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9 
 LELAND HAYWARD 
JoHN H. CONNELLY 
T. R. MITCHELL 
HARRY S. WHITE 
ALWIN W. JOHNSON 
WALTER RocHE 
R. E. COSTELLO 
FLOYD HENDRICKSON 
Chairman of the Board of Directors 
President and General Manager 
Vice President 
Vice President 
Treasurer 
Secretary 
Assistant Secretary and General Traffic Manager 
Assistant Secretary 
fJJoard of flJtffdtJt:1 
BERT ALLENBERG 
JoHN H. CONNELLY 
LELAND HAYWARD 
FLOYD HENDRICKSON 
AL WIN W. JOHNSON 
DANIEL O'SHEA 
WALTER ROCHE 
HARRY 
s. w HITE 
PRICE, WATERHOUSE & Co. 
351 California Street, San Francisco, California 
(/ltyiJt1rv nml.o/ffU!Jjet# Mp 
WALTER ROCHE 
309 First National Bank Building, Phoenix, Arizona 
SOUTHWEST AIRWAYS COMPANY 
San Francisco Airport, South San Francisco, California 
  to the stockholders and employees of Southwest Airways Company 
This twelfth annual report of Southwest Airways Com- 
pany covers the sixth full year of airline operation. 
Gross operating revenues for the year 1952 were at an 
all-time high of $2,883,069, reflecting an increase of 
over 20 per cent from the previous year. There was no 
change in the Company's route pattern in 1952, 
although beginning September 1, 1952, Southwest 
became the exclusive carrier serving Santa Barbara, 
Monterey, Red Bluff and Eureka, California. 
FINANCIAL 
Operating Revenues: 1952 1951 
Passenger, express, 
freight, charter, etc ............ $1,851,335 $1,601,833 
Mail ....................................... 1,031,734 789,131 
Net earnings before Federal income taxes amounted 
to $138,714, an increase of 45 per cent over 1951. 
Federal income taxes accrued for 1952 were $52,000. 
Net profit after Federal income taxes was $86,714, an 
increase of 18.4 per cent over 1951. 
Financial statements for the year ended December 31, 
1952, certified by the Company's auditors, Price 
Waterhouse & Co., are shown on pages 6 through 9 of 
this report. 
SUMMARY 
1950 1949 1948 1947 
$1,269,857 $1,148,588 $ 962,421 $ 710,451 
943,888 1,249,992 1,401,332 1,504,510 
Total operating revenues... $2,883,069 $2,390,964 $2,213,745 $2,398,580 $2,363,753 $2,214,961 
Operating Expenses ................. . 2,740,413 2,352,265 1,968,883 2,263,878 2,283,989 2,172,077 
Operating Profit ........................ $ 142,656 $ 38,699 $ 244,862 $ 134,702 $ 79,764 $ 42,884 
Non-operating income 
( expense) .......................... (3,942) 56,932 (16,856) (481) (15,602) (37,403) 
Net Profit Before Federal 
Income Taxes ......................... $ 138,714 $ 95,631 $ 228,006 $ 134,221 $ 64,162 $ 5,481 
Federal income taxes ............. 52,000 22,400 92,533 53,078 36,100 ----- --  
Net Profit After Taxes............... $ 86,714 $ 73,231 $ 135,473 $ 81,143 $ 28,062 $ 5,481 
2 
 Simplified Comparative Statement of 
INCOME RECEIVED FROM: . 
Passengers ................................................. . 
Express ............................ , ........................ . 
Freight ..................................................... . 
Excess baggage ......................................... . 
Charter ..................................................... . 
Incidental revenues ................................... . 
Profit on disposition of property ............. . 
Interest earned ........................................... . 
Other income ............................................. . 
Mail ........................................................... . 
GROSS INCOME ................................... . 
DISPOSITION OF GROSS INCOME: 
Wages and salaries ................................... . 
Gasoline and oiL ...................................... . 
Telephone, telegraph, teletype ................. . 
Other materials, parts and services ........... . 
Rentals and landing fees ........................... . 
Insurance ................................................. . 
Travel and incidental ............................... . 
Advert~si~g and publicity ......................... . 
Depreciation ............................................. . 
