Southern Airways Annual Report 1962

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Southern Airways inc.
ANNUAL REPORT, 1962
Southern
-----'~-AIRWAYS INC.
DIRECTORS
J. MURREY ATKINS
R. S. Dickson & Co.
Charlotte, N . C.
F . BARTON HARVEY
Alex Brown & Sons
Baltimore, Md.
CECIL A . BEASLEY, JR.
Kilpatrick, Ballard
& Beasley
Washington, D. C.
FRANK W. H ULSE
Chairman of the Board
Southern Airways, Inc.
Birmingham, Ala.
EDWARD U. BENEKE
The Beneke Corporation
Columbus, Miss.
ALTON F . IRBY, JR.
Irby-Adams-Cates Co.
Atlanta, Ga.
ALEXANDER J. BRUNINI
Brunini, Everett,
Grantham & Quin
Vicksburg, Miss.
HENRY P. JOHNSTON
Radio & Television
Consultant
Birmingham, Ala.
GRA YOON HALL
Southern Airways, Inc.
Atlanta, Ga.
G. GUNBY JORDAN
The Jordan Company
Columbus, Ga.
R. EUGENE ORR
Knight, Orr & Co., Inc.
FRANCIS D. SCHAS
Bullington-Schas & Co.
ELTON B. STEPHENS
Ebsco Industries, Inc.
W . B. WHITE, JR. GEN. RALPH H. WOOTEN
White, Bradley, Arant, United States Air Force-Ret.
Jackson ville, Fla. Memphis, Tenn. Birmingham, Ala. All & Rose Memphis, Tenn.
Birmingham, Ala.
EXECUTIVE COMMITTEE
GRA YOON HALL
FRANK W. HULSE
HENRY P. JOHNSTON
ELTON B. STEPHENS
W . B. WHITE, JR.
OFFICERS
FRANK W. HULSE
President
GRAYDON HALL
Vice President - Sales
W. S. MAGILL, JR.
Vice President -
Operations
M . LAMAR MUSE
Vice President -
Finance
IKE F. JONES
Vice President
GEORGE F. E STEY
Secretary
C. H. D. TARRER
Treasurer
GEORGE F. ATTWOOD
Assistant Vice President -
Facilities and Properties
W. BAYNE GRUBB
Assistant Vice President -
Flight Operations
CECIL A. BEASLEY, JR.
A ssistant Secretary
W. B. WHITE, JR.
Assistant Secretary

J . KENNETH COURTENAY
Vice President-
Administrative Services
GEORGE M. GROSS
Assistant Vice President -
Maintenance and
Engineering
GENERAL OFFICES: Atlanta Airport, Atlanta, Georgia
COUNSEL: White, Bradley, Arant, All & Rose, Birmingham, Alabama
Kilpatrick, Ballard & Beasley, Washington, D.C.
AUDITOR : Ernst & Ernst, Atlanta, Georgia
STOCK TRANSFER AGENT: First National Bank of Birmingham, Birmingham, Alabama
ADVERTISING COUNSEL: Harris & Weinstein Associates, Inc., Atlanta, Georgia
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Highlights
of a year
of
PROGRESS
Passengers carried
Cargo ton-miles ...
Aircraft miles flown
Commercial revenues
Operating Cost per Seat-mile
Produced
Net Profit
Stockholder equity ....
* I Strike loss during 1960
1962
Results
518,288
1,048,448
9,172,284
$8,680,927
4.9
$310,080
$1,322,524
1962 Increase
Over Prior Years
1961 1960
34% 104%
42% 137%
12% 62%
37% 119%
6o/o (4%)
56% *
48% 92%
1
2
to shareholders,
employees
and friends
Again, Southern Airways, Inc. broke all previous
traffic and financial records during 1962, with solid
growth that makes our future even more assured.
Passenger and cargo traffic levels for the period
were over one-third above 1961 levels and more than
double the 1960 levels. The substantial traffic in-
creases were accomplished with much smaller in-
creases in plane miles flown and a fairly constant
unit cost level. This had the effect of increasing the
Company's net profit for the year to a new high of
$310,080, or 56% above the previous record made
in 1961. This amounts to $1.06 per average share
outstanding during the year.
