 .. .. .. .... . . .. .. .... . . . ... . . . .. .. ... . ...... . . .... PAGES 20- 2 3 HIGHLIGHTS CF 1971 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 . ... . ... . . . $ 1971* 425,519,246 18,166,420 21,3 61 ,262 1.01 477,053 ,922 22.56 9,517,530 14.5 42.1 6 ,089,273 5 ,553,043,000 258,099,000 21 ,149,756 1970 * $ 3 79,040,136 51,082 ,622 4 4 ,439,469 2 .11 465,2 10, 190 22.00 9,464, 5 3 2 18.0 4 3 .5 4 ,682,8 12 4 ,506,256 ,000 204,714,000 21 ,149,756 * Operating results were affected by a maj or strike wh ich extended from July 8 throu g h Decem b er 14, 1970 and by the strike recove ry period in 1971. 3 4 45THANNUAL REPORT TO THE SHAREHOLDER S From the President: Financial Performance After leading the U.S. airline industry in net earnings for three consecutive years, Northwest Airlines slipped to second place for the calendar year 1971 with an after- tax profit of 21,361,262. This was down $23,078,207 from 1970 net earnings of $44,439 ,469. The principal factors which accounted for the decline in 1971 net earnings were: l. The lingering effects of a lengthy strike in the last half of 1970. The rebuilding of the airline's schedules and the need to recover passenger and freight business that was lost to competition during the strike resulted in a loss for the first six months operation of 1971. A very strong comeback in the last half of the year made possible the profitable perfor- mance for 1971. 2. New competition on Northwest Airlines routes. In 1970 the Civil Aeronautics Board certificated additional air carriers on the direct Milwaukee- New York, the direct Twin Cities-New York , and the Twin Cities- Seattle -Portland routes. Earl} in 1971 an additional air carrier was certificated over NW A's routes from the Twin Cities to Florida. The addition of four new airlines on these routes has resulted in reduced revenue from these markets. Taking these factors into consideration, your Man- agement feels that the 1971 performance was satisfactory. although disappointing if measured by your Company's standard of recent years. Dividends Declared In 1971 the Company declared and paid fou r quarterly dividends. The last of these dividend pay- ments was made in December, 1971 and marked the 67th consecutive quarterly dividend paid by NWA to its shareholders. This is noteworthy in a year in which many U. S. trunk airlines paid no dividends. Fare Increase Revenues in 1971 were aided b a general passenger fare increase of approximately six per cent hich as authorized by the Civil Aeronautics Board effective May 7. 1971. This increase v. as needed to partially offset the spiraling labor costs and sharply rising expenses for fuel landing fees and services which beset the airline industry. Fleet Expansion The upgrading and modernization of J our Company's aircraft fleet was continued in 1971. Five new Boeing 747B 's were delivered and placed into scheduled service. These Model B' aircraft are the longer-range 747 s with an operating range of 6,750 statute miles nearly 1.000 miles more than the earlier model. The five 747B 's represent a capital expenditure of $119 million. As these wide bodied modern jet aircraft were acquired, a successful sales effort was mounted to dispose of certain older aircraft. In 1971, a total of ten NWA aircraft were sold - three Boeing 320's three Boeing 720B's and four Lockheed Electra 188's. Boeing 7 4 7 Scheduling With the acquisition of the five Boeing 747B 's. Northwest Airlines was operating a total of fifteen 747's at year-end. This Boeing 747 fleet investment, largest of any U. S. airline relative to size, permitted your Company to become the first airline to offer B-747 service across the Pacific from the major U. S. gateways of Honolulu Los Angeles San Francisco and Seattle. Domestically. we nm provide B-747 service to New York , Chicago Minneapolis/ St. Paul. Miami , San Francisco, Los Angeles. Seattle, Honolulu, Anchorage, Tampa/ St. Petersburg and Milwaukee. Service to China Northwest Airlines' operating authority to serve the cities of Shanghai Peking, Nanking Mukden, Harbin and Dairen was granted on July 20, 1946. Scheduled service to Shanghai was initiated in July 1947 and continued for nearly a two-year period. In 1948 the Shanghai route accounted for 30 per cent of the passenger miles on NWA's international system. Your Management has advised the U.S. Government that when conditions permit resumption of service to the Asian mainland, it is our desire and intention to reinstate such service. DC-lO's Coming Delivery of the Company s first DC-10 will be made in November 1972. A total of 14 of the long-range series of this airplane has been ordered which with spare parts represents a total investment of $290 million. All such airplanes will be powered by the Pratt & Whitney JT9D engine used in our B-747 fleet. providing a commonality of engines for orthwest Airlines wide-bodied jets. New Director Named The death of Morton H. Fr a director of Northwest Airlines since 1952. as a loss deeply felt. His counsel in the area of finance as invaluable over the years. Elected to replace Mr. Fry was Donald H. Hardesty, vice president-finance and treasurer of NWA, , hose career with the Company spans more than 29 years. Corporate Responsibility Today every major U. S. company must be con- cerned with its responsibilities not only to its employees and its shareholders - but to the general public as , ell. Your Management has recognized this. By our Affirmative Action Program, we have demon- strated our continuing concern for minority elements in our society. In the areas of ecology and environmental concern, Nortl1west Airlines has been aw arded national honors for its leadership in aircraft noise abatement. We are also participating full in the retrofit program of the airline industry to reduce smoke emissions from air- craft engines. The Year Ahead Economic forecasts indicate that passenger traffic will increase by eight to ten per cent and that air freight business will increase at a slightly greater rate during the year. With the U. S. economy's continuing recovery your Management expects 1972 to show increased earnings over 1971. March 15, 1972 Donald W. Nyrop President 5 B MERGER PROPOSED Background and Status of Merger On September 23, 1971, the Boards of Directors of orthwe t Airlines, Inc. and National Airlines, Incorporated signed an Agreement of Merger. This Agreem ent is subject to the approval of the Civil Aeronautics Board and the