Western Air Express Annual Report 1940

1940 AN UAL REPORT OF
WESTERN AIR EXPRESS CORPORATION
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OFFICERS
DIRECTORS
REGISTRAR
STOCK TRANSFER AGENT
AUDITORS
GENERAL OFFICES
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William A. Coulter, President
L. H. Dwerlkotte, First Vice-President, Secretary & Treasurer
Charlie N. James, Vice-President, Operations
Thos. Wolfe, Vice-President, Traffic
E. H. Brown, Asst. Secretary
Serge E Ballif, Jr.
Charles Boettcher II
William A. Coulter
L. H. Dwerlkotte
Harold P. Fabian
Alfred Frank
Stanley W Guthrie
Charlie N. James
Ralph Waycott
Thos. Wolfe
Citizens National Trust & Savings Bank, Lgs Angeles, California
Security-First National Bank of Los Angeles, California
Peat, Marwick, Mitchell & Co.
Lockheed Air '1crminal, Burbank, California
If ftwu SISTER SHIPS OF 1926 AND 1941
OF PROGRESS
On April 17, 1941, Western Air Express
will celebrate its fifteenth a1:miversary-the first American airline to complete a decade and a
half of continuous service. During these fifteen years, Western Air has made swift and steady
progress. A number of important developments in airline equipment and operation were
pioneered by this company-the first scheduled passenger flight-the first use of de luxe multi-
engined airplanes-the first complete weather reporting service, and many others. It is a far cry
from the tiny Douglas bi-plane, whose single passenger perched on the mail sacks in the front
cockpit, to the giant 21-passenger Douglas DC-3's in operation today. But the same spirit of
determination and enterprise which inspired the pioneers of its early clays still dominates
Western Air Express, bringing promise of fresh accomplishments in the days to come.
T O T H E
S. TOCKHOLDERS OF
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MARCH 1, 1941 * There is submitted herewith
Profit and Loss Statement of your company for the
calendar year 1940, together with the Balance Sheet
of the company as at December 31, 1940, to which
is appended the report of Messrs. Peat, Marwick,
Mitchell & Co., accountants and auditors.
Operations of the company for the year 1940 re-
sulted in a net profit of $139,585.26 after all taxes
and charges, including provision of $141,745.81 for
depreciation and $35,000.00 for estimated Federal
Income Taxes for the year 1940. In comparison, the
year 1939 resulted in a net profit of $74,555.90 after
a provision of $142,843.97 for depreciation and
$12,500.00 for Federal Income Taxes.
REVENUES* Passenger revenues established a new
record in 1940 and accounted principally for the im-
provement in net earnings. The total of $752,140.24
was 49.2% higher than the total for 1939, while Rev-
enue airplane miles flown increased only 5.3%, indi-
eating a substantial increase in the average number
of passengers carried per revenue mile. Passenger rev-
enue accounted for 45.6% of total operating rev-
enues as compared with 36.3% in 1939 and 35.3%
in 1938.
Mail revenue for the year 1940 amounted to
$808,487.99 which is slightly under the total for the
prev10us year.
Revenues from the transportation of air express for
the year 1940 amounted to $50,835.89 as compared
with $40,531.74 for the year 1939, or an increase of
25.4%.
OPERATING EXPENSES* The trend of operating
expenses continued upward i1\ 1940 with a 14.5%
increase over 1939, resulting primarily f~om increases
in personnel, wage levels,. prices of materials and
supplies, rentals and taxes. The latter amounted to
$65,653.33, including gasoline taxes of $33,805.18,
an increase of 2 5. 7 % over taxes in 19 39.
FINANCIAL POSITION* The attached balance
sheet of the company as at December 31, 1940 shows
current assets of $505,992,89, including cash of
$260,469.21, as against current liabilities of
$179,024.30. As at December 31, 1939 current
assets amounted to $512,973.65, including cash of
$249,337.20, as against current liabilities of
$258,246.45.
EQUIPMENT * To meet replacement requirements
and the demands of a steadily rising traffic volume,
your company during 1940 purchased and received
delivery of one Douglas DC-3 twenty-one passenger
airplane, new engines, and propellers, having an
aggregate cost of approximately $370,000.00, all of
which has been paid.
In addition, your company had purchase commit-
ments outstanding as at December 31, 1940 for five
Douglas DC-3 twenty-one passenger airplanes, and
spare engines having an approximate total cost of
$680,000.00. The Priorities Board of the National
REVENUE DOLLAR E.~PE.NSE DOLLAR
Defense Council has approved the manufacturers'
acceptance of these orders. Approval of the Priorities
Board has also been obtained for the delivery during
April 1941, of one airplane and for delivery of two
airplanes during August 1941. Approval has not yet
been obtained for the delivery of the two remaining
airplanes on order.
