ANN 
PACIFIC NORTHERN AIRLINES 
~~~_L_~ 
 PACIFIC NORTHERN AIRLINES, INC. 
Directors 
G. P. O'GRADY, WASHINGTON, D. C. 
JOHN A. CUNNINGHAM, 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, PRESIDENT AND GENERAL MANAGER 
H. A. OLSEN, VICE PRESID.ENT-TRAFFIC AND SALES 
JOHN A. CUNNINGHAM, VICE PRESIDENT-OPERATIONS 
J. H. FOSTER, VICE PRESIDENT-ENGINEERING AND MAINTENANCE 
FELIX AUBUCHON, VICE PRESIDENT-ALASKA OPERATIONS 
C. W. NELSON, SECRETARY-TREASURER 
M. E. DIAMOND, ASSISTANT SECRETARY 
DEAN B. HART, 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 KODIAK JUNEAU 
HOMER CORDOVA PORTLAND 
KETCHIKAN 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 and the 
Pacific Coast Stock Exchange 
 President's Report 
TO THE STOCKHOLDERS OF PACIFIC NORTHERN AIRLINES: 
1957 was a successful year in all respects. The most significant achievement was 
the award of a permanent franchise for overseas operations, pursuant to a special 
act of Congress. All the routes of Pacific Northern, both within Alaska and between 
the United States and Alaska, are now permanently certificated for persons, property 
and mail. This was a goal of the utmost importance which had been sought for many 
years. The Company now enjoys permanent security of its routes and is able to 
plan effectively its long range development unhampered by uncertainty and time- 
consuming and costly certificate renewal proceedings. 
The 85th Congress also enacted other aviation statutes which offer material bene- 
fits to Pacific Northern. During the 1957 session, legislation was passed authorizing 
the Government to guarantee loans obtained by airlines for the purchase of airline 
equipment up to a maximum for any one carrier of $5 million. Early in 1958 another 
bill was enacted permitting airlines to retain capital gains realized upon retirement 
of flight equipment for reinvestment in new types of aircraft. These statutes should 
greatly facilitate the Company's long range financing plans for eventual replace- 
ment of the Constellation fleet with turbo-prop or jet aircraft. 
Operating profits in 1957 amounted to $673,000 after depreciation of $644,000. 
This resulted in net income of $261,000 after income taxes and nonoperating expenses 
totaling $412,000. Total revenues of $10 million were the highest in the Company's 
history, continuing the trend which has resulted in the doubling of revenues during 
the past five years. 
1 
 2 
As the dominant airline in the Alaska market, Pacific Northern continued to pro- 
vide more service to the Territory than any other carrier and established new traffic 
highs in 1957. The Company's revenue passenger miles, 36% larger than its next 
ranking competitor, totaled almost 106 million, a gain of 15% over last year. Total 
revenue ton-miles were in excess of 15 million, up 10% over 1956. Mail traffic in- 
creased to 1,121,000 ton-miles, a gain of 24% over last year. Cargo ton-miles of 
2,985,000 were lower than in 1956, but the effect upon total revenues was only a 
fraction of one per cent. 
The following tabulation summarizes Pacific Northern's growth since 1952, which 
was the first full year of its overseas operations: 
Calendar Total Revenue Revenue 
Year Revenues Passenger Miles Ton-Miles 
1957 $10,030,000 105,820,000 15,564,000 
1956 9,608,000 92,103,000 14,211,000 
1955 7,821,000 76,037,000 12,658,000 
1954 6,476,000 59,547,000 10,426,000 
1953 6,129,000 58,912,000 10,157,000 
1952 5,024,000 42,224,000 6,723,000 
The year was noteworthy in many other respects. The Company continued its 
unbroken record of 26 years of operation without a passenger fatality and again 
qualifies for the National Safety Council award. A fourth Lockheed Constellation 
was purchased and placed in revenue service in June of 1957 pursuant to financing 
arrangements which are described in accompanying notes to the financial statements 
of this report. A retirement income plan for flight officers of the Company was put 
into effect on February 1, 1957, and a similar retirement plan was made available 
on January 1, 1958, to all employees not covered by collective bargaining agree- 
ments. The group insurance plan was revised on July 1, 1957, to provide much more 
liberal hospital and medical benefits to employees and their families. 
