Pacific Northern Airlines Annual Report 1953

annual report
1953
PACIFIC NORTHERN AIRLINES, INC.
Directors:
G. P. O'Grady
Washington, D . C.
W. E. Boeing, Jr.
Seattle, Washington
Paul Porzelt
New York, New York
R. A. Rowan
Los Angeles, California
M. B. Kirkpatrick
Anchorage, Alaska
C. W. Nelson
Seattle, Washington
A. G. Woodley
Seattle, Washington
Officers:
A. G. Woodley
H. A. Olsen
John A. Cunningham
J. H. Foster
C. W. Nelson
M. E. Diamond
Dean B. Hart
President and General Manager
Vice President - T raj f ic and Sales
Vice President - Operations
Vice President - Engineering and Maintenance
Secretary-Treasurer
Assistant Secretary
Assistant Secretary
General Counsel:
G. P. O'Grady, 1625 Eye Street, Washington, D. C.
General Offices:
1626 Exchange Building, Seattle, Washington
City Ticket Offices:
Anchorage
Homer
Kodiak
Cordova
Juneau
Portland
Kenai
Seattle
Auditors:
Lybrand, Ross Bros. & Montgomery
Transfer Agent:
Bankers Trust Company
New York, New York
Registrar:
Manufacturers Trust Company
New York, New York
Common Stock listed on the American Stock Exchange
2
To the Stockholders of
PACIFIC NORTHERN AIRLINES
its Customers and Personnel
1953 was a year of significant and successful growth. It marked the inauguration of a
new overseas route from Portland and Seattle direct to Juneau, the capital of Alaska, and
t0 other points within the Territory. System-wide services and facilities of the Company
were improved and greatly expanded during the year. With respect to earnings, 1953 was
a year of transition. Despite several temporary factors which adversely affected the econ-
omy of the Territory, the Company successfully completed its major expansion program
and achieved virtually a break-even result for the year.
EXPANSION PROGRAM
In March new capital was raised through the public sale of 360,000
shares of common stock. Funds thus obtained, together with collateral bank
loans of $1 million, were used for expanding the Company's facilities. Two
additional DC-4 aircraft were purchased, and another DC-4 was secured on
a long-term lease arrangement with an option to purchase. This brings the
Company's flight equipment to a total of five DC-4's used primarily on its
overseas routes between the United States and Alaska, and four DC-3's used
on its routes within the Territory.
The Company's services were expanded primarily on its overseas routes,
but the greater capacity afforded by DC-4 aircraft was also extended to
certain routes within Alaska. Revenue plane miles operated during 1953
amounted to 3,462,000, an increase of 36 percent over last year. Because
of the larger equipment utilized, available ton miles operated amounted to
16,141,000. a growth of 54 rercent over 1952.
AVAILABLE TON MILES
1950
1949
0 0
0 0
0 0
N It')
0
M
,.....
N N
1952
1951
0
0 0
0 0
0
00
-0 -0
CIO ~
IO
0
"'It
1953
0
0
0
~
-0
FINANCIAL
Operating revenues were $6,129,464, the highest in
the Company's history and 22 percent greater than in
1952. Notwithstanding chis marked improvement, it
is probable chat greater revenues could have been
achieved had not the following factors adversely af-
fected the general business economy of the Territory,
resulting in a substantially lower volume of air traffic
during the year: 1) Following the change of national
administration, the Defense Department in February
195 3 issued a "freeze order" on virtually all military
construction projects in Alaska, as well as elsewhere,
pending review and reapproval. This order interrupted
work on Alaskan construction contracts totaling almost
a quarter of a billion dollars. Although practically all
the major Alaskan projects were subsequently reap-
proved, the prolonged suspension interval seriously im-
paired the 1953 level of construction activity. 2) Com-
mercial fishing, one of the Territory's major industries,
1949
C")
1950
"
0
1951
1952
1953
3
experienced its worst season in recent years. 3) In July,
during the peak season for tourist travel to Alaska, the
eruption of Mount Spur blanketed the most important
tourist area in Alaska with several inches of volcanic
ash and resulted in widespread cancellations by vacation
travelers.