ROUTES AND SERVICES* The Civil Aeronautics
Board on June 19, 1940 denied the application of
United Air Lines Transport Corporation to acquire
control of Western Air Express. Plans for merging
the two companies have been abandoned and it is
the intention of your present officers and directors to
make every effort to expand the operations of your
company and strengthen its position in the Air
Transport Industry.
On August 20, 1940 through sleeper service was
inaugurated from Los Angeles to Chicago, New York,
and other eastern cities in conjunction with United
Air Lines Transport Corporation by an exchange of
equipment at Salt Lake City, Utah. This is the first
arrangement of this nature to be placed into opera-
tion by any airline and it is anticipated an increase in
passenger revenues will result.
On December 5, 1940 the Civil Aeronautics Board
awarded your company the route from Great Falls,
Montana, to Lethbridge, Canada, an extension of
approximately 170 miles. Service on this route is to
be inaugurated about April 1st and will close the
"gap" that has heretofore existed in air transportation
between cities in the Western part of the United
States and such important Canadian cities as Edmon-
ton, Alberta, and Lethbridge. It will also provide
service to Glacier ational Park.
In addition to those routes and erviccs presently
operated by your company, applications have been
made to the Civil Aeronautics Board for Certificates
of Public Convenience and Necessity to transport
passengers, mail, and property on the following
routes, with a total new route mileage of approxi-
mately 2,300 miles:
REVENUE P,'>\,S..5ENCi1::.R;5 Re.vENUL PA5..Sa.Nc.e:R.. PA.!>.!>~NG~R REYeNu~ MAIL. PouND.5 EJ\PR.E~ Pounos
Ye.AA. c.,,..._R.Fl.1 e!..O MILE.~ rl..Cv-JN Dou ... AR.5 (.,AA.R-1 E!..0 CARR.I E.O
1935 iii ~ 6ol ~~
1936 iilli! ~ .... @ ~ f)'!Jf)f)!)l
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1937
Aiiij ~ @ i)
e 6~E)~363t G5~~~
\9.38' iiiiit ~ @@ e !J636666!Jl ~~~'r
1939 iiiiii t4 @41>@@\ c!J636o'633t ~~~~
1940 iiiiiiiiii ~ @@@~ !J!Jt.
l 66t>lJ!Jl "@~.~~~~
DATA:
i 5,000 P~i;:~e.~
=-5,000, DOO M IL-E.!5 'i) = 100,000 DoLL.All:S
6-=: 100,000 Pour-.O.!> ~-= \OO,0oo Povno-5
(a) Between San Diego, California, and Pl10e-
nix, Arizona, via El Centro, California, and
Yuma, Arizona.
(b) Between Los Angeles, California, and El
Centro, California, via Palm Springs, Cali-
fornia.
(c) Between Los Angeles, California, and San
Diego, California, via San Bernardino, Cali-
fornia.
( d) Between Los Angeles, California, and San
Francisco, California.
( e) Between Los Angeles, California, and Sacra-
mento-San Francisco, California, via the in-
termediate points Bakersfield, Visalia, Mer-
ced and Stockton, California.
(t) Between Los Angeles, California, and
Denver, Colorado, via Las Vegas, Nevada,
and Grand Junction, Colorado.
No prediction can be made as to what action will
be taken on the applications by the Civil Aeronautics
Board.
CORPORATE NAME* Your officers and directors
recommend for adoption by the stockholders the
changing of the corporate name to Western Air
Lines, Inc., in order to eliminate any possibility of
confusion in the minds of the public as to the serv-
ices rendered by your company caused by the word
"Express" in the present corporate name of Western
Air Express Corporation.
THE ORGANIZATION* Among the main factors
contributing to the improved showing by your com-
pany in the year 1940 was the fine spirit of coopera-
tion and loyalty displayed by the personnel of the
organization. That they performed their duties well
is evidenced by the improvement in business and
operating results. The officers and directors are sin-
cerely appreciative of their efforts.
OUTLOOK FOR 1941
* The unsettled condition
of economic and world affairs makes it extremely dif-
ficult to forecast future trends. Ilowever, it is gratify-
ing to note that the rising trend of air travel which
was experienced almost uninterrupted during 1940
is showing indications of being continued. Your
officers anticipate greater passeriger revenues for 1941
but it is believed increasing operating costs will
partially off et this.
