Northwest Airlines Annual Report 1973

1973 ANNUAL REPORT
NORTI-IWEST ORIENT AIRLINES
~
NORTHWEST ORIENT AIRLINES
General Offices:
Minneapolis-St. Paul International Airport
St. Paul, Minnesota 55111
Area Code 612/726-2111
DIRECTORS*
JAMES H. BINGER
Chairman of the Board, Honeywell, Inc.
Minneapolis, Minnesota
HADLEY CASE
President, Case, Pomeroy & Company, Inc.
New York, New York
A. E. FLOAN
Secretary, Northwest Airlines, Inc.
St. Paul, Minnesota
DONALD H. HARDESTY
Former Vice President-Finance, NWA
St. Paul, Minnesota
MALCOLM S. MACKAY
President, Foothills Company
Roscoe, Montana
DONALD G. McNEELY
President, Space Center, Inc.
St. Paul, Minnesota
DONALD W. NYROP
President, Northwest Airlines, Inc.
St. Paul, Minnesota
C. FRANK REA VIS
Partner, Reavis and McGrath
New York, New York
ALBERT G. REDPATH
Vice President, Thomson and McKinnon,
Auchincloss, Inc.
New York, New York
LYMAN E. WAKEFIELD, JR.
Vice President, Piper, Jaffray & Hopwood
Minneapolis, Minnesota
REGISTRAR: The Chase Manhattan Bank,
New York, New York
TRANSFER AGENT: Bankers Trust Company,
New York, New York
STOCK LISTED: Common Stock listed on
New York Stock Exchange, Pacific Coast Stock
Exchange and Midwest Stock Exchange
* As of March 1, 197 4
OFFICERS*
DONALD W. NYROP
President
JAMES A. ABBOTT
Vice President-Legal
CLAYTON R. BRANDT
Vice President-Purchasing and Stores
ROBERT W. CAMPBELL
Vice President-Budgets
J. WILLIAM CAMPION
Vice President-Regulatory Proceedings
ROLAND W. CHAMBERS
Vice President-Properties
ROBERT A. EBERT
Vice President-Personnel
ROY K. ERICKSON
Vice President-Public Relations
A. E. FLOAN
$ecretary
BENJAMIN G. GRIGGS, JR.
Vice President-Assistant to the President
WILLIAM E. HUSKINS, JR.
Vice President-Maintenance
and Engineering
REGINALD C. JENKINS
Vice President-Orient Region
FRANK C. JUDD
Vice President-Assistant to the President
M. JOSEPH LAPENSKY
Vice President-Finance and Treasurer
RONALD McVICKAR
Vice President
BRYAN G. MOON
Vice President-Advertising
ROBERT J. PHILLIPS
Vice President-Comptroller
C. L. STEWART
Vice President-Transportation Services
ROBERT J. WRIGHT
Vice President-Sales
Total Operating Revenues
Operating Income ........ . . .. .. .. .... .
Net Earnings for the Year ........ . ..... .
Per Common Share . ... . .... . ....... .
St o c kh older s' E quit . . . . . . . . . . . . . . . . . . .
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 . . . . . ... ...... .
1973
$584,348,065
51 305 260
51 850,053
2.40
534 965,212
24.76
9 722,027
15.8
42.5
7,987 299
8 007 850,000
340 198,000
21.604,136
11 263
1972*
$ 392,500,605
15 098 630
17 682 ,391
.83
492 ,837,186
22.81
9,619 967
16. 9q:
49.6
5,150,636
4 565,618,000
215 ,474,000
21 ,604,136
10 000
*Operating results ere affected b a major strike hich e tended from June 30 through October 2. 1972 .
FROM THE PRESIDENT:
47TH ANNUAL
REPORT
TO THE
SHAREHOLDERS
Northwest Airlines achieved a strong performance
in 1973. Earnings of $51,850,000 were recorded; this
is an increase of 193 per cent over the $17,682,000
earnings of the prior year.
Earnings per share in 1973 were $2.40, up sub-
stantially from the 83 cents per share in 1972.
Total operating revenues established an all-time
high of $584,348,000, which is an increase of 49 per
cent over 1972 revenue of $392,501,000. The 1972
revenues and profit were affected by the 95-day
strike of the pilots' union from June 30 through
October 2, 1972. The previous record for revenue was
$467,938,000 in the year 1969.
Dividend payments to Northwest shareholders in
1973 were $9,722,027. Quarterly dividends were paid
for the 19th consecutive year. Book value per share at
December 31 , 1973 was $24.76. Shareholders' equity
increased to over one-half billion dollars
($534,965,000) in 1973 and total assets exceeded one
billion dollars at year-end for the first time in the
history of the Company.
In 1973 Northwest Airlines took delivery of thirteen
DC 10-40 aircraft. Seven additional DC 10's will be
delivered in 1974. Northwest is now operating fifteen
Boeing 747's and fifteen DC 10's - this results in
approximately 66 per cent of the available seat miles
being provided for our customers in the most modern
wide-bodied jet airplanes.
The Company did not ground any airplanes as the
result of fuel allocations. The Boeing 747's and DC
4
10's as scheduled and routed produce more profit per
airplane mile than that produced by conventional jet
airplanes.
As new wide-bodied jets were delivered in 1973,
the Company sold and delivered eleven airplanes
(four Boeing 720B's and seven Boeing 20's). All
aircraft were sold for cash. In 1974, the Company will
sell and deliver a minimum of ten used jets as the new
DC 10's are delivered. The Company's original fleet of
sixteen 720B's (placed in operation starting in 1961)
has been sold and delivered.
Importantly, none of your Company's aircraft is
subject to expensive lease agreements as is true of
many other carriers; all have been purchased by
Northwest. By doing so, we have obtained the bene-
fits of greater cash flow through depreciation and
obtained substantial investment tax credits for the
Company.
The shortage of aviation fuel has created prob-
lems for all U.S. airlines. The U.S. trunk airlines are
presently operating on a fuel allocation of 95 per cent
of the base year, 1972. Northwest has reduced its
schedules by approximately eight per cent from the
level of September 1973. All schedule reductions
were made unilaterally - we have not entered into
capacity reduction agreements in competitive mar-
kets with other U.S. airlines or foreign airlines.
Northwest continues to provide good airline service
to every city on its authorized route structure - fuel
crisis notwithstanding. In Montana and North
Dakota, the Company is providing the same frequency
of flights that we offered before fuel cuts were or-
dered by the Government.
Management of the reduced aviation fuel avail-
ability requires close day-to-day attention, but we
have experienced no major problems in obtaining
sufficient jet fuel to date. The greater concern today
is the rapidly escalating price of jet fuel. The cost of
jet fuel per gallon on a systemwide basis has in-
creased 115 per cent (February 1973 compared with
February 1974). These increases will require a fuel
surcharge or further modest increases in fares and
rates during the remainder of 1974.
Donald H. Hardesty, Vice President-Finance and
Treasurer, retired on July 1 1973 after 30 years of
service with the Company. His valuable counsel in the
financial area will not be lost because he will
continue as a member of the Board of Directors.
amed to succeed Mr. Hardesty was M. J.
Lapensky who had been serving as Vice President-
Economic Planning. Mr. Lapensky, a 28-year veteran
employee, also served as Vice President and Comp-
troller in prior years.
orthwest continues to register its strong interest
in resuming scheduled airline service to the People's
Republic of China. The Company holds operating
authority to six major cities - Peking, Shanghai,
1 anking, Shenyang, Ha-erh-pin and Lu-Ta - which
was granted by the Civil Aeronautics Board on July
20 1946.
