Annual Report
SOIJTHEBN AIRWAYS. INC
Report to Stockholders for period ended December 31, 1968
SOUTHERN AIRWAYS. INC
General Office: Atlanta Airport
Atlanta, Georgia 30320
part, acquisition of the three DC-9-30 aircraft, the longer
"stretched" model of the DC-9, scheduled for delivery in
May and June, 1969.
The year 1968 was an important one in regard to Civil
Aeronautics Board cases involving route improvements
and extensions for Southern. I am happy to report that
the Board finalized a portion of the Southern Airways
Route Realignment Investigation and, among other things,
granted Southern new nonstop authority between many
points on its system. The Board noted in its opinion that
Southern will derive substantial additional annual reve-
nues as a result of this new authority. Extension of South
ern to Tallahassee, Orlando, Miami, and Key West, also in
issue in the Realignment case, will be reviewed by the
Board and has been made the subject of further proce-
dural steps. Final action is expected this summer.
Awaiting decision by the Board in the Gulf States-
Midwest Points Service Investigation is Southern's appli-
cation to serve Chicago and in the Central Airlines Route
81 Investigation, its proposal to serve St. Louis. These
decisions could be issued at any time. It is likely the
Board will also decide during 1969 the Southern Tier
Competitive Nonstop Investigation in which Southern
seeks a route to Dallas.
Despite favorable Examiners' recommendations that
Southern be extended to Chicago and further into Florida,
it is of course impossible to predict final Board action.
Your management believes that the extensions - in spite
of existing service in certain of the markets - will be valu-
able additions to Southern's system. Southern is partici-
pating in numerous other route cases which are discussed
elsewhere in this report.
The Company was saddened by the untimely death ot
Mr. Edward U. Beneke of Columbus, Mississippi. Mr.
Beneke had served asa director since 1951.
Southern looks forward to 1969 with optimism. First,
its modern jet equipment will make possible the highest
quality of service in the Company's history. In 1969 an
increasing portion of Southern's revenue passenger miles
will be provided by jet equipment. In turn, the efficiency
and lower seat mile costs of the aircraft should contribute
to improved financial results. As in 1968, charters should
provide an important source of revenue. Next, as service
over our New York route becomes more fully known, it
will prove of increasing benefit to the traveling public and,
in turn, develop during 1969 increasingly larger revenues
for the Company. Additional benefit will accrue in 1969
from the realignment of our system and the nonstop au-
thority already finalized for Southern by the Board in the
route realignment case. The general fare increase will
assist the Company in defraying increasing costs and high-
er fixed charges involved in aircraft acquisition.
In short, the year 1969 offers a challenging opportu-
nity.
April 2, 1969
~
Frank W. Hulse
President
3
Report to Stockholders for period ended Dec
SOUTHERN AIRWA
General Of1
Alla
196B:
Southern Style
we Pledge our enthusiastic support to bring
our customers the warm and friendly attitude that is traditional
with the South.
We Pledge our efforts to demonstrate genuine
Southern Style service with emphasis on courtesy and hospitality
We Pledge a renewed pride in our responsibility
to our customers, to the growth of Southern Airways and to
the growth of the area we serve.
We Pl,edge our support as a part of the team
that is going places ... SOUTHERN STYLE.
Signed by the
1500 Empwyees of
SOllTH'TRWAYS
STOCKHOLDERS, CUSTOMERS,
EMPLOYEES AND FRIENDS:
In 1968 Southern received the most significant single
route award in its history. The Civil Aeronautics Board
extended our system to Washington, D.C. and New York
City from Eglin Air Force Base, Florida; Dothan, Ala-
bama; and Columbus, Georgia. Service was inaugurated on
September 3 with two daily round trips and a third one
was added on October 27. The dramatic effect of th is
award on our operations is evidenced by the fact that in
December, only three months after the service started, the
new route was developing almost a fourth of the entire
system's total revenue passenger miles.
Southern experienced in 1968, as did virtually every
local service carrier, increasing expenses which preclud-
ed a profit, despite record revenues. Total operating rev-
enues reached a new high of $29,300,278, an increase of
20.8 percent over revenues of $24,255,632 in 1967.
Expenses totaled $28,707,198, an increase of 18.0 per-
cent over 1967. In spite of operating profit of $593,080
(as compared to an operating loss of $68,110 in 1967),
the final results for 1968 showed a loss of $210,982. This
loss was in part due to generally increasing costs and in
part to increased interest and other expenses resulting
from acquisition of our DC-9 jet aircraft and related
equipment.
Recognizing the effect of rising costs, the Civil Aero-
nautics Board approved a general fare increase effective
February 20, 1969. This action, which permits greater
relative increases in short haul markets of the kind South-
ern serves, will substantially increase your" Company's
revenues. Indeed, if the increase had been in effect in
1968, operating revenues would have been higher by some
$2.5 million.
Southern continues its program of strict cost control.
In this connection it is significant that, after adjustments
to the 1968 results to make the two years comparable,
commercial revenues increased 26.3 percent in 1968 over
1967, while operating expenses rose by only 19.9 percent.
Your Company during the year 1968 received delivery
of its fourth, fifth, and sixth DC-9-10 aircraft. One of
these DC-9's was used in charter service and produced the
major portion of the substantially higher charter revenues
of $1,934,461 received in 1968 - an increase of 242.8
percent over the $564,311 derived from charters in 1967.
Southern's fleet modernization program to enable it to
provide better public service, moved forward satisfactorily
in 1968. In November, $8,000,000 of 6% Convertible
Subordinated Debentures, with warrants attached, were
privately placed. The proceeds will be used to finance, in
part, acquisition of the three DC-9-30 aircraft, the longer
"stretched" model of the DC-9, scheduled for delivery in
May and June, 1969.
The year 1968 was an important one in regard to Civil
Aeronautics Board cases involving route improvements
and extensions for Southern. I am happy to report that
the Board finalized a portion of the Southern Airways
Route Realignment Investigation and, among other things,
granted Southern new nonstop authority between many
points on its system. The Board noted in its opinion that
Southern will derive substantial additional annual reve-
nues as a resu It of th is new authority. Extension of South-
ern to Tallahassee, Orlando, Miami, and Key West, also in
issue in the Realignment case, will be reviewed by the
Board and has been made the subject of further proce-
dural steps. Final action is expected this summer.
Awaiting decision by the Board in the Gulf States-
Midwest Points Service Investigation is Southern's appli-
cation to serve Chicago and in the Central Airlines Route
81 Investigation, its proposal to serve St. Louis. These
decisions could be issued at any time. It is likely the
Board will also decide during 1969 the Southern Tier
Competitive Nonstop Investigation in which Southern
seeks a route to Dallas.
Despite favorable Examiners' recommendations that
Southern be extended to Chicago and further into Florida,
it is of course impossible to predict final Board action.
Your management believes that the extensions - in spite
of existing service in certain of the markets - will be valu-
able additions to Southern's system. Southern is partici-
pating in numerous other route cases which are discussed
elsewhere in th is report.
The Company was saddened by the untimely death ot
Mr. Edward U. Beneke of Columbus, Mississippi. Mr.
Beneke had served as a director since 1951.