Total operating expenses for the year amounted to
$6,039,304. Although rising cost trends have been a
major problem co the airline industry in pose-war years,
the Company succeeded for the fifth successive year in
achieving substantial unit cost reductions by means of
greater economies, expanded airlift production, and in-
creased productivity per employee. Total operating coses
per revenue ton mile of traffic amounted to 59c in 1953,
a reduction of 9 percent from the 195 2 cost level.
Although costs per unit of service were consider-
ably reduced, the total expense of establishing the ex-
panded service was naturally greater and showed an in-
crease of 36 percent over last year. This increase relates
primarily to the operation of additional mileage with
larger equipment. The Company's operating profit of
$90,160 was reduced after interest expense and non-
operating charges of $78,154 to a net income before
taxes of $12,006. Income taxes on this amount and tax
adjustments on deferred charges to income had the ef-
fect of creating a tax liability in excess of earnings and
resulted in a net defici c of $3,731 for the year. This sac-
rifice of profits to accomplish expansion is considered
a sound investment in future growth and earnings.
UNIT COSTS
Total operating expenses per
revenue ton mile of traffic
V)
w
~
z
0
....
0
V)
z
0
~
10-
9-
8-
7-
6-
5-
4-
3-
2-
l
1949
10,169,000 ~
Total
750,000
MAIL
3,171,000
CARGO
6,248,000
PASSENGER
1950 1951 1952 1953
TON MILES OF TRAFFIC
TRAFFIC & SA.LES
The Company offered 54 percent more ton miles of service for sale to
its customers in 1953, and response to this increased airlift capacity was
eminently satisfactory. The total number of passengers carried during the
year was 78,283, an increase of 18,185 over the previous year. The average
distance flown per passenger increased to 753 miles, as compared to 704
miles in 1952. Revenue passenger miles reached a new high of 58,977,000,
a 39 percent gain over last year.
Air cargo and revenue baggage increased 76 percent to 3,171,000 ton
miles, a growth of 1,367,000 ton miles over 1952. The volume of U. S.
mail transported showed a 44 percent increase, from 522,000 to 750,000
ton miles. Total revenue traffic increased 51 percent from 6,735,000 ton
miles lase year to 10,169,000 in 1953. These substantial increases in all
categories of traffic were experienced with an overall revenue load factor
of 63 percent compared to the 1952 industry average of 59 percent:
SAFETY
Pacific Northern achieved another year of safe operation, marking the
completion of twenty-two years of air transport service without a passen-
ger fatality. In recognition of this achievement, which reflects the compe-
tence and care exercised by all personnel, the Company will again receive
the Aviation Safety Award of the National Safety Council.
1953
AVIATION
SAFETY
AWARD
TON
5
OPERATIONS & MAINTENANCE
Operations and maintenance continued at the high level of efficiency
which has characterized these functions in prior years. The Company
achieved a 97 percent system performance factor, a slight improvement
over last year's creditable record.
In Seattle, operations and traffic facilities were transferred during the
year from Boeing Field to Seattle-Tacoma Airport. In Anchorage, these
functions were transferred from Company owned premises to the new ad-
ministration building at Anchorage International Airport. All scheduled
trunkline carriers serving the Pacific Northwest now operate from Seattle-
Tacoma Airport, and virtually all of the major carriers serving Anchorage
operate from the Anchorage International Airport. Pacific Northern's new
arrangements at these airports will facilitate the convenience of passengers
transferring to other airlines and should promote the Company's further
participation in interline traffic.
PERSONNEL
During the year, Mr. Paul Porzelt, a Partner of Emanuel, Deetjen & Co.
of New York, and Mr. C. W. Nelson, Secretary-Treasurer of the Company
since 1947, were elected Directors of the Company.
Two new officers were named to the Company's Executive Staff. Mr.
John A. Cunningham was elected Vice President- Operations. Prior to
assuming this office with Pacific Northern, Mr. Cunningham was Vice Pres-
ident- Operations of Mid-Continent Airlines. Mr. J. H. Foster, who has
served the Company as Superintendent of Maintenance since 1947, was
elected Vice President-Engineering and Maintenance.