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PRli:SIDENT
Current Assets:
Cash in Banks and on Hanel
Accounts Receivable:
United States Post Office Department
Interline and Agents' Traffic Balances
ASSETS
Customers' Accounts Receivable . . . . . . . . . .
Sundry ( including $1,974.81 due from Officers and Employees)
Less Reserve for Doubtful Accounts . .
Inventory of Parts and Supplies, at the lower of Cost or Market
Total Current Assets
Prepaid Insurance, Rent, Taxes, etc. . .
Note Receivable- Secured by Deed of Trust ($1,500.00 due in 1941)
Investments:
Securities of Other Corporations .
Property Not Used in Operations, at Cost-less Reserve for
Depreciation of $6,712.46
Properties and Equipment:
Land and Land Improvements . . . . . .
Buildings and Leasehold Improvements . . . . .
Airplanes, Propellers, Engines, and Flying Equipment. . . . .
Radio Stations, Furniture and Fixtures, Shop and Other Equipment
Less Reserve for Depreciation .
Deferred Charges:
Development of Air Routes
Total
$
BALANCE SHE ET
$ 260,469.21
92,023.34
49,001.07
18,956.51
23,697.02
183,677.94
5,098.17 178,579.77
66,943.91
505,992.89
43,542.24
4,457.62
1,724.34
4,248.81 5,973.15
26,091.72
98,899.26
849,357.34
142,045.64
1,116,393.96
487,148.19 629,245.77
6,820.89
$1,196,032.56
AS AT DECEMBER 31, 1940
l LIABILITIES
Current Liabilities:
Accounts Payable-Trade
Interline and Agents' Traffic Balances
Accrued Liabilities:
Salaries and Wages
Taxes, including Social Security Taxes
Insurance.
Other .
Reserve for Federal Income Tax (Subject to
Review by United States Treasury Department) .
Total Current Liabilities .
Reserves for Overhaul of Equipment rented to Others
Unused Portion of Tickets Sold
Capital Stock and Surplus:
Capital Stock:
Authorized, 500,000 shares of $1.00 each
Outstanding, 409,954 shares
Capital Surplus
Opera ting Deficit from Decern ber 1, 19 34 .
Contingent Liabilities (Note 2)
Total
NOTES:
$ 8,607.15
10,058.30
2,938.59
$ 112,259.48
2,910.73
1,200.00 22,804.04
409,954.00
648,214.12
1,058,168.12
65,911.31
41,050.05
179,024.30
13,200.55
11,550.90
992,256.81
$1,196,032.56
( 1) The Company has ordered five Douglas DC-3 airplanes and spare engines having an approximate total cost of $680,000.00. The Priorities Board of the National Defense Council ha approved the manufacturer ' acceptance of the e orders. Approv,al of the
Priorities Board has also been obtained for the delivery during April, 1941, of one airplane and for the delivery of two airplanes during August, 1941. Approval has not yet been obtained for the delivery of the two remaining airplanes on order.
( 2) The Company is the defendant in two lawsuits aggregating in excess of $710,000.00 for damages arising out of an accident involving one of its airplanes on January 12, 19 37. These two lawsuit were con olidated for trial and a verdict in favor of the Company ,
was returned on December 29, 1938, and appeals have been taken by the plaintiff. Liability insurance in substantial amounts was carried by the Company, but hould final judgment exceed the limits of insurance coverage, the Company will be liable for the
excess amounts.
In addition to the foregoing, sundry suits and claims have been filed against the Company aggregating approximately $25,000.00.
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31 , 1940
Opera ting Revenue:
Passenger
Mail .
Express, Freight and Excess Baggage
Other Transportation . . . .
Incidental Services (Net) . . .
Total Operating Revenue.
Operating and General Expenses
Depreciation . . . . . .
Operating Profit . .
Miscellaneous Income:
Interest and Discounts Received . . . . . . .
Gain on Disposal of Equipment . . . . . . .
Income from Property not used in Operations-Net
Sundry . . . . . . . . . . . . . . .
Less Miscellaneous Charges . . . . . . . . . . .
Miscellaneous Income (Net) . . . . . . . .
Net Income before Provision for Federal Income Tax
Provision for Federal Income Tax
Net Income
$1,347,742.38
141,745.81
1,636.45
11,864.94
2,973.57
661.34
17,136.30
1,571.17
SURPLUS (DEFICIT) .ACCOUNTS
Balance as at December 31, 1939 . . . . . . . . . . . . .
