Northwest Airlines Annual Report 1975

1975 Annual Report
NORTHWEST ORIENT AIRLINES
Celebrating 50 Years of Air Service
TH E FOIJNDER of Nort hwest Air-
lines was Colonel L H Bri ttin (right)
who also served as general man-
ager In this 1930 photo, Colonel
Br1tt1n presents an award to
Charles 'Speed ' Hofman (left). a
famous racer and stunt pilot, who
served as operations manager for
the airline until his death 1n 1931
A pictorial review of
Northwest Orient's 50 years
Airlines was Croil Hunter, shown here at
a 1944 ceremony at which the Company
received the coveted Army-Navy 'E'
award for its World War II operation of the
B-24 bomber modification center .
Hunter served as president of Northwest
A1rl1nes from 1937 until 1952 and chair-
man of the board from 1952 until 1965.
THE FAMOUS STRATOCRUISER provides the background tor the celebration
of the 25th anniversary of air mail service. The ceremony was held at
Milwaukee's Mitchell Field in 1951 . THE KOREAN WAR in the 1950's
found Northwest Airlines playing a
vital role with its 'air lift' fl ights to
and from the Far East. Here a group
of 14 Navy nurses and nine medics
are starting their trip to Korea via
NWA and the Great Circle Route.
NWA'S CURRENT PRESIDENT Donald W. Nyrop
(left) is pictured with Willi am Allen , then president of
the Boeing Company, in a 1962 photo taken when
Northwest Airlines announced the purchase of five
Boeing 707-320 jet aircraft.
THE FIRST OF 22 McDonnell Douglas DC 10-40 long-range jets or-
dered by Northwest Airline s is in the background of this 1972 photo
taken at the firm 's Long Beach, Cal ifornia plant. NWA president
Donald W. Nyrop (right) is shown talking with Jackson R. McGowan ,
then president of McDonnell Douglas aircraft division .
THE FIRST AIR-RAI L SERVICE in the history of transportation was inaugurated by North-
west Airways, forerunner of Northwest Airl ines. This 1928 photo shows mail being trans-
ferred from a Rock Island Line train to a waiting NWA ai rplane.
3
From the President
49th Annual Report to the Shareholders
1976 marks the 5oth anniversary of
orthwest Orient Airlines. The
Company was initially called North-
west Airways and was founded in
August 1926 to fly the air mail bet-
ween Minneapolis / St. Paul and
Chicago.
It is very gratifying to report to you
that orthwest Orient, in its 50th
year, led all of the U.S. air carriers in
net earnings , posting a profit of
$43 ,395,834 or $2.01 per share. This
is the fourth time in the last eight
years that Northwest Orient has
achieved the earnings leadership in
the industry. This leadership is espe-
cially significant when consideration
is given to the fact that Northwest
Orient is only seventh in size in terms
of gross revenues.
Total operating revenues were at
an all-time high of $800,562,989 in
1975. This is a 5.5 per cent gain over
1974. Both passenger and cargo re-
venues established new highs.
747Fs Boost Cargo Revenues
Three Boeing 747F all-cargo aircraft
were delivered to Northwest Orient
in July and August of 1975. They
were placed into operation on a rou-
ting linking ew Yark, Chicago, Seat-
tle and Anchorage to Tokyo, Taipei
and Hong Kong. Domestic service be-
tween the Twin Cities, Milwaukee,
Chicago and ew York was also pro-
vided.
The $12.1 million increase in 1975
cargo revenues a 16 per cent jump
over 1974, can largely be attributed to
the added revenues produced by
these new 747F freighters during the
last half of 1975. Eastbound loads
from the Orient of over 200 ,000
pounds - or 100 tons - were com-
monplace in the B-747F. The $90
million investment in these 747F air-
craft is already proving to be profita-
ble.
4
Fleet Modernization Continues
Delivery of eight new advanced
model Boeing 727-200s was made to
Northwest Orient during the last half
of 1975. Three older Boeing 707s
were sold in 1975.
The continuing fleet moderniza-
tion program of Northwest Orient is
truly 'big business'. During the last
21 years, Northwest Orient has
purchased 216 aircraft and 139 air-
craft have been sold by the Company.
That is a total of 3 5 5 aircraft transac-
tions during this period- or an aver-
age of seventeen per year.
Northwest Orient's consistent pro-
fitability has been, of course, essen-
tial to the fleet modernization pro-
gram. Earnings performance over the
years has enabled Northwest Orient
to purchase all of the $1.4 billion air-
craft fleet it presently operates. The
Company does not have leased air-
planes in its fleet - the only major
U.S. airline in that position today.
Major Labor Agreements
New collective bargaining agree-
ments were signed with 11 labor or-
ganizations in 1975, including the
four largest groups - the Brother-
hood of Railway and Airline Clerks
(BRAC) , the Air Line Pilots Associa-
tion (ALPA), the International As-
sociation of Machinists (IAM) and
the Association of Flight Attendants
(AFA).
The new agreements with the
BRAC and the IAM were reached
without participation by the ational
Mediation Board- a noteworthy oc-
currence in the airline industry,
which operates under the Railway
Labor Act. The 33-month agreement
with the IAM was reached on
ovember 30, 1975, just 30 days after
the contract became amendable.
Affirmative Action Continued
Improved employment opportunities
were provided to minorities and
females both in entry level positions
and through upward mobility into
managerial positions as a major goal
in the continuing corporate Affirma-
tive Action Plan.
New Aircraft Ordered
In looking at Northwest Orient Air-
lines' fleet requirements for the years
immediately ahead, it became clear
that we should move forward in two
areas. We have done so very recently.
First, an order has been placed
with the Boeing Company for a 747
all-cargo aircraft. Delivery will be in
June of 1977. This will give us a fleet
of four 747Fs, with the three pres-
ently operated in scheduled service,
and will add to our capacity to handle
the rapidly growing cargo market.
Second, the Company has ordered
four more Advanced Model
7 2 7-2 00s. The first aircraft will be de-
livered in June of 1977 and the re-
maining three aircraft during the
period October through December of
19 77. These aircraft will replace
older 727-lO0s and 707s as they are
sold.
The additional capital investment
is consistent with Northwest Orient's
belief that fleet superiority represents
the single biggest marketing advan-
tage an airline can have in a highly
competitive industry.
Employees Benefit from Success
orthwest Orient's employees con-
tinued to be major beneficiaries of the
Company's financial success.
While corporate net earnings for
1975 were $21.4 million less than in
1974, Northwest Orient paid $16.4
million more in wages and benefits to
its employees in 1975. The total of
$222 ,683 755 paid in employee
wages and benefits in 1975 was the
single largest item of expense and
represented 30 per cent of total
operating expenses.
et earnings b wa of contrast
represented 5.4 per cent of total
operating re enues in 1975. In 1965
net earnings were 17 .4 per cent of
revenues - or more than three times
greater than in 19 7 5.
Officer, Director Changes
M. Joseph Lapensky, vice president-
finance and treasurer of orthwest
Orient as elected to the Board of
Directors on Ma 19 1975. r.
Lapensky, age 57 has had 30 years of
experience with the Company and
has previously served as vice presi-
dent of economic planning and as
comptroller.
Mr. Lapensky succeeds Donald H.
Hardest , retired vice president-
finance of orth, est Orient "ho has
had a trul distinguished career
spanning 3 2 years with the Com-
pan .
John F. Horn has been elected as-
sistant vice president-properties for
orth est Orient, replacing Roland
W. Chambers VI ho retired after 33
years ith orth, est.
and as most recentl
tariffs for the Compan .
Outlook for 1976 Good
r. Horn is 34
director of
The U.S. econom is demonstrating
considerably more vitalit in recent
months than it did during most of
1975. Airline passenger traffic dur-
ing the early weeks of 1976 has been
running ahead of the comparable
Highlights of 1975
Total Operating Revenues ....... . . .. .............. . ........ .
Operating Income .. . . .. . .. . ........ . .......... . .......... . . .
Net Earnings for the Year ......... . ......... . ............... .