Southern looks forward to 1969 with optimism. First,
its modern jet equipment will make possible the highest
quality of service in the Company's history. In 1969 an
increasing portion of Southern's revenue passenger miles
will be provided by jet equipment. In turn, the efficiency
and lower seat mile costs of the aircraft should contribute
to improved financial results. As in 1968, charters should
provide an important source of revenue. Next, as service
over our New York route becomes more fully known, it
will prove of increasing benefit to the traveling public and,
in turn, develop during 1969 increasingly larger revenues
for the Company. Additional benefit will accrue in 1969
from the realignment of our system and the nonstop au-
thority already finalized for Southern by the Board in the
route realignment case. The general fare increase will
assist the Company in defraying increasing costs and high-
er fixed charges involved in aircraft acquisition.
In short, the year 1969 offers a challenging opportu-
nity.
April 2, 1969
~
Frank W. Hulse
President
3
Revenues
Operating revenues in 1968 reached a new record -
$29,300,278. This was an increase of $5,044,646, or 20.8
percent over 1967 revenues. Passengers produced
$20,503,123, 19.5 percent or $3,347,917 over the pre-
vious year. Cargo, including mail, express, and freight rose
to $1,949,557, a 19.1 percent increase above 1967. Char-
ter revenues soared 242.8 percent - $1,370,150 above the
1967 level.
Public service revenue (subsidy) continued its down-
ward trend from 1967 when it represented 17 .5 percent
of the total revenue. In 1968, public service revenue total-
ed $4,038,298 or 13.8 percent of the 1968 operating reve-
nues. Public service revenue per passenger fell 11.9 per-
cent, from $3.61 in 1967 to $3.18 in 1968. Total public
service revenue decreased $216,859, or 5.1 percent below
the amount received in 1967.
Expenses
Operating expenses increased $4,383,456 from
$24,323,742 in 1967 to $28,707,198 in 1968. This in-
crease of 18 percent is in contrast to the previously men-
tioned operating revenues increase of 20.8 percent, and
increase of commercial revenue (excluding subsidy) of
26.3 percent.
The overall rise in operating expenses resulted from
general inflationary increases in the economy as well as
continued Company expansion brought about by route
extension and improved service to our present cities.
Results
Southern had an operating profit for the year 1968 of
$593,080 after accounting changes described in Notes A
FIVE YEAR COMPARISON 1968
OPERATING STATISTICS
Passengers (scheduled service) 1,271,497
Passenger Miles (000) (scheduled service) 254,028
Plane Miles (000) 12,260
Available Seat Miles (000) 611,795
Cargo Ton Miles 3,018,209
Completion Factor 98.1%
Average Passenger Load (scheduled service) 22.3
Passenger Load Factor (scheduled service) 45.8%
Employees At End Of Year 1,538
FINANCIAL STATISTICS
Employee Wages and Benefits (000's) $ 14,240
Commercial Revenues (000) $ 25,262
Net Income (Loss) (000) $ (211)
Stockholders' Equity (000) $ 4,638
Common Shares Outstanding 1,024,871
Book Value per Share $ 4.53
Net Income per Share ( Loss) $ (.21 )
1 Adjusted to reflect three-for-two stock split in May 1966.
4
and B to the financial statements, as compared to an oper-
ating loss for the year 1967 of $68,110. A 94.3 percent
increase in interest costs, from $584,621 in 1967 to
$1,135,812 in 1968 resulted in a loss before income tax
credits of $422,841 in the current year. This is contrasted
to a loss before income tax credits of $595,994 in the
prior year.
After provision for refund of federal income taxes paid
in prior years and use of investment tax credits, a net loss
for the year of $210,982 was incurred, compared to a loss
of $237,695 (as restated) in the prior year.
The comparative financial statements of December 31,
1968 and 1967 included retroactive adjustments appli-
cable to public service revenue, as a result of the final set-
tlement of such payments for all years prior to 1967. As
more fully described in Note C to the financial state-
ments, these items are not applicable to current years'
operations and have therefore been recorded through
charges, net of income taxes, directly against retained
earnings rather than included in results of operations for
the current year. The specific provisions of the subsidy
formula giving rise to these types of retroactive differ-
ences were eliminated as of January 1, 1967, and similar
adjustments should not arise in the future.
Effective with the year 1968, the Company has elected
for federal income tax purposes to utilize accelerated
depreciation on certain DC-9 equipment and the current
deduction of certain expenses which are deferred for book
purposes. Appropriate provision has been made for the
income taxes which may become payable in future years
when depreciation and deferred expenses for tax purposes
are less than for financial reporting purposes.
1967 1966 1965 1964
1,180,297 1,051,554 848,149 721,49-3
222,142 196,366 156,421 137,228
11,803 11,287 10,611 9,865
498,322 416,738 374,757 324,830
2,593,645 2,281,380 1,763,784 1,332,855
97.8% 98.5% 98.5% 97.7%
19.4 18.0 15.3 14.3
45.9% 48.6% 43.2% 43.5%
1,499 1,365 1,248 1,157
$ 12,582 $ 10,800 9,516 $ 8,433
$ 20,000 $ 17,513 14,688 $ 11,728
$ (238) $ 807 938 $ 678
$ 4,849 $ 4,937 4,291 $ 3,477
1,024,871 1,005,000 1,002,3341
$ 4.73 $ 4.91 $ 3.471
$ (.23) $ .80 $ .701
Financing
In November, the Company arranged to sell through
private placement, $8,000,000 of 6 percent Convertible
Subordinated Debentures with warrants attached to pur-
chase an additional 144,000 shares of common stock of
the Company. The debentures are convertible at and the
warrants exercisable at $16 per sr.are. These funds will be
used to partially pay for the three DC-9-30 jet aircraft,
and related spares, scheduled for delivery in May and June
1969.
It is anticipated that the debenture issue, together with
leasing arrangements presently under negotiation, will pro-
vide sufficient financing for the jet aircraft to be received
in 1969.
The Company made extensive analyses ot potential
Martin-404 replacements during 1968. It was found that
there was no specific aircraft available to economically re-
place the Martin at the present time. However, as the re-
sult of greater scheduling flexibility on the realigned sys-
tem, certain Martin flights can be economically replaced
by DC-9's. Equipment reviews are continually being
made to determine that Southern is using the aircraft most
appropriate to its route system.
On December 31, 1968, there were 2,000,000 shares of
common stock authorized of which 1,024,871 were out-
standing and owned by more than 4,400 shareholders
throughout the United States and foreign countries.
Public Service Revenue
Public service revenue (subsidy) as previously stated, is
becoming a lesser portion of your Company's total reve-
nues. It is anticipated that this will continue to be reduced
and any anticipated route awards will be on a subsidy
ineligible basis. Your Company has long sought a profit
position and route structure which would enable it to
operate without subsidy.
Passenger Traffic
The 1,271,497 passengers carried in scheduled service
during 1968 was an all-time high. This was a 7.7 percent
increase over the 1,180,297 persons transported in 1967.
Revenue passenger miles from scheduled service rose 14.4
percent from 222,142,000 in 1967 to 254,028,000 in
1968. The yield per revenue passenger mile increased 5.2
percent from 7. 7 cents in 1967 to 8.1 in 1968.