President of the United States, since international routes are involved. Under term of the m erger agreement, each share of National Airlines common stock outstanding will be exchanged for .85 of a share of Northwest Airlines ommon stock. Shareholders of National Airlines voted to approve the merger on December 13, 1971 with 6.7 million shares favoring and only 49 ,743 voted against. Northwest Airlines shareholders approved the merger on December 15 1971 by an even greater majority, with 17.7 million shares voted for and only 45 ,920 against. Mer ger hearings before the Civil Aeronautics Board E aminer began on January 25, 1972 and con- luded on February 4, 1972. Next step in the proceedings will be the issuance of a recommended decision by th Examiner to the five member Civil Aeronautics Board. Following this will come the hearing of oral argu- ments by the Board members. Its decision will then be made and transmitted to the White House for review and approval by the President. Your Management expects final decision on the merger will be made by December 1, 1972. Many Public Benefits in Merger A number of important benefits to the public will \NITH NATIONAL AI R result from the merger of National Airlines and Northwest Airlines in terms of new and improved air service to many parts of the U.S. 1. The Upper Midwest, for example, will receive first single plane service to a number of addi- tional cities on Florida's West Coast. 2. Major cities in the South and Southwest like Miami, New Orleans, Houston and Las Vegas will be on a direct international route to the Orient for the first time. 3. The California cities of Los Angeles and San Francisco will benefit from increased traffic through these gateways in both directions. 4. New England will benefit from the combina- tion of the two route systems with Boston becoming an ever more important air hub in the merged airline. 5. The Pacific Northwest and Montana will have greatly improved service to cities in the South and on the Atlantic Coast. Additionally, they will benefit from increased tourism as access to their cities is made much easier. 6. Florida and its tourist industry will profit from the merged airline's status as a more important air carrier in the state. Savings Important to Public Too There are a number of savings that will be achieved through merger of the two airlines. These savings are important to the public, too, for they act to hold down V NORTHWEST ORIENT-NATIONAL C O MBI N ED SYST E M ROUTE MAP - - NORTHVVEST ROUTES NATIONAL ROUTES L INES \/\/DU L BRING passenger and air cargo tariffs. Savings will be gen- erated in a variety of ways: 1. More efficient use of facilities can be achieved at the 12 common stations: San Francisco, Los Angeles, Atlanta, Miami, Tampa /St. Petersburg, Ft. Lauderdale, Washington, O.C., Philadelphia, Boston, New York Kennedy, New York LaGuardia and Newark. 2. More efficient use of aircraft will be possible since National Airlines' peak operations are in the resort months and are a natural complement to Northwest's operations which peak in the summer months. Because of this ability to bal- ance aircraft, a superior level of scheduled ser- vice will also be given in peak periods by the merged airline. 3. Increased market identity will result from the ability to consolidate sales and advertising efforts in common markets. This will result in reducing costs for the merged airline. Merger Does Not Create 'Giant' Despite providing these many public benefits in terms of improved service and lower operating costs, the merger of National and Northwest will not create another 'giant' in the U.S. airline industry. In fact, the merged airline will remain seventh in size among trunk airlines - Northwest Airlines' present p~sition - if approval of the Oelta-N ortheast merger is granted by the CAB. P U BLIC BENEFITS So, the present balance in the U.S. airline industry would be undisturbed. No Lessening of Competition All of the benefits outlined above will be achieved without any real lessening of competition. There are only four markets in which Northwest and National have competitive authority. 1. Miami-Tampa. Six other carriers presently serve this market. 2. New York-Washington. Eleven other carriers presently serve this market. 3. Philadelphia-Washington. Seven other carriers presently serve this market. 4. Philadelphia-New York. Five other carriers pre- sently serve this market. Few, if any, other mergers among U.S. airlines can provide such an impressive array of public benefits as those found in the Northwest Airlines-National Airlines merger. While providing these many public benefits, this merger also meets the criteria set forth in the Executive Branch guidelines prepared by the Department of Transportation in consultation with the Department of Justice. It is indeed in the public interest. on,..i/Je Ila 8 o each Ourne Sf Pain-, . Laude Beach 'am; rdate West 7 B FINANCIAL REVIEW OF 1871 Revenues Northwest Airlines' total operating revenues for ~971 were ~425,519,246 compared with $379,040,136 m 1970 which was affected by a major strike in the last six man ths of the year. The operating revenues for 1971 were reduced by payments to other carriers under the Mutual Aid Agreement of $461 ,889 which compares with mutual aid receipts in 1970 - net of payment to others - of $46,324,695. The Civil Aeronautics Board, on No:7ember 23, 1970, issued an order remanding for review only the amended portion of the Mutual Aid Agreement which provided for increased level of supplemental payments. The order stated that con- s~deration would be given to making any modifica- tion to the Agreement prospective only. A hearing was held before an examiner of the CAB during the latter part of 1971 but no final decision has been made. . Compar~sons of individual revenue categories with the pnor year are not meaningful due to the extended strike in 1970. During the post-strike recovery period in 1971 , the Company gradually restored schedules as traffic returned to normal. The buildup of operations continued until a full pattern of service was reached in June. The yield per passenger-mile increased to 5.98 or 3.5 % over the yield of 5.78 in 1970. Trans-Pacific and other international fare increases approximating 5 % were placed into effect on March 15, 1971. The Civil Aeronautics Board issued its tentative decision in the fare level phase of the Domestic Passenger-Fare Investigation and granted a 6 % interim fare