Southern Airways Annual Report 1953

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I I
I I
(IATIONAL~ETY (IOUNCIL.
~~53
AVIATION
SAFETY AWARD
. ,:,
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TO
in rec09nition of its contribution ro t1fe Jtir9ranspor'ratioJt
hal'in9 operated 4 yrar.s and,
as of 'December 31, 1953
without a passenger or crew fatality in
scheduled passen9er carryin9 flighr operations


IKE F. JONES
Vice President
GEORGE F. ESTEY
Secretary - Treasurer
MANAGEMENT
OFFICERS
FRANK W. HULSE
President
NORMAN K. ARNOLD
Vice President - Research
C. M. BRITT
Vice President - Sales
HUGH W. DAVIS
Vice President - Operations
CECIL A. BEASLEY, JR.
Assistant Secretary
W. B. WHITE, JR.
Assistant Secretary
C. H. D. TARRER
Assistant Treasurer

IVAN ALLEN, JR.
Ivan Al I en-Marshal I Co.
Atlanta, Ga.
J. MURREY ATKINS
R. S. Dickson & Co.
Charlotte, N. C.
CECIL A. BEASLEY, JR.
Kilpatrick, Ballard & Beasley
Washington, D. C.
EDWARD U. BENEKE
The Beneke Corporation
Columbus, Miss.
ALEXANDER J. BRUNINI
EXECUTIVE COMMITTEE
FRANK W. HULSE HENRY P. JOHNSTON
IVAN ALLEN, JR. ELTON B. STEPHENS
W. B. WHITE, JR.
DIRECTORS
FRANK W. HULSE
Southern Airways, Inc.
Birmingham, Ala.
ALTON F. IRBY, JR.
A. F. Irby & Co., Inc.
Atlanta, Ga.
HENRY P. JOHNSTON
Birmingham News Company
Birmingham, Ala.
IKE F. JONES
Ga.-Carolina Paper & Supply Co.
Augusta, Ga.
R. EUGENE ORR
Knight, Orr & Co., Inc.
Jacksonville, Fla.
W. HERBERT SMITH
W. Herbert Smith Co.
Clover, S. C.
ELTON B. STEPHENS
Elton 8. Stephens & Assoc.
Birmingham, Ala.
W. B. WHITE, JR.
White, bradley, Arant, All & Rose
Birmingham, Ala.
Brunini, Everett, Grantham & Quin
Vicksburg, Miss.
G. GUNBY JORDAN
The Jordan Company
Columbus, Ga.
GEN. RALPH H. WOOTEN
Mid-South Chemical Co.
Memphis, Tenn.

