1960 
ANNUAL 
REPORT 
Pacific 
Northern 
airlines 
 POINT BARROW  
 BfTHEL 
FAIRBANKS  
 To the Stockholders of Pacific Northern Airlines: 
Highlights of the Company's operations during 1960 include the fol 
lowing items: 
Operating profit of $681,000 after depre 
ciation of $995,000. 
Net earnings of $205,000 or 19 cents per 
share after income taxes of $292,000. 
Reduction of bank debt by $1,391,000 to 
total obligations of $1,045,000 at year-end. 
Total revenues of $11,597,000, highest in 
the Company's history. 
Lower cash operating costs per available 
ton-mile than in any previous year. 
New all time records in every class of traffic. 
Continuation of the Company's leading posi 
tion among all the airlines serving Alaska. 
Highest productivity rate in the Company's 
history by obtaining 30,000 revenue ton- 
miles of traffic per employee. 
A 62% plane load factor for the Company's 
system schedules, which compares to an 
average of 53% for the entire U.S. certifi 
cated airline industry. 
On the whole, 1960 was a year of sound progress for Pacific Northern. 
Although losses were experienced in the first part of 1960, earnings 
during the last half of the year ranked with the highest in the Com- 
1 
 pany's history. This favorable development, together with many other 
business factors, demonstrates complete recovery and further growth 
in Alaska's economy in contrast to the depressed conditions which 
prevailed in 1959 and early 1960. Moreover, marked improvement in 
the first quarter of the current year lends a strong tone of optimism 
to the outlook for 1961. 
During the past year, the Company enjoyed amicable relations with 
all of its employees. Although a number of the nation's airlines were 
plagued by jurisdictional disputes of pilot and flight engineer unions, 
agreements reached in 1955 resolved this problem and therefore elimi 
nate the possibility of such jurisdictional disputes involving Pacific 
Northern. 
The Company has now completed its evaluation studies of jet aircraft 
and has formulated a financing program to enable their acquisition. 
Although no formal commitments have been signed as of this date, 
such action is contemplated in the very near future. The objective will 
be to place jet aircraft in service on the Company's major routes in 
the spring of 1962. 
Pacific Northern's growth in traffic and productivity during the past ten 
years is shown in the following tabulation: 
Calendar 
Year 
Revenue 
Passenger 
Miles 
Mail 
Ton-Miles 
1960 116,304,000 1,585,000 
1959 113,389,000 1,370,000 
1958 105,595,000 1,248,000 
1957 105,820,000 1,121,000 
1956 92,150,000 904,000 
1955 76,110,000 918,000 
1954 59,610,000 881,000 
1953 58,977,000 750,000 
1952 42,303,000 522,000 
1951 17,634,000 218,000 
Ton-Miles of 
Cargo 
Ton-Miles 
Total Revenue 
Ton-Miles 
Traffic per 
Employee 
4,091,000 18,293,000 30,000 
3,306,000 17,013,000 27,000 
3,250,000 15,937,000 26,000 
2,985,000 15,564,000 25,000 
3,368,000 14,218,000 25,000 
3,552,000 12,671,000 25,000 
3,267,000 10,440,000 23,000 
3,097,000 10,169,000 22,000 
1,747,000 6,735,000 18,000 
592,000 2,638,000 12,000 
During 1961, the Company plans to expand its Lockheed Constellation 
services to all routes west of Anchorage and to add all-cargo service 
between the Pacific Northwest and Alaska. Additional Lockheed equip- 
2 
 merit for these purposes will be obtained by short-term lease. In 1962, 
the Company's existing complement of owned Constellation equipment, 
together with the proposed jet aircraft, will be adequate to handle these 
expanded services. 
As previously noted, the outlook for 1961 appears to be highly favor 
able. Preliminary results for the first quarter indicate gains over 1960 
of 40% in revenue passenger miles, 72% in mail ton-miles, 74% in 
cargo and express ton-miles, and 52% in overall revenue ton-miles. 
