Pacific Northern Airlines, Inc. Annual Report to Stockholders 1952

A..NNLJA..L REPORT 1952
B CIFIC NORT_____,,._ LL :S
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Directors
Officers
PACIFIC NORTHERN AIRLINES, INC.
R. A. Rowan
G. P. O'Grady
Washington, D.C. Los Angeles, California
W. E. Boeing, Jr.
Seattle, Washington
M. B. Kirkpatrick
Anchorage, Alaska
A.G. Woodley
Seattle, Washington
A. G. Woodley President and General Manager
H. A. Olsen Vice-President, Traffic and Sales
C. A. DuRose Vice-President, Operations
Clarence W. Nelson Secretary-Treasurer
M. E. Diamond Assistant Secretary
Dean B. Hart Assistant Secretary
General Counsel: G. P. O'Grady
General Of fices:
1025 Connecticut Avenue
Washington 6, D.C.
1626 Exchange Building
Seattle 4, Washington
City Ticket Offices: Anchorage Cordova ,
Juneau
Portland
Transfer Agent
Registrar:
Auditors:
Homer
Kodiak
Bankers Trust Company,
New York, New York
Manufacturers Trust Company
New York, New York
Lybrand, Ross Bros. & Montgomery
Kenai
Seattle
2
$183,000
OPERATING
REVENUES
1946 1947 1948
1943 1944 1945
$258,000
$357,000
$1,061,000
$1,265,000
$1,471,000
1949
$1,535,000
1952
1951
1950
$1,602,000
TON MILES
1947
1948
1949
$2,364,000
$5,023,000
TOTAL
110,000
153,000
216,000
782,000
765,000
1,401,000
1,171,000
1,504,000
2,683,000
_____ 6_,735,000
CARGO MAIL
To the Stockholders of
PACIFIC NORTHERN AIRLINES
its Customers and Personnel
The year 1952 marked the period of greatest growth and
development in Pacific Northern's twenty-one years of con-
tinuous service to Alaska. New records were established in
traffic, revenues, and earnings- growth of well over 100 per
cent. Unit costs were reduced to an all time low- 25 per cent
lower than last year. To keep pace with the rapid deveropment
of the Territory of Alaska, the Company made effective
preparation for still further expansion of its services.
REVENUES AND EXPENSES
Operating revenues during the year totaled $5,023,730, an
increase of 112 per cent over 1951 and a new record for the
Company. Operating expenses totaled $4,415,697, an increase
of 89 per cent. The Company realized an operating profit of
$608,033. After taxes of $298,500 and other charges, net profit
amounted to $238,183, or $0.36 per share.
The 89 per cent increase in expenses reflects primarily the
expansion in operations required to accommodate the 208%
increase in passenger miles, 157% increase in cargo traffic,
and 139% increase in volume of mail flown during the year.
It is noteworthy that a substantial reduction was achieved in
unit costs. Total operating expenses per revenue ton mile of
traffic were 66c in 1952 compared to 88c in 1951 , an improve-
ment of 25 per cent.
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1948
UNIT COSTS
Total operating expenses
per revenue ton mile of traffic
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1949 1950 1951 1952
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NATIONAL
SAFETY COUNCIL
1952
i
AVlATIO.N
I SAFETY
AWARD
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SAFETY
The Company can again point with understandable pride
to another year of safe operation and to the completion of
twenty-one years of air transport service in which it performed
approximately 135 million passenger miles without a fatality.
This excellent record of safety can be attributed to the skill
and loyalty of both ground and flight personnel who have
consistently demonstrated a sense of responsibility to the
traveling public and who have faithfully adhered to the Com-
pany's policy of providing the best in service consistent
with safety.
OPERATIONS AND
MAINTENANCE
Pacific Northern's operations and maintenance act1v1t1es
in 1952 can best be described by results. Although traffic
increased 151 per cent and revenue plane miles increased
88 per cent, the Company succeeded in equaling last year's
performance factor of 96%. No scheduled flight was cancelled
between Alaska and the United States during the entire year,
thus preserving the unbroken record which dates back to the
inauguration of overseas service on October 1, 1951.
