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... ANNUAL REPORT 1957 
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 PACtFIC A. 
IR LINES, INC. 
John H. Connelly . 
T. R. Mitchell . . 
E. Roger Dahl . . 
R. E. Costello . 
Max A. King . 
Walter Roche . 
Floyd Hendrickson . . 
B O A R D 
General Offices: 
San Francisco International Airport 
San Francisco 28, California 
I 
OFFICERS 
. President and General Manager 
. . Executive Vice-President 
Treasurer 
. . . Vice-President-Traffic and Sales 
. . . Vice-President- 
-Public Relations 
. . Secretary 
. Assistant Secretary 
0 F DIRECTORS 
Leland Hayward, Chairman 
Bert Allenberg * *Harry White 
John H. Connelly T. R. Mitchell 
*R. E. Costello Daniel O'Shea 
Floyd Hendrickson Walter Roche 
William B. Smullin 
AUDITORS 
PRICE WATERHOUSE & CO. 
120 Montgomery Street, San Francisco, California 
REGISTRAR 
Bank of America 
3 00 Montgomery Street 
San Francisco 
"' Resigned June, 19 5 8 
,..,.. Elected June, 1958 
TRANSFER AGENT 
Crocker-Anglo National Bank 
1 Montgomery Street 
San Francisco 
 PACIFIC AIR LINES 
THE YEAR I N 
FINANCIAL 
Operating revenues, including subsidy . .. . 
Operating expenses . .................. . 
Non-operating expenses . . . . . . . . ....... . 
Net income, after taxes . . . . . . . . . . . . . 
Extraordinary income . . . . . . . . . . . . . . . .. 
Retained earnings . . . . . . . . . . . . . . . . . . . .. 
Total stockholders' equity .. . ... . ...... . 
Stockholders' Equity Per Share ..... . 
STATISTICAL 
Revenue miles flown . . . . . . . . . . . . . . . . . . . 
Number of passengers carried* ..... .... . 
Available seat miles flown* . .. ... .. . . .. . 
Available seat miles sold* . . . . . . . . . . .... . 
Per cent of available capacity sold . . ..... . 
* Scheduled Service 
B R I E F 
1957 1956 
$ 6,402,996 $ 5,225,736 
6,044,896 5,154,251 
122,961 48,230 
103,139 5,010 
125,645 
1,253,060 1,024,276 
1,835,089 1,606,305 
2.73 2.39 
4,551,716 4,048,797 
319,276 259,522 
124,398,543 107,084,154 
69,999,789 55,917,208 
56.3 % 52.2 % 
Serving more than 30 cities in California, Oregon, and Nevada 
 PACIFIC AIR LINES 
THE PRESIDENT'S REPORT 
TO OUR STOCKHOLDERS, EMPLOYEES, AND FRIENDS 
The year 1957 was one of continued progress for Pacific Air Lines. 
During the year we flew an all-time high of 319,000 passengers almost 
70,000,000 passenger miles. 
On September 29, 1957, we inaugurated daily round-trip service from 
Burbank to Las Vegas, and from San Francisco to Las Vegas. The traffic 
trends indicate that these routes will enjoy a substantial further growth 
and develop into important and profitable segments of our operations. 
On March 7, 1958, the Civil Aeronautics Board approved our applica- 
tion to change the Company's name to Pacific Air Lines, Inc., which 
we believe to be more suitable of the area in which we serve. 
At this time we find ourselves standing on the threshold of the jet age, 
which we are confident will result in vastly improved service to the 
public and, also, further opportunity for the progress of your company 
and its employees. 
The following pages, reflecting economic data, are respectfully sub- 
mitted. 
i ~ '\ 
vJbL\ 
President 
A&ove all fly Pacific Air Lines 
 PACIFIC AIR LINES 
FINANCIAL RESULTS 
19 57 revenues, excluding subsidy, reached an all-time high of $4,216,000. 
The graph below depicts the growth during the last five years. 
$6,000,000 
$5,000,000 
$4,000,000 
$3,000,000 
$2,000,000 
$1,000,000 
$4,216 
1957  
REVENUE GROWTH 
1956 1955 1954 1953 
In spite of the rising costs of providing service, the results of operations 
for the year produced a net profit, after taxes of $103,139. At the end of 
the year stockholders' equity amounted to $1,835,089 or $2.73 per share 
and the net worth of your company was the highest in the local service 
industry. 
 PACIFIC AIR llNES 
FINANCIAL RESULTS - (Continued) 
A petition has been presented to the Civil Aeronautics Board to estab- 
lish a permanent rate of subsidy through June 30, 1958 and it is antici- 
pated that the Board will act upon this petition late in 19 5 8. The at- 
tached statement of earnings includes two thirds of the total amount 
of the claim remaining after a retroactive increase in the temporary rate 
in December, 1958. 