The record earnings during the past two years
increased net stockholder's equity as of December
31, 1962 to $1,322,524. This figure is 48% above the
1961 equity and 92% above the stockholder's equity
as of December 31, 1960.
The local service industry Subsidy Class Mail
Rate, first established by the Civil Aeronautics
Board for the year 1961, continued in effect during
1962. The Class Rate Formula enables your Com-
pany to plan its operations, scheduling, equipment
procurement, traffic development and other key f ea-
tures of effiaient management on a long-range basis
and at the same time has important advantages for
the federal government. Thus, a portion of the prof-
its of efficient management are returned to the gov-
ernment under a profit sharing plan incorporated
into the Class Rate Formula. The Class Rate will
continue in effect during 1963 on a slightly amended
basis and it is expected that the federal government
and your Company will again benefit substantially.
Three additional Martin 404 Aristocrat aircraft
were acquired during 1962 and placed into service to
some 17 airports. During the period, 132,000 pas-
sengers, or one of every four of our total passengers,
enjoyed the comfort of the Martin 404's pressurized
and air conditioned cabin. Our 1963 forecast in-
dicates that some 275,000 passengers or slightly less
than one out of every two, will utilize the Martin
Aristocrat and that the ratio will continue to in-
crease as traffic over our present and proposed
routes develop.
At the end of 1962, your Company purchased
five additional Martin 404 aircraft, bringing the
Martin fleet to a total of thirteen. Their conversion
to the Aristocrat standard of comfort and depend-
.:bility was completed during the initial quarter of
1963 and all aircraft were in scheduled service by
April 1, 1963, permitting the expansion of Martin
service to 26 airports in seven southeastern states.
To assure continuing and improving profit
levels through cost control as well as increased
traffic, the Company began its 1963 operations with
an additional tool in the form of a budgetary ac-
counting system which breaks the Company's opera-
tion down into natural cost centers, each of which
is controlled by a responsible member of manage-
ment.
The 1962 results reported herein are most grati-
fying. I am grateful to each and every one of the
1100 employees of Southern who have worked so
diligently to make these results possible. I am con-
fident there is a great future ahead for Southern
Airways - for its shareholders, employees and most
of all, for its customers who can look forward in the
years ahead to the benefits of our determination to
provide the very finest in air transportation.
Respectfully yours,
FROG-RESS
in sales
and service
Bolstered by the outstanding customer appeal of
the new Martin 404 Aristocrat, sales soared to new
highs during 1962. Total commercial sales of
$8,680,927 were 37 % above the previous year. Im-
proved reservations and ticketing techniques, pas-
senger service improvements, new and intensified
advertising programs and a strong desire on the
part of all employees to see the Company grow,
have contributed to the outstanding success enjoyed
in 1962.
Your Company worked closely with the major
trunk carriers to devise new and improved methods
of exchanging interline traffic, resulting in sales to
customers arriving on other air carriers of over
$3.5 million during the year. For instance, direct
private line telephone service is available from all
stations to several of the large trunk carriers in
Atlanta providing immediate access for the ex-
change of interline customers. The program of joint
advertising between Southern and other airlines has
been expanded.
Another major source of sales in which
Southern is one of the leaders in the local service
industry is the Joint Airline Military Traffic Offices
located on military installations throughout the sys-
tem. These sales amounted to $875,000 for the pe-
riod, an increase of 27 % over the previous year.
Many of our customers throughout the system,
particularly vacation travelers, make reservations
and purchase tickets from authorized travel agents.
Sales from this source amounted to $357,038 for
1962, an increase of 31 % over 1961.