While the number of passengers boarded increased, a
general softening in air travel during much of the year
resulted in less increase than your Company had anticipa-
ted.
Fare levels were raised slightly by the rounding of all
fares to the next whole dollar. An increase in our youth
fare rates and our change in military standby fares result-
ed in the increased overall revenue passenger mile yield.
A general fare increase for all airlines, approved by the
Civil Aeronautics Board effective February 20, 1969, will
substantially improve our basic fare structure during
1969.
Cargo
Air freight, air mail, and air express all showed signifi-
cant gains during the past year. Cargo ton miles increased
16.4 percent to 3,018,209, from 2,593,645. This gain
resulted primarily from the additional capacity afforded
by the DC-9's. In addition to greater lift capacity and
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
1,300,000
1,200,000
1,100,000
1,000,000
900,000
800,000
700,000
600,000
UTILIZATION OF CAPACITY
1964 1965 1966 1967 1968
/
/
-~
~
-1
-----------
.
--
43.5% 43.2{o 48.:.,
6% 45.9% 45.8%
AVAILABLE SEAT MILES
PASSENGER MILES ~ - - - - - - - - - -
% PASSENGER LOAD FACTOR
PASSENGERS BOARDED*
1964 1965 1966 1967 1968
8%
..,
12%
24%
18%
23%
L
,
PASSENGERS BOARDED ~=~~=~========~====:::!
% INCREASE OVER PRIOR YEAR
*SCHEDULED SERVICE
speed, the DC-9's are capable of carrying larger and heav-
ier individual items.
First class mail shipments by air have increased and
these are expected to continue in line with the Post Office
Department's desire to move as much mail as possible by
air.
5
Gulfport/Biloxi and Meridian received
jet service direct to Atlanta.
Future Planning
To provide for immediate as well as long range expan-
sion within your Company, it was decided to retain the
services of a general management consulting firm. In early
1968, a survey was commenced. This has now been con-
cluded and the results and recommendations are under
consideration and will be implemented in the near future.
The Employment Picture
Your Company has enjoyed a plentiful employee sup-
ply, and with the exception of electronics and avionics
technicians and stewardess trainees, few vacancies have
been difficult to fill. A realistic wage scale, coupled with
lower living costs throughout most of our system (com-
pared with much of the country), enables our people to
enjoy one of the highest living standards in the airline in-
dustry.
PUBLIC SERVICE REVENUE PER PASSENGER
$8.00
1964 1965 1966 1967 1968
7.00
I"-
6.00
' '
"'
"
5.00 \..
4.00_
3.00
~
~
I
'------
1!11
2.00 ':l
1.00 ~
-
6
To provide Flight Crew scheduling for the New York
service, a fourth crew base was established in Fort Walton
Beach, Fla., servicing our originating flights from Eglin Air
Force Base. This has been a popular crew base, offering
excellent living conditions and the fine recreational facil-
ities of the Gulf Coast.
We enjoy one of the lowest employee turnover rates in
the airline industry. Many factors enter into this, but a
major one is that 138 people at Southern earned promo-
tions during 1968. And, of the 1,538 persons employed at
year end, more than 700 have been with the Company
more than five years.
Job classifications, excluding management, now num-
ber 68, ranging from porters and aircraft cleaners to oper-
ations research analysts, reliability analysts, and aeronauti-
cal engineers.
It has long been a Company policy to hire and train
locally. Seldom does Southern uproot its people. Experi-
ence indicates the wisdom of this practice, for personnel
with strong home and family ties remain stable in their
job positions.
Training Programs
An increase in DC-9 FanJET flying spurred training
activity to a record 23,000 student hours spent in the
classrooms. The major portion was for up-grading Martin
404 crews to fly the larger and faster DC-9 aircraft. Pilot
flight instructors spent over 750 hours in the air for this
purpose and also to provide the routine practice that en-
abl~s our flight crews to maintain their high standard of
proficiency.
extensive pilot and stewardess training programs have
be~n brought about as a result of additional DC-9's being
put into service. Six flight crews are needed to support
each jet. While there is relatively little turnover among
Southern pilots and co-pilots, there is a continuing need
to upgrade these men to jet qualifications. Annual stew-
ardess turnover may reach as high as 42 percent, attribut-
able primarily to marriage. To replace these brides, a new
. class begins every two months and each trainee undergoes
almost four weeks of ground and flight training before she
pins on her Accent 'S' and dons her Pierre Balmain-design-
ed uniform.
Additional programs train ramp agents, baggage agents,
fuelers, ticket agents and gate agents.
New and replacement reservations agents receive three
weeks of instruction before they are assigned a full-time
position. More than two weeks are spent in the classroom
before a reservations agent first talks with a Southern pas-
seoger. And, these first passenger inquiries are answered
under direct supervision of an instructor.
Programs for maintenance personnel have been expand-
ed to provide jet maintenance instruction. As a result, few
new employees have been required even with the jet
changeover.
Passenger and Employee Safety
For the nineteenth consecutive year, your Company
continued the enviable position of operating without a
passenger or employee fatality. Employee on-job acci-
dents were in line with industry standards, and loss time
accidents were minimal. Again, we operated with
credit-rating on our Workmen's Compensation insurance.
The success of both passenger and employee safety
achievements must be attributed to high safety standards.
Complacency is not tolerated, and safety is never taken
for granted. Our personnel are continuously made aware
of the public's safety - and their own.
Maintaining the Fleet
Maintenance and Engineering has made a significant
contribution to reduced costs by instituting a system of
continuous maintenance for our DC-9 FanJETs. Support-
ed by a maintenance management system that relies heav-
ily upon computer support for planning and scheduling of
all maintenance work, along with a very effective com-
puterized inventory management system, it has been pos-
sible to overhaul and maintain the jet fleet with a min-
imum of non-productive 'ground' time. These functions
are performed at night after the aircraft have returned
from their last flight. By revolving the flying schedules of
each jet, it is possible to schedule one jet each night for
the central maintenance facility. The management con-
trol systems insure that maximum utilization is obtained
from the application of labor, material and facilities that
make up a substantial portion . of the Company's re-
sources.
Careful planning and quick engineering response in
solving maintenance problems has shown Southern to be
one of the leaders in the industry in maintenance cost and
maintenance operating performance.
Inauguration of Washington service brought out
members of the Senate, the House of Representatives,
and the Civil Aeronautics Board. Military officials,
civic leaders, travel agents, the press, and representa-
tives of domestic and international airlines greeted
the first Southern jet at Dulles.
PUBLIC SERVICE REVENUE AS% OF TOTAL REVENUE
35_% 1964 1965 1966 1967 1968
30%
25%
~
" " '
20%
i"-.
'
15%
"'-
~
10%
5% -
Scheduling Flights
Flight scheduling continues to receive rigid attention in
order to provide a pattern of service in keeping with the
needs of the cities served, while at the same time produc-
ing the greatest possible amount of passenger revenue for
the Company.
Additional jet aircraft permitted expanded service in
key markets. Meridian, Miss., acquired its first nonstop jet
service to Atlanta. Gulfport-Biloxi, serving Mississippi's
"Golden Gulf Coast," was connected directly with Atlan-
ta. The Gulf Coast area is an ever expanding vacation and
con~enti?n mecca._ More than 500 conventions are expect-
ed in this area this year, and we shall aggressively solicit
this passenger potential.
