N72DV 
 President's Report 
To the Stockholders of Pacific Northern Airlines: 
Without exception, 1961 was a highly successful year of operations 
for Pacific Northern Airlines. Net earnings reflected a gain of 28 % 
over last year. Total revenues were the highest in the Company's his- 
tory, and new all-time records were established in every category of 
traffic. Substantial improvement was achieved in load factors, and 
revenue ton-miles of traffic per employee were 12 % higher than the 
peak productivity rate of any previous year. Pacific Northern's leading 
position among all of the airlines serving Alaska remained unchallenged. 
The Company's 1961 operating profit amounted to $667,000 after 
charges of $822,000 for depreciation and simifar non-cash items. Net 
earnings were $262,000 or 25 cents per share after income taxes of 
$343,000. Stockholder equity at the close of 1961 amounted to 
$3,532,000 or $3.31 per share, an increase of 8% during the year. 
Unquestionably the most significant achievement during 1961 was 
the successful completion of long term financing for Boeing 720 jet 
aircraft. The first plane will be delivered on March 23 and immediately 
assigned to flight crew training. The second plane will be available in 
the latter part of April and both will be in revenue service on the Com- 
pany's major routes beginning in May of 1962. The inauguration of 
PNA's jet services will coincide with the opening of the World's Fair 
in Seattle and there is every reason to believe that the Company's 
expanded services will be fully utilized from the outset by many of 
the four million out-of-state visitors who are expected to attend 
the exposition. 
On April 10, 1962, Pacific Northern will celebrate its 30th Anniversary. 
In the years ahead, I am confident that the Company's progress and 
prosperity will continue to match the dynamic growth of Alaska and 
the Pacific Northwest. 
March 13, 1962 
PRESIDENT AND 
GENERAL MANAGER 
1 
 2 
The Year in Review: 
Financial 
Total revenues of $12.3 million in 1961 were 6% higher than last year. 
This year's net earnings of $261,814 were 28 % higher than the 1960 
net profit of $205,193. Operating costs per ton-mile of revenue traffic 
were reduced from 60 in 1960 to 57 in 1961. These favorable financial 
results were achieved in the face of jet competition throughout 1961 
on the Company's main route between Seattle and Anchorage. 
Traffic 
During 1961, revenue passengers totaled 147,000, an increase of 9% 
over last year. Revenue passenger miles were 123 million, a 5 % gain 
over 1960. Ton-miles of U. S. mail traffic reached 2.1 million, 32 % 
ahead of last year. Property ton-miles aggregated 5.4 million, an in- 
crease of 27 % over 1960. Total revenue ton-miles of traffic were 20.6 
million in 1961, 13% ahead of the previous year. 
Load factors and productivity showed similar improvement. The Com- 
pany's plane load factor in system operations rose to 65 % in 1961 
from 62 % the year before. Revenue ton-miles of traffic per employee 
increased from 29,649 in 1960 to 33,202 in 1961, a gain of 12% . PNA's 
load factor and productivity rate rank among the highest in the entire 
U. S. airline industry. 
Jet Financing 
During 1961, the Company completed its long-term financing of $11.4 
million for the purchase of jet equipment. Approximately $4 million 
has been guaranteed by the Civil Aeronautics Board under the Guar- 
anty Loan Act. Bank loans comprise $8.5 million of the total financing, 
and private loans totaling $2.5 million were negotiated with other 
parties. In addition, $0.4 million of subordinated debentures were sold 
in a private offering. The debentures were issued with detachable 
 stock purchase warrants entitling the holders to purchase 88,800 
shares of Pacific Northern's common stock at a price of $4.50 per 
share. The warrants may be exercised at any time after November 
10, 1962 and until November 10, 1971. 
Mail Rates 
During 1961, the Civil Aeronautics Board established new final mail 
rates for Pacific Northern's system operations. These rates will auto- 
matically become effective on May 1, 1962, coinciding with the inau- 
guration of jet services, and will supercede the final mail rates in effect 
prior to that date. The mail rate applicable to the first twelve months 
of jet operations was premised upon total operating revenues of $16.6 
million, total operating expenses of $14.4 million, operating profit of 
$2,215,000, interest expense of $637,000, and net income of $742,000 
after income taxes of $836,000. Cash flow (net income plus deprecia- 
tion) was projected at $2.4 million. These financial results were pre- 
dicated on 183 million revenue passenger miles and 30. 7 million total 
ton-miles of revenue traffic during PNA's first twelve months of jet 
operations. 
