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1847 
AVIAT ION 
SAFETY AWA RD 
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outhvlest 
 SOUTHWEST AIRWAYS COMPANY 
DIRECTORS 
BERT ALLENBERG 
JOHN H. CONNELLY 
LELAND HAYWARD 
FLOYD HENDRICKSON 
OFFICERS AND 
LELAND HAYWARD . 
JOHN H. CONNELLY , 
JAMES G. RAY . 
AL. W. JOHNSON. 
WALTER _ 
ROCHE . 
CORNELIUS H. SULLAVAN 
TED R. MITCHELL . 
MICHAEL E. COLE . 
GILBERT MILLER 
DANIEL O'SHEA 
JAMES G. RAY 
WALTER ROCHE 
OFFICIALS 
. Chairman 
. President 
Vice President 
. Treasurer 
. Secretary 
Assistant Secretary 
General Operations Manager 
. General Traffic Manager 
GENERAL OFFICES 
San Francisco Airport 
South San Francisco, California 
 - ~outhwest ~---- 
TO THE STOCKHOLDERS AND EMPLOYEES 
OF SOUTHWEST AIRWAYS COMPANY 
On behalf of the Board of Directors we are pleased to submit a review of operations and 
the financial statements of the Company for the thirteen month period from December 1, 1946 to 
December 31, 1947. 
The first commercial flight by a Southwest Airways DC-3 carrying passengers, mail and prop- 
erty was made on December 2, 1946. The thirteen month period since that date has been one of 
development and progress in the solution of problems in administration, operating procedures and 
traffic generation. In spite of rising costs of materials and labor the Company now is in a sound 
finan~ial condition. During the period under review Southwest earned a profit of $5,480.69 after 
adjustment for accrual of retroactive airmail revenue. The Company's permanent retroactive and 
prospective airmail rate of payment was not established by the Civil Aeronautics Board until May 
U, 1948. Payment of the balance due pursuant to the retroactive rate decision was received dur- 
ing May 1948. 
Prior to establishment of the permanent mail rate the Company operated under a temporary 
rate of mail compensation so nominal as to place a severe financial handicap on the administration 
of the Company's affairs. Pending final determination of the Company's permanent mail rate it was 
necessary to resort to additional bank and equity financing. During the period under review 4565-3/10 
shares of Southwest Airways Company common capital stock were sold, yielding the Company 
$150,654.90. 
OPERATIONS AND SERVICE 
The operating record during this initial period of operation was outstanding. Except for sea- 
sonal variations, a steadily increasing amount of passengers, mail, express and freight has been trans- 
ported. Many new methods of operation have been successfully developed and pioneered by the 
Company, including the use of a drawbridge type door with built in steps for entering and leaving 
the aircraft, stops of two minutes or less at intermediate stations, use of commercial radio stations 
in approaches and takeoffs during fog bound conditions, first commercial airline use of FIDO (Fog 
Intensive, Dispersai of) for operation during zero ceiling weather. These and other innovations in 
the airline industry have brought national prominence to the Company. 
 Operating and traffic statistics during the period under review may be summarized as follows: 
Revenue Number of 
Miles Passengers Passenger Ton-Miles Carried 
Flown Carried Revenue Mail Express Freight 
1946 
December 37,096 897 $ 7,994.59 1,106 882 
1947 
January 57,341 1,692 $12,399.83 1,896 614 
February 68,136 2,165 15,674.44 1,723 902 
March 94,376 4,112 26,993.46 2,175 1,096 
April 122,873 6,270 45,476.03 2,333 1,501 83 
May 166,893 8,295 61,192.21 2,855 3,428 134 
June 160,596 8,257 61,167.15 2,744 3,165 397 
July 192,630 10,517 01,719.09 3,062 3,778 380 
August 195,407 11,393 90,415.12 3,029 4,272 907 
September 220,313 11,317 96,097.19 3,211 4,122 1,954 
October 189,263 7,755 64,543.78 2,785 3,147 2,184 
November 169,923 6,466 55,705.19 3,189 2,299 1,962 
December 176,412 5,925 57,783.46 5,038 2,971 2,430 
Southwest in 1947 carried 35% of the total number of passengers served by all eight of the 
nation's operating certificated local service airlines, 25% of all feeder mail ton-miles, 35% of all 
feeder express ton-miles and 16% of all feeder freight ton-miles. 