During June 1973, t o orthwest jet freighters
landed in Peking with supplies for the U.S. ission -
marking the first appearance of our aircraft in China
since 1949.
e were also honored b the visit of 14 computer
experts from the People's Republic of China on
October 25. 1973. orth est as the onl airline
visited b this distinguished group.
Industr projections for 1974 suggest that the ear
ahead will see little gro th in passenger traffic and
comparatively modest growth in the air freight area.
Your Management is more optimistic for orth est.
Traffic increases in Januar and Februar 1974 have
been excellent and, assuming the fuel situation does
not worsen, we foresee an excellent ear ahead. ith
the continued support of the shareholders, we are
confident that orth est can retain its leadership
role among U.S. airlines.
Sincerel ,
Donald . I rop
March 1, 1974
5
SALES AND MARKETING HIGHLIGHTS
6
RECORD
REVENUES
PRODUCED
IN 1973
An all-time high in total operating revenues of $584
million was registered in 1973, topping the previous
record of $468 million set in 1969 by some 25 per cent.
Playing a major role in this success was the strong
partnership Northwest Orient enjoys with its travel
agents in the U.S. and around the world. Collectively,
they were responsible for more than $190 million of
the passenger revenues generated in 1973.
Orient Travel Up. Substantial gains were shown in
the Orient Region, evidenced by the strong develop-
ment of the Contract Bulk Inclusive Tour (CBIT)
market in Japan.
International traffic to and from the Orient and the
mainland U.S. also showed good increases. Introduc-
tion of DC 10-40 service on the Chicago-Anchorage-
Tokyo route on June 1 resulted in very dramatic gains
in these markets.
Charter Sales. In a year of records, charter sales
were no exception. A major - and most successful -
effort was mounted to increase charter business. The
result was $28 million in revenues - an increase of
42.5 per cent over 1972.
Sports team charters for groups like the Minnesota
Vikings, Baltimore Colts, Minnesota North Stars and
Minnesota Twins assisted in obtaining this increase.
Cargo Shows Growth. A strong cargo sales program
was developed in 1973 and directed primarily at
freight consolidators and wholesalers. Record cargo
revenues of $55 million resulted.
Weight of the average shipment was increased
from 294 pounds to 390 pounds. This 33 per cent
increase in average shipment weight was aided by
the ability to sell containerized space on our fleet of
wide bodied 747's and DC 10-40's. Various new
commodity rates were also developed; one of the most
successful being a shipper-loaded container rate for
shipment of fresh pineapple from Hawaii to Chicago.
Convention Central. The most unique sales program
in the industry for convention sales was developed
and implemented by Northwest Orient in 1973: it was
given the name Convention Central.
This new service utilizes a nationwide toll-free
telephone number which can be dialed for convention
reservations or assistance. It offers the convention
planner a totally coordinated plan - tailored to his
needs. Convention Central has quickly provided
Northwest Orient a larger share of this growing
market.
Room Service. To capitalize on its fleet superiority in
competitive markets, much of Northwest Orient's
advertising in 1973 concentrated on a theme of 'Room
Service.'
A series of advertisements - several of them
featuring members of the NFL Champion Minnesota
Vikings - was run showing the wide-bodied comfort
of WA's fleet of Boeing 747's and 15 DC 10-40's.
Florida Dollars Sell. One of the most effective
marketing campaigns of 1973 involved the Midwest to
Florida market.
Advertisements and broadcast commercials in the
Twin Cities, Chicago and Milwaukee urged pros-
pective travelers to 'get more for your Florida dollar'
by flying Northwest Orient.
From December 1 on, every Florida-bound traveler
on Northwest Orient flights received a packet of
'Florida Dollars' representing discounts offered by
various Florida attractions worth $55. These were
good for credit at popular restaurants, fishing, golf,
dog races, plus car and boat rental. The promotion
has been so successful that it will be adopted for use
in the Mainland-Hawaii markets during 197 4.
Northwest gives the Minnesota Vikings
Roooooom Service!
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Who can Oy you lrom any of
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ORIENT EXPRESS
7
OPERATING HIGHLIGHTS
NWA FIRST WITH
NEW COMPUTER
GENERATED TICKET
Computer generated airline ticketing was pioneered by
orthwest Orient in January, 1973.
A program developed through the combined efforts of
WA, Sperry Rand-Univac and Control Data Corporation
has produced a ticket unique to the industry. It contains
all the specific information relating to the passenger's
travel (flight number, class of service, date, origin and
destination, fare, etc.). This information is printed on the
face of each flight coupon and encoded in a magnetic
tripe on the reverse side. By reading the magnetic
encoding, passenger services such as gate check-in, gate
pass issuance and baggage tag issuance, among other
services, can be automated.
During the ear 1973, a total of 132,848 Insta-Res
computer generated tickets were issued in the test
location at Twin Cities International Airport. In 1974, the
program will be e panded to 14 other airport locations.
Insta-Res Expanded. By utilizing new techniques in which
two data circuits are carried on one voice-grade channel,
the Insta-Res system was extended to Anchorage - and
through Honolulu on to Tokyo. orthwest Orient thus
became the first U.S. airline to provide direct computer
acce s from the Orient.
Insta-Res service was also e panded in 1973 to include
all Montana stations and Jamestown, North Dakota,
completing the link-up of NWA's domestic reservations
stem.
8
A In to Re y tern i now able to provide a
computer eneroted ticket. printed in just
econd .
Two new expon ion of WA 's air freight
focilitie ,vere completed in Detroit (top) and
ilwoukee.
Experimental Program. In an experimental program,
three travel agency offices who do a large volume of
business with NWA were equipped with the same
Cathode Ray Tube sets as used by the airline's reserva-
tions personnel. These CRT sets, literally miniature TV
screens, provide direct access to the computerized
reservations system and a visual display of all necessary
reservations information.
EMPHASIS ON AIR
FREIGHT IN 1973
FACILITY DEVELOPMENT
WA's rapidly growing air freight business was given
priority in facility expansion in 1973.
A new air freight building was constructed in Spokane
and major expansions were completed for cargo facilities
in Detroit and Milwaukee. Total cost for the three projects
was in excess of $600,000.
Four new city ticket offices were opened by Northwest
Orient during the year - in Washington, D.C., New York,
Chicago and Tampa. A major remodeling was also com-
pleted in Seattle. Aggregate cost was $260,000.
Other Major Projects. Delivery of additional DC 10's and
their introduction into new markets by NWA resulted in
the need for passenger jetways capable of handling the
big, wide-bodied jets.
ew jetways for DC 10's and 747's were installed in
Detroit, Cleveland, Philadelphia, Seattle and San Fran-
cisco during the year. Total expense was nearly
$1,000,000.
Relocation of NWA station facilities in Newark, Seattle
and Billings was also accomplished after major airport
expansion programs were completed.
CUSTOMER SERVICES
EXPANDED; NEW
PROGRAMS ARE
INTRODUCED
A variety of new customer service features were intro-
duced or expanded in 1973 by orthwest Orient.
Twenty four hour reservation service was made
available to all cities throughout the continental U.S.
through new night-time telephone connections with the
Minneapolis/ St. Paul central reservation office. Between
12,000-15,000 calls monthly are now being handled
between the hours of 10 p.m. and 7 a.m. with this facility.
