1958 
 Bert Allenberg* 
John H. Connelly 
William Goetz 
Floyd Hendrickson 
BOARD OF DIRECTORS 
Leland Hayward, Chairman 
Harry White 
GENERAL OFFICES: 
T. R. Mitchell 
Daniel O'Shea 
Walter Roche 
William B. Smullin 
San Francisco International Airport 
San Francisco 28, California 
OFFICERS: 
John H. Connelly 
T. R. Mitchell 
C. A. Myhre 
E. Roger Dahl 
R. E. Costello 
Max A. King 
Walter Roche 
Floyd Hendrickson 
President and General Manager 
Executive Vice President 
. Vice President-Finance 
. Treasurer 
Vice President-Traffic 
Vice President-Sales 
. Secretary 
Assistant Secretary 
AUDITORS 
PRICE WATERHOUSE & CO. 
120 Montgomery Street, San Francisco, California 
REGISTRAR 
Bank of America 
300 Montgomery Street 
San Francisco 
* Deceased 
TRANSFER AGENT 
Crocker-Anglo National Bank 
1 Montgomery Street 
San Francisco 
Leland Hayward. 
Chairman 
John H. Connelly 
President 
C. A. Myhre 
Vice President 
R. E. Costello 
Vice President 
Walter Roche 
Secretary 
T. R. Mitchell 
Vice President 
E. Roger Dahl 
Treasurer 
Floyd Hendrickson 
Asst. Secretary 
Max A. King 
Vice President 
 1958 
1957 
1956 
1955 
1949 
TO STOCKHOLDERS, EMPLOYEES, AND PATRONS 
PACIFIC AIR LINES, INC. 
OPERATING RESULTS 
During the year 1958 more than 351,000 passengers were carried almost 79 
million passenger miles in scheduled service, which is a 10 per cent increase 
in number of passengers carried and 12 per cent increase in passenger miles 
over the previous year. This growth was achieved in spite of the general busi- 
ness recession which was felt along the Pacific Coast during the first half of 
the year. 
During this period more than 26,000 passengers were carried between Burbank- 
Las Vegas and San Francisco/Oakland-Las Vegas, over which routes service 
was inaugurated in September, 1957. Further substantial growth in this new 
market is anticipated for the coming year. 
Shown below is a ten-year comparison which sets forth the gains your Com- 
pany has made in market penetration and indicates the growing importance of 
the Company's contribution to the economic growth and development of the 
Pacific area. 
Miles Passengers Available Passenger 
Flown Carried Seat Miles Miles 
5,384,049 351,982 147,312,486 78,331,650 
4,551,716 319,276 124,398,543 69,999,789 
4,048,797 259,522 107,084,154 55,917,208 
3,316,457 236,083 79,005,186 47,131,928 
2,419,695 114,573 50,399,055 20,947,484 
Load 
Factor 
53.2% 
56.3 
52.2 
59.7 
41.6 
 REVENUE AND EXPENSE 
Your Company's revenue, excluding mail pay (subsidy), increased 22 per cent 
over the previous year to a record high of $5,143,950. This increase was due 
primarily to the record number of passengers carried and an approximate 10 
per cent increase in passenger fares. 
As indicated in prior reports, Pacific Air Lines has been operating since Jan- 
uary 9, 1956, under a temporary Mail Rate sufficient only to cover our op- 
erating break-even need. During December 1958 negotiations were begun 
with staff members of the Civil Aeronautics Board towards establishing a 
permanent mail rate, calculated to cover the above-mentioned break-even need 
recognized as necessary by the Civil Aeronautics Board and, also, a return after 
taxes, based on your Company's investment. These negotiations were concluded 
early in 1959 and, on May 19, 1959, the Board issued an order fixing a per- 
manent rate for the period from Januay 9, 1956, through September 30, 1958. 
This order also fixed a rate for the year beginning October 1, 1958. In accord- 
ance with this order, cash funds totaling $869,419 were received on June 15, 
1959. These funds substantially improve the working capital position of your 
Company as reflected in the accompanying financial statements. 