Taxes other than Federal income taxes ..... . 
Interest expense ......................................... . 
Amortization of route development 
expenses ............................................. . 
Federal income taxes ................................. . 
TOTAL EXPENSES ................................ . 
Balance Retained for Use in the 
Development of the Business ................... . 
REVENUE DOLLAR 
AIR MAIL 35% 
1952 
$1,727,621 
23,718 
48,788 
6,705 
14,092 
30,411 
42,164 
6,916 
1,695 
$1,902,110 
1,031,734 
$2,933,844 
$1,372,016 
343,153 
91,952 
323,122 
120,742 
98,730 
85,051 
86,498 
122,607 
98,826 
4,176 
48,257 
52,000 
$2,847,130 
$ 86,714 
1951 
$1,452,523 
16,857 
47,803 
5,671 
55,829 
23,150 
84,998 
7,288 
1,682 
$1,695,801 
789,131 
$2,484,932 
$1,161,636 
291,419 
85,733 
303,555 
104,166 
86,689 
63,650 
69,168 
103,727 
90,174 
29,384 
22,400 
$2,411,701 
$ 73,231 
Per Cent 
Increase 
(Decrease) 
18.94 
40.70 
2.06 
18.23 
(74.76) 
31.36 
(50.39) 
(5.10) 
.77 
12.17 
30.74 
18.07 
18.11 
17.75 
7.25 
6.45 
15.91 
13.89 
33.62 
25.05 
18.20 
9.59 
64.23 
132.14 
18.05 
18.41 
WHERE IT WENT 
~H 
- / (0) - 
-. 
WAGES AND 
SALARIES 48% 
fJII ..  ~~ 
\ 
~ ~ - 1 ) 
RETAINED FOR 
USE IN THE 
BUSINESS 3% 
DEPRECIATION 3% 
3 
GASOLINE 
AND Oil 12% 
 4 
The foregoing financial summaries reflect dis- 
tinct progress for the Company and a healthy 
trend for future operations. Substantial addi- 
tional revenues may be expected from South- 
west's exclusive service to Santa Barbara, Mon- 
terey, Red Bluff and Eureka, since the year 1952 
contains revenue for only four months from Sep- 
tember from such operations. 
Although operating ~osts increased 16% over 
1951, the Company's revenues have kept pace 
with costs, and the Company has been able to 
continue its unmarred record of a profitable op- 
eration every year since its incorporation in 1941. 
The management is continually striving to place 
the operations of the Company on a basis as 
. 
. SOUTHWEST AIRWAYS 
--- 
nearly self-sufficient as possible in order to reduce 
the amount of governmental subsidy required for 
local airline service. With this end in view, South- 
west has petitioned the Civil Aeronautics Board 
for permission to suspend service at Coalinga, 
Vallejo-Napa and Oroville, since practically no 
use was made of air service by those communities. 
Such cessation of service will result not only in a 
saving of subsidy in the form of mail pay to the 
extent of over $50,000 per year, but will allow 
Southwest to provide better service to the inter- 
mediate cities on the Company's route. 
Taxes represent one of the largest cost items in 
operating the Company. During the year 1952 
taxes were payable by Southwest as follows: 
Federal 
Excise tax on gasoline and oil... ..... $ 42,133 
Social Security taxes........................ 21,217 
Local 
$ 4,060 
19,338 
9,076 
3,002 
Total 
$ 46,193 
40,555 
9,076 
3,002 
52,000 
Property taxes ................................. . 
Franchise taxes ............................... . 
Income tax........................................ 52,000 
Total.. ...................................... $115,350 $35,476 $150,826 
In addition the Company collected from its passengers, shippers and employees, $618,602 in transpor- 
tation, payroll and withholding taxes, which has been paid over to the Federal and State governments. 
 e/~efo/m/fooml~ 
1952 1951 
Number of passengers 
carried ...................... 165,057 137,821 
Revenue passenger 
miles in scheduled 
service ...................... 31,133,636 26,332,303 
Available seat miles 
in scheduled service 
(21-seat basis) .......... 56,621,670 51,216,039 
Per cent of available 
seat miles used .......... 54.99% 51.41 % 
Route miles operated .... 1,153 1,153 
Revenue aircraft 
miles flown ................ 2,716,503 2,526,630 
Mail ton miles carried .. 84,432 62,909 
As shown in the above tabulation, Southwest has 
enjoyed a substantial increase in business each 
year since the inception of air line operations. In 
the year 1952 Southwest led all local service air- 
lines in the United States in passenger load factor, 
realizing the occupancy of 54.99% of all seat 
miles available on a standard 21-seat capacity. 
