Western Air Lines Annual Report 1951

Terrell C. Drinkwater
Stanley R. Shatto
Marvin W. Landes
Paul E. Sullivan
Arthur F. Kelly
J. J. Taylor
D. P. Renda
C. J. J. Cox
I. W. Burnham II, New York City
Hugh W. Darling, Los Angeles
Robert E. Driscoll, Rapid City, South Dakota
Hector C. Haight, Los Angeles
L. Welch Pogue, Washington, D. C.
Harry J. Volk, Los Angeles
John M. Wallace, Salt Lake City
Alexander Warden, Great Falls, Montana
Sidney F. Woodbury, Portland, Oregon
GENERAL OFFICES
Western Air Lines Building, 6060 Avion Drive
REGISTRARS
Citizens National Trust & Savings Bank
Chase National Bank
STOCK TRANSFER AGENTS
Security-First National Bank of Los Angeles
New York Trust Company
GENERAL COUNSEL
Guthrie, Darling and Shattuck
AUDITORS
Peat, Marwick, Mitchell & Co.
President and Director
Vice President -
Operations and Director
Vice President -
Service and Director
Vice President -
Administration and Secretary
Vice President -
Sales
Treasurer
Assistant Secretary and Attorney
Controller and Assistant Treasurer
Director
Director
Director
Director
Director
Director
Director
Director
Director
Los Angeles International Airport, Los Angeles 45, California
Los Angeles
New York
Los Angeles
New York
Los Angeles
Los Angeles
TO THE STOCKHOLDERS OF
WESTERN AIR LINES, ITS CUSTOMERS AND PERSONNEL
The year 1951, during which Western
Air Lines, Inc.*, celebrated its Silver
Anniversary, was one of continued development
and progress for the Company. New records for
traffic and net income were established. Net in
come for the year, after taxes and all other charges,
amounted to $1,389,300 or $2.52 per share, includ
ing approximately 68^ per share realized from the
sale of assets. This compares with adjusted net
income of $750,200, or $1.36 per share, for 1950
and $320,806 or 58^ per share, earned during 1949,
based upon 550,164 shares of capital stock outstand
ing on December 31, 1951.
During the year 1951, 691,322 passengers were
carried a distance of 260,000,000 revenue passenger
miles over the Company's 5,016-mile route system.
Total operating revenues were $16,281,514, an in
crease of 14% over the preceding year, despite the
fact that over 5% of the Company's scheduled air
plane miles in 1951 were cancelled due to a 15-day
Mechanics' Union strike during the third quarter.
Passenger revenues increased 20% and mail com
pensation decreased $878,056, or 42%, as compared
with 1950.
Coach operations, pioneered by Western, have
become increasingly important to the Company
and to the industry generally. During 1951, coach
passengers constituted 30% of the total revenue pas
sengers carried by the Company. Western recently
has added daylight coach service on its route north
of San Francisco-Oakland, thus making daylight
economy flights available for the first time, border
to border, from San Diego to Seattle-Tacoma.
Total operating expenses during 1951 were
$13,747,753, as compared with $12,610,732 for the
year 1950, an increase of 9% reflecting the con
tinuing rising costs of payrolls, taxes, parts and
supplies. Of the total revenue dollar, 37% was ex
pended for wages and salaries and 27% for materials,
gasoline and depreciation.
0 Throughout this report, the operations of the Company's sub
sidiary, Inland Air Lines, Inc., are consolidated with those
of the parent Company, except where otherwise indicated.
Although direct taxes accounted for but 12% of
the Company's revenue dollar during 1951, it is
apparent that substantial additional indirect taxes
were included in the price paid by the Company
for practically everything it bought.
The Company also collected from its customers
and employees approximately $2,600,000 in trans
portation, payroll and withholding taxes for re
mittance to the Federal and State Governments.
Probably one-third of the price of each ticket sold
by the scheduled airlines represents tax payments
in one form or another.
During its 25th year of service, the Company
completed 98.25% of all miles scheduled throughout
its system (excluding flights cancelled during the
mechanics' strike). Western carried an average of
1,975 revenue passengers during each day of opera
tion. These passengers traveled an average of 376
miles and paid, exclusive of the Federal transporta
tion tax, an average of $19.80 for their tickets.
