~ 
Southern 
 About the Company 
Southern Airways, Inc. is a certificated, scheduled airline, engaged in transportation of 
persons, property and mail. The Company serves 14 states, the District of Columbia, and 
the Cayman Islands in the British West Indies. Additionally, the Company operates an 
extensive charter business throughout the United States and into the Cayman Islands, 
other points into the Caribbean, Canada, Mexico, and the Bahamas. 
Southern began scheduled service on June 10, 1949. During 1976 the Company's 
aircraft flew more than 27 million miles, serving more than three million passengers. 
Aircraft in service included 28 DC9 jetliners and six Martin 404 piston-engine aircraft. 
Today, more than 95 per cent of Southern's revenue passenger miles are generated 
aboard DC9s. 
Incorporated in the State of Delaware, Southern is a publicly held corporation with 
more than 5,300 stockholders residing in 45 states and 10 foreign countries. The 
Company's stock is registered and traded in the NASDAQ/Over-the-Counter Market. 
Southern is one of 10 "Local Service Carriers" operating in interstate commerce to 
serve cities of small and intermediate 
size as well as in major metropolitan 
areas. For rendering air services to small 
and intermediate size communities that 
otherwise could not sustain scheduled 
service, Southern receives public 
service revenue (subsidy) from the 
Federal Government. 
On the longer haul, more densely 
traveled routes where Southern 
competes with larger Trunk Carriers, the 
Company does not receive a subsidy. 
Southern's fares and quality of service 
a re competitive. 
Southern is headquartered at 
Hartsfield Atlanta International Airport 
where the Company's Maintenance 
Base, Reservations Center, Training 
Center and General Offices are located. 
About the cover: Memphis, Tennessee, where 
Southern operates 46 flights daily and links the 
Southeast with Chicago, Illinois, and St. Louis, 
Missouri. 
Market Price of Common Stock 
Range of high and low bid and asked prices for the 
Company's Common Stock: 
Bid Prices Asked Prices 
Year High Low High Low 
1975 
First Quarter . . . ........ 3 2 4 3 
Second Quarter . . .. . . . . 3 3 3 3 
Third Quarter .. . . . .... . 3 2 3 3 
Fourth Quarter ... .. . . . . 3 2% 3 3 
1976 
First Quarter ........... 5 3 6 3 
Second Quarter ........ 5 4 5 5 
Third Quarter ...... . ... 6 5 7 5% 
Fourth Quarter ..... .. .. 5 3 5% 4 
1977 
First Quarter through 
March 18 ..... . ... ... 4 3 4 4 
The foregoing prices do not represent actual transactions. They 
represent prices between dealers and do not include retail markup, 
markdown or commission . There have been no active markets in 
the Company's convertible preferred stock, convertible 
subordinated debentures, or warrants. 
 Highlights 
SOUTHERN AIRWAYS, INC. Per Cent 
Increase 
Years ended December 31 1976 1975 (Decrease) 
PASSENGER REVENUES $11 5,206,000 $ 95,666,000 20.4% 
OPERATING REVENUES $140,167,000 $ 117,950,000 18.8 
OPERATING INCOME $ 2,492,000 $ 6,076,000 (59.0) 
NET INCOME $ 405,000 $ 2,742,000* (85.2) 
PRIMARY EARNINGS PER SHARE $ .22 $ 1.58* (86.1) 
REVENUE PER PASSENGER MILE $ 0.117 $ 0.112 4.5 
SCHEDULED SERVICE 
REVENUE PASSENGER MILES 978,991,000 852,547,000 14.8 
AVAILABLE SEAT MILES 1,926,166,000 1,688,633,000 14.1 
PASSENGER LOAD FACTOR 50.8% 50.5% .6 
REVENUE PASSENGERS CARRIED 3,245,000 2,935,000 10.6 
REVENUE PLANE MILES FLOWN 27,646,000 25,534,000 8.3 
NUMBER OF EMPLOYEES 2,766 2,519 9.8 
*Includes in 1975 the final settlement of a fuel price dispute and reimbursements 
made under the Federal Airport Development Aid Program which increased net 
income by $1 ,999,000 ($1 .13 per share). These highlights should be read in 
conjunction with the Financial Statements appearing elsewhere in this report. 
Contents 
About the Company . ........ ..... . ...... Outside Foldout Balance Sheet ... ... ....... .... ....... . ......... 20,21 
Southern Routes ..................... Inside Front Cover Statement of Changes in Financial 
Highlights .... .. . ............. ..... . . .. ... .......... 1 Position .. . .. ... . . ....... . . .. ... . ................ 22 
Report to Stockholders .......... .. ................. 2,3 Statement of Stockholders' Equity .. . ..... . ......... .. 23 
Ten Year Operating and Financial Summary ....... .. ... 4,5 Notes to Financial Statements ...... . .... ... ....... 23-30 
Management's Discussion of Summary of Report of Independent Auditors .... .... . ... .. . ..... . . 31 
Operations .......... .. ..... .. .. .. . .. ..... ... .... 6-9 Directors and Officers ..... . .. . .......... .... ........ 32 
Review of Operations ............................ 10-18 General Information .. . ............. .. . Inside Back Cover 
Statement of Income .. ... .... ... .. . ... ... ..... .. .... 19 
1 
 41 
Southern 
NEBRASKA 
DENVER. 
COLORADO 
WICHITA. 
*As of March 21, 1977 
MINNESOTA 
 MINNEAPOLIS- 
ST. PAUL 
\ 
\ 
IOWA \ 
\ 
DES MOINES. - 
ARKANSAS 
WISCONSIN 
MILWAUKEE. 
*Substitute service to Natchez. Miss , 
1s provided by a commuter airline 
MERIDA 
MEXICO 
MICHIGAN 
. BUFFALO 
NEW YORK 
PENNSYLVANIA 
 PITTSBURGH 
...__ _ __, Southern Airways 
System 
Pending Routes 
 Report To Stockholders 
Passengers Carried 
IN THOUSANDS 
4000 
3000 
2000 
1000 
0 
1972 1973 
2 
Frank W Hulse 
Graydon Hall 
1974 1975 1976 
Calendar 1976, an encouraging year for Southern 
Airways despite a disappointing fourth quarter, 
produced record revenues, higher passenger traffic 
volume, and the fifth consecutive year of profitable 
operations. Earnings were $405,000 or 22 cents a 
share. Revenues totaled $140,167,000. A year earlier, 
earnings reached $2,742,000, equal to $1 .58 per 
share, on revenues of $117,950,000. The 1975 
earnings, however, included $1 ,999,000 of 
nonrecurring income arising from settlement of a fuel 
price dispute and from reimbursement of certain 
landing fees under the Federal Airport Development 
Aid Program. 
-L ,Your Company's 1976 earnings were impacted 
;:,ldversely by a $922,000 fourth quarter loss which 
resulted primarily from our passenger traffic growth 
rate falling to 6.1 per cent in the fourth quarter, while 
available seat miles increased 12.3 per cent. This 
mainly resulted from two DC9-30 aircraft being added 
to scheduled service earlier in the year. 
It is gratifying to report that, since year-end , 
Southern's traffic has shown improvement. In January, 
passenger traffic increased 9.3 per cent over January 
1976 despite extremely severe weather conditions. 
Adverse weather imposed substantial operational 
burdens on Southern, closed many plants in cities we 
serve and reduced business travel markedly. Available 
seat miles during the month were up 11 .1 percent. 
The upward trend continued in February and March 
with gains of 7.2 and 7.6 per cent, respectively, over 
Available Seat Miles/Revenue Passenger Miles 
IN MILLIONS 
2000 
Seat Miles 
 Passenger Miles 
1500 
1000 
500 
0 
1972 1973 1974 1975 1976 
 the similar months in 1976. Available seat miles were 
up 7.4 and 8. 7 per cent, respectively, during these 
months. 
Because of the traffic downturn in late 1976 the 
Company had no choice but to effect a staff reduction 
and to do so promptly. Some 190 persons were 
furloughed or terminated. Our employees at the end 
of February numbered 2,608, some 90 more than 
during the similar period last year. This growth in total 
personnel has resulted from increased service and a 
system-wide traffic gain, including expanded service 
between Memphis and Chicago where greater gate 
availability at peak traffic periods has permitted highly 
favorable scheduling. 
Southern continues to expand its promotional efforts 
and to seek ever improving marketing effectiveness. 
As a part of this program, James G. Godsman, vice 
president-Sales, joined Southern in January 1976. He 
comes to Southern from a firm outside the airline 
industry where he served as marketing manager for 
new business ventures. 
There continues to be much uncertainty as to the 
kind and degree of regulation to be maintained for the 
air transportation industry. It is obvious that some 
changes will be forthcoming as early as 1978. As 
demonstrated by our commitment to operate an 
additional kind of aircraft, as discussed later in this 
Report, we are, among other activities, positioning 
ourselves to minimize any problems and exploit the 
Operating Revenues 
IN MILLIONS 
160 
120 
80 
40 
0 
1972 1973 1974 1975 1976 
opportunities presented by changes in the regulatory 
environment. 
In 1976, two members of the Board of Directors 
reached mandatory retirement age: Henry P. Johnston, 
Birmingham, Alabama, and R. Eugene Orr, 
Jacksonville, Florida. Each has made a long and 
meaningful contribution to Southern 's growth. We are 
fortunate to have Mr. Johnston continue his 
association as a senior director. 
Elsewhere in this Report, you will find detailed 
reviews of financial results, operations, marketing 
expansion, new facilities, and other developments that 
made 1976 a year of achievement for Southern. The 
year 1977 justifies optimism and offers new challenges 
as well as opportunities. Southern is fortunate in 
having excellent facilities and outstanding employees 
to take advantage of these opportunities and to meet 
the challenges ahead. 
Respectfully, 
Frank W. Hulse 
Chairman 
~~~ 
Graydon Hall 
President 
April 1, 1977 
Net Income 
IN THOUSANDS 
4000 
3000 
2000 
0 
1972 1973 1974 1975 1976 
3 
 . 
-- - - -- - 
Ten Year Operating and Financial Summary 
SOUTHERN AIRWAYS, INC. 