Per Common Share . . .. . .. . . . . . ........ . ....... . .......... .
Per Dollar of Revenues .. . .. . ... . .......... . .............. .
Stockholders' Equity ......... . ............... . .. ........... .
Per Common Share .... . .. . ............................... .
Dividends Paid .. . ............. . ........................... .
Operating Expenses:
Per Available Ton-Mile ................................... .
Per Revenue Ton-Mile .................................... .
Revenue Traffic:
Passengers Carried ................... ..... ............... .
Passenger-Miles Flown ................................... .
Ton-Miles, Mail, Freight and Express ...................... .
Common Shares at Year End ................................ .
Employees:
umber at Year End ... .. ........... .. .. , . . . . .... ......... .
. Total Wages and Benefits Paid ............................ .
period in 1975 b an encouraging
margin. That trend is e pected to
continue and orthv, est is forecast-
ing passenger-mile increases of 8 to
10 per cent for 1976. Cargo traffic
should shoVI an even larger increase
- up to 15 to 20 per cent.
eVI Federal energ legislation
ill pro ide some much-needed sta-
bility in the price of jet fuel in 1976.
As this occurs, orthv est Orient
should improve its 19 76 earnings
performance.
Sincerel
c:4~71.~
(,
Donald W. rop
March 15 1976
1975 1974
$800,562,989 $758,990,979
49,699 649 77,785,297
43 395,834 64,747,629
2.01 3.00
5.4,t 8.5q'.:
623 676,634 589 990,898
28.87 27.31
9,710 098 9,721,943
20.6,t 19.9
50.2 48.2(/;
8,865 263 8,948,373
9,471,282,000 9,173 ,875,000
481 ,253 000 413 ,415 000
21 604 136 21,604,136
11,268 11 ,515
$222 683 ,755 $206,253,452
5
New 747F freighters help set
cargo revenue records in 1975
Sales and
Marketing
Highlights
The growing importance of air
freight to the U.S. airline industry -
and to Northwest Orient - was un-
derscored in 1975.
Aided by the introduction of three
Boeing 7 4 7F all cargo aircraft which
were delivered in July and August of
1975, Northwest Orient recorded
cargo revenues of $88.3 million. This
figure was a $12 .1 million increase
over 1974 cargo revenues of $76.2
million and represented a 16 per cent
gain over prior year cargo revenues.
Eleven per cent of Northwest Orient's
operating revenues were derived
from cargo in 1975.
A $90 million investment made in
the three new Boeing 747F aircraft
was directly responsible for a new
single month cargo revenue record of
$10.3 million set in November, 1975.
Loads from the Orient to the U.S. on
the huge air freighters in the last
quarter of 1975 were consistently in
the order of 100 tons. The 747F air-
craft also filled a need in the lower 48
-Alaska market where pipeline activ-
ity had dramatically increased traffic.
Introduction of the three 747F all
cargo c:1.ircraft into Northwest Orient's
scheduled operations was accom-
panied by a sophisticated new mar-
keting plan designed to create new
air freight traffic. Through use of
computer programming, a 'total cost'
comparison of surface shipping ver-
sus air shipping is performed for po-
tential customers. In many cases, the
demonstrated savings that can be
achieved through use of air shipment
has provided new business for
Northwest Orient.
Passenger Revenues Up 5%
Passenger revenues of Northwest
Orient in 1975 increased five per cent
over 1974, while revenue passenger-
miles flown in scheduled operations
rose 3.2 per cent. This performance
was better than the trunk airline in-
dustry average in a year when pas-
senger traffic was virtually in a no-
growth condition.
Tour sales to both groups and indi-
I -
Northvvests new 747Fs
More large-cargo capacity
7
viduals by Northwest Orient showed
excellent growth in 1975 with a 20
per cent increase in activity. New
'fly/drive' tours featuring rental car
and family-type motor inn combined
with air fare proved to be among the
most popular domestic tour pack-
ages in 1975. Air/sea cruises out of
Florida to the Caribbean were ex-
tremely well received by the public
and Northwest Orient retained its
dominant position as the air carrier
involved with traffic from Chicago
and the upper midwest.
Convention Central, the new sales
division formed in 1975 that pro-
vides a nation-wide, toll free reserva-
tion and assistance center for firms
and individuals arranging conven-
tions, produced over $9 million in
revenue- a 56 per cent increase over
1974.
than any other U.S. airline!
@NORTHWEST ORIENT CARGO
Supercargoblllty 75
7
Sales and
Marketi ng
Highlights
orthwest Orient's advertising em-
phasis during much of 1975 was on
savings available to passengers
through use of new Bicentennial ex-
cursion fares. This advertising con-
centrated on newspapers and incor-
porated flight schedules, but radio
and television were used as sup-
plementary media in major on-line
cities.
The superiority of orthwest
Orient's wide-cabin fleet - 15 Boe-
ing 7 4 7 s and 2 2 McDonnell Douglas
DC 10-40s - was also given major
emphasis during the year. By the end
of the year, 7 5 per cent of all available
Advertising stresses savings
and wide cabin jet superiority
seat-miles flown by orthwest Orient
were provided in wide-cabin equip-
ment. The public's stated preference
for the 'jumbo jet' made this advertis-
ing approach both obvious and effec-
tive.
Cargo, Orient Also Stressed
The introduction of the three new
Boeing 7 4 7F all cargo aircraft was
given extensive advertising support
in 1975. A larger share of the adver-
tising budget than ever before was
devoted to this area and a special
campaign was directed to senior
NorttPNestgives
Yo.tJ the Orient as no
other anne can.
1:_,,...,._,.........,.,., ,, ...........
i:~p::_~ . ~---~~i
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~NORTHWEST ORIENT
~l'OlllS
;;7tJ.:~. ::
;:,~:-r:~
~~~
~ ~~-~.:~ .. :4~,,
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?::':;.:.,~
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-
management using carefully selected
publications. The primary objective
was to convert surface shipments
being made by major companies to
air shipments on Northwest Orient.
Another major advertising effort
was devoted to the trans-Pacific serv-
ices of Northwest Orient. Within the
United States, national magazines
and business publications were used
to communicate the variety of routes,
services and tours offered. Within the
Orient, similar advertising in Hong
Kong, the Philippines, Taiwan ,
Korea and Japan promoted eastbound
business.
The#1Wayto
$ave a Bundle
to the ftlidwest.
hicago:
save
$50
round-trip
~ ... all wide-cabin jets to Mpls./ St. Paul: To Chicago ... and hatf the world.
I
r:=-_ l-
( 25% savings, too!)
1~ ... ~J = =--
8
. - I .... ... ~-.::-
:=.
1 ~-- :..
h-- ~
Dfnc:l lo .._ Yorti In 7U COllllort. The luxuriously roomy cabin of
lhe Noohwest 7 7 ma.lies a big dillereoce 1n comlm when )'O(J'ra
flying transpacific. Only Northwesl gives yoo a spi,cious 747 Slratghl
ttvovgh lo New York - eYefY day. With.no change o f ~ and fUSI
one stop in Seattle. And dehetous Regal Imperial serv,ce en route.
Through Ille UJLA. and Canada. Northwest ser,,es 41 c,ues in the
United Stales and Canada - mcKe lhan any o her airtma from lhe
Orlflflt In Sea1lle, tor example, we11 grve )'O(J nonstops lo Chtc.lgo,
Minnea~is/SI. Paul and Washington: D.C. With Northwest, you get
fhe extra conven
cnce ol Oymg ll>e same a1rl1ne all the way.
Sat Nlec:tion I n ~- You can reserve your Northwest 747 seat
by phone when you book your 01ghl So you you'll gal exactty
the seat you want Your auporl chec tn will be laslef oo Thal's one
more way we give you the bes1 ol the East a.nd the bes1 of the Wes!
Wegiveyou
the best of both worlds.
3:45 pm Daity Seattle
New York
6:45pm Tue. Anchorage
Thu.