The summary of the operating results for each of the three years ending De- 
cember 31, ( after adjustment for this revised rate) is presented below: 
YEAR ENDING DECEMBER 31 
Revenues: 1956 1957 1958 
From transportation of passengers, 
freight, mail, etc. ------------------------ $3,573,724 $4,216,726 $5,143,950 
Federal subsidy ------------------------------ 1,795,805 2,056,930 2,357,763 
$5,369,529 $6,273,656 $7,501,713 
Operating expenses ---------------------------- 5,154,251 6,044,896 7,263,997 
Operating income ------------------------------ $ 215,278 $ 228,760 $ 237,716 
Other expense, Net, ------------------------ 48,230 122,961 81,550 
$ 167,048 $ 105,799 $ 156,166 
Estimated Federal rncome taxes ______ 93,017 64,743 93,000 
Net earnings for year ----------------- $ 74,031 $ 41,056 $ 63,166 
 FLIGHT EQUIPMENT 
As previously reported to you, Pacific placed an order with Fairchild Engine 
& Airplane Company on February 15, 1957, for three F-27 jet powered 44~ 
passenger aircraft. This order was subsequently increased to 6 aircraft, spare 
Rolls Royce engines, and other related spare equipment. 
The first 3 F-27 airplanes were placed in revenue service on April 26, 1959, 
and the last 3, which were delivered in June, 1959, were placed in service as 
of July 1, 1959. 
Financing for the above aircraft was arranged through the Bank of America 
on November 21, 1958, in the amount of $5,631,000, and, in accordance with 
Public Law No. 307, $4,631,000 of this loan is guaranteed by the United 
States Government. 
Principal payments will aggregate $663,000 per year through 1963 and 
$463,000 per year for 1964 through 1968. It is anticipated that principal pay- 
ments and a substantial portion of the interest payments will be provided by 
depreciation on all the Company's aircraft and related equipment. 
Your Company's aircraft fleet now consists of 6 F-27 44-passenger jet powered 
aircraft; 7 Martin 44-passenger aircraft; 10 Douglas 28-passenger DC-3's; 
1 Lockheed 6-place aircraft; and 1 PBY 28-place amphibian. The Lockheed is 
used by Company executives, auditors, and personnel in inspections of your sta- 
tions at 28 cities. The amphibian will be used in charter and Catalina Island 
servICe. 
 ROUTE DEVELOPMENTS 
In our continuing effort to strengthen, improve, and expand our system, the 
Company was involved in three major route cases during the year: 
The PACIFIC NORTHWEST case concerned the question of additional 
local air service along the northern half of the Pacific Coast. On May 28, 
1959, a Board order was issued whereby your Company's route was ex- 
tended north to Portland and by the same order the route of West Coast 
Airlines was extended south to San Francisco. It is anticipated that service 
to Portland will be inaugurated ( with your Company's newly-acquired 
jet powered Fairchild F-27 aircraft) during the summer of 1959. 
In the PACIFIC SOUTHWEST case Civil Aeronautics Board certifica- 
tion is sought to provide non-stop service between the following pairs of 
cities: San Francisco-Los Angeles; San Francisco-Las Vegas; Burbank-Las 
Vegas; Los Angeles-Las Vegas; and Sacramento-Reno. Your Company has 
also applied to provide service to the San Joaquin Valley cities of Fresno, 
Modesto, and Visalia, as well as authority to serve the cities of San Diego, 
Palm Springs, and Long Beach. Formal hearings commenced in April, 
1959, and it is expected that a final Board decision will be reached in 
1960. 
In the SERVICE TO SANTA CATALINA case, Docket No. 7149, the 
Company requested authority to provide service to Santa Catalina from 
Burbank, Los Angeles, Long Beach, and San Diego. This application was 
rejected by an order of the Board issued in April, 1959. However, upon 
petition for reconsideration, the Civil Aeronautics Board on June 4, 1959, 
issued Exemption Order No. E-13981 authorizing inauguration of service 
from Los Angeles, Burbank, and Long Beach to Catalina on a temporary 
basis pending final decision on our petition for reconsideration. 
PERSONNEL 
The progress made by your Company during 1958 was due in a large measure 
to the efforts of Pacific's skilled and loyal employees, all of whom are now cov- 
ered by a Company pension plan. During this period Pacific reached amicable, 
collective bargaining agreements with all segments of its work force without 
loss of a single man-day due to labor disputes. These contracts provide rates 
of pay, fringe benefits, and working conditions in line with other compara- 
ble carriers. No labor problems are anticipated for the coming year. 