In January, 1952, the Company moved its main Alaskan
operating base from the military airfield in Anchorage to the
new Anchorage International Airport. Two daily round trips
were scheduled on the 633 mile route from Anchorage to
Juneau, serving Cordova and Yakutat en route; one daily
round trip was operated from Anchorage to Bristol Bay via
intermediate points, a distance of 290 miles; and two daily
schedules were operated on the 265 mile route from Anchorage
to Kodiak with en route stops at Kenai and Homer. Twice
daily service was supplied to intermediate communities on
the Kenai Peninsula.
The Company maintained daily round trip schedules over
the 1,580 mile route between Anchorage and the Seattle-
Portland coterminals. Service was increased by 58 per cent
during the month of August to accommodate peak seasonal
demands.
During the year the Company owned four DC-3 aircraft
with Pratt & Whitney R-1830 engines, two DC-4B aircraft
with Pratt & Whitney R-2000-13 engines, and one Lockheed
12 aircraft equipped with Pratt & Whitney R-975 engines.
DC-4 maintenance is performed at the Company's operating
base at Boeing Field, Seattle. All DC-3 and Lockheed main-
tenance is performed at Anchorage In ternational Airport. The
year's impressive record of on-time departures offers further
proof of the competence and care exercised in the main te-
nance and operations departments.
TRAFFIC AND SALES
New records were established in each class of traffic during
1952. Of the 72,885,000 available seat miles, 42,303,000 were
utilized by 60,098 revenue passengers, the greatest number
carried in the Company's history. Average distance flown per
passenger increased from 401 miles last year to 704 miles in
1952. The effect of the increase in number of passengers and
the greater average distance traveled per passenger resulted in
an increase of 208% in revenue passenger miles.
An increase of 157 per cent was achieved in the volume of
air cargo and revenue baggage, from 702.000 ton miles in 1951
to 1,804,000 ton miles in 1952. The amount of U. S. mail
carried showed an increase of 139 per cent, from 218,000 to
522,000 ton miles. Overall ton miles of revenue traffic increased
from 2,683,000 last year to 6,735,000 in 1952, growth of 151
per cent. The total revenue load factor in 1952 was 64.34%-
compared to 58.50% in 1951, 55.60% in 1950, and 50.65%
in 1949.
The Company's 1952 advertising program was conducted
on a national scale and created widespread and favorable
interest in Pacific Northern Airlines and in the Territory of
Alaska. Sales facilities were also notably improved and enla.rged
during the year. The new Portland sales office was completed.
To accommodate the increase in cargo business a city cargo
terminal was established in Juneau. Major improvements and
modernization of the city sales offices at Kodiak, Anchorage,
Cordova and Juneau have been completed and a new airport
terminal established at Kenai.
The record sales accomplishment for the year reflects
intensified promotional and advertising campaigns in an ex-
panding travel market. The Company's identity and unique
reputation for safety and dependability are now established
on a national scale.
I
TON MILES OF
REVENUE TRAFFIC
PER EMPLOYEE
18,105----
12,596--------
10,820-+----+----+--
.... ~
.... ~
.... ~
1950 1951 1952
OF EMPLOYEES
6
COMMUNICATIONS
During the year the Company completed installation of its
radio teletype communication system. This private line teletype
(PL T) network connects Seattle and Portland with Juneau,
Yakutat, Cordova, Anchorage, Kenai, Homer, Kodiak and
Bristol Bay. Totaling over 2,500 circuit miles, it is the largest
private communications system in existence between the United
States and Alaskan points. In operation 24 hours a day, PLT
cuts the average round trip transmission time for messages
from 3 hours to less than 10 minutes.
PERSONNEL
. During the year, Mr. M. B. Kirkpatrick of- Anchorage,
Alaska, President of Alaska Sales and Service, Inc., was
appointed a Director of the Company.
Relations between Management and Personnel continued
satisfactorily through the year. Contracts negotiated or re-
newed in 1952 covering working agreements with four groups
of employees are comparable to the average of the industry.