I 
I 
PASSENGER 35% MAIL 25% EXPRESS 35% FREIGHT 16% 
 _....,.., 
outhvlest 
SIMPLIFlED STATEMENT OF 
INCOME AND EXPENSES FOR 13 MONTH PERIOD 
DECEMBER 1 
, 1946 TO DECEMBER 31, 1947 
Income derived from following sources: 
Passengers and Mail 
Express 
Freight 
Charter 
Other Income 
Total Income 
Income Dispm;ed of as follows: 
Materials, Supplies, and Outside Services 
Gasoline and Oil 
Insurance 
Rentals for Fields, Buildings and Offices 
Travel and Incidental Expenses 
Advertising and Publicity 
Depreciation on Flight and Ground Equipment 
Taxes other than Income taxes 
Engine Overhaul Reserve Provision 
Interest on Bank Loans, etc. 
Total . 
This left available for Employees and. Stockholders 
This $947,921.17 was divided as follows: 
Paid to Employees as Wages and Salaries 
Stockholders' share, retained in surplus to increase company's 
financial strength 
$2,181,671.54 
11,488.87 
4,233.97 
11,006.37 
10,341.85 
$2,218,742.60 
$ 440,425.20 
135,794.23 
76,880.07 
52,406.56 
83,782.75 
61,798.92 
311,204.57 
57,069.89 
22,554.29 
28,904.95 
$1,270,821.43 
$ 947,921.17 
942,440.48 
$ 5,480.69 
 ROUTE APPLICATIONS 
During the period under review the Company participated in proceedings before the Civil 
Aeronautics Board involving its applications for helicopter service in the Los Angeles area and for 
conventional routes in the Arizona-New Mexico area, both of which have been denied. In the "Ad- 
ditional California-Nevada Service Case", hearing on which was held in October 1947, the Company 
seeks extensive additions to its existing Route 76. The Examiner's report and recommendation in 
this case has not yet been issued. In addition, the Company instituted a proceeding in 1947 to 
modify its existing certificate for Route 76 so as to permit operations short of terminal points. The 
authority sought in this proceeding now has been granted and is being utilized by the Company. 
EQUIPMENT 
The Company's flight equipment consists of nine Douglas DC-3 aircraft in passenger service, 
one Douglas C-47 aircraft used for training purposes and transportation of cargo, and one uncon- 
verted Douglas C-47 aircraft which is not presently in use. It is believed that the flight equipment 
now owned by the Company will be adequate for all necessary schedules on the existing route sys- 
tem and will suffice for moderate route expansion. Ground and other equipment consists of that 
property necessary to operate 23 airport stations, and at San Francisco Airport the Company's gen- 
eral offices and the maintenance and engine overhaul base. In December 1947 and January 1948 all 
Company facilities located in Phoenix, Arizona, and the general offices at Los Angeles, California, 
were moved to San Francisco Airport. The engine overhaul shop was improved and enlarged in 
order to accommodate outside engine overhaul work and it is believed that this department will be 
a profitable addition to existing operations. 
 ROUTE MAP 
SOUTHWEST AIRWAYS COMPANY 
EXISTING 
ROUTE 76 
---- PROPOSED 
SERVICE 
outhvlest 
 OUTLOOK FOR 19 4 8 
The management will continue its program of route expansion and development and at the 
same time improve service on existing routes. The permanent mail rate established by the Civil Aero- 
nautics Board for Southwest Airways will requi~e the management to practice the most stringent 
economy consistent with safety and efficiency. Under this rate the Company will be paid, effective 
from April 1, 1948, 55 cents per revenue mile fl.own when the monthly passenger load  factor is 
41.99% or less. For each 1% increase in passenger load factor this rate is reduced by 6/10 of a cent. 
The following table taken from the Civil Aeronautics Board rate order shows, for various load fac- 
tors between 40 per cent and 60 per cent, the anticipated rate of return on the recognized investment 
after provision for Federal income taxes: 
Passenger 
Load Factor 
40% 
45% 
SO% 
55% 
60% 
Return on Investment 
after Federal Income Taxes 
3. 7% 
6.7% 
9.2% 
11. 7% 
14.2% 
The Company's passenger, express and cargo revenues show a healthy and gradual increase, and 
with a continuation of the present level of prices the management should be able to meet its problems 
during the year with success. 