Equipment and Services 
The Company's flight equipment during 1961 consisted of 7 Lockheed 
Constellations ( 5 owned and 2 leased) and 3 Douglas DC-3s. After 
the 2 Boeing 720 jets have been placed in service, the leases on the 2 
L-7 49 aircraft will not be renewed and 2 of the Douglas aircraft will 
eventually be sold. 
The Boeing jets initially will be operated on the Seattle~ 
Anchorage 
nonstop route and on the Seattle-Ketchikan-Juneau route. Each B-720 
will be equipped with 119 seats, 24 in the first class cabin and 95 in 
the tourist compartment. 
3 
 4 
PACIFIC NORTHERN AIRLINES~INC. (AN ALASKA CORPORATION) 
Balance Sheet, December 31, 1961 
ASSETS 
Current assets: 
Cash 
Receivables: 
Traffic 
United States Government agencies (note 1) 
Other . 
Less allowance for doubtful receivables . 
Maintenance and operating supplies, at average cost . 
Less allowance for obsolescence 
Prepaid expenses, principally insurance 
Total current assets 
Investments, principally cash surrender value of life insurance 
Operating properties and equipment, at 
cost (notes 2 and 4): Assets 
Flight equipment $ 6,450,702 
Ground equipment 727,422 
Buildings and improvements to 
leased property . 152,369 
Replacement parts for flight equipment 706,822 
Construction work in progress, 
including advances thereon 3,609,222 
$11,646,537 
Deferred charges, net of amortization: 
Lease deposit 
Preoperating expenses - airport hangar building 
Other 
See accompanying notes to financial statements. 
$ 858,636 
716,201 
162,998 
1,737,835 
24,337 
349,170 
112,917 
Allowances for 
depreciation, 
amortization 
and overhauls 
$ 
$ 
$ 
3,927,101 
534,547 
126,376 
310,335 
4,898,359 
7,000 
37,865 
2,915 
$ 618,800 
1,713,498 
236,253 
139,423 
2,707,974 
57,729 
6,748,178 
47,780 
$ 9,561,661 
LIABILITIES 
Current liabilities: 
Current installments on long-term debt (note 2) 
Accounts payable: 
Trade 
Airline traffic accounts 
Collections as agents 
Accrued wages, taxes, etc. 
Federal and state taxes on income, estimated 
Air travel plan deposits 
Unearned transportation revenue 
Total current liabilities 
Long-term debt, less current installments of 
$632,034 (note 2) 
Provision for deferred taxes on income (note 3) 
Stockholders' equity: 
Common stock - $1.00 par value per share. 
Authorized 2,000,000 shares; issued and 
outstanding 1,068,109 shares (note 2) 
Paid-in surplus - no change during 1961 
Retained earnings, all of which are restricted . 
Contingent liabilities and commitments (notes 4 and 5) 
See accompanying notes to financial statements. 
$ 830,812 
558,128 
156,578 
1,068,109 
584,905 
1,653,014 
1,879,432 
$ 632,034 
1,545,518 
361,853 
140,194 
31,875 
132,691 
2,844,165 
2,921,238 
263,812 
3,532,446 
$ 9,561,661 
5 
 6 
PACIFIC NORTHERN AIRLINES, INC. 
(AN ALASKA CORPORATION) 
Statement of Earnings and Retained Earnings 
Year ended December 31, 1961 
Operating revenues: 
Passenger 
Mail ( note 1) 
Cargo and excess baggage 
Other operating revenues 
Total operating revenues 
Operating expenses: 
Flying operations 
Maintenance and repairs 
Aircraft and traffic servicing 
Passenger service . 
Promotion and sales 
General and administrative 
Depreciation, amortization and obsolescence provisions 
Operating profit. 
Non-operating expenses: 
Interest, net 
Other expenses, net, principally life insurance costs 
Federal and state taxes on income, estimated (note 3) 
Net earnings . 
Retained earnings, January 1, 1961 . 
Retained earnings, December 31, 1961 
See accompanying notes to financial statements. 
