Western Air Lines Annual Report 1950

OFFICERS ANO DIRECTORS
GENERAL OFFICES
REGISTRAR

STOCK TRANSFER AGENT
GENERAL COUNSEL
AUDITORS
Terrell C. Drinkwater, President and Director
Stanley R. Shatto, Vice President- Operations
and Director
Marvin W. Landes, Vice President- Service
and Director'
Paul E. Sullivan, Vice President- Administration
and Secretary
Arthur F. Kelly, Vice President- Sales
J. J. Taylor, Treasurer
D. P. Renda, Assistant Secretary and Attorney
Robert H. Purcell, Controller and Assistant Treasurer
I. W. Burnham II, Director
New 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 ~alls, Montana
Sidney F. Woodbury, Director
Portland, Oregon
Western Air Lines Building
6060 A vion Drive
Los Angeles International Airport
Los Angeles 45, California
Citizens National Trust & Savings Bank,
Los Angeles
Chase National Bank, New York
Security-First National Bank of Los Angeles
New York Trust Company, New York
Guthrie, Darling and Shattuck
Los Angeles
Peat, Marwick, Mitchell & Co.
Los Angeles
to the stockholders of WESTERN AIR LINES, its customers and personnel
During the year 1950, Western Air Lines, Inc. 0 car-
ried 618,624 passengers a distance of 233,118,000
revenue passenger miles over its system. This traffic
represents an increase of 49.68% over 1949.
Operations of the Company for 1950 resulted in
a net income of $787,904, or $1.50 per share after
taxes and all other charges. This compared with a net
income for 1949 of $432,053, which amounted to 82
per share of capital stock outstanding. In 1948, the
net income was 26 per share.
In 1950, total operating revenues of the Company
were $14,246,494, representing an increase of 23.5%
over the 1949 operating revenues of $11,534,131.
Reflecting increased mileage flown and the sharp
effect of inflation on payrolls, materials and
supplies, the 1950 total operating expenses were
$12,610,733, an increase of 19.4% over the 1949 oper-
ating expenses of $10,564,296. Revenue miles flown
in 1950 totalled 11,782,635 miles, an increase of 24.8%
over the 9,495,978 miles flown in 1949.
0 Throughout this report, the operations of the Company's
subsidiary, Inland Air Lines, Inc., are consolidated with those
of the parent Company, except where otherwise indicated.
The Company's total Federal, state, and county
direct tax bill for 1950 was $1,162,423, which
amounted to $2.21 per share of outstanding stock,
as compared with the 1949 direct tax bill of $685,316,
an increase of 70%.
During the past year there was no general increase
in the Company's rates for the carriage of passengers,
mail, express or freight. The 1950 cost of air trans-
portation per available ton mile was reduced to 28
cents as compared with the cost of such unit for
1949 of 33 cents. In spite of the inflation of costs, this
reduction was made possible by greater efficiency,
improved operating techniques, and better utiliza-
tion of personnel and equipment. The Company's
operating costs are among the lowest in the industry.
Improvements in operating equipment, both flight
and ground, and in .operating procedures, have been
made in 1950.
In 1950, the Company completed 97.48% of all
airplane miles scheduled and carried an average of
1,695 passengers each day. The average passenger
traveled 377 miles on Western Air Lines' system
and paid $18.55 for his trip, exclusive of the 15%
Federal transportation tax.