In July of 1973, a new containerized mail program was
introduced by NWA for the U.S. Postal Service. This
eliminates the need for individual handling of mail sacks
at planeside as the Postal Service loads the container at
its facility, seals it for absolute security and unloads the
container at its facility on completion of the flight.
During the year. the Insta Res system was connected to the
Orient Region - permitting instant access to the computers
located in Minneapolis/ St. Paul.
New X-ray equipment for inspection of passengers'
carry-on luggage was installed by Northwest Orient in
several major hub airports to minimize waiting time of our
customers.
A special LD-7 container, contoured for optimum cargo
carrying capacity on NWA aircraft, was designed and
110 of them purchased and placed in use during 1973.
Response from shippers has been excellent.
TEN NEW LABOR
AGREEMENTS SIGNED;
AFFIRMATIVE ACTION
PLAN BROADENED
ew labor agreements were negotiated for ten classes or
crafts of NWA employees in 1973 with la bar-management
harmony preventing any interruption of schedules due to
work stoppages. Collective bargaining is currently being
conducted with six groups of employees, including cabin
attendants, mechanics and related personnel.
During 1973, as schedules were increased, nearly all
personnel who had been idled by the strike of the previous
year were restored to active status, with the exception of
pilots. At year-end, NWA system employment totaled
11,263 persons, of which 879 were local nationals in
countries within the Orient. This compared to 10,000
employees at year end 1972.
Adoption of improved recruitment and placement
techniques within the framework of the Company's
Affirmative Action Program provided opportunities for
1,541 new personnel of which 258 or 16.7 per cent, were
minorities.
The Company's Affirmative Action Program included
WA participation in a number of career guidance
clinics.
A 747 takes on its containerized cargo using automated
loaders (top) . The line of carts shows the great cargo
carrying capacity of the 747.
9
FLEET HIGHLIGHTS OF 1973
13 DC 10-40'5
DELIVERED;
11 OLDER
JETS SOLD
Thirteen of the long range model DC 10-40's joined
Northwest Orient's pure jet fleet in 1973, making a
total of 15 at year-end.
Together with the Company's 15 Boeing 747's, they
gave Northwest Orient a total of 30 new, wide-
bodied jets as of December 31, 1973. This represented
nearly one-third of the fleet total of 111 aircraft.
Relative to its seventh place revenue ranking
among the major U.S. airlines, Northwest Orient has
the largest percentage of its fleet in wide bodied, new
generation jets.
Conversion Program Completed. The conversion pro-
gram to upgrade performance and reliability of the
Boeing 747 powerplant was started in February,
1972, and completed in December, 1973. Total cost
was some $12 million.
A total of 63 JT9D-3A engines were processed
through the NWA overhaul shops where they were
reconditioned and upgraded to the JT9D-7 model. This
improved model corrected shortcomings in the earlier
model and made additional engine thrust available.
The vastly improved performance has resulted in
Northwest Orient having one of the best engine
reliability records in the industry.
Engine Commonality. Recognizing that any new air-
craft engine is likely to have initial problems, the
management of Northwest Orient made a decision
several years ago to order its DC 10 aircraft with the
same Pratt & Whitney engine used in the 747. We
were the only U.S. airline to do so.
This commonality of engines has provided dramatic
savings in the areas of spare engines and spare parts
and pilot and mechanic training.
It has also contributed great savings in terms of
reliability. Northwest Orient's DC 10-40's, powered
by the improved model JT9D Pratt & Whitney
10
engine, have achieved a far lower in-flight shutdown
rate and off-schedule engine removal rate than any
other wide-bodied jet flown by U.S. airlines.
Older Aircraft Sold. As new DC 10-40's were
delivered to Northwest Orient in 1973, older jets were
sold. In all, four Boeing 720B's and seven Boeing 320's
were delivered to their new owners.
There are two noteworthy points in our used air-
craft sales program:
First, there is substantial 'repeat' business for our
used jets. Olympic Airlines, Maersk Air of Denmark
and Cathay Pacific Airlines, three of our five custom-
ers in 1973, all had been previous purchasers.
Obviously, they approved of the thorough overhaul
and renovation program done by Northwest Orient
before delivery of an aircraft.
Second, all used Northwest Orient jets are sold for
cash on delivery. This attests to the quality of the air-
craft offered for sale since credit terms are available
from most other sellers.
The last two of Northwest Orient's original fleet of
16 Boeing 720B's were delivered to buyers in early
1974.
15 DC 10-40's
Range of 5,100 miles with 236 passengers.
15 BOEING 747's
Range of 5,850 miles with 362 passengers .
++++++++++++++++
++++++++++++++++
32 BOEING 727-lO0's
Ra nge of 1,760 miles with 122 passengers.
++++++
++++++
++++++
++++++
24 BOEING 727-200's
Ra nge of 2,380 miles with 93 passengers.
++++++
++++++
++++++
+++++
23 BOEI G 707-320'
Ra nge of 5,620 miles with 142 pas eng r .
11
FINANCIAL
REVIEW
FOR 1973
Revenues. Northwest Airlines' total operating revenues of
$584,348,065 represents an all-time high with the previous
record of $467,937,999 having been set in 1969.
Comparisons of individual categories with 1972 are not
meaningful as the prior year's revenues were severely
curtailed due to a pilot strike. All-time revenue records
were also established in Passenger - $476,793,651 and
Cargo - $55,280,382.
The system yield per passenger-mile decreased from
6.09<t in 1972 to 5.92<t per mile in 1973. This yield
reduction was a result of the sizeable increase in traffic
we received in tour groups from our international
operations.
Revenues from charter and other transportation in
1973 were $28,516,986 compared to $20,008,467 in 1972.
This year's revenue included $12,599,537 from com-
mercial charters and other income which was up from
$5,819,140 a year ago and reflects the increased emphasis
the Company placed in this market. Also included was
$15,917,449 from military charters which compared with
$14,189,327 a year ago. The Military Airlift Contract
expires on June 30, 197 4 and we will again seek a renewal
contract for the Government's 1975 fiscal year.
Fares and Rates. Various fare and rate increases were
approved by the Civil Aeronautics Board and placed into
effect in 1973. The principal fare adjustments included a
50/o currency surcharge which went into effect in April,
1973 for travel from the U.S. to foreign destinations to
compensate for the currency devaluation. The CAB can-
celled this fare increase in July and again reinstated the
currency surcharge at the rate of 30/o effective January 1,
1974. The CAB declared Family Plan and Youth Fare dis-
counts discriminatory and ordered that these discounts
be phased out in three steps. Phase-out steps have been
placed into effect on June 1 and December 1, 1973 with the
last step scheduled for June 1, 197 4. The CAB approved
fare increases of 50/o for domestic operations effective
December 1, 1973 and approximately 70/o for international
operations effective January 1, 1974, in recognition of
increased fuel costs. Other increases in rates were
received for cargo and mail services. It is anticipated that
further fare and rate increases may be required to com-
pensate for additional increased costs arising from the
fuel situation.
In the Domestic Fare Investigation, the Civil Aero-
nautics Board established fare levels between the U.S.
ainland points. Certain phases of this case relative to
joint fares, load factor and fare structure have not been
finall decided by the Board. There is also in process an
12
investigation into the level and structure of Mainland-
Hawaii passenger fares.
