Western Air Lines Annual Report 1949

OFFICERS AND DIRECTORS
REGISTRAR
STOCK TRANSFER AGENT
AUDITORS
GENERAL OFFICES
Terrell C. Drinkwater, President and Director
Stanley R. Shatto, Vice President-Engineering
and Maintenance and Director
Marvin W. Landes, Vice President-Service
and Director
Arthur F. Kelly, Vice President-Sales
Paul E. Sullivan, Vice President and Secretary
D. P. Renda, Assistant Secretary
J. J. Taylor, Treasurer
Robert H. Purcell, Controller and Assistant Treasurer
I. W. Burnham II, Director
ew York City
Hugh W. Darling, Director
Los Angeles
Hector C. Haight, Director
Los Angeles
L. Welch Pogue, Director
Washington, D. C.
John M. Wallace, Director
Salt Lake City
Alexander Warden, Director
Great Falls, fontana
Sidney F. Woodbury, Director
Portland, Oregon
Citizens National Trust & Savings Bank,
Los Angeles
Chase National Bank, ew York
Security-First National Bank of Los Angeles
New York Trust Company, New York
Peat, Marwick, Mitchell & Co.
W stern Air Lines Building
6060 A vion Driv
Los Ang les Int rnational Airport
Los Ang 1 s 45, California
to the stockholders of WESTERN AIR LINES, its customers and employees
For the calendar year 1949, the operations of the
Company and its subsidiary, Inland Air Lines, Inc.,
resulted in a net profit of $432,053, or 82 per share
after taxes and all other charges. This compares
with a net profit for 1948 of $134,704, equivalent
to 26 per share of capital stock outstanding.
In 1949, total operating revenues of the Com-
pany0 amounted to $11,534,131, an increase of 10.2%
over the total operating revenues of $10,463,232
realized the previous year. Total revenue miles
flown by the Company increased 9.1% during the
period. This increased mileage was operated with
an addition of only $202,321, or 1.9%, in total oper-
ating expenses, which totaled $10,564,296 in 1949,
as compared with $10,361,975 in 1948. Those ex-
penses directly related to the cost of flying the
aircraft accounted for all of the increase in total
operating costs, with indirect expenses reflecting
a decrease of $436,335, or 7.3%.
During the past year many new problems arose
in the operation of the Company, some of these
requiring sharp revisions in the planning of the
management. Substantial progress has been made
in meeting these problems. The beneficial results
of the reorganization of the Company during the
past three years have become manifest and, in
the absence of totally unforeseen contingencies, it
is expected that additional gains will be made
0 Whenever the term "the Company" appears herein, it refers
to Western Air Lines, Inc. and its subsidiary, Inland Air
Lines, Inc.
during 1950. The entire western region served by
the Company is growing in population, commerce
and industry.
The Company is presently serving 39 stations
located in 13 states and Canada. Each day 372
Western Air Lines take-offs and landings are sched-
uled-or one every 4 minutes. A fleet of 26 aircraft
is operated, including 10 Convairs, 10 Douglas
DC-3' s and 6 Douglas DC-4' s. The Company has
certificated routes of 4,613 miles, over which 29,955
airplane miles are scheduled each day. This is equal
to a daily trip around the world with two round
trips between Los Angeles and Seattle added.
Each day the Company schedules 1,078,280 airplane
seat miles.
During 1949, the Company completed 97.72% of
all airplane miles scheduled. An average of 1,157
passengers was carried each day. The average pas-
senger traveled 369 miles and paid $20.44 for his
ticket, exclusive of the 15% Federal transportation
tax.
Working in concert with the industry and the
governmental agencies concerned, much progress
has been made by the Company during 1949 in
improving the safety and dependability of its fly-
ing operations. Considerable work was done in
studying and installing new techniques, procedures
and equipment for instrument flying, airway traffic
control, and airport approach systems. This pro-
gram is being continued and it is confidently
expected that the Company will be able to report
more advancement at the close of 1950, during
which year it is anticipated that still further im-
proved radio, instrument landing, airport lighting,
fog dispersal and other aids to navigation will be
studied, refined and utilized.
In the Company's headquarters at the Los
Angeles International Airport, additions have been
made to the maintenance and shop equipment to
the end that these facilities now take care of vir-
tually all of the overhaul and maintenance work
required for all aircraft. These facilities are among
the most complete, efficient and outstanding units
of their kind.