Looking forward to 1962, prospects for further growth seem even more 
impressive. The Century 21 Exposition to be held in Seattle in 1962 
will attract hundreds of thousands of out-of-state tourists to Seattle, 
and many of these visitors have already expressed an interest in ex 
tending their travel to include excursions to Alaska. Pacific Northern's 
routes offer convenient access to more points of interest in Alaska than 
do those of any other airline, and it is anticipated that the air travel 
market generated by Century 21 will increase the Company's traffic by 
25% in 1962. 
In the light of these experienced and anticipated developments, the 
Company petitioned the Civil Aeronautics Board in February of 1961 
to dismiss its application for higher rates of mail pay which the Com 
pany filed in 1959 because of a temporary downturn in the level of 
economic activity in Alaska. The Board's order approving the petition 
for dismissal is expected within the next ten days. This will give the 
Company an earnings allowance in 1961 of 12%% after taxes on its 
recognized investment, as distinguished from the allowable return of 
7 % in the past. 
Because of Pacific Northern's secured position as the leading airline 
serving Alaska, the Company's continued growth in future years will 
directly reflect the tide of new economic and commercial activities in 
the 49th State. In the immediate future, as well as in long range fore 
casts, all factors seem to indicate sound and accelerated development. 
March 27, 1961 
3 
 Peat, Marwick. Mitchell & Co. 
CEBTIFIED PUBLIC ACCOUNTANTS 
STUART BUILDING 
SEATTLE 1, WASHINGTON 
ACCOUNTANTS' REPORT 
The Board of Directors 
Pacific Northern Airlines, Inc. 
We have examined the balance sheet of Pacific Northern Airlines, Inc. 
as of December 31, 1960 and the related statement of earnings and retained earn 
ings for the year then ended. Our examination was made in accordance with gener 
ally accepted auditing standards, and accordingly included such tests of the ac 
counting records and such other auditing procedures as we considered necessary in 
the circumstances. It was not practicable to confirm amounts due from certain 
United States Government agencies by communication with them, but we satisfied 
ourselves as to these amounts by means of other auditing procedures. 
In our opinion, the accompanying balance sheet and statement of earn 
ings and retained earnings present fairly the financial position of Pacific 
Northern Airlines, Inc. at December 31, 1960 and the results of its operations 
for the year then ended, in conformity with generally accepted accounting princi 
ples applied on a basis consistent with that of the preceding year. 
Seattle, Washington 
April 14, 1961 
 PACIFIC NORTHERN AIRLINES, INC. 
(AN ALASKA CORPORATION) 
Statement of Earnings and Retained Earnings 
Year ended December 31, 1960 
Operating revenues: 
Passenger 
Mail (note 1) 
Cargo and excess baggage 
Other transport service 
Incidental revenues, net 
Total operating revenues 
Operating expenses: 
Flying operations $ 3,264,868 
Maintenance and repairs 1,936,107 
Aircraft and traffic servicing 2,280,909 
Passenger service 787,499 
Promotion and sales 810,651 
General and administrative 840,939 
Depreciation and amortization 995,069 
Operating profit 
Non-operating income: 
Non-operating expenses: 
Losses on disposal of flight equipment 
and other assets 42,330 
Interest, net 98,548 
Provision for obsolescence in inventories of 
Constellation aircraft maintenance materials 
.... 
44,536 
Federal and state taxes on income, estimated (note 3) . . 
Net earnings 
Retained earnings, January 1, 1960 
Deduct special charge -- 
reversal of 1959 accrual (net 
of taxes) of estimated retroactive mail pay (note 1) 
Retained earnings, December 31, 1960 
See accompanying notes to financial statements. 
$ 7,221,318 
2,899,008 
1,302,193 
51,979 
122,934 
11,597,432 
10,916,042 
681,390 
1,524 
682,914 
185,414 
497,500 
292,307 
205,193 
1,576,425 
1,781,618 
164,000 
$ 1,617,618 
5 
 Pacific NorthernAirlines, 
Balance Sheet, December 31, 1960 
ASSETS 
Current assets: 
Cash 
Receivables: 
Traffic $ 904,948 
United States Government agencies (note 1) . . 