The Board, in a current proceeding on mail rates, is
determining the level of rates for the carriage of mail over
the domestic routes for the period beginning March 28,
1973. The Board also has in process an investigation to
consider the level and structure of rates for the carriage
of freight on domestic routes.
Expenses. Operating expenses in 1973 amounted to
$533,042,805 compared with $377,401,975 in the prior
year which were considerably reduced due to the pilot
strike.
Depreciation and amortization expenses amounted to
$87,641,813 compared with $81,054,263 in the prior year.
This increased expense is the result of the increased
number of new Douglas DC 10-40 wide-bodied equipment
added to our fleet. Opera ting expenses per available
ton-mile in 1973 were 15.8 compared with a strike-
inflated 16.9 a year ago. Northwest Airlines continues to
be the leader in low cost levels in the airline industry.
Northwest Airlines is continuing to experience infla-
tionary trends in all cost areas, including wages, rentals,
services and costs of materials and supplies. The cost of
fuel is currently showing sharp increases in both the
domestic and international operations. However, as pre-
viously stated, the Civil Aeronautics Board has approved
fare increases in both the domestic and international
operations in recognition of these escalating costs.
The Federal Energy Policy Office, beginning in the fall
of 1973, allocated monthly gallonage of domestic aviation
fuel on the base year of 1972. Northwest Airlines' base
year was adjusted upwards to offset the effect of reduced
operations due to the pilot union strike in that year. New
fuel allocation regulations established under the Federal
Energy Office effective in 1974 provide for a level of 950/o
of the base period volume for domestic source fuel only.
As a result of the fuel shortage and related allocation
regulations, Northwest Airlines reduced its flight sched-
ules early in January 197 4 to a capacity base slightly
below the level of the prior year. Quantities of fuel
provided by the FEO allocation system have generally
been available to the Company.
Earnings and Dividends. Earnings in 1973 amounted to
$51,850,053 or $2.40 per average share of common stock
outstanding compared to $17,682,391 or $.83 per share in
1972.
Gain from disposals of property before tax application
increased to $18,683,982 from $9,923,380 a year ago. This
disposal gain results primarily from the sale of aircraft
and spare parts which were replaced by the new wide-
bodied DC 10-40 equipment received in 1973.
Although a number of U.S. airlines discontinued divi-
dend payments, orthwest Airlines continued its dividend
payment policy in 1973 with quarterly payments resulting
in an annual rate of $.45 per common share. 1973 marks
the 19th consecutive year in which the Company has paid
dividends.
SOURCE AND DISTRIBUTION OF REVENUES
9.5%
INCOME TAX
AND EARNINGS
13.7%
FUEL AND OIL 30.9%
EMPLOYEE WAGES
AND BENEFITS
81 .6%
PASSENGER
15.0%
DEPRECIATION
AND AMORTIZATION
SOURCE
Taxes on Earnings. Income taxes on earnings in 1973
amounted to $3,830,100 compared with a net credit of
$429,300 in 1972. The current year income tax amount is
made up of a normal provision of $26,816,900 of which
$14,104,300 has been deferred for future payment due
primarily to the Company's use of accelerated deprecia-
tion methods for the computation of income for income tax
purposes. Investment tax credits of $22, 986,800 were off-
set against the income tax provision. These credits
included $19,870,500 generated in the current year
primarily from the purchase of 13 DC 10-40 airplanes and
$3,116,300 from the current year's amortization of invest-
ment tax credits from 1968 and prior. See Notes A and E
to the Financial Statements.
Investment tax credits which could not be applied to
income tax returns, but which were offset against
deferred income taxes for future application, amount to
$35,050,800 at the end of 1973.
Cash Flow. Funds generated from operations in 1973
amounted to $136,928,766 which were derived from net
earnings, depreciation and amortization, deferred income
taxes and investment tax credits. Other funds generated
totaled $101,689,866 from the disposals of operating
property and increased application of our long-term debt
arrangements. The Company's policy of owning its equip-
ment rather than procurement through leasing arrange-
ments provides additional funds in excess of earnings
through depreciation cha rges which with amortization
amounted to $87,641 ,813 in 1973. Funds received from the
sale of previously purchased equipment amounted to
$41 ,373,848 this year.
Application of funds in 1973 amounted to $268,612,063
which was made up of $248,756,012 for new flight and
ground property additions and advance deposits on air-
c ra ft, $9 ,722 ,027 fo r payment of cas h dividends ,
$3,000,000 for repayment of long-term debt and $7,134,024
for other applications.
Financial Condition. orthwest Airlines' financial condi-
tion continues to rank among the most fa vorable in the
airline industry.
Previous financial arrangements and internal cash flow
provided the Company with funds for all of its financial
30.9%
MATERIALS, SERVICES
AND OTHER
DISTRIBUTION
STOCKHOLDERS' EQUITY
VS. LONG TERM DEBT
MILLIONS OF DOLLARS
600 .------.---.----.---~--~
EQUITY
- DEBT
100
0
1969 1970 1971 1972 1973
needs in 1973 including the purchase of 13 Douglas DC
10-40 aircraft and related spare parts. The present
financial a rrangements and internally generated funds
a re expected to cover the purchase of the 7 additional DC
10-40's on order with the McDonnell Douglas Company for
delivery in 197 4. This will require an expenditure of
$154,488,000 of which $36,481 ,000 has been deposited
with manufacturers at year end. Details of the Company's
long-term debt arrangements are described in Note B -
ates To Financial Statements.
Stockholders' equity at December 31 , 1973 was
$534,965,212 compared with $492,837,186 in 1972. The
book value per common share increased to $24.76 from
$22.81 a year ago. Outstanding debt at year end
amounted to $287,000,000 compared with $211 ,000,000 in
1972. This outstanding debt amounts to 53.60/o of stock-
holder equity and this very desirable ratio is the lowest of
the U.S. trunkline carriers.
13
STATEMENT OF FINANCIAL POSITION
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
ASSETS
Current Assets
Cash and short-term investments
Accounts receivable . ....
Recoverable federal income tax . .
Flight equipment spare parts, at average cost, less
allowances for depreciation of $7,607,420
(1972 - $7,141,035) .... .. ... ... .... .. .............. .
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 D .. .
Other property and equipment at cost ... . .......... .. .. .
Less allowances for depreciation .......... . .... .
Deferred Charges and Other Assets
Training and development costs ................... .. . . .
Rentals ........ . .................................. . .
Other assets . . ...................... . ............ .. . .
14
December 31
1973 1972
$ 37,819,883 $ 23,340,648
55,103,729 41,012,970
7,901,803
16,119,104 18,785,638
4,891 ,192 4,457,932
3,145,730 1,924,095
117,079,638 97,423,086
1,216,631 ,982 1,008,040,777
355,400,549 326,020,308
861 ,231 ,433 682,020,469
36,480,999 74,117,238
897,712,432 756,137,707
101 ,437,028 94,805,390
44,135,491 37,254,176
57,301 ,537 57,551,214
955,013 ,969 813,688,921
4,379,311 3,139,391
5,295,978 4,062,435
3,863,527 2,103,681
13 538,816 9,305,507
$1 ,085 ,632 ,423 $920,417,514
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable .. . .............. ... ... . . .
Employee compensation .. ............. .
Air travel card deposits . . . . . . . . . ....... .
Unredeemed ticket liability .. . .... . ............. .
Income taxes . . . ....... . ......... .
Current maturities of long-term debt . . . . ....... .
Total Current Liabilities
Long-Term Debt - Note B ..