Airport Congestion
Southern has been fortunate in being able to operate
and maintain its flight schedules with a very high on-time
performance, especially in view of the serious congestion
problems. Of the four busiest airport centers in the coun-
try, we serve two: Atlanta and New York. Our six daily
jet operations at LaGuardia have been able to operate usu-
ally within ten minutes of schedule. This is due to our se-
lected arrival and departure times being at other than peak
periods. A similar situation has prevailed in Atlanta and
while we do suffer occasional delays resulting fro~ air
traffic, this has not been for us the major problem it has
been for some carriers. The situation can change, how-
ever, and we are carefully analyzing our schedules in all
major markets.
Computer Regeneration
During the year, a major project was upgrading our
computer from a second generation RCA 301 to a third
generation RCA Spectra 70/35. In order to accomplish
this with minimum additional expense, a contract was ef-
fected with a regional division of a national company to
utilize our computer during the 8:00 P.M. to 5:00 A.M.
shift five days a week, a time when the equipment would
not be used by Southern.
. Following installation of the Spectra 70/35, an upgrad-
ing of the Company-wide teletype system was instituted.
A~aly_sis had indicated that a computerized message
switching system would provide the greatest benefit re-
placing a teletype system which has basically been in' use
since the Company's organization.
The new equipment selected is a specialized communi-
~tions computer. V;'ith minor expansion costs, it will pro-
v Ide for Southern s communications requirements for
some time to come.
This equipment will be delivered in April 1969, and
will be operational in May.
Southern Style Program
In March, a Company-wide commitment was made to
service' for our customers. The year's marketing concept
was developed around the basic theme: "Southern Style."
Southern Style would imply that our customers would re-
ceive '\'."arm, friendly, an,~ courteous service accompanied
by on-time performance. But before the marketing shift
was made from a 'destinations' to a 'service and perform-
ance' approach, every Southern employee was acquainted
with the soon-to-be-introduced program. Each signed a
8
pledge that he would perform "Southern Style," and man-
agement was assured that it could produce what it adver-
tised.
Concurrent with the new marketing approach, an em-
ployee incentive program was launched, the first such
used by your Company. Employees could earn rewards
for extraordinary individual performances, as well as
Company-wide performances, when predetermined corpo-
rate and/or departmental goals were achieved.
As a result of the 1968: Southern Style program,
on-tjme performances reached new highs, employee. pro-
du ct ion increased throughout the Company, and em-
ployee morale soared to even greater heights.
The incentive program terminated at the end of 1968.
Consideration is being given to other such programs in the
future. The theme, "Southern Style," continues as the
major marketing concept of your Company.
Major Marketing Problem
Entry into Washington and New York posed a severe
marketing challenge: gaining immediate exposure to the
flying public within a limited period of time at a min-
imum overall expense. The solution evolved around tele-
vision, the first time this medium has been used so exten-
sively by your Company. Careful analysis of the channels
available, relating to their audience, convinced us that
spot commercials in prime time on a major network
wou Id produce the greatest results for the least amount of
dollars spent. Accordingly, a saturation-type program was
introduced with as many as ten spots running weekly.
This program reached some 5,000,000 homes each week,
and the immediate ticket sale responses indicated the wis-
dom of this selection.
Accompanying the television program was a sustained
$20,000,000
18,000,000
16,000,000
14,000,000
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
INVESTED CAPITAL
1964 1965 1966 1967 1968
STOCKHOLDERS EQUITY
LONG TERM D E B T - - - - - - - - - - - -
CONVERTIBLE SUBORDINATED DEBENTURES (000)
1964 1965 1966
$5,000
1967 1968
$4,682 $12,682
Maintnance crews work around the clock. One jet is
scheduled into the Maintenance and Overhaul facility
each night.
$2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
CARGO REVENUE
1964 1965 1966 1967 1968
AIR FREIGHT - - - - - - - - - - - - -
AIR EXPRESS
AIR MAIL
advertising program in the New York Times. Ads featuring
the themes "Skip the Battle of Atlanta" and "Sherman
Went Through Atlanta, But You Don't Have To" followed
a "teaser" campaign building up interest in Southern's
initiation of service.
In Washington we developed a similar program of spot
TV and newspaper advertising in the Washington Post
with the same themes as used in New York.
Combined with the advertising program was an exten-
sive effort by members of the Home Office and Field
Sales Department. In New York and Washington, hun-
dreds of personal calls were made on key travel agencies
and transportation department heads of companies having
travel to the South. In turn, a city sales office was opened
in New York City at 80 East 42nd Street. A combined
sales and city ticket office was established in Washington
at 1625 K Street. Our stockholders are urged to visit these
offices.
Expanding Charter Sales
Long a leading charter operator among regional air-
lines, new dimensions in charter sales were sought and
3chieved during 1968. It was determined early in the year
:o place one 75-passenger DC-9 and one 40-passenger
./lartin-404 in full-time charter service. This opened the
capability of carrying virtually any size group, with partic-
ular emphasis on military charters and business and in-
dustrial flights. Authority was requested and received to
operate chatters both to Canada and to the Bahamas.
Southern charters can operate without restriction
throughout the United States, and charter jets were seen
from coast to coast during the year. Charter sales for the
9
---------
March 25, 1969
year reached $1,934,461, with even greater results antici-
pated during 1969. With the delivery of the DC-9-30 jets,
carrying 95 passengers, Southern will be an even stronger
charter contender.
Stockholders are urged to think of a Southern charter
to carry any business or civic group to meetings, con-
ventions, or vacations.
Reservations Expansion
Reservations facilities were expanded with telephone
lines added to link New York and Washington with the
Consolidated Reservations Office in Atlanta. Inquiries
from New York and Washington passengers are answered
with a pleasant "Southern accent." Reservations agents'
productivity related to length of time per call handled
continues to increase, and newly-implemented training
procedures by the Reservations Department staff resulted
in faster initial productivity among new and replacement
personnel.
New lnflight Service
Passengers' inflight service received new attention,
brought about by longer flights, better serving facilities on
the new jets - and competition. While it has long been
considered that most Southern flights were too short to
warrant full meal service, excellent light meals were de-
veloped, particularly for the New York segment. These
also appear on other longer flights at appropriate t,imes of
the day.
All Southern passengers are offered complimentary re-
freshments, and alcoholic beverage sales continue to be
wel I received by the passengers. With the advent of
Southern's "stretched" jets, galley facilities will facilitate
handling and service.
A Southern Magazine
SOUTHERN SCENE magazine was introduced in
March 1968, and is distributed without charge in every
seat pocket aboard each Southern plane, as well as at our
ticket counters, in many travel agencies, and in selected
hotels on the system. This quarterly publication has won
praise within as well as without the airline industry, and it
has become accepted as a standard among airline inflight
magazines. SOUTHERN SCENE has found a profound
place as a goodwill builder for the Company, yet is
self-supporting through the advertising it contains. During
the 12 months beginning April 1, 1969, almost two mil-
lion persons will be reached by SOUTHERN SCENE, tell-
ing stories about the cities we serve, as well as informative
facts about the Company.