1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 
Summary of Operations 
(In thousands, except per share amounts) 
Operating revenues 
Passenger $115,206 $ 95,666 $ 86,821 $ 65,949 $ 52 ,052 $ 45,302 $ 37,1 87 $ 28,050 $ 20,503 $ 17,155 
Charter 8,803 8,208 6,908 5,358 4,839 4,067 3,835 3,358 1,934 564 
Public service 5,723 5,961 6,805 6,814 7,138 6,974 4,823 3,580 4,038 4,255 
Other 10,435 8,115 7,818 6,488 5,603 4,917 4,563 3,641 3,652 2,949 
140,167 117,950 108,352 84,609 69,632 61 ,260 50,408 38,629 30,127 24,923 
Operating expenses 
Depreciation and amortization 5,381 4,634 4,397 3,673 2,559 2,637 2,632 2,396 1,770 1,454 
Other 132,294 107,240 97,072 79,447 64,180 58,216 49,556 35,807 27,764 23,537 
137,675 111 ,874 101,469 83,120 66,739 60,853 52,188 38,203 29,534 24,991 
Operating income (loss) 2,492 6,076 6,883 1,489 2,893 407 (1,780) 426 593 (68) 
Interest on long-term debt 2,468 2,918 3,929 3,083 1,362 1,678 1,789 1,720 1,136 585 
Miscellaneous deductions (income)- net (514) (612) (623) (2,023) (110) 23 (236) 15 (120) (57) 
Income (loss) before income taxes, extraordinary 
tax credit and accounting change 538 3,770 3,577 429 1,641 (1 ,294) (3,333) (1 ,309) (423) (596) 
Income taxes (credit) 133 1,028 985 109 450 (235) (487) (212) (358) 
Income (loss) before extraordinary tax credit 
and accounting change 405 2,742 2,592 320 1,191 (1 ,059) (3,333) (822) (211) (238) 
Tax benefits of net operating loss carryforward 325 97 409 
Cumulative effect of accounting change 565 
Net income (loss) $ 405 $ 2,742 $ 3,482 $ 417 $ 1,600 $ (1 ,059) $ (3,333) $ (822) $ (211) $ (238) 
Earnings (loss) per common and common equivalent share (1) 
Primary $ .22 $ 1.58 $ 2.19 $ .23 $ 1.06 $ (1 .02) $ (3.25) $ (.80) $ (. 21) $ (.23) 
Fully diluted $ .22 $ 1.14 $ 1.40 $ .23 $ .80 $ (1 .02) $ (3.25) $ (.80) $ (.21) $ (.23) 
Average number of common and common equivalent shares 
Primary 1,581 1,765 1,599 1,314 1,440 1,035 1,025 1,025 1,025 1,025 
Fully diluted 1,581 2,912 2,913 1,314 3,099 1,035 1,025 1,025 1,025 1,025 
Financial Position - at year end 
(In thousands, except per share amounts) 
Current assets $ 28,306 $ 30,324 $ 27,214 $ 25,793 $ 15,923 $ 14,336 $ 12,380 $ 12,308 $ 15,754 $ 7,048 
Current liabilities 25,447 24,366 23,620 21 ,629 10,399 10,944 12,012 8,707 7,696 6,255 
Property and equipment - net 40,651 34,818 36,414 36,467 16,987 18,739 20,336 21 ,086 20,333 21,178 
Long-term debt (excluding current maturities) 
Notes payable and other 21,545 19,006 22,687 27,523 9,238 8,535 9,408 9,903 12,228 13,468 
Convertible subordinated debentures 9,307 9,743 10,178 10,178 11 ,345 12,682 12,682 12,682 12,682 4,682 
Total stockholders' equity 13,246 12,900 10,277 ., 7,043 5,514 2,493 915 4,248 5,070 4,849 
Common stockholders' equity (2) 12,204 11 ,858 9,171 4,803 3,245 (30) 915 4,248 5,070 4,849 
Common stockholders' equity per common share 7.72 7.50 5.80 3.40 2.55 (.03) .89 4.14 4.95 4.73 
Common shares outstanding 1,581 1,581 1,580 1,413 1,271 1,062 1,025 1,025 1,025 1,025 
Operating Statistics 
Scheduled service 
Passengers carried (thousands) 3,245 2,935 2,940 2,494 2,101 1,875 1,589 1,377 1,271 1,180 
Available seat miles (thousands) 1,926,166 1,688,633 1,618,776 1,643,569 1,279,175 1,222,289 1,111,287 763,748 554,516 483,644 
Revenue passenger miles (thousands) 978,991 852,547 832,372 721 ,135 596,197 527,552 430,736 323,472 254,028 222,142 
Passenger load factor 50.8% 50.5% 51.4% 43.9% 46.6% 43.2% 38.8% 42.4% 45.8% 45.9% 
Breakeven passenger load factor 50.6% 48.2% 49.0% 45.1% 44.9% 44.6% 42.9% 44.8% 47.1% 48.1% 
Revenue per passenger $ 35.46 $ 32.55 $ 29.49 $ 26.41 $ 24.73 $ 24.11 $ 23.36 $ 20.33 $ 16.08 $ 14.49 
Revenue per passenger mile 11.7~ 11 .2 10.4 9.1 8.7 8.6 8.6 8.7 8.1 7.7 
All services 
Available seat miles (thousands) 2,167,198 1,906,443 1,803,177 1,798,409 1,418,799 1,336,982 1,228,373 862,388 611 ,795 498,322 
Cost per seat mile 6.4~ 6.0 5.8 4.6 4.7 4.6 4.3 4.5 4.9 5.0 
Number of employees at year end 2,766 2,519 2,639 2,478 2,084 1,994 1,757 1,747 1,538 1,499 
(1) Primary earnings per share include $.20 (1974), Fully diluted earnings per share include $.11 (2) After deducting equity of preferred share- Dividends on common stock of $.16 per share 
$.08 (1973) and $. 29 (1972) appl icable to tax (1974), $.08 (1973) and $.20 (1972) applicable holders at $6 per outstanding preferred share were paid in 1967. No cash dividends on common 
benefits of net operating loss carryforward to tax benefits of net operati ng loss carry- plus cumulative dividends at the end of each stock have been paid since 1967. Annual dividends 
and $.35 (1974) applicable to cumulative effect forward and $. 19 (1974) applicable to cumula- of the years 1971 (year preferred shares were of $.36 per share have been paid on preferred 
of accounting change. tive effect of accounting change. first issued) through 1976. shares for 1972 through 1976. 
4 
5 
 Management's Discussion of 1976 and 1975 
Summary of Operations 
Overview 
Net income in the 1974 to 1976 period was subjected 
to substantial variations, resulting from sudden and 
dramatic shifts in the rate of passenger growth during 
the perrod, substantial cost increases, and several 
nonrecurring events. Earnings for the period totaled 
$405,000 or 22 cents per share in 1976; $2,742,000 or 
$1 .58 per share in 1975; and $3,482,000 or $2.19 per 
share in 1974. 
Passenger traffic volume in 1975 began that year 
below comparable 1974 levels. The comparison was 
distorted because of the unusual bulge in early 1974 
air travel caused by the automotive gasoline shortage. 
In late 1975, the rate of traffic growth rose dramatically 
and this continued into early 1976. In the latter half of 
1976, the rate of traffic growth again shifted downward 
and it has continued at more moderate levels. 
Anticipating a higher and more sustained level of 
traffic growth, Southern added aircraft in late 1975 and 
mid-1976. The additional aircraft met the higher traffic 
demand in early 1976, but with the downturn in rate 
of traffic growth in the second half of 1976, these 
added aircraft resulted in excess capacity relative to 
traffic demand and operating costs disproportionate 
to revenues generated. Consequently, a $1 ,327,000 
profit in the first nine months of 1976 was reduced by 
a $922,000 fourth-quarter loss. 
Extensive cost cutting measures were implemented 
early in 1977 to lower costs to the current level of 
traffic growth. As part of this program, the number of 
employees was reduced by 190, approximately 7 per 
cent of the total work force, but remained at a level 
above that at the end of 1975. 
Continuing operating cost increases also have 
squeezed net income that already was under pressure 
from lower than expected revenues. Fuel costs have 
continued to rise markedly, while other cost increases 
have kept pace with inflation. Fare increases in 1976 
did not sufficiently improve the yield necessary to 
offset the increased costs. 
6 
Earnings were influenced in 1975 by several non- 
recurring events. A $2,074,000 settlement of a fuel 
price dispute, and a $595,000 reimbursement of 
certain landing fees, had a combined favorable effect 
amounting to $1,999,000 on 1975 after-tax earnings. 
In both 1975 and 1976, long-term debt was reduced . 
These reductions together with lower prime interest 
rates resulted in reduced interest expense. These 
interest reductions, which partially offset the declines 
in operating income, amounted to $450,000 in 1976 
and $1 ,011 ,000 in 1975. 
Operating Revenues 
Total operating revenues reached record levels of 
$140,167,000 in 1976 and $117,950,000 in 1975, up 
18.8 per cent and 8.9 per cent, respectively, compared 
with prior years. Changes in the percentage 
composition of revenues is highlighted by Table 1, 
Revenue Composition . 
Table 1 - Revenue Composition 
PER CENT OF TOTAL REVENUES 
1976 1975 1974 
Passenger: 
Scheduled Service 82.1% 81.1 % 80.1% 
Charter 6.3 7.0 6.4 
88.4 88.1 86.5 
Mail, Freight and Express 4.9 4.5 4.7 
Public Service 4.1 5.1 6.3 
Other 2.6 2.3 2.5 
100.0% 100.0% 100.0% 
Passenger revenues of $115,206,000 in 1976 
represented a 20.4 per cent gain over the prior year, 
while the $95,666,000 in passenger revenues in 1975 
reflected a 10.2 per cent gain over 1974. 
Traffic behavior since 1974 is indicated by Table 2, 
which reflects total revenue passenger miles by 
quarter and the increase or decrease in revenue 
passenger miles over the same quarter of the prior 
year. As demonstrated by Table 2, Southern 
 experienced soft traffic during the first half of 1975, 
which was more than offset by increased traffic levels 
during the second half of that year as the economy 
improved. The traffic recovery continued into 1976 
with revenue passenger miles up 19.7 per cent in the 
first half of 1976 compared with the similar period 
in 1975. 
Table 2 - Traffic Behavior By Quarter 
IN MILLIONS OF REVENUE PASSENGER MILES 
1976 1975 1974 
Total Net Total Net Total 
RPMs Change RPMs Change RPMs 
First Quarter 224 + 37 187 - 9 196 
Second Quarter 253 + 42 211 - 9 220 
Thi rd Quarter 257 + 33 224 + 4 220 
Fourth Quarter 245 + 14 231 + 35 196 
979 + 126 853 + 21 832 
With the traffic recovery in the second half of 1975 
and further increases expected in 1976, three 100- 
passenger DC9 (30 Series) aircraft were added to the 
fleet; one each in October 1975, December 1975 and 
August 1976. An additional 100-passenger DC9 (30 
Series) aircraft was placed into service in June 1976 
to replace a 75-passenger DC9 (10 Series) which was 
returned to a lessor. This added capacity increased 
available seat miles (all services) by 13.7 per cent 
in 1976 following a 5.7 per cent increase in 1975. 
