Western Air Lines Annual Report 1941

1 9 4 1 N UAL R E.. R T O F
WESTERN AIR LINES,INC.
OFFICERS
DIRECTORS
REGISTRAR
STOCK TRANSFER AGENT
AUDITORS
GENERAL OFFICES
William A. Coulter, President
L. H. Dwerlkotte, First Vice-President, Treasurer
Charlie N. James, Vice-President, Operations
Thos. Wolfe, Vice-President, Traffic
Paul E. Sullivan, Secretary
E. H. Brown, Asst. Secretary
William A. Coulter
L. H. Dwerlkotte
Harold P. Fabian
Alfred Frank
Stanley W Guthrie
Citizens National Trust & Savings Bank, L9s Angeles, California
Security-First National Bank of Los Angeles, Califo,rnia
Peat, Marwick, Mitchell & Co.
Lockheed Air Terminal, Burbank, California
~
* On April 17, 1926, a tiny Western Air Express plane left Los Angeles for Salt Lake City on Southern Cali-
fornia's first air mail flight. One month later, on May 23rd, this same plane carried America's first scheduled air
passenger, marking the true beginning of the air transport era.
* From that day to this, Western Air Lines has
been a leader in the development of air transportation. Over half of today's air route mileage we t of Kansa
City was pioneered by vVestern Air Lines. Looking toward the future, applications have been filed for 4880
miles of additional route which would give the company an integrated system, stretching from the tip of Alaska
to the Mexican border.
* Thus W cstcrn Air Lines, only airline owned west of the Rockies, demonstrates that
it is till the pioneer of western air transport and, more than ever, deserves its title, "Born in the West-Owned
in the West- Serving the West."
TO THE
s,oc KHOLDERS OF
FEBRUARY 28, 1942
* There is submitted
herewith Profit and Loss Statement of your com-
pany for the calendar year 1941, together with the
Balance Sheet of the company as at December 31,
1941, to which is appended the report of Messrs.
Peat, Marwick, M,itchell & Company, accountants
and auditors.
Operations of the company for the year 1941 re-
sulted in a net profit of $5,980.64 after all taxes and
charges, including provision of $197,780-43 for de-
preciation. In comparison, the year 1940 resulted in
a net profit of $139,585.26, after a provision of
$141,745.81 for depreciation, and $35,000 for Fed-
eral Income Taxes.
REVENUES* Passenger revenue amounted to
$1,055,821.10 increasing 40% over the total for
1940 of $752,140.24 and for the first time in the
16-year history of the company exceeded mail rev-
enue thereby becoming the largest single source of
revenue. In 1941 passenger revenue accounted for
52 % of operating revenues as compared with 45.6%
in 1940 and 36% in 1939. This increase in passenger
revenue required added flying schedules for which
authorizations for the carrying of mail had not been
granted. During the year 1941, these added sched-
ules accounted for 877,300 of the miles flown by the
company, 27.9% of its total revenue miles from
which no mail revenue was received. Applications
have been filed for authorization to carry mail on
these schedules.
Mail revenue for the yea~ 1941 amounted to
$848,654.64 which is 5.0% higher tl~an the 1940
total of $808,487.99. The 1941 total includes an
estimate of $23,025.6o in mail revenue earned for
the period June 12, 1941 to December 31, 1941
over the company's route between Great Falls,
Montana, and Lethbridge, Canada. The Company
\000,000
1500,000
EXPENSE
0,
,..,
a,
1--------6::-----. TRAFFIC
(EXCL. SAL ARJES)
INSURANCE
began carrying mail on this route June 12, 1941 and
a petition for a determination of the mail rate there-
for is now pending before the Civil Aeronautics
Board.
Revenues from the transportation of air express
for the year 1941 amounted to $69,022.32, as com-
pared with $50,835.89 for the year 1940, or an in-
crease of 35.7%.