GENERAL OFFICES
Brown-Marx Building
Birmingham, Alabama
Stock Transfer Agent
THE FIRST NATIONAL BANK OF BIRMINGHAM
OPERATIONS HEADQUARTERS
Municipal Airport
Atlanta, Georgia
TO STOCKHOLDERS, EMPLOYEES AND FRIENDS
OF SOUTHERN AIRWAYS, INC.
The twelve months ended December 31, 1953, was the most successful year to date in
your company's history. Despite major operational adjustments required because of revisions
in our route system by the Civil Aeronautics Board in the Certificate Renewal Case, we earned
a profit during 1953 in an amount that may be regarded as satisfactory under all the circum-
stances.
In addition to the necessity of major operational adjustments in 1953, the retroactive
application of our permanent mai I rate to the first quarter of the year also had a depressive
effect upon profits. While the Boarddid not issue the final moil rate order until April 7, 1953,
it was nevertheless made retroactive to October I, 1952. largely because of the resulting
inability of your management to conform scheduling and expense levels to those established by
the Board in this mail rate order, the company incurred a loss during the period January l
through March 31, 1953 of approximately $35,000. Significantly, we operated at a profit in
Apri I and during every succeeding month of the year, earning an amount sufficient to offset
the I oss during the first quarter and to show a profit for the year of $31 , 886.
Although the Renewal Case was tried during 1952, the Board's decision was not issued
until April, 1953. Our certificate was extended forapproximotely five years from February 8,
1952, the original expiration date, through December 31, 1956. Route revisions ordered by
the Board in the Renewal Case were placed in effect by your company on June 13 when service
was terminated between Columbus, Georgia and Charleston, South Carolina, and at Hattiesburg,
Mississippi. On the same date we inaugurated service at Monroe, Louisiana, with two trips per
day. On September 27, 1953, this service was increased to four trips per day.
While during 1953 we operated our revised system for some six months, past experience
in the industry demonstrates that a substantially longer period is required to properly develop
the traffic potential and achieve the maximum commercial revenues which can be expected
after ma jor route modifications.
Improvement in your company's traffic generation during 1953 is reflected by the fact
that its load factor or percentage of seats occupied was the highest for any year since it com-
menced operations. This record load factor was achieved despite a 9.25% reduction of total
mileage below that in 1952 and despite the fact that, because of the lower total mileage, we
carried7.22% lesspassengers in1953than in 1952. By elimination of our less productive mile-
age, and constant sales efforts we were able to increase our non-mai I revenues from 37. 40c per
plane mile in 1952 to 39.99c in 1953, an increase of 6.93%.
While increasing its load factor, your company maintained strict control over costs.
Although it flew substantially less total mileage and although inflationary pressures continued
from all quarters, nevertheless your company held its 1953 per mile operating cost to 105.?lc--
an amount below the average for the local service industry for the same period. This result was
accomplished by a reduction in personnel made possible in no small part through the A -
-
increasing efficiency of our employees. Thus, at the beginning of 1953 your company h~n
excess of 475 persons on its payrol I and by the end of the year this number had been reduced to
408.
During 1953 the Civil Aeronautics Administration extended the number of hours during
which our aircraft may be operated without major overhaul. This extension was based upon
your company's excellent maintenance record. The increase of the overhaul period resulted in
making available more time for our maintenance staff to work upon equipment other than that
of your company. Services performed during 1953 for owners of several executive airplanes
increased considerably your company's revenues from outside service sales.
Pursuant to the provisions of the Internal Revenue Code, no Federal Income Taxes are
expected to be due on our 1953 earnings of $31,886. Further, under the present revenue laws,
no taxes are anticipated on future earnings of your company up to $142,000 provided such
profits ore obtained withinthe next four years. Barring changes in the present Federal tax law,
profits in coming years may be used to retire a substantial portion of our deficit without pay-
ment of any Federal Income Tax.
In the fall of 1953 our Atlanta offices were moved into new quarters in a more conven-
ient location near the main entrance to the Atlanta Airport. The new, air-conditioned facili-
ties are well-suited functionally to our purposes and shouldsubstantially improve the company's
operating efficiency. I am happy toreport thatwe were able toobtain the space atno increase
in rental over that paid for the old offices. You are cordially invited to visit your company's
offices at any ti me you can do so.

During the Christmas season of 1953 your company carried first class mail along with
ti ther local service airlines. Participation by the local service air carriers in the movement
of this mail substantially expedited a large volume of mail which would otherwise have moved
by surface transportation and at the same time materially improved the Post Office's service to
the public. It is believed that the success of this experimentwill in time lead toregular trans-
portation of first class mail by Southern Airways.
Again in 1953, your company operated with a perfect safety record. The fact that we
have earned the Aviation Safety Award from the National Safety Counci I every year since
operations began is a real tribute to the members of our organization.
At December 31, 1953, the original bank loan of $500,000 made in the second quarter
of 1952 had been reduced to $130,000. No additional loans are contemplated; likewise, no
increase in equity financing is planned at this time.
Your management wi II continue to exercise every possible effort to increase non-mai I
revenues, control costs and to reduce its dependence upon Government mai I pay. Progress made
by your company since it commenced operation in June, 1949, is illustrated by statistics on the
last page of this report. An aggressive sales campaign is presently in progress and already our
load factor is ahead of 1953.
We, of Southern, look forward to the year 1954 with confidence and I personally con-
sider our future brighter than ever.

