FOURTEENTH 
ANNUAL REPORT 1953 
 SEPARATION OF CARGO SAVES TIME 
HANDLING AND SORTING OF BAGGAGE REDUCED BY COMPARTMENT 
ALLOCATION SYSTEMe THE 
1 
BELLY 
1 
COMPARTMENTS ARE QUICKLY 
LOADED FROM GROUND LEVEL. 
NO WAITING FOR HAND LUGGAGE 
CARRY-ON BAGGAGE RACKS SIMPLIFY 
ANO SPEED THE HANDLING OF 
1 
0VER- 
N IGHT1 AND COMMUTER PASSENGERS 
PASSENGER LOADING RAMP 
BUILT-IN HYDRAULIC PASSENGER LOADING,._ RAMPS FACILITATE THE RECORD 3 1/2 MINUTE AVERAGE LOADING TIMEe 
 ~ 
[I\ATIONAL l)AFETY DUNCIL 
1952 
AVIATION 
SAFETY AWARD 
TO 
SOUTHWEST AIRWAYS COMPANY 
in 1wf~Jnilil111 l1f it,: flllllribu1 il111 hi ~ufl' .:tir ~ 
Ti-ll11sp,1rr,11i11n 
h,11,inq ll!'l'l1111'l{ tlw l'lltin pl'llr llf I~).:-:! lllld, 
 ll-" <If i)l'l'"l'fllblr 31 , l~.5~ 
53. 884. aao PASSfNGER M 
~ 
l[S 
n,itf1,,ur 11 p,usen9er or ,ml' fo111lity in 
s,h,'liuled p.use~r runyin9 Ai9hr ,,perations 
. 
. SOUTHWEST AIRWAYS 
--- 
DIVISION OF CARGO SPACE FACILI.TATES LOADING 
EASILY ACCESSIBLE FROM TWO-DECK CART, LARGE 
INDIVIDUAL STATION CARGO BINS ON BOTH SIDES OF 
FORWARD COMPARTMENT ARE QUICKLY LOADEDe 
ONE MAN BAGGAGE CARTS 
RAMP AGENT LOADS BAGGAGE ANO CARGO WHILE PURSER HANOLES PASSENGER TRAFFIC. 
 . 
, 
.. 
BOARD of DIRECTORS 
LELAND HAYWARD, Chairman 
BERT ALLENBERG 
JOHN H. CONNELLY 
ALWIN W. JOHNSON 
DANil!L O'SHEA 
FLOYD HENDRI(;KSON WALTER ROCHE 
WILLIAM B. SMULLIN 
OFFICERS 
JOHN H. CONNELLY, President and General Manager 
T. R. MITCHELL, Executive Vice President 
R. E. COSTELLO, Vice President T rafjic and Sales 
w ALTER ROCHE, Secretary 
ALWIN W. JOHNSON, Vice President and Treasurer 
MAX A. KING, Vice President Public Relations 
FLOYD HENDRICKSON, Assistant Secretary 
AUDITORS 
PRICE, WATERHOUSE & Co. 
351 California Street, San Francisco, California 
REGISTRAR and TRANSFER AGENT 
WALTER ROCHE 
309 First National Bank Building, Phoenix, Arizona 
SOUTHWEST AIRWAYS COMPANY 
San Francisco International Airport, South San Francisco, California 
 . 
~~. SOUTHWEST AIRWAYS 
--- 
PRESIDENTS REPORT 
to the stockholders and employees - 
of Southwest Airways Company 
The statement of Income reproduced herein for 
the year of 1953, as certified by our auditors, Price, 
Waterhouse & Company, reflects a net loss of 
$90,812 based upon a temporary mail rate from 
July 22, 1953. The final determination of revenues 
for that period will not be known until settlement 
of the mail rate proceedings which is now in 
process. It is anticipated that this settlement will 
be concluded in July of this year. The new mail 
rate, when determined, will be retroactive to July 
22, 1953, and, to the extent of any increase over 
our present temporary mail rate, will reduce or 
eliminate the loss for the period July 22, 1953, 
through December 31, 1953. If upon determina- 
tion of the permanent mail rate the full amount 
applied for is allowed, there will be additional 
revenue to the company of $100,538 for the year 
ended December 31, 1953. 