The Company's staff of personnel increased from 213 during
1951 to 372 during 1952. It is significant to relate this increase
of only 75 per cent in number of employees to the 151 per
cent increase in revenue traffic flown during the year. The
loyalty, skill, and individual effort of the Company's personnel
are best evidenced by this comparison. In achieving over
18,000 ton miles of revenue traffic per employee in 1952, the
Company not only improved upon its creditable record of last
year by 44 per cent but also established a level of efficiency
which ranks the Company among the leading carriers in the
aviation industry.
139
213
372
THE YEAR AHEAD
A $2 million expansion program is the keynote of the
Company's 1953 operations. At the special stockholders' meet-
ing in January, you were advised that the Company planned
to finance this expansion by stock subscriptions and collateral
banking arrangements. On March 3, 1953, the Company made
a public offering through Emanuel Deetjen & Co. and Hayden
Stone & Co. of New York of 360,000 shares of its common
stock at $3 per share which was fully subscribed with nation-
wide distribution. Concurrently, credit arrangements were
negotiated with three West Coast banks for $1,000,000. In
addition, the Company issued 41,665 shares of stock at $3 per
share in part payment of a loan previously made by three
Directors in the amount of $250,000 and extended the balance
by notes subordinated to the bank credit. The Company
designated the Bankers Trust Company of New York as
Transfer Agent and the Manufacturers Trust Company of
New York as Registrar. The bank loan was arranged through
The Pacific National Bank of Seattle. Participating in this
credit were The Farmers & Merchants National Bank of Los
Angeles and The United States National Bank of Portland.
These funds will be used to expand the Company's system-
wide services and to inaugurate a new overseas route between
Seattle and Portland direct to Juneau, Y aku tat and Cordova.
The Company has completed purchase arrangements for two
additional DC-4B aircraft and it is expected that the new
services will be inaugurated on or about May 15, 1953.
With this program of expansion the Company stands to
participate in a fuller degree in the development of Alaska
and to keep abreast of the increasing economy of the Territory
which has been substantial and has had a healthy growth in
the postwar period. As a partner in the progress of Alaska1
Pacific Northern's sole responsibility is the continuing develop-
ment of air transportation service for the Territory. This will
continue to be the aim of the Company. Because Pacific
Northern is not burdened by considerations and problems of
unrelated world routes, the Company is in an enviable position
to devote its entire energy toward the development of this
service.
Respectfully submitted,
April 3, 1953
General Ma nag er
7
PACIFIC NORTHERN AIRLINES
and the Territory of A laska
grew up together. In 1932 Anchorage was still a log
cabin village with approximately 2,400 inhabitants.
The Territory's economy, such as it was, related
mostly to mining, fishing and trapping, with weather
determining when these activities could be pursued.
Dog teams were a basic means of travel, for aviation
was still in its infancy. The vast Territory of Alaska
- truly America's last great frontier- lacked only
development, not resources.
Pacific Northern's president, A. G. Woodley,
started an aviation business in Alaska in 1932,
offering air service to virtually every village in the
entire Territory. Early flying was performed in
single engine five passenger planes, generally on
pontoons, since modern airfields did not exist and
landing areas of any nature were Jew and far between.
Weather reporting facilities were nonexistent and
flights destined over the vast stretches of wilderness
depended on the ingenuity and resourcefulness of
the pilot.
B From the outset Woodley Airways mirrored the
progress of aviation and the growth of Alaska.Because
of its demonstrated speed and efficiency the airplane
soon won mail contracts from the dog teams, and a
pattern of scheduled service was in the process of
developing. New air trails were blazed from Anchor-
age to Juneau, Kodiak, Kenai Peninsula, and
Bristol Bay areas, and to the interior of Alaska-
trails that became permanently certificated air routes
of Woodley Airways under the Civil Aeronautics
Act of 1938.
World War II gave tremendous impetus to the
progress of aviation and the Territory. New airfields,
comparable to the largest in the Continental United
States, were built along the 10,000 miles of air routes
in Alaska, and a modern network of airway facilities,
second to none, was established by the Civil Aeronau-
tics Administration. As larger airfields were built,
Pacific Northern was the first of the Alaskan air
carriers to employ new multi- engine aircraft of greater
speed and range equipped for all-weather flying.
Instrument flying was pioneered on the Anchorage-
Kodiak and Anchorage-Juneau routes, making pos-
sible the completion of flights on schedule which
previously had been delayed several days waiting for
clear flying weather.