The total number of passengers carried by South- 
west in 1952 of 165,057 represents a 20% increase 
over the previous year. The Post Office Depart- 
ment also increased its use of the Company's fa- 
cilities by placing 84,432 ton miles of mail on 
Southwest aircraft- an increase of 34% over 
1951. 
All operations in 1952 were conducted with 10 
Douglas DC3 aircraft. While the performance of 
these aircraft is satisfactory for the majority of 
the flights operated by Southwest, they do have 
the disadvantages of limited capacity and slow 
speed when measured by modern standards. In 
the early fall of 1952 the Company had the op- 
portunity to acquire 4 Martinliner aircraft at a 
very favorable price. After extensive operating 
tests and economic studies, which proved to our 
satisfaction that the Martinliner was the best and 
safest modern airplane for local service operation, 
arrangements were made for their purchase. Fi- 
nancing was accomplished through use of com- 
pany funds and a five-year $800,000 loan from 
the Bank of America National Trust & Savings 
Association. 
On April 26, 1953, the first two Martinliners were 
1950 1949 1948 1947 
121,971 115,918 97,954 85,076 
22,236,008 20,947,484 17,783,649 15,160,237 
48,546,414 50,399,055 49,356,216 38,627,001 
45.80% 41.56% 36.03% 39.25% 
1,153 1,153 1,130 1,130 
2,375,224 2,419,695 2,363,827 1,854,117 
46,406 51,136 45,892 35,146 
placed in service on two round-trip flights serving 
San Francisco, Monterey, Paso Robles, Santa 
Barbara and Los Angeles, California. Passenger 
reaction to the new service in the first weeks of 
use has been extremely favorable. 
Traffic estimates for the year 1953 are encourag- 
ing and we are confident, too, that the inaugura- 
tion of Martinliner service will be an important 
factor and an added impetus to the development 
of additional travel on Southwest Airways. 
Route development matters are being given con- 
tinual attention by the management. Negotiations 
are still in progress with Bonanza Air Lines, Inc., 
regarding a merger with Southwest in accordance 
with the suggestion of the Civil Aeronautics Board. 
Additional airline routes which have been applied 
for are from San Francisco, California, to Las 
Vegas, Nevada, via the intermediate points San 
Jose, Monterey, Bakersfield and lnyokern; from 
Bakersfield to Los Angeles via Palmdale-Lancas- 
ter; from Los Angeles, California, to Phoenix, 
Arizona, via the intermediate points Riverside- 
Ontario, Indio and Blythe; and from San Fran- 
cisco, California, to Reno, Nevada, via the 
intermediate points Stockton and Sacramento. 
Southwest believes that public convenience and 
necessity for these airline routes are amply suffi- 
cient to justify their implementation. The fur- 
nishing of such service by Southwest will 
strengthen the Company's route structure and 
improve the financial and operating results. 
5 
 6 
ASSETS 
CURRENT ASSETS: 
Cash in banks and on hand ............................................... . 
U.S. Government securities, at cost.. ................................. . 
Accounts receivable: 
U.S. Government-mail, passengers and other ....... . 
Traffic and agents ....................................................... . 
Miscellaneous, less allowances for possible losses 
in collection (1952 - $864; 1951 - $705) ......... . 
Employees ................................................................. . 
Inventories of materials and supplies, motor fuel, and 
customers' work in process, at approximate cost, 
not in excess of market.. ............................................. . 
Prepaid expenses ............................................................... . 
INVESTMENTS IN STOCKS OF SERVICE 
ORGANIZATIONS, at cost... ............................................ . 
PROPERTY AND EQUIPMENT, at cost: 
Flight equipment in use-pledged under note payable .... 
Flight equipment in overhaul-pledged under note 
payable (Note B) ..................................................... . 