IN MEMORIAM 
The death of our beloved Director, Bertrum Allenberg, on November 27, 
1958, terminated a long, fruitful, and happy association. His pleasant, warm 
companionship and sage advice will be greatly missed. He not only created 
a better section of the world in which he lived, but impelled by brotherly love 
and generosity, earned the ever-lasting gratitude of those who benefit from 
his association and memory. 
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 FUTURE 
With your Company's extended routes over which our new equipment will 
operate, combined with our strengthened financial position, we look forward 
to 1959, based on results to date, as a good year for Pacific Air Lines. As the 
rapid growth of this region continues, your Company, whose routes cover the 
very heart of the Pacific area, may be expected to become an increasingly valued 
property. Growth trend curves based on historical statistical data of only our 
Martin equipment and recent F-27 passenger loads indicate possibilities of at- 
taining average annual loads of approximately 33 passengers while, at the 
same time, offering a frequency of service suitable to traffic needs, sound econ- 
omy, and maintaining an conomically realistic competitive position in our major 
markets. To meet these growth demands, additional modern equipment will be 
required in order to provide the public with adequate service. Although your 
management feels that a reasonably high frequency of flights should be offered 
where warranted, a careful balance, however, must be maintained between 
flight frequency, cost and traffic development. High frequency, brought about 
as a result of small aircraft capacity, is economically undesirable. Therefore, 
in order to avoid resorting to high flight frequencies, with the attendant in- 
crease in operating costs, aircraft of approximately 55-passenger capacity, per- 
mitting an operating load factor of 60 per cent, may be indicated in servicing 
our most dense routes, which routes, of course, offer the maximum opportunity 
for profit. The capital requirements to finance further equipment needs will 
impose underwriting problems; however, improvements in net earnings should 
also result. 
The retirement of the DC-3's begins a new era in local air service as there is 
now available ample, comparative statistical data indicating that the saleability 
of DC-3 service is not conducive to traffic development. As the transition to 
modern equipment takes place, passenger loads will increase through substan- 
tial diversion of intercity traffic presently moving via automobiles, buses, and 
trains, resulting in increased revenue and less subsidy. The traffic potential of 
our densely populated area can not be developed fully without the most modern 
equipment. 
President 
 Operating revenues: 
Passenger _______________________________ _ 
_______________________________________________ _ 
Mail ---------------------------------------------------------------------------------------- 
Charter and contract operations -------------------------------------------- 
Express, freight and excess baggage ------------------------------------ 
0th er _____________________________________________________________________________________ _ 
Federal subsidy ---------------------------------------------------------------------- 
Operating expenses: 
Flying operations ------------------------------------------------------------------ 
Direct maintenance-flight equipment -------------------------------- 
D . . fl" h . 
eprec1atton- 1g t eqmpment -------------------------------------------- 
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 loss on disposition of assets ------------------------------------------ 
Adjustment of spare parts inventory _____________________________________ _ 
Others, net ------------------------------------------------------------------------------ 
Estimated federal income taxes 
Net earnings for year------------------------------------ 
Retroactive subsidy for 1956 less related federal income tax _____ _ 
Earnings retained for use in the business: 
Balance, beginning of year ---------------------------------------------------- 
Balance, end of year -------------------------------------- 
Year ended December 31 
1958 1957 
(Note C) 
$4,603,419 $3,791,591 
122,400 116,605 
289,475 199,257 
113,321 91,684 
15,335 17,589 
5,143,950 4,216,726 
2,357,763 2,056,930 
7,501,713 6,273,656 
2,372,282 1,906,179 
1,201,281 1,014,200 
358,157 350,955 
3,931,720 3,271,334 