Stockholders: As of November 7, 1949, there were
issued and outstanding 525,164 shares of the capi-
tal stock of the Company, all of one class and held
by 2,691 shq.reholders of record. Many are nominees
who hold stock for the accounts of others, the num-
ber of whom is unknown to the Company. It is
estimated, however, that Western Air Lines, Inc.,
is owned by over 4,000 individual stockholders:
residing in each of the forty-eight states. Since
the sale in the spring of 1949 of the large block
of stock formerly held by Mr. W. A. Coulter,
most of which stock has since been redistributed,
the number of shareholders of the Company has
increased materially, particularly in the western
states served by the Company, thus providing a
broadened market for the stock.
Approximately 17% of the employes and all of
the officers own stock in the Company.
Employes: At the close of the year, the Com-
pany's payroll listed 1,226 employes, 74.7% men
and 25.3% women. These employes were divided
between divisions of the Company as follows:
Service Division, including station and reserva-
tions personnel, radio operators and stewardesses,
473; Maintenance and Engineering Division, 318;
Flight Division, including pilots, dispatchers and
instructors, 198; Treasury Division, including
budget, accounting, purchasing and stores person-
nel, 97; Sales Division, including city ticket office
staffs, 92; General Administration Division, includ-
ing corporate, legal, clerical and insurance depart-
ments, 48.
The average length of service with the Company
for ~.11 employes was 5J~ years. The average length
of service of pilot captains was 11 years. There
has been a marked reduction in the turnover of
employes during the year. This, coupled with
revised training programs and departmental reor-
ganization, has aided in increasing efficiency and
reducing costs.
Approximately 85% of the Company's employes
are represented by six labor unions. The Com-
pany has contracts with these unions under which
harmonious relationships have been maintained
throughout the year.
The employes' Westernaire Federal Credit Union
has had a successful year during which 863 loans
totaling $130,230 were made to employes. A divi-
dend of 6% was paid on savings accounts to employe
members. No losses have been experienced in con-
nection with loans made. Membership is open to
all Company employes, of whom 54% are now
members.
The Employes' Suggestion System has been
continued, with awards of tnany cash prizes for
individual suggestions which have been accepted
and put into effect to improve the efficiency of
the organization.
($000.00 omitted)
For the Calendar Year
1949 1948 1947
Operating revenues:
Passenger ............ $ 8,024. $ 7,813. $10,114.
Mai1 ................ 2,504. 2,136. 1,570.
Other ............... $ 1,006. 514. 692.
Total operating
revenues ......... $11,534. $10,463. $12,376.
Operating expenses:
Depreciation ......... $ 1,335. $ 1,164. $ 1,845.
. Other ............... $9,229. 9,198. 11,196.
Total operating
expenses ......... $10,564. $10,362. $13,041.
Operating profit ( or loss) ..
Non-operating income and
970. 101. (665.)
expense (net) ......... (249.) ( 180.) ( 192.)
Federal income taxes or
credits ............... (280.) 220. (88.)
Minority inter tin profit
ofsubsidiary .......... (9.) (6.)
Net proftt ( or loss) . .. $ 432. $ 135. $ (945.)
Flnanclal Position-The comparative financial status of
your Company as of the close of the last three calendar
years is shown in the following condensed statement:
As of December 31, 1949 ($000.00 omitted)
ASSETS
( What we own)
1949 1948 1947
Current Assets:
Cash ............... . $ 1,401. $ 1,462. $ 2,187.
Accounts receivable .... 1,021. 2,307. 1,168.
Inventories ........... 210. 246. 229.
Total current assets . . 2,632. 4,015. 3,534.
Properties and equipment:
Airplanes, engines, land,
buildings, equipment,
spare parts, etc .. .... . .. 12,598. 12,311. 9,823.
Less reserve for
depreciation .......... (5,427.) (4,217.) (3,531.)
Sundry securities ........ 11. 12. 11.
Deposits on equipment
purchase contracts ..... 484.
Insurance, rent, interest,
etc., paid in advance . ... 637. 678. 269.
Routes, contracts
and leases ............ 127. 147. 166.
Total Assets ........ $10,578. $12,946. $10,756.
---
The Employes' club in Los Angeles maintains
close working arrangements and sponsorships with
such organizations as the Red Cross, Boy Scouts,
and the National Polio Foundation.
For a number of years the Company has pro-
vided a voluntary employes' Group Insurance
Program under which life, accident and sickness,
and accidental death and dismemberment insur-
ance is made available for employes, and hospitali-
zation insurance with medical and surgical benefits
is made available for employes and for members
of their families. All employes are eligible to par-
ticipate in this insurance, which cost is borne
jointly by the employes and the Company. Benefits
under all coverages have been broadened from
time to time, and the program is now one of the
finest available. Approximately 75% of the employes
LIABILITIES
( What we owe)
1949 1948 1947
Current Liabilities:
Notes payable ........ $ 773. $ 2,394. $
Accounts payable ..... . 522. 1,087. 532.