The Territory's economic development during the
decade of the 1940's was swift and sure, clearly
demonstrating the need for additional air service to
the Pacific Northwest. Population increased by 77%,
the most rapid rate of growth under the U. S. flag.
Basic year-round industries took root and proved
themselves economically sound. Agriculture grew
apace. Hundreds of millions were expended on hous-
ing throughout the Territory. Fourteen story apart-
ment houses sprang up in Anchorage to replace
yesterday's log cabins. Huge permanent military
air bases were built and manned. Hydroelectric
resources were inventoried and harnessed. A $47
million pulp m'ill was constructed with private capital
and a $700 million aluminum plant was projected.
Paved highways obliterated dog team trails.
Matching the Territory's dynamic growth, Pacific
Northern during the decade of the 1940's achieved
well over a ten-fold increase in operating revenues
and maintained its unbroken record of profitable
operations. PNA was the first Alaskan air carrier
to be awarded a scheduled air carrier operating cer-
tificate by the CAA. Woodley remained Pacific
Northern's chief executive, as he had been from the
start and still is today. Convinced that bush flying
could not be mixed with scheduled trunkline opera-
tions, he focused his attention on developing his
three mainline routes emanating from Anchorage to
Kodiak, Bristol Bay and Juneau. Because he real1zed
the desirability of having direct service between his
Alaskan points and the United States, he petitioned
the Civil Aeronautics Board for authority to establish
an air route to the Pacific Northwest. This valuable
franchise was granted by the CAB and service was
inaugurated by October 19 51.
Despite their impressive growth in recent years,
both Pacific Northern and the Territory appear only
now to have reached the threshold of significant
expansion. P NA 's routes embrace the areas in
Alaska where the bulk of the population is concen-
trated and where most of the present and potential
economt"c development is taking place. The nature of
the terrain and the distances involved dictate that
Alaskans must continue to rely upon flying as their
basic mode of travel. Because they share the mutual
confidence which stems from growing up together,
Pacific Northern looks to the Territory for its future,
and Alaskans turn to P NA for the best in service
consistent with safety.
a
DC-3 FLAGLINER IN SERVICE ON ALASKA ROUTES
t
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PACIFIC NORTHERN DC-4 FLAGLINER IN STATES-ALASKA SERVICE
9
LOOK NORTH and GO WEST are two challenging by-
words of American history with more in common than
points of the compass. The growth of Alaska in the 20th
Century parallels in many ways the settlement of the West
in the last century. Alaska like so much of the West
represents the same lure that caused previous generations
of Americans to move long distances to build new cities
in wilderness areas. Prairie schooners and river boats
carried only the beginning of the flood tide of settlers.
Until railroads linked the West with the eastern seaboard,
the greatest period of the westward movement could not
take place. In Alaska, airlines have provided the transpor-
tation and communications required by a vast area one-fifth
the si:ze of the U. S. Surface transportation by ship, rail,
and dog team could do no more than create a mere fringe
of settlements in the Territory in nearly a hundred years
.
The airplane in only one generation has given to Alaska
/.
F(ltf'banks '1. ~ /
~~\'- /.
~\, ./
. / ...
Yak~t' ...
not only the life-blood of commerce, but an identity and
community of interest which now form the basis for the
Territory's greatest period of development. World interest
is now focused upon Alaska's vast resources and upon
its strategic location astride the crossroads of world air
routes. As a pioneer in the air age of Alaska, Pacific
Northern Airlines stakes its future on the conviction that
Alaska's progress will equal and eventually surpass the
rate of growth of any other area in American history.
PACIFIC NORTHERN AIRLINES
Legend
PNA scheduled service ...... .#
Connecting air carrier service .. - - - - - - -
Cities served by PN A ................
*
,/
,/
ALASKA
12
CIVIL AERONAUTICS BOARD
On M ay 16, 1952, th ivil Aeronauti s Board established final
mail pay for the ompany's operations from 1942 through 1951. All of
the servic s operated by Pacific Northern during the entire ten year
p riod were r cognized by the Board to be "of the character a nd quality
r quired for the commerce of the United States, the Postal Service,
and the national defense." Over 98 per cent of the Company's reported
expen es w re recognized for rate making purposes, and the Board
found no adjustments necessary to reported revenues. The establish-
ment of final mail compensation for past operations is reflected in the
financial statem nts which a company this report.