Sales promotion activities to attract new cus-
tomers have taken many new forms, such as the
inauguration during 1962 of several promotional
tariffs. The "Visit Dixieland" tariff allows visitors
from outside the United States to travel on Southern
Airways without limitation for a period of 30 days
for only $100.00. Southern's group excursion fare
allows a group of 10 or more to travel at a one-third
discount and Southern's Fly Now-Pay Later plan
allows a customer who desires to do so, to pay for
his travel on an installment plan. Promotional type
fares are designed to attract new air travelers, par-
ticularly from those persons now traveling by auto,
and are designed to minimize diversion from estab-
lished customers. Your Company will continue to
pursue any and all avenues of sound revenue pro-
ducing potential.
Cargo sales including mail, express and freight
accounted for a total of $654,243, a 32 % increase
over last year. Late in 1962, an air cargo terminal
was established in Atlanta to assist in the develop-
ment of cargo sales and to facilitate the exchange
of cargo traffic between Southern and other carriers.
It is anticipated that this new facility will increase
Atlanta freight activity by at least one-third during
1963.
Charter sales during 1962 were extremely .en-
couraging. Athletic teams, business groups, con-
vention attendees, and other groups desiring private
accommodations boosted charter revenue over 150%
to $203,641.
Prospects for increased sales during 1963 ap-
pear exceptionally good and it is anticipated that
new records will be established in all categories.
3
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Southerls ~ircraft flew over nine million miles in 1962, a
PROGRESS . ... -
~ai .. 1: -.o~ ... ~n; ~~.~~i?_~,}:1i!es over the preceding7ear. Of t~is
. 8~a{Jw~t ,{p_et .. ~arff:lvas flown by the Martm fleet which
in . incre~~rc;l.Jr9Jp five, in use at the beginning of the year, to
Operations eight )nvJJtiri)t The DC-3 fleet was reduced to twenty-five
whe'n'~oiiej 1aine'was sold in November.
A perfect safety record was again achieved during 1962. Since the start of scheduled
service in 1949, this record now exceeds five hundred million saf~ pa.sseng~~ ~il,es. ~1:- recog-
m:tio'tf, t-
Jie ,Nationa4 'Safety){Joune'it1
p-resente(r Stft;Whettinit~~rA. Wa1rd.'.6tJY~efjr~ /:!~--:'.;~ '!,C/
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Personnel .l;p!ar.t!pent, in~.J0Jjdel!'9tOs ,asim;r,eJthatP
-iufuret 1niddlel and top
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fi.ed-1e1:1tfldyee~, ;b.
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p-
~bgtarii:J rn ;af'_pe'cialized
man~gement ifrairrriiiftprogrhti"'f6r' tfsmall nutiil:>ei"-61 :~,atitfidat~~(1did p'r6vfdes ::r/t=-excellent
opportunity for rapid advancement.
During 1962, a program of job evaluatio~ was completed for numerous administrative
and clerical positions. These evaluations improved the employee's understanding of job re-
Moving into the new general office building in May enabled the Com-
pany to consolidate departments functionally. Expansion into these
modern offices improved efficiency and provided more effective inter-
nal communications.
To improve efficiency substantial sums were spent for ma-
chinery and tools to handle the increased workload. Judicious
planning, skilled purchasing and enthusiastic utilization of
these improvements in all departments produced a credit-
able record for 1962 and established a sound base for
continued growth.
The Voice of
Southern Hospitality
Conti rming Reservations
Southern Charter
for Georgia's 1963 Industry
Red Carpet Tour
Southern
Aristocrats Serve
Redstone Arsenal
at Huntsville,
Ala.
sponsibilities and job assignments within the Company. Also, the regular evaluation of per-
sonnel progress was continued and expanded. These evaluations are made semi-annually by
each department head and assure that each individual employee's performance is recognized.
The total number of employees at year-end was 1100, as compared with slightly over
1000 at the end of 1961, an increase of approximately 10 %. This percentage increase com-
pares most favorably with increases in all other activities, as listed elsewhere in this report.
Since 1958 the number of employees has nearly doubled.
The safety program for our ground employees resulted in the best safety record in the
airline industry in 1962. The accident frequency was 7.27 accidents per million man-hours
worked and accident severity was 39.0 days lost per million man-hours worked, which is
outstanding.
5
6
ASSETS
CURRENT ASSETS
Cash .............................. .