Deferred Credits - Note E
Income taxes - arising principally from
accelerated depreciation methods ............... .. .
Investment credit ............... . ........ . ......... .
Stockholders' Equity - Note C
Common Stock $1.25 par value; authorized 40,000,000
shares; issued and outstanding 21 ,604,136 shares ...... .
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . .... .. .
Retained earnings . . . . . . . . . . . . . . . . ....... .
Commitments - Note D
Leases - Note F
See notes to financial statements.
December 31
$
1973
93,410,975
19,804,754
986,000
10,264,152
6,690,330
3,000,000
134,156,211
284,000,000
128,429,100
4,081 ,900
132,511 ,000
27,005,170
124,140,834
383,819,208
534,965,212
$1,085,632,423
$
1972
53,330,067
18,486,358
1,009,800
7,556,029
1,123,974
3,000,000
84,506,228
208,000,000
127,875,900
7,198,200
135,074,100
27,005,170
124,140,834
341 ,691,182
492,837,186
$920,417 ,514
15
STATEMENT OF EARNINGS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Operating Revenues
Passenger .. .. . ... . ..... . ............. . ............. .
Cargo .... . ........ .. .. . . ...................... . .. . . .
Mail ........ ... ... . . . . . ..... . . . . . ... . . ............ . .
Charter and other transportation . . . . . . .. .............. .
Mutual Aid Agreement .... . ....... .. . . . .... . ......... .
Nontransport ................. . .. . .. . ....... . ....... .
Operating Expenses
Flying operations ....... . .... .. ..... . ....... ... . .. ... .
Maintenance ..... .. . . ... . ............. . ......... ... .
Passenger service . . ... .. .... . .... .... .... . ....... . .. .
Aircraft and traffic servicing . . ............. . . .. ... . .. . .
Reservations, sales and advertising ..... . . . . ........... .
Administrative and general ............. .. ....... .. ... .
Depreciation and amortization . . .. ... . . . ............ . . .
Other Income and (Deductions)
Interest on long-term debt ........ .. ............... . . . .
Disposals of property .. .. .. ... . . . . .. . ... .. .... . ... . . . .
Other ............................. .. .. ..... ........ .
Earnings Before Taxes . . ....................... .. ...... .
Taxes on Earnings, including def erred taxes
and investment credit - Note E .... . ....... . .......... .
Net Earnings for the Year .................. . . . . ......... .
Average shares of Common Stock
outstanding during the year ........................... .
Earnings per share of Common Stock ..................... .
*Operating results in 1972 were affected by a strike which ex-
tended from June 30, 1972 through October 2, 1972.
See note to financial statements.
Year Ended December 31
1973 1972*
$476,793,651 $277,890,978
55,280,382 34,694,315
18,414,621 13,309,095
28,516,986 20,008,467
( 2,692,100) 43,629,192
8,034,525 2,968,558
584,348,065 392,500,605
155,066,543 100,642,511
63,530,814 47,503,176
56,970,838 33,462,312
96,407,948 62,170,832
57,390,985 38,410,180
16,033,864 14,158,701
87,641 ,813 81,054,263
533,042,805 377,401,975
51 ,305,260 15,098,630
( 14,758,082) 8,355,485)
18,683,982 9,923,380
448,993 586,566
4,374,893 2,154,461
55,680,153 17,253,091
3,830,100 429,300)
$ 51 ,850,053 $ 17,682,391
21,604,136 21,361,255
$2.40 $ .83
STATEMENT OF CHANGES IN FINANCIAL POSITION
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Source of Funds
Net earnings ................ . ....................... .
Items not requiring current funds:
Depreciation and amortization:
Aircraft and related flight equipment ... . ......... .
Other .......................................... .
Def erred income taxes ............................. .
Deferred investment credit .................. ... . . .. .
Total from Operations
Sale of Common Stock, less expenses ..................... .
Issuance of long-term debt .............................. .
Disposals of operating property - book value . ............ .
Total of Sources
Application of Funds
Flight equipment and other property additions ..... . .... .
Advance deposits on aircraft .......................... .
Deferred DC 10-40 training costs ....................... .
Other assets and def erred charges .... . .. .. ........... . .
Cash dividends ....................... . .............. .
Payment of long-term debt ............................ .
Other . . . . . . . . . . . . . . . . . . . . ........ . .
Total of Applications
Decrease in Working Capital ............................ .
Changes in working capital consist of:
Increase (decrease) in current assets:
Cash and short-term investments ........... .. ....... .
Receivables ........................ .. .. .
Inventories ................. . ..... .. .............. .
Prepaid expenses .................... . ............. .
Increase (decrease) in current liabilities:
Accounts payable ................................. .
Other accrued liabilities .................. .. ... .
Unredeemed ticket liability ......................... .
Decrease in Working Capital . ........................... .
See notes to financial statements.
Year Ended December 31
19n
$ 51 ,850,053
78,787 ,383
8,854,430
553,200
3,116,300)
136,928,766
79,000,000
22.689,866
238,618.632
221,794,269
26 961 ,743
2.473.520
3 003 ,661
9,722 ,027
3 000 000
1,656 ,843
268,612 063
($29,993 431)
$ 14,479,235
6,188.956
( 2 233,274)
1 221 ,635
19,656,552
40 080,908
6.860 952
2.708,123
49 ,649.983
($29,993 ,431)
1972
$ 17,682,391
72,873 ,728
8,1 80,535
7,148,600
3,785,100)
102,100,154
7,720,840
133,500,000
14,373,996
257,694,990
58,156,479
39,530,611
665,534
9,619,967
178,000,000
970,796
286,943,387
($29,248,397)
($19,127 ,670)
( 9,782 ,661)
2,815,958
1,684,807)
( 27,779,180)
2,969,085)
3,301,296
1,137,006
1,469 217
($29,248,397)
17
STATEMENT OF STOCKHOLDERS' EQUITY
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Common Stock Capital Retained
Shares Amount Surplus Earnings
Balance January 1, 1972 . . ... . .. . ... .. .. .. ... . 21,149,756 $26,437,195 $116,987,969 $333,628,758
Shares issued pursuant to:
Employee Stock Purchase Plan .... . 452,598 565,748 7,089,826
Employee Stock Option Plan . . . . 1,782 2,227 63,039
Net earnings for the year . . ..... ... .. . 17,682,391
Cash dividends - $.45 a share ............. . 9,619,967)
Balance December 31, 1972 . . .. .. ... . ... . . . .. . 21,604,136 27,005,170 124,140,834 341,691,182
Net earnings for the year ......... . .... . . 51,850,053
Cash dividends - $.45 a share . ...... . . 9,722,027)
Balance December 31, 1973 .... . . .. .. . . . . . . .. . 21,604,136 $27,005,170 $124,140,834 $383,819,208
See notes to financial statements.
APPLICATION OF INVESTMENT TAX CREDIT NORTHWEST AIRLINES FLEET
Period
1962-1972
1973 .. . .... . .. . . . . .
Total ........ . ... . .
To Net Earnings .... .
To Be Amortized . .. .
Available*
$74,597,300
19,870,500
Reflected in
Net Earningst
$67,399,100
22,986,800
$90,385,900
$94,467,800
90,385,900 ---~
$ 4,081,900
*Investment credits not applied on tax returns but
offset against deferred taxes through 1973, amount
to $35,050,800. See Note E to financial statements.
t income 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.
18
Aircraft Type
JET:
707-320B & 320C
720B . .. ..... ..