Amicable relations between Management and Personnel continued
throughout the year. Personnel of the Company increased from an average
of 372 employees during 1952 to 468 during 1953. The high morale and
loyalty of employees is reflected in the Company's excellent productivity
record for the year. The 26 per-
cent increase in number of em-
MILES OF REVENUE
PER EMPLOYEE
TRAFFIC
ployees was attended by a 51
percent increase in revenue
traffic. This productivity
20,000
15,000
10,000
5,000
1951
achievement of almost 22,000
ton miles of revenue traffic per
employee surpasses all pre-
vious records of the Company
and further improves its posi-
tion among the leaders of the
aviation industry.
6
ROUTE PROCEEDINGS
Since October 1952 the Company has had pending
before the Civil Aeronautics Board an application for
renewal of its overseas routes between the United States
and Alaska which technically expired in December
1953, along with the temporary certificates of North-
west Airlines and Alaska Airlines, and operations are
currently conducted pursuant to the Administrative Pro-
cedure Act pending final orders of the Board on renewal
applications. All other routes of the Company are per-
manently certificated for the transportation of persons,
property and mail. The Company's application also
seeks authorization to extend service on its overseas
routes to the additional points of Ketchikan and Fair-
banks, Alaska. This application was consolidated for
hearing with renewal applications of other carriers serv-
ALASKA
\
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\
\
Fairbanks \
r----..... \
I ..._~
I . \'
CANADA
I \ , ,
Skwent~o \ ' , ,
\ kogwa ~ ,
t:-::.::::::-i~:...:..:.~
- Principal services in operation
Services applied for
ing the same general area. Also incorporated in this
proceeding is an investigation instituted by the Civil
Aeronautics Board to determine whether the public
interest would be served by the merger of Pacific North-
ern Airlines and Alaska Airlines, or by some consolida-
tion of the routes of the two companies. Alaska Airlines
is an Alaskan carrier serving certain routes in the Terri-
tory not competitive to the Company and also operating
an overseas route from Portland and Seattle direct to
Fairbanks, which likewise is not directly competitive
with the Company's routes.
At the hearings in this case, which commenced in
October 1953 and will conclude some time this month,
the Company presented evidence to support its applica-
tion for renewal and extension of its present overseas
certificate. In connection with the merger investigation,
the Company presented to the Board a proposal for
merger with Alaska Airlines and outlined certain con-
ditions upon which such a merger would be acceptable
to the Company, including the condition that control of
the merged company be vested in Pacific Northern's
stockholders. The Company believes such merger would
be in the public interest, would effect substantial overall
savings, and would enhance the growth potential and
earnings of the Company.
In June 1953 a nonmail route authorization be-
tween Anchorage and Flat was eliminated from the
Company's certificate in an order of the Civil Aero-
nautics Board issued for the purpose of conforming
existing certificates to current operations. The Com-
pany had voluntarily discontinued service over this route
at the start of World War II. In the same order the
Board added Gustavus to the Company's permanent
certificate as an intermediate point on the Anchorage-
] uneau route.
CANADA
.,,,..
.,,,..
--
Seattle
UNITED STATES
Portland
7
MAIL RATE PROCEEDING
Throughout 1953 the Company received mail com-
pensation pursuant to an order of the Civil Aeronautics
Board dated May 10, 1952. The order provided total
annual compensation for transporting U. S. mail in the
amount of $1,701,924 and was related to the volume of
operations performed with the lesser number of air-
craft owned by the Company at that time. During 1953
the Company increased its investment by $2 million and
enlarged its fleet of aircraft by the addition of three
DC-4's. Plane miles operated in 1953 exceeded the
scope of operations contemplated in the Board's mail
race order by 5 7 percent. In addition to operating a
greatly expanded volume of service under a static mail
compensation formula, the Company also transported a
44 percent greater volume of U. S. mail during the year
without additional compensation. To secure equitable
adjustment of these factors, the Company on February
10, 1954, petitioned the Civil Aeronautics Board co es-
tablish annual mail compensation in the amount of
$2,673,157. If the Board is unable to establish the new
final race within 90 days from the date of the petition,
the Company has requested that an increased temporary
race be established pending the fixing of a final mail
rate.