In the second half of 1976, the rate of traffic 
growth declined significantly. The third quarter rate of 
increase declined to 15 per cent and the fourth quarter 
produced only a 6 per cent gain over the preceding 
1975 quarter. 
The decrease in traffic growth in the latter half 
of 1976 can be attributed both to an overall slowing of 
the rate of growth in air transportation throughout the 
country and to increased activity by other carriers in 
the Southeast. Further, in each of the two previous 
years a major competitor experienced a strike during 
the fourth quarter. 
Source of Passenger Revenue Dollar 
FOR THE YEAR 1976 
Business 
Pleasure/ 
Vacation 
Personal 
Business/ Pleasure 
Combined 
Other 
Distribution of Total Expense Dollar 
FOR THE YEAR 1976 
Wages. Salaries. 
Employee Benefits 
Fuel, 011 
Deprec1at1on . Amortization. 
Aircraft Leases 
Aircraft Maintenance. 
Material. Supplies. Services 
Landing Fees. Rentals 
Passenger Service 
All Other 
7 
 Management's Discussion of 1976 and 1975 
Summary of Operations (continued) 
Public Service Revenue 
DOLLARS PER PASSENGER 
4.00 
3.00 ~ 
2.00 
1.00 
0 
1972 1973 1974 
Common Stockholders' Equity 
DOLLARS PER COMMON SHARE 
8.00 
6.00 
4.00 
2.00 
8 
0 
1972 1973 1974 
1975 1976 
1975 1976 
Improved yields, i.e., revenue per passenger mile, 
also contributed to improvements in passenger 
revenues. Yield increased from 10.4 cents in 1974 to 
11 .2 cents in 1975 and to 11 . 7 cents in 1976, increases 
of 7.7 per cent and 4.5 per cent, respectively. These 
improvements reflected certain fare increases during 
the period, the elimination of certain discount fares, 
and an adjustment increasing short-haul fares 
resulting from the completion of an investigation of 
domestic passenger fares by the Civil Aeronautics 
Board. The latter adjustment became effective in 
April 1975. 
Public service revenues, or government payments 
to the Company to provide service to certain small 
communities, were reduced by $238,000 in 1976, 
following a $844,000 reduction in 1975. In 1976 the 
decline resulted from reduced losses in subsidized 
service and the removal of certain larger cities from 
subsidy eligibility. The 1975 reduction was due 
principally to the discontinuance of service to four 
cities late in 197 4 and to a fifth in 1975. 
Operating Expenses 
Operating expenses increased by $23,132,000 in 
1976, following a $13,074,000 increase in 1975, 
exclusive of the fuel price settlement and landing fee 
rebate totaling $2,669,000. Of these amounts, 
increases of $3,117,000 and $4,119,000 in 1976 and 
1975, respectively, are attributable to increases in the 
unit price of fuel. Increased fuel consumption as a 
result of increases in the number of aircraft flown on 
the system resulted in further cost increases of 
$1 ,777,000 in 1976and $419,000 in 1975. 
On a unit cost basis, operating expenses per 
available seat mile increased to 6.35 cents in 1976, up 
from 6.01 cents in 1975 (before reduction for the fuel 
price settlement and landing fee rebate) and 5.64 
cents in 1974. The influence of fuel on these unit cost 
increases is demonstrated byTable 3, Unit 
Cost Analysis. 
 Table 3 - Unit Cost Analysis 
PER AVAILABLE SEAT MILE (ASM) 
1976 1975 1974 
Cost % Cost % Cost 
Per ASM Increase Per ASM Increase Per ASM 
Operating 
Expenses 
Fuel 1.18 9.3% 1.08 16.1% .93 
Fuel Price 
Adjustment 
and Land- 
ing Fee 
Rebate (.14) 
Other 
Operating 
Expenses 5.17 4.9 4.93 4.7 4.71 
Total 
Operating 
Expenses 6.35 8.2 5.87 4.1 5.64 
Non-Operating 
Charges and 
Credits-Net .10 .18 .19 
Total Cost 6.45 6.05 5.83 
Labor costs, exclusive of pension expense, 
increased by $8,578,000 in 1976 and by $3,817,000 in 
1975, primarily as a result of increased salaries and 
benefits. Labor costs also were affected by an increase 
of 9 per cent in the average number of employees in 
1976, following a 4 per cent decrease in the average 
number of employees in 1975. 
Pension expense increased $872,000 in 1976 to a 
total of $3,251 ,000, after a $480,000 increase in 1975. 
As a result, pension expense has climbed , from 4.4 
per cent of total labor cost in 1974, to 5.0 per cent in 
1975, and to 5.7 per cent in 1976. These increases 
were caused principally by an increased number of 
employees participating in the plans and by the cost 
of benefit improvements. Also contributing to the 
increases were contributions of $273,000 in 1976 and 
$43,000 in 1975 for the Employee Stock Ownership 
Plan (ESOP) adopted effective November 1, 1975. 
Rental expense increased to $11,229,000 in 1976, 
$1 ,628,000 above the 1975 level. Rental expense in 
1975 increased $1 ,669,000 over 1974. Of these 
amounts, aircraft rentals increased by $570,000 in 
1976, following a $942,000 increase in 1975. These 
increases were brought about by the short-term lease 
of an aircraft from late 1974 through June 1976, and by 
the two aircraft acquired in 1975, both of which were 
leased under long-term agreements. The remaining 
increases, $1 ,063,000 in 1976 and $728,000 in 1975, 
related to property other than aircraft, principally 
terminal rentals. In addition to a continual program 
to modernize and expand these other lf ased 
properties, as required, the Company also is subject 
to periodic rental increases when leases are renewed 
or renegotiated , due principally to the inflationary rise 
in the cost of lessor-provided maintenance and 
operations. The rentals were further increased by the 
commencement of rentals on the new Atlanta training 
facility, effective October 1, 1975, and maintenance 
base, effective October 1, 1976. 
Depreciation and amortization expense was 
$5,381 ,000 in 1976 and $4,634,000 in 1975. The 
increase in 1976 of$ 747,000 was due primarily to 
depreciation on the two aircraft acquired in 1976, both 
of which were purchased . This followed an increase 
of $237,000 in 1975 which resulted from the effect 
(approximately $330,000) of certain adjustments to 
the I ives of DC9 ratable parts. 
Advertising costs were increased by $794,000 in 
1976 as a resu It of the need to promote new services 
and to initiate several new sales programs. This 
followed a decline in advertising costs in 1975 of 
$271 ,000 a result of the cost reduction program in 
effect during the first half of that year. 
Increases in other operating costs, such as outside 
goods and services, commissions, etc, are generally 
reflective of the expanded operating levels and 
inflationary pressures. 
9 
 Review of Operations 
10 
Southern 's growth and facilities modernization 
program continued forward in 1976. An additional 238 
million available seat miles were offered in scheduled 
service along existing routes, made possible by the 
acquisition in late 1975 and early 1976 of three 
additional DC9-30 aircraft. A new Maintenance Base 
was completed and occupied, a newTraining Center, 
completed in late 1975, achieved a high degree of 
utilization, and a new Reservations Center and 
General Offices building is well underway. 
Among the 63 certificated cities on Southern 's 
system, 56 now are served with jet flights, producing 
96.6 per cent of total revenue passenger miles. Each 
day in 1976 some 9,000 passenger-customers traveled 
an average 302-mile flight. On these same flights, 
some 23,000 ton miles of cargo and mail also were 
transported. 
In support of this level of service, reservations 
agents answered an average total of 12,500 telephone 
calls each day. Calls from throughout the United States 
are answered in the Consolidated Reservations 
Center in Atlanta. 
Southern uses a highly efficient reservations 
computer which contains schedules of more than 25 
airlines, with Southern 's schedules correspondingly 
logged in those carriers' reservations systems. 
Each day, connections are made with every 
scheduled airline in the continental United States, as 
well as with foreign carriers at major gateways in the 
eastern-half of the country. 
New Route Applications and Awards 
Southern continues to press for profitable new 
markets through new route applications before the 
Civil Aeronautics Board. These are outlined inside the 
front cover of this Report. Both business-oriented and 
pleasure-oriented market routes are being sought. 
In mid-1976, permanent authority was received as 
the United States Flag Carrier to the Cayman Islands 
in the British West Indies. Some two years earlier, 
temporary operating authority had been granted by 
the Board, until hearings could be completed and a 
final decision made. Since service to the Cayman 
Islands began, an outstanding quality of service has 
been provided between Miami, Florida, and Grand 
Cayman, the largest of the three-island chain . Daily, 
round trip flights have been offered, as well as many 
charter flights. 
The experience gained in promoting and operating 
Cayman Islands service has led to interests elsewhere 
south of the United States. Three vacation destinations 
in Mexico - Merida, Cozumel, and Punta Cancun - 
 Reservations agents answer 12,500 calls daily, while Southern 
serves some 9,000 passengers during that time. Comfortable 
facilities for improved passenger service are being developed 
throughout Southern's system. New passenger boarding areas and 
modern ticket counters depict Southern's commitment to the 
public. In Atlanta, a new Reservations Center and General Offices 
building is underway to provide better support services. 
11 
 Review of Operations (continued) 
12 
Southern's new Maintenance Base and Traimng Center in Atlanta 
now are operative. Nearby, the Reservations Center and General 
Offices structure will be occupied late in 1977. Throughout its 
system, Southern is modernizing facilities and developing 
outstand,ng personnel. 
Sou 
were applied for in 1976. Southern proposes to serve 
these developing resort areas from New Orleans, 
Louisiana. 
In the meantime, charter activities into the 
Bahamas, to the Caribbean, and into Mexico have 
been increased, further evidencing ability to promote 
and serve primarily vacation areas. 
Business-related travel , however, always has been 
the Company's principal revenue source, amounting 
to almost 60 per cent of 1976 passenger revenues. 
Accordingly, Southern has been pursuing new routes 
supported by the business traveler. The success in 
developing service between Memphis and Chicago, 
Memphis and St. Louis, and Nashville and Detroit is 
expected to favorably influence new route 
authorizations now pending. In addition to expansion 
in mid-America and into the Midwest, Southern is 
seeking Sun Belt growth that would add service to the 
Georgia coast and an extensive pattern of service 
between and among points in Florida, as well as 
non-stop service to and from Atlanta. 