Air Travel Plan deposits . 206. 229. 244.
Accrued salaries, wages,
taxes, insurance, etc ..... 887. 620. 1,348.
---
Total current liabilities 2,388. 4,330. 2,124.
Unused portion of
tickets sold ........... 174. 321. 239.
Notes payable-long term 3,113. 3,551. 3,800.
Operating reserves ...... 272. 260.
Minority stockholders'
inter~t in subsidiary . ... 23. 24. 20.
Capital stock
(525,164 shares) ... . ... 525. 525. 525.
Capital surplus . ......... 2,768. 2,768. 2,768.
Earned surplus ........ . . 1,587. 1,155. 1,020.
Total Liabilities ..... $10,578. $12,946. $10,756.
--- - - -
Stockholders' equity
per share ............. $9.29' $8.47 $8.21
carry the group life insurance, while about 90%
have availed themselves of the accident and sick-
ness and hospitalization coverages.
The management and directors wish to thank each
individual employe for his or her contribution to
the progress made by the Company during 1949.
Debt: The Company's loan from the Reconstruc-
tion Finance Corporation, which represents total
borrowings in 1947. and 1948 of $6,421,606, had
been reduced at the year end to $3,886,098. As
of March 15, 1950, this balance has been further
reduced to $3,544,036, which represents a repay-
ment of 45% of the original loans.
During 1949 a'trangements were made with the
Reconstruction Finance Corporation for the re-
scheduling of-the principal payments of the unpaid
balance of these loans. Under the revised terms,
the Company will be required to pay the unpaid
balance over a three-year period ending December
31, 1952. The annual principal payments required
will approximate $840,000 per year, with any un-
paid balance due on December 31st, 1952. The
interest rate of the loans is 4% per annum, but the
Company is permitted to make prepayments on
the loans whenever working capital will permit
in order to reduce the interest charges. As of March
15, 1950, the principal payments were prepaid to
July 1, 1950.
In addition to the regular principal payments,
amounts which the Company receives from rentals
and sales of surplus property from time to time
are also applied in reduction of the loans. The
loans are secured by a first lien on practically all
of the Company's property. The annual principal
payments required are less than the Company's
current annual depreciation charges.
Air Coach Service: It has become quite appar-
ent to the Company's management during the
past year that there exists a definite market for
two types of air transportation between large cen-
ters of population sufficiently far apart to enable
the airplane to produce a real saving in time over
surface carriers. On the system of Western Air
Lines, it is believed that these factors presently
exist on the coastal route between Seattle-Tacoma
and Portland and San Francisco-Oakland and Los
Angeles-Burbank and, to a limited degree, between
Los Angeles-Burbank and Las Vegas, Nevada.
In addition to its first-class services operated on
the Coastal Division with Convair aircraft, the
Company, on October 15, 1949, inaugurated night-
time air coach service between Los Angeles-Burbank
and Seattle-Tacoma via San Francisco-Oakland and
Portland, using DC-4 aircraft with added seating
capacity. The fare for this service is approximately
one-third less than the regular first-class fare charged
on the Convair coastal flights. No meals or other
refinements of passenger service are furnished on the
coach flights. Due to r strictions imposed by the
Civil Aeronautics Board, up to the present time
regular air coach sch dules must be flown only
at night, with departures being restricted to times
subsequent to 10:00 PM from both t rminal points.
Because of the unusual nature of the traffic flow
between Los Angeles -Burbank and Las Vegas,
Nevada, the Company, with the same type DC-4
aircraft, inaugurated, on January 12, 1950, a round-
trip excursion coach type service between these
points.
As set forth in the annual report for 1948, por-
tions of the Company's system have been subjected
to improper competition by so-called irregular or
non-scheduled air carriers. No action was taken
by either the Federal or State Government to
regulate such competition, which began to have
a particularly serious effect on Western Air Lines
behveen San Francisco-Oakland and Los Angeles-
Burbank The Company made application to the
Civil Aeronautics Board for permission to operate
coach service between these cities at any time day
or night at the four-cent-a-mile coach rate which
has been the minimum fare permitted by that
regulatory body. The application was not approved
by the CAB.
During the first half of 1949 there were six
intrastate coach-type operators carrying passengers
between these points, practically without economic
regulation by either the State or Federal Govern-
ments. The one-way fare most of such carriers
were charging was $9.95, which amounts to 3.04
per mile. In the fall of 1949, the Company _
entered
into an arrangement with an independent Califor-
nia corporation, Western Air Lines of California,
Inc., whereby the Company charters high seat-
density DC-4s to Western Air Lines of California,
Inc. The latter has been furnishing coach service
at $9,95 between San Francisco-Oakland and Los
Angeles (Burbank) under intrastate tariffs led
with the California Public Utilities Commission.
