Fifteenth 
ANNUAL REPORT 1954 
SOUTHWEST AIRWAYS 
 \ 
SOU,HWEST AIRWAYS COMPANY 
General Offices 
San Francisco International Airport 
San Francisco, California 
JOHN H. CONNELL y 
TED R. MITCHELL 
ALWIN 
w. JOHNSON  
R. E. COSTELLO 
MAX A. KING 
WALTER ROCHE 
FLOYD HENDRICKSON  
LELAND HAYWARD, Chairman 
BERT ALLENBERG 
JOHN H. CONNELLY 
WARNER EDMONDS, JR. 
FLOYD HENDRICKSON 
PRICE, WATERHOUSE & COMPANY 
President and General Manager 
Executive Vice-President 
Vice-President and Treasurer 
Vice-President-Traffic and Sales 
Vice-President-Public Relations 
Secretary 
Assistant Secretary 
ALWIN W. JOHNSON 
DANIEL O'SHEA 
WALTER ROCHE 
WILLIAM B. SMULLIN 
3 51 California Street, San Francisco, California 
WALTER ROCHE 
3 O 9 Central and Washington Building, Phoenix, Arizona 
1 
 . 
___ 
2 
. SOUTHWEST AIRWAYS- 
  YREKA 
CRESCENT 
CITY  REDDING 
 EUREKA-ARCATA 
 RED BLUFF 
 YUBA CITY 
MARYSVILLE 
 SACRAMENTO 
 .. 
. SOUTHWEST AIRWAYS 
--- 
PRESIDENT'S REPORT 
T-o the stockholders and employees of Southwest Airways Company 
The year 19 5 4, which was Southwest's eighth 
full year of operation as a Federally certificated 
local service airline, was one of the Company's 
most successful years. Earnings were $126,739 or 
$ .19 per share of outstanding capital stock, after 
providing for Federal income truces of $104,000. 
Financial statements prepared by our auditors, 
Messrs. Price, Waterhouse & Co., follow this let- 
ter and set forth in detail Southwest's operations 
for the year. 
19 5 4 represented a highly important year in the 
progress of Southwest and confirmed the confi- 
dence of your directors and management in the 
use of modern post-war aircraft in local airline 
service. In this year the operating costs of our 
Martinliner aircraft were stabilized and high effi- 
ciency in operation was achieved. The public ac- 
ceptance of these aircraft has been overwhelmingly 
favorable and new records in traffic development 
have resulted. That this trend is continuing in 
19 5 5 is indicated by a 2 9. 3 % increase in number 
of passenger seat miles sold in January 19 5 5 over 
1954 and a 44.6 % increase in February 1955 over 
19 5 4. In addition, revenues from charter and con- 
tract operations in 19 5 4 increased by 2 3 % over 
the year 19 5 3. Contract operations include regu- 
larly scheduled flights for the U.S. Navy between 
Burbank and Inyokern, California and for Lock- 
heed Aircraft Corporation between Burbank and 
Palmdale, California. 
The Civil Aeronautics Board in 19 5 4 placed 
Southwest's mail and subsidy rate on a permanent 
basis and in doing so recognized the use of South- 
west's Martinliner aircraft for both cost and in- 
vestment return purposes. This was a far-reaching 
decision on the part of the Civil Aeronautics 
Board and one which will make possible the full 
development of traffic on Southwest's route. The 
renewal of Southwest's operating certificate and 
the issue of the continued suspension of United 
Air Lines at Santa Barbara, Monterey, Eureka and 
Red Bluff, California, were subjects of a public 
hearing held in Washington, D.C. in October 
1954. It is your management's opinion that a de- 
cision by the Board, favorable to Southwest will 
be forthcoming in the summer of 19 5 5. In the 
meantime, there is a strong possibility that legis- 
lation may be passed by Congress,. making perma- 
nent the operating certificates of the leading local 
service airlines. Southwest also has on file with 
the Civil Aeronautics Board applications for ex- 
tensions of the Company's route to Stockton and 
Bakersfield, California, and to Reno and Las 
Vegas, Nevada. The Board has granted Southwest 
temporary authority under an exemption order to 
serve Stockton, California and such service was 
commenced on March 7, 19 5 5. Final decision by 
the Board on these matters has been def erred by 
the Board for simultaneous decision with the 
Company's certificate renewal case. 