Service to Smaller Communities 
Southern also is developing a program to ensure 
continued service to small and intermediate cities on 
its 14-state domestic route network. Although few such 
cities are more than one hour by surface from a major 
or regional airport, these cities continue to need local 
air service, both for passengers and for cargo. Service 
to these points has been provided by Southern's 
piston aircraft, as few of the smaller points have traffic 
volume sufficient to support jet service or have jet- 
capable airports. While there has been a lack of 
passenger growth, and in some areas an actual 
passenger decline, a need does exist for a frequent 
pattern of service to ensure community growth. 
Recognizing this, a program has been developed 
to offer a viable level of air service, utilizing an aircraft 
capable of meeting these needs. In March 1977, 
Southern entered into an agreement to purchase 
seven new, 19-passenger Metro 11 turboprop aircraft 
from Swearingen Aviation Corporation. These aircraft 
cruise at speeds of almost 300 miles per hour. They 
will replace Southern's piston aircraft which will be 
phased out by the end of 1977. On the short flights, 
where the new aircraft will be used, travel time is 
comparable with that of jet aircraft. Southern will 
implement th is revitalized short-haul service during 
13 
 Review of Operations (contmued) 
14 
Southern 's customers are served by friendly, competent men 
and women 
the third quarter of this year, with delivery of the 
Metro I ls beginning in June. This new aircraft program 
also is expected to save 2,200,000 gallons of 
fuel annually. 
Other Sources of Revenue 
Already a major factor in charter sales among 
scheduled airlines, additional revenue opportunities 
are anticipated as a result of liberalized charter 
regulations adopted in 1976 by the Civil Aeronautics 
Board. Both domestic and foreign destinations are 
expected to attract additional tourists who will benefit 
from low-cost package tours. 
In addition to passenger revenue generated by 
Southern's jet aircraft, 600 cubic feet of space is 
available in the cargo compartments beneath . Three 
services are offered: Air Express, for items that must 
go on a designated flight; Air Freight, when a specific 
flight is not required ; and Swift, a guaranteed-delivery 
small parcel service that moves packages weighing 
less than 50 pounds between ticket counters and 
freight terminals. Sales efforts have been expanded 
to develop this important additional revenue. Cargo 
handling equipment has been installed at major freight 
hubs, increasing single-item shipment weight capacity 
to 500 pounds. 
Facility Improvements 
Southern has occupied a new maintenance facility 
at Hartsfield Atlanta International Airport. Construction 
at the 50-acre site was completed in September 1976, 
with more than eight acres of hangar, departmental 
workshops and support offices under one roof. The 
hangar area is sufficient to simultaneously house four 
jet aircraft. Adjoining the main building is a jet engine 
test cell and allied equipment. Nearby is a modern 
waste treatment plant that eliminates any undesirable 
impact on the environment. 
Built to Southern 's specifications, the maintenance 
facility is owned by the City of Atlanta, Georgia, funded 
with airport revenue bonds, and leased to Southern 
for 30 years with a renewal option. 
Prior to this move, the maintenance facility had been 
outgrown as a result of jet fleet expansion. In the new 
facility, virtually every support function necessary to 
operate a fleet of modern DC9 aircraft will be 
performed. No longer will it be necessary for the 
Company to contract jet engine overhaul to outside 
sources. 
A collateral benefit of the new facility is the 
capability of providing contract maintenance support 
to other airlines and government agencies. Currently 
 underway is a program to offer these services to 
airlines throughout the world . Because of the ability 
to move jet aircraft quickly between continents, the 
efficient facility and the technical experience of 
Southern's personnel, contract work can be scheduled 
to mesh with the predetermined maintenance that 
supports Southern 's own fleet. 
Southern long has provided contract maintenance 
for government and corporate aircraft. This experience, 
backed by one of the most modern and technically 
efficient maintenance and overhaul centers, will make 
possible a greatly expanded external support program. 
Further Facilities Expansion 
A new Reservations Center and General Offices 
building will be ready for occupancy in November. 
Built on a site adjoining the Maintenance Base, this 
complex will bring all Atlanta headquarters operations 
into one area. Previously, portions of seven buildings 
at various locations on or near Hartsfield Atlanta 
International Airport were being used. 
The new building will be leased from a private owner 
for 30 years with renewal options. The increased 
efficiency from consolidated operations and favorable 
rental rate, compared with present rental rates, were 
decisive factors in this move. 
A collateral benefit of the move is the consolidation 
of people and functions, permitting employees to 
share greater knowledge of each corporate 
department. 
Personnel Development 
Southern takes pride in the competence and high 
morale of its employees. Contributing to an excellent 
employee attitude are good working conditions, 
salaries in line with industry standards, excellent fringe 
benefits, a practice of promoting from within the 
Company when possible, and constant communication 
between employees and management. 
Salaries and benefit costs represent 40.7 per cent 
of total expenses. As a service-oriented organization, 
this represents the highest operating expense 
category. 
Furthering Company expansion and individual 
employee growth are new training programs. This 
ensures an adequate supply of qualified people to 
support growth. More importantly, it provides 
employees an opportunity to progress in the Company, 
in turn , increasing their capabilities and reducing 
turnover. 
Understanding Company goals and the 
opportunities available to both the Company and its 
Innovation extends to both training methods and promotional 
programs. Southern's customers constantly are reminded of the 
value of travel agents' free service 
15 
 Review of Operations (continued) 
16 
Sophisticated ma,ntenance checks determine when Southern s 
skilled mechanics put their experience to work. 
employees is an important element in Southern 's 
internal communications effort. Ongoing programs 
continue to emphasize to all personnel the necessity 
to earn an adequate return on investment. The 
employee newspaper explained this in many editions, 
and a filmed presentation explained and emphasized 
the importance of profitability and methods to be 
used in achieving it. 
Training 
Further enhancing the value of our employees is the 
support training offered in the new Training Center. 
Becoming operative late in 1975, the center was fully 
functional in 1976. It provides pilots with the most 
advanced DC9 simulator training available, as well as 
innovative methods for training ground personnel. 
Use of the DC9 simulator permits maximum 
utilization of all aircraft for revenue flying and 
eliminates the expense of leasing simulator time from 
other airlines. Training schedules now may be more 
efficient, reducing transportation time and related 
expenses. 
When Southern pilots are not operating the 
simulator, its 24-hour daily capacity permits contract 
use by other airlines and government agencies, 
making a contribution to profit. Currently, two airlines, 
two government agencies and a major aircraft 
manufacturer lease simulator time. 
Flight attendants receive their initial five-week 
training in the center, then return for semi-annual 
training. New station employees receive introductory 
training here, before station assignments where skills 
are developed on the job. Classrooms in the facility 
often are occupied by office personnel receiving 
special training , or members of Southern 's field sales 
staff learning new techniques to develop additional 
revenue sources. 
Southern has entered into a continuing effort to 
improve service to its customers. The Training Center 
is making a significant contribution toward this goal. 
Fuel Situation 
Although 1976 and the first quarter of 1977 have not 
seen significant fuel price increases like those incurred 
in the 1973-1975 period, fuel costs continue to 
increase at an irregular rate. In the 36-month period 
through December 1976, jet fuel prices increased from 
an average of 13.9 cents per gallon in December 1973, 
to 32.1 cents in December 1976. At 1976 consumption 
levels, this equates to an annual increase of more than 
$14,900,000. At February 28, 1977, the average cost 
for jet fuel was 34.1 cents per gallon . 
 Elevating women to management and improving employee skills 
aid Southern in retaining highly qualified people. 
Southern s maintenance facility utilizes eight acres of under-roof 
hangar and support area~ 
17 
 Review of Operations (continued) Southern has been diligent in minimizing fuel 
usage and the increases cited would have had an even 
greater adverse effect had it not been for fuel 
economy programs that were implemented with 
substantial positive results. 
Southern pilots, utilizing improved flying techniques 
including reduced air speeds, changing some taxiing 
times, and modifications in refueling schedules, 
reduced hourly DC9 fuel burn from 944 gallons per 
hour to 873 gallons. This represents a savings of 71 
gallons per hour and a monetary savings of more than 
$2 million per year. 
Fuel economy programs also extend to ground 
equipment. Vehicles are being operated only when 
necessary, are shut off at all stops, and are maintained 
mechanically to ensure optimum mileage. 
Fuel availability was not a problem through the end 
of 1976, but the first months of 1977 have seen some 
shortages. This has required some change in fueling 
points, but no flight schedules have required 
- adjustment. 
18 
Jet engines now are overhauled and tested in house, part of 
Southern 's self-supporting aircraft maintenance program. 
Additional price increase notifications have been 
received from major suppliers and the Company's 
plans for 1977 take into account anticipated jet fuel 
price increases. 
Present and Future 
Southern continues to progress as a reliable and 
growing transportation company. Changing is the 
image that the Company is a small airline serving only 
the heartland of the Southeastern United States. 
Instead, the airline has won recognition in Chicago, 
St. Louis, Detroit, New York and Washington as a 
primary source of travel to and from the Southeast. 
Between Orlando and Miami and between Orlando 
and Fort Lauderdale, Southern serves more travelers 
than any other airline. 
Elsewhere, Southern continues to provide a high 
level of service, always responsive to community 
needs. 
Passenger growth will result from continued 
dedication to the public, both in frequency of service 
and in quality of service. 
Underway are new programs to further increase 
frequency, to further upgrade quality, and to be 
responsive as always to Southern's primary purpose: 
" ... to provide the best in short-haul air 
transportation throughout the Southeast and to 
provide convenient long-haul service to and from 
other parts of the country from our key gateway 
cities:' 
 Statement of Income 
SOUTHERN AIRWAYS, INC. 
Year ended December 31, 1976 1975 
Operating Revenues 
Passenger $115,206,000 $ 95,666,000 
Mail, express and freight 6,848,000 5,351,000 
Public service revenue 5,723,000 5,961,000 
Charter 8,803,000 8,208,000 
Other 3,587,000 2,764,000 
140,167,000 117,950,000 
Operating Expenses- Note B 
Flying operations 49,802,000 41 ,628,000 
Maintenance 19,337,000 16,831,000 
Aircraft and traffic servicing 32,804,000 26,782,000 
Passenger service 8,598,000 7,490,000 
Promotion and sales 12,246,000 9,012,000 
General and administrative 7,633,000 6,053,000 
Depreciation and amortization 5,381,000 4,634,000 
Other 1,874,000 1,518,000 
Fuel price adjustment (credit)- Note B (2,074,000) 
137,675,000 111,874,000 
Operating Income 2,492,000 6,076,000 
Other Deductions and Income 
Interest on long-term debt 2,468,000 2,918,000 
Gain on disposal of property (91,000) (40,000) 
Miscellaneous deductions (income)- net (423,000) (572,000) 
1,954,000 2,306,000 
Income Before Income Taxes 538,000 3,770,000 
Income taxes - Note D 133,000 1,028,000 
Net Income $ 405,000 $ 2,742,000 
Net Income per Common and Common Equivalent Share - Note I 
Primary $ .22 $ 1.58 
Fully diluted $ .22 $ 1.14 
See Notes to Financial Statements. 