Between September 1 and December 31, 1949,
Western Air Lines of California, Inc. carried more
than 50,000 passengers in this intrastate coach serv-
ice. The charter revenues received by the Company
from this arrangement continue to represent an
important source of income.
Although General Counsel for the Company has
advised that th arrang m nt is 1 gal und r the
provisions of th Civil Aeronautics Act of 1938
and th regulations of th Civil A ronautics Board
thereunder, the CAB has instituted an investiga-
tion of the arrangement, coupled with an investi-
gation of all intrastate operations within the State
of California. The duration or the outcome of such
investigation cannot be forecast. However, the man-
agement of the Company is firmly convinced that
the low fare service has been demonstrated to be
in the public interest and profitable to the Com-
pany, and should be offered between these Cali-
fornia metropolitan centers, notwithstanding the
CAB aircoach policy more applicable in other sec-
tions of the country. Figures recently released by
the California Public Utilities Commission show
that of the total number of passengers carried by
rail, bus and air between the San Francisco-Oakland
and Los Angeles metropolitan areas in 1949, 43.1%
went by air, 32.7% by rail, and 24.2% by bus. It is
doubtful if this ratie exists between any other pair
of cities in the United States.
Governmental Regulation: By far the greatest
imponderable in the scheduled air transport busi-
ness today is the regulatory relationship of the
Federal Government to the industry. Being faced
with constant and minute regulation by the Civil
($000.00 omitted)
1949
We Received:
Passenger revenue ............... $ 8,024.
Mail revenue . . . . . . . . . . . . . . . . . . . 3,555. 0
Express, freight, charter, etc. . . . . . . 1,006.
RFC loan ..................... .
Sale of other assets . . . . . . . . . . . . . . . 494.
$13,079.
We Spent:
Salaries and wages .............. $ 4,856.
Gasoline and oil . . . . . . . . . . . . . . . . . 1,279.
Insurance . . . . . . . . . . . . . . . . . . . . . . 542.
Taxes.......................... 385.
Passenger food and supplies . . . . . . 116.
Materials and outside services . . . . . 1,670.
Other expenses . . . . . . . . . . . . . . . . . . 394.
Interest . . . . . . . . . . . . . . . . . . . . . . . . 197.
Payment of loans. . . . . . . . . . . . . . . . . 2,059.
Purchase of equipment, spare parts,
etc ....................... .
Reduction of other debts and misc.
( ) $1,051 arned in 1948.
910.
671.
$13,079.
1948
$ 7,813.
1,085.
514.
2,266.
176.
$11,854.
$ 4,974.
1,118.
312.
368.
301.
1,694.
404.
184.
121.
2,270.
108.
$11,854.
Aeronautics Board, the Post Office Department and
the Civil Aeronautics Administration as well as
other Federal agencies, scheduled air transporta-
tion is probably the most completely regulated
industry in the nation.
A large part of such regulation stems from the
provisions of the Civil Aeronautics Act of 1938 as
administered by the executive branch of the gov-
ernment. During the twelve years since its passage,
this has proven to be a good basic law. There now
are attempts being made in Congress to change it
by those who are motivated by a desire to stifle the
steady growth of domestic air transportation. The
Company's management, in common with most of
the other scheduled air carriers, has taken the posi-
tion that this law should not now be changed in
any major respect. But the administration of this
law should be considerably simplified, clarified,
and expedited.
In addition to the investigation of the California
intrastate air coach service, the Company, like all
other members of the air transport industry, has
many proceedings pending before the Civil Aero-
nautics Board.
Although the matter has been pending for sev-
eral years, no final decision has yet been rendered
on the Company's request for a determination of
mail compensation for the period prior to January
1, 1949. Because of disagreements between the
Civil Aeronautics Board and the Post Office Depart-
ment, additional lengthy hearings on the case have
just been concluded and it is hoped that a final
determination will be made by the CAB during
1950. The rate of mail compensation for the period
subsequent to January 1, 1949, has been determined
and is not in issue.
No formal action has been taken by the Civil
Aeronautics Board in connection with any of the
several investigations announced by it in a state-
ment of policy issued February 25, 1949. One of
these had specific reference to Western Air Lines,
as set forth in the Company's Annual Report for
1948. The management of the Company is of the
opinion that if there ever were any valid reasons
for this investigation, they uo longer exist.
On Dec mber 19, 1949, the CAB issu d "show
cause orders" directing the Company to demon-
strate why it should not stop service presently
rendered to San Bernardino (Ontario), Palm Springs
and El Centro, California, and Yuma, Arizona, in
order that service could be provided to these points
on Western's system by a so-called "feederline"
operator which is now doing everything possible
to become a permanently certified trunk line car-
rier competitive with the Company's coastal route.