Regularly scheduled services were inaugurated in
1950 to Edmonton, the Capital of the Province of
Alberta, Canada; to Brookings, South Dakota, and
to Mankato, Minnesota. Western Air Lines' system
presently consists of 5,014 miles of routes certifi-
cated by the Civil Aeronautics Board over which
an average of 32,432 airplane miles, amounting to
1,116,592 airplane seat miles, are scheduled each
day to serve, with Convair, Douglas DC-4 and DC-3
aircraft, the following 45 cities in 13 western states
and Canada:
ARIZONA NEBRASKA
Yuma Alliance
CALIFORNIA Scottsbluff
Burbank NEVADA
El Centro Las Vegas
Long Beach OREGON
Los Angeles Portland
Oakland
Ontario
SOUTH DAKOTA
Palm Springs
Brookings
San Bernardino
Huron
San Diego
Pierre
San Francisco
Rapid City
COLORADO
Spearfish
Denver
UTAH
Cedar City
IDAHO Logan
Idaho Falls Ogden
Pocatello Salt Lake City
MINNESOTA WASHINGTON
Mankato Tacoma
Minneapolis Seattle
Rochester
St. Paul
WYOMING
Casper
MONTANA Cheyenne
Billings Jackson
Butte Sheridan
Cut Bank
Great Falls CANADA
Helena Edmonton, Alberta
Lewistown Lethbridge, Alberta
Additional certificated points not now served because of
inadequate airports are: St. George and Richfield, Utah; Hot
Springs, South Dakota; West Yellowstone, Montana; and
Chadron, Nebraska.
In 1946 the Company was granted a certificate by the
President of the United States and the CAB for an inter-
national route between Los Angeles, California and Mexico
City, Mexico, via La Paz, Baja California. Service over this
route cannot begin until the governments of the United States
and Mexico agre~ on reciprocal air routes between the two
countries. The Company is advised that little progress has been
made in connection with such an agreement and hence has
no present plans for the inauguration of service to Mexico.
Condensed Comparative
Statement of Profit and Loss
($000.00 omitted)
For the Calendar Year
1950 1949 1948
Operating revenues:
Passenger ............ $10,865.
Mail . . . . . . . . . . . . . . . . 2,090.
Other . . . . . . . . . . . . . . . 1,291.
Total operating
$ 8,024.
2,504.
1,006.
$ 7,813.
2,136.
514.
revenues ......... $14,246. $11,534. $10,463.
Operating expenses:
Depreciation ......... $ 1,124.
Other . . . . . . . . . . . . . . . 11,487.
Total operating
expenses ........ .
Operating profit ( or loss) ..
Non-operating income and
expense ( net) ........ .
Federal income taxes or
credits .............. .
Minority interest in profit
$12,611.
1,635.
( 192.)
( 652.)
$ 1,335.
9,229.
$10,564.
970.
(249.)
(280.)
$ 1,164.
9,198.
$10,362.
101.
( 180.)
220.
of subsidiary . . . . . . . . . . ( 3.) ( 9.) ( 6.)
Net profit ( or loss) . . . $ 788. $ 432. $ 135.
Condensed Comparative Balance Sheet
As of December 31 ($000.00 omitted)
ASSETS LIABILITIES
( What we own) ( What we owe)
1950 1949 1948 1950 1949 1948
Current Assets: Current Liabilities:
Cash ............... $ 1,635. $ 1,401. $ 1,462. Notes payable ........ $ 440. $ 773. $ 2,394.
Accounts receivable .... 1,363. 1,021. 2,307. Accounts payable ...... 786. 522. 1,087.
Inventories ........... 245. 210. 246. Air Travel Plan deposits . 203. 206. 229.
Prepaid expenses ....... 482. 461. 522. Accrued salaries, wages.,
taxes, insurance, etc,. ... 1,052. 887. 620.
Total current assets .. 3,725. 3,093. 4,537.
Properties and equipment:
Unused portion of
Airplanes, engines, land,
tickets sold ........... 264. 174. 321.
Total current liabilities 2,745. 2,562. 4,651.
buildings, equipment,
spare parts, etc ......... 12,934. 12,598. 12,311. Notes payable-long term 2,231. 3,113. 3,551.
Less reserve for Operating reserves ...... 272.
depreciation .......... (6,313.) (5,427.) (4,217.) Minority stockholders'
11. 11. 12. interest in subsidiary .... 12. 23. 24.
Sundry securities ........
Deferred Charges ........ 186. 176. 156. Capital stock
(525,164 shares) ....... 525. 525. 525.
Routes, contracts
and leases ............ ll3. 127. 147.
Capital surplus .......... 2,768. 2,768. 2,768.
- -- - - - Earned surplus .......... 2,375. 1,587. 1,155.
$10,656. $10,578. $12,946.
Total Assets ........
