Western Air Lines Annual Report 1943

1943 ANNUAL REP"ORT OF
~
WESTERN AIR LINES, INC.
OFFICERS
DIR E CTORS
REGISTRAR
S T OCK TRANSFER AGENT
AUDITORS
GENERAL OFFICES
William A. Coulter, President
L. H. Dwerlkotte, Executive Vice-President
Charlie N. James, Vice-President, Operations
Thos. Wolfe, Vice-President, Traffic
Paul E. Sullivan, Secretary-11easurer
J. J. Taylor, Asst. Secretary-Treasurer
William A. Coulter
L. H. Dwerlkotte
Harold P. Fabian
Stanley W Guthrie
George Albert Smith
Citizens National Trust & Savings Bank, Los Angeles, California
Security-First National Bank of Los Ang~les, Califon~ia
Peat, Marwick, Mitchell & Co.
6331 Hollywood Blvd., Los Angeles 28, California
On August 13, 1941, the Cil'il Acron,1utics Board
all'ar<lcd W cstcn, Air Linc.
s a route between Los Angeles and
San lo'raucisco, re.establishing a service wbicb this colllpany
pioueercd in 19,8. '!'bis action represents a major forward
.
step in a longrmige Pfan of cxpausion designed to continue
Westen, Air Lines as tl1c strongest independent air carrier iu
the \Vest.
nc lllaps included With this rcort illustrate what
lias been accolllplisbcd to date and the vastly greater opor.
tunitics that Jial'c been cJ1,1tted for the future.
During its eighteen rears of oper;1tions, Western
Air Lines li,is experienced various periods of expansion and
contraction. But througi, it all, the one essential Policy on
11'11icJ1 tl1c colllpany \\'as founded lias remained tu1changcd-to
gfrc the con,lllunitics of the West an unsurpassed air transport
scnice.
Noll' stronger tl,au c,cr and Wit!, an expandiug future
11 'liicJ, has almost no Iimi ts, W cs tern Air Linc, 11 ill con tin uc
to build soundly so tl,at it lllay continue to merit its dcsig.
nation as "Tlic \Vest's Own Airline."
~d~
'
President
-
TO THE STOCKHOLDERS OF
MARCH 22, 1944
* There is submitted here-
with Profit and Loss Statement of your Company
for the calendar year 1943, together with the Bal-
ance Sheet of the Company as of December 31,
1943, to which is appended the report of :tv'!essrs.
Peat, Marwick and Mitchell & Co., accountants
and auditors.
Operations of the Company for the year 1943
resulted in a net profit of $90,194-05 after all taxes
and charges including provision of $203,886.31 for
depreciation and $48,087.24 for estimated Federal
income taxes for the year 1943. In comparison the
year 1942 resulted in a net profit of $693,703-30
after provision of $215,707.34 for depreciation and
$315,000 for Federal income taxes.
The decrease in net income results largely from
the following:
(a) A decrease in mail revenues of approxi-
mately $500,000.
( b) A 10% decrease in passenger fares and a
12 % decrease in express rates effective
July 15, 1943.
( c) Net profit for 1942 included a gain of $401,-
370. 36 on the sale of equipment.
( d) A general increase in operating costs includ-
ing increases in the level of wages and prices
of materials and supplies.
( e) Inexperienced personnel requiring consider-
able training and additional supervision.
REVENUES
* Notwithstanding the reduction in
passenger fares on July 1 5, 194 3, higher Ioad factors
enabled your Company to. show a 38% increase in
passenger revenues. The pa senger load factor in
1943 was 84-6% as compared with 6i .9% in 1942.
Pas enger revenue amounted to $1,709,402.01 as
compared with $1,242,540.81 for 1942 and con-
tributed 79% of the gross revenues. On December
1,600,000 21, 1942, the Civil Aeronautics Board issued its
1,400,000
order to "show cause" why mail rates for your Com-
pany should not be reduced to three-tenths mill per
1,200,000
pound mile of mail carried over the Company's en-
1,000,000
tire system, effective January 1, 1943. Similar reduc-
tions were proposed for the majority of the other
800,000 airlines. Your Company protested this reduction
600,000
and subsequently a hearing was held by the Civil
Aeronautics Board. However in its final decision
400,000 issued on November 8, 1943, the Board affirmed
the rate of three-tenths mill per pound mile and
200,000 as a result mail revenue for 1943 amounted to $26o,-
0
906.27 as compared with $76o,572.94 in 1942 or a
1940 1941 1942 1943 reduction of 65%. Prior to 1943 your Company
800
had received a rate of 40 cents per airplane mile on
its Salt Lake-Great Falls route and 37 cents per
700
airplane mile on its Salt Lake-San Diego route.