No date has yet been set for the hearings on this
matter, but at the time of those hearings the Com-
pany feels it can defend its position with respect
to service to these four cities, and prove that the
substitution of a feederline for Western Air Lines
would be a costly duplication of service and a
waste of taxpayers' money.
The Company has refiled its CAB application
to extend its Imperial Valley flights from Yuma
to Phoenix in order to make a sensible route out
of this portion of its system, it being impractical
to carry out its previously announced plan to solve
the problem.
During 1949, the U. S. Senate Committee on
Interstate and Foreign Commerce started an inquiry
into the financial condition of the air transport
industry. This investigation ~s still going on.
One of the main projects being considered by
this Committee is the necessity or desirability of
separating moneys received by air carriers for
transporting United States mail into payments solely
for the carriage of that mail and payments in the
nature of subsidy to permit continued operation of
essential but uneconomical segments of the air
transport system, much the same as subsidy pay-
ments are made to provide free delivery mail
service to rural districts of the United States.
The rate of mail compensation received by the
Company falls neither in the highest nor lowest
categories paid to the various classes of airlines.
United States air carriers operating international
and overseas routes, as well as temporary feeder-
line operators and some of the smaller domestic
trunk line air carriers, receive mail compensation
at a considerably higher rate than that received
by the Company. On the other hand, several of
the domestic air carriers larger than Western Air
Lines receive mail compensation at a rate lower
than that paid to the Company.
The management of the Company has taken no
position in opposition to the separation of mail
compensation into two components, provided such
separation is done on a fair and non-political basis
by persons competent to make such separation, after
thorough and impartial study and analysis has
been completed.
Many attacks during the past year have been
leveled at scheduled interstate air transportation,
inspired in most instances by surface carriers and
other interests whose purpose is to retard the devel-
opment of air transport. Much has been spoken and
written about what has been loosely referred to as
"airline subsidy." However, many informed persons
have suggested that the airlines as such are not
subsidized but rather, if there is any element of
subsidy involved, it is the users of the airline
services who are subsidized.
The Postmaster General of the United States has
recently expressed an opinion that the subsidy
required for airmail costs the Post Office Depart-
ment about $50,000,000 a year, while Government
franked mail costs a little over $75,000,000. The
Postmaster General has further stated that second-
class mail requires a subsidy of about $200,000,000
annually, third-class $130,000,000 annually, and
postal cards $55,000,000. In other words, the air-
mail subsidy is the smallest subsidy the Post Office
Department pays.
In any event, and regardless of the outcome of
the current debate, it is clear that the combined
route systems of Western Air Lines and its sub-
sidiary are sound and essential and must continue to
be operated in the public interest to provide needed
service for the fast growing commercial interests
in the areas served, to meet the postal needs and
the increasing needs of the national defense.
During 1949 the Company has been privileged
to work closely with the Military Air Transport
Service of the United States Department of the
Air Force, in sponsoring and providing headquar-
ters for the organization and development of a
military reserve air transport organization in South-
ern California. Several of the Company's key per-
sonnel have provided the original stimulus for this
reserve unit, which is the first and only one of its
kind in the nation. The unit includes former mem-
bers of the Naval Air Transport Service, the Air
Transport Command, the Army Ground Forces,
Marine Corps flying personnel, and civilians
engaged in the aviation industry in Southern Cali-
fornia. The Company will continue to cooperate
with the Military Air Transport Service in this
project in order to meet its obligation under the
national defense aspect of the Civil Aeronautics Act.
During 1949, the Company inaugurated opera-
tions to the Ontario International Airport, which is
in the center of a heavily populated area adjacent
to Los Angeles County. It is expected that new
sources of business will be developed from this point.
The Company expects to receive permission from
the Canadian Government to extend its service
north from Lethbridge to Edmonton in the Province
of Alberta in the late spring or early summer of
1950. This extension will enable the Company to
tap additional long-haul traffic to and from this
fast-growing Province of Canada which may well
become one of the greatest oil-producing areas in
the world.
The governments of the United States and Mexico
have as yet been unable to come to an under-
standing with respect to the terms of a bilateral
agreement for the further exchange of air routes
between the two countries. As a result of this con-
tinuing disagreement the Company has no present
plans for service over its route authorized by our
Government between Los Angeles and Mexico City
via La Paz, Baja California.
In furtherance of the policy of strengthening
the Company in the western region it serves, the
Board of Directors has been enlarged. The mem-
bers of the present Board are listed at the beginning
of this report.