THE YEAR AHEAD
The Company has successfully completed its program of expansion and no
change in route pattern is contemplated during 1954. The Company believes
it has sufficient equipment to perform all the services required on its present
system.
The key to substantial earnings for the Company in 1954 will be found
primarily in the future economic progress of Alaska. The Territory is on the
threshhold of significant industrial development. This is evidenced by new
pulp and timber enterprises, power projects, construction activities, petroleum
exploration, the production of coal and strategic metals, and an expanding
volume of tourist travel. Alaska's growth in population continues to be the
most rapid under the American flag. These events clearly indicate a mounting
level of general business activity and, together with the strategic importance of
Alaska to the National Defense and the National Economy, assure the Ter-
ritory of prosperous development which will be reflected in the further growth
of Pacific Northern.
Respectfully submitted,
March 5, 1954
d7~
President and General Manager
For all Americans ic is the keyscone of our defense sys-
tem, guarding the approaches co the North American continent and domi-
n ting the air routes of the world. Within the span of a few years huge
military bases and airfields have been built and manned as pare of our long
range program of strategic plans. Over a billion dollars have been invested
during rhe lase five years in these North Pacific bastions of national security.
Alaska's vast mineral resources include virtually all of the
strategic metals which are in shore supply throughout the world. Since its
purchase from Russia the Terricory has yielded over a billion dollars in min-
eral wealth from the production of gold, copper, coal, silver, and platinum
metals. Current emphasis is shifting co the mining of tin, tungsten, .fluorite,
nickel, cobalt, bismuth and chromire - merals which the United Scares is
hard pressed co supply or acquire abroad in a world divided by an Iron
Curtain. The aluminum industry is now looking to Alaska's immense power resources for
rhe development of some of the concinenc's largest metallurgical and chemical industries.
In 1952 the Aluminum Company of America announced plans for a $700 million dollar
aluminum processing plane in the Terricory. Harvey Aluminum in 1953 divulged its plans
for a second major aluminum development. The giant plant of the Aluminum Company
of Canada is already an accualicy, located only 90 miles from the Alaskan border.
Since World War II the Navy Deparcmenc has expended over $50 million
for petroleum exploration in che Arctic slopes of Alaska with several significant dis-
coveries. During 1953 a major oil exploration program was commenced in the Cor-
dova area by Phillips Petroleum, and geologic investigations are also being conducted
by ac lease five ocher major oil companies in central Alaska.
Alaska's unique timber resources are of immense economic signifi-
cance and can supply at least a million cons of newsprint annually in perpetuity, as well
as huge amounts of high alpha cellulose for cexcile and plastic planes. The new $50
million pulp plant of Kerchikan Pulp and Paper will commence production in 1954.
Ocher interests have announced plans ro construct a similar pulp plane in the Juneau
area, and ac least two additional developments are imminent possibilities.
The Territory is a magnet not only for huge irn;luscrial developments
but also for a hose of mushrooming small enterprises. New retail and service establish-
ments are being created each month co meet the insatiable demands of rapid popula-
tion growth. The construction and fishing industries annually draw thousands of
migratory workers to Alaska. Many remain co seek their permanent futures in the
Territory, attracted by the ready availability of homesteads and small farm tracts and
by the unlimited opportunities for small trades enterprises.
(
l
l
offers something for everyone
. ~
/
The lure of Alaska extends beyond the realm of business to the hundreds
of thousands who seek primarily the pleasures of travel and vacation enjoyments. Magnifi-
cent mountains and colorful glacial fjords of unsurpassed beauty rim the sea coast of Alaska.
Brilliant displays of northern lights, sweeping vistas of chains of lakes, and impressive
waterfalls enchant both business and vacation travelers.
('/
.........__,/
.
--
For the sportsman Alaska offers a virtual paradise for hunting and fresh
and sale water fishing. Winter sports enthusiasts can enjoy sun-can skiing in dazzling snow,
and skating in scenic settings of incomparable beauty.