600
The decrease in Express and Freight revenue is
due largely to heavy passenger loads precluding tl~e
500 carriage of any substantial poundage of such cargo,
400
and to the reduction in express rates in July.
300
OPERATING EXPENSES
* Operating and gen-
eral expenses increased $287,059.34 during the year
200 due in part to increased prices of materials and sup-
100
plies and added costs of personnel and training
thereof and in part to the expansion of passenger
0
and ticketing facilities.
1940 1941 1942 1943
FINANCIAL POSITION* The attached Balance
$4,000,000
Sheet of your Company as of December 31, 1943,
3,500,000 shows current assets of $1,767,264.24 including cash
3,000,000
of $342,257-47 as against current liabilities of $1,-
027,887.94. As of December 31, 1942, current assets
2,500,000 amounted to $1,643,647-18 including cash of $572,-
2,000,000
115.31 as against current liabilities of $680,326.32.
1,500,000
EQUIPMENT
* During 1943 one Douglas DC-3
Airplane was released to the Company by the Army
1,000,000
Air Forces, to provide an additional round trip
schedule between Los Angeles and Salt Lake. An-
500,000 other Douglas DC-3 has recently been received
0
which is now undergoing conversion to a passenger-
1940 1941 1942 1943 type airplane and will be placed in passenger service
[4]
1940
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
1940
2,000,000
1,750,000
1,500,000
1,250,000
1,000,000
750,000
500,000
250,000
0
1940
1941 1942
1941 1942
1941 1942
1943
1943
1943
[5]
m the near future. It is possible that additional
aircraft may be released to the airlines in 1944 by
the Army Air Forces but your Company has no
information as to the number or when they may
be expected. On December 31, 1943, your Com-
pany and Inland Air Lines, the acquisition of which
is discussed herein below, operated in commercial
service four Douglas DC-3' s, two Lockheed Lode-
stars and two Beechcraft airplanes, while prior to
our country's entry into the war they operated
seven Douglas DC-3 and ten Boeing 247D, air-
planes.
NEW ROUTES
* On October 7, 1943, your C_om-
pany contracted to purchase 137,241 shares or 83%
of the outstanding common stock of Inland Air
Lines, Inc. U ncler the provisions of the Civil Aero-
nautics Act of 1938 this purchase to be effective
must be approved by the Civil Aeronautics Board
and as of the elate of this letter the decision of the
Board has not yet been received. A total of $363,-
688.65 in cash was deposited in escrow as payment
for this stock. After approval of the Civil Aeronau-
tics Board is received an offer will be made to the
remaining stockholders of Inland Air Lines, Inc., to
purchase their stock under terms and conditions
identical with those contained in the contract of
October 7, 1943. Inland Air Lines, Inc. holds certifi-
cates of public convenience and necessity for the
route between Cheyenne, Wyoming and Great
Falls, Montana; and between Cheyenne, W'> om-
ing and Huron, South Dakota, involving approxi-
mately 1200 route miles. Inland is also operating
between Cheyenne and Denver on a temporary
permit.
On May 10, 1943, the Civil Aeronautics Board
amended the certificate of convenience and ncccs-
ity held by your Company for the route between
Salt Lake and San Diego to include an Bernar-
dino, Palm Springs and El Centro, California, as
additional intermediate stops. This change in the
certificate added 282 route miles. Inauguration of
this ervice is to be deferred until the Civil Aero-
nautics Board shall have notified your Company
that national defense no longer requires a delay.
On August 13, 1943, the Civil Aeronautics Board
awarded your Company a certificate to operate be-
tween Los Angeles and San Francisco, involving
327 route miles. Authorization to operate over this
route has been received and service will begin on
May 1, 1944, with three round trips daily.
Applications are pending before the Civil Aero-
nautics Board for the following additional routes:
(a) Between Los Angeles, California and Den-
ver, Colorado via Las Vegas, Nevada and
Grand Junction, Colorado.
( b) Between Leth bridge, Canada and Nome,
Alaska via Calgary, Edmonton and Grand
Prairie, Canada; and J unca u, Anchorage
and McGrath, Alaska, with supplementary
service between Anchorage and Fairbanks,
Alaska.
[6j
( c) Between San Francisco, California and Se-
attle, Washington via Sacramento and
Chico, California; Klamath Falls, Bend, The
Dalles a11(l Portland, Oregon.