increase y-rhich was placed into effect on May 7. A further mcrease of 3 % was deferred pending decision in other phases dealing with discount fares and fare structure. At the same time the CAB decided the rate of return phase of the fare case and set 12 % as a fair and reason- able return on investment for the trunkline carriers which compares with a 10.5 % investment return established previously. Also, as a result of court actions, the CAB is currently conducting a hearing on the reasonableness of the level of domestic fares between October 1, 1969 and October 14, 1970, and a decision can be expected sometime in 1972. A Domestic Air Freight Rate Investigation is mov- ing ahead with preliminary procedural steps under way. It is expected that the hearing in this matter will be held late in 1972. Domestic mail and express rates are also open and progress toward settlement is be_ing made. It is anticipated that rate improvements will result from these investigations. Revenues from charter and other transportation were $31,588,334 compared with $20,800,298 in 1970. This increased revenue included $8 370 039 from commercial charters and other income ~ompared with $3,322,003 in 1970, and $23,218,295 from military charte~s_ in 197~ ~ompared with $17,478,295 last year. The Military Airlift Contract expires on June 30 1972 and we will seek a renewal contract for the G~vern- ment's 1973 fiscal year. Expenses Operating expenses in 1971 amounted to $407,352,826 compared with $327,957,514 in 1970 which were abnormally low due to the strike and for this reason most of the individual categories of expense are not comparable with the prior year. Depreciation and amortization increased to $77,245 ,465 from $69,173,449 in 1970. This was primarily due to the adding of the Boeing 747 air- craft to our fleet, ten of which were received during 1970 and five in 1971. In 1971 the U. S. Govern- ment cancelled the Supersonic Transport research and development program and Northwest Airlines received a ref~nd of the $5,500,000 previously advance~ for this program. As a result, and in accor- d_an~e with a CAB accounting directive, 1971 depre- ciat10n and amortization was reduced by $3,300,000 to re~ect the reversal of the prior years' amortization of t~is research and development payment. Inflation contmues to accelerate the costs in the airline industry and 1971 saw ~ubstantial_ increases in employee wages and be_nefits, mcreases m rentals, landing fees and other airport costs and in the cost of services materials a!1d supplies. Your Company has continued 'to empha- size ~o~t control pr_o~edures and improvement in pro- ductivity. The addit10n of the 747 to our aircraft fleet has contributed to this productivity improvement. Unit costs per available ton-mile in 1971 were 14.5 compared with 18.0 in the 1970 strike year. Only 01;-e other time in the last ten years, 1967, have we achieved this low a unit cost. Earnings and Dividends North west Airlines' net earnings for 1971 amounted to $21,361,262, or $1.01 per average share of common stock, compared with $44,439,469, or $2.11 per share in 1970. The reduced earnings in 1971 are a reflection of the slow recovery process from the OPERATING REVENUES AND EXPENSES OPERATING EXPENSES PER AVAILABLE TON MILE BREAK EVEN AND ACTUAL PAYLOAD FACTOR MILLIONS OF DOLLARS 500 50% 45% 400 16 35% 200 14 :: 1967 1968 1969 1970 1971 1968 1969 1970 1971 1967 1968 1969 1970 1971 STRIKE STRIKE STRIKE [ , ,561.000. Cash Flow I und en r 105,805,927 w o. l i Iii rl m L9Tl al nn hare. L971 rn. .. i di id nd t trm ,J r u lrs. during . . dil r: 00 h cd ft ls l 90,000 i11 1971. Al in d '10.983,300 l hi h appli d hi ,l 00.insl al$11. - Nol'D t.ion cind a d in d 88 d 0 - s L. . i n i o . . . 'nhl n rl 87. 1 ,, i G . d ' nls u .. ncia o n n c "JS s lh '....0. 7 1 s . r r 1 g d Clo l Lh . 1ould o l r r r 197' . tc nlinus ils h du 111 l971, "as $ 7 5,2 10.1900.llh nd f l 11 har in r o. ,ct lo $-- J r. ulslondin nm unl d l $2r:5.S00.000 or 5 r quil . This 1, d l,l 1il 11 l Co rnbl, in Lh a du .. LI r loi c1 Air! ii. fou 1l Al 3 pr ll1 .Xill1l or hi ,000 ho un , hos . l, LONG TERM DEBT VS. [ , l , n , 19TI. qunl I , u[l ar 1 1973. STOCKHOLDERS' EQUITY MIi l I N11 0 1 11011 AHS bOO L--.J lOUllY - llllll 400 JOO ~00 I I 100 I IRIIT 11011 1non I 70 \Oil SIIW(I 9 NORTHWEST AIRLINES, INC. AND SUBSIDIARIES ASSETS December 31 Current Assets 1971 1970 Cash ............ . .................................. . $ 42,468,318 $ 51,525,395 Accounts receivable .................................. . 43,303,034 32,906,579 Recoverable federal income tax ....................... . 15,394,400 16,526,200 Flight equipment spare parts, at average cost, less allowances for depreciation of $6,662,645 (1970 - $5,544,776) ................................ . 15,985,804 14,850,678 Maintenance and operating supplies at average cost ...... . 4,441,808 4,088,318 Prepaid expenses ..................................... . 3,608,902 2,149,483 Total Current Assets 125,202,266 122,046,653 Property and Equipment Flight equipment at cost .............................. . 1,012,567,920 929,180,892 Less allowances for depreciation ....................... . 303,134,687 261,051,456 709,433,233 668,129,436 Advance payments on new flight equipment-Note C ..... . 41 ,130,050 64,134,857 750,563,283 732,264,293 Other property and equipment at cost .................. . 90,327,722 84,755,904 Less allowances for depreciation ....................... . 31 ,394,624 25,621,826 58,933,098 59,134,078 809,496,381 791,398,371 Deferred Charges and Other Assets Training and development costs-Note F ............... . 3,337,857 4,944,297 Rentals .................... . ........... . ............ . 4,003,320 2,619,231 Other .............................................. . 2,261 709 2,117,304 9,602,886 9,680,832 $944,301 ,533 $923,125,856 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable .................................... . Employee compensation ............................. . . Air travel card deposits ............................... . Unredeemed ticket liability ............................ . l ncome 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 $1.25 par value; authorized 40,000,000 shares; issued and outstanding 21,149,756 shares ...... . Capital surplus ...................... , ...... . ........ . Retained earnings ... . .. . . . ... . .... . . ...... . .......... . Commitments - Note C See notes to financial statements. December 31 $ 1971 56,299,152 15,535,334 1,056,125 6,419,023 727,377 3,000,000 83,037,011 252,500,000 120,727,300 10,983,300 131,710,600 26,437,195 116,987,969 333,628,758 477,053,922 $944,301 ,533 1970 $ 38,376,415 12,345,069 1,104,150 2,133,669 530,328 18,000,000 72,489,631 260,914,635 109,138,100 15,373,300 124,511,400 26,437,195 116,987,969 321 ,785,026 465,2 10, l 90 $923,125,856 NORTHWEST AIRLINES, INC. AND SUBSIDIARIES Operating Revenues Passenger ..... .. . . . ... .. .... ...... . ................ . Cargo ............................................. . Mail .............. .. ............................... . Charter and other transportation ...................... . Mutual Aid Agreement-Note H ...................... . 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 .. . . . . ........................................ . Earnings Before Taxes ................................. . Taxes on Earnings including deferred taxes and in e tment credit- ote D ....................... . Net Earnings for the Year .. .. ..... ......... ............ . Average shares of Common Stock outstanding during the year ........................... . Earning per share of Common Stock . . ... . ........ . ...... . *Operating results in 1970 were affected by a major strike which extended from July 8 through December 14, 1970. See Note H. See notes to financial statements. Year Ended December 31 1971 1970* $331,966,391 $260,335,218 39,641,301 30,052,685 19,442,669 18,958,456 31,588,334 20,800,298 ( 461,889) 46,324,695 3,342,440 2,568,784 425,519,246 379,040,136 122,181,445 87,899,274 47,936,083 41,240,434 39,009,954 31,383,737 65,332,134 49,183,105 41,373,888 36,706,873 14,273,857 12,370,642 77,245,465 69,173,449 407,352,826 327,957,514 18,166,420 51,082,622 ( 13,050,806) ( 6,295,259) 6,198,195 739,108 486,453 (966,302) ( 6,366,158) ( 6,522,453) 11,800,262 44,560,169 ( 9,561,000) 120,700 $ 21,361,262 $ 44,439,469 21,149,756 21,023,949 $1.01 S2.11 NORTHWEST AIRLINES, INC. AND SUBSIDIARIES Year Ended December 31 Source of Funds 1971 1970 Net earnings ........................................ . $ 21,361,262 $ 44,439,469 Add expenses not requiring current outlay of working capital Depreciation and amortization ...................... . 77,245,465 69,173,449 Deferred income taxes ......................... . .... . 11,589,200 19,885,700 Deferred investment credit. ........ . .. . ............. . ( 4,390,000) ( 4,484,400) Total from Operations 105,805,927 129,014,21 8 Proceeds from sale of common stock, less expenses ...... . 3,438,328 Increase in long-term debt ....................... . . . .. . 148,914,635 Disposals of operating property ....................... . 12,364,883 2,725,579 Refund of SST development cost .................. . 5,500,000 Total of Sources 123,670,810 284,092,760 Application of Funds Flight equipment and other property additions .......... . 87,330,076 176,256,285 Advance deposits on aircraft. ............... .......... . 23,166,916 38,049,353 Deferred Boeing 747 training costs ..................... . 1,287,427 2,786,927 Cash dividends ............................... . ...... . 9,517,530 9,464,532 Decrease in long-term debt .. . ............. . .......... . 8,414,635 Other .............................................. . 1,345,993 877,983 Total of Applications 131,062,577 227,435,080 Increase (Decrease) in Working Capital ($ 7,391,767) $ 56,657,680 Changes in Working Capital Consist of: Increase (decrease) in current assets: Cash ............................................ . ($ 9,057,077) $ 24,705,933 Receivables ....................................... . 9,264,655 4,845,311 Inventories ....................................... . 1,488,616 4,308,895 Prepaid expenses .................................. . 1,459,419 462,544 3,155,613 34,322,683 Increase (decrease) in current liabilities: Current maturities of long-term debt ................. . ( 15,000,000) Accounts payable ................................. . 17,922,737 ( 10,273,261) Other accrued liabilities ............................ . 3,339,289 ( 8,352,035) Unredeemed ticket liability ..................... . ... . 4 285,354 ( 3,709,701) 10 547 380 ( 22,334,997) Increase (Decrease) in Working Capital ($ 7,391,767) $ 56,657,680 See notes to financial statements NORTHWEST AIRLINES, INC. AND SUBSIDIARIES Common Stock Shares Amount Capital Surplus Balance January 1, 1970 . .................... 20,914,272 $26,142,840 $113,843,996 Shares issued pursuant to Employee Stock Purchase Plan, less expenses. . . . . . . . 235,484 294,355 3,143,973 Net earnings for the year .................. . Cash dividends-$.45 a share .............. . - - - - Balance December 31, 1970 . ................. 21,149,756 26,437,195 116,987,969 Net earnings for the year .................. . Cash dividends-$.45 a share ............... ___ _ Balance December 31, 1971. ................. 21,149,756 $26,437,195 $116,987,969 See notes to financial statements. Retained Earnings $286,810,089 44,439,469 ( 9,464,532) 321,785,026 21,361,262 ( 9,517,530) $333.628.758 Period 1962-1970 Available* $61,955,000 8,744,600 Reflected in NetEamingst December31 1971 .............. . Total .............. . To Net Earnings ...... . $70,699,600 59,716,300 To Be Amortized . . . . . . $10,983,300 $46,581,700 13,134,600 $59,716,300 ~ I * All investment credit amounts generated 1962-1971 have been utilized to reduce income tax payments except $2,797,700 from 1970 and $8,744,600 from 1971. See Note D to financial state- ments. t lncome benefits of investment credit generated in 1962-68 are amortized over an eight year period. The flow-through method of accounting was adopted for investment credit generated after 1968 and the income benefits have been reflected in the year generated. Aircraft Type JET: 707-320B & 320C 720B ............... 727 & 727C-100 ...... 727-200 ............ 747 . ............... DC-10 .............. Total Jet .............. 1970 1971 On Order 36 33 16 13 32 32 24 24 10 15 14 - 118 117 14 NORTHWEST AIRLINES, INC. AND SUBSIDIARIES Years Ended December 31, 1971 and 1970 Note A -Long-Term Debt Note purchase agreements with twelve insurance companies payable $3 000,000 annually and $4,000,000 on October I, I 978 plus interest at 6% per annum. Certain optional pre- payments 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% ............... .. ........... . ... .. ........................... . The Fourth Amendatory Credit Agreement with fifteen banks providing for credit which is payable $5,000,000 quarterly and terminated October 1, 1971. Interest on funds borrowed was at 4 % .............................................. . A credit agreement with twenty-four banks providing for a revolving credit of $250,000,000 reducing to $230,000,000 by October 1, 1972, to $210,000,000 by October l , 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, 1971 the agreement makes available at any time an additional $75,000,000 (1970-$35,000,000) for working capital and other purposes .... . ........ . .... . ........................................... . Credit agreements with aircraft and aircraft engine manufacturers providing for financing of purchases from those manufacturers through the issuance of five-year notes to aggre- gate not more than $60,000,000 .. ...... . . . ...... . ............. . .... ..... ... ... . Less amounts due within one year included in current liabilities ..................... . December 31 1971 1970 $ 22,000,000 175,000,000 58,500,000 255,500,000 3,000,000 $252,500,000 $ 25,000,000 15,000,000 215,000,000 23,914,635 278,914,635 18,000,000 $260,914,635 The Company had complied with the covenants of the debt agreements at the end of both years. The aggregate repayment of the outstanding long-term debt over the years 1973 through 1976 is $3,000,000, $88,800,000, $116,915,000 and $37,585,000, respectively. Note B Stockholders' Equity Cumulative Preferred Stock, $25 par value: Authorized ................................................................. . Issued December 3 I ....... . .................... ............................. . Common Stock Options for officers and employees at prices ranging from $32.375 1 36.625 a share which were not less than 100% of market at date of grant: Outstanding ............................................................ . . . Became exercisable during year .. ...... .. ..... .. ............................ . Exercisable at end of year .. .... ............... ... .......................... . Common shares reserved for merger with National Airlines, Incorporated- Note G . . . Common shares reserved for additional stock options and/ or the Employee Stock Purchase Plan at December 31 .. ....... . .. .......... .......... ........................ . Shares 1971 1,000,000 None 71,768 24,167 67,468 7,321,603 792,748 1970 1,000,000 one 71,768 24,167 43 301 792,748 The orthwest Airlines I 968 Employee Stock Purchase Plan provides for the ale of Common Stock to eligible employee through payroll deductions of up to lOo/i'. of their salary not to exceed $3,000 a ear. The sale price is 901c, of the highe t price of the stock on the ew York Stock E change on specified annual date ~. - Note C-Commitments At December 31, 1971, the Company has contracted to purchase jet aircraft for delivery in 1972 through 1973 which, with spare engines, will require expenditures of $290,060,000 ($408,368,000 at December 31, 1970). Of this amount, $41,130,000 has been deposited with manufacturers at December 31, 1971 and approximately $60,809,000 and $188,121,000 become payable during the next two years, respectively. As of December 31, 1971 annual rental payments of approximately $8,800,000 (1970-$7,800,000) were required under various lease agreements for periods up to forty years covering airport facilities, ticket offices, etc. Note D - Taxes on Earnings Since 1969, the Company has used the flow-through method of accounting for the investment credit. No change has been made in accounting for the deferred investment credits arising in prior years which are amortized over eight years from the dates the credits arose. The provision for taxes on earnings consists of the following: Year Ended December 31 1971 1970 Current: Operating loss carry back for tax purposes ............................... . Provision ........................................................... . Investment credit: Flow-through ..................................................... . Refund for carry back to prior years .................................. . Reduction of refund for limitation of credits utilized in prior years ....... . Deferred : Provision ............................................................ . Unapplied investment credit: Flow-through ..................................................... . Arising from operating loss carryback ................................ . ($18,192,100) 2,797,700 ( 15,394,400) 21,765,700 ( 8,744,600) ( 2,797,700) 10,223,400 Deferred investment credit being amortized over eight years. . . . . . . . . . . . . . . . . . ( 4,390,000) ($ 9,561,000) $ 1,688,900 ( 443,300) ( 16,526,200) ( 15,280,600) 19,885,700 19,885,700 ( 4,484,400) $ 120,700 Investment credits not applied on tax returns but offset against deferred income taxes at December 31, 1971 will expire as follows: $8,925)00-1978 and $2,617,000-1980. Note E - Pension Plans The Company has several pension plans covering substantially all of their employees. The total pension expense was $8,557 205 (1970-$5,348,098) and includes amortization of prior service costs over a period of forty years. It is the Company's policy to fund pension costs accrued. As of the latest valuation date, the total amount of fund assets was sufficient to cover vested benefits. Note F - Depreciation and Amortization Policies Provi ion for depreciation of aircraft and related flight equipment approximated $73,424,000 (1970-$62,993,000) and \J as computed on the straight line method assuming ten year lives and 15% residual values, except as to 747 jet aircraft a to \J hich the life is fifteen years and residual value is 10% . Included in operating expenses for 1970 is the amortization of SST aircraft development costs of $1,100,000. Upon abandonment of the project by the United States Government during 1971, all such costs were refunded, and accordingly, $3,300 000, a credited to reduce depreciation and amortization expense for 1971 in accordance with Civil Aeronautics Board accounting requirements. Boeing 74 7 aircraft ~raining costs are being amortized over five years. NOTES TO FINANCIAL STATEMENTS (cont'd) Note G - Proposed Merger Under terms of an agreement which would merge National Airlines, Incorporated into the Company, National stock- holders would receive .85 of one share of Northwest stock for each share of National held, an exchange for approximately 7,223,000 shares. The merger is subject to approval of the Civil Aeronautics Board and the President of the United States. If accomplished, it will be accounted