1949-June Ill 242 . 1 July 1,109 I Aug 1,476 Sept 1,916 Oct 2,109 REVENUE PASSENGERS Nov 2,208 Dec 1,605 1st year: June 194 9 thru May 1950 1950-Jan 1,440 - 2nd year: June 1950 thru May 1951 Feb 1,770 Mar 2,126 Apr 2,671 May 3,091 June 3,214 July 3,253 Aug 3,348 Sept 3,370 Oct 4,089 Nov 4,789 Dec 4,892 1951 Jan - 4;a29 Feb 5,442 Mar 7,012 Apr 7,479 May 8,074 - I ' . ' ' I I . I I . - 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 MANAGEMENT IKE F. JO E Vice-President HUGH W. DA VIS Vice-President, Operations ECIL A. BEASLEY, JR. ssistant Secretaru FRA KW. H uL E RTH R M. SPIE ) JR. J. MURREY TKTN R. S. Dickson & Co., Inc. Charlotte, orth Carolina OFFICERS FRA KW. HUL E President TOM D. EVE Vice-President, Traffic & Sales W. B. WHITE, JR. Assistant Secretary Executive Committee ER ETH. Wooo DIRECTORS FRA K W. H UL E, President Southern Airways, Inc. Birmingham Ala. GEORGE F. ESTEY Secretary-Treasurer F. L. McLEOD Assistant Treasurer HE RY P. JOH STON ELTO B. STEPHE ARTHUR M. SPIE ' JR. , Ass't to the Pres. CECIL A . BEASLEY, JR. H E RY P. JoH STO r, Exec. Vice-Pres. Meyer Hotel Birmingham, labama Kilpatrick, Ballard & Beasley Washington, D. C. Eow ARD U. BE EKE The Beneke Corporation Columbu , 1is issippi ROBERT Z. ATES, President Arkwright ills Spartanburg South Carolina Th Birmingham ews Company Birmingham, Alabama IKE F. To ES, Vice-President Southern Airways, Inc. Augusta, G orgia W. HERBERT SMITH W. Herb rt Smith Company Clover, South arolina Stock Transfer Agent ELTO B. STEPHE s Elton B. Stephens & A ociates Birmingham, Alabama ER EST H. Wooo , President Lib rty 1otors, Inc. Birmingham, Alabama Th First ational Bank of Birmingham Birmingham, Ala. GENERAL OFFICES Municipal Airport Birmingham, Ala. OPERATIONS HEADQUARTERS Municipal ir!)Ort Atlanta, Ga. A MESSAGE FROM YOUR PRESIDENT To give you a full year of op rating tatistics since our last report, we hav included herein op- erating statistics for the first six months of 1951. In addition to giving you comparisons for two year of operation, this will demonstrate how rap- idly our busines has de loped in th Missi sippi Valley area. 19.50 wa the fir t full y ar of operation for your Company. First and foremost, I wi h to report that w operated the ntir y ar with a perfect af ty record. Thi brought u national recognition by th receipt of an award from th ati nal Saf ty Council. Dnring the period we flew 10,126,000 pa enger miles and erved 38,117 pas- s ng rs. 96.92% of all ch dule w r compl t d. During th year th ivil eronautiq_ Board reaffirm d its confid nee in your Company b extending our syst m to serv 10 additional cities, o that w now er e a total of 31 cities in ejght states. The award in the o-called i sissippi Val- ley Case brought our rout mileage up to 2,120 miles. The larger part of this new system wa inaugurated befor the end of the year, with the complete activation of the new routes on January 15, 1951. This award is being con- tested by an unsuccessful applicant in the U. S. Court of Appeals. Our counsel is not concerned ov r this action. Thirteen of the 31 cities where we operate are served by Southern alon . We are proud of the fact that we ha e gi en these comnrnni- tie their first chedul d airline service. The y ar 1950 brought many new de- velopments to our area. A number of mili- tary establishments were announced. 20 of our 31 cities have military installations. Among the larger new establishments an- nounced are the Atomic Energy Plant near Augusta, Georgia, and the farine Corp Base near Albany, Georgia. This additional military ac- tivity plus the establishment of many new industrial plants throughout our entir area will provide a tremendous business impetus during the corning years. As shown by the chart on the inside front cover, we njoyed increases in pa senger traffic COMPARATIVE OPERATING STATISTICS (1st Year: June 1949 thru Moy l 950- 2nd Year: June 1950 thru Moy 1951 ) Our Our Percant 1st Year 2nd Year Increase REVENUE PASSENGERS 21,763 59,791 I 174.7% REVENUE PASSENGER MILES 3,665,215 10,553,071 I 187.9% PASSENGER LOAD FACTOR 11.02% 21.56% I 95.6% MAIL