Sat Ch cago
York
7:20pm Daily Honolulu
ex.cep1 Los Angeles
Tue. Minneapolis/
St Paul
9:30pm Daily Honolulu
San Francisco
Los Angeles
Pl~ 5e"l1Ce ID Bosl<Jn M.xl"'SOO. t.l,
"" lo!oNana and Oatato
9:00am Seool 7<7
9:00am Taipei 1 7
10:30am Seou l 77ll07
6: Spm Manila 7 7
o, r ~ De:ro,~ F~ L.ao<lort:.a:e
~ . l.l ~slSl."~. P- ilade'ohla,
P ttst,un;.-. Spob,,e..
h-rp,.1$1_ '1l W nv;:,r. ::>.C..
wrn.,.,.;Gainald.ai
Se
--r~.
E__. rear-)
Ala""1.. ~ 0e<roo.
Tv-,pa!S ~
~~~-C-4im, =..:i~
~~V-A~t.:'tt
Fo, ~ see a tra\le ~.t o, cal
~ U l-7"7 K,.alo 22'2-11'1 , &I 296,
O<lll 098-r.17 115
~
~ t.::~O)iit .W.-"' ~i;:{Q~
9
10
Financial review and management analysis for 1975
SOURCE AND DISTRIBUTION OF REVENUES
Percent of Total (Dollars in Millions)
Source:
Passenger - Coach
I 73.2% $586.1
Passenger - 1st Class
I 9.2% $ 73.8
- - - - - - - - - Freight and Express
- - - - - - - - / 11 .1% $ 88.3
/
Charter and Other
3.6% $ 29.0
--Mail
2.9% $ 23.3
Applied to
Distribution:
/
Employees Wages and Benefits
27.8% $222.7
Fuel and Oil
I 23.8% $190.5
Materials and Services
I 21.2% $169.8
Depreciation and Amortization
12.3% $ 98.9
- - Earnings and Income Taxes
5.9% $ 47.1
Revenues
Northwest Airlines' total operating revenue in 1975
reached a record $800,562,989. This compares with the
previous highs of $758,990,979 in 1974 and
$584,348,065 in 1973.
Records were set in all revenue categories and were
derived from increased traffic and from increased rates
and fares granted by the Civil Aeronautics Board. The
system passenger-mile yield increased to 6.94 in 1975
compared with 6.81ic in 1974 and 5.92 in 1973. The
revenue ton-mile yields for mail and freight in 1975 were
24.52 and 22.86, respectively, compared with 23.87
and 23.99 in 1974 and 20.85 and 21.95 in 1973.
Cargo revenue in 1975 was $88,307,610 and compares
with $76,157,097 in 1974 and $55,280,382 in 1973. This
growth reflects the emphasis the Company is placing on
broadened and improved air freight services. Revenue
in 19 7 5 from commercial charter and other income
amounted to $12,561,055 and from military charters
$16,457,917. These compare with $12,811,474 and
$14,510,212 in 1974 and $12,599,537 and $15,917,449
in 1973, respectively. The Military Airlift Contract ex-
pires on September 30, 1976 and the Company will seek
a renewal contract for the Government's 1977 fiscal
year.
Fares and Rates
The Civil Aeronautics Board approved fare and rate
increases in 1975 which were required as a result of
inflationary pressures. However, the gain in yields to
the carrier that should have resulted was largely negated
by the introduction of a far wider range of domestic
discount fares introduced by other airlines. To remain
competitive, Northwest Airlines matched these dis-
count fares. It appears that further increases will be
required and the CAB has now approved passenger fare
increases totaling three per cent which Northwest Air-
lines will place in effect on April 1, 1976.
Expenses
Operating expense in 1975 increased to $750,863,340.
This compares with $681 ,205 ,682 in 1974 and
$533,042,805 in 1973.
The Company is continuing to experience inflation-
ary trends in most cost areas and is continuing strin-
gent cost control procedures to minimize the effect.
Operating expense per available ton-mile increased to
20.6q; in 1975 compared with 19.9 in 1974 and 15.8 in
1973. This cost level is one of the lowest in the airline
industry.
Depreciation and amortization expense amounted to
$98,879,815 in 1975. This compares with $96,212,517
in 1974 and $87,641,813 in 1973. The increase in 1975
reflects the addition of new aircraft and the disposal of
older less productive aircraft. Expense for flying opera-
tions in 1975 increased to $281 814,492 from
$243,517 374 in 1974 and $155,066,543 in 1973. The
increase reflects both the higher cost of labor and the
higher prices paid for fuel. The chart shown below illus-
trates the upward trend in fuel costs over the years and
shows the growing portion of the revenue dollar taken
by fuel. The chart also shows that higher fuel costs have
been offset partially by increased productivity - with
more revenue ton-miles produced per gallon of fuel.
Earnings and Dividends
Earnings in 1975 were $43,395,834 or $2.01 per average
share of common stock outstanding. This compares
with $64 747,629 or $3.00 per share in 1974. These
earnings represent the highest in the U.S. airline indus-
try for 1975.
Included in earnings are gains from disposals of prop-
erty, before related income taxes, of $13 616,020 in
1975. This is down from $39,161,170 in 1974 and
$18,683,982 in 1973. The disposal gains were from the
sale of older aircraft and spare parts. Additional sales of
older aircraft will be made in 1976.
The Company continued its dividend payment policy
in 1975 with quarterly payments at an annual rate of 45
per common share. This is the 21st consecutive year in
which the Company has paid dividends. The principal
market on which orthwest Airlines common stock is
traded is the ew York Stock Exchange. The following
table shows the sales price ranges for the years 1975 and
1974, along with the dividends paid per share for the
same period.
Sales Price of Dividends
Common Shares Per Share
Quarter 1975 1974 1975/1974
1st
High 19 253/s
$.1125
Low 11% 16%
2nd
High 221/s 27
.1125
Low 16 22
3rd
High 223/s 223/s
.1125
Low 171/s 12
4th
High 23 18
.1125
Low 171/s 10%
Taxes on Earnings
Income taxes on earnings in 1975 were $3 ,693 200 and
compares with $33,631100 in 1974. The current year
amount consists of the normal tax provision, including
current and deferred taxes amounting to $22,397 500,
less investment tax credits of $18,704 300. The invest-
ment credit includes $17,329,400 generated in the cur-
rent year primarily from the purchase of 11 airplanes,
with related spare parts, and $1 ,374,900 from the cur-
rent year's amortization of the investment tax credits
from 1968 and prior.
Investment tax credits which could not be applied to
income tax returns but which were offset against defer-
red income taxes totaled $62,158,300 for 1975 and prior
years. For further tax information see ate D to the
Financial Statements.
SYSTEM FUEL ANALYSIS
1973
Price Per Gallon ....................... . 12.66
Gallons Used (000) .. . .... . ........... . . 616,930
Fuel Cost (000) ....................... . $78,134
Revenue Ton-Miles (000) ........ . . . .. . . . 1,254,074
Revenue Ton-Miles Per Gallon ... . ..... . . 2.03
Total Revenues (000) ........ .. ... . ... . . $584,348
Fuel Cost % of Revenues .............. . 13.37%
Year Ended December
1974
27.20
587,302
$159,753
1,411 ,862
2.40
$758,991
21 .05%
1975
31 .67
593,821
$188,049
1,494,669
2.52
$800,563
23.49%
% Change
1975/1974
+16.4%
+ 1.1%
+17.7%
+ 5.9%
+ 5.0%
+ 5.5%
+ 11 .6%
11
Financial review for 1975
( continued)
STOCKHOLDERS' EQUITY
VS. LONG-TERM DEBT
Millions of Dollars
700
600
500
400
300
200
100
0
1971
Cash Flow
1972
- -
EQUITY DEBT
1973 1974 1975
Funds generated in the current year from all sources
amounted to $192,775,616.
The Company's policy of owning its own equipment,
rather than leasing, has provided funds through depre-
ciation which with amortization, amounted to
$98 879,815 in 1975 and $96 212,517 in 1974. Disposals
of previously purchased equipment provided addi-
tional funds of $21 ,739 116 in 1975 and $69,043 853 in
1974. Additional funds of $32,100 000 were from pres-
ent long-term debt agreements and were applied to air-
craft purchase
12
Application of funds in 1975 totaled $176,297,301.