642,868 
Other 128,930 
1,676,746 
Less allowance for doubtful receivables 
.... 
23,434 
Maintenance and operating supplies, at average cost . . 
352,205 
Less allowance for obsolescence 74,225 
Prepaid expenses, principally insurance 
Total current assets 
Investments, principally cash surrender value of life insurance 
$ 535,662 
1,653,312 
277,980 
134,046 
2,601,000 
50,729 
Operating properties and equipment, at 
cost (notes 2, 4 and 6): Assets 
Allowances for 
depreciation, 
amortization 
and overhauls 
Flight equipment $ 6,408,183 $ 3,314,636 
Ground equipment 674,561 491,350 
Buildings and improvements to 
leased property 151,206 127,490 
Replacement parts for flight equipment . 
697,021 287,946 
Construction work in progress .... 
14,476 - 
$ 7,945,447 $ 4,221,422 3,724,025 
Deferred charges, net of amortization: 
Lease deposit $ 7,000 
Preoperating expenses -- 
airport hanger building . . . 
18,757 
Other 1,793 27,550 
$ 6,403,304 
See accompanying notes to financial statements. 
6 
Inc. (AN ALASKA CORPORATION) 
LIABILITIES 
Current liabilities: 
Current installments on long-term debt 
Accounts payable: 
Trade $ 628,208 
Airline traffic accounts 449,212 
Collections as agents 139,205 
Accrued wages, taxes, etc 
Federal and state taxes on income, estimated 
Air travel plan deposits 
Unearned transportation revenue .... 
Total current liabilities 
$ 737,472 
1,216,625 
236,819 
308,163 
28,475 
158,433 
2,685,987 
Long-term debt: 
Chattel mortgage notes to bank, non-current portion (note 2) ... . 
307,288 
Provision for deferred taxes on income (note 3) 139,397 
Stockholders' equity: 
Common stock -- 
$1.00 par value per share. Authorized 
2,000,000 shares; issued and outstanding 1,068,109 
shares 1,068,109 
Paid-in surplus -- no change during 1960 584,905 
1,653,014 
Retained earnings, all of which are restricted 
(notes 1 and 3) 1,617,618 3,270,632 
Contingent liabilities and commitments (notes 4, 5 and 6) 
$ 6,403,304 
See accompanying notes to financial statements. 
7 
 Notes to 
Financial Statements 
December 31, 1960 
1.U. 
S. mail pay: 
The Company is a certificated air carrier subject to 
regulation by the Civil Aeronautics Board. Under 
provisions of the Federal Aviation Act, the Com 
pany is entitled to mail pay adequate in amount 
to provide it with a reasonable return on invest 
ment after income taxes. As indicated in the ac 
companying report to stockholders, the Company had 
petitioned the Board to reinstate mail rates as 
they existed prior to October 23, 1959 as final rates 
of mail compensation for the periods subsequent to 
that date. By Civil Aeronautics Board Order dated 
April 11, 1961, such rates were finalized for the past 
period and will remain in effect hereafter until action 
is taken either by the Board or by the Company to 
revise them prospectively. Accordingly the accrual 
of retroactive mail pay at December 31, 1959, which 
represented an estimate of the additional mail pay 
due in excess of that received under temporary rates, 
has been reversed, with the net effect thereof, 
$164,000, after reduction for applicable income 
taxes, being charged against retained earnings. 
2.Long-term 
debt; 
The Company is indebted under a Loan Agreement 
which had a balance at December 31, 1960 amount 
ing to $1,044,760, of which $737,472 represents 
principal payments due within one year and is in 
cluded in current liabilities. Substantially all of tbe 
Company's flight equipment is pledged as collateral 
under the Loan Agreement. Among other provisions, 
the Loan Agreement together with amendments 
thereto require that the Company shall maintain 
specified amounts of working capital and shall not 
declare or pay any dividends or purchase, redeem 
or otherwise acquire for value any of its capital 
stock. 
