Western Air Express Annual Report 1938

Western Air Express Corporation
Burbank, California
ANNUAL REPORT
1938
WESTERN AIR EXPRESS CORPORATION
OFFICERS
President .. - - .. ALVIN P. ADAMS
Vice--President
Operations .. - ,. - CHARLIE N. JAMES
Vice--President
Traffic .. .. .. .. .. THos. WoLFE
Secretary and
Treasurer ...... L. H. DWERLKOTTE
Ass't. Secretary ,. - ,., - E. H. BROWN
DIRECTORS
Chairman: CHARLES BOETTCHER II
ALVIN P. ADAMS STANLEY w. GUTHRIE
SERGE F. BALLIF, JR. CHARLIE N. JAMES
L. H. DWERLKOTTE JAMES Q. NEWTON, JR.
HAROLD P. FABIAN w. F. NICHOLSON
ALFRED FRANK THOS. w OLPE
RALPH WAYCOTT
REGISTRAR
Citizens National Trust & Savings Bank, Los Angeles, California
STOCK TRANSFER AGENT
Security--First National Bank of Los Angeles, California
AUDITORS
Peat, Marwick, Mitchell & Co.
GENERAL OFFICES
Union Air Terminal, Burbank, California
March 17, 1939
TO THE STOCKHOLDERS:
There is submitted herewith Profit and Loss Statement of your company for
the calendar year 1938, together with the Balance Sheet of the company as of
December 31, 1938, to which is appended the report of Messrs. Peat, Marwick,
Mitchell & Company, accountants and auditors.
Operations of the company for the year 1938 resulted in a net loss of
$12,531.72 after all taxes and charges, including provision of $162,567.44 for
depreciation. In 1937 a net loss of $34,939.58 was sustained after depreciation
charges of $94,508.25.
On February 25, 1939 the Interstate Commerce Commission released its
decision on our petition for an increase in the air mail rate for the San Diego-
Salt Lake City route, as a result of which the air mail rate of pay has been in-
creased from 28-1 /3c to 33-1 /3c per airplane mile flown with mail, retroactive
to December 28, 1937. Mail income received by the company in 1938 amounted
to $754,650.51 as compared with $469,511.11 in 1937. The bulk of this increase
is accounted for by the above increase in rates, increased mileage authorizations,
and the fact that the 1937 figure includes only five months' operation of the Salt
Lake City-Great Falls route. Mail revenue on the latter route, allowing for a
full year's operation, increased $14,837.73 or 6.5 % in 19 38 over 19 37, while mail
revenue on the San Diego-Salt Lake City route increased $146,056.96 or 39.5%.
Passenger revenue for 1938, amounting to $451,156.71, consists of
$390,671.60 cash revenue and $60,485.11 "Trade Exchange" revenue. Cash
passenger revenue during 1938 amounted to $390,671.60, an increase of 19.8 %
over the $325,919.98 earned in the previous year. The majority of this increase
is accounted for by the 1937 figure including only five months' operation of the
Salt Lake City-Great Falls route. Cash passenger revenue over the San Diego-
Salt Lake City route increased 8.3% over the previous year, while the Salt Lake
City-Great Falls route, allowing for a full year's operation in 1937, increased
23.5%.
Passenger revenue on the San Diego-Salt Lake City route was increased in
the face of added competition from streamlined trains and other airlines. During
the year certain local passenger rate experiments were conducted. It is believed
that our present rates, providing for a round trip fare of one and one half times
the one way rate between local points on the company's route, are at levels at
which maximum passenger revenue can be realized. On the present rate levels,
the company is receiving approximately 4.45c per passenger mile on the San
Diego-Los Angeles-Salt Lake City route and approximately 4.1 0c per passenger
mile on the Salt Lake City-Great Falls route.
Excluding "Trade Exchange" advertising, operating costs per airplane mile
in 1938 amounted to 53c as compared with 48.9c in 1937. This increase is mainly
accounted for by larger equipment employed in service, compliance with Govern ...
ment regulation and legislation, increased taxes, and efforts toward improved
safety of operation. Your company in 1938 paid a total of $48,412.64 in taxes,
excluding income and sales tax. In 1937, $35,630.79 was so paid. The manage,.
ment has endeavored and will continue to effect as many economies as possible,
consistent with safety of operation and proper service.
The following table shows revenue and expense comparisons for the past
four years, together with certain operating statistics:
Passenger Revenue---Cash ......... .
Passenger Revenue--
Trade Exchange ....................... .
Mail Revenue ............................... .
Express .......................................... .
Other Revenue ............................. .
GROSS REVENUE .............. .
Operating & General Expenses ..
Trade Exchange Advertising .... .
Depreciation ................................. .
TOTAL OPERATING EXP.
Net Operating Income ................ .
Miscellaneous Charges ............... .
Net Income Before Federal
Income Tax .............................. .
Revenue Miles Flown ................. .
Revenue Passengers Carried ...... .
Revenue Seat Miles ..................... .
Mail Poundage ............................. .