$ 3,773,602 
2,016,308 
2,376,222 
880,200 
985,634 
801,675 
821,548 
40,816 
21,170 
$ 7,704,775 
2,889,430 
1,562,218 
165,643 
12,322,066 
11,655,189 
666,877 
61,986 
604,891 
343,077 
261,814 
1,617,618 
$ 1,879,432 
 Notes to Financial Statements 
December 31, 1961 
1. U.S. Mail Pay: 
See comments under "The Year in Review" 
2. Jet Program and Long-Term Debt: 
The Company has contracted for the purchase of two Boeing 720 jet 
aircraft with total investment in such aircraft and related equipment 
estimated to be $11,423,036 of which $3,482,170 is reflected in con- 
struction in progress at December 31, 1961. Financing arrangements 
under the program and amounts borrowed thereunder at December 
31, 1961 are as follows: 
Term loans from bank, payable monthly 
for ten years from time of borrowing 
($200,000 estimated as due in 1962) 
Term notes to aircraft manufacturer, 
payable annually for ten years from 
time of delivery of second aircraft 
T erm notes to engine manufacturer, 
payable quarterly over seven years, 
repayment of each note commencing 
approximately six months after 
delivery of the related engine 
($67,546 due in 1962 applicable to 
borrowings at December 31, 1961) 
Indebtedness subordinated to the above 
(except as to $500,000 of the term 
loans from bank) , payable in ten annual 
installments beginning November, 1962: 
Note to supplier . . . . . 
6-% subordinated debentures 
Total 
borrowings 
arranged 
$ 8,460,001 
950,000 
1,513,035 
100,000 
400,000 
$11,423,036 
Borrowings at 
December 31, 
1961 
$1,150,000 ( 1 
) 
950,000 ( 1 
) 
630,431 
100,000 
400,000 
$3,230,431 
( 
1 
) 
Interim financing to be converted to long-term indebtedness. 
See comments under "Jet Financing" for stock options applicable to the 
6-% subordinated debentures. 
Other long-term debt of the Company at December 31, 1961, totaling 
$322,841, consisted of: (a) $307,288 chattel mortgage notes to bank, 
secured by substantially all of the Company's present flight equip- 
ment, all due in 1962, and (b) a $15,553 note payable to vendor with 
payment due based on purchases - $7,200 estimated as payable in 
7 
 a 
1962. Among other provisions, certain of the documents covering the 
Company's long-term borrowings 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: 
The deferred income tax liability arismg from differences (relating 
principally to depreciation, overhaul and obsolescence reserves) be- 
tween book and taxable income has been provided for in the estimated 
amount of $263,812 of which $124,415 pertained to and was charged 
against operations of the year 1961, with the remainder 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: 
Minimum annual rentals payable under leases expmng more than 
three years from December 31, 1961 are $66,360. Under its fifty-year 
ground lease with the Port of Seattle, the Company is obligated to 
construct an airport hangar building by June 1, 1963 at a mm1mum 
cost of $1,000,000. 
5. Retirement Plans: 
The costs charged to operating expense in 1961 totaled $200,364, of 
which $19,068 was for past service benefits. At December 31, 1961, the 
remaining unfunded past service cost amounted to approximately 
$253,000. 
P EAT , MARWICK , MITC H ELL & Co. 
The Board of Directors 
CERTIFIED PUBLI C A CCOUNTANTS 
STUART BUILDING 
SEATTLE l. WASH JNGTON 
ACCOUNTANTS ' REPO 
RT 
Pacific Northern Airlines , Inc .: 
We have examined the balance sheet of Pacific Northern Airlines, Inc . 
as of December 31, 1961 and the related statement of earnings and retained 
earnings for the year then ended . 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 
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 
earnings and retained earnings present fairly the financial position of 
Pacific Northern Airlines , Inc . at December 31, 1961 and the resul ts of its 
operations for the year then ended, in conformity with generally accepted 
accounting principles applied on a basis consistent with that of the preceding 
year . 
Seattle , Washington 
March 13 , 1962 
 Directors: 
G. P . O'GRADY, Washington, D. C. 
J . A. CUNNINGHAM, Seattle, Washington 
PAUL PORZELT, New York, New York 
R. A. ROW AN, 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 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 
PACIFIC NORTHERN AIRLINES, INC. 
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