On November 1, 1949, Mr. Arthur F. Kelly was.
elected Vice President-Sales to direct the Com-
pany's advertising, sales, traffic and promotional
programs.
Respectfully submitted,
PRESIDENT
March 15, 1950
Western Air Lines Building
6060 A vion Drive
Los Angeles International Airport
Los Angeles 45, California
On the next two pages is a reproduction
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signed for easy reading and immediate
understanding, this timetable has drawn
nationwide attention as a passenger serv-
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forward in WestemAir Lines' long history
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Indicates CON VAi R De Luxe pressurized aircraft.
Indicates Douglas DC-4 COACH MASTER aircraft.
T Indicates Douglas DC-3 aircraft.
I
I
I
I
I
I
MINN.
FLIGHT NUMBERS: -301-
FOOD SERVICE:
NOTES:
B-Breakfast L-Lunch D-Dinner S-Snacks, complimentary meals served aloft.
-Complimentary meals served at airport cafe for through passengers only.
CD-Twenty miles from San Bernardino.
-One fuel stop may occasionally be made enroute.
-Operates daily except Saturday.
@-Operates Friday and Sunday only.
All times are local Standard Time. A.M.- Light Fh:urrs. P.M .~Dark figures.
OLDEST AIRLINE
MA IL EXPRESS F R E, I G H T
Consolidated Balance Sheet as of De~ember 31, 1949
ASSETS
Current Assets:
Cash in banks and on hand
Deposit with Reconstruction Finance Corporation
for payment of certain state and local taxes ..... .
Accounts receivable:
United States Post Office Department .......... .
Other United States and State Government Depts.
Interline and agents' traffic balances ......... .
Customers' accounts receivable ................ .
Other ( including $15,464.30 due from officers and
employes) .............................. .
Less allowance for doubtful accounts ........... .
Inventory of parts and supplies at the
lower of cost or replacement market
( substantially all pledged) ( Note 1) ........... .
Sundry securities .................................... .
Properties and equipment, at cost ( substantially all
pledged) ( Note 1):
Land ........................................... .
Buildings on and improvements to leased property .. .
Airplanes, engines, propellers and flying equipment .. .
Radio stations, furniture, fixtures,
shop and other equipment ................... .
Property not used in operat10ns .................... .
Construction work in process ..................... .
Less allowance for depreciation ................... .
Routes, contracts and leases, less amortizatior.t $55,212.00 ..
Deferred charges:
Prepaid insurance . . . . .......................... .
Unamortized pre-operational expense
of new type aircraft ......................... .
Other .......................................... .
$ 262,204.62
127,575.26
273,885.70
144,366.49
114,861.99
922,894.06
8,660.73
1,348.35
2,969,172.26
8,159,672.60
1,101,377.42
339,633.00
27,210.91
12,598,414.54
5,427,024.20
397,978.17
93,368.02
145,941.84
$ 1,401,260.11
106,281.17
914,233.33
209,636.14
2,631,410.75
11,186.71
7,171,390.34
127,241.60
637,288.03
$10,578,517.43
LIABILITIES
Current Liabilities:
Notes payable-Reconstruction Finance Corporation
( amount due within 12 months) ( Note 1) ..... .
Accounts payable-trade . . ....... . ................ .
Accounts payable-taxes collected from others ....... .
Interline and agents' traffic balances ............... .
Air Travel Plan deposits ................ . ........ .
Accrued salaries, ~ages, taxes, insurance and other ... .
Provision for Federal taxes on income
( subject to review by United States
Treasury Department) (Note 2) ............... .
Deferred income ( unused portion of tickets sold) ....... .
Long term debt:
Notes payable-Reconstruction
Finance Corporation (Nate 1 ) ................ .
Less amount due within 12 months ................ .
Minority stockholders' interest in subsidiary ............. .
Capital stock-$1.00 par value per share (Note 1)
Authorized 2,000,000 shares (25,000 shares
reserved for option to officer)
Issued 525,164 shares ............................ .
Surplus:
Capital surplus ( no change during year) ........... .
Earned surplus from December 31, 1934 ........... .
Contingent liabilities ( Note 3) ........................ .
Long term lease commitments (Nate 4) ................. .
$ 3,886,097.80
772,916.63
2,768,247.10
1,587,022.90
$ 772,916.63
358,436.04
135,506.22
28,146.47
206,125.00
325,580.51
561,424.22
2,388,135.09
173,680.80
3,113,181.17
23,086.37
525,164.00
4,355,270.00
$10,578,517.43
Consolidated Profit and Loss Statement for the Year Ended December 31, 1949
Operating Revenue:
Passenger .............................................. .
Mail (Note 2) .......................................... .
Non-Scheduled transport services ........................ .
Express and freight ..................................... .