U.S. Treasury bills - at cost and accrued interest (maturity
value $200,000 in 1962 and $600,000 in 1961) ...... .
Accounts receivable:
U.S. Government - for transportation and public
service - Note A . . . . . . . .
Airline traffic and other receivables
Maintenance and other operating supplies - principally at
average cost, less allowances of $41,785 in 1962 and
$9,962 in 1961 for obsolescence .............. . ... .. .
Prepaid expenses ................ .
INVESTMENTS AND OTHER ASSETS
PROPERTY AND EQUIPMENT - Note B
Cost:
1962
1961
Less allowances for depreciation
and maintenance :
1962 ..... . .... . ..... . .
1961 ............. . .. . . .
DEFERRED CHARGES
TOTAL CURRENT ASSETS
Flight
Equipment
$5,730,022
4,076,361
2,433,296
1,934,429
Ground Property
and Equipment
$1,106,835
889,922
568,051
466,973
Unamortized route extension and development costs
Unamortized long-term debt expense ... .. .... .... .
D'ecember 31, 1962 and December 31, 1961
Dec. 31, 1962
$ 347,932
197,143
$1,565,324
913,545
$2,478,869
427,168
150,331
$3,601,443
58,842
$6,836,857
3,001,347
$3,835,510
$ 134,328
74,425
$ 208,753
$7,704,548
Dec. 31, 1961
$ 875,310
592,165
$1,028,907
810,876
$1,839,783
255,432
49,767
$3,612,457
55,476
$4,966,283
2,401,402
$2,564,881
$ 182,623
82,471
$ 265,094
$6,497,908
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses :
Trade accounts ......... .
Collections and withholding as agents
Salaries, wages, and vacation pay
Accrued taxes, advertising, and other expenses
Unearned transportation revenue . . ....... .
Air travel plan deposits ......... .. ... . ................. .
Estimated federal and state taxes on income, less tax
anticipation notes of $198,726 in 1962 - Note D . . ..... .
Current maturities of long-term debt - Note B
TOTAL CURRENT LIABILITIES
LONG-TERM DEBT (exclusive of current maturities) - Note 8
6% SUBORDINATED CONVERTIBLE DEBENTURES - Note C
DEFERRED INVESTMENT CREDIT
STOCKHOLDERS' EQUITY - Notes A, B, C, D, and E
Common Stock, par value $3 a share:
Authorized - 1,000,000 shares
Issued - 315,950 shares in 1962 and 288,000 shares in 1961 .
Paid-in surplus ............ . . . ........... .
Earned surplus . . . ..... .. . . . ....... ...... .. ... .
Contingent liabilities - Note D.
See Notes to Financial Statements.
Dec. 31, 1962
$ 847,146
954,216
318,007
243,492
$2,362,861
39,113
71,400
215,584
461,336
$3,150,294
1,987,500
1,227,800
16,430
$ 947,850
58,248
316,426
$1,322,524
$7,704,548
Dec. 31, 1961
$ 454,243
904,857
318,590
104,438
$1,782,128
35,648
65,025
305,537
663,212
$2,851,550
1,450,325
1,300,000
- 0 -
$ 864,000
25,687
6,346
$ 896,033
$6,497,908
7
8
Southern
AIRWAYS: INC.
Years ended December 31, 1962 and December 31, 1961
STATEJY.I:ENT OF INCOJY.I:E
Year Ended December 31,
OPERATING REVENUES
Passenger and excess baggage
Mail, express, and freight .
Public service revenue - Notes A and D
Charter .......... .
Other operating revenues - net
TOTAL OPERATING REVENUES
OPERATING EXPENSES
Flying operations ...... .
Maintenance . ... .
Aircraft and traffic servicing
Passenger service .......... .
Promotion and sales ....... .
General and administrative
Amortization and provision for depreciation .
TOTAL OPERATING EXPENSES
OPERATING INCOME
OTHER INCOME
OTHER DEDUCTIONS
Interest . . . . . . . . . . . . . . ....... .
Miscellaneous ..... ...... ........ .