During the 19 5 7 session of Congress legislation was enacted whereby 
the government will guarantee 90 % of a loan, up to $5,000,000, to an 
air carrier for the purchase of new aircraft equipment. On November 
17, 1958, our petition for such a guarantee was approved by the Civil 
Aeronautics Board and, consequently, a government-guaranteed loan 
commitment totaling slightly more than $5,000,000 was obtained from 
the Bank of America. Your company has purchased six Fairchild aircraft 
under this loan and it is estimated that delivery of this equipment will 
be effected during the first half of 1959. 
OPERATIONS AND EQUIPMENT 
You will recall the disastrous fire which destroyed much of our over- 
haul facilities late in 1955. During 1957 we completed our rebuilding 
program and are proud to say that our overhaul shop is unequaled else- 
where in the local service industry. The modern facilities now allow 
us to perform all maintenance and overhauls necessary to "keep 'em 
flying" and, after expenditures for additional equipment, will also 
enabie us to service the forty-four passenger tur ho-prop Fair child air- 
planes to be delivered in 1959. 
At the end of the year our fleet consisted of 7 Martinliners and 11 DC- 
3 aircraft. 
 PACIFIC AIR LINES 
A S S E T S 
Current Assets: 
Cash 
Accounts receivable: 
United States Government-mail, 
passengers and other 
(Notes C and D). 
Traffic and agents . .... .. . 
Miscellaneous, less allowance for 
possible losses ( 19 5 7 - $13,000; 
1956 - $2,692) ........... . 
Employees . . . . . . . . . .... . 
Inventories of materials and supplies, 
at approximate cost, not in excess 
of market .. .. . ........ . 
Prepaid expenses . . . 
Property and Equipment, at cost: 
Flight equipment-pledged under 
notes payable . . 
Ground and other equipment .. . . . .. . 
Less-Accumulated depreciation 
Construction in progress. 
Deposits on purchase of flight 
equipment (Note B) . 
Investments in Service Organizations, 
at cost 
Deferred Charges: 
Extension and development expense .. 
Other . 
B A L A 
December 31 
1957 
$ 12,120 
1,237,033 
160,038 
26,192 
3,834 
233,379 
114,489 
$ 1,787,085 
$ 3,661,357 
678,956 
$ 4,340,313 
2,123,072 
$ 2,217,241 
92,695 
145,786 
$ 2,455,722 
$ 4,321 
$ 37,521 
157,293 
$ 194,814 
$ 4,441,942 
1956, 
$ 114,011 
689,596 
286,157 
26,041 
4,834 
206,945 
119,873 
$ 1,447,457 
$ 3,736,446 
561,455 
$ 4,297,901 
1,765,020 
$ 2,532,881 
81,080 
$ 2,613,961 
$ 4,321 
$ 34,230 
164,795 
$ 199,025 
$ 4,2 64,7 <>4 
N C E s H E E T PACIFIC AIR LINES 
LIABILITIES 
Current Liabilities: 
Notes payable-current instalments 
on long-term debt 
Accounts payable 
Taxes collected or withheld from others 
Accrued expenses .. ..... . ... . 
Transportation sold, not yet used or 
refunded 
Estimated federal income taxes .. 
Long-Term Debt: 
5 % notes payable to bank-secured 
by chattel mortgage on flight equip- 
ment-maturing in monthly instal- 
ments to June 15, 1963 (Note A) . . 
Conditional sales contracts .. 
Provision For Federal Income Taxes of 
Future Years 
Capital Stock and Surplus: 
Common stock: 
Authorized, 10,000,000 shares of 5 0c 
par value per share (Note G) 
Issued, 671,410 sh.ares .. 
Paid-in surplus 
Earnings retained for use in the bus- 
iness, per accompanying statement 
(Note A) 
December 31 
1957 
$ 490,187 
917,697 
92,108 
155,960 
29,997 
301,341 
$ 1,987,290 
$ 515,787 
$ 515,787 
$ 103,776 
$ 335,705 
246,324 
1,253,060 
$ 1,835,089 
$ 4,441,942 
1956 
$ 335,210 
1,029,379 
79,985 
134,545 
28,876 
53,821 
$ 1,661,816 
$ 857,000 
3,187 
$ 860,187 
$ 136,456 
$ 335,705 
246,324 
1,024,276 
$ 1,606,305 
$ 4,264,764 
 PACIFIC AIR LINES 
STATEMENT 0 F 
Operating revenues: 
Passenger . . . . . . . . . . ...... . ... . 
Mail . . . . . . . . . . ....... . ... . . 
Charter and contract operations . . 