19 
 Balance Sheet 
SOUTHERN AIRWAYS, INC. 
Assets 
Current Assets 
Cash, including short-term investments of $3,200,000 
in 1976 and $7,599,000 in 1975 - Note C 
Accounts receivable 
U.S. Government-transportation and public service revenue 
Trade receivables, less allowance for doubtful  
accounts (1976-$162,000; 1975-$127,000) 
Maintenance and operating supplies, at average cost less allowance 
for obsolescence (1976- $1,717,000; 1975- $1,498,000)- Note A 
Prepaid expenses 
Total Current Assets 
Property and Equipment - on the basis of cost- 
Notes A and C 
Flight equipment 
Other property and equipment 
Less allowances for depreciation and maintenance 
Deferred Charges and Other Assets 
Deferred charges - Note A 
Other assets 
See Notes to Financial Statements. 
20 
December 31 , 
1976 1975 
$ 8,131,000 
1,703,000 
11,492,000 
13,195,000 
6,006,000 
974,000 
28,306,000 
58,812,000 
7,865,000 
66,677,000 
26,026,000 
40,651,000 
949,000 
252,000 
1,201,000 
$70,158,000 
$11 ,918,000 
2,135,000 
9,709,000 
11 ,844,000 
5,645,000 
917,000 
30,324,000 
51 ,349,000 
6,204,000 
57,553,000 
22,735,000 
34,818,000 
1,230,000 
241 ,000 
1,471 ,000 
$66,613,000 
 Liabilities and Stockholders' Equity 
Current Liabilities 
Accounts payable 
Collections and withholdings as agent 
Salaries, wages and vacations 
Accrued interest payable 
Accrued income taxes 
Accrued taxes and other expense ~ 
Air traffic liability 
Current maturities of long-term debt - Note C 
Total Current Liabilities 
Long-Term Debt, less current maturities - Note C 
Notes payable and other 
Convertible subordinated debentures 
Deferred Credits and Other Liabilities 
Deferred income taxes 
Other 
Stockholders' Equity- Notes C and E 
Preferred Stock, authorized 2,000,000 shares, 
issuable in series: 
Series A, $.36 Convertible, $1 par value, voting 
(liquidation value $6 per share plus cumulative 
dividends - aggregate of $1 ,042,000) 
issued and outstanding-163,781 shares 
Common Stock, $2 par value, authorized 7,500,000 
shares, issued and outstanding 1,580,880 shares 
Other paid-in capital 
Retained earnings 
Leases, Commitments and Contingencies - Notes G and H 
December 31, 
1976 1975 
$ 6,264,000 $ 5,644,000 
1,387,000 1,206,000 
3,914,000 3,222,000 
567,000 713,000 
109,000 1,093,000 
2,258,000 837,000 
7,9~6,000 r 7 535,000 
2,952,000 4,116,000 
25,447,000 24,366,000 
21,545,000 19,006,000 
9,307,000 9,743,000 
30,852,000 28,749,000 
391,000 496,000 
222,000 102,000 
613,000 598,000 
164,000 164,000 
3,162,000 3,162,000 
5,124,000 5,124,000 
4,796,000 4,450,000 
13,246,000 12,900,000 
$70,158,000 $66,613,000 
21 
 Statement of Changes in Financial Position 
SOUTHERN AIRWAYS, INC. 
Year ended December 31, 
Funds Provided 
From operations 
Net income 
Items not requiring outlay of working capital in current period : 
Depreciation 
Allowance for maintenance (deduction) 
Amortization of deferred charges 
Deferred credits and other liabilities 
Total from operations 
Issuance of long-term debt 
Property and equipment sold, less gain included in operations 
Recovery of hijacking payment less deferred subsidy- Note B 
Reclassification of equipment to inventory 
Funds Used 
Additions to property and equipment 
Utilization of DC9 engine maintenance reserve 
Reduction of long-term debt 
Dividends on preferred stock 
Other 
Increase (Decrease) in Working Capital 
Working capital at beginning of year 
Working Capital at End of Year 
Increase (Decrease) in Working Capital by Component 
Cash and short-term investments 
Accounts receivable 
Maintenance and operating supplies 
Prepaid expenses 
Accounts payable 
Collections and withholdings as agent 
Salaries, wages and vacations 
Accrued interest, taxes and other expenses 
Air traffic liability 
Current maturities of long-term debt 
Increase (Decrease) in Working Capital 
See Notes to Financial Statements. 
22 
Lt 
1976 1975 
$ 405,000 $2,742,000 
4,878,000 4,177,000 
(82,000) {2,000) 
396,000 388,000 
15,000 304,000 
5,612,000 7,609,000 
8,918,000 
88,000 84,000 
1,400,000 
533,000 
14,618,000 9,626,000 
10,517,000 2,331 ,000 
200,000 665,000 
6,815,000 4,116,000 
59,000 119,000 
126,000 31 ,000 
17,717,000 7,262,000 
(3,099,000) 2,364,000 
5,958,000 3,594,000 
$ 2,859,000 $5,958,000 
$(3,787,000) $ 23,000 
1,351,000 1,870,000 
361,000 1,068,000 
57,000 149,000 
(620,000) 1,626,000 
(181,000) (162,000) 
(692,000) (59,000) 
(291,000) -- (850,000) 
{461,000) (1,021 ,000) 
1,164,000 (280,000) 
$(3,099,000) $2,364,000 
 Statement of Stockholders' Equity 
SOUTHERN AIRWAYS, INC. 
Preferred Stock Common Other 
$1 Par Value Stock Paid-In Retained 
Years Ended December 31, 1976 and 1975 
Balance, January 1, 1975 
Net income 
Dividends on preferred stock 
($.36 per share) 
Common stock issued upon conversion 
of preferred stock 
Balance, December 31 , 1975 
Net income 
Dividends on preferred stock 
($.36 per share) 
Balance, December 31 , 1976 
See Notes to Financial Statements. 
Notes to Financial Statements 
SOUTHERN AIRWAYS, INC. 
December 31 , 1976 
Note A- Summary of Significant Accounting Policies 
Property, Equipment, Depreciation and Obsolescence 
Provisions for depreciation of property and 
equipment are computed on the straight-line method 
calculated to amortize the cost of the properties over 
their estimated useful lives. For DC9 flight equipment 
the life is 15 years (new equipment) and 10 years (used 
equipment and ratable parts), with a 10 per cent 
salvage value; for ground equipment, the life ranges 
from three to 10 years. 
The Company is engaged in a program of 
permanently reducing the use of Martin 404 flight 
equipment. At December 31 , 1976, the Company's 
investment in Martin 404 flight equipment is fully 
depreciated except for $394,000 related primarily to 
engine overhauls, which will be charged to operations 
based on hours flown . 
Series A $2 Par Value Capital Earnings 
$165,000 $3,160,000 $5,125,000 $1 ,827,000 
2,742,000 
(119,000) 
(1,000) 2,000 (1,000) 
164,000 3,162,000 5,124,000 4,450,000 
405,000 
(59,000) 
$164,000 $3,162,000 $5,124,000 $4,796,000 
At the time properties are retired , the amounts 
of costs and allowances for depreciation and 
maintenance are eliminated from the accounts. Profits 
and losses on disposals of DC9 flight equipment 
(exclusive of ratable parts) are credited or charged to 
operations. Proceeds from the disposal of DC9 ratable 
parts are credited to the allowance for depreciation 
account. Proceeds from the disposal of Martin 404 
flight equipment and ratable parts are included 
in income. 
Expenditures for ordinary maintenance and repairs 
are charged to expense. Expenditures for major spare 
parts are capitalized and minor parts are recorded in 
inventory accounts and charged to expense as used. 
A provision for obsolescence of the investment 
in minor spare parts inventory for DC9 aircraft is made 
at an annual rate of 4 per cent. 
23 
 Notes to Financial Statements (continued) 
Deferred Charges 
Expenditures for preoperating and route extension 
and development costs are deferred and are amortized 
over a period of five years from the dates operations 
of the routes are started. Costs associated with 
obtaining leased DC9 aircraft are being amortized over 
the I ives of the leases. Deferred charges associated 
with long-term debt are being amortized over the 
period of the financing arrangements. 
Income Taxes 
Income taxes are provided at current tax rates for 
all items included in the statement of operations 
regardless of the years when such items are reported 
for tax purposes. 
The Company uses the flow-through method of 
accounting for investment tax credit, and available 
investment tax credit is recognized to the extent it 
can be realized or offset against income taxes 
currently payable or deferred. 
Pension Plans 
The Company has several pension plans covering 
substantially all of its employees. There are no 
unfunded past service costs. The Company's policy is 
to fund pension costs accrued. At December 31 , 1976, 
the assets of the pension fund exceeded the 
actuarially computed value of vested benefits. 
Employee Stock Ownership Plan 
The Company has an Employee Stock Ownership 
Plan (ESOP) for certain of its employees. The Plan was 
established effective November 1, 1975. The 
Company's contributions to the plan are determined 
annually at rates related to the base compensation of 
active participants. It is the Company's policy to fund 
contributions accrued. 
Public Service Revenue 
The Company receives public service revenue 
from the Civil Aeronautics Board (CAB) for providing 
service to small and intermediate-size cities on its 
routes. Amounts received and recognized as revenues 
are those paid for the period based on the formula 
then in effect. 
Note B - Certain Significant Transactions and 
Changes Affecting Operating Results 
In January 1976, pursuant to an offer tendered in 
December 1975, the Company purchased $871,400 
24 
principal amount of 5-3/4% Convertible Subordinated 
Debentures at a price of $750 for each $1,000 
debenture plus certain brokerage and other related 
expenses. A gain of $200,000 ($145,000 after income 
taxes -9 cents per share) resulted from the 
repurchase. These debentures were used to satisfy 
sinking fund payments due December 1, 1976 
and 1977. 