(cl) Between Seattle, Washington and Nome,
Alaska via Ketchikan, Juneau, Anchorage
and McGrath, Alaska, with supplementary
service between Anchorage and Fairbanks,
Alaska.
( e) Between Los Angeles, California and Rio
de Janiero, Brazil and Buenos Aires, Argen-
tina via La Paz and Mexico City, Mexico;
Guatemala City, Guatemala; San Jose, Cos-
ta Rica; Balboa, Canal Zone; Bogota, Co-
lombia; Iquitos, Peru; Cobija and Santa
Cruz, Bolivia; Asuncion, Paraguay; Curityba,
Sao Paulo and Porto Alegre, Brazil; and
Montevideo, Uruguay.
( f) Between Denver, Colorado and Minneapo-
lis, Minnesota via Ft. Morgan and Sterling,
Colorado; North Platte and Norfolk, Ne-
braska; Sioux City, Iowa and Mankato,
Minnesota ( filed by Inland Air Lines, Inc.)
(g) Between Chicago, Illinois and Seattle,
Washington via Rockford, Illinois; Du-
buque and Mason City, Iowa; Sioux Falls,
Mitchell, Pierre and Rapid City, South Da-
kota; Sheridan, Wyoming; Billings, Lewis-
town and Great Falls, Montana and Spo-
kane, Washington (filed by Inland Air
Lines, Inc.)
(h) A system of secondary or feeder routes.
A hearing was held in January, 1944, on the ap-
plication listed under (a), while a hearing is sched-
uled for May 15, 1944, on the application listed
under ( e). No dates have been set for hearing the
other applications listed.
WAR ACTIVITIES* Since May, 1942, your Com-
pany has transported cargo to Alaska for the Army
Air Forces. Recently this has been expanded to in-
clnclc cargo operations m the \Vcstcrn United
State . During 1943, extensive training of Army
personnel for the Army Air Forces was also under-
taken. No profit has been derived from these opera-
tions clue to disallowanccs of numerous charges by
Government auditors, but it is believed that your
Company has made substantial contributions to
the war effort and i continuing to do so.
THE ORGANIZATION
* The continued loyalty
and cooperation of the employees of your Com-
pany, in spite of the many problems and uncertain-
ties, have been most gratifying.
The number of employees of your Company at
December 31, 1943, totaled 807, of which 319 or
. ['7 I
40% were women. A year previous, employees num-
bered 593, of whom 30% were women.
OUTLOOK FOR THE FUTURE
* A combination
of lower revenue and increased costs may necessi-
tate your Company's filing an application with the
Civil Aeronautics Board in the near future for an
increase in mail rate. An alternate remedy would
be for the Army Air Forces to release to your
Compai1y additional airplanes for commercial
operations.
PRESIDENT
Current Assets: ,,
Cash in banks and on hand
United States Treas r ates, Tax Series C, at cost
Accounts receivable:
Interline and agents' traffic balances . . . .
Customers' accounts receivable . . . . . .
Sundry ( including $17,872.43 due from officers and employees)
Less reserve for doubtful accounts . . . . . .
Billed and unbilled charges to United States Army Air Forces, less
advance payment of $72,331.99 ( see note) . . . . .
Inventory of parts and supplies, at the lower of cost ( first-in,
first-out) or replacement market . . . . . . . . . . .
Escrow deposit for purchase, subject to approval of the Civil Aero-
nautics Board, of 137,241 shares of common capital stock of Inland
Airlines, Inc. . . . . . . . . . . . .
Investments:
Securities of other corporations . . . .
Property not used in operations, at cost-less reserve for deprecia-
tion of $705.95 . . . . . . . . . . . .
Properties and Equipment:
Land . . . . . . .
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:
Prepaid insurance rent, taxes, etc.
Development of air routes .
$ 17,607.99
178,230.38
42,095.98
237,934.35
13,527.88
2,345.34
10,384.01
9,449.75
73,764.10
825,479.93
240,997.98
1,149,691.76
$ 342,257.47
160,000.00
224,406.47
849,008.44
191,591.86
1,767,264.24
363,688.65
12,729.35
534,718.25 614,973.51
105,954.86
6,820.89 112,775.75
$2,871,431.50
'
I
l
{i
OF DECEMBER 31,
LIABIL ITIES
1943
Current Liabilities:
otes payable to bank
3% equipment notes payable to bank, portion clue in 1944
Accounts payable-United States Post Office Department
Accounts payable-other . .
Interline and agents' traffic balances payable
Accrued salaries, wages, taxes, insurance, etc.
Reserve for contingencies ( see note)
Provision for Federal taxes on income .