Express Poundage ....................... .
( ) Denotes Red Figures.
1938
60,485
754,650
39,651
34,145
$1,279,603
1,062,532
60,485
162,567
$1,285,584
5,981)
6,551
( 12,532)
2,309,938
28,738
10,551,761
893,920
312,209
$
$
1937
29,588
469,511
39,620
22,074
886,713
834,991
29,588
94,508
959,087
(72,374)
(37,434)
(34,940)
1,898,520
21,776
7,654,174
707,873
386,400
1936
$ 352,947
$
$
10,608
330,198
37,038
10,193
740,984
546,069
10,608
95,639
652,316
58,298
1,533,356
20,242
7,473,774
506,448
475,274
$
$
$
1935
269,368
289,763
18,935
8,923
586,989
495,295
71,109
566,404
(8,188)
1,213,274
13,736
4,915,129
298,287
198,389
Balance Sheet of the company shows current assets of $341,442.10, includ ...
ing cash of $139,654.40, as against current liabilities of $85,837.31. As of
December 31, 1937, current assets amounted to $217,425.99, including cash of
$53,112.73, as against current liabilities of $201,816.03. The improved financial
position of the company is accounted for by the sale of 130,818 shares of stock
at $2.00 per share to stockholders and underwriters last May and to the gain in
cash from operations in 1938. During the year the company made capital ex,.,
penditures of $276,548.67, of which $175,415.26 was for the purchase of addition-
al flying equipment, including a Douglas Skylounge, two Boeing 247 ... D airplanes
and three spare engines for the Douglas airplanes. The Boeings were purchased
to replace the Lockheeds, which were returned to the factory April 27, 1938.
The outlook for 1939 is promising. The enactment by Congress last year
of the Civil Aeronautics Act of 1938, which in effect placed the Administration
and regulation of the United States air transport companies in the hands of an
independent five member agency, will do much toward the encouragement and
development of air transportation. Your company's application to the Civil
Aeronautics Authority for an increase in its air mail rates over the San Diego ...
Los Angeles,..,Salt Lake City division to 43c per mile and over the Salt Lake City ...
Great Falls division to 50c per mile, was heard before that body February 23rd
and 24th, 1939. It is expected that the Authority will arrive at a decision in this
matter within a short period of time. A contract between this company and
United Air Lines Transport Corporation, providing for interchange of sleeper
equipment over the lines of the two companies thereby eliminating the change of
airplanes at Salt Lake City, Utah, is expected to be filed with the Civil Aero,.,
nautics Authority for approval within the next few weeks. The placing of this
arrangement into operation should materially improve the service offered to the
public and should reflect itself in improved passenger revenue. Your company
has currently on file with the Civil Aeronautics Authority an application to ex,.,
tend its line from Great Falls, Montana to Lethbridge, Alberta, a distance of
approximately 175 miles. The Lethbridge extension would permit connection
with the system of Canadian airways at this point and should have a material
effect on the business of this company. It is anticipated that a hearing will be
held shortly on this matter before the Authority.
Respectfully yours,
ALVIN P. ADAMS. President
ASSETS
Current Assets:
Cash on Hand and in Banks ....................... .
Accounts Receivable:
Accounts Receivable from United States
Post Office Department... .................... .
Customers' Accounts Receivable ............. .
Interline and Agents' Traffic Balances ..
Sundry ( including $1,922.19, due from
Officers and Employees) ..................... .
Less Reserve for Doubtful Accounts ....... .
Inventory of Parts and Supplies stated at
the lower of Cost or Market ( determined
by responsible officials on the basis of
physical inventories) ................................. .
Total Current Assets ....................... .
Note Receivable-Secured by Deed of Trust
($1,800.00 due in 1939) ............................... .
Investments:
Securities of Other Corporations ................. .
Property not used in Operations-at Cost
-less Reserves of $4,870.70 ..................... .
Properties and Equipment:
Land and Land Improvements ..................... .
Buildings and Leasehold Improvements ..... .
Airplanes, Propellers and Engines ............. .
Radio Communication, Shop and Other
Equipment and Furniture and Fixtures ... .
Less Reserve for Depreciation ..................... .
Deferred Charges:
Prepaid Insurance, Rent, Taxes, etc ............ .
Development of Air Routes ......................... .
Total. .................................................. .
WESTERN AIR EXPRESS CORPORATION
$ 118,023.21
20,070.27
10,289.32
14,713.54
163,096.34
5,098.17
1,724.34
5,669.77
24,206.94
90,224.92
507,304.06
152,464.11
774,200.03
301,274.82
23,147.72
6,585.89
BALANCE SHEET
As at December 31, 1938
LIABILITIES
Current Liabilities:
$ 139,654.40 Accounts Payable-Trade ........................... .
157,998.17
43,789.53
341,442.10
7,231.52
7,394.11
472,925.21 J
29,733.61
$ 858,726.55
Interline and Agents' Traffic Balances ....... .
Accrued Liabilities:
Salaries, Wages and Commissions.............. $
Insurance ........................................................ .