In early 1974, a fuel supplier notified the Company 
that its contract with the Company was withdrawn and 
future fuel deliveries would only be made on a spot 
price basis. Subsequently, the Company filed an action 
in the Federal District Court seeking a declaration that 
the supplier must specifically perform under the terms 
of the contract, which expired May 31 , 1975. In 
January 1976, the Company negotiated a final 
settlement of the amount due to the supplier under 
this contract. The amount provided in 1974 as due to 
the supplier exceeded the final settlement by 
$2,074,000 and such amount has been included 
separately in the'statement of income for 1975 as a 
reduction of operating expenses. This final settlement 
had the effect of increasing net income by 
approximately $1,500,000 (85 cents per share). 
In 1975, the City of Atlantareimbursed airlines 
using Hartsfield Atlanta International Airport for 
certain amounts which the airlines had advanced 
toward airport expansion through higher landing fees 
since 1967. These funds were made available to the 
City under the Federal Airport Development Aid 
Program. This reimbursement of $686,000 (which 
includes interest of $91,000) has been included as a 
reduction of expenses and in interest income for 1975 
and had the effect of increasing net income 
approximately $499,000 (28 cents per share). 
In 1973, the CAB implemented a subsidy formula 
which recognized the $2 million ransom payment 
retained by the Republic of Cuba following a 1972 
hijacking. This formula resulted in increased subsidy 
revenue; however, the Company was required to 
return to the CAB a proportionate amount of the 
increased subsidy revenue when the ransom was 
returned. Following receipt of approximately 
$2 million from the Cuban Government in 1975, 
representing payment in full return of the ransom 
funds, the Company refunded to the CAB 
approximately $490,000 of the $600,000 which had 
been deferred at December 31, 1974. General and 
administrative expenses were reduced by 
approximately $110,000 for the final subsidy 
 settlement related to the hijacking payment. The 
settlement resulted in an increase in net income for 
1975 of approximately $80,000 (five cents per share). 
Note C - Long-Term Debt 
At December 31, 1976 1975 
Notes payable to banks under 
a Credit Agreement dated 
February 20, 1973 and 
amended February 2, 1976 
"A" Term Loans, payable 
quarterly through 1982 $13,183,000 $15,403,000 
"B" Revolving Loans, 
payable in 1978 
and 1979 4,400,000 7,284,000 
"C" Term Loans, payable 
quarterly through 1984 6,754,000 
Other 160,000 
Convertible Subordinated 
Debentures 
5-3/ 4% due December 1, 
1981 3,474,000 4,345,000 
6-1/ 2% due November 1, 
1983 5,833,000 5,833,000 
33,804,000 32,865,000 
Less current maturities 2,952,000 4,116,000 
$30,852,000 $28,749,000 
The Credit Agreement loans bear interest at the 
lead bank's prime rate (six per cent at December 31, 
1976) plus one per cent ("A" and "C" Term Loans) and 
two per cent ('' B" Revolving Loan) and are payable in 
quarterly installments. Substantially all of the 
Company's assets are pledged as collateral under the 
terms of the Credit Agreement. Additionally, the "A" 
and "C" Term Loans are 90 per cent guaranteed by 
the Federal Aviation Administration. 
On February 2, 1976, the " B" Loan was converted 
from a term loan to a revolving credit loan under which 
the Company may borrow, repay and reborrow 
through 1978, subject to quarterly reductions in the 
amount of funds available. The unused " B" Loan 
Commitment at December 31, 1976, was $1,424,000. 
In connection with the Credit Agreement, the 
Company maintains average compensating balances, 
based on bank ledger balances adjusted for treasury 
tax contributions and uncollected funds, equal to the 
sum of 15 per ce-nt of the average daily balance of the 
"A" and " B" Loans outstanding, 15 per cent of the 
unused portion of the " B" Loan Commitment, and 
20 per cent of the average daily balance of the "C" 
Loan outstanding. Based upon outstanding borrowings 
at December 31 , 1976, the Company should maintain 
average compensating balances of approximately 
$4,483,000, which stated in terms of the Company's 
book cash balances is approximately $2,409,000. The 
difference is attributable to average uncollected funds 
and float. During 1976, the Company maintained 
average compensating balances of approximately 
$4,660,000. Compensating balances are not restricted 
as to withdrawals, serve in some instances as 
compensation to the participating banks for their 
account handling function and other services, and 
additionally serve as part of the Company's minimum 
operating cash balances. 
The 5-3/4% Convertible Subordinated Debentures 
due December 1, 1981 , are convertible (until maturity 
or prior redemption) into common stock at $10.86 per 
share; are subordinated, generally, to all existing and 
future indebtedness for borrowed money; are callable 
at premiums currently ranging from 1. 75 per cent 
downward; and require annual sinking fund payments 
on December 1 of each year in an amount equal to 
$435,000. In January 1976, pursuant to an offer 
tendered in December 1975, the Company purchased 
$871,400 principal amount of the 5-3/4% Convertible 
Subordinated Debentures at a price of $750 for each 
$1,000 debenture, plus certain brokerage and other 
related expenses. These debentures were used to 
make the sinking fund payments due December 1, 
1976, and December 1, 1977. Also, the Company may 
make additional voluntary prepayments equal 
to the required amounts. 
The 6-1 /2% Convertible Subordinated Debentures 
due November 1, 1983, are convertible (until maturity 
or prior redemption) into common stock at $10 per 
share; are subordinated, generally, to all existing and 
future indebtedness for borrowed money, are callable 
at premiums ranging from four per cent downward; 
and require annual sinking fund payments beginning 
November 1, 1978, in an amount equal to 1 0 per cent 
of the principal amount outstanding at November 1, 
1977, less credit for principal amount converted or 
cal led subsequent to November 1, 1977. Also, the 
Company may make additional voluntary prepayments 
equal to the required amounts. 
The terms of the Credit Agreement and both issues 
of convertible s.ubordinated debentures place certain 
requirements and restrictions upon, among other 
things, (a) working capital , (b) indebtedness and lease 
obligati,ons, (c) capital expenditures, (d) net worth and 
(e) payments relating to capital stock, including 
25 
 Notes to Financial Statements (continued) 
dividends. Retained earnings available for the 
payment of dividends at December 31, 1976, under 
the most restrictive requirement, amounted to 
approximately $1,885,000. 
Credit Agreement Loans 
Year "A" "B" 
1977 $ 2,220,000 $ 
1978 2,220,000 1,276,000 
1979 2,220,000 3,124,000 
1980 2,220,000 
1981 2,220,000 
$ 
A summary of minimum principal payments under 
the Credit Agreement loans, other indebtedness and 
both issues of convertible subordinated debentures 
is as follows: 
Convertible 
Subordinated 
"C" Other Debentures Total 
724,000 $ 8,000 $ $ 2,952,000 
965,000 9,000 1,015,000 5,485,000 
965,000 11,000 1,018,000 7,338,000 
965,000 13,000 1,018,000 4,216,000 
965,000 16,000 2,756,000 5,957,000 
Thereafter 2,083,000 2,170,000 103,000 3,500,000 7,856,000 
$13,183,000 $4,400,000 $6,754,000 $160,000 $9,307,000 $33,804,000 
A reduction in the "B'' Loan Commitment is required 
equal to 25 per cent of net income in excess of $1 ,500,000 
plus 50 per cent of net income in excess of $3,000,000 
earned in any fiscal year. The above summary of minimum 
Note D - Income Taxes 
Income taxes are as follows: 
1976 1975 
Current: 
Federal $361,000 $1 ,309,000 
State 42,000 155,000 
Investment tax credit (193,000) (638,000) 
210,000 826,000 
Deferred: 
Federal (122,000) 396,000 
State (15,000) 33,000 
Investment tax credit 60,000 (227,000) 
(77,000) 202,000 
$133,000 $1,028,000 
Deferred income taxes resulted from timing 
differences in the recognition of revenue and expense 
for tax and financial reporting purposes. The sources 
of these differences and the tax effect.of each were 
as follows: 
1976 1975 
Accelerated depreciation for tax 
purposes $ 25,000 $ 791 ,000 
Provision for inventory 
obsolescence for financial 
reporting purposes in excess of 
amount allowed for tax purposes (51,000) (111 ,000) 
Provision for maintenance (39,000) (166,000) 
Deferred compensation (61,000) (43,000) 
Other (11,000) (42,000) 
Investment tax credit 60,000 (227,000) 
$ (77,000) $ 202,000 
26 
principal payments does not reflect the possible effect of 
any prepayment which may result from the reduction in 
the commitment. 
The sum of current and deferred Federal income 
taxes in each year before applicable investment tax 
credits equals approximately 48 per cent (the statutory 
Federal tax rate) of income before taxes after 
deducting the state tax provision shown above. 
Investment tax credit carryovers, which may be 
used to offset Federal income taxes payable in future 
income tax returns, aggregate approximately 
$927,000 and expire in 1978 ($26,000), 1979 
($44,000), 1980 ($257,000), 1981 ($126,000), 1982 
($193,000), and 1983 ($281 ,000). Approximately 
$417,000 of this amount has been utilized as a 
reduction of deferred taxes for financial reporting 
purposes. 
Note E - Capital Stock and Options 
The Series A Preferred Stock is convertible into 
common stock on a share for share basis, can be 
redeemed at the Company's option after July 1, 1976, 
at $6 per share plus accumulated dividends and is 
entitled upon liquidation to receive $6 per share plus 
accumulated dividends. The liquidation preference 
for the 163,781 shares outstanding at December 31 , 
1976, including the dividend requirement described 
below, aggregated $1 ,042,000 which is $878,000 
more than the aggregate par value of such shares. 
Each share of preferred stock is entitled to receive 
annual dividends of 36 cents cumulative only to the 
extent of annual net profits. Payment of dividends is 
also subject to the limitations prescribed by the 
 Indenture Agreements covering the 5-3/4% and 
6-1 /2% Convertible Subordinated Debentures and to 
limitations contained in the Credit Agreement (See 
Note C). The dividend requirement on preferred 
shares at December 31 , 1976, aggregated $59,000 
and was paid on February 28, 1977. 