117,336 82,204 
44(011 351,828 
287,117 231,340 
481,018 379,739 
1,063,402 870,970 
168,822 122,900 
243,739 218,956 
429,872 424,850 
99,960 90,775 
3,332,277 2,773,562 
7,263,997 6,044,896 
237,716 228,760 
61,798 62,757 
14,377 10,172 
10,129 6,741 
43,417 
(4,754) (126) 
81,550 122,961 
156,166 105,799 
(93,000) (64,743) 
63,166 41,056 
69,021 
1,134,353 1,024,276 
$1,197,519 $1,134,353 
 ASSETS 
Current Assets: 
Cash 
Accounts receivable: 
United States Government- mail, pas- 
sengers and other -------------------------------- 
Traffic and agents ------------------------------------ 
Miscellaneous, less allowance for pos- 
sible losses (1958-$8,306; 1957- 
$13,000) ---------------------------------------------- 
Employees ----------------------------------------------- 
Inventories of materials and supplies, at 
approximate cost, not in excess of mar- 
ket ____ 
_____ 
_ 
_ 
_ 
____ 
_ 
___ 
_ 
_ 
___ 
___________ 
______ 
____________ 
_ 
_ 
_ 
__ _ 
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 ------------------------------------------------------ 
December 31 
1958 
$ 61,930 $ 
1,672,273 
211,461 
74,806 
7,672 
248,315 
41,064 
2,317,521 
4,215,728 
725,778 
4,941,506 
2,750,206 
2,191,300 
156,296 
385,786 
2,733,382 
4,321 
32,802 
32,802 
1957 
12,120 
989,727 
160,038 
26,192 
3,834 
233,379 
3'6;059 
1,461,349 
3,832,399 
678,956 
4,511,355 
2,123,072 
2,388,283 
92,695 
145,786 
2,626,764 
4,321 
37,521 
64,681 
102,202 
$5,088,026 $4,194,636 
LIABILITIES 
Current Liabilities: 
Notes payable - current instalments on 
long-term debt ---- 
0 ---- --- ---- --- - ----- - -------- - ----- - 
Accounts payable ---------------------------------------- 
Taxes collected or withheld from others ___ _ 
Accrued expenses ---------------------------------------- 
Transportation sold, not yet used or re- 
funded --------------------------------------------------- 
Estimated federal income taxes ____ 
_____________ _ 
Long-Term Debt: 
5o/o notes payable to bank-secured by 
chattel mortgage on flight equipment- 
maturing in monthly instalments to De- 
cember 15, 1963. (Note A)------------------- 
Conditional sales contract ---------------------------- 
Provision For Federal Income Taxes of Future 
Years 
Capital Stock and Surplus: 
Common stock: 
Authorized, 40_ 
,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 (Notes A 
and C) --------------------------------------------------- 
$ 
December 31 
1958 1957 
349,415 
1,439,901 
131,182 
193,334 
30,390 
349,820 
2,494,042 
735,387 
6,274 
741,661 
72,775 
335,705 
246,324 
1,197,519 
1,779,548 
$ 490,187 
917,697 
92,108 
155,960 
29,997 
172,742 
1,858,691 
515,787 
515,787 
103,776 
335,705 
246,324 
1,134,353 
1,716,382 
$5,088,026 $4,194,636 
 NOTES TO FINANCIAL STATEMENTS 
NOTE A: 
December 31, 1958 
NOTE B: 
Notes payable at December 31, 1958 comprised 
the following: 
5  % secured bank loan, under agree- 
ment dated May 1, 1957, due June 
15, 1958. Repayment extensions 
were obtained and the indebted- 
ness was liquidated on June 17, 
1959 ------------------------------------------------$ 142,000 
5  % secured bank loan, under agree- 
ment dated November 21, 1958, 
payable in monthly instalments of 
$16,700 commencing January 15, 
1959-secured by the Company's 
present flight equipment _ 
_________ 
_____ 
_ 
Conditional sales contracts ______________ 
_ 
_ 
935,787 
13,289 
$1,091,076 
In addition to the foregoing, the Company entered 
into two new bank loan agreements dated Novem- 
ber 21, 1958 to finance the purchase of new flight 
equipment ( see Note B); the particulars of the loan 
agreements are as follows: 
5  % loan, payable in monthly in- 
stalments of $5,500 for each new 
Fairchild aircraft acquired, to Jan- 
uary 15, 1960, and $33,000 month- 
ly thereafter-to be secured by 
new Fairchild aircraft and equip- 
ment ------------------------------------------------$3,964,500 
5 % loan, payable in monthly in- 
stalments of $5,550, commencing 
July 15, 1959-to be secured by 
new Fairchild aircraft and equip- 
ment. ---------------------------------------------- 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 dividencfs ( except in stock) or purchase, 
redeem or otherwise acquire for value any of 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 the November 21, 
1958 loan agreements may be excluded from current 
liabilities and 60-75 % of any claims for retroactive 
subsidy pending before the Civil Aeronautics Board, 
less provision for taxes, may be included in current 
assets. 