MOBILIZATION-As Western Air Lines, the coun-
try's oldest continuously operated air carrier, enters
its second quarter-century, the mobilization of its
personnel and facilities in the interests of our na-
tional defense is of paramount importance in the
Company's planning. Secretary of the Air Force,
Thomas K. Finletter, recently recognized the neces-
sity of maintaining the domestic air transport
industry at an efficient level to provide required
transportation for production and home front pur-
poses during a period of national emergency. Mr.
Finletter observed that, "While the air transport
- - - - - -
Total Liabilities ..... $10,656. $10,578. $12,946.
Stockholders' equity
per share ............. $10.79 $9.29 $8.47
industry will be called upon to assist in a material
way in the event of war, a plan must be developed
so that the airlines -which now are an absolutely
essential part of our transportation system-can con-
tinue to operate as commercial airlines during the
war, since the country will be very dependent upon
them."
During World War II, both Western Air Lines
and its subsidiary, Inland Air Lines, performed
several war-time services under contract with the
Government. Among other tasks, the Company oper-
ated for over three years a total of 6,150 trips over
a 2,451 mile route between Great Falls, Montana,
and Nome, Alaska. More than seven million miles
in all were flown over this route, with a perfect
safety record.
At the present time the Company has a contract
with the United States Air Force under which its
aircraft and flight personnel participate in the Pacific
airlift to Tokyo.
Throughout the Company's system, including the
Pacific Coast, the Intermountain Region and the
northern section of the Great Plains, the defense
industries and the mobilization program have been
and are being materially accelerated. Military estab-
lishments are located at or in the vicinity of many
cities on Western Air Lines' system. Because of these
wide-spread and varied enterprises, it is anticipated
that the requirements for commercial air transport
services offered by the Company will in the imme-
diate future be substantially increased. The Company
is making plans to provide additional service and will
stand ready to do its part.
STOCKHOLDERS-The 525,164 outstanding shares
of $1.00 par value capital stock of the Company are
held by approximately 4500 individual stockholders
residing in each of the 48 states. The stock is listed
on the New York Stock Exchange and on the Los
Angeles Stock Exchange. During 1950, 490,000
shares of the stock were traded on the New York
Stock Exchange between a price range of 7}~ low
and 13 high; on the Los Angeles Stock Exchange
43,260 shares were traded with a low of 7 and a
high of 13. The year-end closing price of the stock
on both stock exchanges was 12. Book value of the
stock as of December 31, 1950, was $10.79 per share.
All shareholders are urged to be represented in
person or by proxy at the annual stockholders meet-
ing to be held at the general headquarters of the
Company in Los Angeles on April 10, 1951.
DEBT - During the reorganization of the Company
in 1947, loans from the Reconstruction Finance Cor-
poration were arranged for a total of $6,421,606.
At the end of 1950, this debt had been reduced to
$2,671,598, representing a repayment of 58.4% of the
original loans. All amounts due through June 30,
1951, were prepaid as of December 31, 1950. Steps
are being taken to refinance the balance of this obli-
gation with private banking sources on terms more
advantageous to the Company.
PERSONNEL-The Company is fortunate in being
staffed by an outstanding group of loyal and expe-
rienced personnel in all divisions. The average
length of service of Western Air Lines employes is
the highest in the industry. The training, knowledge
and judgment of these veteran airline people is of
immeasurable value to the Company and to the
cities it serves. About 17% of the employes own stock
in the Company. Good progress has been made in
the stabilization of employment during the year
and in minimizing the extent of the historical sea-
sonal change in number of employes due to the
operation of reduced flight schedules in the winter
months. At the close of the year the Company had
1279 employes, of whom 548 were in the Operations
Division, 496 in the Service Division, 97 in the Treas-
ury Division, 93 in the Sales Division, and 45 in the
General Administrative Division.
As a result of the national mobilization the air-
line industry, like many others, is now faced with
a manpower problem which requires intensified
employment training and replacement programs.
The Company and the rest of the industry are
working closely with the appropriate branches of
the Federal Government in order to solve this
problem so that the national defense utility of the
industry and its component units can be preserved
and strengthened.