-11
Those who travel primarily for pleasure will find Alaska
replete with historic lore dating back to Russian ownership and gold rush
days. Amateur photographers will be overwhelmed by the panoramic variety
of colorful wildflowers, bird life, wild game, totem poles, gold mining
dredges, native fishwheels, and an endless array of ocher attractions. The
summer is filled with sparkling days and with nights warmed by the mid-
night sun. Swimming, golfing, gold panning expeditions, and mountain
trail excursions are but a few of the recreational enjoyments. Sightseeing
tours to native villages will reveal pageants and costumes and folklore un-
tainted by commercialism. Trips to newly staked homesteads will impart che
strong feeling of vitality and pioneering of America's last great frontier. The
dynamic growth of the Territory's larger cities will disclose the fascinating
paradox of log cabins in the shadows of skyscrapers and game trails still flank-
ing modern highways. A vacationland still uncrowded and unspoiled, Alaska
offers unique hospitality and adequate accommodations for visitors. The
Territory will soon become -one.of the leading tourist meccas of the world.
Whether travelers to Alaska seek business
or pleasure, they will find along the
routes of Pacific Northern Airlines the
greatest scenic attractions and the areas
where most of the significant economy de-
velopment is taking place in the Territory.
ANALYSIS OF SOURCE
AND USE OF FUNDS
DURING 1953
FUNDS WERE PROVIDED BY:
Operations, after adding back charges thereto not requiring ex-
penditures of funds for depreciation ($505,594) and amorti-
zation of route extension and development ($48,090)______________ $ 549,953
Issuance of 401,665 shares of common stock________________________________ 986,570
Additional borrowings on long term obligations (net)________________ 187,077
Changes in working capital and reserve for income tax
contingencies ________ ---------------------------------------------------------------------- 193,454
Total funds available__________________________________________________________ $1,917,054
FUNDS WERE USED FOR:
Property and eq ui pmen t__ _______________________________ --------------------------------- $1,858,627
Other purposes ____________ -------------------------------------------------------------------- 58,427
Total funds used _________________________ ----------------------------------------- $1,917,054
PACIFIC NORTHERN AIRLINES, INC.
STATEMENT OF INCOME AND EARNED SURPLUS
FOR THE YEAR ENDED DECEMBER 31, 1953
OPERA TING REVENUES :
Passenger ___________________________________________________________________________________________________________________________ _
Air mail -------------------------------------------------------------------------------------------------------------------------___ _
Cargo _________________________________________________________________________________________________________________________________ _
Excess baggage ------------------------------------------------------------------------------------------------ __________________ _
Other transport service --------------------------------------------------------------------------------------------------------
Incidental revenues, net -----------------------------------------------------------------------------------------------------
Total ________________________________________________________ ------------------------------------ ___________________ _
______ _
OPERATING EXPENSES :
F 1 y i ng operations _________________________________________________________________________________________ _
Direct maintenance - ffight equipment -----------------------------------------------------
G round operations ________________ --------------------------------------------------------------------___ _
Ground and indirect maintenance ---------------------------------------------------------------
Passenger service ________________________________________________________________________ --------------_____ _
Traffic and sales _____________________________________________________________________________________________ _
Advertising and publicity ________________ ------------------------------------------------------------
Ge neral and administrative--------------------------------------------------------------------------
Depreciation:
Flight eq ui pmen t --------------------------------------------------------------------------------------
Ground eq ui pm en t _______________ ---------------------------------------------------------------------
0 pera ting income ------------------------------------------------------------------------____ _
DEDUCTIONS FROM INCOME:
Interest on long-term no ces ----------------------------------------------------------------------------
0 ch er i n t er est ___________________________________________________________________ -----------------------------
Amortization of route extension and development _
____________________________________ _
Miscellaneous, nee _________________________________________________________________________________________ _
Profit before taxes on income ------------------------------------------------------------
PROVISIONS FOR Federal and Terricorial income taxes, nee of $2,263 adjust-
ments of prior year taxes ---------------------------------------------------------------------------
Net loss ________________ ------------------------------------------------------------------------------
EARNED S URPL us, Jan u~ ry 1, 19 5 3 ____________________
_________ -----------------------------------
EARNED SURPLUS, December 31, 195 3------------------------------------------------------------
$1,879,127
751,823
715,983
541,936
439,582
607,775
106,905
490,579
425,612
79,982
48,922
3,912
20,967
4,353
The accompanying notes are an integral part of the financial statements.