SHAREHOLDERS
Western is owned by approximately 5,000 share
holders holding a total of 550,164 shares of out
standing capital stock. The stock is listed and traded
CONDENSED COMPARATIVE BALANCE SHEET
($000 omitted)
ASSETS
(What we own)
As of December 31
1951 1950 1949
Current assets:
Cash $ 3,223 $ 1,635 $ 1,401
Accounts receivable..
.
1,485 1,363 1,021
Inventories 324 245 210
Prepaid expenses 484 482 461
Total 5,516 3,725 3,093
Sundry securities 17 11 11
Properties and
equipment 13,448 12,934 12,598
Less allowance
for depreciation (6,859) (6,313) (5,427)
Deposits on equipment
purchase contracts . .. .
1,313 - -
Routes, contracts
and leases 96 113 127
Deferred charges 271 186 176
Total assets $13,802 $10,656 $10,578
LIABILITIES
(What we owe)
As of December 31
1951 1950 1949
Current Liabilities:
Notes payable $ 861 $ 440 $ 773
Accounts payable ....
916 847 583
Air travel plan deposits 210 203 206
Accrued salaries,
wages and expenses. 1,209 333 326
Unused transportation. 430 264 174
Federal taxes on income 1,455 890 694
Total 5,081 2,977 2,756
Notes payable --
long term 1,924 2,231 3,113
Provision for
contingencies 200 200 200
Minority stockholders
interest 10 12 23
Shareholders equity:
Capital stock 550 525 525
Capital surplus 2,967 2,768 2,768
Earned surplus 3,070 1,943 1,193
Total 6,587 5,236 4,486
Total liabilities $13,802 $10,656 $10,578
Shareholders' equity
per share $11.97 $9.97 $8.54
on the New York Stock Exchange and on the Los
Angeles Stock Exchange. It also is traded on the
San Francisco Stock Exchange. During 1951,
369,800 shares of stock were traded on the New
York Stock Exchange within a price range of $11%
low and $16 high; on the Los Angeles Stock
Exchange 36,240 shares were traded between a low
of $12 and a high of $15%. The year-end closing
price of the stock on the New York Exchange was
$15/8. The net book value per share of the stock as
of December 31, 1951 was $11.97, as compared with
$9.97 per share, as adjusted, on December 31, 1950.
For the first time since 1936, stockholders received
a dividend in 1951 consisting of two payments of
25 cents each or a total of 50 cents per share. It is
the hope of the Board of Directors and Manage-
ment of the Company that earnings will
permit the continuation of regular divi
dend payments to shareholders.
The Company solicits the support of its share
holders in furnishing modern air transportation to
45 cities in 13 Western states and Canada. Western
hopes its stockholders will use its passenger, mail
and cargo services and will urge such use by their
friends and associates.
FINANCES
In the Spring of 1951, the Company arranged for
a bank credit totaling $8,000,000 but limited to
$6,500,000 at any one time. During the year, the
Company borrowed $3,500,000 against this credit,
of which $2,500,000 was used to retire the
Company's loan from the Reconstruction Finance
Corporation and the balance was used for progress
payments on the five Douglas DC-6B aircraft which
are on order. As at December 31, 1951, these bor
rowings had been reduced to $2,785,000. It is
anticipated that additional borrowings will be made
under the credit agreement during 1952 to complete
the purchase of the five Douglas DC-6B aircraft.
In order to improve Western's working capital
position and to provide additional funds for general
corporate purposes, the Board of Directors has
under active consideration the issuance of addi
tional capital stock with rights to be made available
to existing stockholders. The time of issuance will
depend upon market and general business condi
tions, and when and if action is taken in this regard
all stockholders will be promptly notified.
CONDENSED COMPARATIVE
STATEMENTS OF INCOME
($000 omitted)
For Calendar Year
1951 1950 1949
Operating revenues:
Passenger $13,688 $11,395 $ 8,471
Mail 1,212 2,090 2,504
Other 1,382 761 559
Total 16,282 14,246 11,534
Operating expenses:
Depreciation 998 1,124 1,335
Other 12,750 11,486 9,229
Total 13,748 12,610 10,564
Operating profit 2,534 1,636 970
Non-operating (income)
ajid expense (280) 196 258
Federal income taxes
or (credits) 1,425 690 391
Net income $ 1,389 $ 750 $ 321
Per share based on
550,164 shares $2.52 $1.36 $0.58
PERSONNEL
Sincere appreciation on behalf of the Board of
Directors is expressed to the loyal and hard-working
Western employees for their individual contribu
tions to the successful operation of the Company
in its Silver Anniversary year. The experience, train
ing, knowledge, skill and judgment of its 1,459
employees is Western's principal asset. Being the
oldest continuously operated airline in the nation,
Western is fortunate in the long service record of
its personnel. For example, the average length of
Company service of Flight Captains exceeds 11
years. During 1951, the average monthly turnover
in Western's personnel amounted to but 2.4%.