for as a pooling of interests. The issue of 41,310 shares may be required in connection with National's employee stock option plan and 57,344 shares for conversion of National's debentures. Note H - Mutual Aid Agreement The Company was struck by the Brotherhood of Railway and Airline Clerks (BRAC) on July 8, 1970 and the strike continued through December 14, 1970. For this period the Company received payments from other carriers under the Mutual Aid Agreement. The Civil Aeronautics Board on November 23, 1970 issued an Order remanding for.,.review only the amended portion of the Mutual Aid Agreement which provided for increased level of supplemental payments. The Order states that consideration will be given to making any modifications to this agreement prospective only. A hearing was held before an examiner of the Civil Aeronautics Board during the latter part of 1971 but no final decision has been made. In the opinion of management of the Company, there is no reason to believe that the modification to the Agreement will not be approved and that the total amount received by the Company during the strike period will not be retained. ACCOUNTANTS1 REPORT To the Stockholders and Board of Directors Northwest Airlines, Inc. Saint Paul, Minnesota We have examined the financial statements of North west Airlines, Inc. and subsidiaries for the years ended December 31, 1971 and 1970. Our examinations were made in accordance with generally accepted auditing standards, and accord- ingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the accompanying statements of financial position, earnings, stockholders' equity and changes in financial position present fairly the consolidated financial position of Northwest Airlines, Inc. and subsidiaries at December 31, 1971 and 1970 and the consolidated results of their operations, the changes in stockholders' equity and changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. Saint Paul, Minnesota February 21, 1972 Certified Pu blic Accountants NOTICE TO STOCKHOLDERS A new rule adopted by the Civil Aeronautics Board, effec- tive August I, 1970, requires that any person who owns, as of December 31 of any year, or acquires ownership either beneficially or as trustee, more than five percent, in the aggregate, of the capital stock or capital_ o_f th~ air carr!er, shall file a report with the CAB containing information required by Section 245.13 of the CAB Econom_ ic Regula- tions. This report must be filed on or before April I of each year as to capital stock or capital owned as of December 31 of the precedi ng year. The regulation also provides that a report must be filed by any person acquiring more than five percent of the capital stock or capital within ten days of acquisition. Any stockholder who believes he may be required to file such a report may obtain further information by writing to the Director, Bureau of Operating Rights, Civil Aeronau- tics Board, Washington, D. C. 20428. - - NORTHWEST AIRLlNES, INC. AND SUBSIDIARIES (Dollars in thousands except per share figures) Operating Revenues 1971 t 1970t 1969 Passenger ......................................... $331,966 $ 260,335 $ 350,504 Cargo ............................................ 39,641 30,053 51,006 Mail ............................................. 19,443 18,958 29,386 Charter and Other Transportation ................... 31,588 20,800 35,090 Mutual Aid Agreement. ............................ (462) 46,325 (509) Nontransport ..................................... 3,343 2,569 2,461 Total Operating Revenues $ 425,519 $ 379,040 $ 467,938 Operating Expenses Depreciation and Amortization ...................... $ 77,245 $ 69,173 $ 60,833 Other ............................................ 330,108 258,784 324,979 Total Operating Expenses $ 407,353 $ 327,957 $ 385,812 Operating Jncome .................................... $ 18,166 $ 51,083 $ 82,126 Other Income and (Deductions)-Net. .................. (6,366) (6,523) (1,153) Earnings Befcre Taxes ................................ $ 11,800 $ 44,560 $ 80,973 Jncome Taxes ........................................ (9,561) 121 29,507 Net Earnings ........................................ $ 21,361 $ 44,439 $ 51,466 Earnings per Average Share As Reported Each Year()) ..... $ 1.01 $ 2.11 $ 2.55 Cash Dividends ...................................... 9,518 9,465 9,117 Dividends per Share As Paid Each Year ................ .45 .45 .45 Stockholders' Equity .................................. 477,054 465,210 426,797 umber of Shares Outstanding at End of Year .......... 21,149,756 21,149,756 20,914,272 Book Value per Share at End of YearC1 ) $ 22.56 $ 22.00 $ 20.41 Recomputed per Share Figures After Stock Splits :C2 ) Earnings per Average ShareC2 ) . 1.01 2.11 2.55 Dividends per ShareC2 ) .45 .45 .45 Book Value per Share at End of Year(2) .............. 22.56 22.00 20.41 Assets and Long-Term Debt Flight Property at Cost ................................ $ 1,012,568 $ 929,181 $ 697,938 Flight Property at Net Book Value ..................... 709,433 668,129 492,241 Total Assets ......................................... 944,302 923,126 742,732 Long-Term Debt ..................................... 252,500 260,915 112,000 Unit Expenses Per Available Ton-Mile ............................ 14.5e 18.0 15.2c Per Revenue Ton-Mile ............................. 42. le 43.5 34.5 Per Cent of Operating Revenues ..................... 95.7% 86.5 82.4% Statistics - Scheduled Services Re enue Plane Miles (000) .......................... 100,992 83,177 123,966 Available Seat Miles (000) .......................... 15,614,614 10,234,060 13,504, l l l Revenue Passenger Miles (000) ...................... 5,553,043 4,506,256 6,208,725 Passenger Load Factor ............................. 35.6% 44.0% 46.0S-~ Revenue Passengers Carried ........................ 6,089,273 4,682 812 7,517,780 Freight and Express Ton-Miles (000) ................. 161,345 110,215 198,494 Total Revenue Ton-Miles (000) ...................... 813,403 655,339 942,050 Statistics - Total Operations Revenue Plane Miles (000) .. . ....................... 110 045 89,938 135,563 A\ailable Ton-Mile (000) .......................... 2,806,407 1,819,439 2,535,137 t Affected by major strikes in 1966 and 1970, and from the strike recovery period in 1971. (1) Per share figures reflect the increase in outstanding shares resulting from stock issues in 1964, 1969 and 1970 and from the conversion of preferred stock in 1962. (2) The stock was split 'two-for-one" in 1964, 1966 and 1969. The recomputations in this section are shown to provide coml?arability on an adjusted basis and follow the form recommended by the Accounting Principles Board. These figures, of course, do not reflect the way the corporation was operated. 