TON MILES 35,187 68,773 I 95.4% EXPRESS TON MILES 31,117 62,225 I 99.9% REVENUE PLANE MILES 1,530,830 2,270,751 I 48 .3% PERCENT SCHEDULED MILES COMPLETED 94.80% 97.14% , _ 2.5% 2 during e ery month of the y ar 1950. Starting with only 1,440 passengers in January, w complet d the year with .J 892 passengers in December. This chart also contrasts the passenger business for 1950 with the seven months we operated during 1949, and the first six month of 1951. We led the local s rvice industry for the entir year of 1950 on air-mail carried per mil flown. A chart showing mail flown is shown on page 3. The new routes in the Mississippi Valley area are getting off to an excellent start. !though w have been in operation for only a few months over the new system, these new routes ar developing busin ss at a rate that required a full year of de- velopment on the original system. I am most opti- mistic over th future of our new area. During the course of the year, your director authorized an increase of the outstanding capital tock to 200,000 shares. All of this stock has been sold, and apparently there exi ts a substantial de- mand for mor.o stock. We have recently received a $370,000 loan from the Reconstmction Finance Corporation with the participation of The Mer- chants _ational Bank of Mobile, Alabama. The pro- ceeds of this loan were used to liquidate other loans, to purchase equipment for our expanded routes and to provide working capital. During the latter part of 1950 we employed and trained our first group of stewardesses. Since that time these young ladies have replaced flight agents on all of our trips. Public reaction to this change has been excellent. At the close of the year we ~edesigned our airplane paint scheme to provide for a white top, which makes the airplane cabin as much as 10 percent cooler in the summertime. \iVe have received many compliments on our new paint job from the traveling public. We have also i_ nitiated a program of naming our airplanes for famous Confederate personalities. The company has rec ived a most favorable public r action to this program. Your attention is directed to the Proiit and Loss Statement on page 8. The indicated loss of $71,134.55, plus lo ses from operations in 1949, are exp cted to be recovered, togeth r with a reason- able profit, when our permanent mail rate is es- tablish d. It is hoped that this rate will be de- termin d before the end of 1951. In addition, we expect to r cov r preoperational and development costs as outlined in ote D of the audit report. One of your Company's assets not reflected in the balance sheet is th present market value of your fleet of airplanes. Since these airplanes were acquired, there has been a tremendous increase in their market value. Several qualified appraisers have estimated the market value of our fleet to be in excess of one million dollars. We hope that you will tell your friends of our service. Should each of our mor than 700 stock- holders account for a single new passenger, it would substantially increase our business. I urge you to visit or call any of our stations for any air- line information. Our station managers and their telephones are listed on page 5. Our 400 employees are young, energetic, and enthusiastic over the success of your Company. Should you have occasion to visit one of our sta- tions, I hope that you will tell our employees that you are interested in Southern Airways. This will make them more conscious of the growing interest of everyone in Southern, which of course will be an incentive for them to do a better job. R sp ctfully yours, Aug. 7, 1951. AIR MAIL TABLE Industry Position 1 2 3 4 5 A Comparison of Five Local Service Airlines, 1950 SOUTHERN AIRWAYS Airline "A" Airline "B" Airline '~C" Airline "D" Pounds Per Mile Flown 53.2 51.4 41.1 39.1 39.0 Year of Operation 2nd 5th 4th 4th 3rd 3 Serving 31 Leading Cit In 8 Southern States , 1es BATON RO ATLANTA BIRMINGHAM CHARLOTTE BATON ROUGE 4 I MPHIS - - 0 LEANS ~ Capital Delta Eastern Capital Delta Eastern Capital Eastern Piedmont Eastern Delta GREENWOOD COLUMBUS o / HATTIESBURG JACKSONVILLE t CE1C1 PROPOSED ROUTE CONNECTIONS WITH OTHER AIRllN1 ES MACON Delta CHARLESTON Delta Eastern Eastern Nation&I JACKSONVILLE Delta ALBANY Eastern Eastern National National VALDOSTA COLUMBUS Delta JACKSON Delta Eastern Chicago & Southern GREENVILLE Delta Eastern MOBILE Capital Eastern SPARTANBURG Delta ational Eastern Offering Scheduled Airline Service to More Than 3 Million People. Annual Retail Sales of Cities Served are Nearly 4 Billion Dollars.