Authorized common shares include 1,560,163 
shares and 1,674,403 shares reserved at December 
31 , 1976 and 1975, respectively, for issuance 
as follows: 
1976 1975 
For convertible securities 
conversions: 
5-3/ 4% Convertible Subordinated 
Debentures (Note C) 
6-1 / 2% Convertible Subordinated 
Debentures (Note C) 
Series A Convertible Preferred 
Stock 
For exercise of outstanding 
warrants at $6 per share, issued 
with Convertible Preferred Stock 
For options under Qualified Stock 
Option Plan ( 1976-11 ,000 shares; 
1975-45,000 shares) and 
Employee Stock Option Plan 
(25,000 shares) 
319,853 
583,300 
163,781 
1,066,934 
457,229 
36,000 
1,560,163 
400,093 
583,300 
163,781 
1,147,174 
457,229 
70,000 
1,674,403 
At December 31 , 1976, there were outstanding 
options for 11 ,000 shares of common stock under the 
Company's Qualified Stock Option Plan, of which 
4,000 shares (at $5.81 per share) expire in 1978, 3,000 
shares (at $3.50 per share) expire in 1979, and 4,000 
shares (at $2.94 per share) expire in 1980. Option 
transactions during the two years ended December 
31 , 1976, are summarized as follows: 
Number of Option Price 
Shares Per Share Total 
Outstanding 
January 1, 1975 44,000 $3.50-$5.81 $229,000 
Granted 4,000 2.94 12,000 
Expired (3,000) 5.25- 5.81 (16,000) 
Outstanding 
December 31 , 
1975 45,000 2.94- 5.81 225,000 
Expired (34,000) 5.25 (179,000) 
Outstanding 
December 
31 , 1976 11 ,000 $2.94-$5.81 $ 46,000 
The Qualified Stock Option Plan expired on October 
26, 1975, except for options which were outstanding at 
that date. 
Options granted under the Plan are intended to 
constitute "qualified stock options" as defined in 
Section 424 (b) of the Internal Revenue Code of 1954, 
as amended. Options are exercisable at not less than 
100 per cent of the fair market value of the stock on 
the date of grant, terminate not later than five years 
after date of grant, and are not exercisable during the 
first 24 months after date of grant. Each option is 
exercisable with respect to one-third of the number of 
shares at any time after 24 months following date of 
grant, with respect to an additional one-third after 36 
months, and with respect to the balance after 48 
months. No options were exercised during the two 
years ended December 31 , 1976. Options became 
exercisable as follows: 
1976 1975 
Number of Shares 
Option Price: 
Per Share 
Total 
2,333 
$3.50-$5.81 
$ 11 ,000 
12,667 
$5.25 -$5.81 
$ 67,000 
Quoted Market Price at Date 
Exercisable: 
Per Share 
Total 
$5.00-$5.50 
$ 12,000 
$2.875-$3.25 
$ 37,000 
Options for 3,667 shares (aggregating $19,000 at 
option prices) arid 35,333 shares (aggregating 
$186,000 at option prices) were exercisable at 
December 31 , 1976 and 1975, respectively. 
A total of 25,000 shares of common stock are 
reserved for issuance to participating employees 
under an Employees' Stock Option Plan (an employee 
stock purchase plan as defined by section 423(b) of 
the Internal Revenue Code of 1954). This plan is 
currently inactive and there are no participants. 
The Company makes no charge to income with 
respect to options. 
Note F - Pension and Employee Stock Ownership 
Plan 
Pension expense was $3,251 ,000 in 1976 and 
$2,379,000 in 1975, which includes $273,000 in 1976 
and $43,000 in 1975 applicable to the Employee Stock 
Ownership Plan adopted in 1975. During 1976, the 
Company made certain changes in one of its plans to 
provide increased benefits, which had the effect of 
increasing pension costs by approximately $450,000. 
The plans have been modified to comply with the 
Employee Retirement Income Security Act of 1974 
to the extent of existing regulations. 
27 
 Notes to Financial Statements (continued) 
Note G - Leases 
Total rental expense for all leases amounted to: 
Fi nancing leases (minimum 
rentals): 
1976 1975 
Flight equipment 
Other financing leases 
$ 5,933,000 $4,991 ,000 
Other leases: 
Minimum rentals 
Contingent rentals 
3,299,000 2,132,000 
1,636,000 1,912,000 
431,000 639,000 
$11,299,000 $9,674,000 
Contingent rentals for 1976 and 1975 consist of 
1977 
1978 
1979 
1980 
1981 
1982-1986 
1987-1991 
1992-1996 
Remainder 
Flight 
Equipment 
$ 5,901 ,000 
5,901 ,000 
4,924,000 
2,861 ,000 
2,508,000 
4,778,000 
$26,873,000 
Financing Leases 
Maintenance 
Center 
$ 2,535,000 
2,535,000 
2,535,000 
2,535,000 
2,535,000 
12,673,000 
12,673,000 
12,673,000 
22,173,000 
$72,867,000 
The Maintenance Center lease extends to October 1, 
2005, and may be renewed at the Company's option 
for an additional term extending to January 1, 2024. 
Most of the Company's other leases do not contain 
formal renewal options. However, consistent with the 
prevailing practice in the industry, leases with 
relatively short terms are generally renegotiated and 
charges of $331 ,000 and $437,000, respectively, for 
reservation services based upon the number of 
unduplicated passengers in excess of a specified 
minimum of $120,000 per annum ; and $100,000 and 
$202,000, respectively, for that portion of the rental 
charges for a short-term leased aircraft which was 
based on hours flown . Rentals received from 
subleases are immaterial. 
Future minimum rental commitments as of 
December 31 , 1976, for all noncancelable leases 
including the new Maintenance Center at the 
Hartsfield Atlanta International Airport are as follows: 
Other 
Financing 
Leases 
$ 2,023,000 
1,741 ,000 
1,629,000 
1,594,000 
1,587,000 
6,816,000 
5,245,000 
1,703,000 
1,300,000 
$23,638,000 
Other 
Leases 
$ 744,000 
544,000 
450,000 
345,000 
160,000 
541 ,000 
356,000 
30,000 
16,000 
$3,186,000 
Total 
$ 11 ,203,000 
10,721 ,000 
9,538,000 
7,335,000 
6,790,000 
24,808,000 
18,274,000 
14,406,000 
23,489,000 
$126,564,000 
extended at the conclusion of their terms and leases 
with relatively long terms generally provide for 
renegotiation of their provisions at specified intervals 
throughout their term . 
The estimated present values of the net fixed 
minimum rental commitments for all non-capitalized 
financing leases are: 
Interest Rates Used 
Weighted Average Range As of December 31 , 
1976 1975 1976 1975 1976 1975 
Flight equipment 7.98% 7.91 % 5.3%- 9.2% 5.3%- 9.2% $21 ,941 ,000 $25,977,000 
Computer and message switching 
equipment 11 .39 
Airport terminal facilities 5.35 
Maintenance, training and other facilities* 7.62 
Miscellaneous ground equipment 7.52 
*Includes only land and phase one facilities for new 
Maintenance Center in 1975. 
28 
14.01 
5.50 
7.22 
6.12 
7.5 -23.7 
2.9 - 8.0 
3.5 - 7.8 
7.5 
7.5 -23.7 
2.9 - 7.5 
3.5 - 7.5 
5.1 - 6.8 
1,539,000 
8,924,000 
30,351 ,000 
94,000 
622,000 
7,264,000 
9,754,000 
9,000 
 The present values were computed after reducing 
total rental commitments, where required, by 
estimated or actual amounts applicable to lessors' 
payments of taxes, insurance, maintenance, and other 
operating expenses. 
If all financing leases had been capitalized and it 
was assumed that the estimated present values were 
amortized on a straight-line method over the terms of 
the leases and that interest expense was accrued on 
the outstanding lease obligations at the rates shown 
above, the increase in expenses would have been 
as follows: 
1976 
Rent expense- net $(8,619,000) 
Amortization of leased property 5,505,000 
Interest expense 3,597,000 
Income taxes (121,000) 
1975 
$(6,659,000) 
4,586,000 
2,394,000 
(90,000) 
$ 362,000 $ 231 ,000 
To the extent that the increased expenses were not 
offset by resultant increases in subsidy revenues and 
related income taxes, which are indeterminable as 
to specific amounts, net income would have been 
decreased. 
Landing fees were $3,094,000 in 1976; and 
$1 ,950,000 in 1975, after reduction for the 
reimbursement by the City of Atlanta of $595,000 
(see Note B). 
Note H -Other Commitments and Contingencies 
In connection with the sale of two aircraft in 1973, 
the Company agreed to indemnify the purchaser 
against loss to the extent of $350,000 in the event the 
third party to which the purchaser resold the aircraft 
should default in payment to the purchaser. 
The Company has an employment agreement with 
its Chairman of the Board providing for his 
employment to December 31, 1979, at an annual 
salary of not less than $90,000. In addition, upon his 
retirement, the Company has agreed to pay $4,000 
per month to him for life, or not less than 180 months 
to him and his lineal descendants in the event of his 
death. Provision for the amount due under the 
retirement agre~ment is being made over a five-year 
period beginning in 1975. 
The Company is the defendant in a number of law 
suits. In the opinion of management there is adequate 
insurance coverage for such of those suits as are 
being defended by the Company's insurance carriers. 
In the opinion of management, the other suits will 
have no material effect on the financial statements 
for 1976. 
In August 1976, the Company entered into an 
agreement to lease a new general office building 
under a capitalizable lease obligation. This building 
is being constructed to the Company's specifications 
at an estimated total cost of $3,900,000. 
In December 1976, the Company entered into an 
agreement to lease a Reservation Call System under 
a capitalizable lease obligation. This equipment will 
be put into use in late 1977 at a cost of approximately 
$900,000. 
The Company, in order to comply with the Aviation 
Noise Abatement Policy of the Department of 
Transportation, is required to modify 50 per cent of its 
DC9 aircraft by January 1, 1981 and have all these 
aircraft modified by January 1, 1983. The estimated 
cost to modify these aircraft is approximately $5.6 
million. Legislation has been proposed to permit 
financing of a portion of the cost of compliance with 
this policy by air carriers from special ticket-tax 
revenues presently allocated to airport development. 
Note I - Earnings Per Share 
Primary and fully diluted earnings per share for 
1976 were computed by dividing net income, after 
reduction for the preferred dividend requirement, by 
the weighted average number of common shares 
outstanding during the year-1 ,580,880 shares. 
Common equivalent shares (described below) and 
adjustments resulting from their assumed exercise 
were excluded from the computation of primary 
earnings per share for 1976 since their inclusion 
would have increased earnings per share. Similarly, 
the assumed conversion of convertible securities was 
excluded from the computation of fully diluted 
earnings per share for 1976 since the result of such 
conversions would not have been dilutive. 
Primary earnings per share for 1975 were computed 
by dividing net income (adjusted as described below 
and reduced by the preferred dividend requirement) 
by the weighted average number of common shares 
and common equivalent shares outstanding during the 
year- 1,765,168 shares. Common equivalent shares 
comprise that number of common shares issuable 
upon exercise of stock options and warrants in excess 
of 20 per cent of the number of common shares 
outstanding at the end of the year. Proceeds from the 
assumed exercise of the options and warrants in 
excess of the amount which would have been required 
29 
 Notes to Financial Statements (continued) 
to purchase 20 per cent of the outstanding common 
stock at the average market price during the year 
were assumed to have been applied to debt reduction 
and the related interest, net of income tax effect, was 
added to income for purposes of the calculation. 