Ground and shop equipment ............................................. . 
Leasehold improvements ................................................... . 
Other ................................................................................. . 
Less-Accumulated depreciation ..................................... . 
DEFERRED CHARGES: 
Extension and development expense ................................. . 
Other - 
SOUTHWEST AIRWAYS COMPANY 
(AN ARIZONA CORPORATION) 
December 31 
1952 1951 
$ 171,622 $ 87,474 
219,968 
180,099 
36,619 
2,210 
183,469 
79,494 
$ 873,481 
$ 4,321 
$1,283,543 
1,022,365 
209,378 
82,323 
149,567 
$2,747,176 
1,155,445 
$1,591,731 
$ 23,932 
11,253 
$ 35,185 
$2,504,718 
500,023 
188,787 
114,114 
30,215 
3,669 
102,753 
29,055 
$1,056,090 
$ 4,321 
$1,188,517 
135,915 
124,698 
156,697 
$1,605,827 
1,119,485 
$ 486,342 
$ 55,073 
4,187 
$ 59,260 
$1,606,013 
( 
If 
LIABILITIES 
CURRENT LIABILITIES: 
Note payable to bank ......................................................... . 
Accounts payable ............................................................... . 
Taxes collected or withheld from others ........................... . 
Accrued expenses ............................................................... . 
Transportation sold, not yet used or refunded ................. . 
Federal taxes on income (estimated) ............................... . 
NOTE PAYABLE TO BANK, maturing in monthly in- 
stalments to November 15, 1957, interest at 5% per 
annum (instalments due within one year included in 
current liabilities )- secured by chattel mortgage 
on flight equipment (Note A) ........................................... . 
RESERVE FOR AIRCRAFT ENGINE OVERHAUL 
(Note C) ........................................................................... . 
CAPITAL STOCK AND SURPLUS: 
Common stock (Note D) : 
Authorized, 10,000,000 shares at 50c par 
value per share 
Issued: 
December 31, 1951-655,985 shares ............... . 
December 31, 1952-671,410 shares ............... . 
Paid-in surplus (Note D) ................................................. . 
Earnings retained for use in the business, per 
accompanying statement.. ......................................... . 
December 31 
1952 
$ 87,500 
490,398 
66,086 
77,032 
26,714 
53,140 
$ 800,870 
$ 412,500 
$ 335,705 
246,324 
709,319 
$1,291,348 
$2,504,718 
1951 
$ 274,456 
47,523 
60,138 
9,058 
22,400 
$ 413,575 
$ 42,743 
$ 327,993 
234,600 
587,102 
$1,149,695 
$1,606,013 
7 
 . 
. SOUTHWEST AIRWAYS 
--- 
of Income and Earnings Retained for Use in the Business 
Year ended December 31 
1952 1951 
Operating revenues: 
Passenger ........................................................................... . 
Mail ................................................................................... . 
$1,727,621 $1,452,523 
1,031,734 789,131 
Express ............................................................................... . 
Freight ............................................................................... . 
Charter ................................................................................ . 
23,718 16,857 
48,788 47,803 
14,092 55,829 
Excess baggage ................................................................. . 
Other ................................................................................. . 
6,705 5,671 
30,411 23,150 
Total operating revenue ................................... . $2,883,069 $2,390,964 
Operating expense: 
Flying operations ............................................................... . $ 889,930 $ 735,297 
Flight ~q~ipment ~ainten~nce ......................................... . 
Depreciat10n on flight eqmpment.. ................................... . 