Flight equipment and other property additions ac-
counted for $165 ,096 ,830 , cash dividends for
$9,710,098, and other applications, $1 ,490,373.
Traffic and Services
The Company's operations in scheduled services in
1975 showed gains in both traffic and capacity over
1974.
Revenue passenger-miles in scheduled s rvice in-
creased 3.2% and available passenger seat-miles in-
creased 4.5%. The passenger load factor was 45.29% in
1975 compared with 45.83% in 1974. The slight decline
in the passenger load factor reflects the increase in avail-
able seat-miles from addition of larger, more productive
aircraft received in 1974 and 1975, even though revenue
plane-miles flown in 1975 were reduced 1.1% from
1974.
Revenue ton-miles were up 7.3% in 1975. This gain
includes an increase of 3.2% in passenger revenue
ton-miles and 16.4% increase in cargo and mail ton-
miles. The gain in cargo ton-miles reflects the accept-
ance by shippers of new 7 4 7F freighter service offered in
the last half of 1975. Available ton-miles in scheduled
service increased 7.0% over the prior year, reflecting
increased productivity of new aircraft added to the fleet.
Financial Condition
The Company continued to improve its financial posi-
tion in 1975, enhancing its ranking as one of the
strongest carriers in the airline industry.
Stockholder equity at December 31 , 19 7 5 was
$623 ,676,634 compared with $589,990,898 at the end of
1974. Book value per common share increased to $28.87
in 1975 from $27.31 a year ago. Outstanding debt at year
end was $271,900,000 compared with $229,000,000 in
1974. Outstanding debt is 43.6% of stockholder equity,
up from 38.8% in 1974. This favorable debt to equity
ratio continues to be the lowest of the U. S. trunkline
carriers.
Previous financial arrangements and internal cash
flow provided funds for all financial needs in 1975,
including purchase of three Boeing 747F freighters and
eight B-727-200's and related spare parts. Details of the
Company's long-term debt arrangements are described
in ote B to the Financial Statements.
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, net of capitalized
interest of $1,657,011 (1974 - $2,429,994) - Note A
Disposals of property ................ . ......... . ... . . . . .
Other ............. . ................ . . . ............. . . . .
Earnings Before Taxes .... . .... . . . .. . . . .......... .... .... .
Taxes on Earnings, including deferred taxes
and investment credit - Note D .... . . . ... . . . . . ... . . .. .. .
Net Earnings for the Year ..... . . . . . . . .. . .... . . .... . ... . . . .
Average shares of Common Stock outstanding
during the year . .... .. ... . . . . . . ....... . . . . . ...... . . . . . . .
Earnings per share of Common Stock . . . . ................ . . .
See notes to financial statements.
Year Ended December 31
1975
$659,849,499
88,307,610
23 ,279,860
29,018,972
5,340,153)
5,447,201
800,562,989
281 ,814,492
77,880,613
69,248,885
118,521,564
83,789,048
20,728,923
98,879,815
750,863 ,340
49,699,649
16,119,659)
13,616,020
106,976)
2,610 ,615)
47,089,034
3,693 ,200
$ 43 ,395,834
21 ,604,136
$2 .01
1974
$628,488,358
76,157,097
22 ,911 ,103
27,321,686
1,529,882)
5,642,617
758,990,979
243,517,374
71 ,355,832
69,146,474
110,776,802
70,255,493
19,941 ,190
96,212 ,517
681 ,205,682
77,785,297
19,553,814)
39,161,1 70
986,076
20,593 ,432
98,378,729
33,631 ,100
$ 64,74 7,629
21,604,136
$3. 00
13
14
Statement of Financial Position
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
ASSETS
Current Assets
Cash and short-term investments ........................ .
Accounts receivable, less allowance of $1 ,100,000
(1974 - $950,000) .......... . ...... . .. . .............. .
Recoverable income tax ................................ .
Flight equipment spare parts at average cost,
less allowances for depreciation of $11,224,428
(1974 - $9,262,733) . . .... . .. . ....................... .
Maintenance and operating supplies at average cost ...... .
Prepaid expenses ...................................... .
Total Current Assets
Other Assets
Property and Equipment
Flight equipment at cost ............................ . .. .
Less allowances for depreciation ........................ .
Advance payments on new flight equipment - Note E ....
Other property and equipment at cost ................... .
Less allowances for depreciation .......... . . . ...... . .... .
Deferred Charges
Training and development costs . .. .. .. ..... ... ... .. . . . . .
Rentals .... . . . .............. . . . .. . . .. .......... . .... . . .
December 31
1975 1974
$ 49,162,168 $ 40,070,177
72,492,128 59,363,639
6,040,800
24,040,408 21 ,147,524
6,731 ,613 6,038,606
2,626,259 2,190,900
161,093,376 128,810,846
10,302,405 8,783,172
1,420,670,459 1,282,556,385
443 ,608,223 374,621,819
977,062,236 907,934,566
6,641 ,028
977,062,236 914,575,594
118,929,206 112,129,133
58,926,846 51 ,359,908
60,002 ,360 60,769,225
1,037,064,596 975,344,819
1,259,587 2,759,311
5,426,160 5,455,020
6,685 ,747 8,214,331
$1 ,215,146,1 24 $1 ,121,153,168
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses .......... . ...... .
Employee compensation ......... . ........ ......... .. .. .
Unredeemed ticket liability .............. .. ............. .
Income taxes . ......................................... .
Current maturities of long-term debt ...... . . . ..... .. . . .. .
Total Current Liabilities
Long-Term Debt - Note B
Deferred Credits and Other Liabilities
Income taxes - Note D .... . ........................... .
Other ......... . ... .... . ........... .. ......... . . . ...... .
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 E
Leases - Note F
Contingencies - Note G
See notes to financial statements.
December 31
$
1975
100,844 423
27 451 65 7
18,224,695
1454,110
25,900,000
173,874 885
246,000 000
165,026,200
6,568,405
171,594,605
27,005,170
124,140,834
472,530,630
623 ,676,634
$1 ,215,146,124
$
1974
93 ,483 ,456
27,195,640
13,410,376
8,881,198
15,100,000
158,070,670
213,900,000
157,294,500
1,897,100
159,191,600
27,005,170
124,140,834
438,844,894
589,990,898
$1 ,121,153,168
15
Statement of Changes in Financial Position
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Year Ended December 31
1975 1974
Source of Funds
Net earnings . ........ . ... .. ............... . ........... . $ 43 ,395,834 $ 64,747,629
Items not requiring current funds:
Depreciation and amortization:
Aircraft and related flight equipment ............ . ... . 88,304,178 86,341,066
Other . . . . . . . . .... . . ..... ... . .... . . . ....... . .... . .. . 10,575,637 9,871,451
Deferred income taxes ..... . .. .. .. . .. . ............... . 7,731 ,700 28,865,400
Deferred investment credit . . .. -
. ....... . .............. . 1,374,900) 2,184,800)
Total from Operations 148,632,449 187,640,746
Issuance of long-term debt - Note B .......... . ..... . ... . 32 ,100,000
Disposals of operating property - book value . .......... . 8,123,096 29,882,683
Other .. . .. ... . . . ... . ...... . .. . .... .. .... .. .. .. ........ . 3,920,071
Total of Sources 192,775,616 217,523,429
Application of Funds
Flight equipment and other property additions .... . .... . . . 165,096,830 136,518,651
Advance deposits on aircraft . . .. . .. .. ........... . ...... . 6,600,528
Other assets and deferred charges ................... .. . . . 1,490,373 5,078,687
Cash dividends . . . . ...... ... . ..... .. .......... . ........ . 9,710,098 9,721 ,943
Reduction of long-term debt .... . .......... . . . . . ........ . 70,100,000
Other ..... . ........................................... . 1,686,871
Total of Applications 176,297,301 229,706,680
Increase (Decrease) in Working Capital ... . ........... . ... . $ 16,478,315 ($ 12,183,251)
Changes in working capital consist of:
Increase (decrease) in current assets:
Cash and short-term investments .. . . .. . ............... . $ 9,091 ,991 $ 2,250,294
Receivables ... . ......... . .................. . ...... . . . 13,128,489 4,259,910
Recoverable income taxes .. .... .. . . . .... .. ........... . 6,040,800
Inventories .. . . . . ... . . . ....... . ......... .. ...... .. ... . 3,585,891 6,175,834
Prepaid expenses ... . ..... . ....... . . ... . . ..... . ...... . 435 ,359 954,830)
32 ,282,530 11,731 ,208
Increase (decrease) in current liabilities:
Accounts payable and accrued expenses . ..... . . ... .... . 7,360,967 72 ,481
Other accrued liabilities . . ... .. .... . ... .. ........ . . .. . . 7,171,071) 9,581 ,754
Unredeemed ticket liability ..... . . . . .. . ... ... . ...... . . . 4,814,319 2,160,224
Current maturities of long-term debt .. . ... . . .. . . .. .. . . . 10,800,000 12,100,000
15,804,215 23,914,459
Increase (decrease) in working capital .. . . . ... . . .... . . . . . . . $ 16,478,315 ($ 12,183,251)
See notes to financial statements.