3.Deferred 
income taxes: 
Certain adjustments (relating principally to de 
preciation, overhaul and obsolescence reserves) to 
income determined in accordance with the rules and 
regulations of the Civil Aeronautics Board are re 
quired to be made in determination of income re 
portable for tax purpo.ses. The deferred income tax 
liability arising from the resulting differences be 
tween book and taxable income has been provided 
for in the estimated amount of $139,397, of which 
approximately $39,000 pertained to and was charged 
against operations of the year 1960, with the re 
mainder having been provided for by accrual in 
prior years and by crediting to the deferred liability 
account tax refunds arising from such differences. 
4.Long-term 
leases; 
The Company is obligated under a fifty-year ground 
lease with the Port of Seattle, requiring monthly 
rentals of $1,530.92 through May 31, 1969 and there 
after at a newly-negotiated rate, to construct an air 
port hangar building by June 1, 1961 at a minimum 
cost of $1,000,000 at Seattle-Tacoma Airport. The 
Company has requested that the construction com 
pletion date be extended to June 1, 1963 and be 
lieves that such request will be granted. 
Terminal buildings and facilities in tbe State of 
Alaska have been leased to the Company for a period 
of fifteen years from December 30, 1959 at the 
monthly rental of $4,000, with an option to renew 
under certain conditions. The lease agreement also 
gives the Company an option to purchase the proper 
ties upon expiration of the lease. 
To replace an aircraft lost in Alaska in 1960, the 
Company is presently leasing one Constellation air 
craft for $7,000 per month, such lease to expire 
August 15, 1963. 
5.Retirement 
plans: 
The Company has two contributory retirement plans 
covering (1) flight officers and (2) other employees 
of the Company. During 1960 the Company charged 
to operating expenses and other accounts provisions 
totaling $222,219 of which $34,611 was for past serv 
ice benefits. The unfunded past service benefit costs 
of both plans have been estimated by the Company's 
independent actuaries to aggregate $248,072 at De 
cember 31, 1960. 
6.Aircraft 
acquisition: 
Tbe Company's program for the acquisition of jet 
aircraft is described in the accompanying report to 
stockholders and insert thereto. 
8 
 PACIFIC NORTHERN AIRLINES, INC. 
Directors 
G. P. O'GRADY, Washington, D C. 
J. A. CUNNINGHAM, Sea/f/e. Was/iing/on 
PAUL PORZELT, New York. New York 
R. A. ROWAN, Los Angeles, California 
M. B. KIRKPATRICK, Anc/iorage, AZasA:a 
C. W. NELSON, Seattle, Washington 
A. G. WOODLEY, Seattle, Washington 
Officers 
A. G. WOODLEY, President and General Manager 
H. A. OI.SEN, Vice President -- 
Traffic and Sales 
J. A. CUNNINGHAM, Vice President -- 
Operations 
J. H. FOSTER, Vice President -- 
Engineering and Maintenance 
FELIX AUBUCHON, Vice President -- 
Alaska Operations 
T. D. STUART, Vice President -- 
Industrial Relations 
C. W. NELSON, Secretary-Treasurer 
M. E. DIAMOND, Assistant Secretary 
D. B. HART, Assistant Secretary 
GENERAL COUNSEL: G. p. o'grady, 1625 eye street, n. w., Washington, d. c. 
GENERAL OFFICES: 400 Norton building, Seattle, Washington 
CITY TICKET OFFICES: Portland, Seattle, ketchikan, juneau, cordova, anchorage, 
KENAI, homer, KODIAK, KING SALMON, YAKUTAT 
AUDITORS: peat, marwick, mitchell & co. 
TRANSFER AGENT: bankers trust company, new york, new york 
REGISTRAR: manufacturers trust company, new york, new york 
COMMON STOCK LISTED: American stock exchange, pacific coast stock exchange