Participation in the Westemaire Federal Credit
Union is open to all Company personnel, of whom
approximately 65% are now members. This organi-
zation closed a successful year with a total of 509
loans aggregating $162,519, and its 821 members
received a dividend on their savings. No losses have
been experienced in connection with loans made.
The Employes' Suggestion System has been con-
tinued. Many cash prizes have been given for indi-
vidual suggestions which have been accepted and
put into effect to improve the efficiency of the
Company.
Early in 1950, the Employes' club in Los Angeles
opened a modem cafeteria for the use of Company
employes, their guests, passengers, and tenants of
Western Air Lines' headquarters building.
The employes' group insurance program, cover-
ing both life insurance and accident and sickness
insurance, hospitalization and family benefits, to
which most employes subscribe, operated success-
fully during 1950.
Due to the increase in living costs, two voluntary,
Company-wide increases in salaries and wages were
granted to all employes during the fall of 1950.
GOVERNMENTAL REGULATION-The Company has
numerous matters pending before the Civil Aero-
nautics Board. Of prime importance among these
is the dispute over the Company's claim for retro-
active mail compensation for the period prior to
January 1, 1949, on which matter the CAB has not
finally acted. The Company considers the CAB' s
tentative decision as legally and equitably wrong
and has advanced that position in its exceptions and
brief filed with the CAB in January 1951. Also, the
Air Transport Association of America, composed of
forty scheduled certificated airlines, requested and
has been permitted by the CAB to intervene in this
proceeding as amicus curiae in support of the Com-
pany's position, and in opposition to the tentative
findings of the Civil Aeronautics Board. It is hoped
that this matter can be finally decided by the CAB
during 1951. The Company's current mail rates are
not in issue.
The Company has pending with the CAB two
important applications for extensions of its routes
as shown by dotted lines on the system map else-
where in this report. One application involves an
extension of the Imperial Valley route from Yuma
to Phoenix, Arizona. It is expected that a decision
in this case will be reached during the fall of 1951.
The other application is for a route between Rapid
City, South Dakota, and Salt Lake City, Utah, via
Casper, Wyoming. This new connecting route, if
granted, will _
serve to integrate the operations of
the Company's system, thereby permitting greater
utilization of personnel and equipment, in addition
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to providing much-needed direct air service be-
tween Southern California, Nevada and Utah, and
the important communities of the Great Plains
region in central Wyoming, South Dakota and
Minnesota.
The Company also has pending with the Civil
Aeronautics Board two applications for "feeder
routes" on the West Coast extending from Los
Angeles, California, to Bellingham, Washington.
The Company is of the opinion that it can provide
the existing temporary "feeder" service at a very
substantial savings to the taxpayers in comparison
with the present cost of this service. It is not known
what action, if any, the Civil Aeronautics Board
contemplates taking on these applications. The Com-
pany will continue to impress its views upon the
CAB with the hope that in due course the Board will
undertake a review of its "experimental feeder route"
program which now threatens the continued sound
development of the nation's air transport system.
Also awaiting action by the Civil Aeronautics
Board is the Company's application to dissolve its
subsidiary, Inland Air Lines, Inc., and to consoli-
date the properties and routes of that corporation
with those of the parent company in order to elimi~
nate the necessity for maintaining duplicate sets of
books, duplicate Government reports, etc. The Com-
pany owns 98.8% of the outstanding stock of Inland
Air Lines, Inc., and the dissolution of the latter will
reduce the cost of operating the Company's system.
Other than those mentioned herein, no additional
applications for new routes or extensions of existing
routes are presently contemplated.
Studies are still in progress by committees of the
Congress, the CAB and others, looking toward the
separation of the elements of so-called "subsidy,"
if any there be, in the amounts of compensation
paid to all air carriers for the transportation of U. S.
mail. As stated in the Annual Report for 1949, the
Company does not oppose such separation provided
it is done on a fair and non-political basis by per-
sons competent to make such separation after thor-
ough and impartial study. As a matter of fact, the
rates of mail compensation received by the Com-
pany are lower than mail rates paid to many com-
parable air carriers and very considerably lower
than the rates paid to international air carriers and
recently certificated "temporary feeder lines."