April 26, 1954
Respectfully yours,
Frank W. Hulse
President
BALANCE
SOUTHERN
DECEMBER
ASSETS
CURRENT ASSETS
Cash:
Demond deposits
Due from agents
Office and station cash funds
Accounts receivable:
United States Government:
For transportation of moi I - Note B
For other transportation
Air travel plans, air line traffic,
and other trade receivables
I nve ntori es - at cost:
Repair ports and shop supplies
Other operating supplies
Prepayments:
Aircraft engine overhaul (unamortized)
Insurance and interest
INVESTMENTS AND OTHER ASSETS
Investments in affiliates - at cost
Account receivable from Employees' Trust
Committee and accrued interest
Service, utility and other deposits
PROPERTY AND EQUIPMENT - at cost, less allowances
for depreciation and overhaul - Note B
Hangar (located on leased land)
Aircraft and related equipment
Other equipment
Improvements to rented property
less allowances for depreciation and
overhaul
Construction in progress - equipment
DEFERRED CHARGES
Unamortized cost of certificate of public
convenience and necessity
Dues, advertising and other expenses
Note A - The Company is engaged in air tronspor-
tati on with respect to persons, property, and mai I under
authority of a Temporary Certificate of Public Conven-
ience and Necessity issued by the Civi I Aeronautics Boord,
which was originally effective February 8, 1949, and
which was renewed under date of April 14, 1953 (with
certain modifications) for an additional period expiring
December 31, 1956.
Note B - Note payable to bank for money borrowed
is secured by ten aircraft and substantially all of the re-
$ 79,171.84
9,229.31
4,325.00
$193,702.52
10,645.84 $ 204,348.36
N
149,430.12
$ 105,555.87
13,847.27
$ 57,871.69
33,312.87
TOT Al CURRENT ASSETS
0 T E
$ 1,101.00
2,028.01
1,047.00
$ 124,479.23
729,721.35
163,745.11
9,611.32
$1,027,557.01
696,085.85
$ 331,471.16
16,282.03
$ 8,508.64
6,081.56
s T 0
$ 92,726.15
353,778.48
119,403.14
91.56
$ 657,2.33
4,176.01
347,753.19
14,590.20
$1 , 023, 6 l l . 73
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F N A
lated equipment, hangar located on land leased until
January 11 , 1959 (with option of re newa I for five years),
station and office furniture and equipment, automotive
equipment, assignment of air moil pay due from .ed
States Government, insurance policies for $150, ,.00
on life of on officer, and lease under which the Company
is lessee of the land on which the hangar is located. The
indebtedness is further secured by the guaranty of an offi-
cer of the Company.
Under the terms of the loan agreement with the
SHEET
AIRWAYS,
31, 1953
n C.
LIABILITIES
C
CURRENT LIABILITIES
Notes payable, including current portion of
long-term debt due within one year:
Secured:
For money borrowed - Note B
For insurance premium - Note C
Accounts payable and accrued expenses:
T rode accounts
Interest, taxes, and insurance
Salaries and wages
Withholding and pay rol I taxes
Rents and londi ng fees
Other
Unearned transportation revenue
State taxes on income - estimated
G-TERM DEBT
Secured:
Note payable to bank for money borrowed,
due $10,000.00 monthly to January, 1955 -
Note B
less payments due within one year shown
as current liability
Unsecured:
Note payable for equipment and supplies -
(subordinated) - Note D
CAPITAL
Common stock, par value $3.00 per shore:
Authorized, issued, and outstondi ng
250, 000 shores
Paid-in surplus
Earned surplus - deficit*
A L s T A T E M E N T s
bank as amended effective January l, 1954, the Company
has agreed, among other things, (l) to maintoi n net current
assets (as defined in the agreement) of $300,000.00 or