 The Company's stock, which has been listed on the American Stock Exchange 
since 1953, was listed on the Pacific Coast Stock Exchange on August 1, 1957. 
In January of 1958, the Civil Aeronautics Board ordered an investigation to de- 
termine whether the four airlines now operating between the United States and 
Alaska could be reduced in number by merger, consolidation, route transfer, sus- 
pension, or similar arrangements. The C.A.B.'s power to accomplish any such result 
is extremely limited and, accordingly, the Board has stated that it prefers to deal 
with the problem on the basis of voluntary proposals from the airlines. In addition 
to Pacific Northern, the carriers included in the investigation are Pan American 
World Airways, Alaska Airlines and Northwest Airlines. Although this proceeding 
will probably extend over a period of several years before final conclusions are 
reached, Pacific Northern welcomes the investigation and is in complete accord 
with the Board's objectives. It is obvious that the elimination of one or two of the 
carriers now serving the States-Alaska market would greatly strengthen the econo- 
mic position of the remaining airlines and would probably enable them to conduct 
highly profitable operations without Government subsidy. As the largest and most 
economically situated carrier in the Alaska market, Pacific Northern is confident 
that its own long range development will be greatly enhanced if conclusive action 
is taken with respect to any of the other carriers. 
The outlook for 1958 is highly promising. Significant activities are now taking 
place in Alaska in connection with tourism, petroleum exploration, pulp and timber 
development and military defense construction. There appears to be no question 
that the Territory's rapid economic development will continue at an accelerated 
pace and that these activities will be directly reflected in Pacific Northern's further 
substantial growth. 
A. G. WOODLEY 
PRESIDENT AND 
GENERAL MANAGER 
3 
 4 
AUDITOR'S REPORT 
LYBRAND, Ross BROS. c.. MONTGOMERY 
CERTIFIED PUBI.I C AC C OU N TANTS 
Pacific Northern Airlines, Inc. 
Seattle, Washington 
We have examined the balance sheet of 
PACIFIC NORTHERN AIRLINES, INC. 
,tQCll. " 0 " O 
LOUI SV LI.C LOS ANGl!:Llt S 
S U TT1.C 
COOPERS C. LYBRA N D 
as of December 31, 1957, and the related statement of income and 
retained earnings for the year then ended. It was not practicable 
to confirm the balances receivable from the United States 
Government. We satisfied ourselves as to these balances by means 
of other auditing procedures. Our examination 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 circumstances. 
Changes in accounting methods prescribed by the Civil 
Aeronautics Board in connection with the revised system of accounts 
for air carriers effective January 1, 1957 are reflected in the 
accompanying statements as explained in the financial comments. 
In our opinion, the accompanying balance sheet and 
3tatement of income and retained earnings present fairly the 
financial position of Pacific Northern Airlines, Inc. at 
December 31, 1957, and the results of its operations for the year 
then ended, in conformity with generally accepted accounting 
principles, applied on a consistent basis except for the changes 
referred to in the preceding paragraph. 
A.4. ::-:-t .. ~1o... 
Seattle, W a s h i n g t o n ~  
fY6-p-- 
March 26, 1958 
 PACIFIC NORTHERN AIRLINES, INC. (AN ALASKA CORPORATION) 
STATEMENT OF INCOME AND RETAINED EARNINGS 
FOR THE YEAR ENDED DECEMBER 31, 1957 
OPERATING REVENUES: 
Passenger 
Air mail 
Cargo and excess baggage 
Other transport service 
Incidental revenues, net 
Total 
OPERATING EXPENSES: 
Flying operations 
Maintenance . 
Aircraft and traffic servicing 
Passenger service 
Promotion and sales 
General and administrative 
Depreciation . 
Operating profit 
OTHER EXPENSES, NET: 
Interest expense . 
Miscellaneous income 
Income before provision for taxes thereon 
Provision for federal and territorial income taxes 
Net income . 