In February 19 5 5 Southwest joined with Alle- 
gheny Airlines, Inc. in a joint venture to purchase 
additional flight equipment from the trustee in 
bankruptcy for California Central Airlines, Inc., 
an intra-state carrier not possessing a Federal Civil 
Aeronautics Board certificate of public convenience 
and necessity. I am happy to report that we were 
the successful bidders and that Southwest acquired 
an additional Martinliner aircraft, a Douglas DC-3 
aircraft and certain spare parts at very advan- 
tageous prices. All station equipment and intangi- 
bles that were included in the original purchase 
were immediately resold to a third party in order 
that the bankrupt company's operations could be 
reactivated and their personnel re-employed. In- 
cluding the flight equipment recently obtained, 
Southwest's fleet now consists of fifteen aircraft, 
of which five are Martinliners and ten are Doug- 
las DC-3's. , 
It is a pleasure to announce at this time the 
election to Southwest's Board of Direaors of Mr. 
Warner Edmonds, Jr., attorney and civic leader 
of Santa Barbara, California. 
In the field of transportation no method of 
travel has grown as fast in all history as air travel. 
This is an achievement in which every Southwest 
stockholder and employee can be justly proud. I 
know that many of our stockholders regularly use 
the air for business or pleasure travel, but those 
who have not yet flown are in for a treat, as mil- 
lions of new travelers are discovering every year. 
Like them, you will find that air travel is Ameri- 
ca's, biggest travel bargain, for it combines all the 
advantages of speed, comfort, dependability, safety, 
and economy. Growth in air travel is important 
to the prosperity of the nation, and the State of 
California. It is equally important to you as a 
stockholder or employee and to your Company. 
This is your airline-we hope you will use it. 
I want to take this opportunity to express my 
appreciation to the employees of Southwest for 
their highly skilled an~ efficient effort on behalf 
of the Company and for their continued support 
in our common goal of keeping Southwest as one 
of the outstanding local air carriers in America. 
 4 
BALANCE 
ASSETS December Jl 
Current Assets: 
Cash in banks and on hand . 
Accounts receivable: 
U.S. Government-mail, passengers and other 
Traffic and agents ... . .. ............ . .. . . 
Miscellaneous, less allowance for possible losses 
in collection (1954-$570; 1953- 
. $1,189) 
Employees ......... .............. ... . .. . 
Refundable federal taxes on income ......... . 
Inventories of materials and supplies, motor fuel, 
and customers' work in process, at approxi- 
mate 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- 
 Accumulated depreciation ..... .... ... . 
Constructio~ work in progress. 
' Deferred. Charge's: 
Extension and development expense. . ..  ..... . 
Other ..... ... ........... ... . .... ..... ... . 
1954 1953 
$ 217,958 
335,612 
201,155 
30,003 
2,885 
175,524 
112,561 
$ 1,075,698 
$ 4,321 
$ 2,608,070 
445,631 
$ 3,053,701 
1,488,562 
$1,565,139 
11,283 
$ 1,576,422 
$ 34,083 
33,265 
$ 67,348 
$ 2,723,789 
$ 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 
SOUTHWEST AIRWAYS 
SHEET (AN ARIZONA CORPORATION) 
L I A B I L I T I E S December 31 
Current Liabilities: 
Note payable to bank . . 
Accounts payable ................. . ...... . 
Taxes collected or withheld from others . . .... . 
Accrued expenses ..................... .... . 
Transportation sold, n~t yet used or refunded .. 
Federal taxes on income (estimated) . . . . . . . . . . 
Long .Term Debt: . 
Note payable to bank, maturing in monthly in- 
stalments to Nove~ber 15, 1957, interest 
at 5 % per annum ( instalments due within 
one year included in current liabilities)- 
_ 
secured by chattel mortgage on flight 
equipment (Note B) : . . .............. . 
Condi~ional sales contracts, pay~ble 
through 1958 .. ..... . .......... ....... . 
Capital Stock" and Surplus: 
Common stock: 
Authorized, 10,000,000 shares of 5 Oc 
par value per share 
Issued, 671, 410 shares . . . . . . . . . , . . . . . . . . . . 