The 1950 mail compensation: received by the Com-
pany was 16.5% less than mail compensation paid to
it in 1949. In 1949 mail pay represented 21.7% of total
operating revenues, while in 1950 mail compensation
represented only 14.7% of total operating revenues.
On the other hand, ton miles of mail carried by the
Company increased 72.5% in 1950 over ton miles
carried in 1949.
OUTLOOK-The Company celebrates its Silver An-
niversary with good reason for confidence and
optimism. Along with a rapid increase in the accept-
ance of air transportation as a necessary part of the
present day economy has come a great growth in
the population, prosperity, and industrial and
mobilization activity in the thirteen states in which
Western Air Lines operates. All indications point to
a continuation of such growth.
In concluding this report on the most successful
year of operation in the Company's history, it is
proper that on behalf of the Board of Directors,
appreciation be expressed to all members of the
organization for a job well done, together with a
firm determination to do in the future an. even better
job in meeting the demands made on the Company
in the interests of commerce, the national defense
and the Postal Service.
March 10, 1951
Western Air Lines Building
Los Angeles International Airport
Los Angeles 45, California
PRESIDENT
s America's oldest Airline
enters its second
quarter-century
ln April, Western Air Lines becomes the first
airline in the nation to complete 25 years of
continuous operation. Air transport's growth
during this quarter-century has speeded the
development of the West by setting new stand-
ards of travel and communication.
West rn is proud to have pion ered from its
original route between Los Angel and Salt
Lake City, started in 1926 with two-passenger, open cockpit
biplanes, to its present 5000-mile system, serving each day
with modern, dependable airplanes, 45 cities in 13 western
states and Canada. Western is proud to have d veloped new
quipm nt and techniques that have been adopted by the
industry; proud that in addition to meeting the needs of
commerce and of the postal service, its record shows many
jobs well done for the military during World War II -
including the operation for over three years of a vital route
between M-0ntana and Alaska. Today some of West m's
personnel and aircraft are engaged under Air Force contract
in the Pacific Airlift from California to Tokyo.
On it Silv r Anniv rsary Western pledges its continued
Hort to strengthen the nation's air transport faciliti s - for
p ac , mobilization or war.
Consolidated Balance Sheet as of December 31, 1950
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 $16,395.07 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) ........... .
Prepaid expenses ................................. .
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 operations ................... .
Construction work in process ..................... .
Less allowance for depreciation ( Note 2) .......... .
Routes, contracts and leases, less amortization $73,392.00 .. .
Deferred charges:
Unamortized overhaul and pre-operational expense of
aircraft ..................................... .
Other .......................................... .
$ 355,508.96
308,254.21
440,229.35
168,965.63
92,167.58
1,365,125.73
14,661.08
1,348.35
2,984,093.48
8,392,621.85
1,186,115.87
271,444.69
98,534.52
12,934,158.76
6,313,139.88
158,453.90
27,746.26
$ 1,634,673.45
12,761.22
1,350,464.65
245,315.70
482,008.08
3,725,223.10
11,186.71
6,621,018.88
112,939.98
186,200.16
$10,656,568.83
tt
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, wages, taxes, insurance and other ... .
Provision for unused tickets ........................ .
Provision for Federal taxes on income ( Note 2) ..... .
Long term debt:
Notes payable-Reconstruction
Finance Corporation ( Note 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 (Notes 2 and 3)
Contingent liabilities (Note 4) ......................... .
Long term lease commitments ( Note 5) ................. .
$ 2,671,597.65
440,499.98
525,164.00
2,768,247.10
2,374,927.31
$ 440,499.98
540,810.06
204,270.54
40,601.30
202,725.00
332,843.70
264,141.15
718,773.56
2,744,665.29
2,231,097.67
12,467.46
5,668,338.41
$10,656,568.83
Statement of Consolidated Income for the Year Ended December 31, 1950
Operating Revenue:
Passenger .............................................. .
Mail .................................................
Non-Scheduled transport services ........................ .
Express and freight ..................................... .