Eighty-four per cent of the employees carry
Western's group accident and sickness insurance;
84% carry group hospitalization insurance for them
selves and their families; and 70% of those eligible
carry Company group life insurance. During the
past year, benefit payments in excess of $126,000
were made under these policies.
To supplement the existing employees' insurance
programs, the Board of Directors currently is sub
mitting to the stockholders for approval an
employees' Company-wide contributory pension or
retirement plan, which, if approved by the stock
holders and accepted by the requisite number of
eligible employees, soon will be made effective.
Under this plan, the Company will pay the cost
of past service benefits and will share with the
employees the cost of future service benefits.
Western maintains for its employees one of the
most liberal emergency and vacation free transpor
tation policies in the Industry. In 1951, Western
personnel and their families were issued 4,500 passes
on Western's system, and by virtue of arrangements
between Western and other scheduled airlines, were
issued 3,000 passes on the systems of those airlines
for total "space available" air transportation valued
at $692,000.
During the past year, the employees' Western-
aire Federal Credit Union continued to grow.
Membership increased from 821 to 1,015. In 1951,
1,282 loans were made to employees aggregating
$271,670, an increase of 25% over 1950. Total em
ployees' savings on deposit exceed $242,000. A divi
dend of 5% was earned and paid to the shareholders
of the Credit Union.
EQUIPMENT
Passenger, mail, express and freight serv
ice over the Company's 5,016-mile route
system was operated during 1951 with a fleet con
sisting of 10 Convair-Liner, 10 Douglas DC-3, and
5 Douglas DC-4 aircraft. This fleet will be aug
mented, beginning in the Fall of 1952, by the addi
tion of 5 Douglas DC-6B aircraft, which, together
with spare parts and equipment, have been ordered
at a total cost exceeding $6,000,000. The addition of
these new and improved 66-passenger, pressurized
luxury liners will enable the Company to provide
more service over its principal routes with the finest
equipment flying today.
Western's complete maintenance and overhaul
shops have continued the program of progressive
modernization of its fleet. Among major projects
in this category were the installation of omni
directional aircraft radio equipment, and extensive
conversions of engines and airframes for improved
operating efficiency.
The Company's gross investment during the past
four years in property and equipment has been
approximately $10,000 per employee, as compared
with an average investment per employee in 1946
of $4,500 and an average investment per employee
in 1936 of approximately $3,600.
CIVIL AERONAUTICS
BOARD PROCEEDINGS
The Company has pending before the Civil Aero
nautics Board a very important route application
to provide scheduled service between Salt Lake
City, Utah, and Rapid City, South Dakota, via
Casper, Wyoming. It is expected that a final de
cision will be forthcoming in this proceeding during
the summer of 1952. The new franchise, if granted,
will permit the Company to supply much-needed
regional air service between points in Utah,
Wyoming, and South Dakota, and will permit far
better operating integration of the Company's sys
tem. The proposed route extension also will enable
the Company to furnish one-carrier, one-plane,
passenger, mail and air express service between
Southern California and the Minneapolis-St. Paul
area, which will be an important improvement over
the existing service.
Shortly after the close of 1951, the CAB denied
Western's application for an extension of its routes
from the present terminal, Yuma, Ariz., to Phoenix,
Ariz., and issued an order undertaking to force the
DIVISION OF WESTERN'S INCOME
Total Operating Revenues.. .$16,282,000 100%
suspension of the Company's operations at Yuma,
Ariz., and at El Centro, Calif. Counsel for the
Company is of the opinion that the CAB exceeded
its statutory authority in this regard and therefore
this case has been appealed to the United States
Circuit Court of Appeals. The only other trunk
route application Western has pending with the
CAB is for a new direct route between San
Francisco-Oakland and Las Vegas, Nev.