727 & 727C-100 . . ..
727-200
747 .. . .
DC 10-40 . . . . . . . . .
Total Jet . .. .......
December 31
1972 1973 On Order
30 23
6 2
32 32
24 24
15 15
2 15 7
109 111 7
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Years Ended December 31 , 1973 and 1972
Note A - Accounting Policies
A summary of certain accounting policies of the Company which have been consistently
followed in preparing the accompanying financial statements is set forth below:
Consolidation
The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries after elimination of intercompany accounts and transactions.
Foreign Currency Translation
Inventory and property and equipment are translated at rates of exchange in effect when
acquired. All other assets and liabilities are translated at the rate of exchange in effect at the
close of the period. Revenue and expense accounts are translated at a weighted average of
exchange rates which were in effect during the year, except for depreciation which is
translated at the rates of exchange in effect when the property and equipment were acquired.
Exchange adjustments are charged or credited to income currently and are not material.
Flight Equipment and Property
Provision for depreciation is computed by the straight line method over the estimated useful
lives of the assets. The calculation assumes fifteen year lives and 100/o residual values for 747
and DC-10 aircraft and ten years and 150/o residual values for all other aircraft. Useful lives of
buildings vary from 5-30 years and other equipment 4-10 years.
Allowances for depreciation of flight equipment spare parts, rotables and assemblies are
provided by the straight line method at rates which allocate the cost of these assets, less
residual value, over the estimated useful lives of the related aircraft.
The Company charges to operating expense when incurred, all expenditures for maintenance
and repairs and minor renewals and betterments. Expenditures which materially increase
values or extend useful lives are generally capitalized. Carrying amounts of assets sold or
otherwise disposed of are eliminated from the accounts in the year of disposal and the
resulting gain or loss reflected in operations.
The Company capitalizes interest on borrowings related to the acquisition of aircraft until
such time as the aircraft is delivered. The capitalized interest is amortized over the useful life
of the aircraft.
For income tax purposes, accelerated depreciation methods are used and interest is not
capitalized.
Training and Development Costs
The Company defers preoperating expenses of new aircraft fleets (principally training) and
amortizes such costs over future periods to be benefited, generally five years.
Pension Plans
The Company has several pension plans covering substantially all of its employees. The policy
is to fund pension costs accrued which includes the amortization of prior service costs over a
period of forty years.
19
NOTES TO FINANCIAL STATEMENTS
Note A - Accounting Policies (Continued)
Taxes on Earnings
Taxes are provided for all items included in the statement of earnings regardless of the years
when such items are reported for tax purposes. Deferred income taxes result primarily from
accelerated depreciation methods and non-capitalization of interest costs related to aircraft
acquisitions for tax purposes.
Since 1969, the Company has used the flow-through method of accounting for the investment
credit. Investment credits not applied on tax returns are offset against deferred income taxes
to the extent they are applicable to deferred taxes becoming payable in the carryover periods.
No change has been made in accounting for investment credits arising prior to 1969 which are
amortized over eight years from the dates the credits arose.
Earnings Per Share
Earnings per share are based on the average number of shares of Common Stock outstanding
during each year. Shares issuable upon exercise of stock options (and under the Employee
Stock Purchase Plan for 1972) are excluded from the computation since their effect is not
significant.
Note B - Long-Term Debt
Revolving Credit Agreement with banks provides for revolving
credit of $250 million reducing $20 million quarterly
beginning July 1, 1976 and terminates April 1, 1979. Interest
on funds borrowed is at 0/o above prime commercial loan
December 31
1973 1972
rate prior to July 1, 1976 and 0/o above thereafter . . . . . . . . $111,000,000 $ 32,000,000
Term Credit with banks is payable $12.5 million quarterly be-
ginning April 1, 1981 and terminates January 1, 1983. Inter-
est is paid based on a formula related to prime commercial
loan rates; however, total interest paid shall not exceed
7 7 / 80/o per annum on borrowings over the term of the loan.
Current payments in excess of that rate are deferred as
receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000,000 100,000,000
Note purchase agreements with twelve insurance companies
are payable $3,000,000 annually and terminate on October
1, 1978. Interest is at 60/o 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 not to
exceed 20/o . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,000,000 19,000,000
Credit agreements with aircraft and aircraft engine manu-
facturers financing purchases from those manufacturers
through the issuance of five-year notes . . . . . . . . . . . . . . . . . . 60,000,000 60,000,000
Less amounts due within one year included in current
liabilities ............ . .. ... ...... . ................. .
20
287,000,000
3,000,000
$284,000,000
211 ,000,000
3,000,000
$208,000,000
NOTES TO FINANCIAL STATEMENTS
Note B - Long-Term Debt (Continued)
The Company had complied with the covenants of the debt agreements at the end of both
years. The payment of dividends is limited to $50,000,000 plus 750/o of net earnings (as defined)
from January 1, 1973 or $72,010,000.
The aggregate repayment of the outstanding long-term debt over the years 1975 through 1978
is $26,915,000, $39,085,000, $3,000,000 and $65,000,000, respectively.
Note C - Stockholders' Equity
Cumulative Preferred Stock, $25 par value:
Authorized . . . ..... .
Issued December 31 ... . . ...... . .. .. ....... . .. . . .. .. . . .
Common Stock options for officers and employees at prices
which were not less than 1000/o of market at date of grant
are as follows:
Outstanding January 1, 1972
Exercised . . ...... . ...... . . . ... .. . . .. . .
Outstanding December 31, 1972
Lapsed ... . . . ... . . . . . ... .. . . .... . ...... . ... . . . .
Granted ..
Outstanding December 31, 1973
Options exercisable:
At December 31, 1972
At December 31, 1973
Shares
1973
1,000,000
1972
1,000,000
None
None
Shares Price Per Share
71 ,768 $32.375/ 36.625
1,782 36.625
69,986 32.375/ 36.625
(57,586) 33.470/ 36.625
37,500 20.06
49,900 20.06/ 32.375
69,986 32.375/ 36.625
12,400 32.375
Shares available for future stock options and other plans were 360,236 at December 31, 1973
and 340,150 at December 31, 1972.
Note D - Commitments
At December 31 , 1973, the Company has contracted to purchase jet aircraft for delivery in
1974 which, with spare engines, will require expenditures of $154,488,000 ($422,120,000 at
December 31 , 1972). Of this amount, $36,481,000 has been deposited with manufacturers and
the remainder becomes payable in 197 4.
Note E - Taxes on Earnings
The provision for taxes on earnings consists of the following:
Current:
Provision for the year . .. ..... . ....... . . . . .... . ....... .
Operating loss carryback for tax purposes . . ......... . . . .
Investment credit flow-through ........................ .
Reduction of refund for limitation of investment
credits utilized in prior years ........ . .. . .. . .... .. . . .
Year Ended December 31
1973 1972
$12,712,600 $
5,729,600)
6,983,000
( 11 ,643,500)
5,469,900
6,173,600)
21
NOTES TO FINANCIAL STATEMENTS
Note E - Taxes on Earnings (Continued)
Deferred:
Provision ....... . ..................... .. ... . ........ . $14,104,300 $18,897,000
Unapplied investment credit:
Flow-through .. . .. ... . .. .......... . . . . .. ...... . ... . ( 14,140,900) 3,897,700)
Arising from operating loss carryback ... . ....... . 5,469,900)
36,600) 9,529,400
Deferred investment credit being amortized
over eight years ... . ......... . .. . .... . . 3,116,300) 3,785,100)
$ 3,830,100 ($ 429,300)
Investment credits not applied on tax returns but offset against deferred income taxes at
December 31 , 1973 will expire $8,921,800 - 1978, $3,879,300 - 1979 and $22,249,700 - 1980.