INCOME BEFORE TAXES ON INCOME
TAXES ON INCOME - estimated - Note D
NET INCOME
1962
$ 7,778,342
654,243
5,351,872
203,641
44,701
$14,032, 799
$ 3,772,399
2,960,589
3,478,068
715,556
899,375
694,917
556,840
$13,077,744
$ 955,055
31,698
$ 986,753
$ 185,327
9,046
$ 194,373
$ 792,380
482,300
$ 310,080
STATEJY.I:ENT OF SURFL US
1961
$ 5,718,046
494,839
4,395,236
79,741
30,526
$10,718,388
$ 2,913,497
2,067,213
2,858,699
580,304
730,026
534,314
423,535
$10,107,588
$ 610,800
27,988
$ 638,788
$ 126,523
8,283
$ 134,806
$ 503,982
305,070
$ 198,912
Year Ended December 31,
1962 1961
PAID-IN SURPLUS
Paid-in surplus at beginning of year . ... . ........... $ 25,687
Add excess of proceeds over par value of
Common Stock issued as a result of:
Shares Issued
1962 1961
Exercise of stock options .
Conversion of debentures
Other
Paid-in surplus at end of year .
EARNED SURPLUS - Note D
9,900
18,050
- 0 -
27,950
Earned surplus - deficit* at beginning of year .
Net income .............................. .
Earned surplus at end of year ......... ..... ... .
See Notes to Financial Statements.
1,600
- 0 -
1,156
2,756
$ 13,860
18,050
651
$ 32,561
$ 58,248
. ..... $ 6,346
310,080
. . $316,426
$ 22,536
$ 2,515
- 0 -
636
$ 3,151
$ 25,687
$192,566*
198,912
$ 6,346
\Stiuthern
-.4'/RWAVS: INC.
Note A - The Company operates und:el!\t'bEf"~
'\l'tM.i~tf'{,\~ Revenue Service. Of the maximum additional tax of ap-
of a "Certificate of Public Convenience and Necessity proximately $65,000 which would be due for these years,
for Local or Feeder Service" issued by the Civil Aero- approximately $54,000 would be recoverable in subse-
nautics Board for a period of unlimited durati.01:1. Such quent years as a reduction of any taxes otherwise due
certificate entitles the Company to receive mlriJ and for such years.
public service revenues from the U. S. Government. The Company intends to file its federal income tax
During the period of eighteen months eml.~9-_,J:>~cernl;>{\ return for 1962 and to make an amended return for
31, 1960, the Company received public service revenues - 1961 to include the effect on these years of certain of the
under a temporary rate which is subject tq .,ac;1jptP!,~rW. proposed adjustments. Accordingly, the 1962 provision
either upward or downward upon determih~tion' byl.th'e .r. for taxes on income includes the tax due on this basis,
Civil Aeronautics Board of a final rate for that period. and the 1961 comparative financial statements included
Since that date the Company {~~i~'g:' l!u."afic;:se't( .') .~ke.rliin have been adjusted to reflect the additional 1961
ice revenues under a permaneifl""cia~sa 'i'!t'te'..,wlfi'cfi"'pro:="" = ~a~1iability of $26,537, as well as the resulting in-
vides for the refunding of profits in excess of stipulated creased public service revenues of $21,100 for that year.
returns on investment. Accordingly, the Company pro- The net effect of these adjustments is to decrease income
vided for profit-sharing refunds of $169,800 in 1962 and previously reported by $5,437, with a corresponding de-
$37,900 in 1961, which amounts are subject to adjust- crease in earned surplus reported at December 31, 1961.