* 0 Sales Management Survey of Buying Power, 1951. NEW ORLEANS Capital Chicago & Southern Delta Eastern Mid-Continent ational Pan-American TACA American MEMPHIS Braniff Capital Chicago & Southern Eastern Ozark SOUTHERN AIRWAYS IS YOUR COMPANY Due to the combined efforts of outhern Airways employees, stockholders and friends, your company ha. made rapid strides in the short space of two years. The Southern Airways manager in or near your city will welcome any ~ugg stions or help you may give him. It will be especially helpful if you will refer to the manager the names of any of your friends who are air travelers or who are potential users of Southern Airways air mail or air express. Following is a list of Southern Airway cities, with managers' narn s and telephone numbers: City Albany, Ga. Athens, Ga. Atlanta, Ga. Augusta, Ga. Baton Rouge, La. Birmingham, Ala. Charleston, S. C. Charlotte, 1 . C. Clarksdale, Miss. Columbus, Ga. Columbus, Miss. Gadsden, Ala. Greenville, Miss. Green ille, S. C. Greenwood, . C. Hattiesburg, Miss. Jack on, Mis . Jacksonville, Fla. LaGrange, Ga. Laur 1, Miss. Macon, Ga. Memphis, Tenn. Mobile, Ala. Moultrie, Ga. atchez, Miss. New Orleans, La. Spartanburg, S. C. Tupelo, Miss. Tuscaloosa, Ala. Valdosta, Ga. Vicksburg, Mi Managel' W. Fenton J. B. Giles \ V. A. Brabson C. V. Diacetis 0. B. Mathew J. A. laxham J. D. Jefford C. T. Ma hew T. J. Lathem A. D. Yawn A.G. Cowley J. 0. Lasseter C. D. Grave H. E. Kale J. A. Reckard L. K. Dailey C. F. Attwood L. A. McLaughlin J. A. ~Iann J. II. Echols G. M. Sutton V. H. Rowley 1 A. McDonald M . E. eal J. E. Judd E. H. Seaman H. S. Kinnebrew Geo. Farrar I. T. Tucker II. Goodson L. I. Brook Phone 3124 4487 CA-7761 2-4821 7-2293 , 59-9646 4-267,'3 .5-8733 1971 7-6568 764 6-5285 40,51 3-0173 9-3191 3716 4-8880 , 5-8108 8614 3440 2-7761 35-4850 7-3637 1140 6963 Kenner 4-2558 3-5532 2-55 8-0251 2851 S50 5 BALANCE S H E E T S O U T H E R N AIRWAYS I I N C Current Assets Cash: Demand Deposits Due from agents Office and station cash funds Accounts receivable: ASSETS DECEMBER $ 97,194.35 8,152.83 4,325.00 $ 109,672. 18 U.S. Government-for transportation of mail, etc.- T ote B Other account $123,270.65 81,630.19 204,900.84 Inventorie -at cost: Repair parts and shop supplies Other operating supplies Materials in transit Other Assets Investments in affiliates-at cost Notes receivable and accrued interest Postage and service depo its Property and Equipment- At cost, less allowances for depreciation- ote C Hangar ( constructed on leased land ) Aircraft and related equipment Other equipment Improvements to rented property Less allowances for depreciation Construction in progress-equipment Non-operating property-air raft engines Advance payment on equipment purchased Def erred Charges Development and preoperating expenses- ote D Prepaid insurance, interest, dues, etc. TOTAL CURRE T ASSETS $121,129.54 526,421.2,5 75,185.46 1,243.14 $723,979.39 2$6,.546.03 ------- $467,433.36 36,743.23 $ 59,378.33 10,395.38 959.06 $ 511.00 6,321.61 400.00 $504,176 .. 