Transfer from Capital Surplus of Expenses of issuing Capital Stock in
prior years to Operating Deficit in accordance with Uniform Sys-
tem of Accounts for Domestic Air Mail Carriers
Balance as at December 31, 1939, as adjusted . . . . . . . . .
Net Income for Year ended December 31, 1940 . . . . . . . .
Excess of Proceeds from Sale of Capital Stock at $2.00 over Par Value
of $1 .00 per share . . . . . . . . . . . . . . . . .
Balance as at December 31, 1940 . . . . . . . . . . . . .
Capital
Surplus
$ 629,466.47
12,793.65
642,260.12
5,954.00
$ 648,214.12
=====
$ 752,140.24
808,487.99
58,093.92
6,120.51
23,665.66
1,648,508.32
1,489,488.19
159,020.13
15,565.13
174,585.26
35,000.00
$ 139,585.26
Operating
Deficit
192,702.92
12,793.65
205,496.57
139,585.26
65,911.31
ACCOUNTANTS' REPORT
To the Board of Directors of
WESTERN AIR EXPRESS CORPORATION
We have examined the Balance Sheet of Western Air Express Corpora-
tion as at December 31, 1940, and the statements of Profit and Loss and
Surplus (Deficit) for the year ended on that date, have reviewed the system
of internal control and the accounting procedures of the Company and,
without making a detailed audit of the transactions, have examined or
tested accounting records and other supporting evidence, by methods and
to the extent we deemed appropriate.
In our opinion, the accompanying Balance Sheet and related statements
of Profit and Loss and Surplus (Deficit) present fairly the position of
Western Air Express Corporation at December 31, 1940, and the results of
the operations for the year, in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding year.
Los Angeles, California,
February 27, 1941.
PEAT, MARWICK, MITCHELL & CO.
TRAFFIC STATISTICS
Percent of
Increase
1937 1938 1939 1940 1940 over 1939
Revenue:
Passenger .................... ..... $ 355,508 $ 451,157 $ 503,998 $ 752,140 49.2
Mail ...................... ....... 469,511 754,650 809,980 808,488 (0.2 )
Express, Freight and Excess Baggage .. 39,620 39,651 45,249 58,094 28.4
Other ............................ 22,074 34,145 28,020 29,786 6.3
Total .......................... $ 886,713 $1,279,603 $1,387,247 $1,648,508 18.8
Revenue Miles Flown .................. 1,898,520 2,309,938 2,277,161 2,399,338 5.4
Revenue Passengers .................... 21,776 28,738 30,075 47,407 57.6
Average Passengers per Revenue Mile Flown 4.03 4.57 4.85 6.59 35.9
Average Revenue per Passenger Mile ...... .0464 .0428 .0457 .0476 4.2
Passenger Seat Miles Flown .............. 21,090,260 26,276,444 27,564,517 32,359,017 17.4
Revenue Passenger Miles ................ 7,654,174 10,551,761 11,035,541 15,803,768 43.2
Load Factor ..... ....... .. ... .... . ... .. 36.29% 40.16% 40.04% 48.84% 22.0
Mail Pounds Carried .... .. ....... .... .. 707,873 893,920 957,884 951,451 ( 0.7)
Express Pounds Carried ................. 386,400 312,209 361,017 566,427 56.9
OPERATING STATISTICS
Percent of
Increase
1937 1938 1939 1940 1940 over 1939
Expense:
Depreciation ...................... $ 94,508 $ 162,567 $ 142,844 $ 141,746 ( 0.8)
Other Operating & General Expenses .. 864,579 1,123,017 1,158,231 1,347,742 16.4
Total Operating Expenses ......... $ 959,087 $1,285,584 $1,301,075 $1,489,488 14.5
Operating Expenses per Revenue Mile ..... .5052 .5565 .5714 62.08 8.6
Percent of Scheduled Service Performed ... 94.90% 95.66% 95.65% 96.39% 0.8
Number of Employees (average) . . ....... 142 173 194 241 24.2
Brackets denote decrease
C..ALC:.AA.Y
EDMONTON
A.LA5KA
----- ~A NADA
--- --------------
LONG
LE.GE ND
- PR~ENT ROUT~ of 'w'E.5TE.R.N AtR., [)(.PR.~ CoRR - 1,411 MILES
IICll f'R.OPO:SEO R.-ouTE.~ of 'wE.5TE.RN A1R EXPRE.~ CoQ.,R - 2,300 MILE.~
ROUTE5 Ot OfHER. A\R., CAR.R,IE.M
MAR-CH I, 1941
MONTANA
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