OPERATING EXPENSES* Substantial increases
in operating costs more than offset the gains in
operating revenues. While the revenue miles flown
by the company increased 30%, operating expenses
increased 36%. This increase resulted primarily
from increases in personnel, wage levels, costs of
materials and supplies, and the additional mile-
age flown. Operating expenses per revenue mile
amounted to $.6454 in 1941 as compared with
$.foo8 in 1940. The experience of Western Air
Lines in this respect is similar to that of the major-
ity of other airlines.
FINANCIAL POSITION* The attached balance
sheet of the company as at December 31, 1941,
shows current assets of $518,913-46, including cash
of $102,729.89, as against current liabilities of
$291,043.89. As at December 31, 1940, current as-
sets amounted to $505,992.89, including cash of
$260,469.21 as against current liabilities of
$179,024.30.
EQUIPMENT* An adequate inventory of parts
and supplies required to maintain equipment at the
highest of standards is being carried. Inventory of
Parts and Supplies at the encl of 1941 amounted to
approximately $144,000 as compared with approxi-
mately $67,000 at the encl of 1940. The Federal
Government has recognized the essential part that
the commercial airlines are playing in the War
Program and has issued priorities to permit the pur-
chase of ample parts and supplies. Property and
equipment purchased and delivered during the year
amounted to approximately $592,000.00 including
three Douglas DC-3 twenty-one passenger airplanes
which cost $395,884.09 and were ordered during
1940.
NEW ROUTES* On June 1, 1941 your Company
began operations over the route from Great Falls,
Montana, to Lethbriclge, Canada.
Applications are now pending before the Civil
' Aeronautics Board for the following additional
routes:
(a) Between Los Angeles and San Francisco,
California.
Between Los Angeles and Sacramento-San
Francisco, California, via the intermediate
points Bakersfield, Visalia, Merced, and
Stockton, California.
Between Los Angeles and El Centro, Cali-
fornia, via Palm Springs, California.
(b) Between San Diego, California, and Phoenix,
Arizona, via El Centro, California, and Yuma,
Arizona.
REVENUE PASSENGERS REVENUE PASSENGfR
CARRIED MILES FlOWN
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( c) Between Los Angeles, California, and Den-
ver, Colorado, via Las Vegas, Nevada, and
Grand Junction, Colorado.
( d) Between Lethbridge, Canada, and Nome,
Alaska, via Calgary, Edmonton, and Grand
Prairie, Canada, and Juneau, Anchorage, and
McGrath, Alaska, with shuttle service be-
tween Anchorage and Fairbanks, Alaska.
The applications listed as (a) and (b ) have been
heard but decisions have not been reached by the
Board. Hearings have not been set on the other
applications.
On December 12, 1941 the Board suspended all
further proceedings in pending applications for new
routes and intermediate stops on existing routes. It
is not known what future disposition will be made
by the Board with respect to pending applications,
but it is believed that no new routes will be awarded
for the duration unless deemed necessary to the war
program.
THE ORGANIZATION* The pressure of rising
industrial employment has caused an increased
turnover in personnel. However, an adequate staff
of experienced employees is being maintained in all
MAIL POUNDS EXPRESS POUNDS
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departments and arrangements are being made to
train replacement personnel for those positions
now occupied by employees who n'lay be called to
active service. The fine spirit of cooperation and
loyalty displayed by the personnel of the organiza-
tion throughout the year 1941 has been a source of
deep satisfaction to your officers and directors, and
they now desire to express their sincere appreciation.
OUTLOOK FOR 1942
* The nation is at war,
and the future is unpredictable. The impact of the
war is bound to cause some dislocations with the
airlines as with all other businesses. It is not be-
lieved, however, that these dislocations will seri-
ously affect either the statu or the service of the
airlines, and assurance may be given to you that the
safety of commercial flights will not be impaired.
Your company welcomes the part that it is able to
play in the war program ahd pledges itself to aid
the war effort whenever and wherever possible.
t/l'~t:<~
'
PR ES ID E T
Current Assets:
Cash in Banks and on Hanel
Accounts Receivable:
ASSETS
United States Post Office Department .