Express, freight and excess baggage . 
Other .. .. . ....... . ..... . 
Federal subsidy (Notes C and D) . 
Operating expenses (Note H): 
Flying operations . . 
Direct maintenance-flight equipment. 
Depreciation-flight equipment (Note E) . 
Direct maintenance-ground equipment . 
Maintenance burden ........ . . 
Passenger service . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Aircraft servicing . . . . . . . . . . . . . . . . . . . . . . . . . 
Traffic servicing . . . . . . . . . . . . . . . . . . . . . . . . . . . 
Promotion and sales . . . . . . . . . . . . . 
Advertising . . . . . . . . . ... .. . ... . . 
General and administrative 
Depreciation-ground equipment . .. ... . . . . 
Operating income 
Other (income) and expenses: 
Interest ... . .. . . .. ..... . 
Extension and development ....... . 
Net (gain)or loss on disposition of assets . 
Adjustment of spare parts inventory . 
Other, net . . . . . . .. . ... . 
Estimated federal income taxes 
Net earnings for year . 
Additional temporary subsidy ($12,100-Note C) and 
estimated final subsidy ($249,660-Note D) for 
19 5 6, less related federal income tax . 
Earnings retained for use in the business: 
Balance, beginning of year 
Balance, end of year . . . . . . . . . . . . . . . . . . 
EARNINGS 
Year ended December 31 
1957 1956 
$ 3,791,591 
116,605 
199,257 
91,684 
17,589 
$ 4,216,726 
2,186,270 
$ 6,402,996 
$ 1,906,179 
1,014,200 
350,955 
$ 3,271,334 
$ 82,204 
351,828 
231,340 
379,739 
870,970 
122,900 
218,956 
424,850 
90,775 
$ 2,773,562 
$ 6,044,896 
$ 358,100 
$ 62,757 
10,172 
6,741 
43,417 
( 126) 
$ 122,961 
$ 235,139 
132,000 
$ 103,139 
125,645 
$ 228,784 
1,024,276 
$ 1,253,060 
$ 3,129,855 
102,496 
224,101 
95,855 
21,417 
$ 3,573,724 
1,652,012 
$ 5,225,736 
$ 1,604,876 
847,228 
264,646 
$ 2,716,750 
$ 72,280 
320,164 
209,605 
342,246 
763,249 
107,621 
193,828 
383,529 
44,979 
$ 2,437,501 
$ 5, 154,251 
$ 71,485 
$ 45,902 
7,243 
(2,497) 
(2,418) 
$ 48,230 
$ 23,255 
18,245 
$ 5,010 
$ 5,010 
1,019,266 
$ 1,024,276 
 PRICE WATERHOUSE & Co. 
To the Board of Directors of 
Pacific Air Lines, Inc. 
120 MONTGOMERY STREET 
SAN FRANCISCO 4 
December 1 1958 
In our opinion, the accompanying statements present 
fairly the financial position of Pacific Air Lines, Inc. 
(formerly Southwest Airways Company) at December 31 1957 and 
the results of its operations for the year, in conformity with 
generally accepted accounting principles. These principles 
have been applied on a basis consistent with that of the pre- 
ceding year, except for the change which we approve, in the 
basis of providing depreciation on certain flight equipment as 
described in Note E to the financial statements. Our examina- 
tion of these 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. Certain receivables 
from the United States Government selected for tests were not 
confirmed by direct correspondence, but we satisfied ourselves 
as to these amounts by means of other auditing procedures. 
 PACIFIC AIR LINES 
N O T E S T 0 FINANC IAL STATEMEN TS 
December 31, 19 5 7 
NOTE A: 
Notes payable at December 31, 195 7 comprised 
the following: 
5  o/o secured bank loan, under agreement 
dated May 1, 1957, payable in monthly 
instalments of $15,000 to May 15, 1958, 
and balance payable June 15, 1958 ........ $ 307,000 
5  /~ secured bank loan, under agreement 
dated May 1, 1957, payable in monthly 
instalments of $30,000 commencing July 
15, 1958 to May 15, 1963, and balance 
payable June 15, 1963 ............................ 695,787 
Conditional sales contract ................... 3,187 
$ 1,005,974 
During 1958, repayment extensions were obtained 
for both bank loans; as at November 21, 1958, the 
balances payable were $142,000 and $695,787, re- 
spectively. 