Excess baggage and other ............................... .
Incidental revenue-net .................................. .
Tohll 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 . .............................. . ................. .
Income before Federal Taxes on Income ............... .
Provision for Federal Taxes on Income
( excess profits tax - none ) ............................ .
Less Minority interest in subsidiary . . . ......................... .
Net Income ( Note 2) ....... . ........................ .
Statement of Consolidated Earned Surplus
Amount at December 31, 1949 .. . ............. . ............... .
Add- Net income for the year ............................... .
Amount at December 31, 1950 ( Notes 2 and 3) .................. .
$ 3,842,598.57
2,066,144.84
1,184,305.74
801,796.72
894,083.03
1,177,997.92
476,492.26
1,043,185.99
1,124,127.80
8,943.61
9,024.60
153,532.62
18,180.00
25,464.02
13,172.53
$10,865,079.22
2,090,031.97
730,557.66
398,620.65
98,405.45
14,182,694.95
63,798.65
14,246,493.60
12,610,732.87
1,635,760.73
17,968.21
1,653,728.94
210,349.17
1,443,379.77
652,000.00
791,379.77
3,475.36
$ 787,904.41
$ 1,587,022.90
787,904.41
- - - -
$ 2,374,927.31
Notes to Financial Statements
1. NOTES PAYABLE-RECONSTRUCTION FINANCE CORPORATION.
The amount due to Reconstruction Finance Corporation,
$2,671,597 ($2,117,766 on 1947 loan and $553,831 on
1948 loan), is secured by inventories, property and equip-
:ment, and the capital stock of Inland Air Lines, Inc., a
99% owned subsidiary. Under the terms of the credit agree-
ments, as amended, the indebtedness as of December 31,
1950, is payable in specific amounts with interest at 4% per
annum as follows:
1947 Loan - Period July 1, 1951, to June 1, 1952, $28,000
monthly May through October, and $8,000 monthly
November through April; Period July 1, 1952, to Decem-
ber 1, 1952, $100,000 monthly July through October,
and $55,000 monthly during November and December.
The unpaid balance, if any, is due on or before December
31, 1952.
1948 Loan - $52,083 monthly commencing July 30, 1951.
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 income for the preceding year ( before provision
for depreciati_
on) 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 1951.
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. FEDERAL TAXES ON INCOME. The federal income tax
returns of the Company for 1947, 1948 and 1949, have been
examined by a field agent of the Bureau of Internal Revenue
and in connection therewith the Company agreed to a pro-
posed additional assessment of $171,000 of which $44,000
has been recorded as a liability as of December 31, 1950.
The balance of $127,000 has not been recorded pending
clearance by the Government of the related depreciation
schedule for Douglas DC-4 aircraft and engines, which as
of January 1, 1949, redetermines the remaining life to be
60 months from that date rather than a life of 48 months
ending in 1950. Upon clearance by the Government adjust-
ment will be made reducing the provision for depreciation
for 1949 and 1950 in respective amounts of $339,000 and
$193,000 and increasing the provision for federal taxes on
income for such years in the respective amounts of $127,000
and $81,000. Net income as reported for 1949 and 1950
would thus be increased $212,000 and $112,000, respec-
tively, or a total of $324,000. The Federal income tax returns
of the subsidiary have been examined and settled through
June 30, 1947.
3. MAIL REVENUE. On March 3, 1949, the Civil Aeronautics
Board awarded the Company "Temporary Rates of Mail
Compensation" which, as to the period subsequent to Janu-
ary 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 retro-
active mail revenue in amount of $975,461, which was
recorded as income for the year 1948; a similar award was
made to the subsidiary in amount of $75,049. On November
27, 1950, the Civil Aeronautics Board issued a tentative de-
cision, to which exception has been filed by the Company
and its subsidiary, specifying a rate of compensation for the
period prior to January 1, 1949, which, if the appeal is not
successful, will require a refund of mail pay in amount of
$747,681. Against such amount there would be applied a
related tax credit which at 1951 tax rates would amount to
approximately $350,000; the net amount of $397,681 would
then be charged against earned surplus. Management is of
the opinion that the tentative decision of the Civil Aero-
nautics Board is in error, both legally and equitably, and
therefore no provision has been made in the accounts of the
Company pending final settlement of the issue.