The avenues which led to the loss for 1953 are 
clear. First, the inflationary cost spiral continued 
throughout the year of 1953. The second factor 
was the addition of Martinliner aircraft, early in 
1953, to our operating. fleet. The public introduc- 
tion of this new equipment and the training costs 
of both our pilot and mechanical personnel were 
absorbed entirely by your company during the first 
half of 1953. The absorption of these costs became 
necessary because of the position taken by the 
Civil Aeronautics Board for the first time in the 
Pioneer Airlines' Mail Rate Case. This decision 
was issued over six months after the acquisition by 
Southwest of the Martinliners. Prior to the Pioneer 
decision and since the inception of the Civil Aero- 
nautics Act of 1938, the Civil Aeronautics Boar~ 
had recognized for rate purposes, increases in costs 
attributable to new equipment. Third, during the 
latter half of 195 3 Southwest sustained a decrease 
in passenger revenue of approximately $110,000 
due to the closing of Camp Roberts at Paso Robles, 
Camp Cooke at Santa Maria, and Camp San Luis 
Obispo. The closing of these military camps was 
inevitable. Efforts toward replacing this lost mili- 
tary revenue with civilian traffic are proving suc- 
cessful largely because of the stimulating effect of 
the Martinliners on traffic development. 
After a full year of operating the Martinliners in 
scheduled service, we can now tell you that this 
equipment is well suited to our local type of opera- 
tion; that its loading time at intermediate station 
gates is but 9/ 10 of a second longer than with our 
DC-3 equipment; that there are no operational or 
mechanical problems resulting from our standard 
procedure of shutting off one engine while loading 
at intermediate points, and that the built-in passen- 
ger stairs and carry-on luggage racks are properly 
located. The freight and mail compartments, which 
are divided into separate spaces for each city, serve 
to accelerate the loading and unloading and are 
definitely an improvement over the DC-3. Ground 
handling and flight characteristics are improved 
over the DC-3, and maintenance-wise the aircraft 
is sturdy and simple. Most important of all, the 
airplane is acceptable to our customers as is demon- 
strated by the fact that in the first year of operation 
of Martinliners a passenger load factor of 56.3% 
was achieved, resulting in an average load of 20.3 
passengers per mile. This produced commercial 
revenues (exclusive of mail pay) of $1.18 for each 
mile flown. While the Martinliner is efficient on 
high density flights, the DC-3 is more efficient on 
the lighter density flights and in this respect will 
be suitable in local airline operations for many 
more years. 
The management has confidence that having 
weathered the equipment and military traffic prob- 
lems of 1953, your company is now in a more 
favorable equipment position to meet the local air 
transportation needs of the rapidly growing area 
which it serves. 
 ASSETS 
CURRENT ASSETS: 
Cash in banks and on hand ................................................ . 
Accounts receivable: 
U.S. Government- mail, passengers and other.. ........... . 
Traffic and agents ........................................................... . 
Miscellaneous, less allowances for possible losses 
in collection ( 1953 - $1 
7 
189; 1952 - $864) ................ . 
Employees ........................................................................ . 
Refundable federal taxes on income .................................. . 
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- pledged under note payable ............... . 
Ground and other equipment ............................................ . 
Less-Accumulate<l depreciation ....................................... . 
Construction work in progress ............................................ . 
DEFERRED CHARGES: 
Extension and development expense .................................. . 
Ocher ................. , ................................................................. . 
SOUTHWEST AIRWAYS COMPANY 
December 31 
1 953 1952 
$ 147,993 
250,347 
188,393 
41,916 
2,345 
49,023 
199,513 
161,239 
$1,040,769 
$ 4,321 
$2,545,862 
426,975 
$2,972,837 
1,262,655 
$1,710,182 
25,339 
$1,735,521 
$ 22,092 
22,998 
$ 45,090 
$2,825,701 
$ 171,622 
219,968 
180,099 
36,619 
2,210 
183,469 
79,494 
$ 873,481 
$ 4,321 
$2,305,908 
441,268 
$2,747,176 
1,155,445 
$1,591,731 
$1,591,731 
$ 23,932 
11,253 
$ 35,185 
$2,504,718 
(AN ARIZONA CORPORA1'ION) 
BALANCE SHEET 
l 
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) ................................ . 
LONG-TERM DEBT: 
Note payable to bank, maturing in monthly installments 
to November 15, 1957, interest at 5% per annum 
(installments due within one year included in current 
liabilities) - secured by chattel mortgage on flight 
equipment (Nore B) ................................................. . 