16
Statement of Stockholders' Equity
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
Common Stock Capital Retained
Shares
Balance December 31, 1973 ..... . . . ... . 21,604,136
Net earnings for 197 4 ............... .
Cash dividends - $.45 a share .. . .. . .
Balance December 31, 1974 ... . ...... . . 21,604,136
Net earnings for 1975 ............... .
Cash dividends - $.45 a share ...... .
Balance December 31, 1975 ........... . 21 ,604,136
See notes to financial statements.
APPLICATION OF INVESTMENT TAX CREDIT
Reflected in
Period Available* Net Earningst
1962-1974 ... . .... $106,102,300 $104,205,200
1975 . . . . . . . . . . . . . 17,329,400 18,704,300
Total ....... .. . .. . $123,431,700 $122,909,500
To Net Earnings . . . 122,909,500 I
To Be Amortized .. $ 522,200
* Investment credits not applied on tax returns but
offset against deferred taxes through 1975, amount
to $62,158,300. See Note D 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.
Amount Surplus Earnings
$27,005,170 $124,140,834 $383,819,208
64,747,629
9,721 ,943)
27,005,170 124,140,834 438,844,894
43,395,834
( 9,710,098)
$27,005,170 $124,140,834 $472,530,630
NORTHWEST AIRLINES FLEET
December 31
Aircraft Type 1974 1975
B727 & B727C-100 .. . . 32 32
B727-200 . . .. ..... . . . 23 31
B707-320B & 320C . .. . 13 10
DCl0-40 . .. ........ . . 22 22
B747 . . .. . . . . .. . . .. . . 15 15
B747F ... . .. . .. . . .. . . 3
Total . . . . . ... .. ..... . 105 113
NOTE: No aircraft on order at Dec. 31, 1975
17
18
Notes to Financial Statements
NORTHWEST AIRLlNES, INC. AND SUBSIDIARIES
Years Ended December 31, 1975 and 1974
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 monetary assets and liabilities are translated at year-end rates of exchange.
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 10% residual values for 747 and
DC-10 aircraft and ten years and 15% 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 pro-
vided 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.
Interest on the Company's long-term debt relating to deposits advanced to manufacturers prior to
the delivery of new aircraft is capitalized as cost of the assets and is amortized over the useful life
of the aircraft. If the Company did not follow a policy of capitalizing interest, net earnings would
have been increased by $322,000 ($.01 a share) in 1975 and decreased $11,500 ($.00 a share) in
1974.
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 thirty years.
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
Notes to Financial Statements
Note A - Accounting Policies (Continued)
using for tax purposes accelerated depreciation methods and deducting currently the interest
capitalized as cost of aircraft.
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 investment credit
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.
Earned Revenue
Passenger and cargo sales are recognized as earned revenue when the transportation is provided.
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 are excluded from the computa-
tion since their effect is not significant.
Note B - Long-Term Debt
Revolving Credit Agreement with banks provides for revolving
credit of $200 million reducing $15.9 million quarterly be-
ginning July 1, 1976 and terminates April 1, 1979. Interest on
funds borrowed is at% above prime commercial loan rate
prior to July 1, 1976 and% above thereafter. As of December
31, 1975 the agreement makes available an additional $61
million for working capital and other purposes .... . ..... .
Term Credit with banks is payable $12.5 million quarterly be-
ginning April 1, 1981 and terminates January 1, 1983. Interest
is paid based on a formula related to prime commercial loan
rates; however, total interest paid shall not exceed 7%% per
annum on borrowings over the term of the loan. Current pay-
ments in excess of that rate are classified as other assets ...
Note purchase agreements with twelve insurance companies are
payable $3 ,000,000 annually and terminate on October 1,
1978. Interest is at 6% per annum. Certain optional prepay-
ments 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 2% ..
Credit agreements with aircraft and aircraft engine manufactur-
ers financing purchases from those manufacturers through
the issuance of five-year notes ..... . ................. . . . .
Less amounts due within one year included in current liabilities
December 31
1975 1974
$139,000,000
100,000,000
10,000,000
22,900,000
271 ,900,000
25,900,000
$246,000,000
$ 81 ,000,000
100,000,000
13,000,000
35,000,000
229,000,000
15,100,000
$213,900,000
The Company had complied with the covenants of the debt agreements at the end of both years.
At December 31, 1975 approximately $11,400,000 ofretained earnings were not restricted under
terms of the long-term debt agreements.
Long-term debt requires payments of $37,400,000-1977, $67,600,000-1978, $41,000,000-
1979, none in 1980 and $100,000,000 thereafter through 1983.
19
20
Notes to Financial Statements
Note C - Stockholders' Equity
Shares
Cumulative Preferred Stock, $25 par value: 1975
Authorized ....... . . . ........ . ... .. ... . . .. .. . ........... 1,000,000
Issued December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . None
Common Stock options for officers and employees
at prices which were not less than 100% of
market at date of grant are as follows:
Shares
Outstanding January 1, 1974 ............. . ............ . 49,900
Lapsed . . ....... .... . . .. .. .................. . ...... . (13,200)
Outstanding December 31, 1974 . . ......... . .. . . . . . ... . 36,700
Granted ..... .. .. . . . ....... . .... . ... . . . ........... . . 45,300
Lapsed ... . .... . . . . . ................ . ............ . . . ( 1,000)
Outstanding December 31 , 1975 . . .... . ............... . 81,000
Options exercisable:
At December 31, 1974 ........ . .. . ........ . .......... . 18,350
At December 31, 1975 ... .. .. . ... . . . ................ . 35,700
1974
1,000,000
None
Price Per Share
$20.06/32.3 75
20.06/32.375
20.06
19.13
20.06
19.13/20.06
20.06
20.06
Shares available for future stock options and other plans were 329,136 and 373,436 at December
31, 1975 and 1974, respectively, of which 69,000 and 113,300, respectively, were available for
additional grants under the 1973 Stock Option Plan.
Note D -Taxes on Earnings
The provision for taxes on earnings consists of the following:
Year Ended December 31
1975 1974
Current:
Operating loss carryback for tax purposes .......... . ... . . ($12,224,500) $
Provision for the year ........ . . . .......... . ............ . 11,235,000
Reduction of refund for limitation of
investment credits applied in prior years .............. . 6,183,700
Investment credit flow-through .. . . . . ... .. ... . . .. . .. .. .. . 4,992,600)
6,040,800) 6,242,400
Deferred:
Provision . .. ... .. . .. . ... . .... . ... . ... .. .. . . . .......... . 34,622,000 36,215,400
Investment credit:
Flow-through . . . . . .. . .. ... . . ... ....... . . . ........... . 17,329,400) 6,641 ,900)
Arising from operating loss carryback ........ . .... . ... . 6,183,700)
11,108,900 29,573,500
Deferred investment credit being amortized
over eight years . .. ... ... . ....... .... . . ........ . . . ... . . . ( 1,374,900) ( 2,184,800)
$ 3,693 ,200 $33,631 ,100
Notes to Financial Statements
Note D - Taxes on Earnings (Continued)
Investment credits not applied on tax returns but offset against deferred income taxes at
December 31, 1975 will expire $8,919,800 - 1978, $4,042,500 - 1979, $20,177, 300 - 1980,
$11,685,300 - 1981, and $17,333,400 - 1982.