ment either upward or downward upon completion of Note E - Restricted options (all of which are pres-
a1t3d~t:.s by the {;:l~ Aerona~~~ Board. r";n '.t-11}\ ently exerci~~~-d~r~r,~pa$ , ~1pmon Stock of the
NHte B - Lo'fig-term debt a't December ~l, 1962 (for~ Company were--ncl<l~y oiwee ~"'3.-
t .. Hecember 31, 1962; op-
~~ic~" all airer~~~-' _
,en&"ine~2
ra!1~ ... relate1 ~q~_
i_pment ~f.EL , , tioi:s issued in 1955 for 9,0~0 s~ar~~ a~ $4.67 a share
1
p:iBdgel::1 as co11:a.\eral) 1s stl~afazed as.lollows: ~i~:., ,.:1.,: expire May 1, l9fili;1anoptiprt~i'lssxred m 1962 for 11,000
shares at $5.631/s .. a shar.e to J anua1;:y 1, 1965 and $7.00
8!8; [)~ ~
-g2!2;.\ ,;,Jr?!\ Due
~;r~lr Due A~jl,22 a share theI"eaitel" ~~pi~e'l.:J iiHiWf~. 1970. During the
~ . r ~,. r c - 2,~ - - - One fffi;P: One Y~: ~ .. ~?iC year ende-
d Decembe~,,M-tf Gp,: rilf-
~ions were exercised
'5s);;o/o "notes itirfaiJ'l~ to bat.k~'\ iie for 9,900 shares at $4:40 ~-share:
C ~n. Jquarte;:l~J~tallm~nt~il: r,rJFt~:!: 8[::. i:3(1 NotJ~'It- '.f!tf ('.lo~~
'tJh.~ .. Co~~l'f,y of its employee re-
$112,500 thro'l.!gh January 1, tirement plans amounted to $150;418 for the year ended
8\?i1,9ea~fi witrfiSiefdifoed qlhlit~ely~ [2\ p .;6,\ ~-_
:'J.'..I C
.L December 3t;sfa52t
-attd>t1H:flun1'lin-0e'd past service liabili-
"' -. ~~~m~nts t.hwn~tter to ,De~I,n.--, - . ".J - , ... ~, ,. ,- ,. , .-.
ty at that date totaled approximately $250,000.
!.IC ~ ~
M, 1967:3:,~ll:5;;~ ... l_
(,\h:i-J,( $331;5'0& ~
-~t,662,SOO,...,.; ..!...~ [l'-'tO.IT JSlI .... 4
.' _; ,;._
~
o/o notes pa/{ble to suppl~}s due ~:r.
in quarterly installments of
$25,000 (subject to increase or
decrease due to earnings or re-
ceipt of retroactive mail pay)
with any remaining balance
due April 30, 1964 (a) 123,836 325,000
fi? b~t haif
~f {he unpa{if ,l1Ia~ce J{'.i~ti~ber 3/;
;t:~6~~y, at itb~.'.S~p_
plier'~!op,t-lon,,~be cativ.~~fed to Cotn-
mori Stock of the Company at $4 a share.
ERNST & ERNST
F11=/J1' ;.ilr,o~}~ BANK eu1Lo1No
__ i' ATLANTA 3 , GA.
Board of Directors
Southern Airways, Inq.. ,:. ,.
Atlanta, Georgia
:'' l,';_jr; ..
~
T -J ,_, ... _; ... ,,~;...
We have examined the balance sheet of
The agreements relating to these notes place certain
restrictions upon, among other things, (1) net current
~~~.t&(, {2) 1tnt .~1,,th, {q)i-:!.~~@;flJ?tion ft?J.'.~P,entur~~;- :: ~
, ?
ana (4) payments relating to capital stockJ including
di!'6,de;~ds. As:~oifi,'-D.icembei:;:i1?If962, thl!:i-Cimitpany h~d' -
met ,an 8f thes.e
1
r_~g:ptremep!; 9-f:d:apprrxt111.~~e~l $1 ~O,::,. ,
dOO of earned surtnu~ was 1.free of such Testtrct10ns. 1
,d1fot~ ,
C - OJ, J;lw-610 su~;r9-irv1t~d conve:p~ibl_
e deben-
ttires , dtre December' 1., 197'5(.;butstanding a:-CDecember
31,_1~62, $1,00,0.,.9Q.9 is conve,rt.ihle- into Common Stock of
the Company ii-t-$5 a share to January 1, 1965 and the
remaining $227,800 is convertible at $4 a share to
December 1, 1965. After these dates, the conversion
fi1
. ?.Bou'tbern ;:A...r.wa.y!.:} ]ne;; a.s of December 31, 1962, and the
related statemen_t,s o_f_(.iR,come and surplus for the year
then ended. Our exam1hation was made in accordance with
generally accepted ~/i:-it,ing standards, and accordingly
included such tests of the accounting records and such
other auditing procedures as we considered necessary
rates range frorp.1,7 to $10c:FJ?~!e. The .de_
bentures are
callable by the Company at premmms rangmg from 6%
~)Y.n,ward, amJj~ !~:.Jg~ner,';J[IJy ~ully sub.ordinated to all
existing debt and to any future p~nk indebkdness which
~-a maturity_: Hate. of. less~
than five yeatsJ The deben-
tures place restrictions upon the Company similar to
those described in Note B.