4. CONTINGENT LIABILITIES. As of December 31, 1950, the
Company and its subsidiary were contingently 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,
will not be material in amount.
5. 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, 1950, is summarized by periods of expiration
as follows:
Leases Amount
1954-1958
1959-1968
1969-1973
24
2
1
$109,000
26,000
29,000
6. CHANGES IN ACCOUNTING PRINCIPLES. For the year 1949 the
Company adopted the practice of amortizing over a 30
month period that part of the cost of new aircraft which
was deemed to be "built-in overhaul." Based upon experi-
ence with the new aircraft the Company, as of January 1,
1950, redetermined the amount of original cost deemed to
be "built-in overhaul" with the result that net income after
taxes for 1950 is approximately $42,000 greater than it
would have been if such redetermination had not been
made.
Accountants' Report
To the Board of Directors,
WESTERN AIR LINES, INC.:
We have examined the Consolidated Balance Sheet of Western
Air Lines, Inc., and Subsidiary as of December 31, 1950, and
the related statements of Consolidated Income 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 necessary in the cir-
cumstances; it was not practicable to con.firm receivables
from United States and State Government departments but
we satisfied ourselves by other means as to these items.
Provision has not been made for the possible refund to the
United States Government in respect to the final determina-
tion of mail pay compensation for the period prior to January
1, 1949; also, depreciation of Douglas DC-4 aircraft and
engines for 1949 and 1950 and the related Federal taxes on
income have not been revised to reflect the possible change
in estimated life. These matters are more fully explained in
Notes 3 and 2 to financial statements.
In our opinion, subject to the possible effect of the matters
referred to in the preceding paragraph, the accompanying
Consolidated Balance Sheet and statements of Consolidated
Income and Surplus present fairly the financial position of
Western Air Lines, Inc., and Subsidiary, at December 31,
1950, and the results of their operations for the year then
ended, in conformity with generally accepted accounting
principles applied on a basis consistent with that of the pre-
ceding year, except for the change, which we approve, set
forth in Note 6 to financial statements.
PEAT, MARWICK, MITCHELL &: CO.
Los Angeles, California
March 5, 1951
A B A N N E R Y E A R
Many new records were chalked up by the men and women
of Western Air Lines during 1950 - in traffic gains and
operating efficiency. Pictured here are highlights of some
of the activities that helped to make this the
best year in the company's history.
AIR COACH - Leading operator of economy coach service in the West, the
company passed a milestone in air travel history last May when the 100,000th
Coachmaster passenger boarded at Burbank for Oakland. Receiving orchids are
Mrs. Lawrence Brown and daughter, Cindy, who became "Air Coach Passenger
No. 100,000."
NEW NON-STOP SERVICE - Queens of the Minneapolis Aquatennial and St. Paul
Winter Carnival added glamour to 1950's inaugural of non-stop service between
the Twin Cities and Denver.
SKYWAY OF THE STARS - For 25 years the favorite airline of Hollywood, Western
has carried almost every important personality of screen, radio and television.
Shown are just a few. At left, the hero of young America, Bill "Hopalong
Cassidy" Boyd, and his wife, Grace Bradley, depart from Los Angeles for Jackson,
Wyo., during an extensive tour of the West's national parks. Center, lovely Esther
CHARTER FLIGHTS- Western set new charter-operation records in 1950, special-
izing in the transport of athletic teams, civic organizations, and military groups.
Most colorful charter flight of the year was made from Seattle to Los Angeles
by the famed Vancouver Police Bagpipe Band.
EDMONTON INAUGURAL- Service was opened during April into Edmonton, Alta.,
gateway to Canada's parks and oil fields. At official banquet Mayor Sidney
Parsons of Edmonton (center) received trophy of friendship from Mayor Earl J.
Glade of Salt Lake City as James Flaherty, president of the Great Falls Chamber
of Commerce, smiled approval.
Williams and Western team up to promote the annual Christmas Seal campaign.