Exclusive of investment credit, the Company's effective tax rate is 47.6% and 48.2% for 1975 and
1974, respectively, as compared to the federal statutory rate of 48%.
The Company's federal income tax returns have been examined and settled through 1973.
Note E - Commitments
At December 31 , 1975 the Company had no commitments to purchase aircraft or engines.
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
1975 1974
Air terminal and main base facilities
( financing leases) ....... . ... . ... . .. . ... .... ....... . . . .. . $ 9,272,000
5,026,000
$14,298,000
$ 8,593,000
4,817,000
$13 ,410,000
Ticket offices and miscellaneous equipment ..... .. . . ...... .
Future minimum rental commitments at December 31 , 1975 for all non-cancellable leases
follows:
Air Terminal
and Main Base
Facilities
1976 . ................ . .......... ... .. $ 9,188,000
1977
1978
1979
1980
Five years 1981-85 .... . ... .. . . ..... . .. .
Five years 1986-90 ......... . . . .. . . .. . .
Five years 1991-95 . . ... .. ... . . . .. . ... . .
Remainder .. . . . . ... . .. . .. .. . . .. . . . . . . .
8,924,000
8,885,000
8,677,000
8,399,000
40,965,000
29,741 ,000
17,675 ,000
21 ,568,000
$154,022,000
Ticket
Offices and
Miscellaneous
Equipment
$1 ,441 ,000
1,330,000
1,171,000
844,000
566,000
1,280,000
273,000
$6,905,000
Total
$ 10,629,000
10,254,000
10,056,000
9,521 ,000
8,965,000
42 ,245,000
30,014,000
17,675 ,000
21 ,568,000
$160,927,000
21
22
Notes to Financial Statements
Note F - Leases (Continued)
The estimated present values of the net fixed minimum rental commitments for all non-
cancellable financing leases (terminal facilities and other buildings) were $79,674,000 at De-
cember 31, 1975 and $79,641 ,000 at December 31, 1974. The present values were computed after
reducing total rental commitments by estimated amounts applicable to the lessors' payments of
taxes, insurance, maintenance and other operating costs. The weighted average interest rate
used was 7.16% for 1975 and 6.54% for 1974. The range of interest rates was 2.8% to 10.5% for
1975 and 2.8% to 10.0% for 1974. The impact on net earnings if financing leases had been
capitalized was not material for either year.
Note G - Contingencies
The Company is a defendant in a class action brought by certain of its female cabin attendants
alleging violations of certain provisions of the Equal Pay Act of 1963 and the Civil Rights Act of
1964. The trial judge held that provisions of both statutes had been violated by the Company. The
Company has appealed that decision. Counsel for the Company have advised that neither the
timing of the final outcome nor the consequences of the lawsuit are presently determinable.
However, Company management does not believe any resulting liability will have a material
effect on the Company's financial position.
The Company is a defendant, along with other airlines, in a number of legal actions alleging
noise and air pollution resulting from aircraft operations around certain airports, excessive air
fares and violation of anti-trust laws. Company management does not believe that these actions
will result in a material liability to the Company.
Note H - Pension Plans
The total pension expense was $19,782,163 (1974 - $17,460,589). As of the most recent
valuation date the market value of the assets in all pension funds was approximately
$93,911 ,000, and the actuarially computed value of vested benefits exceeded applicable assets
by approximately $7,383,000 at cost and $33,032,000 at market. The value of vested benefits was
increased during the year as a result of increased benefits provided under certain new labor
contracts (no material effect on net earnings). The effect on the Company's future pension
expense of the Employee Retirement Income Security Act of 1974 has not been determined but,
in the opinion of Company management based upon a report from its consulting actuaries, the
effect is not expected to be material. Certain changes in actuarial assumptions were made during
1975 which had no material effect on pension expense.
Accountants' Report
To the Stockholders and Board of Directors
Northwest Air lines Inc.
Saint Paul Minnesota
We have examined the statement of financial position of Northwest Airlines, Inc. and subsidiaries as of December
31, 1975, and December 31, 1974, and the related statements of earnings, stockholders' equity and changes in
financial position for the years then ended. Our examinations were made in accordance with generall 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 financial statements referred to above present fairly the consolidated financial position of
Northwest Airlines, Inc. and subsidiaries at December 31. 1975, and December 31 , 1974 and the consolidated
results of their operations and changes in their financial position for the years then ended, in conformity with
generally accepted accounting principles applied on a consistent basis.
Saint Paul, Minnesota
February 16, 1976
Notice to Stockholders
Any person who either owns, as of December 31 of the year preceding issuance of this annual report or subse-
quently 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 245.1 5 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 Aeronautics Board, Washington, D. C. 20428.
23
10 Year Summary
NORTHWEST AIRLINES, INC. AND SUBSIDIARIES
(Dollars in thousands excepl per share figures) 1975 1974 1973 1972t 1971t 1970t 1969 1968 1967 1966
Operating Revenues
$
Passenger . . .... '
................ . .... . ............ 659,849 $ 628,488 $ 476,794 $ 277,891 $ 331,966 $ 260.335 $ 350,504 $ 301,277 $ 275,873 $ 216,239
Cargo ............................................. 88,308 76,157 55,280 34,694 39,641 30,053 51.006 43,902 38,118 29,515
Mail . . ... . ................. . .............. . ....... 23,280 22,911 18,415 13,309 19,443 18,958 29,386 28.605 26,898 22,557
Charter and other transportation .................... 29,019 27,322 28,517 20,009 31,588 20,800 35,090 41,060 41,799 39,205
Mutual aid agreement .... . ........... .. ............ (5,340) (1,530) (2,692) 43,629 (462) 46,325 (509) 2,491
on transport . . . . .................................. 5,447 5,643 8,034 2.969 3,343 2,569 2,461 1,446 1,291 1,312
Total Operating Revenues $ 800,563 $ 758,991
Operating Expenses
$ 584,348 $ 392,501 $ 425,519 $ 379,040 $ 467,938 $ 416,290 $ 383,979 $ 311,319
Depreciation and amortization ......... . ............ $ 98,880 $ 96,213 $ 87,642 $ 81.054 $ 77,245 $ 69,173 $ 60,833 $ 49,817 $ 41,252 $ 33.195
Other . .............. . ...... . ............. . ....... . 651,983 584,993 445,401 296,348 330,108 258,784 324,979 268,529 229,969 177,469
Total Operating Expenses $ 750,863 $ 681,206 $ 533,043 $ 377,402 $ 407,353 $ 327,957 $ 385,812 $ 318,346 $ 271,221 $ 210,664
Operating income ....................... . ............ $ 49,700 $ 77,785 $ 51,305 $ 15,099 $ 18,166 $ 51,083 $ 82.126 $ 97,944 $ 112,758 $ 100,655
Interest expense on long-term debt .. . . . ........... . ... (16,120) (19,554) (14,758) (8 ,356} (13,051) (6,296} (2,334} (3 ,894) (3,725) (3,268}
Other income and (deductions) - net ................. 13,509 40,148 19,133 10,510 6,685 (227) 1,181 674 1,334 2,025
Earnings before taxes ...... . ........ . .......... . ...... $ 47,089 $ 98,379 $ 55,680 $ 17,253 $ 11,800 $ 44,560 $ 80,973 $ 94,724 $ 110,367 $ 99,412
Income taxes . ....... . ........ . ................... . .. 3,693 33,631 3,830 ' (429) (9,561) 121 29,507 44,673 51,651 46.276
Net Earnings f) 1

$ 43,396 $ 64,748 $ 51,850 $ 17,682 $ 21,361 $ 44,439 $ 51,466 $ 50,051 $ 58,716 $ 53,136
Earnings per average share as reported each year 1
'.