CONCLUSION 
The success of Southwest Airways has been the direct result of the loyalty, resourcefulness, skill 
and intelligence of the men and women in its employ. It is with great pride that the Board of Di- 
rectors looks back on the Company's first thirteen months of commercial airline operation and to the 
manner in which its employees and officers have met the challenge and maintained the traditions of 
Southwest Airways. 
Sincerely yours, 
Chairman 
President 
 outhvlest 
AN ARIZONA CORPORATION 
CURRENT ASSETS: 
Cash in banks and on hand 
Accounts receivable: 
A S S E T S 
U. S. Post Office Department, for carrying 
mail (Note A) 
Traffic and agents 
Miscellaneous, less reserve of $1,400 
Officers and employees 
Inventories of motor fuels, lubricants and materials and 
supplies, at approximate cost, not in excess of market 
INVESTMENT IN STOCK OF SERVICE 
ORGANIZATION, at cost . 
PROPERTY AND EQUIPMENT, at cost: 
Flight equipment - pledged, per contra 
Ground and shop equipment 
Leasehold improvements 
Other 
Less - Reserve for depreciation 
DEFERRED CHARGES: 
Prepaid insurance 
Prepaid taxes 
Extension and development expense 
Uniforms, deposits, etc. . 
BALANCE SHEET 
$ 826,158.77 
34,496.81 
18,954.42 
1,800.01 
$1,019,211.16 
62,735.6.7 
82,399.95 
62,463.16 
$1,226,809.94 
~ 334,300.26 
$ 5,773.43 
3,680.14 
10,977.24 
13,809.65 
$ 53,826.93 
881,410.01 
58,180.21 
$ 993,417.15 
1,001.00 
892,509.68 
34,240.46 
$1,921,168.29 
AS OF DECEMBER 31, 1947 
LIABILITIES 
CURRENT LIABILITIES: 
Notes payable to bank - secured by chattel mortgage 
on flight equipment, Note A 
Accounts payable 
Taxes collected or withheld from others . 
Accrued expenses 
Transportation sold, not yet used or refunded 
NOTES PAY ABLE TO BANK - secured by chattel mortgage 
on flight equipment ( due-$350,000 on November 30, 1949 
and $150,000 on November 30, 1950, Note A) 
RESERVE FOR AIRCRAFT ENGINE OVERHAUL . 
CAPITAL STOCK AND SURPLUS: 
Common Stock: 
Authorized, 10,000,000 shares of 50c par value per share 
Issued, 23,393 shares -Note C 
Capital surplus, per accompanying statement 
Earned surplus : 
Balance, November 30, 1946 
Profit for thirteen months ending 
December 31, 1947, per accom- 
panying statement . 
$ 575,088.21 
5,480.69 
Balance, December 31, 1947 (no cash divi- 
dends may be paid under the tetms of the 
bank loan) 
( See notes to the financial statements) 
$ 11,696.50 
178,971.00 
580,568.90 
$ 340,000.00 
177,275.86 
23,966.35 
73,211.12 
12,924.27 
$ 627,377.60 
500,000.00 
22,554.29 
771,236.40 
$1,921,168.29 
 _..._.., 
I 
outhvJest 
STATEMENT. OF PROFIT AND LOSS FOR THE 13 MONTH 
PERIOD ENDING DECEMBER 31, 1947 (NOTE Bl 
Operating revenue: 
Passenger 
Mail (Note A) 
Express . 
Freight . 
Charter and special revenue 
Other 
Total operating revenue 
Operating expenses: 
Flying operations 
Flight equipment maintenance - direct 
Depreciation - flight equipment 
Ground operations 
Ground and indirect maintenance 
Passenger service 
Traffic and sales . 
Advertising and publicity 
General and administrative expenses 
Depreciation - ground equipment 
Total operating expense 
Net operating profit 
Other income : 
Discounts earned 
Refund of prior year's taxes 
Other 
Other deductions : 
Interest . 
Loss on disposition of equipment, net . 