Stockholders are invited to write the Public Relations
Office for a complimentary copy of the next issue.
11
Thousands of Georgia peaches were passed out by
"Southern Belles" when service was inaugurated to
New York. Travelers and terminal personnel were
the happy recipients.
Route Proceedings
The year 1968 saw the first route award for Southern
under the Civil Aeronautics Board's route strengthening
policy. After completron of the formal hearing process in
early Spring, the CAB in mid-summer effected its ex-
aminer's recommendation that Southern be awarded a
new segment between Eglin Air Force Base, Fla. and
New York/Newark via Dothan, Ala., Columbus, Ga., and
Washington, D.C. (via Dulles Airport). The Company
inaugurated service over this 1,011 mile segment on Sep-
tember 3, 1968. Traffic response on the initial two daily
round trips was excellent and within a few weeks, on
October 27, the third round trip was added. By the end of
the year, the New York flights were producing 25 percent
of the Company's total revenue passenger miles.
1968 also saw two other route proceedings of the Com-
pany reach their final stages although short of ultimate
Civil Aeronautics Board decision. Oral Arg_
ument before
the CAB was held late in 1968 in the Central Airlines
Route 81 Investigation and in the Gulf States-Midwest
Points Service Investigation. In the former, Southern is
pursuing an application for nonstop authority between
Memphis and St. Louis and in the latter, seeks authority
to provide service between Memphis and Chicago and be-
tween Memphis and New Orleans both nonstop and via
Jackson, Mississippi. Final decision on these two proceed-
ings is expected momentarily.
Hearings were also concluded last year in the Southern
12
Airways, Inc. Route Realignment Investigation. In that
proceeding, the Civil Aeronautics Board is considering the
realignment of the present system, condensing the current
sixteen segments to eight segments and further, consider-
ing the extension of the system down the Florida penin-
sula through Tallahassee, Orlando, Miami and Marathon to
Key West, Florida. Earlier this year the Board approved a
major portion of the proposed system realignment, but
voted to review its examiner's recommendation for the
Company's extension into South Florida. A CAB Hearing
Examiner had recommended that Southern be granted
access to the Florida peninsula from various points on its
present system, including Memphis, Birmingham, Mont-
gomery, Dothan, Eglin Air Force Base and Panama City.
He failed, however, to recommend approval of Southern's
bid for authority between Atlanta and the Florida points.
Oral argument before the CAB is scheduled for May 7,
1969 and the Company is hopeful of a prompt decision.
During the spring of last year, the company participat-
ed in the Southern Tier Competitive Nonstop Investiga-
tion pursuing applications for authority to operate be-
tween Atlanta and Dallas/Ft. Worth and between
Dallas/Ft. Worth and Miami/Ft. Lauderdale via New Or-
leans and Tampa/St. Petersburg/Clearwater. Early in
1969, a Civil Aeronautics Board Examiner issued his
initial decision recommending against award of any au-
thority to Southern or any other Local Service Carrier ap-
plicant. The CAB, on its own motion, announced shortly
after the examiner's recommendations were released, that
it would review this decision. The Company plans to vig-
orously pursue its service proposals through further pro-
cedural steps.
Another proceeding, instituted last year and still in its
early stages, is the North Carolina Points Service Investiga-
tion. This case involves the issues of additional air service
between New York, Chicago and Miami on the one hand
and three North Carolina airports serving Charlotte.
Greensboro/High Point/Winston-Salem and Raleigh/Dur-
ham on the other. Additionally, the Company's proposal
calls for the provision of new or additional single-plane
service between several presently served points and New
York/Newark. Final decision in this proceeding is antici-
pated late this year.
Two other route proceedings, both still in the form-
ative stages, but in which the Company has a vital interest,
are the Additional Service to Augusta and Columbia Case
and the Cleveland/Detroit-Atlanta Investigation. In the
former, the Company is proposing to increase its existing
operations at both Washington and New York by linking
these two points with other of its presently served cities
including Columbia, South Carolina. In the latter, the pro-
posal calls for Southern to become the first competitive
carrier in the current Atlanta-Detroit and Atlanta-Cleve-
land markets. Final decisions in these cases are not ex-
pected for some time.
Southern's customers at Washington's Dulles
International Airport board and deplane at the
terminal. Many airlines park their jets more than
a half-mile from the terminal and bus their
passengers to and from the gates.
Light meals are now served on longer flights.
Refreshments are offered on all Southern planes.
13
balance sheet
December 31, 1968 and 1967
Assets
CURR ENT ASSETS
Cash ..
Certificates of deposit
Accounts receivable:
U.S. Government:
Transportation and public service revenue-Note C
Refundable income taxes
Trade receivables ....... . ...... .
Maintenance and operating supplies, at average cost,
less allowances for obsolescence ( 1968 - $282,359;
1967 - $223,813) ......... .
Prepaid expenses
Total Current Assets
INVESTMENTS AND OTHER ASSETS - at cost .
PROPERTY AND EQUIPMENT - on the basis of cost-Notes A,
Band D
Flight equipment .... . ....... . . .
Less allowances for depreciation and maintenance
Deposits on new equipment-Notes D and H
Other property and equipment .
Less allowances for depreciation
DEFERRED CHARGES
Unamortized pre-operating, route extension, and
development costs . . . . . . .
Deferred lease costs ........ .
Unamortized long-term debt expense
1968
$ 4,143,852
5,534,316
$ 722,581
552,482
3,016,283
$ 4,291,346
1,011,101
773,714
$15,754,329
$ 47,455
$20,568,356
4,610,250
$15,958,106
3,179,958
$19,138,064
2,857,605
1,663,114
$ 1,194,491
$20,332,555
$ 730,111
206,780
407,899
$ 1,344,790
$37,479,129
$
$
$
1967
2,435,258
-0-
773,359
504,700
2,119,928
3,397,987
910,096
304,882
$ 7,048,223
$ 32,963
$20,508,289
3,839,135
$16,669,154
3,221,955
$19,891,109
2,672,238
1,385,727
$ 1,286,511
$21,177,620
$ 674,404
-0-
320,385
$ 994,789
$29,253,595
Liabilities
CURRENT LIABILITIES
Accounts payable
Collections and withholding as agents
Salaries, wages, and vacations . . . .
Accrued taxes, advertising, and other expenses
Air travel plan deposits . . . . . . . . . . .
Employee stock purchase plan ..... . . .
Current maturities of long-term debt-Note D .
Total Current Liabilities
LONG-TERM DEBT, less current maturities-Note D
Notes payable to banks . . . . . . .
Convertible Subordinated Debentures ..
DEFERRED TAXES ON INCOME-Note E- .
STOCKHOLDERS' EQUITY-Notes C, D and F
Common Stock, $2 par value:
Authorized - 2,000,000 shares
Issued and outstanding - 1,024,871 shares
Other paid-in capital
Retained earnings ............... .
COMMITMENTS-Note H
See Notes to Financial Statements.