59 19.00 271.03 70,732.77 $ 385,305.79 7,2,'32.61 .504,466.62 Unamortized expense in connection with sale of capital stock- ate E Overhauled aircraft and engines-unamortized balance $ 81,430.09 41,053.54 30,465.56 ,'36,366.92 189,316.11 ote A-The company is engaged in air transportation with respect to persons, property, and mail under authority of a Temporary Certificate of Public Convenience and ecessity issued by the Civil Aeronautics Board effective February 8, 1949, for a period of three years. Since com- mencement of scheduled service on June 10, 1949, the Company has been and is now being compensated for the transportation of mail under temporary rates. These rates are subject to adjustment in a future Civil Aeronautics Board proceeding to determine a final mail rate. either the final mail rate, nor the amount of retroactive adjusted compensation which the Company will receive thereunder for the transportation of mail during the term of its tem- porary certificate, are determinable at this time. Note B-Charges to accounts receivable and credits to income for the transportation of U. S. mail have been made on the basis of adju. ted rates applicable through the year 6 $1,086,321.13 N O T E S T 0 F I N A N 1950. Such rates are not final but are subject to review and possible further adjustment by the Civil Aeronautics Board. During the year 1950, the Company received the sum of $108,549.26 representing an adjustment of com- pensation for transportation of U. S. mail during the year 1949. As this amount was determinable prior to the com- pletion of our examination for the year ended December 31, 1949, it was included in the financial statements for the year 1949. Note C-Collateral to the secured notes payable includes eight aircraft and substantially all of the related equipment, hangar building ( constructed on land leased until January 11, 1959 with option of renewal for five years), certain office equipment, Plymouth sedan automobile, insurance policy for $25,000.00 on life of an officer, and leases under which the Company is lessee of the land on which the hangar building is located and is lessor of that building. 3 1 , 1 9 5 0 LIABILITIES Current liabilities I 1 otes payabl ( including portion of long-term debt du within one year ): Secured- ate C: For money borrowed F'or equipment, supplies, etc. Unsecured: For equipment, supplies, etc. Employees-for unpaid compensation Accounts payable and accrued expenses: Bank overdraft: Bank checks outstanding Less cash on deposit as reported by bank, and cash for deposit Trade accounts For equipment purchased Pay roll taxes and laxes withheld from employee:, Interest, taxes and insurance Audit and legal fees Salaries and wages Rents and landing fees $ 69.600.00 206,876.89 $12.5 . .594.36 11, 103.,59 $ 55.0,'3,5.,51 37.62.3.74 $276,476.89 136.697.95 $ 17,409.77 190,18,'3.27 12,141.l l 33,023.54 :32,880.38 12,381.87 4,914.68 .5,741.13 $ 413,174.84 TOTAL CORRE T LIABILITIES 308,675.7.5 $ 721,850.59 Long Term Debt ( Secured )-Note C : Notes payable-for money borrowed Less payments due within one year Notes payable for equipment, supplies, etc. Less payments due within one year Deferred Income Unearned transportation revenue Capital Stock and Surplus (Deficit) Common stock, par value $3.00 per share: Authorized 250,000 shares Issued and outstanding 198,166 2/ 3 shares Common stock ( old issue), par value $1.00 per share: Outstanding 5,500 shares ( entitled upon surrender to l ,8,'.33 1/ 3 shares of $3.00 par value common stock) Earned surplus- deficit" Contingent Liability - ate F. See notes to finan cial statement. C I A L STATEMENTS In addition to the above. certain of these notes arc further secured by guaranty of an officer of the Company, and by pledge of certain shares of stock in another cor- poration owned by this officer. 1 ote D-Expenses incurred by the Company in connec- tion with its application to the Civil Aeronautics Board for authority to engage in air transportation and before actual flying operations amounted to $185,010.14, and the e e penses, upon approval by the Board, are subject to recovery after the establishment of a permanent mail rate. Such expenses are being amortized over the life of the temporary certificate issued by the Civil Aeronautics Board. as mentioned in Note A, and the remaining unamortized portion of these expenses, amounting to $81,430.09, is reflected in the balance sheet under deferred charges. ote E-Expenses in connection with the sale of capital stock are being amortized over the period covered by the , 80,950.00 69,600.00 $ ,'3,56,'.3.64 1,187.88 $594,500.00 5,500.00 $ 11,350.00 2,375.76 S600,000.00 254,231.95 13,72.5.76 4,976.7:3 :345,768.05 $1,086,321.13 Certificate of Public Convenience and ecessitv, as set forth in Note A, by charges made directly to earned surplus- deficit. ote F - The Company is contingently liable in the amount of $34,500.00 for the repurchase from a bank of a note of the Employees Trust Committee of Southern Airways, Inc. If the Company is required to repurchase the note, it is entitled to the related collateral, which, at December 31, 1950, consisted of employees' notes having balances aggre- gating $42,000.00 and 24,000 shares of stock of the Com- pany. At the date of the balance sheet the Company, together with others, was co-defendant in a pending lawsuit brought hy an individual for damages claimed, the actual liability for which, if any, cannot be determined until final decision by the courts. 7 8 SOUTHERN AIRWAYS, I Statement of Profit and Loss INC. Year Ended December 31, 1950 Op rating re enu Transportation : Passenger Mail-Note B Expre E c ss baggag , etc. In id ntal : Rent recei ed- joint facilities rvice sal s-n t $ 252,237.09 1,374,062.70 14,670.46 6,369.57 5,100.00 1,926.73 TOTAL OPERATL G REVE1 UES $1,654,366.55 Operating expenses: Flying operations Ground operations Ground and indirect maintcnanc ' Passenger service Traffic and sales dv rtising and publicity eneral and aclrninistrati c 0 th r income: OPERA TI1 G PROFIT Insurance collected in excess of carrying amounts of equipment damag d Profit on sale of equipment Interest earned : U. S. Government securities Other Sundry Other deductions: Amortization of development and pr operating expenses- Note D Intere t paid Pr mium on insurance to s cur debt Life insurance expense Loss of securities sold Sundry Statement of Earned Surplus - Deficit 1 ET LOS $858,387.47 267,214.99 ll.'3,118.93 .54,233.- 55 1.51,479.40 .55,528.64 145,.565.82 $ 8,305.56 189.25 2.252.26 201.61 216.58 $ 63,979.26 18.721.46 4,173.80 374.87 364.45 523.72 Year Ended December 31, 19 50 Deficit at January 1, 1950 Add : et los for the year Amortization of expenses in connection with sale of capital stock DEFICIT - DECEMBER 31, 1950 See notes to financial statem ents $ 71,134.55 18,680.79 $ 1,64,5,528.80 8,837.75 11,165.26 $ 20,003.01 91,137.56 $ 71.134.55 $ 164,416.61 89,815.34 $ 254,231.95 Atlanta , Georgia March 16 , 1951 AUDITORS REPORT -'TLA.N1A BALTIMORC BIR M INGMAM BUF",.ALO COLUM B US O.-.lLAS OA'Y'TON OElPJt:R 0El'R 01T" roRT WOATM GR"N.0 RAPIDS INOIANAPOLtS K.-..L .-. '"AZOO KANSAS crtY LOUISVILLC ""C.MPMIS Ml~WAUM.CC MINNE.APOLIS ERNST & ERNST A CC OUNTANTS AND AUDITORS SYSTEM SERVICE ATLA N TA I RST "'AT tQNAL SANK BLO G OELIVE.RV ZONE 3 Board of Directors Southern Airways, Inc. Birmingham, Alabama NCW CAL.CANS PMILACCLPMI A PORTLAND, MC PROVIOC,.CE !llt~i:: COARE:SPONOCNT AT lONOON CABLE AOORC~S Ct:PJSTAUO"t ' N .._ We have examined the balance sheet of Southern Airways, Inc . as of December 31, 1950, and the related statements of profit and loss and surplus-deficit for the year then ended . Our examination was made in accordance with ~enerally accepted auditing standards, and ac- cordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. The Company has included in its financial statements a11 temporary adjustments of compensation for transportation of U.S . m ail through the year ended December 31, 1950 . Under provisions of the Civil Aeronautics Act of 1938, as amended , the Civil Aeronautics Board will determine the final mail compensatiqn rate after it has reviewed the results of the Company's operations over a period of time . The erfect of such retroactive determination upon the financial state- ments of the Company at December 31, 1950 cannot be anticipated at this date . In our opinion, subject to the effect of retroactive mail compensation rates as commented upon in the preceding paragraph, the ac- companying balance sheet and statements of profit and loss and surplus- deficit present fairly the financial position of Southern Airways, Inc . at December 31 , 1950, and the results 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 . Certified Public Accountants The South's Local Service Airline