Expenses of merged companies, net 
Other 
Net profit for the thirteen-month period 
$ 677,161.54 
1,504,510.00 
11,488.87 
4,233.97 
11,006.37 
6,560.43 
$ 419,628.77 
273,017.37 
263;015.56 
$ 955,661.70 
413,116.68 
112,222.72 
61,306.16 
226,612.22 
85,405.43 
269,563.26 
48,189.01 
$ 1,069.15 
1,410.68 
1,301.59 
$ 28,904.95 
4,057.49 
6,359.76 
1,862.53 
$2,214,961.18 
2,172,077.18 
$ 42,884.00 
3,781.42 
$ 46,665.42 
41,184.73 
$ 5,480.69 
 STATEMENT OF CAPITAL .SURPLUS 
13 MONTHS EN.DEB DECEMBER 31, 1947 
Balance, November 30, 1946 $ 15,307.50 
Excess of fair market value over par value of 4701/z shares of capital stock issued 
in 1947 as compensation 15,291.25 
148,372.25 
Excess of cash received over par value of 4,565-3/10 shares sold during 1947 
Balance, December 31, 1947 
NOTE A 
On May 11, 1948 the Civil Aeronautics Board 
fixed the rates of pay which the Company is 
to receive for transportation of air mail after 
December 1, 1946. As a result, the Company 
received on May 27, 1948, $945,707.14 of addi- 
tional pay, of which $728,257.34 applied to the 
period prior to January 1, 1948 and has been 
included in the amount due from the United 
States Post Office Department in the accompany- 
ing balance sheet. The remainder of $217,449.80 
applied to the period from January 1, 1948 to 
March 31, 1948. Of the $945,707.14 received, 
$579,353.57 must be applied to the payment of 
outstanding notes payable under the terms of 
the bank loan agreement. 
NOTE B 
The Company commenced flight operations 
on December 2, 1946 under a Temporary Certifi- 
cate of Public Convenience which expires No- 
vember 21, 1949. The fiscal year of the Company 
was changed from November 30 to December . 
31 
and the accompanying statement of . profit and 
loss covers the thirteen months ending Decem- 
ber 31, 1947. 
 
$ 178,971.00 
NOTE C 
Of the 23,393 shares of stock issued, certifi- 
cates representing 81 shares have not been deliv- 
ered to the stockholders entitled thereto, but will 
be issued upon the surrender of certificates repre- 
senting 54 shares of stock of merged predecessor: 
PnJ CE,\ VATE R HOUSE & Co. 
To the Board cf Directors cf 
Southwest Airways Co=ipan:, 
'.'!e have examined the acccrrpanyiny, balance sheet of Southwest Airways 
Company as of Decertber 31 1~47 and tt.e stater.ients of capi tal surplus and profit 
and loss for the thirteen months ended on that date . Our examination was mad e 
in accordance with generally accepted auditing standards and included such tests 
of the accounting records and other supporting evidence, and such ot her proce- 
dt:res as we considered necessary in the circumstances. It was not practicable 
to confirm the arr.ounts receivable from the U.S . Post Office Department , as .to 
,;hich 'lfe have satisfied ourselves by other means . 
ln our opinion , the accompanying balance sheet and related sta te- 
ments of capital sur11lus and profit ahd loss, together with the notes attached 
thereto, present fairly the position of Southwest Airways Company as of 
December 31 1947 and the results of its operations for the thirteen months 
then ended, in conformity with gene!'ally accepted accounting principles . 
 STATION 
:sAIRPORT- 220 FEET 
:t_ ': . . _ C O M M E R C I A L R A D I O A 5 A N 
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Late in 1947 plans were being formulated by Southwest A. ' .. 
 d 1tways progressive opera- 
t10ns epartment; plans that were to arouse national and world "d . f 
h 
-w1 e mterest a ew months 
ence when a compa DC 3 
. ny - was to perform a scheduled landing at Monterey Calif . 
usin . 
1 
, ornia, 
g a commerc1a radio station transmitter as . 
. an mstrument approach aid. With Civil 
Aeronautics Administration 1 S 
approva ' outhwest successfully undertook t h 
 d  o prove t e 
m isputable value of another "first" th. b . . . 
- is o v10us nav1gat10nal aid. 
outhvJest 
 On the morning of December 14, 1947, a Southwest Airways' DC-3 descended 
through a blanket of peasou p fog hanging over the northern California coastal region. 
Moments later the big passenger laden aircraft successfully completed the world's first 
commercial airline scheduled "blind" landing.* At Eureka-Arcata, the nation's "foggiest" 
airport, FIDO (Fog Intensive, Dispersal of) now had been used initially by commercial 
aviation and another "first" was added to Southwest's growing line. 
,:,ceiling visibility manufactured by use of FIDO from a 
zero-zero conditions to CAA approved instrument minimums.