On November 21, 1958, the Company entered into 
two new bank loan agreements to finance the pur- 
chase of new flight equipment ( see Note B) and 
provision was made for repayment of the balances 
due under the May 1, 1957 loan agreement. Par- 
ticulars of the new loan agreements are as follows: 
5  % loan, payable in monthly instalments 
ments of $16,700, commencing Decem- 
ber 15, 1958 - secured by the Com- 
pany's present flight equipment ............ $ 1,000,000 
5  % loan, payable in monthly instalments 
of $5,500 for each new Fairchild air- 
craft acquired, to January 15, 1960, and 
$33,000 monthly thereafter-to be se- 
cured by new Fairchild aircraft and 
equipment .............................................. 3,964,500 
5  % loan, payable in monthly instalments 
of $5,550, coinmencing July 15, 1959- 
to be secured by new Fairchild aircraft 
and equipment ........................................ 666,500 
On November 17, 1958, the Civil Aeronautics Board 
undertook to guarantee 90 % of the principal amount 
and 100% of the interest on the two 5 % loans 
aggregating $4,631,000. 
Under the terms of the November 21, 1958 loan 
agreements, the Company has agreed that ( 1) it will 
not, without the prior written consent of the bank, 
pay any dividends ( except in stock) or purchase, 
redeem or otherwise acquire for value any if its out- 
standing shares, and (2) commencing January 1, 
1959 will maintain current assets at least equal to 
current liabilities; for the purpose of this computa- 
tion, current instalments under both loan agreements 
may be excluded from current liabilities and 60-75 % 
of claims for ,etroactive subsidy pending before the 
Civil Aeronautics Board, less provision for taxes, may 
be included in current assets. 
NOTE B: 
The Company has undertaken a program calling for 
the purchase of six new Fairchild F-27 turbo-prop 
aircraft and related spare engines, equipment and 
parts for a total cost of approximately $5,340,000, 
against which advance payments of $145,786 had been 
made as of December 31, 1957. Delivery is scheduled 
for the first half 0f 1959, at which time the balance 
will be payable. 
NOTE C: 
On December 5, 1958, the Civil Aeronautics Board 
increased the temporary rate of pay for the transpor- 
tation of mail for the period from January 9, 1956 to 
June 30, 1958. As a result, the Company is entitled 
to receive additional compensation of $135,857 for 
1957 and $12,100 for 1956 and these amounts have 
been included in the accompanying financial state- 
ments. 
NOTE D~ 
The Company has applied to the Civil Aeronautics 
Board to establish a final rate for the period Janu- 
ary 9, 1956 through June 30, 1958, and has filed a 
claim for additional compensation for this period. In 
the opinion of the management, the amount claimed 
is reasonable and has been determined in accordance 
with airline subsidy practices and procedures. How- 
ever, in order to provide for possible disallowances 
by the Civil Aeronautics Board only 66 % of the 
amount claimed for the period from January 9, 
1956 to December 31, 195 7, has been included in the 
accompanying financial statements; these amounts 
were $276,590 for 195 7 and $249,660 for 1956. 
 PACIFIC AIR LINES 
NOTES TO FINANCIAL S T AT E M E N T S ( Continued) 
December 31, 1957 
NOTE E: 
During the year ended December 31, 195 7, the 
Company changed the basis of providing depreciation 
on certain flight equipment acquired during 1956 in 
order that such equipment would become fully de- 
preciated at approximately the same time as similar 
equipment previously acquired. The effect of such 
change was to increase 1957 depreciation by approxi- 
mately $50,000. 
NOTE F: 
During 1956, the Company created an insured re- 
tirement plan for its pilots. During the year ended 
December 31, 1957, income was charged with $28,476 
representing cost of current service and a portion of 
past service liability. As at _ 
December 31, 1957, the 
estimated unfunded portion of past service costs, pay- 
able over the next nine years, amounted to approxi- 
mately $167,000. 
On September 8, 1958, the Board of Directors ap- 
proved a participating retirement plan for all em- 
ployees of the Company, other than those who 
participate in the retirement plan for pilots. The plan 
is to be insured and is to be effective July 1, 1958. 
To become eligible to participate in this plan an em- 
ployee must have had five years service with the Com- 
pany and have attained the age of 25; no credits 
accrue to employees for services prior to July 1, 1958. 
The estimated cost to the Company of such plan is 
not expected to exceed $30,000 per year. 
NOTE G: 
On October 23, 1958, the Company's Articles of 
Incorporation were amended to increase the authorized 
capital stock of the Company to $20,000,000 com- 
prising 40,000,000 shares of common stock having 
a par value of 50c per share. This action was necessary 
under the laws of the State of Arizona in order to 
enable the Company to increase the limitation on 
maximum indebtedness. 
NOTE H: 
Operating expenses for the year ended December 
31, 1956, have been reclassified in accordance with the 
provisions of the new uniform system of accounts 
prescribed by the Civil Aeronautics Board, effective 
January 1, 1957. 
 ;;,6111 PACIFIC AIR l.--lNES 
RADAR Equipped 
PACIFIC 
AIR LINES