Note F - Leases
The Company does not lease any aircraft or related flight equipment. Sublease income and
contingent rentals are not material. Total rental expense follows:
Year Ended December 31
Air terminal and main base facilities 1973 1972
(financing leases) ... . ... . .......................... . $ 7,533,000 $ 7,224,000
Ticket offices and miscellaneous equipment ... . 4,140,000 3,045,000
TOTAL . .. . $11,673,000 $10,269,000
Future minimum rental commitments at December 31, 1973 for all non-cancelable leases
follows:
1974
1975
1976
1977
1978
Five years 1979-83 . ...... . ............... .
Five years 1984-88 ..... . .............. . .. .
Five years 1989-93 . . . . . . . . . . . . ...... .
Remainder ................ . ...... .
Ticket
Air Terminal Offices and
and Main Base Miscellaneous
Facilities Equipment
$ 7,261,000
6,995,000
6,888,000
6,607,000
6,585,000
32,232,000
28,057,000
16,713,000
22,867,000
$134,205,000
$1,843,000
1,653,000
1,485,000
1,331,000
826,000
2,135,000
516,000
$9,789,000
Total
$ 9,104,000
8,648,000
8,373,000
7,938,000
7,411,000
34,367,000
28,573,000
16,713,000
22,867,000
$143,994,000
Information as to the present value of non-capitalized financing leases and their impact on net
income had they been capitalized is not available but will be included in Form 10-K, the
Company's annual report to the Securities and Exchange Commission.
Note G - Pension Plans
Total pension expense was $14,118,050 (1972 - $8,397,778). As of the latest valuation date,
fund assets of all plans were sufficient to cover vested benefits of all plans.
22
ACCOUNTANTS' REPORT
To the Stockholders and Board of Directors
Northwest Airlines, Inc.
Saint Paul, Minnesota
We have examined the financial statements of Northwest Airlines, Inc. and subsidiaries for the years ended
December 31, 1973 and 1972. Our examinations were made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and such other auditing procedures as
we considered necessary in the circumstances.
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, 1973 and 1972 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 25, 1974
NOTICE TO STOCKHOLDERS
Any person who either owns, as of December 31 of the year preceding issuance of this annual report, or
subsequently acquires, beneficially or as trustee, more than 5 per centum, in the aggregate, of any class of the
capital stock or capital of the air carrier, shall file with the Civil Aeronautics Board (CAB) a report containing the
information required by Section 245.12 of the CAB's Economic Regulations on or before April 1, as to capital
stock or capital owned as of December 31 of the preceding year, and, in the case of stock subsequently acquired,
a report under Section 245.13 of such Economic Regulations, within 10 days after such acquisition, unless such
person has otherwise filed with the CAB a report covering such acquisition or ownership.
A bank or broker which holds, as trustee, more than 5 per centum of any class of the capital stock or capital of an
air carrier to the extent that it holds shares on the last day of any quarter of a calendar year, shall file with the
CAB, within 30 days after the end of the quarter, a report in accordance with the provisions of Section 245.14 of
the CAB's Economic Regulations. Any person required to report under the CAB's regulations who grants a
security interest in more than 5 per centum of any class of the capital stock or capital of the air carrier shall,
within 30 days after granting such security interest, file with the CAB a report containing the information
required in Section 245.15 of the CAB's Economic Regulations.
Any stockholder who believes that he may be required to file such a report may obtain further information by
writing to the Director, Bureau of Operating Rights, Civil Aeronautic Board, Washington, D.C. 20428.
23
-----
10 YEAR SUMMARY
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
(Dollars in thou ands e cept per share figures)
1973 1972t 1971t 1970t 1969 1968 1967 1966 1965 1964
Operating Revenues
Passenger . . .... '
. ... ...... . ............ $ 476,794 $ 277,891 $ 331,966 $ 260,335 $ 350,504 $ 301,277 $ 275,873 $ 216,239 $ 198,457 $ 163,807
Cargo .... '
. . .. '
.......... . . . . . . . . . . 55,280 34,694 39,641 30,053 51,006 43,902 38,118 29,515 24,779 18,402
Mail '
. ... '
. ..... '
... . ..... . . . . . . . . 18,415 13,309 19,443 18,958 29,386 28,605 26,898 22,557 17,421 15,313
Charter and other transportation . . .
. . . . . . . . . 28,517 20,009 31,588 20,800 35,090 41,060 41,799 39,205 21,851 12,965
Mutual aid agreement .... ...... . . . . . . '.
(2,692) 43,629 (462) 46,325 (509) 2,491 (717) (21)
Non transport
'
.. .. ... . . . . . . . . . . . . . 8,034 2,969 3,343 2,569 2,461 1,446 1,291 1,312 1,207 1,144
Operating Expenses
Total Operating Revenues $ 584,348 $ 392,501 $ 425,519 $ 379,040 $ 467,938 $ 416,290 $ 383,979 $ 311,319 $ 262,998 $ 211,610
Depreciation and amortization .. . '
.. '
.. '
. ...... $ 87,642 $ 81 ,054 $ 77,245 $ 69,173 $ 60,833 $ 49,817 $ 41,252 $ 33,195 $ 24,011 $ 22,852
Other .. . '
...... '
.. '
... '
.. . .. '
. ......... 445,401 296,348 330,108 258,784 324,979 268,529 229,969 177,469 153,140 135,627
- - - -
Total Operating Expenses $ 533,043 $ 377,402 $ 407,353 $ 327,957 $ 385,812 $ 318,346 $ 271,221 $ 210,664 $ 177,151 $ 158,479
Operating income .. ........ ' . '
...... '
.... '
... '
$ 51 ,305 $ 15,099 $ 18,166 $ 51,083 $ 82,126 $ 97,944 $ 112,758 $ 100,655 $ 85,847 $ 53,131
Other income and (deductions) - net ............... 4,375 2,154 (6,366) (6,523) (1,153) (3,220) (2,391) (1,243) 224 (1,125)
Earnings before ta es ............ . .... . .. '
..... . '
$ 55,680 $ 17,253 $ 11,800 $ 44,560 $ 80,973 $ 94,724 $ 110,367 $ 99,412 $ 86,071 $ 52,006
Income ta es ........ ' . '
......... . .... . . . . . . '
3,830 (429) (9,561) 121 29,507 44,673 51,651 46,276 40,377 25,220
Net Earnings ............................ ........ $ 51 ,850 $ 17,682 $ 21,361 $ 44,439 $ 51,466 $ 50,051 $ 58,716 $ 53,136 $ 45,694 $ 26,786
Earnings per average share as reported each year 111 .. . . $ 2.40 $ .83 $ 1.01 $ 2.11 $ 2.55 $ 5.47 $ 6.42 $ 5.81 $ 9.99 $ 5.86
Cash dividends . '
........... '
..... '
..... ' '
........ 9,722 9,620 9,518 9,465 9,117 7,320 6,405 5,490 3,657 2,602
Dividends per share as paid each year .............. .45 .45 .45 .45 .45 .80 .70 .60 .80 .60
Stockholders' equity ......... . .................. .. . . 534,965 492,837 477,054 465,210 426,797 306,717 263,986 212,727 165,081 122,960
umber of shares outstanding at end of year .. .. ... . 21,604,136 21,604,136 21,149,756 21,149,756 20,914,272 9,149,628 9,149,626 9,1 49,626 4,574,813 4,568,634
Book value per share at end of year 1
1
_1 . . . .