Retained earnings, January 1, 1957 
Amortization of property acquisition adjustment (deduct) 
Retained earnings, December 31, 1957 
The financial comments on page 8 
$2,972,405 
1,851,084 
1,935,107 
630,978 
636,664 
686,861 
644,020 
191,262 
38,812 
are an integral part of the financial statements 
$ 
$ 
5,919,866 
2,997,409 
964,789 
70,132 
78,136 
10,030,332 
9,357,119 
673,213 
152,450 
520,763 
259,638 
261,125 
713,070 
(43,340) 
930,855 
5 
 6 
PACIFIC NORTHERN AIRLINES, INC. (AN ALASKA CORPORATION) 
BALANCE SHEET, DECEMBER 31, 1957 
Current: 
Cash 
Receivables: 
Traffic balances 
United States Government 
Other 
Less allowance for losses 
Maintenance and operating supplies, 
at average cost 
Prepaid expenses, mainly insurance . 
Total current assets 
Investments: 
ASSETS 
Cash surrender value of life insurance 
Aeronautical Radio, Inc. stock, at cost 
Property and equipment, at cost: 
Flight equipment 
Ground equipment 
Buildings and improvements 
to leased property 
Replacement parts for flight 
equipment 
Construction work in progress 
N onoperating property and equipment, 
net of $59,262 depreciation . 
Deferred charges, llet of amortization: 
Property acquisition adjustment 
Route extension and development 
Preoperating expenses-Constellations 
Other 
Assets 
$6,849,391 
565,788 
501,484 
456,480 
31,516 
$8,404,659 
The financial comments on page 8 
$ 558,189 
1,184,935 
83,345 
1,826,469 
27,830 
28,539 
1,000 
Allowance 
for 
Depreciation 
$2,494,577 
362,097 
200,063 
208,382 
$3,265,119 
86,680 
22,695 
87,094 
43,760 
are an integral part of the financial statements. 
LIABILITIES 
Current: 
$ 204,438 Current portion of long-term debt 
Accounts payable: 
Trade. $ 689,293 
Airline traffic accounts 545,481 
Collections, etc. as agents 98,963 
1,798,639 
Accrued liabilities: 
389,918 Salaries and wages 120,735 
120,561 Other . 108,249 
2,513,556 
Provision for income taxes 
Air travel plan deposits 
Unearned transportation revenue 
29,539 
Total current liabilities . 
Long-term debt: 
Chattel mortgage notes to bank, noncurrent portion 
Note payable, officer, due January 1, 1961 
STOCKHOLDER EQUITY 
5,139,540 
Common stock, authorized 2,000,000 shares, 
12,240 par value $1 each, issued and outstanding 1,068,109 shares 1,068,109 
Paid-in surplus - no change during 1957 584,905 
1,653,014 
Retained earnings, all of which are restricted, 
statement annexed . 930,855 
240,2.29 
$7,935,104 
The financial comments on page 8 
are an integral part of the financial statements. 
$ 765,600 
1,333,737 
228,984 
267,000 
13,175 
149,072 
2,757,568 
2,568,667 
25,000 
2,583,869 
$7,935,104 
7 
 8 
FINANCIAL COMMENTS 
UNIFORM SYSTEM 
OF ACCOUNTS: 
The Company has regularly maintained 
its accounting records in accordance with 
the uniform system of accounts for air 
carriers prescribed by the Civil Aero- 
nautics Board. Effective January 1, 1957, 
the Board issued a revised system which 
made changes, among others, in the ex- 
pense classifications, and in the accounting 
treatment of certain investments in flight 
equipment and in airframe maintenance 
costs. The changes have been reflected in 
the Company's records for the year ended 
December 31, 1957, and have had no sig- 
nificant effect upon the amount of net in- 
come reported by the Company, inasmuch 
as they were recognized in the proceeding 
which established the U. S. mail pay, re- 
ferred to in the succeeding note. 
U. S. MAIL PAY: 
Under provisions of the Civil Aero- 
nautics Act, the Company is entitled to 
a reasonable return on investment after 
income taxes, such provisions to be ad- 
ministered by the Civil Aeronautics Board. 
On April 23, 1957, the Board issued an 
order instituting a proceeding which (1) 
reopened the current final mail rates for 
the purpose of determining new final mail 
rates, and (2) established reduced tempo- 
rary mail rates effective April 23, 1957. On 
December 27, 1957, the Board fixed final 
mail rates which provided additional mail 
compensation amounting to $439,257 for 
the period April 23 through November 30, 
1957. This amount is reflected in the 1957 
financial statements and was received by 
the Company in early January 1958. In 
the same proceeding the Board established 
final future rates which were used by the 
Company to compute the December 1957 
mail pay and will remain in effect until 
action is taken by either the Board or the 
Company to revise them prospectively. 