Excess baggage and other ............................... .
Incidental revenue-net .................................. .
Tot:il Operating Revenue ............................ .
Operating Expenses:
Flying operations ....................................... .
Ground operations ...................................... .
Direct maintenance-flight equipment ..................... .
Ground and indirect maintenance ......................... .
Passenger service ....................................... .
Traffic and sales ........................................ .
Advertising and publicity ................................. .
General and administrative .............................. .
Depreciation ........................................... .
Operating Profit ..................................... .
Non-operating Income:
Discounts received ...................................... .
Other ................................................. .
Non-operating Charges:
Interest ................................................ .
Amortization of routes, contracts and leases ................ .
Amortization of pre-operational expense ................... .
Other ................................................. .
Profit before Federal Taxes on Income ................ .
Provision for Federal Taxes on Income ........................ .
Less Minority interest in subsidiary ............................ .
Net Profit .......................................... .
Amount at December 31, 1948 ............................... .
Add-Net profit for the year .................................. .
Amount at December 31, 1949 ................................ .
$ 3,080,370.59
1,746,574.41
821,782.38
721,815.10
561,538.03
1,062,326.00
299,805.87
934,911.64
1,335,171.98
6,866.05
9,182.10
196,798.26
18,408.00
25,464.00
24,379.60
$ 8,024,175.98
2,504,172.33
604,026.12
252,182.17
63,231.73
11,447,788.33
86,342.25
11,534,130.58
10,564,296.00
969,834.58
16,048.15
985,882.73
265,049.86
720,832.87
280,000.00
440,832.87
8,780.21
$ 432,052.66
---
$ 1,154,970.24
432,052.66
$ 1,587,022.90
Notes to Financial Statements
1. NOTES PAYABLE-RECONSTRUCTION FINANCE CORPORATION.
The amount due to Reconstruction Finance Corporation,
$3,886,097.80 ($2,446,850.33 on 1947 loan and
$1,439,247.47 on 1948 loan), is secured by inventories,
property and equipment, and the capital stock of Inland
Air Lines, Inc., a 97% owned subsidiary. Under the terms of
the credit agreements, as amended, the indebtedness as of
December 31, 1949, is payable in specific amounts with
interest at 4% per annum as follows:
1947 Loan - Period March 1, 1950, to June 1, 1952,
$28,000.00 monthly May through October, and $8,000.00
monthly November through April; Period July 1, 1952,
to December 1, 1952, $100,000.00 monthly July through
October, and $55,000.00 monthly during November and
December. The unpaid balance, if any, is due on or
before December 31, 1952.
1948 Loan- $52,083.33 monthly commencing February
1950. The unpaid balance, if any, is due on or before
December 31, 1952.
Additional principal payments are to be made annually
within the first two months after the close of each calendar
year in amounts equal'to the excess of 50% of the Company's
annual net profit for the preceding year ( before provision
for depreciation) over the total of the specified monthly
payments on principal made during the preceding year. No
additional payment is due under this provision during the
year 1950.
The credit agreements provide, among other things, that
no dividends on the capital stock of the Company are to be
paid without the approval of the Reconstruction Finance
Corporation.
2. MAIL REVENUE AND FEDERAL INCOME TAXES. On March 3,
1949, the Civil Aeronautics Board awarded the Company
"Temporary Rates of Mail Compensation" which as to the
period subsequent to January 1, 1949, were made permanent
by an order issued on May 6, 1949. For the period prior to
January 1, 1949, the temporary rates so established resulted
in additional retroactive mail revenue in amount of
$975,461.20, which was recorded as income for the year
1948 and set forth as being includable in the 1949
income tax return of the Company. Accordingly provision
was made as of December 31, 1948, in the amount of
$272,000.00 for the Federal income tax deemed to be pay-
able for the year ended December 31, 1949, on the increased
mail revenue of $975,461.20. The amount ($272,000.00)
so provided together with the provision for Federal income
taxes based upon the net profit for the year ended December
31, 1949, is reflected on the balance sheet as a current
liability.
A protest against the additional retroactive mail revenue
awarded the Company has been filed by the United States
Post Office Department and appropriate proceedings are
b fore the Civil Aeronautics Board for final determination.
In the opinion of the management such final determination
will not materially r due the amount of the award made
although the y ar or y ars in which the additional r v nue
is taxabl may be altered.
3. CONTINGENT LIABILITIES. As of D c mber 31, 1949, the
Company and its subsidiary w re conting ntly liable for
damage claims and lawsuits in which they are or may be
defendants. The amounts claimed by the plaintiffs in such
damage claims and lawsuits are substantial but the manage-
ment and its counsel believe the ultimate liability, if any,
that may result therefrom will not be material in amount.