Conditional sales contracts, payable through 1958 ............ . 
CAPITAL STOCK AND SURPLUS: 
Common stock: 
Authorized, 10,000,000 shares of 50c par 
value per share 
Issued-671,410 shares ............................................... . 
Paid-in surplus .................................................................... . 
Earnings retained for use in the business, per 
accompanying statement ............................................. . 
December 31 
1 9 5 3 1 9 5 2 
$ 175,000 $ 87,500 
729,326 490,398 
77,773 66,086 
86,552 77,032 
33,697 26,714 
53,140 
$1,102,348 $ 800,870 
$ 504,000 $ 412,500 
$ 412,500 
$ 335,705 $ 335,705 
246,324 246,324 
618,507 709,319 
$1,200,536 $1,291,348 
$2,825,701 $2,504,718 
 . 
~.... SOUTHWEST AIRWAYS 
--- 
STATEMENT 
of Income and Earnings Retained for Use in the Business 
Year ended December 31 
1953 1952 
Operating revenues: 
Passenger ............................................................................. . $1,926,293 $1,727,621 
Mail. .................................................................................... . 1,065,121 l,Q31,734 
Express ................................................................................ . 25,059 23,718 
Freight ................................................................................. . 44,447 48,788 
Charter ........................................................ ....................... . 159,710 14,092 
Excess baggage .................................................................... . 7,569 6,705 
Other ................................................................................... . 16,039 30,411 
Total operating revenue ..................................... . $3,244,238 $2,883,069 
Operating expense: 
Flying operations ................................................................ . $1,068,165 $ 889,930 
Flight equipment maintenance .......................................... . 372,795 220,766 
Depreciation on flight equipment ...................................... . 154,190 95,581 
$1,595,150 $1,206,277 
Ground operations .............................................................. . $ 587,666 $ 520,901 
Ground and indirect maintenance ...................................... . 268,653 201,563 
Passenger service ................................................................ . 154,313 146,108 
Traffic and sales .................................................................. . 375,541 324,758 
Advertising and publicity ................................................... . 104,008 86,498 
General and administrative ................................................ . 240,537 227,282 
Depreciation on ground equipment ................................... . 47,727 27,026 
$1,ns,445 $1,534,136 
Total operating expense ..................................... . $3,373,595 $2,740,413 
Operating profit (loss) ...................................... . ($129,357) $ 142,656 
Other income: 
Net gain on disposition of equipment ............................... . 
Interest ........................... , .................................................... . 
$ 63,511 $ 42,187 
237 6,916 
Other ................................................................................... . 2,355 1,485 
$ 66,103 $ 50,588 
Other deductions: 
Interest ................................................................................ . $ 35,533 $ 4,176 
Extension an~ ~evelopment.:.- 
Personnel trammg, new equipment .................................... . 
Other ................................................................................... . 
18,820 48,257 
21,986 
4,360 2,097 
$ 80,699 ,$ 54~530 
($143,953) $ 138,714 
Provision for estimated federal taxes on income ....................... . 52,000 
Excess provision for federal taxes on income in prior year ........ . 4,118 
Credit arising from claim for refund of federal taxes on 
income resulting fro.J)l carry-back of 1953 operating 
loss ............................................................... ~ 49,023 
Net income (loss) for year ................................ . ($90,812) $ 86,714 
Earnings retained-for use in the business, beginning of year .... . 709,319 587,102 
Reserve for aircraft engine overhaul restored to earnings 
retained for use in the business ......................................... . 35,503 
Earnings retained for use in the business, 
end of year .................................................. . ' 618,507 $ 709,319 
 NOTES TO FINANCIAL STATEMENTS 
December 31, 1953 
NOTE A 
The Company is operating under a temporary certificate of public convenience 
and necessity which expires September 30, 1954. An applicatioft-was filed on 
January 11, 1954, for the renewal of the Company's certificate. 
NOTE B 
The bank loan agreement provides, among other things, that the Company 
( 1 ) will not, without the prior written consent of the bank, pay any dividends 
in cash or purchase, redeem or otherwise acquire for value any of its outstand- 
ing shares, and ( 2) after December 31, 195 2, will maintain curr~nt assets in 
excess of current liabilities by an amount equal to fifty per cent of net income 
before depreciation but after all taxes and principal payments on the loan; this 
provision is cumulative and applies as to each fiscal year within ninety days 
after the termination of such year. Until January i, 1955, in computing working 
capital under the agreement, the Company need not include in current liabilities 
any principal payments on the loan in excess of a total amount of $84,000. 