$3,473,712
1,751,626
823,665
44,339
21,701
14,421
6,129,464
6,039,304
90,160
78,154
12,006
15,737
3,731
50,020
$ 46,289
11
PACIFIC NORTHERN AIRLINES, INC.
BALANCE SHEET
December 31, 1953
ASSETS
Current:
Cash on hand and demand deposits in banks _____________
____________________________ _
Receivables:
Traffic balances, including $102,178 from governmental agencies _______________ _
United States Post Office Department _______________________________________________ _
Ocher------------------------------------------------------------------------
Less, Allowance for losses ______
_____
_______________________
___________________________
__ _
Maintenance and operating supplies, at average cost _________________________________________ _
Prepaid expenses, mainly insurance ______________________________________________________
_
Total current assets _________________________________________________________________________________ _
Investments:
Cash surrender value of life insurance _________________________________________________________________ _
Aeronautical Raaio, Inc. stock, at cosc__ ____
_
______
_______________________________________________
_____ _
Property and Equipment, most of which is pledged as collateral for debt ( at cost
to the Company or predecessor):
Cost
Flight equipment ------------------------------------------------- $3,295,878
Ground equipment__ _______________________________________________________________
_ 380,886
Buildings and improvements to leased propercy ___________________ _ 213,877
Replacement parts for flight equipment _______________________________ _ 186,734
Construction work in progress _______________________________________________ _ 60,691
$4,138,066
$ 392,499
230,360
10,348
633,207
22,847
11,381
1,000
Allowances
For
Depreciation
$1,437,723
152,377
73,925
80,741
$1,744,766
Excess of Par Value of Common Stock issued at organization and amount of then recorded lia-
bilities assumed over book amount of assets acquired, plus subsequent adjustment of assumed
liabilities ---------------------------------------------------------------------------------------------------------------------
Route Extension and Development at Cose__ _________________________________________________________________________________________ _
Other Deferred Charges --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
12
$ 179,857
610,360
194,625
124,480
1,109,322
12,381
2,393,300
130,020
25,894
64,388
$3,735,305
( An Alaska Corporation J
LIABILITIES
Current:
Current portion of long-term debt _______________________ _
Accounts payable:
Trade _____________________ _
Taxes withheld or collected for benefit of taxing authorities _______________________ _
Accrued liabilities:
Salaries and wages---------------------------------~--
Insurance and miscellaneous ___________________ _
Interest __ -------------------------------------------------- - - -
Taxes other than federal income taxes _______ _
Provision for federal income taxes _______________
______________________ _
Air travel plan deposits _____________________________________________________________ _
Unearned transportation revenue ________________________ _
Total current liabilities _______ _
Reserve for income tax contingencies .. __ _
Long-Term Debt:
Chattel mortgage notes to bank ____________ _
Chattel mortgage note, for equipment purchase __________________ _
Demand notes payable to stockholders, subordinated to above mortgage
notes to bank ___ ---------------------- - - -
Less, Amount included in current liabilities ___________________________________________
__ _
Total liabilities ---------------------------------------------------- ----------------------
Commitments ( See Notes: )
CAPITAL AND SURPLUS
Common Stock, authorized 2,000,000 shares, par value $1, each, issued
and outstanding 1,068,109 shares _________________ _
Paid-in Surplus, excess of net proceeds from 401,665 shares of common
stock over par value _______________________ _
Earned Surplus, all of which is restricted; statement annexed _______________________________ _
$ 540,013
76,997
91,150
91,687
9,006
28,930
778,400
63,042
125,000
966,442
356,876
1,068,109
584,905
46,289
The accompanying notes are an integral part of the financial statements.