220,766 198,509 
95,581 78,777 
$1,206,277 $1,012,583 
Ground operations ............................................................. . $ 520,901 $ 429,087 
Ground and indirect maintenance ..................................... . 201,563 165,655 
Passenger service ............................................................... . 146,108 107,869 
Traffic and sales ................................................................. . 324,758 314,709 
Advertising and publicity ................................................. . 86,498 70,742 
General and administrative ............................................... . 227,282 226,670 
Depreciation on ground equipment ................................. . 27,026 24,950 
$1,534,136 $1,339,682 
Total operating expense ................................... . $2,740,413 $2,352,265 
Operating profit.. ............................................... . $ 142,656 $ 38,699 
Other income: 
Discounts earned ............................................................... . $ 1,485 $ 1,682 
Interest ............................................................................... . 6,916 7,288 
Net gain on disposition of equipment.. ............................. . 42,187 84,998 
$ 50,588 $ 93,968 
Other deductions: 
Interest ............................................................................... . $ 4,176 $ 1,645 
Extension and development ............................................. . 48,257 29,384 
Other ................................................................................. . 2,097 6,007 
$ 54,530 $ 37,036 
$ 138,714 $ 95,631 
Provision for estimated federal taxes on income ..................... . 52,000 22,400 
Net income for year ........................................... . $ 86,714 $, 73,231 
Earnings retained for use in the business, 
beginning of year ............................................................... . 587,102 513,871 
Reserve for aircraft engine overhaul restored to 
earnings retained for use in the busine,s ........................... . 35,503 
Earnings retained for use in the 
business, end of year ................................. . $ 709,319 $ 587,102 
8 
 . 
. SOUTHWEST AIRWAYS 
--- 
NOTES TO FINANCIAL STATEMENTS 
December 31, 1952 
NOTE A 
Subsequent to December 31, 1952, the Company 
borrowed an additional $300,000 from the bank, 
thereby increasing the loan to $800,000, the maxi- 
mum permitted under the loan agreement. The 
principal amount, which is secured by a chattel 
mortgage on all of the Company's flight equip- 
ment, is repayable in equal monthly instalments 
commencing March 15, 1953, and ending Novem- 
ber 15, 1957. The loan agreement provides, among 
other things, that the Company ( 1) will not, with- 
out prior written consent of the bank, pay any 
dividends in cash or purchase, redeem or other- 
wise acquire for value any of its outstanding 
shares, and ( 2) will maintain current assets at 
least equal to current liabilities up to December 
31, 1952, and thereafter will maintain current as- 
sets in excess of current liabilities by an amount 
equal to fifty per cent of net income before depre- 
ciation but after all taxes and principal payments 
on the loan; this provision is cumulative and ap- 
plies as to each fiscal year within ninety days after 
the termination of such year. 
NOTE B 
Flight equipment in overhaul, at cost of $1,022,- 
365, consists of four Martin aircraft acquired dur- 
ing the latter part of 1952, plus overhaul costs 
incurred to December 31, 1952, preparatory to 
placing the aircraft in operation. In accordance 
with Company practice, no depreciation will be 
provided until the planes have been placed in 
flying operations. 
NOTE C 
It has been the practice of the Company to charge 
operations with estimated cost of aircraft engine 
overhaul and credit a reserve therefor; actual 
costs of overhauls were charged to the reserve. 
Commencing January 1, 1953, the Company ex- 
pects to charge overhaul costs to operations as 
incurred and, accordingly, the balance of $35,503 
in the reserve at December 31, 1952, was credited 
to earnings retained for use in the business at that 
date. 
NOTED 
During 1952 certain officers and employees exer- 
cised the outstanding stock options, which were 
granted in 1948 and purchased 15,425 shares of 
unissued common stock of the Company at $1.26 
per share. The proceeds of $19,435 were credited 
$7,712 to capital stock account and $11,723 to 
paid-in surplus. 
9 
 10 
PRICE WATERHOUSE & Co. 
To the Board of Directors of 
Southwest Airways Company 
351 California Street 
San Francisco 4 
March 12, 1953 
In our opinion, the accompanying financial statements, together 
with the explanatory notes thereto, present fairly the position of South- 
west Airways Company as of December 31, 1952, and the results of its 
operations for the year then ended, in conformity with generally accepted 
accounting principles applied on a basis consistent with that of the pre- 
ceding year. Our examination of such financial statements was 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. 
   YREKA 
CRESCENT 
CITY  REDDING 
 EUREKA-ARCATA, 
 RED BLUFF 
 CHICO 
 FORT BRAGG 
 UKIAH  YUBA CITY 
MARYSVILLE 
 SACRAMENTO 
 SANT A CLARA-SAN JOSE 
 SANTA CRUZ-WATSONVILLE 
 SANT A MARIA 
SOUTHWEST AIRWAYS 
ROUTE MAP 
11 
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