4. LONG TERM LEASE COMMITMENTS. The minimum annual
rental liability on real property leased to the Company and
its subsidiary for terms expiring more than three years from
December 31, 1949, is approximately $ll7,000.00; the
numb ~ of leases is 25. A summary by periods of expiration
is as follows :
1953-1957
1958-1967
1968-1973
Leases
22
1
2
Amount
$81,000.00
1,000:00
29,000.00
5. CHANGES IN ACCOUNTING PRINCIPLES. For the year 1948
the Company and its subsidiary discontinued the practice
of making monthly reserve provisions for aircraft and
engine overhaul costs in order to conform its accounting
practices with a majority of the Air Transport Industry and
to reflect agreements reached after extensive conferences
with the Rates and Analyses Division of the Civil Aero-
nautics Board. In 1949, as a furtherance of this fundamental
change, aircraft overhaul costs are being amortized over a
SO-month period. Likewise that part of the cost of new
aircraft which is deemed to be "built-in overhaul" is being
amortized over a 30-month period rather than over the
eximcted life of the aircraft. As a result of the change in
1949, the net profit for the year 1949 is approximately
$45,000.00 less than it would have been if such changes had
not been made.
To the Board of Directors,
WESTERN AIR LI ES, I C.:
We have examined the Consolidated Balance Sheet of Western
Air Lines, Inc., and Subsidiary as of December 31, 1949, and
the related statements of Consolidated Profit and Loss and
Surplus for the year then ended. Our examination was made
in accordance with generally accepted auditing standards,
and accordingly included such tests of the accounting records
and such other auditing procedures as we considered neces-
sary in the circumstances; it was not practicable to confirm
receivables from United States and State Government depart-
ments but we satisfied ourselves by other means as to these
items.
In our opinion, the accompanying Consolidated Balance Sheet
and statements of Consolidated Profit and Loss and Surplus
present fairly the financial position of Western Air Lines,
Inc., and Subsidiary, at Dec mber 31, 1949, and the results
of their operations for the year then ended, in conformity with
gen rally accepted accounting principles applied on a basis
consistent with that. of the preceding year, except for the
changes, which w approve, set forth in ote 5.
PEAT, MARWICK, MITCHELL & CO,
Los Angeles, California
March 10, 1950
A museum pi e today, this M-2 biplane was
the last word n aviation back in 1926 when it
made the nat n's first scheduled commercial
airline flights for Western Air between Los
Angeles and S It Lake City.
this is p ogress
Western Air Lines' 300-mph Convair-Liner represents commercial
aviation's latest and finest in speed, comfort and safety. The
sleek plane carries 40 passengers and crew of three in an air-
conditioned, pressurized cabin which gives ground-level comfort
while cruising at above-the-weather altitudes.
passengers
mail
maintenance
facilities
In 1926 Western Air Lines, America's oldest
airline, carried the nation's first commercial
airline feminine passenger between Salt Lake
City and Los Angeles-in 6 hours, 30 minutes.
Maude Campbell paid $90 for her ticket and
rode in the windblown front open cockpit.
Totaling less than 200 pounds, this airmail load
was a capacity haul for Western Air's M-2
biplane in 1926 when the company flew the
nation's first commercial airmail between Los
Angeles and Salt Lake City.
In 1926 when Western Air mechanics did repair
work on the 425-hp Liberty engine of the M
-2
biplane they placed stepladders alongside the
ship, climbed up, lifted the engine hood fnd
began tinkering.
In 1949 nearly one-half million passengers flew
Western Air Lines. Many thousands, new to
air travel, used and liked Western's reduced
fare DC-4 Coachmasters between major cities
on the Pacific Coast.
Just in from Seattle-Tacoma on a Western Air
Lines Convair-Liner, this ton of airmail being
processed at the Los Angeles International
Airport field postoffice represents a typical mail
load carried in WAL aircraft.
A typical scene in Western Air Lines' modern
engine overhaul shop at Los Angeles Inter-
national Airport, with mechanics in left back-
ground working on a 2400-hp Pratt & Whitney
Convair-Liner engine, while mechanic in fore-
ground gives finishing tune-up touches to
~~~~-------~ ____
1200-hp Pratt & Whitney DC-3 en~
gi_
ne
_
. ___ __,
Taken 24 years a10, this picture shows one of
Western Air's ori1inal fleet of six M-2 biplanes
soarin1 over the company's ori&inal han1ar at
old Vall Field near Montebello, California.
The old 1926 Western Air hangar could be
tucked away in one corner of the company's
modern headquarters buildin1 at Los Angeles
International Airport, which houses WAL's
administrative offices and complete mainte-
nance, overhaul and enalneering facilities.