13
$ 356,876
617,010
220,773
17,000
8,075
64,702
1,284,436
142,000
609,566
2,036,002
1,699,303
$3,735,305
NOTES TO FINANCIAL STATEMENTS
CONSTRUCTION IN PROGRESS. The Company
has instructed the vendor co sell a prefabricated
hanger on which a deposit of $23,833, included in con-
struction in progress, was made during 1951. The de-
posit ( on a structure estimated to cost about $71,500)
may be applied against the purchase price of another
hangar, or the Company may elect co accept in full set-
tlement a refund of one-half of the deposit; however,
the Company is now working on plans under which it
is expected that the full value of the deposit will ulti-
mately be realized.
An estimated $18,000 of additional expenditures
will be necessary co complete other construction work
in progress at December 31, 1953.
LONG-TERM DEBT, in connection with which all of
the flight equipment and $101,635 of ground property
and equipment are pledged as collateral, consists of
the following :
Payable
within one N oncurrent
year portion
Chattel mortgage notes to bank,
payable $27,800 per month,
interest 5 % ( or an amount
equal to 2 % above the prime
rate for unsecured loans
charged from time to time
by certain named banks,
whichever rate is higher) ma-
tttring April 20, 1956 __________ $333,600
Chattel mortgage for equip-
ment purchase, payable in
monthly installments, inter-
est 5 % ----------------------------_ _ _ 2 3 ,2 7 6
Demand notes payable to stock-
holders, dated March 6, 1953,
interest 6% payable quar-
terly, subordinated to above
mortgage notes to bank ________ ___ _
Totals_________________________ $ 3 5 6 ,87 6
39,766
The chattel mortgage for the above bank loan con-
tains certain restrictions and limitations under which
the Company may not, among ocher things, without
written consent during the term of the loan, make
capital expenditures exceeding specified amounts, mort-
gage or pledge real or personal property now owned
or hereafter acquired, or pay dividends on its stock in
excess of 50% of its net income after December 31,
1952.
COMMITMENTS. Minimum annual rentals under
leases of two or more years' unexpired terms aggregate
$51,437. Of this amount $44,038 relates to leases
which expire within two to five years. Other leases hav-
ing an annual rental of $64,714 are presently being
negotiated. In addition, under a lease-purchase agree-
ment expiring June 5, 1955, covering an aircraft, the
Company pays $240,000 annual rental, part of which
may be applied on the purchase price. See also com-
ments on Construction in Progress.
ROUTE EXTENSION AND DEVELOPMENT. The
operating expenses shown in the accompanying state-
ment of income include amortization of the preoper-
acing costs in connection with the Portland/ Seactle-
Alaska route, but exclude amortization of the develop-
ment coses of chat route which has been charged to
income as a nonoperating expense, pursuant to the
Uniform System of Accounts prescribed by the Civil
Aeronautics Board. These coses were amortized over a
period ended December 31, 1953. The cost of route
extension and development shown in the accompanying
balance sheet represents costs incurred in connection
with the application for renewal of the certificate over
the Portland/ Seattle-Alaska route described on page 6
of the Annual Report. These coses will be amortized
during future periods.
DEPRECIATION. Due to an estimated extension of
the useful life of DC-4 aircraft and related flight equip-
ment owned at January 1, 1953, the Company is de-
preciating those assets over a period ending three years
from that date. This extension resulted in a provision
for depreciation which was $124,000 less than would
have been provided under the depreciation rates previ-
ously used, and correspondingly decreased the depreci-
ation charged to operations for 195 3. DC-4 flight
equipment acquired during 195 3 is being depreciated
over a four-year estimated life.
15
FEDERAL AND TERRITORIAL TAXES ON
INCOME. Certain expenditures are required by the
Uniform System of Accounts prescribed by the Civil
Aeronautics Board to be treated as deferred charges,
but are chargeable against income for tax purposes.
Mainly because of this required difference in accounting
treatment, the 1953 Federal and Territorial taxes on
income exceeded the Company's profit before taxes
for the year.
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.
N EW YORK
P M tl.AOELPMIA.