Taxes, including Social Security Taxes ..... .
Other ............................................................ .
Total Current Liabilities ................... .
Unused Portion of Tickets Sold ......................... .
Reserve for Contingencies ................................... .
Capital Stock and Surplus:
Capital Stock:
Authorized, 500,000 Shares of $1.00 each
(Note 1)
Outstanding, 396,309 Shares ................... .
Capital Surplus ......................................... .
Operating Deficit ...................................... .
Contingent Liabilities ( Note 2)
Total. .................................................. .
Notes constituting a part of the foregoing Balance Sheet are submitted on the following page.
8,657.41
6,388.07
8,111.37
5,000.65
396,309.00
621.775.4.7
1,018,084.47
$ 56,565.73
1,114.08
28,157.50
85,837.31
5,315.15
5,850.00
256,360.38 761,724.09
$ 858,726.55
WESTERN AIR EXPRESS CORPORATION
Balance Sheet. Continued
NOTES CONSTITUTING A PART OF THE
FOREGOING BALANCE SHEET
Note 1, Capital Stock:
In accordance with an employees' stock purchase plan, 3,855
shares of capital stock were issued to the employees and manage--
ment of the Company during the year ended December 31, 1938,
and additional subscriptions ( which may be cancelled at the option
of the subscriber in whole or in part prior to issuance and delivery
of the stock) for 13,911 shares were received therefrom.
Note 2, Contingent Liabilities:
The Company is the defendant in three lawsuits aggregating
in excess of $825,000.00 for damages arising from deaths and in--
juries of passengers on the Company's airplanes which crashed on
December 15. 1936. and January 12. 1937. A compromise settle--
ment has been agreed upon. subject to Court approval, in connec--
tion with one suit filed against the Company. and a verdict in favor
of the Company was returned on December 29. 1938. relative to
the other two lawsuits. It is anticipated that appeals will be taken
by the plaintiff. Liability insurance in substantial amounts was
carried by the Company, but should final judgment in these cases
exceed the limits of insurance coverage the Company will be liable
for the excess amounts.
WESTERN AIR EXPRESS CORPORATION
PROFIT AND LOSS ACCOUNT
For the Year ended December 31, 1938
Operating Revenue:
MaiL ...................................... : ........................ .
Passenger ........................................................ .
Express and Freight ..................................... .
Other ............................................................... .
Total Operating Revenue ..................... .
Operating and General Expenses ........................ .
Depreciation ........................................................... .
Operating Loss ...................................... .
Miscellaneous Charges:
Loss on Disposal of Equipment ................... .
Interest ............................................................ .
Expenses of Property not used in
Operations .................................................. .
Sundry ............................................................ .
Less Miscellaneous Income .......................... .
Miscellaneous Charges (Net) ............. .
Loss ......................................................... .
$1,123,016.83
162,567.44
3,219.27
1,345.14
963.94
1,853.50
7,381 .85
830.89
SURPLUS (DEFICIT) ACCOUNTS
Capital
Surplus
Balance as at December 31, 1937 ...... .
Depreciation Adjustments re Eight
Airplane Engines applicable to
Prior Year ......................................... $8,794.41
Additional Mail Revenue applicable
to Prior Year.................................... 1,279.44
Federal Income and Gasoline Taxes
paid for Prior Years, including
interest thereon ................................ .
Balance as at December 31, 1937, as
adjusted ............................................ .
Loss for Year ended December 31 ,
1938 .................................................. .
Airport Leases and Rights not used
in Operations, written off ............... .
One--Half Proceeds from Sale of
Capital Stock, less Expenses in
connection therewith ($12,793.65)
Balance as at December 31 , 1938 ....... .
$ 499,896.12
499,896.12
499,896.12
121,879.35
$ 621,775.47
$ 754,650.51
451,156.71
39,650.90
34,145.39
1,279,603.51
1,285,584.27
5,980.76
6,550.96
$ 12,531.72
Operating
Deficit
204,705.00
10,073.85
194,631.15
19,823.51
214,454.66
12,531 .72
29,374.00
256,360.38
To the Board of Directors of
WESTERN AIR EXPRESS CORPORATION
We have made an examination of the Balance Sheet of
Western Air Express Corporation as at December 31, 1938, and of
the Profit and Loss and Operating Deficit Accounts for the yeat'
1938. In connection therewith, we examined or tested accounting
records of the Company and other supporting evidence and obtain--
ed information and explanations from officers and employees of
the Company; we also made a general review of the accounting
methods and of the operating and income accounts for the year,
but we did not make a detailed audit of the transactions.
In our opinion, based on such examination, the accompanying
Balance Sheet and related Profit and Loss, Operating Deficit and
Capital Surplus Accounts fairly present, in accordance with ac--
cepted principles of accounting consistently maintained by the
Company during the year under review, its position as at December
31, 1938, and the results of its operations for the year.
Los Angeles, California.
March 7, 1939.
PEAT, MARWICK, MITCHELL l:!J Co.