11
. $ 2.01 $ 3.00 $ 2.40 $ .83 $ 1.01 $ 2.11 $ 2.55 $ 5.47 $ 6.42 $ 5.81
Cash dividends .. ............. . . . _
. .. ............ . .... 9,710 9,722 9,722 9,620 9,518 9.465 9.117 7,320 6,405 5,490
Dividends per share as paid each year .. . .... . ..... . ... .45 .45 .45 .45 .45 .45 .45 .80 .70 .60
Stockholders' equity ... ..... . .. . . . . . .. . ...... . . .. .... 623,677 589,991 534,965 492,837 477,054 465,210 426 ,797 306.717 263,986 212,727
umber of shares outstanding at end of year ........... 21,604,136 21,604,136 21,604,136 21.604,136 21,149,756 21,149,756 20,914,272 9,149,628 9,149.626 9,149,626
Book value per share at end of year 121 . .. . $ 28.87 $ 27.31 $ 24.76 $ 22.81 $ 22.56 $ 22.00 $ 20.41 $ 33.52 $ 28.85 $ 23.25
Recomputed per share figures after stock splits 1

31
. .
Earnings per average share 13
_1 . . . . . .
2.01 3.00 2.40 .83 1.01 2.11 2.55 2.74 3.21 2.90
Dividends per share 1
.31
.... . ...... . .. .45 .45 .45 .45 .45 .45 .45 .40 .35 .30
Book value per share at end of year r:'.1 .. 28.87 27.31 24.76 22.81 22.56 22.00 20.41 16.76 14.43 11.62
Assets and Long-Term Debt
Flight property at cost .. . .. ...... . . . . . ..... . .... . . .. . . $ 1,420,670 $ 1,282,556 $1,216,632 $ 1,008.041 $ 1.012,568 $ 929,181 $ 697.938 $ 582,646 $ 467,859 $ 401,476
Flight property at net book value .. ......... ...... . .... 977,062 907,935 861,231 682,020 709,433 668,129 492 ,241 424,522 346,029 311,803
Total assets . . .............. .. .................... . ... 1,215,146 1,121,153 1,085,632 920.418 944,302 923,126 7 42. 732 627.538 481,206 422,040
Long-term debt .... . ... ...... .... . ......... .. ........ 246,000 213,900 284,000 208,000 252,500 260,915 112.000 160.000 85,000 96,000
Unit Expenses
Per available ton-mile ...... . . .. . ....... .. .. . ... .. .. 20.6 19.9 15.8 16.9 14.5 18.0t 15.2, 14.6. 14.5 15.6t
Per revenue ton-mile .... ... .... . .... ........ ... . ... 50.2 48.2 42.5(1', 49.6t 42.1 43.5t 34.5. 30.8 30.3 30.1(/,
Per cent of operating revenues . . .... ..... . .. .. ...... 93.8% 89.8% 91.20/o 96.20/o 95.70/o 86.50/o 82.40/o 76. 5/o 70.60/o 67 . 70/o
Statistics - Scheduled Services
Revenue pl ane-miles (000) ......... . ...... . ......... 104,104 105,295 108,853 79,025 100,992 83,177 123,966 107,646 93,395 67,780
Available seat-miles (000) .......... . . . .. . .... . .... . 20,910,966 20,016,107 19,593,379 12,963.054 15,614,614 10,234,060 13,504,111 10,840.758 9,198,150 6,773,257
Revenue passenger-miles (000) .. . .. . ... . . . . . .. . .... . 9,471,282 9,173,875 8,007,850 4.565 ,618 5,553,043 4,506,256 6,208,725 5,458,128 4,901,520 3,699,851
Passenger load fac tor ..... . .. ... .. . . . .. . .... ... . .... 45.3% 45.8% 40.90/o 35.20/o 35.60/o 44.00/o 46.00/o 50.3/n 53.30/o 54 .60/o
Revenue passengers carried . ... .. .... . .... . ..... . . . . 8,865,263 8,948,373 7,987,299 5,150,636 6,089,273 4,682.812 7,517.780 7,173.805 6.489.295 4,963,275
Freight and express ton-miles (000) . . .. . .... . ... . .. . 386,309 317,437 251,865 150,973 161,345 110,215 198,494 169.416 141.175 108,914
Total reve nue ton-miles (000) . .. . .... .. ... .... . ..... 1,428,381 1,330,803 1,140,983 672,035 813,403 655,339 942,050 836.085 709,165 533,556
Statistics - Total Operations
Revenue plane-miles (000) ..... . . .... . ..... .. . . .... . 107,721 110,519 115,726 84,098 110,045 89,938 135,563 121.077 106.197 77,715
Available ton-miles (000) ..... . .. . ........ . ....... . . 3,642,650 3,431,038 3,370,694 2,236,069 2,806,407 1,819,439 2,535,137 2,186.234 1,864,128 1,348,983
t trikes adver ely affected 1970 and 1972 and L
he trike recovery period of 1971.
(II See Financial Review pages 10 through 12 for Ma nage ment 's Di scussion a nd An alysis of the Summary of Operation s.
121 Per sharr figures reflect the increase in oulsta nd ing sha res res ultin g from stock issues in 1969, 1970 and 1972.
ri1The stock was spliL "two-for-one" in 1966 a nd 1969. The recomputations in thi s section are shown to provide
comparabilitv on an adju ted basis a nd fo llow the fo rm recommend ed by the Accounting Princi ples Board . These
figures, of cour e. do not re fl ect the way the corporatio n was operated.
24 25
Operating
Highlights
The substantial growth in air freight
volume, sparked by the introduction
of the three new Boeing 747F all-
cargo aircraft, was aided by major
improvements in Northwest Orient's
physical plant and new equipment
for cargo handling.
Orders were placed in 1975 for ten
Cochran Western CL-7 5 5 main deck
loaders , for example. This is the
largest air cargo loader available
today with a 55,000 pound loading
capacity. It can service the main deck
of the Boeing 747F and McDonnell
Douglas DClOF as well as the lower
decks of the passenger version of all
three 'jumbo jets' (747, DC 10 and L
26
New cargo buildings constructed,
support facilities also increased
1011) and the main deck of the DC 8
and 707 air freighters.
New 10 foot containers measuring
88 inches in width, 96 inches in
height and 125 inches in length were
ordered by Northwest Orient. Both
aluminum and fiberglass versions
were ordered for service testing. The
model containers are of the type that
can be accommodated on narrow bed
trucks.
New cargo buildings were con-
structed and occupied by Northwest
Orient in Anchorage and Atlanta,
while major expansions and modifi-
cations occurred at New York's Ken-
nedy airport and at Chicago O'Hare.
A Burroughs programmable cal-
culator was acquired by Northwest
Orient and placed in service during
1975. This 'mini-computer' gener-
ates comparison data for customers to
facilitate decisions on air movement
at bulk rates versus containerized
rates. It also provides information
about density, stacking arrangement
and weight per pound to minimize
shipping costs by NWA customers.
Engineering programs
generate savings
The management concept of being
self-supporting whenever poss.ible in
the area of maintenance and en-
gineering continues to provide major
savings.
The investment of $4,000 in fab-
ricating a sonic nozzle air flow bench
at the Twin Cities main overhaul base
has produced a one year saving of
$651,840, for example. The new
technique provided the capability of
air flow checking of engines used on
the 747 and DC 10-40 aircraft as part
of the overhaul process and also per-
mitted salvage of air distribution tub-
ing with the resulting saving men-
tioned above.
Standardization of the JT8 engines
used on Boeing 727-200 aircraft was
undertaken by NWA's maintenance
department during 1975. This will
permit use of the standardized JT8 on
both the early model 727-200's and
on the recently delivered advanced
model 727-200's.