;~
GW.o_
t~D - No:;preyJsion has,j;>~~i]. made'_;ilf ,the financial
statements for any additional income taxes which may
finally be determined as a result of proposed adjust-
ments to the Company's income tax returns for the
years 1948 through 1960. The Company is protesting
these adjustments, which relate principally to deprecia-
tion rates, with the Appellate Division of the Internal
in the circumstances. We made a similar examination of
Jh.e .. :ft'inancial statements for:.:.;the preceding year .
l . In o~r opinion'. su?ject to th~ effec~ of
any future retroact1ve determination of public service
revenues as explained in Note A to the financial
statements, the accompanying balance sheet and state-
ments of '~ncome and surplus present fairly the financial
position qf,Southern Airways, Inc . at December 31, 1962,
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.
Atlanta, Georgia
April 11, 1963
Certified Public Accountants
9
Southern
AIRWAYS: INC.
A
Five Year
Report of
PROGRESS
TRAFFIC 1962 1961 1960
Passengers Carried 518,288 401,711 260,760
Passenger Miles Flown 95,435 71,300 46,765
Mail Ton Miles 364,610 290,091 179,054
Express & Freight Ton Miles 683,838 480,904 288,707
Total revenue ton miles 10,184,178 7,603,753 4,953,317
Revenue Miles flown 9,172,284 8,212,646 5,669,267
Airports served 55 52 45
FINANCIAL
Revenues
Commercial $ 8,680,927 $ 6,323,152 $3,964,069
Public Service 5,351,872 4,395,236 3,068,190
Total 14,032,799 10,718,388 7,032,259
Expenses
Salaries & Wages 6,488,269 5,515,237 4,012,249
Depreciation & amortization 556,840 423,535 316,365
Other (net) 6,677,610 4,580,704 3,035,993
Total 13,722,719 10,519,476 7,364,607
Net Income or (Loss) 310,080 198,912 (332,348)
Selected Balance Sheet Items
Net working capital 451,149 760,907 (504,055)
Property&Equipment (net) 3,835,510 2,564,881 1,238,651
Stockholder equity $ 1,322,524 $ 896,033 $ 689,140
Shares of common stock
outstanding 315,950 288,000 285,244
1959 1958
258,180 226,230
45,583 41,818
125,109 111,436
295,662 211,877
4,793,228 4,333,498
4,809,191 4,076,250
35 33
$3,612,590 $3,087,814
2,525,815 2,373,221
6,138,405 5,461,035
3,376,756 2,893,079
187,682 209,582
2,552,371 2,211,771
6,116,809 5,314,432
21,596 146,603
43,917 123,740
1,030,008 715,438
$ 974,195 $ 913,956
252,400 252,400
SOURCE
55.3
Passengers
arg0
~ 4.Jc
1.9 Charter & Misc
38.1
Public Service Revenue
Passengers . . . . . . . .
Cargo Carried ........
Private Charter Flights
Miscellaneous .. . .... . ..
Public Service Revenue
Total
....... . . $ 7,778,342
654,243
203,641
76,399
$ 8,712,625
5,351,872
$14,064,497
DISPOSITION
Salaries & Wages
Materials & Repairs
Services Purchased
Taxes & Insurance (including $429,769
for benefit of employees) . . . . . . . . .