1968 1967 1966t 1965 1964 1963 1962 $ 301 ,277 $ 275,873 $ 216,239 $ 198,457 $ 163,807 $ 135,222 $ 121,781 43,902 38,118 29,515 24,779 18,402 13,745 11,828 28,605 26,898 22,557 17,421 15,313 14,233 14,228 41,060 41,799 39,205 21,851 12,965 6,442 2.646 2,491 (717) (21) (1 2) (858) 1,446 1,291 1,312 1,207 1,144 (842) 828 $ 416,290 $ 383,979 $ 311,319 $ 262,998 $ 211,610 $ 168,788 $ 150,453 $ 49,817 $ 41 ,252 $ 33,195 $ 24,011 $ 22,852 $ 19,159 $ 18,445 268,529 229,969 177,469 153,140 135,627 123,713 112,802 $ 318,346 $ 271 ,221 $ 210,664 $ 177,151 $ 158,479 $ 142,872 $ 131,247 $ 97,944 $ 112,758 $ 100,655 $ 85,847 $ 53,131 $ 25,916 $ 19,206 (3,220) (2,391) (1,243) 224 (1,125) (4,166) (4,578) $ 94,724 $ 110,367 $ 99,412 $ 86,071 $ 52,006 $ 21,750 $ 14,628 44,673 51,651 46,276 40,377 25,220 11,297 7,398 $ 50,051 $ 58,716 $ 53,136 $ 45,694 $ 26,786 $ 10,453 $ 7,230 $ 5.47 $ 6.42 $ 5.81 $ 9.99 $ 5.86 $ 5.73 $ 3.97 7,320 6,405 5,490 3,657 2,602 1,823 1,702 .80 .70 .60 .80 .60 1.00 .80 306,717 263,986 212,727 165,081 I 22,960 68,436 59,71 2 9,149,628 9,149,626 9,149,626 4,574,8 13 4,568,634 1,824,452 1,820,714 $ 33.52 $ 28.85 $ 23.25 $ 36.08 $ 26.91 $ 37.51 $ 32.80 - 2.74 3.21 2.90 2.50 1.47 .72 .50 .40 .35 .30 .20 .15 .1 2 .IO 16.76 14.43 11.62 9.02 6.73 4.69 4.10 $ 582,646 $ 467,859 $ 401 ,476 $ 304,072 $ 219,523 $ 176,655 $ 169,413 424,522 346,029 311 ,803 233,858 160,925 127,074 122,980 627,538 481 ,206 422,040 333,311 237,226 196,765 186,887 160,000 85,000 96,000 72,000 45,000 64,996 74,968 14.6 14.5 15.6 16.4 18.5 21.7 23.9 30.8 30.3 30.1 33.0 39.7 46. 8 50.2 76.5% 70.6% 67.7% 67.4% 74.9% 84.6% 87.2% 107,646 93,395 67,780 61 ,653 52, 157 45,356 41 ,821 10,840,758 9,198,150 6,773,257 6, 140,7_17 5,129,944 4,305, 147 3,697,796 5,458,128 4,901 ,520 3,699,85 1 3,303,809 2,668,8 12 2, 179,208 1,904,11 2 50.3% 53.3% 54.6% 53.8% 52.0% 50.6 0 51.5% 7,173,805 6,489,295 4,963,275 4,593,462 3,663,077 2,911 ,914 2,437,342 169,416 141 ,175 108,914 82,7 15 55,100 39,41 7 35, 179 836,085 709,165 533,556 452,553 35 1,886 284,732 254,033 121,077 I 06, 197 77,7 15 67, 125 55,477 47,207 42,7 18 2,186,234 1,864, 128 1,348,983 1,079,832 856,6 I 2 657,761 548, 159 0 HIGHLIGHTS OF 1971 .. . FIVE BOEING 747'S ADDED TO N\NA ..JET FLEET: !iv r 747B 's and th addition f hi t ri Bo t Air-lines' route ystem ranked a f 1971. Th cembcr b r 1 1 NWA 747 in new hang ar 1, 1971 num- rn in th U.S. st relnliv lo NWA'. l l,a only four ty f j t 72 727 and 747. The raft a r er ' t LI l p s jct cngi1 th J a, Pratl & Whit s. T his s ta ndnrdi z~ Li n f qL n ontinucs to repr s 'n l im ortant ;_wings l r Airline~ in mainl ' I\Onc . SJ nr pL rts and s par l fa ililics and pilot trn i ning. With .. W 's 7 apilal xpcnditur n 74713 ' y ur om pa 11 , 11 1 l in j t m n l t o er on ' bi N w 747 e r ices lnau uratcd As tht' 747 11' t gr' , n , crvi ' w P in tr du d. Much or this nc,v 747 s 'rvi 'C was initial ,ct n th Pncifi , and ri 'nl in t r-porl roul s, hclpin th ri nl R gion of th Company to its most succes fol year in history. On January 23, 1971 Boeing 747 service be an to M nila ; on January 31 to Hon Kong; on February 1 to Taip i; on Mar h 1 to Tokyo from San Francis o via H nolulu and on August 1 to Tokyo from the Twin ili s via Lo Angeles and Honolulu. With the tremendou ar o apa ity of the 747 came th opportunity to introduce .new ar o rat from Hong Kon and Taipei to th U.S. mainland. Th se new tariffs, bas d on use of 747 cargo ontainers, nerated sub- stantial new business. 747's Help Sales Efforts The prim mphasi lo recapture pa senger and ar o business and to offset the irnpa t of n w omp tition. H re, the ability to sell our 747 service - which the competi- tion could not match - was important. A 1971 ended NWA was the onl ff n 74 , t follow ke : Twi c Y rk T pa u ; T - Mi a S a Ltle-Anchora Twin Chi L go ; Twin Ci tie - Los Ang e les- Hon o I u \LI_ Tok y O ; Minnesota Twins signed with NWA Twin i Li s- nn Fran isco ; Miami-S atlle; Tolry -Taip t ; T kyo-Maniln and enltl -Honolulu. Thi rvi e advantage wa instrnm ntal in g ncrat- ing busin s wilh travel agenls, always a major our c f bu incss for Norlhwe t Airlines. For 1971, revenue fr m trav I a, nt lolal d $L24.5 million - highest in NWA hi t ry. 0 liv ry f n w 747 air raft al o provid d th BOSTON-NE\N CITY ON N\NA ROUTE SYSTEM Boston's Skyline behind Logan International tunity to u oth r, mall r aircraft in the harter ale ar a. With a sp ial ale team formed to sell charter travel, volume grew to nearly double that of the most re ent omparabl year. Special attention was d voted to ports r 1 t d trav 1, app d by th signing of the Minne ota Twins bas ball team for the 1972 season. Advertising Concentrates on 747's With the competitive edge of 747 equipment which Northwest Airline po es ed in many markets, much of the adverti ing tr s ed this advantage. Advertising stressed 747 sup remacy A new trans-Pacific campaign, "Fly The Orient Expressway," was launched in 1971 and will continue through 1972. It is based on four color, full page adver- tisements in national magazines, underlining the choice of routes, service and 747 equipment supremacy offered by North west. The return of NW A to television advertising centered on the Florida campaign - "The Good Times To Florida." This campaign relied heavily on TV commer- ial run in the Twin Cities, Chicago, Miami and Tampa/ St. Petersburg, backed by newspaper and radio schedules. Boston Becomes On-Line City " Hello, Boston, We're Your New Airline" was the theme of the special adverti ing ampaign develop d to support the inauguration of service from the Twin Cities and Milwaul ee to Boston which began September 1, 1971. Newspaper, radio and TV advertising were all used to register NWA in ths historic and major market. Initial chedules included two flights daily in each direction between Boston-Twin Cities and Boston- Milwaul ee - one a non-stop. At the end of thr e month , Northwe t Airline had succeeded in capturing more than 50 percent of the non-stop business in these marl ets. 747 Support Facilities Expanded The support services and facilities necessary to han- dle the 747 .fleet - and the growth in passen er and cargo business