NOTE C 
Air mail revenue fbr the period from July 22, 1953, to December 31, 1953, has 
been determined on the basis of a temporary mail rate fixed by the Civil Aero- 
nautics Board on April 5, 1954; a proceeding for the determination of a more 
favorable final air mail rate is presently pending before the Board. 
NOTED 
During 195 3 the Company changed the estimated residual value of its Douglas 
DC-3 aircraft from 5 % to 10 % of cost in order to conform with the basis 
allowed by the Civil Aeronautics Board in computing air mail rates. As a result, 
the depreciation provided during 195 3 was approximately $40,000 less than 
would have been provided had no change been made. 
 . SOUTHWEST AIRWAYS 
PR1cE WATERHOUSE & Co. 
To the Board or Directors of 
Southwest Airways Company 
3tn. C.ALIPO:RNJA ST:REBT 
SAN FRANCISCO 4 
April 14 1954 
In our opinion, the accompanying financial statements, 
together with the notes thereto, present fairly the position or Southwest 
Airways Company as of December 31 1953 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 preceding 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 con- 
sidered necessary in the circumstances. Certain receivables from the 
United States Government selected for test were not confirmed by direct 
correspondence, but we satisfied ourselves by other auditing procedures 
as to these items. 
 FINANCIAL SUMMARY 
Operating Revenues: 1953 1952 1951 1950 1949 1948 
Passenger, express, 
freight, charter, etc .............. $2,179,117 $1,851,335 $1,601,833 1,269,857 $1,148,588 $ 962,421 
Mail .......................................... 1,065,121 1,031,734 789,131 943,888 1,249,992 1,401,332 
Total operating revenues ..... $3,244,238 $2,883,069 $2,390,964 $2,213,745 $2,398,580 $2,363,753 
Operating Expenses..................... 3,373,595 2,740,413 2,352,265 1,968,883 2,263,878 2,283,989 
Operating Profit or (Loss) ......... $(129,357) $ 142,656 $ 38,699 $ 244,862 $ 134,702 $ 79,764 
Non-operating income 
( ex~ense).............................. (14,596) (3,942) 56,932 (16,856) (481) (15,602) 
Net Profit or (Loss) Before 
Federal Income Taxes .............. $(143,953) $ 138,714 $ 95,631 $ 228,006 $ 134,221 $ 64,162 
Federal income taxes .............. . (53,141) 52,000 22,400 92,533 53,078 36,100 
Net Profit or (Loss) After 
Taxes ........................... __________ ... $(90,812) $ 86,714 $ 73,231 $ 135,473 $ 81,143 $ 28,062 
SUMMARY of TRAFFIC and OPERATIONS 
1953 
Number of passengers 
carried --------------------- 188,366 
Revenue passenger 
miles in scheduled 
1957 
165,057 
1951 
137,821 
1950 
121,971 
1949 
115,918 
1948 
97,954 
service ---------------------- 34,753,675 31,133,636 26,332,303 22,236,008 20,947,484 17,783,649 
Available seat miles 
in scheduled service ____ .. 63,007,173 56,621,670 51,216,039 48,546,414 50,399,055 49,356,216 
Per cent of available 
seat miles used______________ 55.16% 54.99% 51.41 % 45.80% 41.56% 36.03% 
Route miles operated .. ____ 
__ 1,153 1,153 1,153 1,153 1,153 1,130 
Revenue aircraft 
miles flown .. --------------- 2,845,172 2,716,503 2,526,630 2,375,224 2,419,695 2,363,827 
Mail ton miles carried .. _ 
.__ 78,443 84,432 62,909 46,406 51,136 45,892 
 ._REDDIN 
._RED BLUFF 
~CHICO - @ 
-~ 
._YUBA CITY ~~ ...:- 
MARYSVILLE ..--~ 
4 
AN FRANCISCO 
-.OAKLAND 
. . SACRAMENTO _ ~,'S- 
i\~~ 
~~~~ 
SANTA CLARA- SAN JOSE 
Above all * fly 
 
SOUTHWEST AIRWAYS