In the same pro eeding the Board fixed a final mail rate for the
ompany's future operations beginning January 1, 1952. The rate is
designed to yield annual mail revenue of $1,701 ,924 if the Company
su ceeds in maintaining a performance factor of 94% with reference
to its base mileage. Total mail pay may be reduced or increased in
dire t proportion to the Company's actual performance factor. With a
performan e factor of 96% in 1952, the Company earned $1,740,436
in mail revenue.
ROUTE EXTENSION
APPLICATIONS
All of th Company's routes within Alaska were permanently
certificated by the Civil Aeronautics Board during the period from
1942 to 1946. In October 1952 the Company applied to the Board
for renewal and extension of its temporary route between Alaska and
the nited States. The application requested either permanent certifi-
cation or renewal for an add itional period of ten years. Authorization
was also requested to serve Kodiak, Ketchikan, Gustavus and Skag-
way as additional intermediate points, and to add Fairbanks as a
coterminal with Anchorage. Hearing on the application will be held
during the summer of 1953. In view of the Territory's substantial
growth during the past five years, the Company is firmly convinced
that its present overseas route will be renewed. It is hoped that
certification will be made permanent in order to eliminate further
costly and time consuming proceedings before the Board. Prospects
are good for extending the route into Ket hikan and Fairbanks and
for including service to Gustavus, Skagway and Kodiak.
- Principal services in operation
Services not yet inaugurated
Services suspended
Services applied for
CANADA
Pacific Northern Airlines, Inc.
STATEMENTS OF INCOME AND EARNED SURPLUS
for the year ended December 31, 1952
OPERA TING REVENUES :
Passenger .. . . . . . . ... ..... .. . . .. . .. . . . . ... . . . .. . .. . ....... . ... . .
Air mail (Note 4) . . . . . ... . .. . . . .. . . . . . .. .. . . . . . . . . . . . ...... . .. . .
Cargo . . ... .. .. . . . . . . ... ... . . ... .... . .. . ... .... . .. . .... ....... . .
Excess baggage .... .. . ............ .. .. . .. . .... . ... ... .. ........ . .
Other transport service . . . .... .. . .. .. . . .. . . . .. .... . . ... . . ... . . . .. .
Incidental revenues, net. ... .. . .. . ... . . .. . ... .. .. . . .. . .. .. .. .... . .
Total . . ... . ...... . ...... . .. . . .. . .... ..... . ... . . ... . .. . .. .
OPE RATING EXPENSES:
Flying operations . .. .... . ..... ... . . ... . . .. . . . .. .. . .
Direct maintenance-flight equipment .. . .. ... ... . .. . .
Ground operations . . . ... ... .. . .. .. . .. . ... . ........ .
Ground and indirect maintena nce ...... ... .. . .. . . .. . .
Passenger service .. . . . . . .. . . . .. . . . .. . . . . ..... . .. .. .
Traffic and sales . ... .. .. .. . .... . ....... ... ........ .
Advertising and publicity .. . . ... . . . . .. . .. . . .. .. . .. . .
General and administrative . .. . . .... . ...... ....... . . .
Depreciation:
Flight equipment . . . .. . . ... . . .... .. .. . . ... . ..... .
$1,141,590.34
618,158.19
515,754.77
543,323.79
329,992.33
436,857.40
57,303.77
382,634.30
303,931.66
$2,712,861.64
1,740,435.99
495,185.47
44,690.05
15,516.88
15,040.05
5,023,730.08
Ground equipment . ... . .. . ... ... . . . . . . . .. . . . .. .. . 86,150.50 4,415,697.05
Operating income .... . .. . ... . . .. . . . . . . . .. . . :- . .. ..... . . ... . .
DEDUCTIONS FROM INCOME:
Interest on long-term notes . . .. ... . . ..... . .... . . .. .. .
Other interest . . . .. .. .. .... ...... . .. .. . .... . . . . . . . .