of operating expenses (exclusive of depreciation)
e preceding twelve months, whichever is greater;
(2) pay no dividends while the note is outstanding; and
(3) to maintain a net worth of one and one-fourth times
the unpaid principal amount of the note; otherwise the
entire balance. of the loan may be called by the bank.
Note C - Note payable for insurance premium is
$120,000.00
31,616.00
$157,903.59
19,347.48
13,257.12
1,735.91
12,718.93
8,025.24
TOT AL CURRENT LIABILITIES
$130,000.00
120,000.00
$10,000.00
109,403.42
$750,000.00
6,251.38
227,908.28*
$ 151,616.00
212,988.27
9,760.94
1,500.00
$ 375,865.21
119,403.42
528,343.10
$ I , 023 , 6 11. 73
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secured by the unexpired portion of such premium.
Note D - Note payable to Southern Airways
Company for equipment and supplies in the amount of
$109,403.42 is subordinated to the note payable to bank
for money borrowed.
Note E - At December 31 , 1953, the Company was
contingently liable as endorser of note ofEmployees' Trust
Committee of Southern Ai rwoys, Inc. payable to bank,
in the amount of $7,666.62. This note was paid in April,
1954.
Operating revenues:
T ronsportoti on:
Passenger
Moil
Express
Excess baggage
Incidental:
SOUTHERN AIRWAYS, Inc.
STATEMENT OF PROFIT AND LOSS
Year ended December 31, 1953
Agency services and rents received -
joint facilities
Service soles - net
Other
TOT Al OPERATING REVENUES
Operating expenses:
Flying operations
Ground operations
Ground and indirect maintenance
Passenger service
Traffic and soles
Advertising and publicity
General and administrative
Other income:
Interest earned
Cash discount earned
Profit on sole of equipment
Reduction of rents and landing fees
accrued for prior years
Reduction in taxes accrued for prior years
Sundry
Other deductions:
Interest on long-term debt
Other interest paid
Amortization of route extension and
development expenses
Amortization of cost of renewal of certificate
of public convenience and necessity
life insurance premiums
Mai I fines
loss on equipment abandoned
Sundry
Taxes on income - estimated:
Provision for the year for state income taxes
Provision for depreciation and overhaul of property
and equipment included above - $160,497. 27.
See Notes to Financial Statements.
$1,529,280.75
513,530.72
257,741.30
135,041.62
459,360.07
66,577.88
233,466.70
OPERATING PROFIT
$ 130.16
4,516.31
2,491.81
3,600.00
2,951.86
1,510.78
$ 15,646.26
3,392 . 35
4,529.50
2,127. 15
2,186. 30
660. 48
1,621.44
41.02
PROFIT BEFORE TAXES ON INCOME
NET PROFIT
STATEMENTS OF PAID-IN SURPLUS AND EARNED SURPLUS-DEFICIT
Year ended December 31 , 1 <J.53
PAID-IN SURPLUS
Balance at January 1, 1953 and
December 31 , 1953 - {no change
during year}
EARNED SURPLUS-DEFICIT
Deficit at January 1, 1953
Credit net profit for the year
$1, 138,851.38
2,036,353 . 60
36,435.37
5,987.15
1,333.06
23,661.15
767.52
$3,243,389.23
3 , 194,999. 04
$ 48,390.19
15,200.92
$ 63,591.11
30,204 . 50
$ 33 ,386. 61
1,500. 00
$ 31,886.61
$259,794.89
31,886.61
Deficit - December 31, 1953 $227,908.28
See Notes to Financial Statements.
,.OAT WORTH
GAND ,-APIO S
LOS ANGCt.l. S
LOUISVILLC
M1LWAUllCC
ERNST & ERNST
ACC OUNTANT S A ND AUD ITORS
SYSTEM S ERVICE
A TLANTA
f"I RST NATIONAL BANK BLDG
DELIVERY ZONE 3
Board of Directors
Southern Airways, Inc.
Birmingham, Alabama
A OCMCSTCA
W I N STON - SAI.Cloll
We have examined the balance sheet of Southern
Airways, Inc. as of December 31, 1953, and the related state-
ments of profit and loss and surplus-deficit 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 ~e considered necessary i n the circumstances .
Prepayments of air craft engine overhaul,
insurance and 1nterest, which in the previous year were classi-
fi ed as deferred charges, are included in the balance sheet
under current assets; and unearned transportation revenue ,
previously classified as deferred income, is included in the
balance sheet under current liabilities in accordance with
the general practice adopted by the airline industry in
compliance with the uniform system of accounts prescribed by
t he Civil Aeronautics Board.
In our opinion, the accompanying balance
sheet and stat ements of profit and loss and surplus-deficit
present fairly the f i nancial position of Southern Airways, Inc .
at December 31, 1953, and the results of its operations for
t he year then ended, in conformity with generally accepted
accounting principles applied, except as mentioned in the
precedi ng paragraph, on a basis consistent with that of the
preceding year .
Atlanta, Georii a
April 14, 1954-
Certif ied Public Account ants
COMPARATIVE OPERATING STATISTICS
BY CALENDAR YEARS
.....
..
!ti
? :,,1949 1:950 '1951 1952 1953
REVENUE PLANE MJLES \._. 854,082 1,860,748 3,070,576 3,330,568 3,022,365
REYE NUE PASSENGERS 10,665 38, 117 96,572 121,065 112,328
REVENUE PASSENGER MILES 1,753,268 6,565,645 17,186,342 20,670,139 19,286,489
PASSENGER LOAD FACTOR 9.84 17.08 27. 19 29.54 30.49
'MAIL TON MILES IHlf{. 18,495 48,771 86,011 86,387 80,050
:r=:!:+:: .
EXPRESS TON MILES -:
15,765 44,546 79,359 88,403
::::
73,507
,. :-:
:'o/o.;,SCl:JED ULED MILES'' COMPLEie.o 94.34 96.92
;,\}{~~~:-.::-:-: . ' ,. . ' .-. . . . :-: t: .- ,:-:- .. _):
97.54 98.47 97.68
TOTAL NON MAIL REVENUE PASSENGER REVENUE
Cents Per Revenue Plane Mi le Cents Per Revenue Plane Mi le
.3.5.54
30.87
% I NC REASE OVER PREVIOUS YEAR , INCREASE OVER PREVIOUS YEAR
17 .29 116. 14 14. 90 6. 93 14. 44 127. 82 15. 13

GREENWOOD
~~
TUSCALOOSA BIRMINGHAM
MONROE
BATON ROUGE