Un used portion of tickets sold . .
3% equipment notes payable to bank, due 1945 and 1946
Common capital stock of 1.00 par value per share. Authorized
1 000,000 shares; issued and outstanding 409,954 shares . . .
Surplus:
Capital surplus .
Earned surplus ( see note)
Contingent Liabilities:
Damage claims, if any in exces of in urance coverage which i
carried in substantial amounts
$ 100,000.00
40,000.00
232,388.33
253,652.06
163,254.23
146,522.19
50,000.00
42,071.13
1,027,887.94
45,416.28
62,000.00
409,954.00
648,214.12
677,959.16 1 326,173.28
$2,871,431.50
ote to Financial Statements
The net profit for the year and the earned surplus arc subject to any adjustment that may be made by Army Air Force auditor :md through renegotiation of billed and unbilled charges to Army contracts. Di ens ion with the Army Air Force have disclosed
the possibility of adjustments for 1942 charges of approximately $50,000.00 and a reserve for contingencies was provided therefor during the year 1943 by a charge to earned surplus. o provi ion has been included in the accounts for pos iblc adju tm nt
of 194 3 charge as the management docs not con ider it feasible to make an estimate thereof at this time.
l8J
~
FOR THE YEAR ENDED DECEMBER 31, 1943
Opera ting Revenue:
Passenger
Mail . . . .
Commercial express, freight and excess baggage
Equipment rentals and incidental services
Operating and general expenses
Depreciation . . . . . . .
Other Income:
Profit from fixed price and fixed fee United States Army Air
Forces con tracts . . . . . . . . . . . .
et income from restaurant operations:
Opera ting revenue . . . . . . .
Less Opera ting expenses . . . . .
Income from property not used in operations-net
Interest and discounts received
Sundry .
Operating Profit
Other Charges:
Interest paid . . . . . . .
Loss on disposition of equipment
Profit before laxes on Income
Provision for Federal normal income and surtax
et Profit ( sec note)
$243,202.41
236,961 .22
SURPLUS ACCOUNTS
Capital Surplus:
Amount at December 31, 1942 and December 31, 1943
Earned Surplus:
Amount at December 31, 1942
Net profit for the year . . .
Deduct provision for re crvc for contingencies
Amount at December 31, 1943 ( sec note)
1_10 l
$1,709,402.01
260,906.27
148,472.72
36,430.99
2,155,211.99
$1,869,218.93
203,886.31 2,073,105.24
82,106.75
47,065.00
6,241.19
8,336.42
3,061.56
81 .73 64,785.90
146,892.65
3,936.47
4,674.89 8,611.36
138,281.29
48,087.24
$ 90,194.05
$ 648,214.12
637,765.11
90,194.05
727,959.16
50,000.00
$ 677,959.16
Revenue: 1940 1941 1942
Passenger ......................... $ 752,140 $1,055,821 $1,242,541
Mail ................... .... ...... 808,488 848,655 760,573
Express, Freight and Excess Baggage .. 58,094 83,702 191,051
Other ..... . ... ................... 29,786 31,067 180,892
Total ........................... $1,648,508 $2,019,245 $2,375,057
Revenue Miles Flown ....... .. ......... 2,399,338 3,136,917 2,318,305
Revenue Passengers . . .................. 47,407 69,791 77,801
Average No. Passengers per Revenue Mile .. 6.59 7.30 10.52
Average Revenue per Passenger Mile .. .... .0476 .0461 .0509
Passenger Seat Miles Flown ............. 32,359,017 48,592,298 39,348,869
Revenue Passenger Miles ................ 15,803,768 22,892,281 24,393,816
Load Factor .............. .. . .. ........ 48.84 47.11 61.99
Mail Pounds Carried .......... ... ...... 951,451 1,289,505 1,547,984
Express Pounds Carried ... .. . . .. ....... . 566,427 821,514 1,258,368
1940 1941 1942
Expense:
Depreciation ...................... $ 141,746 $ 197,781 $ 215,707
Other Operating and General Expenses 1,347,742 1,826,920 1,582,160
1otal Operating Expenses ......... $1,489,488 $2,024,701 $1,797,867
Operating Expenses per Revenue Mile. . . . .6208 .6454 .7755
Percent of Scheduled Service Performed. . . 96.39 96.85 96.17
Number of Employees (Average). . . . . . . . 241 330 485
Brackets denote decrease.
All of the above figures, except the umnber of employees, apply to commercial operations only.