Amortization of route extension and development (Note 6)
Miscellaneous, net (credit) . .. . . . ... . .. . . . . ... .. ... . .
38,807.11
14,731.67
20,975.04
(3,164.31)
Profit before taxes on income . .... . . . . . . . . ... . . .. . . .. .. . . . .. .
PROVISIONS FOR TAXES ON INCOME:
Federal income taxes; no excess profits taxes payable . . .
State and territorial ..... .. . . .. .. . .... . . . . ..... . . . . .
283,800.00
14,700.00
Net income ... .. . . ... . .... .. ... . ...... . . ....... , ....... . .
EARNED SURPLUS, Jan. 1, 1952 . ..... .. . ..... . .. . .. . .. .
Net additional mail pay revenues of prior years (Note 4).
NET CHARGE resulting from adjustment of mail revenues
4,225.92
13,570.37
applicable to operations of predecessor (Note 4) . .. ... . . .. . . . .. . .. .
EARNED SURPLUS, Dec. 31, 1952 ... . ....... . . . . . . .. .. .. .. . . .. . . . . .. . . $
The accompanying notes are an integral part of the financial statements
608,033.03
71,349.51
536,683.52
298,500.00
238,183.52
17,796.29
255,979.81
205,960.25
50,019.56
13
PACIFIC NORTHERN
BALANCE SHEET
December 31, 1952
ASSETS
Current:
Cash on hand and demand deposits in banks .... . ... . ................ ... ... . . .
Receivables :
Traffic balances, including $121,130.15 from governmental agencies
United States Post Office Department ........... . .......... .
Other .......... . ..... .. . . .. .... .... .. . ... . .. ............ .
Less, Allowance for losses ... . ... . ... . . . . . . . ... . . . ........ .
$ 374,527.25
301,432.02
7,863.37
683,822.64
27,489.74
Maintenance and operating supplies, at average cost ........ . ............. .. . .
Prepaid expenses, mainly insurance ......... . . . . . . . . . ... . . . ........... .. ... .
Total current assets . ....... . .... .. ....... . ... .. .. .. . ... . ... . . ... . . . . .
Investments:
Cash surrender value of life insurance .. . ... . .. . ... . . ... . . .. . .. .
Aeronautical Radio, Inc. stock, at cost. ...... . ...... . . . ..... . . .
Property and Equipment, most of which is pledged as collateral for
debt; see Note 3 (at cost to the Company or predecessor):
Flight equipment. .. . ...... . ........ . . . .. ... . .
Ground equipment ............ . .. . . ... .. . ... .
Buildings and improvements to leased property . . .
Replacement parts for flight equipment ....... . .
Construction work in progress (Note 2) ........ .
Cost
$1,641,904.60
333,624.15
168,779.12
126,985.58
23,833.33
$2,295,126.78
8,078.48
1,000.00
Allowances
for
Depreciation
$1,029,594.25
109,252.47
47 ,985.11
68,027 .84
$1,254,859.67
Excess of Par Value of Common Stock issued at organization and amount of then
recorded liabilities assumed over b:>ok amount of assets acquired, plus subsequent
adjustment of assumed liabilities .......... . ... . .. . . . . . .... . ...... . .. ... . .. . .
Unamortized Cost of Route Extension and Development (Note 6) ......... . . .. ... .
Other Def erred Charges .................. . .... . .. .. ...... . ... .. .. . . . ..... .. . .
The accompanying notes are an integral part of the financial statements.
14
$ 249,495.40
656,332.90
109,135.17
36,232.18
1,051,195.65
9,078.48
1,040, 2 6 7. 11
130,020.01
48,090.00
35,158.23
$2,313,809.48
AIRLINES, INC.
(An Alaska Corporation)
LIABILITIES
Current:
Current portion of long-term debt (Note 3) .. .... ...... . ............... . ..... .
Accounts payable:
Trade . . . . . . . . . . . . . . . . . ............. .
Taxes withheld or collected for benefit of taxing authorities . .
$ 316,300.51
48,072.92
Accrued liabilities:
Salaries and wages ......... . .............................. .
Insurance and miscellaneous . ..... . .................. . ..... .
Interest .... . ..... .. ......... . .. . . . ............ .. ... . .... .