Another example of cost savings is
the introduction of electrostatic paint
application equipment late in 1975.
Based on the electrical principle that
unlike charges attract, the system re-
sults in a superior paint coating with
very substantial savings in paint
material costs. An important by-
product of the system's use is the im-
provement in environment due to an
almost total lack of overs pray of paint
and solvents into the working area.
Food service
is big business
In 1975, Northwest Orient's flight
kitchens in the Twin Cities, Seattle
and Anchorage produced a total of
3 911 ,766 in-flight meals. The Twin
Cities facility alone produced
1 ,486,824 meals during the year.
In addition to handling in-flight
catering for the majority of its own
flights , Northwest Orient's food serv-
ice division generates substantial re-
venue for the company from other re-
lated activities. The Anchorage flight
kitchen services other airlines and
brought in revenues of $2 ,941 ,871
from its outside catering activities in
1975.
Montana Enterprises , an WA
subsidiary in Billings, Montana, pro-
duced sales of $1 ,221 ,403 through
in-flight catering and operation of the
food service facilities in the airport
terminal building.
27
Route
Case
Investigations
Trans Atlantic Route Proceeding
In this case, orthwest Orient has re-
quested that it be designated as the
U.S. flag North Country specialist,
replacing Pan American at the cities
on the route proposed. The Bureau of
Operating Rights of the CAB has re-
commended that Northwest Orient
be granted authority betw een the
U.S. and the Scandinavian countries.
orthwest Orient's proposed sum-
mer service patterns are depicted
graphically here:
Chicago-New Orleans Nonstop Case
orthwest Orient seeks authoriza-
tion to provide nonstop service be-
tween Chicago and ew Orleans.
Direct service to 1
ew Orleans would
also be provided from the Twin Cities
and Mih aukee via Chicago.
28
Northwest Orient awaits final
decision by CAB on six applications
A total of six route case investiga-
tions involving Northwest Orient
presently are under active considera-
tion by the Civil Aeronautics Board.
Northwest Orient has not received
any new domestic or international
route authority since August, 1970
when it was given nonstop rights
from the Twin Cities and Milwaukee
to Boston. Permission to reinstate
service to Edmonton, Alberta ,

Seattle
Los Angeles
Detroit New York
Twin Cities Chicago
Washington, D.C. New York
Canada was given to Northwest
Orient in 1974 following the signing
of a new bilateral air rights agreement
by the U.S. and Canadian govern-
ments.
With the announced end of its un-
official route award 'moratorium', it
is expected that the Ci vH Aeronautics
Board will be making final decisions
on most - if not all - of the follow-
ing route case matters in 1976:
Copenh89'11
Copenhagen
Copenhagen
New York Glasgow Oslo/Bergen
Twin Cities New York
Boston
:c==========;:J
Detroit-Boston Nonstop Route Case
orthwest Orient seeks new author-
ity between Detroit and Boston, both
cities already served by the airline.
Copenhagen
Chicago-Montreal Case
A new route linking Chicago and
Montreal is sought. Direct service
from Honolulu, Seattle, Portland,
Twin Cities and Milwaukee (via
Chicago) would also be planned.
Peking
Nanking
Shangh
Harbin
- - - - ROUTES OPERATED
--------- CHINESE MAINLAND ROUTES SUSPENDED
Cities Served by Northwest Orient
DOMESTIC Chicago Helena Minneapolis/St. Paul
Anchorage Cleveland Hilo Missoula
Atlanta Detroit Honolulu New York
Billings Edmonton Jamesto~ Newark
Bismarck/Mandan Fargo/Moorhead Los Angeles/Long Beach/ Ontario Philadelphia
Boston Ft. Lauderdale/Hollywood Madison Pittsburgh
Bozeman Grand Forks
Butte Great Falls
Midwest-Atlanta Competitive
Service Case
orthwest Orient has requested CAB
authorization to provide service be-
tween Atlanta and Cleveland and be-
tween Atlanta and Detroit. All three
cities are. presently served by A.
Miami Portland
Milwaukee Rochester
Service to Saipan Case
Authority to serve Saipan from the
terminal points of Japan and Guam
has been requested. orthwest
Orient is one of three carriers seeking
this route. The case has recentl been
returned to the CAB by the President
for further proceedings.
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
2
Fleet
Highlights
Three Boeing 747F's
All cargo aircraft capable of carrying
a structural payload of 262,900 pounds.
Fifteen Boeing 747's
Range of 5,850 miles with 369 passengers.
Twenty-two McDonnell Douglas DC 10-40's
Range of 5,100 miles with 236 passengers.
Ten Boeing 707-320's
Range of 5,620 miles with 156 passengers.
+++++++++++++
++++++++++++
++++++++++++
++++++++++
+++++++++
+++++++
Sixty-three Boeing 727's
Thirt -t,, o 727-100 ' - Range of 2,380 miles with 93 passengers.
Thirt) -one 727-200' - Range of 1 760 miles with 128 passengers.
30
. '
Directors*
James H. Binger
Honeywell, Inc.,
Chairman of the Executive Committee,
Minneapolis, Minnesota
(Manufacturer of automation system s)
Hadley Case
President, Case, Pomeroy & Company, Inc.
New York, New York
(Investments)
Melvin R. Laird
Senior Counsellor, Reader's Digest, Inc.
Washington, D.C.
(Magazine publishing)
M. Joseph Lapensky
Vice President-Finance and Treasurer
Northwest Airlines, Inc.
St. Paul, Minnesota
. Officers*
Donald W. Nyrop
President
James A. Abbott
Vice President-Law
Clayton R. Brandt
Vice President-Purchasing and Stores
Robert W. Campbell
Vice President-Budgets
J. William Campion
Vice President-Regulatory Proceedings
Robert A. Ebert
Vice President-Personnel
Roy K. Erickson
Vice President-Public Relations
A.E. Floan
Secretary
Co-Registrars and Transfer Agents:
Northwestern ational Bank,
Minneapolis, Minnesota
orth western Trust Co.,
New York, ew York
Stock Listed:
Common Stock listed on ew York Stock
Exchange, Pacific Coast Stock Exchange
and Midwest Stock Exchange
General Offices:
Minneapolis-St. Paul International Airport
St. Paul, Minnesota 551 11
Malcolm S. Mackay
President, Foothills Company
Roscoe, Montana
(Oil and gas properties)
Donald G. McNeely
President, Space Center, Inc.
St. Paul, Minnesota
(Real estate)
Donald W. Nyrop
President, Northwest Airlines, Inc.
St. Paul, Minnesota
C. Frank Reavis
Partner, Reavis and McGrath
New York, ew York
(Attorneys)
Robert J. Glischinski
Vice President-Communications
and Computer Services
Benjamin G. Griggs, Jr.
Vice President-Assistant
to the President
John F. Horn
Assistant Vice President-Properties
William E. Huskins, Jr.
Vice President-Maintenance
and Engineering
Reginald C. Jenkins
Vice President-Orient Region
M. Joseph Lapensky
Vice President-Finance and Treasurer
Description of Business
Albert G. Redpath
Drexel, Burnham & Co.
ew York, New York
(In vestment bankers)
Lyman E. Wakefield, Jr.
Resource Trust Co.,
Chairman of the Board
Minneapolis, Minnesota
(In vestment advisors)
Ronald Mc Vickar
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
* A s of March 15, 1976
Northwest Airlines, Inc., incorporated in the State of Minnesota, is a scheduled air
carrier engaged in commercial transportation of passengers, mail and property, and
operates under certificates of public convenience and necessity issued by the Civil
Aeronautics Board. The present route system covers approximately 24,200 route
miles and serves directly cities in 17 states of the 48 contiguous states, as well as
Alaska , Hawaii, the District of Columbia, Canada and countries in Asia, including
Japan, Korea, Taiwan, Hong Kong and the Philippines. Authorizations to serve
Shanghai, Peking and other points in continental China remain in effect although
presently i nopera ti ve.
31