Interline and Agents' Traffic Balances .
Customers' Accounts Receivable. . .
Sundry ( including $2,316.57 due from Officers and Employees)
Less Reserve for Doubtful Accounts . . . . . . . . . .
Inventory of Parts and Supplies, at the lower of Cost or Replace-
ment Market . . . . .
Total Current Assets .
Prepaid Insurance, Rent, Taxes, etc.
Investments:
Securities of Other Corporations. . . . . . . . . .
Property Not Used in Operations, At Cost-less Reserve for
Depreciation of $7,883.05 . . . . . . . . . . .
Properties and Equipment:
Land and Land Improvements . . . . . . . . . . . .
Buildings and Leasehold Improvements . . . . . . . . .
Airplanes, Propellers, Engines and Flying Equipment ( See Note)
Radio Stations, Furniture and Fixtures, Shop and Other Equipment
Less Reserve for Depreciation
Deferred Charges:
Development of Air Routes
Total . . . . .
$
BALANCE SHEET AS AT DECEMBER 31, 1941
$ 102,729.89
133,379.65
44,631.67
74,485.30
24,721.00
277,217.62
5,098.17 272,119.45
144,064.12
518,913.46
62,419.51
1,724.34
7,031.02 8,755.36
26,690.07
102,145.80
1,368,305.17
196,334.70
1,693,475.74
734,711.65 958,764.09
6,820.89
$1,555,673.31
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LIABILITIES
Current Liabilities:
3% Equipment Notes Payable, portion due in 1942 ( See
Accounts Payable-Trade . . . . . . .
Interline and Agents' Traffic Balances Payable
Accrued Liabilities:
Salaries and Wages
Taxes, including Social Security Taxes .
Insurance
Other .
Total Current Liabilities .
Reserves for Overhaul of Equipment rented to Others
Unused Portion of Tickets Sold . . . . . . .
3% Equipment Notes Payable, due 1943 to 1946 (See ote) .
Capital Stock and Surplus:
Capital Stock:
Authorized, 500,000 Shares of $1.00 each
Outstanding, 409,954 Shares
Capital Surplus
Operating Deficit from December 1, 1934
Contingent Liabilities:
Sundry Claims and Law uits aggregating $25,000.00
Total . . . . . . . . . . . . . .
ote)
17,247.41
14,428.59
9,653.48
1,725.25
409,954.00
648,214.12
1,058,168.12
55,871.20
$ 60,000.00
180,935.65
7,053.51
43,054.73
291,043.89
27,884.67
31,447.83
203,000.00
1,002,296.92
$1,555,673.31
NOTE: During 1941 the Company received delivery of three Douglas DC-3 airplanes which, complete with engines, propellers and accessoric, cost $395,884.09. To finance the purchase of these airplanes, the Company borrowed $273,000.00. Title to thee
airplanes is vested in the lending Bank as collateral security for the indebtedness. This financing arrangement require semi-annual payment of $30,000.00.
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1941
Opera ting Revenue:
Passenger
Mail.
Express, Freight and Excess Baggage
Other Transportation . . .
Incidental Services (Net) ..
Net Operating Revenue
Operating and General Expenses
Depreciation . . . .
Operating Loss . .
Miscellaneous Income:
Interest and Discounts Received .
Gain on Disposal of Equipment .
Income from Property not used in Operations-Net .
Sundry . . . . . . . . . . . . . . . .
Less Miscellaneous Charges- Interest .
Miscellaneous Income (Net) .
Net Income . . . . . . .
$1,826,920.33
197,780.43
2,730.96
3,883.53
8,490.53
794.57
15,899.59
4,463.28
$ 1,055,821.10
848,654.64
83,701.79
6,441.66
24,625.90
2,019,245.09
2,024,700.76
5,455.67
11,436.31
$ 5,980.64
NOTE: Deductions allowable for Federal Income Tax purposes exceed the Taxable Income for the
year and no provision for such Tax has been made.
SURPLUS (DEFICIT) ACCOUNTS
Balance as of December 31, 1940 . . . . . . . .