SOUTHE~WAYS.INC
1968
$ 1,321,297
2,459,524
822,166
1,012,926
112,625
145,866
1,821,739
$ 7,696,143
$12,228,237
12,682,000
$24,910,237
$ 235,000
$ 2,049,742
797,523
1,790,484
$ 4,637,749
$37,479,129
1967
$ 1,274,430
2,101,440
684,280
636,952
114,750
68,512
1,374,448
$ 6,254,812
$13,468,052
4,682,000
$18, 150,052
$ -0-
$ 2,049,742
797,523
2,001,466
$ 4,848,731
$29,253,595
16
Southern Airways, Inc.
STATEMENT OF INCOME AND RETAINED EARNINGS
Years Ended December 31, 1968 and 1967
OPERATING REVENUES
Passenger and excess baggage
Mail, express, and freight ..
Public service revenue-Note C
Charter ........... .
Other operating revenues-net
OPERATING EXPENSES
Flying operations ..
Maintenance ....
Aircraft and traffic servicing
Passenger service . . . . .
Promotion and sales . . . .
General and administrative .
Amortization and provision for depreciation
OTHER DEDUCTIONS AND (INCOME)
Interest on long-term debt-net of interest capitalized
Gain on disposal of property ........ .
Other (income), less miscellaneous deductions ....
1968
$20,503,123
1,949,557
4,038,298
1,934,461
874,839
$29,300,278
$ 9,117,641
5,121,450
7,502,089
1,282,685
2,306,037
1,607,534
1,769,762
$28,707,198
$ 593,080
$ 1,135,812
( 90,177)
( 29,714)
$ 1,015,921
LOSS BEFORE INCOME TAX CREDIT $ (422,841)
INCOME TAX CREDIT -Note E
Provision for income taxes
Current .................. .. . .
Deferred ................. .
Investment credit - including in 1967 carry-back
to prior years, less applicable refund of
$230,174 of public service revenue-Note C
. $ (387,862)
235,000
( 58,997)
$ (211,859)
NET LOSS (per share: 1968-$.21; 1967 -$.23) $ (210,982)
RETAINED EARNINGS at beginning of year,
as previously reported . . . . . . . . .
Adjustment of public service revenue,
net of applicable income taxes-Note C
RETAINED EARNINGS at beginning of year, as restated
Cash dividends paid in 1967 - $.16 per share . . . . . . .
RETAINED EARNINGS AT END OF YEAR
See Notes to Financial Statements.
$ 2,122,525
(121,059)
$ 2,001,466
$ 1,790,484
-0-
$ 1,790,484
1967
$17,155,206
1,637,487
4,255,157
564,311
643,471
$24,255,632
$ 7,049,726
5,217,328
6,517,775
1,101,901
1,852,364
1,130,298
1,454,350
$24,323,742
$ ( 68,110)
$ 584,621
( 21,354)
( 35,383)
$ 527,884
$ (595,994)
$ (314,486)
-0-
( 43,813)
$ (358,299)
$ (237,695)
$ 2,443,630
( 42,079)
$ 2,401,551
$ 2,163,856
(162,390)
$ 2,001,466
Southern Airways, Inc.
STATEMENT OF SOURCE AND APPLICATION OF FUNDS
Years Ended December 31, 1968 and 1967
FUNDS PROVIDED BY
From Income:
Net loss .....
Items not requiring outlay of funds:
Provision for depreciation . . . .
Amortization of deferred charges
Deferred taxes on income . . . .
Increase in long-term debt - net ............ .
Certificates of deposit applied to purchase of equipment
Sale of 6 1 /2% Convertible Subordinated Debentures
FUNDS APPLIED TO
Additions to property, plant and equipment - net
Equipment purchase deposits - net
Increase in deferred charges
Cash dividends ($.16 per share)
Decrease in long-term debt - net
Increase in investments and other assets
Increase (decrease) in working capital
Working capital at beginning of year
Working capital at end of year . . .
$
$
$
$
$
$
$
Southern Airways, Inc. NOTE D - Long-term Debt. Long-term debt at December 31,
1968 is summarized as follows :
NOTES TO FINANCIAL STATEMENTS
December 31, 1968
NOTE A - Change in Accounting Principle. The Company has
consistently followed the policy of capitalizing direct labor and
material costs applicable to Martin 404 airframe overhaul and
amortizing such costs over the estimated useful lives of the over-
hauls. On January 1, 1968, the Company changed its method of
accounting for overhead costs applicable to Martin 404 airframe
overhaul from expensing such costs as incurred to a method of
capitalizing these costs and amortizing such costs over the esti-
mated useful lives of the overhauls. As a result of this change, the
net loss for 1968 was decreased by approximately $248,000 ($.24
per share) after applicable income taxes at 24% rate .
NOTE B - Change in Life of Depreciable Assets. During 1968 the
Company redetermined the estimated economic useful life of its
DC-9 aircraft and related equipment and increased the lives of
these assets from 12 years to 1 5 vaars and reduced the salvage
value from 15% to 10%. This change had the effect of decreasing
the provision for depreciation approximately $136,000 and
decreasing the net loss approximately $103,000 ($.10 per share)
after applicable income taxes at 24% rate.
NOTE C - Public Service Revenue. During 1968, the Civil Aero-
nautics Board proposed reductions in public service revenue in the
amount of $189,160 for years prior to 1968. Such amount, net of
applicable income taxes of $68,101, has been charged to retained
earnings. For comparative purposes, the financial statements for
1967 have been retroactively restated to include these adjustments
which increased the net loss by $78,980 resulting from profit-
sharing applicable to carry-back of investment credit.
Public service revenue received from the Federal Government is
subject to review by the Civil Aeronautics Board. Settlement has
been finalized for years through 1966 and provision has been
made for all known adjustments for subsequent years.
Notes payable to banks in quarterly
installments through 1976 (1) (6) (7) $10,555,000
Notes payable to banks in quarterly
installments through 1974 (2) (6) (7) 2,739,130
DC-9 Predelivery Deposit Notes (3) 755,846
5 % Convertible Subordinated
Debentures due December 1, 1981
(4) (7) 4,682,000
6% Convertible Subordinated
Debentures with warrants attached
due November 1, 1983 (5) (7)
Less current maturities
8,000,000
'$26,731 ,976
1,821,739
$24,910,237
(1) The interest rate is of 1 % above the lead bank's
prime rate.
(2) The interest rate is of 1 % above the lead bank's
prime rate.
(3) The interest rate is of 1 % above the Chase Manhatten
Bank (National Association) prime rate but not less
than 6% or more than 7%. The notes are due upon
completion of financing arrangements for the three
DC-9 aircraft scheduled for delivery in 1969, but not
later than July 1, 1969. Since these notes are to be
repaid out of proceeds of long-term financing, the
entire amount is classified as long-term debt.
(4) The 5% Convertible Subordinated Debentures due
December 1, 1981 are convertible (until maturity or
prior redemption) into Common Stock at $16 per
share; are subordinated, generally, to all existing and
future indebtedness for borrowed money; are callable
1968
(210,982)
1,703,817
233,003
235,000
1,960,838
-0-
-0-
8,000,000
9,960,838
845,744
13,008
583,004
-0-
1,239,815
14,492
2,696,063
7,264,775
793,411
8,058,186
$
1967
(237,695)
1,353,751
70,042
-0-
$ 1,186,098
7,725,466
4,800,000
-0-
$13,711,564
$12,088,025
2,485,802
569,059
162,390
-0-
18,408
$15,323,684
$(1,612,120)
2,405,531
$ 793,411
at premiums ranging from 5.75% downward; and
require annual sinking fund payments beginning De-
cember 1, 1976, in an amount equal to 10% of the
principal amount outstanding at December 1, 1975.