Paid-in surplus ........................... . 
Earnings retained for use in the business, 
per accompanying sta_ 
tement (Note B) .... 
1954 1953 
$ 168,000 
602,724 
61,648 
90,177 
20,358 
104,000 
$ 1,046,907 
$ 336,000 
13,607 
$ 349,607 
$ 335,705 
246,324 
745,246 
$ 1,327,275 
$ 2,723,789 
$ 175,000 
729,326 
77,773 
86,552 
33,697 
$ 1,102,348 
$ 504,000 
18,817 
$ 522,817 
$ 335,705 
246,324 
618,507 
$1,200,536 
$ 2,825,701 
 6 
. 
. SOUTHWEST AIRWAYS 
-~ STATEMENT 
of Income and Earnings Retained for Use in the Business 
Year ended December 31 
Operating Revenues: 
Passenger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Mail ......... . .... . ... . .. . .. . ... . ...... . 
Express .. . . ... . . .. . . ... i . ..  . . . .... .. .. .. . 
Freight ... . ........... . ... . . . .. . ....... . 
Charter .. .. .. ... .. . . ......... . .... . . .  .. . 
Excess baggage . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Other .. .. . .... .. . ... .. . .. .. ..... .... ... . 
Federal subsidy . . . . . . . . . . . . . . . . . . . . . , . . . .. 
Total operating rev~nues . . . . . . . . . . . . . . . 
Operating Expenses: 
Fly~g operations . . . . . . . . . . . . . . . . . . . . . . . . . . 
Flight equipment maintenance . ... .... ..... . 
 Depreciation on flight equipment ...... . ... . . 
Ground operations ... ... ............. . .... . 
Ground and indirect maintenance . . . .. . ......  
Passenger service . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 
Traffic and sales .......................... . 
Advertising and publicity . . . . . . . . . . . . . . . . . . 
General and administrative ..... . . ........  .. 
Depreciation on ground equipment ...... .. . . 
Total operating expenses ...... ... . . ... . 
Operating profit (loss) .... . ..... ~ . .. . . . 
Other Income: 
Net gain (loss) on disposition of equipment . . . . 
Other ......... . .. ... ..... .. . . .... . .... . . 
Other Deductions: 
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Extension and development . . .............. . 
Personnel training, new equipment ...... . ... . 
Other .... . .. . .... . ............ . . .. ..... . 
Provision for estimated federal taxes on income . . . . . . . . . 
Excess provision for federal taxes on income in prior year 
Credit arising from claim for refund of federal taxes on 
income resulting from carry-back of 195 3 operating 
loss . ..... . . .. ... . ....... .. ........ . .. .. . . . . . 
Net Income (Loss) for Year 
Earnings Retained for Use in the Business: 
Beginning of Year . 
End of Year . 
1954 
$ 2,006,971 
61,885 
27,013 
35,097 
226,700 
7,272 
22,514 
$ 2,387,452 
1,068,067 
$ 3,455,519 
$ 1,014,978 
340,801 
189,461 
$1,545,240 
$ 528,081 
233,089 
136,826 
352,911 
84,886 
252,097 
52,561 
$ 1,640,451 
$ 3,185,691 
$ 269,828 
($1,715) 
1,796 
$ 81 
$ 30,485 
8,553 
132 
$ 39,170 
$ 230,739 
104,000 
$ 126,739 
618,507 
$ 745,246 
1953 
$ 1,926,293 
72,108 
25,059 
44,447 
184,695 
7,569 
18,471 
$ 2,278,642 
993 ,013 
$ 3,271,655 
$1,081,292 
375,602 
154,190 
$ 1,611,084 
$ 592,660 
268,653 
156,082 
379,496 
104,008 
241,025 
48,004 
$ 1,789,928 
$ 3,401,012 
($ 129,357) 
$ 63,511 
2,592 
$ 66,103 
$ 35,533 
18,820 
21,986 
4,360 
$ 80,699 
($ 143,953) 
4,118 
49,023 
($ 90,812) 
709,319 
$ 618,507 
 -0 
SOUTHWEST AIR~AYS 
HOUSE & CO, 
PRICE WATER 
ANc1sco 4 
s~FB 
March 15 1955 
d of Directors of 
To the Boar 
Airways company 
southwest l statements, 
financia 
the accompanying of 
i Position 
In our opin on, t fairlY the 
tes thereto, presen 4 d the results 