At right, a famous troupe poses before leaving for San Francisco on Convair-liner
tour of Pacific Coast service installations. Left to right are Bob Hope, singer
Marilyn Maxwell, comedian Eddie Bracken, actress Gene Tierney, and leading man
Lloyd Nolan, all veteran air travelers.
OPERATING STATISTICS
Revenues: 0 1943 1944 1945 1946 1947 1948 1949 1950
Passenger0 ............................ $ 1,709 $ 3,169 $ 5,654 $10,474 $10,114 $ 7,813 $ 8,024 $10,865
Mail0
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
261 837 1,239 1,326( a) 1,570 2,136 2,504 2,090
Express, Freight, Charter, etc. 0

148 155 206 318 410 483 920 1,227
Other0

43 97 59 118 282 31 86 64
Total Revenueso . . . . . . . . . . . . . . . . . . . . . . $ 2,161 $ 4,258 $ 7,158 $12,236( a) $12,376 $10,463 $11,534 $14,246
- - -
Operating Expenses: 0
Depreciation .......................... $ 204 $ 321 $ 555 $ 1,369 $ 1,845 $ 1,164 $ 1,335 $ 1,124
Other0

1,851 3,702 6,298 11,744 11,196 9,198 9,229 11,487
Total Operating Expenses0

$ 2,055 $ 4,023 $ 6,853 $13,113 $13,041 $10,362 $10,564 $12,611
- - - - - - ---
Revenue Miles Flown ........ , ........... 2,057 4,057 7,279 10,594 9,607 8,707 9,496 11,783
Revenue Passengers .............. , ......... 80,907 147,854 303,931 602,302 491,680 353,569 422,193 618,624
Average Length in Miles per Passenger Trip .. 403 427 385 355 396 384 369 377
Average Revenue per Passenger Mile ........ $ .0525 $ .0502 $ .0483 $ .0489 $ .0519 $ .0576 $ .0515 $ .0497
Passenger Seat Miles Flown ............... 38,499 73,101 138,852 301,856 312,615 243,771 299,503 414,169
Revenue Passenger Miles0
. . . . . . . . . . . . . . . . . . 32,589 63,073 117,106 214,023 194,923 135,724 155,747 233,118
Passenger Load Factor ..................... 84.65% 86.28 % 84.34% 70.90% 62.35% 55.68% 52.00% 56.29%
Mail Ton Miles Flown .................... 435 893 1,120 706 733 574 567 978
Express and Freight Ton Miles0

221 221 312 635 912 1,089 926 1,442
Total Revenue per Revenu; Mile ............ $1.0506 $1.0495 $ .9834 $1.1550 $1.2882 $1.2017 $1.2146 $ 1.2005
Total Operating Expenses per Revenue Mile .... $ .9988 $ .9915 $ .9414 $1.2377 $1.3574 $1.1901 $1.1125 $ 1.0703
Percent of Scheduled Service Performed ...... 94.44% 95.43% 98.41% 96.59% 96.77% 98.32% 97.72% 97.48%
Nurnber Employes End of Year ............. 817 1,120 1,674 2,396 1,529 1,285 1,226 1,279
0 000. omitted (a) Adjusted for $344,300.89 in mail pay applicable to 1946, but received in 1947.
See WESTERN America first
Western Air Lines provides fast service to many
great vacation areas, including:
Banff and Lake Louise
Jasper National Park
Glacier National Park and the Waterton Lakes
Black Hills and Mt. Rushmore
Rocky Mountain National Park
Minnesota Lakes
Yellowstone National Park
Jackson Hole, Wyo., and Grand Teton National Park
Sun Valley
Utah National Parks
Grand Canyon
Dude Ranches and Desert Resorts
Death Valley
Las Vegas and Hoover Dam
Palm Springs
Southern California
San Francisco and the Redwood Empire
Oregon's Evergreen Empire
Mt. Rainier and Olympic National Parks
Seattle and the Puget Sound Playground
WESTERN AIR LINES
WESTERN AIR LINES SYSTEM
- PRESENT ROUTES PROPOSED ROUTES