Also, the Company may make additional voluntary
sinking fund payments equal to the required amount.
(5) The 6% Convertible Subordinated Debentures due
November 1, 1983, are convertible (until maturity or
prior redemption) into Common Stock at $16 per
share; are issued in integral multiples of $1 ,000 with a
warrant for the purchase of 1 8 shares at $16 a share
attached; are subordinated, generally, to all existing
and future indebtedness for borrowed money ; are call-
able on or after November 1, 1973, at premiums rang-
ing from 6.5% downward ; and require annual prepay-
ments beginning November 1, 1978, in an amount equal
to 10% of the principal amount outstanding at Nov-
ember 1, 1977 less credit for principal amount convert-
ed or called subsequent to November 1, 1977. Also,
the Company may make additional voluntary prepay-
ments equal to the required amount.
(6) All aircraft, engines and related equipment are pledged
as collateral on this indebtedness.
(7) The agreements relating to the notes payable and the
Convertible Subordinated Debentures place certain re-
quirements and restrictions upon, among other things,
(1) net current assets, (2) net worth , (3) capital ex-
penditures, and (4) payments relating to capital stock
including dividends. The Company has met all of these
requirements, and retained earnings is restricted from
payments relating to capital stock and dividends at
December 31, 1968.
Pending clarification of the accounting principles applicable to
debt issued with stock purchase warrants, the Company has elect-
ed not to recognize any debt discount attributable to the stock
purchase warrants attached to the 6% Convertible Subordinated
Debentures issued in 1968. Upon clarification of these accounting
17
principles, it may be necessary to apply such principles (which
may require the recognition of debt discount) retroactively, If
debt discount had been recognized on the debentures sold in
1968, other paid-in capital and unamortized debt discount at
December 31 , 1968 wou Id have increased approximately
$432,000, and additional amortization of debt discount charged
to expense during the year would have amounted to approximate-
ly $3,600.
NOTE E - Income Taxes. The loss to be carried back for income
tax purposes will exceed the loss shown in the income statement
because of certain expenses deferred for financial statement pur-
poses and additional depreciation to be claimed for income tax
purposes. Provision has been made in the accompanying financial
statements for the income taxes deferred to future years.
Employee Stock Option Plan
approved by Board of Directors in 1967:
Exercisable in June 1969 at
a price of $18. 75 per share
Exercisable in June 1970 at
a price of $11 .52 per share
Shares available for additional
options which may be granted
under Plan
Shares reserved for conversion of
5% Convertible Subordinated Debentures
Shares reserved for conversion of
6% Convertible Subordinated Debentures
Shares reserved for sale persuant to
stock purchase warrants issued
9,272
2,786
3,035
15,093
292,625
500,000
The Company uses the flow-through method of accounting for
investment credit and the available investment credit has been
recognized only to the extent that it can be offset against the
aforementioned deferred income taxes. The remaining investment
credit at December 31 , 1968 amounted to appro ximately
$760,000 and expires in 1974 ($722,000) and 1975 ($38,000) .
with 6% Convertible Subordinated
Debentures at a pr ice of $16 per share 144,000
TOTAL 972,118
NOTE F - Common Stock and Other Paid-in Capital.' At Decem-
ber 31 , 1968, 972,118 shares of Common Stock of the Company
were reserved as follows:
Qualified Stock Option Plan
approved by Board of Directors in 1965:
Currently exercisable at a
price of $10.16 2/3 per share
Exercisable one-third each year
beginning in November 1970 at a
price of $13.75 per share
Shares
Reserved
19,500
900
20,400
During the year, the Board of Directors withdrew 9,350 shares
and 9,907 shares of Common Stock authorized for issuance pur-
suant to the Qualified Stock Option Plan and the Employee Stock
Option Plan until the Company has authorized additional Com-
mon Stock by appropriate amendment of its Certificate of Incor-
poration. In addition, options previously granted under the Quali-
fied Stock Option Plan for 15,250 shares were suspended from ex-
ercise until October 27,1969.
During 1967, 19,871 shares of Common Stock were issued
upon conversion of 5% Convertible Subordinated Debentures.
The excess ($272,277) of the conversion price over the par value
($39,742) of such shares less applicable deferred financing costs
ACCOUNTANTS'REPORT
Board of Directors
Southern Ajrways, Inc.
Atlanta, Georgia
We have examined the balance sheet of Southern Airways, Inc.
as of December 31, 1968, and the related statemertts of income
and retained earnings and S,OUrce and application of funds for the
year then ended. Our examination was made in accordance with
generally accepted auditing standards, and accordingly lncluded
such tests of the accounting records and such other auditing pro-
cedures as we considered necessary in the circumstances. We l)re-
viously made a similar examination ot 1he financial statements
for
the preceding year which have been restated for changes -in public
service revenue as explained in Note C.
During 1968, the Corppany increased the estimated ecopomio
useful life and reduced the salvage vafue of hs DC-9 :airoraftutnd
related equipr,nent as described in Note B to the financial state
rnents. Th;s change, with which we CQJJcur, had the effect of de-
creasing the net loss approximate y $193,008 for the year 1968.
Jn our opinion~ the accompanying balance sheet and statement$,
of income and retained earnfngs and source aod appllcation of
funds present fairly the financial p0sition ot Southern Airways,
Inc. at December 31., "
1968, <Snd the results ,of its 9.perations and
soDrce 8-nd application of funds for the year th,en ended, in con-
formity with generally accepted accounting principles applied on a
basis consistent with that,of the precec:Ung year, except for tf:le
change~ with '(Vhjch we concur" in the methQd of accounting for
overhead applicable to airframe overhaul as described in Note A to
the financial ,statem~"&f C ,~
ERNST & ERNST
was credited to other paid-in capital. This constitutes the only
change in Common Stock and other paid-in capital for the two
years ended December_ 31 , 1968.
NOTE G - Pension Plans. The Company has several pension plans
covering substantially all of its employees. The total pension ex-
pense for the year was $633,672, which includes $262,776 under
a defined-contribution plan . The Company's policy is to fund
normal cost plus accrued interest on the unfunded past service
liability. At December 31 , 1968, the total of the pension fund ex-
ceeded t he actuarially computed value of vested benefits and the
unfunded past service liability was approximately $522,000. A
change during the year in the actuarial assumptions used in com-
puting pension cost applicable to one of the plans had the effect
of reducing the net loss for the year by approximately $45,000.
NOTE H - Commitments. On February 1, 1968, the Company
leased three DC-9 jet aircraft for a period of twelve years at a min-
imum net annual rental of $1 ,090,395.
At December 31, 1968, the Company had on order three
DC-9 jet aircraft scheduled for delivery in 1969. The three aircraft
represent a commitment of approximately $9,242,000 in excess of
the related equipment purchase deposits.