Net Income for Year ended December 31, 1941 . . .
Excess Provision for Federal Income Tax for Prior Year .
Balance as of December 31, 1941 . . . . . . . .
Capital
Surplus
$ 648,214.12
$ 648,214.12
Operating
Deficit
65,911.31
5,980.64
4,059.47
55,871.20
ACCOUNTANTS' REPORT
To the Board of Directors of
WESTERN AIR LINES, INC.
We have examined the Balance Sheet of W cstern Air Lines, Inc., ( formerly
Western Air Express Corporation) as of December 31, 1941, and the statements
of Profit and Loss and Surplus (Deficit) for the year then ended, 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 of the Company and other supporting evidence, by methods
and to the extent we deemed appropriate. Our examination was made in accordance
with generally accepted auditing standards applicable in the circumstances and
included all procedures which we considered necessary.
In our opinion, the accompanying Balance Sheet and related statements of
Profit and Loss and Surplus (Deficit) present fairly the position of Western Air
Lines Inc. at December 31 1941, and the results of its operations for the ear,
in conformity with generally accepted accounting principles applied on a ba i
consistent with that of the preceding year.
Los Angeles, California
February 27, 1942
PEAT, IARWICK, IITCHELL & CO.
.
TRAFFIC STATISTICS
1938 1939 1940
Revenue:
Passenger . .................. ...... $ 451,157 $ 503,998 $ 752,140
Mail ..... . .. ............ . .... .... 754,650 809,980 808,488
Express, Freight and Excess Baggage .. 39,651 45,249 58,094
Other ..... .. . ... ... .............. 34,145 28,020 29,786
Total .. ........................ $1,279,603 $1,387,247 $1,648,508
Revenue Miles Flown .................. 2,309,938 2,277,161 2,399,338
Revenue Passengers .. .................. 28,738 30,075 47,407
Average Passengers per Revenue Mile Flown 4.57 4.85 6.59
Average Revenue per Passenger Mile .... .. .0428 .0457 .0476
Passenger Seat Miles Flown ......... ... . 26,276,444 27,564,517 32,359,017
Revenue Passenger Miles ........ . ..... . 10,551,761 11,035,541 15,803,768
Load Factor . ........... ........ 40.16 40.04 48.84
Mail Pounds Carried ... . 893,920 957,884 951,451
Express Pounds Carried .. ...... ' . '
..... 312,209 361,017 566,427
OPERATING STATISTICS
1938 1939 1940
Expense:
1941
$1,055,821
848,655
83,702
31,067
$2,019,245
3,136,917
69,791
7.30
.0461
48,592,298
22,892,281
47.11
1,289,505
821,514
1941
Percent of
Increase
1 941 over 1 940
40.4
5.0
44.1
4.3
22.5
30.7
47.2
10.8
( 3.2)
50.2
44.8
( 3.5)
35.5
45.0
Percent ot
Increase
1941 over 1940
Depreciation ...................... $ 162,567 $ 142,844 $ 141,746 $ 197,781 39.5
Other Operating and General Expenses 1,123,017 1,158,231 1,347,742 1,826,920 35.6
Total Operating Expenses ........ $1,285,584 $1,301,075 $1,489,488 $2,024,701 35.9
Operating Expenses per Revenue Mile .... .5565 .5714
Percent of Scheduled Service Performed .. 95.66 95.65
Number of Employees (Average) ... . . ... 173 194
Brackets denote decrease
.6208
96.39
241
.6454
96.85
330
4.0
0.5
36.9
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WESTERN AIR LINES, INC.
FEB RUA RY, 1942
LEGEND
- PRESENT EXISTING ROUTES OF WESTERN AIR LINES - 1,411 MILES
-=--=-:> PROPOSED ROUTES OF WESTERN Al R LINES - 4,880 MILES
PROPOSED
EXISTING
ALTERNATE ROUTE OF WESTERN AIR LINES
ROUTES OF OTHER CARRIERS
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