AMORTIZATION OF 
DEFERRED CHARGES: 
The Company is amortizing route exten- 
sion and development and preoperating 
expenses - Constellations in accordance 
with the policy established in 1955. 
In 1957 the Board of Directors of the 
Company authorized the amortization of 
the Property Acquisition Adjustment Ac- 
count to be accomplished in three equal 
annual charges to retained earnings begin- 
ning in the current period. 
LONG-TERM DEBT: 
In May 1957, the Company acquired an 
additional Lockheed Constellation aircraft 
financed in part from the proceeds of a 
$1,000,000 bank loan. In connection with 
this acquistion and financing , certain 
modifications were made in the terms of 
the loan agreement dated February 27, 
1956, including an extended payment peri- 
od. The December 31, 1957 balances of the 
loans aggregated $3,334,267, on which in- 
terest ranges from 5% to 6% (current- 
ly 6%). Substantially all of the Company's 
flight equipment is pledged under chattel 
mortgages as collateral. The loan agree- 
ment contains certain restrictions and lim- 
itations including, among other things, 
dividend payments. 
RETIREMENT PLAN : 
During 1957 the Company agreed to the 
establishment of a contributory retirement 
plan for flight officers and paid into the 
plan's trust fund and charged to operating 
expenses $57,125 which included a portion 
of the amount necessary to fund past serv- 
ice requirements. The Company's obli- 
gation for past service requirements at 
December 31, 1957, was computed to be 
approximately $153,000 by the Company's 
independent actuaries. 
As of January 1, 1958, the Board of 
Directors established a contributory re- 
tirement plan for employees whose em- 
ployment is not subject to the terms 
of collective bargaining agreements. Past 
service requirements have been computed 
by the Company's independent actuaries 
to be approximately $163,000 which will 
be paid into the plan by the Company 
during succeeding years. 
The Company has filed application with 
the United States Treasury Department 
for approval of the flight officers' retire- 
ment plan, and management intends to 
file for approval of the other retirement 
plan in 1958. 
CONTINGENT LIABILITIES: 
As of December 31, 1957, the Company 
was contingently liable for claims arising 
in the normal course of business in which 
it is or may be a defendant, but in the 
opinion of legal counsel the ultimate lia- 
bility, if any, will not materially affect the 
financial statements. 
 COMPARISONS 
TRAFFIC 
Revenue Passenger Miles 
Revenue Ton-Miles of Traffic: 
Passenger . 
Mail. 
Cargo 
Excess baggage . . 
Total Revenue Ton-Miles 
FINANCIAL 
Operating Revenues: 
Passenger 
Mail. 
Cargo 
Excess baggage 
Other 
Total Revenues 
Operating Expenses: 
Other than depreciation 
Depreciation . 
Total Operating Expenses 
Operating Profit 
N onoperating Expenses 
Income Taxes . 
Net Income 
Retained Earnings at Year End 
Common Shares OutstaJ1ding 
Stockholder Equity- Net . 
This Year 
1957 
105,820,000 
11,323,000 
1,121,000 
2,985,000 
135,000 
15,564,000 
$ 5,920,000 
2,997,000 
871,000 
94,000 
148,000 
$10,030,000 
$ 8,713,000 
644,000 
$ 9,357,000 
$ 673,000 
152,000 
260,000 
$ 261,000 
$ 931,000 
1,068,109 
$ 2,584,000 
Last Year 5 Years Ago 
1956 1952 
92,103,000 42,224,000 
9,845,000 4,402,000 
904,000 522,000 
3,365,000 1,743,000 
97,000 56,000 
14,211,000 6,723,000 
$ 5,237,000 $ 2,713,000 
3,191,000 1,740,000 
950,000 495,000 
74,000 45,000 
156,000 31,000 
$ 9,608,000 $ 5,024,000 
$ 7,889,000 $ 4,026,000 
583,000 390,000 
$ 8,472,000 $ 4,416,000 
$ 1,136,000 $ 608,000 
192,000 71,000 
550,000 299,000 
$ 394,000 $ 238,000 
$ 713,000 $ 50,000 
1,068,109 666,444 
$ 2,366,000 $ 716,000