The Marketing Outlook for 1969
Your Company is faced with ever increasing competi-
tion from other airlines and from automobile convenience
resulting from a superb highway network encompassing
the Southeast. In addition, our recent entry into new city
markets, as wel I as anticipated route awards, create both
challenges and problems.
To face these, a new look has been taken at sales and
marketing concepts. Continued emphasis will be placed on
spot television commercials, particularly in densely popu-
lated areas. Newspaper advertising may be replaced in
whole or in part by television in some key cities. Radio is
receiving continued scheduling. For the first time, South-
ern is entering an era of color magazine advertising with
full page ads touting our twenty-year growth and capabil-
ities appearing in selective trade and general interest publi-
cations.
Southern has acquired exclusive rights in its system
area to the hit tune, "Everything's Coming Up Roses,"
from the Broadway play, "Gypsy." New lyrics have been
written, and millions of potential passengers will hear
these words: "Everyone's Going Up Southern Style."
As new city markets are entered, greater emphasis will
be placed on the vacation traveler. Heretofore the business
Southern Charter jets fly across the United States,
to Canada and to the Bahamas.
Thousands of potential passengers and shippers
see Southern's promotional displays.
19
20
A Little Shot
made its mark. This is our
twentieth year ... our twentieth
memento. The first year's glass is
now a collector's item ... the years in
between have proved to be something
worth toasting! We've highlighted each
year with new services, new cities or
the christening of our DC-9 FanJET
fleet two years ago. Last year we
saluted our daily flights between
New York, Washington and
Columbus, Georgia; Dothan,
Alabama; Eglin AFB and
Panama City, Florida ...
This year we may be
flying to other
exciting cities.
} 'ou mayuar,yourcoll:ion
wiihour20dtSOt,utnir"4s,
bywriting: Dt-pt. JG, ~
5;:;:!:.:" /;::;;,:6 ~' ; ;
Atlanta.~gia
31)320
everyone's going up ... SOl!TllE-'!:f! ~!'!!a~."'"
c-g;
30320
A Southern Flight
was only when our fine feathered friends
soared over the smaller communities.
Twenty years ago when you flew into a
few big cities in the South ... the flying journey
ended. Today our DC-9 FanJET fleet and frequent
flight schedules put 60 cities in the South on the air
map. No longer is the South for the birds .. it's for
the vacationer who seeks the fun of an eight-
state-playground ... it's for the businessman
who seeks the buying power of an economic
boom area and it's for the traveler who seeks
Sou them Hospitality at Jet speeds. And now
we offer the short cut route between New
York, Washington and Columbus, Ga.;
Dothan, Ala.; Eglin AFB
and Panama City, Fla.
everyone's f{Oinl{ up ...
SOlJTll~~'J!.1+,-...., ..
t:-pa:!03:zc>
Lonely Grasshoppers
took off and landed in the
crossroads of the South ... and the
world was big and far away. Today
Southern Airways regularly takes off
and lands in more than 60 cities and
brings the air network of. the world
to the crossroads. Now we're flying
more than a million passengers a
year in and out and even on to
Washington and New York, and
our DC-9 FanJETS are the
envy of every grasshopper.
everyone's going up ... S0lfTIIE1!!!,,_
!~"'!..~ .....
t:-gi
30320
traveler has represented almost 70 percent of our total.
While business travel will continue as the major category,
the vacationer will occupy an increasing number of seats.
Realizing this, package tour programs to Washington and
New York have been developed, with other destinations
and attractions to come.
The importance of the connecting passenger is evidenc-
ed by the attention being given interline sales. Thousands
of reservations agents of other airlines will be visited by
our field sales force. These agents will see and hear the
Southern story vividly told on sound film. They will be
urged to route their passengers via Southern on any por-
tion of the journey not served by their own airline. The
importance of this source of business is evidenced by the.
more than $13,000,000 of revenue exchanged with other
airlines during 1968.
Cargo will be sold hard this year. The capability of the
DC-9, accompanied by its speed, gives one jet the cargo
capacity of four Martin-404 aircraft. Our longer flights
make shipping via Southern more attractive to manufac-
turers.
Here are samples of our 1969 advertising approach.
You will see these ads in prominent publications. You
will hear "Everyone's Going Up Southern Style" on the
radio and on television.
You, the stockholder, are invited to Go Places ...
Southern Style. We now go to more places with more
flights, and will continue to have warm, friendly, cour-
teous service: Southern Style. Try it.
EXECUTIVE COMMITTEE
Frank W. Hulse
G. Gunby Jordan
W. B. White, Jr.
DIRECTORS
Cecil A. Beasley, Jr.
Ballard & Beasley
Washington, D. C.
Alexander J. Brunini
Graydon Hall
Elton B. Stephens
Brunini, Everett, Grantham & Quin
Vicksburg, Mississippi
Graydon Hall
Southern Airways, Inc.
Atlanta, Georgia
F. Barton Harvey, Jr.
Alex. Brown & Sons
Baltimore, Maryland
Frank W. Hulse
Southern Airways, Inc.
Birmingham, Alabama
Alton F. Irby, Jr.
Irby-Adams-Cates Co.
Atlanta, Georgia
Henry P. Johnston
Radio and Television Consultant
Birmingham, Alabama
G. Gunby Jordan
The Jordan Company
Columbus, Georgia
Sartain Lanier
Oxford Industries, Inc.
Atlanta, Georgia
R. Eugene Orr
Orr & Company, Inc.
Jacksonville. Florida
G. Frank Purvis
Pan-American Life Insurance Co.
New Orleans, Louisiana
Francis D. Schas
Bullington-Schas & Co.
Memphis, Tennessee
Elton B. Stephens
EBSCO Industries, Inc.
Birmingham, Alabama
Richard A. Trippeer
R. A. Trippeer, Inc.
Memphis, Tennessee
W. B. White, Jr.
Bradley, Arant, Rose & White
Birmingham, Alabama
Maj. Gen. Ralph H. Wooten
(Honorary Director)
United States Air Force, Retired
Memphis, Tennessee
COUNSEL:
Bradley, Arant, Rose & White
Birmingham, Alabama
Ballard & Beasley
Washington, D. C.
AUDITORS:
Ernst & Ernst
Atlanta, Georgia
STOCK TRANSFER AGENT:
Trust Company of Georgia
Atlanta, Georgia
ADVERTISING COUNSEL:
Harris & Weinstein Associates, Inc.
Atlanta, Georgia
OFFICERS
Frank W. Hulse
President
Graydon Hall
Senior Vice President
W. S. Magill, Jr.
Senior Vice President
J. Kenneth Courtenay
Vice President-Administrative
Services and Secretary
George M. Gross
Vice President-Maintenance
and Engineering
W. Bayne Grubb
Vice President-
Flight Operations
Thomas A. Wiley, Jr.
Vice President-Sa/es
A. L. Maxson
Treasurer
Everett L. Martin
Assistant Vice President-
Personnel
J. R. Price
Assistant Vice President-
Properties
Ray W. Burden
Assistant Treasurer
Richard K. Robinson
Controller
Cecil A. Beasley, Jr.
Assistant Secretary
Mrs. Mary C. Hayes
Assistant Secretary
W. B. White, Jr.
Assistant Secretary