with the no 31 195 an 
together f December ith 
southwest ,r...irwaY company asa: then ended, in conformitY wis con- 
f r the ye a bas 
. of its operations o ipleS applied on such 
t d 
accounting princ a.mination of 
accep e our ex 
generallY eding year, 
that of the prec with generallY 
S 
istent with i accordance ts 
made n uch tes 
tatements was included s 
financials d accordingly s as 
uditing standards an auditing procedure 
accepted a ch other 
records and su certain receiV- 
f 
the accounting stances, 
o in the c ircum test were 
d necessarY selected for 
we considere rnment 
United states Gove we satisfied our- 
ableS from the s ondence, but 
direct corre p these items, 
not confirmed bY 
ther auditing 
selves bY 0 
s as to 
procG~ LJ,;w,t.-f2 
NOTE A: The Compan~ is opera~ing under a cert!fi- 
, care of public convenience and necessity, 
issued by the Civil Aeronautics Board, the authority con- 
tained in which is continued beyond the expiration date 
therein prescribed ( September 3 O, 19 5 4) by the Adminis- 
trative Procedure Act pending final disposition by the 
Board of the application of the Company filed January 11, 
19 5 4, for the renewal of the Company's certificate. 
Subsequent to December 31, 1954, the Com- 
pany purchased, at a trustee's sale in bank- 
ruptcy, certain aircraft and parts for approximately 
$240,000. The bank has consented to this purchase and 
has loaned the Company an additional $150,000. A new 
loan agreement has been signed whereby the total bank 
loans will mature in monthly instalments to February 15, 
1960 with interest at 4% per annum. The new loan 
agreement provides among other things, that the Company 
( 1) will not, without prior written consent of the bank, 
pay any dividends in cash or purchase, redeem or otherwise 
acquire for value any of its outstanding shares, and ( 2) 
maintain current assets at least equal to cur.rent liabilities 
between the date of the agreement and December 3 1, 19 5 5, 
and thereafter maintain current assets in excess of current 
liabilities by an amount equal to fifty per cent of net in- 
come 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. 
7 
 SOUTHWEST AIRWAYS COMPANY 
Eight Year Record of Progress 
FINANCIAL 
Non- Profit or Net 
Operating (Loss) Before Federal Profit 
Total Operating Income Income Income or (Loss) 
Revenues Expenses (Expense) Taxes Taxes After Taxes 
1954 $3,455,519 $3,185,691 $ (39,089) $ 230,739 $104,000 $126,739 
1953 3,271,655 3,401,012 (14,596) (143,953) (53,141) (90,812) 
1952 2,883,069 2,740,413 ( 3,942) 138,714 52,000 86,714 
1951 2,390,964 2,352,265 56,932 95,631 22,400 73,231 
1950 2,213,745 1,968,883 (16,856) 228,006 92,533 135,473 
1949 2,398,580 2,263,878 ( 481) 134,221 53,078 81,143 
1948 2,363,753 2,283,989 (15,602) 64,162 36,100 28,062 
1947 2,214,961 2,172,077 (37,403) 5,481 5,481 
OPERATIONS and TRAFFIC 
Revenue Number of Passengers Carried Seat Miles-Scheduled Service 
Miles Charter, Scheduled % 
Flown Total Etc. Service Sold Produced Sold 
1954 2,563,039 203,814 23,099 180,715 34,842,303 57,528,963 60.56% 
1953 2,845,172 188,366 9,549 178,817 34,763,675 63,007,173 55.16% 
1952 2,716,503 165,057 776 164,281 31,133,636 56,621,670 54.99% 
1951 2,526,630 137,821 2,663 1'.35,158 26,332,303 51,216,039 51.41 % 
1950 2,375,224 121,971 3,111 118,860 22,236,008 48,546,414 45.80% 
1949 2,419,695 115,918 1,345 114,573 20,947,484 50,399,055 41.56% 
1948 2,363,827 97,424 530 97,424 17,783,649 49,356,216 36.03% 
1947 1,854,117 85,076 1,082 83,994 15,160,237 38,627,001 39.25% 
8 
 Above all*flY