Fully diluted earnings per share for 1975 were 
determined on the assumption that the weighted 
average number of common and common equivalent 
shares were further increased from the beginning of 
the year by conversion of outstanding convertible 
debentures and convertible preferred stock- a total 
of 2,912,407 shares. This calculation also assumes 
no preferred dividend requirement, and interest, net 
of income tax effect, related to the debentures 
assumed converted, was added to income for 
purposes of the calculation. 
Note J - Supplementary Information 
1976 
Depreciation and Amortization: 
Depreciation of property and 
equipment $ 4,878,000 
Amortization of deferred 
charges 
Provision for inventory 
obsolescence 
Deduct- amounts charged 
to other expense accounts 
Taxes, other than income taxes, 
charged to operating 
expenses: 
Payrol I taxes 
Fuel and oil taxes 
Property taxes 
Sales and use taxes 
Other 
Rents: 
Rental expense under leases 
396,000 
233,000 
5,507,000 
126,000 
$ 5,381,000 
$ 2,352,000 
881,000 
782,000 
431,000 
175,000 
$ 4,621,000 
1975 
$4,177,000 
388,000 
203,000 
4,768,000 
134,000 
$4,634,000 
$1 ,874,000 
723,000 
652,000 
360,000 
154,000 
$3,763,000 
(Note G) $11,299,000 $9,674,000 
Portion of gross lease rentals 
not charged to rent 
expense in accordance 
with CAB classifications 
and miscellaneous rentals 
- net (70,000) (73,000) 
$11,229,000 $9,601,000 
Advertising costs $ 1,712,000 $ 918,000 
There were no royalties or research and development 
costs. 
Note K - Quarterly Results of Operations (unaudited) 
The following is a tabulation of the quarterly results 
of operations for the year ended December 31, 1976: 
30 
Three Months Ended 
Mar. 31 Jun. 30 Sept. 30 Dec.31 
(Thousands of dollars, except per share data) 
Operating revenues 
Operating expenses 
Operating income (loss) 
Net income (loss) 
$32,045 $35,860 $36,087 $36,1 75 
32,650 33,791 34,370 36,864 
(605) 2,069 1,717 (689) 
(649) 1,149 827 (922) 
Net income (loss) per 
common and common 
equivalent share: 
Primary 
Fully diluted 
(.42) 
(.42) 
.65 
.45 
.47 
.33 
(.59) 
(.59) 
Quarterly earnings per share do not total earnings 
per share for the year because the computation of 
earnings per share on a quarterly basis included 
certain common stock equivalents which were not 
included in the earnings per share computation on an 
annual basis. 
Note L- Replacement Cost of Property and 
Equipment (unaudited) 
The Company has estimated certain replacement 
cost information for flight equipment and ground 
property and equipment, and has elected to present 
this information in its annual report to the Securities 
and Exchange Commission on Form 10-K, a copy of 
which is available upon request. Form 10-K contains 
specific information with respect to the approximate 
replacement cost of flight equipment and ground 
property and equipment at December 31 , 1976, and 
the approximate effect which replacement cost would 
have had on depreciation expense for the year, as 
compiled in accordance with the rules of the 
Commission. Replacing items of property and 
equipment with assets having an equivalent capacity 
has generally required a greater capital investment 
than was required to purchase the assets which are 
being replaced due to the cumulative impact of 
inflation. 
Note M - Subsequent Event 
On March 18, 1977 the Company signed a purchase 
agreement with Swearingen Aviation Corporation for 
the purchase of seven new Metro 11 aircraft and 
related spare parts to be delivered from June 1977 
through January 1978. These turboprop transports 
have a capacity of 19 passengers and cruise at speeds 
of approximately 300 miles per hour. The total cost of 
these aircraft including related spare parts and 
equipment is expected to approximate $7,750,000. 
The purchase agreement is subject to the Company 
obtaining the required financing. A deposit of 
$175,000 was made in connection with the agreement 
and is subject to forfeiture if the financing is not 
obtained by May 15, 1977. 
 . REPORT OF ERNST & ERNST, Independent Auditors 
Board of Directors 
Southern Airways, Inc. 
Atlanta, Georgia 
We have examined the balance sheet of Southern Airways, Inc. as of December 31, 1976, and 
December 31, 1975, and the related statements of income, stockholders' equity and changes in 
financial position for the years then ended. Our examinations were made in accordance with 
generally accepted auditing standards and, accordingly, included such tests of the accounting 
records and such other auditing procedures as we considered necessary in the circumstances. 
In our opinion, the financial statements referred to above present fairly the financial 
position of Southern Airways, Inc. at December 31, 1976, and December 31, 1975, and the 
results of its operations and changes in its financial position for the years then ended in 
conformity with generally accepted accounting principles applied on a consistent basis. 
Atlanta, Georgia 
January 31 , 1977, except 
as to Note M as to which 
the date is March 18, 1977 
Notice to Stockholders of Southern Airways, Inc. 
Any person who owns as of December 31 of any year, or 
subsequently acquires ownership, either personally or as a 
trustee, of more than five per cent (5%) in the aggregate of 
any class of capital stock or capital of Southern Airways, Inc. 
shall file with the Civil Aeronautics Board a report containing 
the information required by Part 245.12 of the Board 's 
Economic Regulations. This report must be filed on or 
before April 1 of each year as to the capital stock or capital 
owned as of December 31 of the preceding year; and in the 
case of capital subsequently acquired, a report must be filed 
within ten (10) days after such acquisition, unless such 
person has otherwise filed with the Civil Aeronautics Board 
a report covering such acquisition or ownership. 
Any bank or broker covered by this provision, to the 
extent that it holds shares as trustee on the last day of any 
quarter of a calendar year, shall file with the Civil Aeronautics 
Board within thirty (30) days after the end of the quarter, a 
report in accordance with the provisions of Part 245.14 of 
the Board's Economic Regulations. 
Any person required to report pursuant to these 
provisions who grants a security interest in more than five 
per cent (5%) of any class of the capital stock or capital of an 
air carrier, shall within thirty (30) days after granting such 
security interest, file with the Civil Aeronautics Board a 
report containing the information required in Part 245.15 
of the Economic Regulations. 
Any stockholder who believes that he may be required 
to file such a report may obtain further information by writing 
to the Director, Bureau of Operating Rights, Civil 
Aeronautics Board, Washington, D.C. 20428. 
Equal Opportunity Policy 
It is the policy and practice of Southern Airways, Inc. to 
recruit, hire and promote qualified applicants regardless of 
their race, color, religion, sex, age, national origin, or 
physical handicap. 
To further this objective, the Company has established 
procedures to insure that all personnel actions such as 
compensation , benefits, transfers, layoffs, returns from 
layoffs, Company sponsored training, education, tuition 
assistance, social and recreational programs, and all 
Company facilities are administered without regard to race, 
color, religion, sex, age, national origin, or physical handicap. 
31 
 Directors and Officers 
Directors 
CECIL A. BEASLEY, JR. 
Assistant Secretary, 
Southern Airways, Inc. and 
Partner- Ballard, Beasley and Nelson 
(Attorneys) Washington, D.C. 
GEORGE M. GROSS 
Executive Vice President and 
General Manager, 
Southern Airways, Inc. 
GRAYDON HALL* 
President, 
Southern Airways, Inc. 
F. BARTON HARVEY, JR. 
Partner-Alex. Brown & Sons 
(Investment Bankers) 
Baltimore, Maryland 
FRANK W. HULSE* 
Chairman of the Board and 
Chief Executive Officer 
Southern Airways, Inc. 
ALTON F. IRBY, JR. 
Chairman of the Board 
Fred S. James & Company of 
Georgia, Inc. (Insurance Agents 
and Counselors) 
Atlanta, Georgia 
HENRY P. JOHNSTONt 
Radio and Television Consultant 
Birmingham, Alabama 
G. GUNBY JORDAN* 
Chairman of the Board 
The Jordan Company (Construction) 
Columbus, Georgia 
SARTAIN LANIER** 
Chairman of the Board 
Oxford Industries, Inc. 
(Textile Manufacturer) 
Atlanta, Georgia 
32 
A. L. MAXSON 
Vice President- Finance 
and Treasurer, 
Southern Airways, Inc. 
G. FRANK PURVIS, JW* 
Chairman of the Board and Chief 
Executive Officer - Pan American 
Life Insurance Company 
New Orleans, Louisiana 
F. D. SCHASt 
Retired Investment Counselor 
Memphis, Tennessee 
ELTON B. STEPHENS* 
Chairman and Founder 
EBSCO Industries, Inc. 
(Diversified Multinational Sales 
Corporation and Metals Manufacturing) 
Birmingham, Alabama 
RICHARD A. TRIPPEER, JW* 
President- Union Planters 
National Bank 
Memphis, Tennessee 
WM. BEW WHITE, JW 
Assistant Secretary, 
Southern Airways, Inc. and 
Partner- Bradley, Arant, Rose & White 
(Attorneys) 
Birmingham, Alabama 
Officers 
FRANK W. HULSE 
Chairman and Chief 
Executive Officer 
GRAYDON HALL 
President 
GEORGE M. GROSS 
Executive Vice President 
and General Manager 
J. KENNETH COURTENAY 
Vice President - Economic 
Regulations and Secretary 
JAMES G. GODSMAN 
Vice President - Sales 
A. L. MAXSON 
Vice President- Finance 
and Treasurer 
OWEN L. McREE 
Vice President - Customer Sales 
and Services 
J. R. PRICE 
Vice President- Properties 
VICTOR C. PRUITT 
Vice President - 
Technical Services 
T. M. SHANAHAN 
Vice President-Flight 
THOMAS A. WILEY, JR. 
Vice President- Marketing 
RAY W. BURDEN 
Assistant Treasurer 
JAMES H. ISHEE 
Assistant Treasurer and 
Controller 
J. PHILLIP DAY 
Assistant Vice President - 
System Planning 
WILLIAM E. OAKES 
Assistant Vice President- 
Economic Research 
CECIL A. BEASLEY, JR. 
Assistant Secretary 
MARY C. HAYES 
Assistant Secretary 
WM. BEW WHITE, JR. 
Assistant Secretary 
*Member of Executive Committee 
**Member of Audit Committee 
tSenior Director 
 , 
Southern 
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