BOSTON
BALTI M ORE
P ITTS B UROt-4
O E T A OIT
CL E V E LA N D
C INCI NN AT I
ST LOUIS
LOUISVILLE
BfA M INGHA.M
DALLAS
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LO N DO N
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as of December 31, 1953, and the related statement of income and
earned surplus for the year then ended. It ~as 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 :.tfas made in accordance wi'th generally accepted auditing
standards, and accordingly included such tests of the accounting
records and such other auditing procedures as ~e considered neces-
sary in the circumstances.
In our opinion, the accompanying balance sheet and state-
ment of income and earned surplus present fairly the financial
position of Pacific Northern Airlines, Inc. at December 31, 1953,
and the results of it s operations for the year then ended, in con-
formity with generally accepted accounting principles applied on a
consistent basis.
~~
Seattle, Washington
March 5, 1954
a
65% OF ITS POPULATION LIVES IN THE
AVIIAOI DAYTIMI TlMPllATUIIS
City Summff Winter
Juneou 62.1 33.8
Anc:hcM'ag .. 61.4 20.9
ICodlok ....... . . , . 65.3 38.8
MODERATE CLIMATE REGION SERVED BY
PACIFIC NORTHERN AIRLINES ... THE ALASKA FLAG LINE
S.ottle.. .... . ..... 67.4 42.,
Sonfra~o 58.9 SJ.8
Ok.090. , .. . ...... 78.6 32.1
Hew York ......... 7-4.4 38.8
'''" n .J 34,J
While snow, ice and prolonged sub-zero winter
temperatures are no rarities in the hinterland
of Alaska, more than 65% of Alaska's present popu
lation of 170,000 people lives in the moderate climate
belt along Pacific Northem's routes. Juneau, Alaska's
capital, for example, has the same average daytime winter
temperatures as those prevailing in cities along the
North Atlantic seaboard. Anchorage, Alaska's largest city,
has temperatures comparable to the New England states.
This favorable climate has been an influential factor
in the building of modem and rapidly developing cities
along more than 900 miles of Pacific Northern routes
within Alaska. All of Alaska's important industries-
including fishing, mining, fur and forest prod
ucts-are of great benefit to the people in the
cities and towns in the moderate climate zone. And
it l>! in this same area that Alaska's current progress
and prospects for future growth are most apparent.
As a partner in the progress of Alaska, Pacific Northern
has served the most productive region of Alaska
with dependable air transportation for more than twenty
years. Last year Pacific Northern began direct service
daily between the Pacific Northwest and Anchorage
in comfortable, 4 engine Flagliners. Convenient
schedules to Western and Southeastern Alaska points
are maintained by several flights daily from Anchorage.
For information on Alaska or for reservations and information on Pacific Northern
Airlines, write: General Sales Office, 1626 Exchange Building, Seattle 4, Wash.
PACIFIC NORTHERN AIRLINES
---r/fe,,~~ .L~
in the progress
of ALASKA ...
Since 1932 Pacific Northern Airlines-
The Alaska Flag Line-has been an Alaskan
institution and has played an important
part in the development of the Territory. Oldest
of the Alaskan carriers still under original
management, Pacific Northern has served the
major cities of Alaska with dependable, scheduled
air transportation. Late last year Pacific Northern
started service on its direct route between
the Pacific Northwest and Alaska linking
Portland and Seattle with Anchorage,
Alaska's Jar gest city.
In the first year of operation on this
1580 mile States-Alaska route approximately
23,000 passengers have been carried in
comfortable, 4 engine Pacific Northern Flagliners
as well as thousands of tons of air cargo.
Intra-Alaska service is maintained on
convenient schedules by Pacific Northern from
Anchorage west to Bristol Bay and from
Anchorage to Kodiak via the Kenai Peninsula.
Juneau, Alaska's capital, is also served
from Anchorage with intermediate
stops at Cordova and Yakutat.
For au.tJwritatiue information on Ai<Jska or for reseroation.s and information on Pacific
Northun Airlines write: General Sales Office, 1626 Exchange Bldg., Seattle 4, Wash.
PACIFIC NORTHERN AIRLINES
~~~.L~
ONE Of THE SCHEDULED AllllNES OF THE U. S.