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.