The Company has agreed to purchase six new Fair- 
child F-27 turbo-prop aircraft and related spare en- 
gines, equipment and parts for a total cost of approxi- 
mately $5,340,000, against which advance payments 
of $385,786 had been made as of December 31, 
1958. All aircraft and a substantial portion of the 
equipment was received during the first half of 1959. 
Payment therefor has been made principally from 
the proceeds of the bank loans as mentioned in 
Note A. 
NOTE C: 
On June 9, 1959 the Civil Aeronautics Board fixed 
the rates of compensation which the Company is to 
receive for the transportation of mail by aircraft after 
January 9, 1956. As a result of this settlement, which 
was recorded in the accounts as of December 31, 
1958 the statement of earnings for 1957 has been 
restated as follows: 
Previously As 
reported restated 
1957 earnings ____________ 
$ 103,139 $ 41,056 
Adjustment applicable 
to 1956 ________ 
__________ 125,645 69,021 
Earnings retained for 
use in the business, 
December 31, 1957, 1,253,060 1,134,353 
NOTE D: 
On September 8, 1958, the Board of Directors ap- 
proved a participating retirement plan for all employ- 
ees of the Company, other than those who participate 
in the retirement plan for pilots. The plan is insured 
and is effective July 1, 1958. To become eligible to 
participate in this plan an employee must have had 
five years service with the Company and have attained 
the age of 25; no credits accrue to employees for serv- 
ices prior to July 1, 1958. The estimated cost to the 
Company of such plan for the first policy year is 
$25,000. 
As at December 31, 1958, the estimated unfunded 
portion of past service costs, payable over the next 
eight years, under the retirement plan for pilots, 
amounted to approximately $153,000. 
NOTE E: 
In accordance with the request of the Civil Aero- 
nautics Board the Company has in 1958 transferred 
def erred overhaul costs from def erred charges to 
flight equipment and the 1957 figures have been re- 
stated in order to be comparable. The Company also 
in 1958 changed its method of providing for the 
cost of overhaul of aircraft. The result of such change 
was to increase the charge to direct maintenance by 
approximately $40,000. 
 PRICE WATERHOUSE & Co. 
To the Board of Directors of 
Pacific Air Lines, Inco 
120 MONTGOMERY STREET 
SAN FRANCISCO 4 
June 29 1959 
In our opinion, the accompanying statements present fairly 
the financial position of Pacific Air Lines, Inc o at December 31 1958 
and the results of its operations for the year, in conformity with 
generally accepted accounting principles o These principles have been 
applied on a basis consistent wi~h that of the preceding year, except 
for the change which we approve, in the basis of providing for the 
cost of overhaul of aircraft as described in Note E to the financial 
statementso Our examination of these statements was made in accord- 
ance 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 circumstanceso 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 provides fast, comfortable, economical flights 
to major vacation areas of the Pacific Southwest. 
Portland and Catalina are now easily accessible with 
Pacific's new swift service. 
For a more enjoyable vacation, arrive refreshed and 
relaxed-Above All Fly Pacific Air Lines! 
Las Vegas offers the vacationer the quietness and stillness of a desert 
night as well as excitement of the bright lights and the spinning wheel. 
The relaxing atmosphere of Avalon has 
made Catalina Island a favorite of millions. 
 DING 
BLUFF 
ICO I 
RYSVILLE 
-----~~ RENO 
RAMENTO 
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---- 
LEGEND 
- = Routes 
Non stop 
Service 
New Routes 
-Pending 
CAB Action 
Francisco-Oak 
ctions of this b 
The charm and serenity of Santa Barbara remain unchanged 
since the days of the Padres and the Conquistadores. 
 PACIFIC 
AIR LINES 
JETHAWK