[12]
1943
$1,709,402
260,906
148,473
42,672
$2,161,453
2,057,028
80,907
15.84
.0525
38,498,693
32,589,240
84.65
1,914,391
957,291
1943
$ 203,886
1,850,699
$2,054,585
.9988
94.44
807
Percent of
Increase
1943 overl 942
37 .57~1o
(65.7%)
(22.29%)
(76.41%)
(8.99%)
( 11.27%)
3.99%
50.57%
3.14%
(2.16%)
33.6%
36.55%
23.67%
(23.93%)
Percent of
Increase
1943 over 1942
( 5.48%)
16.97%
14.28%
28.79%
( 1.80%)
66.39%
ce fticiency, W t
ed an average of 9.2
943, compared with 6. 7
Center Right: The Military Divi ion of
We tern Air Lines continued it plen-
did record of accompli hment in the
tran portation of vital war cargo to Army
base in Ala ka and the leutian .
Lower Right: Western Air's new in-
strument shop is r pon ible for the mo t
delicate repairs and adju tment to the
73 instruments which are contained in
the cockpit of the Doug]a DC-3.
Left Hand Column:
On May 10, 1943, We tern Air Line wa
awarded a new route from Lo ngele
to San Diego via an Bernardino, Palm
pring and El Centro. rvice on thi
route will be inaugurated a soon a the
rmy relea es the nece ary equipment.
ith the addition of a Coflee hop at
Las Vegas, Western now operate a chain
of three airport restaurants which showed
a gross profit of $6,241.19 in 1943.
In Jine with the general trend, We tern'
percentage of women employees rose
harply during 1943. At the clo e of the
year, 40% of a11 employee were women,
compared with 30% in 1942.
tern Air employee numbered 807 at
the clo of 1943. continuou program
of inten ive training ha been inaugu-
rated to teach the employe the fun-
damental of their variou job .
Top photo: Several ticket offices were mod-
ernized and enlarged this year. One of the
finest is at Great Falls, Montana, which
has invested over $500,000.00 in its Muni-
cipal Airport.
In et: A total of 119 Westernaires were
serving in the armed forces at the close of
1943. Typical of this splendid group is
former stewardess Lieutenant Henrietta
Richard on ( "Mike" Furler), an Army
Flight nurse with 132 hours of combat fly-
ing to her credit evacuating wounded in
orth Africa.
Below: In October of 1943, Western Air
purchased 83% of the stock of Inland Air
Lines whose routes extend from Great
Falls to Denver and from Cheyenne to
Huron, South Dakota. These operations
will soon be absorbed into the Western
Air Lines syst~m.
Right Hand Column:
On August 13, 1943, West-
ern Air Lines was awarded
a non-stop route between
Los Angeles and San Fran-
cisco, re-establi hing a serv-
ice which the company pio-
neered in 1928. Pictured
are Operations Vice-Presi-
dent C. N. James and two
of the passengers on the
original 1928 flight.
The acute shortage of plane
equipment was relieved
somewhat when the Army
returned one of the air-
plan es which had been
taken over. The plane was
quickly converted and com-
menced commercial opera-
tions on August 27, 1943.
In April, 1943, Western'
General Offices were moved
to Hollywood where they
now occupy two ful] floor
of the Guaranty Building.
The Communications De-
partment has been provided
with the latest testing fa-
cilities for the repair and
maintenance of all air and
ground radio equipment.
LEGEND
Route certificates now held by
Western Air Lines, ... 2,265 miles
Route certificates applied for
by Western Air Lines .. 15,092 miles
Route certificates held by
Inland Air Lines
Route certificates applied for
by Inland Air Lines
WESTERN HAS ALSO APPLIED FOR
PROPOSED ROUTE TO ALASKA NORTH
FROM SEATTLE "IHcouvEI!
Vi~R IAl,. -
"Onc11
SA~T4 BAR
BOTH WESTERN AND INLAND HAVE APPLIED FOR
PROPOSED ROUTE TO ALASKA NORTH
FROM LETHBRIOGE
---
REGIN,_
WINNIPEG
-;o,;r~~-;""o;;ofA- -----------
i
I
Map showing existing and proposed domestic
routes of Western Air lines and Inland Air Lines
March, 1944
/ G-oro~
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BISMARCK
I ~00
MILES CITY
NG$
r-----
1 S DA<OTA - - - - - - -
~-....
---------------=-=-ie~:::--
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~-T~
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COL01t.ao0
.... ,zo,-,
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WATE
LEGEND
Western's routes, operating or
authorized
Western's proposed routes
lnland's routes, operating
- - - - - lnland's proposed routes
Al I other routes