it will generate - were greatly xpanded in 1971. A number of departments within your Company were involved: Maintenance and Engineering's major effort was the com- pletion of the pro- gram to provide for the maintenance, overhaul and testing of th 747 fleet. N ew 747 engine test cell 21 22 HIGHLIGHTS OF 1971 ... Commissioning of the two new 747 hangars at the Twin Cities headquarters was accomplished and a new $1.5 million test cell facility was built and put into operation in July. This provided post- overhaul and repair test capabilities for the JT9D Pratt & Whitney engine which now powers the 747 and which will be used in the DC-10. INSTA -RES gives fast answers In the Computer Services area, the dividends on the Company's investment in new and larger computer equipment were very evident in 1971. The INSTA-RES system provided an instantaneous reservations system - a completely standardized pro- cedure with the ca- pacity to develop a passenger name record - that was the most advanced in the industry. In August, 1971, a flight infor- mation system (FLIFO) was com- puterized. This pro- TV screen shows complete record vides sales, reserva- tions and operations personnel with up-to-the-minute information on each flight's status - departure time, en route delays, arrival time. This information, captured by the computer directly from radio reports, appears on the agent set in TV picture form. Use of the com- puter was also expanded to sched- uling of flight crews - improving crew productivity and working conditions. Pilots check flight dispatch Today, NW A's computer services also function in point to point communications, monitor- ing engine performance, fare quotations and a number of accounting functions of the Company. The expansion program that was made necessary by the arrival of the 747, continued throughout 1971. Two new 747 hangars were com- pleted and occupied and a new $3 .5 million flight ser- vices and cargo building was also finished. Additionally, a $4.3 million satellite terminal was con- structed and put Weather g ets constant study in to operation at Twin Cities International Airport. Built primarily to provide gate positions for wide-bodied jet aircraft, the satellite can accommodate four 747's or DC-l0's - or seven smaller jets - simultaneously. At Miami, a concourse was extended to provide the capacity for handling two 747's at once. And at Tampa/ St. Petersburg, NW A became custodian and tenant of Airside Building No. 4 in that handsome new terminal complex. A new $2.9 mil- lion 747 flight simu- lator was installed in the new flight ser- vices building in the Twin Cities and, combined with actual 747 training flights, aided in qualifying a total of 30 4 NW A pilots on the aircraft N e w Twin Cit ies sa tellite term inal in 1971. Testimony to Northwest Airlines' leadership in air- craft noise abatement came from the National Organiza- tion to Insure a Sound- Controlled Environment (NOISE), a nation-wide citizen group concerned with aircraft noise impact, when they singled out NW A as the air carrier for its national award. The Federal Aviation Administration and air- port authorities from around the U.S. also recognized WA's leader- ship and came to the Twin Cities to watch demonstration flights using NWA noise abate- n1ent procedures. Boeing 747 flight simu lator Route Case Activity Is Slow New route case proceedings were almost totally dormant in 1971. Three cases already before the Board in which Northwest Airlines is an applicant are still awaiting CAB final decision: Omaha/ Des Moines to vari- ous east and west coast terminals; Detroit/ Cleveland- Atlanta and Chicago-Jamaica. New Services Introduced In addition to the service to Boston inaugurated on September 1, 1971, Northwest Airlines introduced its non-stop service in the Twin Cities-Philadelphia mar- ket and it has been very well received. All-cargo service connecting Philadelphia to Detroit, the Twin Cities and Seattle was also inaugurated, with connecting services to the Orient. In the area of air freight, NW A introduced an experi- mental program with motor carriers trucking freight from system cities lacking air freighter service to the NWA city nearest which offers this service. This has provided a much larger market base. Personnel Key to Success Even with the newest and best of equipment, an airline's success is based on the ability and enthusiasm of its personnel. In 1971 , the people of Northwest Airlines demon- strated their interest in, and concern for, the customer and the Company. There were a number of ways to document this: The establishment of a new annual on-time per- ' formance record with 81.2 per cent of all flights departing on published sched- ule - a very favor- able ranking among U.S. airlines. The receipt by the Company in 1971 of a record number of commendation letters from customers, cit- ing excellent perfor- mance by flight Activity in new flight kitchen crew and ground employees. The creation of a voluntary public relations pro- gram by the pilots called PEP (Pilot Employee Program) to assist in selling the airline's services. This has brought NW A pilots before a number of civic, church and school groups across the system. The participation by 4,372 NW A employees m the Company's Employee Stock Purchase Plan. During 1971, NWA's employment grew from 6,507 to 10,113 persons at year-end. The in- crease reflected the build-up of scheduled services during the year following the strike of late 1970. The stability of Ground hostess aids passengers NWA's work force is well illustrated by the fact that 1,200 employees have 25 years of service or more with the airline. Affirmative Action Program Continued The Company continued its active participation in the Affirmative Action Program - providing employ- ment opportunities for members of minority groups. Ern,phasis on job upgrading was also continued. Northwest Airlines also participated in the national convention of the NAACP and, for the third year, sponsored 'Operation Kidlift' in which jet flights were provided to disadvantaged youngsters from the Twin Cities area. Bright Outlook fo r 1972 As 1971 ended, Northwest Airlines was noting the upswing in business that was reflected in the econ- omy generally. With this momentum, and continued dedication by Northwest Airlines' employees in all departments, your Company looks forward to bright prospects for 1972. ~--'.,:;,. - ll'llialdli!~III'!! Tampa/St. Petersburg's new airport 23