Taxes other than federal income taxes . . ........... .. ........ .
85 ,634.03
49,261.01
11,293.38
27,833.52
Provision for federal income taxes ...... . ......... .. ..... . ..... . ............ .
Provision for unpaid balance of mail pay refund to United States Post Office (Note 4)
Air travel plan deposits ....... . ...... . .... . . . ........... .. ............... . .
Unearned transportation revenue .. . ...... . ............ . ..... . .............. .
Total current liabilities .......... . ....... . ............. . . . .... .. ..... .
Long-Term Debt (Note 3):
Chattel mortgage note to bank .................. . . . .... . .... .
Chattel mortgage notes, others ........ . . .. .. .. ........ . .... .
Demand notes payable to stockholders, subordinated to above mortgage
note to bank .. .... . .. . ..... . .......... . .... . ..... . ... .. .. .
278,000.00
86,250.16
364,250.16
250,000.00
614,250.16
Less, Amount included in current liabilities . . . . . . . . . . . . . . . . . 191,761.48
Total liabilities .... . .. .. .. . .. . ....... . ...... . . . ....... . ... .
Commitments (Note 5):
CAPITAL AND SURPLUS
Common Stock, authorized 2,000,000 shares, par value $1, each, issued
and outstanding 6.66,444 shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 666,444.00
Earned Surplus, all of which is restricted; see Note 3 and statement
annexed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,019.56
The accompanying notes are an integral part of the financial statements
$ 191,761 .48
364,373.43
174,021.94
283,800.00
107,359.00
5,525.00
48,016.39
1,174,857.24
422,488.68
1,597,345.92
716,463.56
$2,313,809.48
16
NOTES TO
FINANCIAL STATEMENTS
1
2
3
The Company is negotiating with underwriters for the purpose
of selling approximately 360,000 shares of common stock at
a price that will net the Company about $900,000, and is
also negotiating with banks for loans that will provide about
$750,000 of additional funds. It is planned that a large part
of the funds from these sources will be utilized in the acqui-
sition of two Douglas DC-4 aircraft needed to inaugurate
additional service between certain Alaska points and Port-
land-Seattle.
The Company has instructed the vendor to sell a prefabricated
hangar on which a deposit of $23,833.33, shown as con-
struction in progress, was made during 1951. The deposit
(on a structure estimated to cost about $71,500) is to be
applied against the purchase price of another hangar, or
the Company may elect to accept in full settlement a refund
of one half of the deposit.
Long-term debts, in connection with which substantially all of
the flight equipment and $101,533.98 of ground property
and equipment are pledged as ollateral, consist of the
following:
Chattel mortgage note lo bank, face amount
$500,000.00 , payable $13,900.00 per month, in-
terest 5% (or an amount equal lo 2% above the
prime rate for unsecured loans charged from
time to time by certain named banks, whichever
rate is higher) maturing A ugusl 20, 195.J.
Chattel mortgages for equipment purchases, payable
Payable
Within
One Year
Noncurrent
Portion
$166,800.00 $111,200.00
in monthly ins/allmenls, interest 5% . 24,961.48 61,288.68
Demand notes payable lo stockholders, dated Sep-
tember 26, 1951, interest 6% payable quarterly
subordinated lo above mortgage note lo bank . . . 250,000.00(a)
$191,761 .48 $422,488.68
(a) If stock referred to in Note 1 is sold, one-half of these notes will be
satisfied in shares of stock at the initial public offering price per share.
4
s
6
The chattel mortgage for the above bank loan contains
certain restrictions and limitations, among which are the
following: (1) the Company may not, without written
consent, mortgage or pledge real or personal property owned
on August 13, 1951, or pay any dividends on its presently
outstanding capital stock, (2) capital expenditures after
1951 are limited to $300,000.00 annually, except those out
of proceeds from sales of capital stock.
The Company and its predecessors have carried mail for the
United States Post Office Department since December 1942
at temporary rates. Permanent rate were established in
May 1952, effective as of December 31, 1951. by the Civil
Aeronautics Board, and as a result of th order fixing such
rates the Company is required to make a net payment
tentatively determined to be 192,389.88 for the period
from December, 1942 to December 31, 1951 to the Post
Office Department as adjustment of the temporary rates.