$ 24.76 $ 22.81 $ 22.56 $ 22.00 $ 20.41 $ 33.52 $ 28.85 $ 23.25 $ 36.08 $ 26.91
Recomputed per share figures after stock splits 1
2_1 ..
Earnings per average share l2! ............ . .. ... . 2.40 .83 1.01 2.11 2.55 2.74 3.21 2.90 2.50 1.47
Dividends per share 1
2

1 ......... '
..... .. . '
... . .. .45 .45 .45 .45 .45 .40 .35 .30 .20 .15
Book value per share at end of year 1
2
.1 .. .. .. ... 24.76 22.81 22 .56 22.00 20.41 16.76 14.43 11.62 9.02 6.73
Assets and Long-Term Debt
Flight propert at cost ...... ................ ' ' . '
... . $ 1,216,632 $ 1,008,041 $ 1,012,568 $ 929,181 $ 697,938 $ 582,646 $ 467,859 $ 401,476 $ 304,072 $ 219,523
Flight property at net book value ............. ..... '
.. 861,231 682,020 709.433 668,129 492,241 424,522 346,029 311,803 233,858 160,925
Total a sets ....... '
... '
............. '
............. 1,085,632 920.418 944,302 923.126 742,732 627,538 481,206 422,040 333,311 237,226
Long~erm debt ....................
'
..... ' '
. ... '
. . '
284.000 208,000 252,500 260,915 112,000 160.000 85,000 96,000 72,000 45,000
Unit Expenses
Per available ton-mile ........... . '
............... 15.8 16.9 14.5it 18.0 15.2 14.6 14.5 15.6 16.4 18.5
Per revenue ton-mile .... ' . '
... . . . . . . . . . . . . '
... ' .
42.5ft 49.6t 42 .1 43.5 34.5 30.8 30.3 30.1 33.0 39.7
Per cent of operating revenues ..
'
.......... . .. ... 91.20/o 96.20/o 95.70/o 86.50/o 82.40/o 76.50/o 70.60/o 67. 70/o 67.40/o 74.90/o
Statistics - Scheduled Services
Revenue plane-miles (000) ...... ..
'
...... . . . . . . . . . 108,853 79,025 100,992 83,177 123,966 107,646 93,395 67,780 61,653 52,157
Available seat-miles (000) ... '
.. . '
..... ' ' . '
19,593,379 12,963,054 15,614,614 10,234,060 13,504,111 10,840,758 9,198,150 6,773,257 6,1 40,717 5,129,944
Revenue passenger-miles (000) ............ .... ' ' .
8,007,850 4,565,618 5,553.043 4,506,256 6,208,725 5,458,128 4,901,520 3,699,851 3,303,809 2,668,812
Pa sen er load factor .. . . . . . . . . '. '
.... '
... '
40.90/o 35.20/o 35.60/o 44.00/o 46.00/o 50.30/o 53.30/o 54.60/o 53.80/o 52.00/o
Revenue pas engers carried ....................... 7,987,299 5,150,636 6.089,273 4,682,812 7,517,780 7.173,805 6,489,295 4,963,275 4,593,462 3,663,077
Frei ht and e press ton-miles (000) .......
'
..... '
... 251 ,865 150,973 161,345 110,215 198,494 169,416 141,175 108,914 82,715 55,100
Total re enue ton-miles (000) ......... '
........ '. ' .
1.140,983 672,035 813,403 655,339 942,050 836.085 709,165 533,556 452,553 351,886
Statistics - Total Operations
Revenue plane-miles (000) ..... '
....... . . . . . . . 115,726 84,098 110,045 89,938 135,563 121,077 106,197 77,715 67,1 25 55,477
A ail able ton-miles (000) .............. 3,370,694 2,236,069 2,806,407 1,819,439 2,535,137 2,186.234 1,864,128 1,348,983 1,079,832 856,612
t trike dver el affect d 1970 and 1972 and the trike recovery period of 1971.
Per. hare figur reflect th increa in out tanding hare re ulting from tock i ue in 196-1. 1969. 1970 and 1972.
~ h tock \\a plit .. t\\'O-for-one .. in 1964. 1966 a nd 1969. The recomputation in this ection a r hov\'n to pro ide
comparability on an dju t d ba i and follow the form recommended b the Accounting Principles
Boord. The e figur . of cour e. do not reflect the way the corporation wa operated.
2'1 25
SERVICE HIGHLIGHTS
NEW WIDE BODIED
JETS TAKE OVER
PACIFIC ROUTES
With the addition of 15 McDonnell Douglas DC 10-40's
to its fleet of 15 Boeing 747's, Northwest Orient be-
came the first, and is still the only, U.S. carrier to
offer trans-Pacific passenger service exclusively with
new, wide-bodied jets.
DC 10-40 service was inaugurated on the non-stop
Polar Express Route - Anchorage to Tokyo - on
June 1, 1973. North Pacific non-stop flights from
Seattle to Tokyo, and Mid Pacific flights from San
Francisco and Los Angeles to Tokyo via Honolulu,
continued to be served by NWA's 747's.
SERVICE
TO EDMONTON
SEEN LIKELY
IN 1974
Resumption of scheduled service to Edmonton, Al-
berta, Canada by Northwest Orient becomes a
distinct likelihood in 197 4, following the signing of a
bilateral air rights agreement by the U.S . and
Canadian governments.
Service had been provided between the lower 48
states and Edmonton until September, 1962.
In the intervening 12 years, Edmonton has shown
dramatic population growth and is today a center of
oil and gas related industry.
26
NO DECISIONS
REACHED IN
PENDING ROUTE
CASES
The cautious attitude displayed by the Civil Aero-
nautics Board during 1972 regarding new route
awards continued through 1973.
Thus, there were no decisions reached in the four
proceedings in which Northwest Orient has a sub-
stantial interest. These are :
Service to Saipan Case. (This case has recently
been remanded for further proceedings.)
Miami-Los Angeles Competitive Non-Stop Case.
Reopened Service to Omaha and Des Moines Case.
Remanded Atlanta-Detroit / Cleveland / Cincinnati
Investigation.
Anchorage
- - - ROUTES OPERATED
------ CHINESE MAINLAND ROUTES SUSPENDED
CITIES SERVED BY NORTHWEST ORIENT
DOMESTIC
Anchorage
Atlanta
Billings
Bismarck/ Mandan
Boston
Bozeman
Butte
Chicago
Cleveland
Detroit
Fargo/ Moorhead
Ft. Lauderdale/ Hollywood
Grand Forks
Great Falls
Helena
Hilo
Honolulu
Jamestown
Los Angeles/ Long Beach/ Ontario
Madison
Miami
Milwaukee
Minneapolis/ St. Paul
Missoula
New York
Newark
Philadelphia
Pittsburgh
Portland
Rochester
San Francisco/ Oakland/ San Jose
Seattle/ Tacoma
Spokane
Tampa/ St. Petersburg/Clearwater
Washington, D.C./Baltimore
Winnipeg
ORIENT
Hong Kong
Manila
Okinawa
Osaka
Seoul
Taipei
Tokyo
27