Rentals
Advertising, Interest & Other Items
Depreciation & Amortization
Retained Earnings
Total
46.7
Salaries & Wages
$ 6,572,415
2,820,617
1,324,712
1,323,435
472,941
683,457
556,840
310,080
$14,064,497
SOURCE and APPLICATION of FUNDS
SOURCE OF FUNDS
From Sale of -
Common Stock ... ....... .... .
Retired Equipment .
From Loans by Banks . . . . . ........... .
From Operations -
Net Income . . . . . . .......... .
Provisions for Depreciation .. .
Allowance for Obsolescence . . ...... .
Amortization of Intangibles . . ..
From Reduction in Working Capital
From Other Sources (Net)
Total
$ 43,560
46,949
974,675
310,080
476,354
31,823
57,710
479,811
8,458
$2,429,420
APPLICATION OF FUNDS
To Additional Operating Property &
Equipment
To Debt Retirement -
Banks ...
Suppliers
Other
$1,790,044
539,700
94,051
5,625
Total .. . . . . . . $2,429,420
11
12
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PROGRESS
of Route
Expansion
The year 1962 saw continued expansion of the Com-
pany's operations. On June 21, service was inaugu-
rated to Columbia, Charleston and Myrtle Beach,
S. C., providing new local air service between these
cities and other communities in South Carolina and
Georgia.
In August, the CAB renewed, on a permanent
basis, Southern's Segment 5 authority between At-
lanta and New Orleans via Columbus, Ga., Dothan,
Ala., Panama City and Eglin Air Force Base, Fla.
This segment was originally awarded on a tempo-
rary basis but because of its exceptional traffic pro-
ductivity, permanent authorization was granted. At
the same time the CAB announced the institution
of the Panama City-Memphis Route Case to consider
the Company's application to operate between Pan-
ama City and Memphis via Montgomery, Birming-
ham and Florence-Sheffield-Tuscumbia, Ala. Hear-
ings before an Examiner were concluded in
February, and final Board decision is expected in
late 1963.
A route application between Huntsville and
Houston to connect space age activities at these
communities was denied largely because these mar-
kets had not developed sufficient demand for direct
service. The Company plans to renew its efforts to
connect these points.
With the completion of the airport at Rock-
wood, Tenn., service to that point was inaugurated
in October. By the end of 1962, Southern served 65
cities through 55 stations over a network of 5,977
route miles.
The predicted efforts of the long-haul trunkline
carriers to suspend their service to the smaller and
intermediate size communities, which have been un-
der way for some time in other parts of the country,
have begun in the Southeast. During the first quarter
of 1963, these carriers filed applications with the
Civil Aeronautics Board for permission to terminate
service at such points as Greenville/ Spartanburg,
S. C., Brunswick, Waycross, Rome and Savannah,
Ga., and at Dothan and Florence/Sheffield/Tuscum-
bia, Ala. It is expected that further applications of
this nature will occur during the next several
months. In order to fulfill the public needs arising
from these route refinements, Southern has already
taken the initial steps to replace these carriers at
certain of the points in the event their service is
discontinued.
Recently, the Company made application for
authority to operate three new routes as follows:
Between Charlotte, N. C. and Jacksonville,
Fla. via the intermediate cities of Columbia
and Charleston, S. C. and Savannah and
Brunswick, Ga.
Between Atlanta, Ga. and Jacksonville, Fla.
with service to the intermediate points of
Macon, Savannah and Brunswick, Ga.
Between Nash ville, Tenn. and Jacksonville,
Fla., via the intermediate points of Hunts-
ville, Birmingham, Montgomery and Dothan,
Ala., and Tallahassee, Fla.
Although no procedural dates have been set for
these applications, public hearings are expected to
be held within the relatively near future.
As trunk carrier operations in areas within
and adjacent to Southern's present system are al-
tered to meet jet age economics, it is expected that
the Company's present routes will be materially
strengthened and extended into the State of Florida
and other highly productive areas.
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"We've Got Good Connections"
Between the Southland and the World
- - - - - APPLICATION PENDING
f/1
Southern
AIRWAYS
Route
of the
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