Of the net payment ($107,359.00 of which remained repay-
able at December 31, 1952) a credit of $13,570.37 has been
computed to be applicable to the operations of the corpora-
tion in 1951 and prior years, and a charge of $205,960.25
has been made directly to earned surplus for the portion
applicable to operations of predecessors.
Minimum annual rentals under leases of two or more years
unexpired terms aggregate $34,778. Of this amount, $27,244
relates to leases which expire within two to five years.
The operating expenses shown in the accompanying statement
of income include amortization of the preoperating costs in
connection with the Portland /Seattle-Alaska route, but
exclude amortization of the development costs of that route
which has been charged to income as a nonoperating expense,
pursuant to the uniform system of accounts prescribed by
the Civi l Aeronautics Board. These costs are being amortized
over a period ending December 31, 1953.
17
18
FUNDS WERE PROVIDED BY:
Operations:
Net profits . . . . . . . . . . . . . . . . . . . . . ..... .
Depreciation charged against profits .. .
Route extension and development
paid in prior years ...... . ......... .
$238,184
390,081
48,098
Analysis of source
ana se of Funds
during 1952
Mortgage loan for purchase of equipment ...... . . .. .... .... . .... . ... . . .
$676,363
82,083
30,462
$788,908
Sale of Merrill Field and other properties .. . ... .
Total funds available .. .. . . . . . ......... .
FUNDS WERE USED FOR:
Purchase of additional equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $269,985
Payments on bank loans and equipment purchase contracts . . . . . . . . . . . . . . 183,466
Increase in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,970
Repayment to Post Office Department pursuant to final
retroactive mail rate order .......... . .. . ........ . . . . . . . . .... . . . . .. .
Payment of expenses in connection
with issue of additional capital stock
85,031
10,456
Total funds used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $788,908
AUDITORS' CERTIFICATION
LYBRAND. Ross BRos. & MONTGOMERY
CERTIFIED PUBLIC ACCOUNTANTS
SKINNER BUILDING
SEATTLE I
Pacific Northern Airlines, Inc.
Seattle, Washington
We have examined the balance sheet of
PACIFIC NORTHERN AIRLINES, INC.
NEW YORK
PHtLADf:LPHIA
CH1C.-,GO
eoSTON
CLEVr:LAN O
CINCI N NAT I
ST. LOUIS
DALLAS
HOUSTON
S"N ,-A.-.NCISCO
LOS ANGELES
LON OOf',j
PARIS
as of December 31, 1952, and the related statement of income and
earned surplus for the year then ended. It was not practicable to
confirm the balances receivable from the United States Post Office
Department and other governmental agencies . We satisfied ourselves
as to these balances by means of other auditing procedures. Our
examination 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 neces-
sary in the circumstances.
In our opinion, the accompanying balance sheet and statement
of income and earned surplus present fairly the financial position
of Pacific Northern Airlines, Inc. at December 31, 1952, and the
results of its operations for the year then ended, in conformity with
generally accepted accounting principles applied on a consistent
basis.
Seattle, washington
February 21, 1953
20
for business and pleasure trips
~
NON STOP SERVICE BY ~'
4 ENGINE PNA ~ ~
Now that another heavy travel year for Alaska has ended, it's wise
to make definite plaRs for both business and pleasure travel to
Alaska during 1953. From all indications it appears that the coming
year will see the greatest number yet of Alaska-bound passengers,
A glance at the map will convince you that some of the world's
finest hunting and fishing _
country lies directly along Pacific
Northern's extensive Alaska air system. You'll have every
inclination to combine healthful outdoor recreation with the
business opportunities created by Alaska's recent growth.
Make your space reservations soon for your non stop flight by comfort-
able 4 engine Pacific Northern Flagliner to Anchorage, Alaska's
largest city. Convenient connections are maintained by Pacific Northern
from Anchorage to Western and to Southeastern Alaska points.
PACIFIC NORTHERN AIRLINES
>,
=-~z*=
For reservations
and information
call your nearest
Pacific Northern
ticket office or see
your travel agent.
ONE OF THE SCHEDULED
AIRLINES OF THE U. S.