By order of the Civil Aeronautics Board, effec
tive October 1, 1951, the mail rates for Western
Air Lines, Inc., and Inland Air Lines, Inc., were
opened for review. Since the issuance of that order,
Western has indicated to the CAB its willingness
to accept a non-subsidy mail rate of 53 cents per
ton mile of mail carried. The proposed rate, re
garded by the CAB as a service rate for Western,
should be established soon. The mail rate for
Western's subsidiary, Inland Air Lines, Inc., from
October 1, 1951, forward also remains to be de
termined by the CAB. The question of the mail
rate for Western for the retroactive period prior
to January 1, 1949, has been appealed from the
order of the CAB to the United States Circuit Court
of Appeals where the matter is pending.
Progress has been made toward the dissolution
of Inland Air Lines, Inc., and the merger of its
properties and franchises into the parent Company,
Western, which owns more than 99% of the out
standing stock of the subsidiary. It is expected that
this dissolution and merger can be concluded pur
suant to orders of the CAB before the summer of
1952 with resultant savings in costs.
Since 1946, Western has had a certificate of public
convenience and necessity issued by the Civil Aero
nautics Board and approved by the President of
the United States to provide service from Los
Angeles to Mexico City, D. F., and to La Paz, Baja
California. Service over this route has been delayed
because of the absence of a bilateral agreement
between the governments of the United States and
Mexico covering reciprocal air rights between the
two countries. During 1951, further discussions took
place between the two governments, but as yet no
agreement has been reached. It is hoped that during
1952 this matter will be settled so that Western will
be in a position to provide service to Mexico.
Western presently serves the cities of Edmonton
and Lethbridge in the Province of Alberta, Canada.
Although the Company has a franchise from the
Civil Aeronautics Board to serve Calgary, the gate
way to world-famous Banff and Lake Louise, situ-
ated midway between Lethbridge and Edmonton,
the Canadian Government has not yet granted
authority to serve Calgary. Western is urging that
appropriate arrangements be made between the
Governments of the United States and Canada in
order that service to Calgary soon may
be inaugurated.
OUTLOOK
Western's forecast for 1952 indicates an increase in
operating revenues over 1951. Such anticipated in
crease is predicated upon the expanding utilization
of air transportation by the public and the expected
continued prosperity and industrial development in
the general territory served. Operating expenses are
expected to continue the inflationary rise. In order
to meet these higher costs and insure reasonable
earnings, it is not unlikely that a modest industry
wide increase in first-class fares will become neces
sary during 1952. An airline ticket is one of the
few commodities which has not yet become more
expensive with inflation.
During 1951, the Company played its part in the
mobilization program. Some of its personnel and
aircraft were engaged in the Korean Airlift. Other
military tasks were performed. Western, in common
with the entire scheduled air transport industry,
will continue to stand ready to do its part in this
program.
In order to obtain additional outstanding repre
sentation in the West, the Board of Directors was
increased to 12 members during 1951 by the addi
tion of Mr. Harry J. Volk of Los Angeles, Vice-
President in charge of the Western Home Office of
the Prudential Insurance Company of America; and
Mr. Robert E. Driscoll of Rapid City, South Dakota,
Chairman of the Board of The First National Bank
of the Black Hills.
Western Air Lines notes with sorrow the death
of Mr. Robert H. Purcell, Controller and Assistant
Treasurer. This office has been filled by the election
of Mr. Charles J. J. Cox.
The Board of Directors and Executive Staff of
Western Air Lines look to the future with confi
dence and faith in the sound development of air
transportation as an essential public utility, and be
lieve that this Company is privileged to serve the
finest and fastest-growing section of our Country.
Respectfully submitted,
I A
jJLSL C..
President
March 1, 1952
Western Air Lines Building
Los Angeles International Airport
Los Angeles 45, California
EDMONTON
1EWISTOWN
MINNEAPOLIS
PAUL
BILLINGS
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POCATELLO!
LOGANf
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NEBR.
APRIL 17, 1926
TO MEXICO CITY
Twenty-five years have seen Western
Air Lines grow from a 670-mile route serving
three cities to a 5000-mile system linking
45 cities in 13 western states and Alberta, Canada, with
fast, frequent passenger, mail, express and freight service.
WESTERN AIR LINES
AMERICA'S OLDEST AIRLINE
CONSOLIDATED BALANCE SHEE
(WITH COMPARATIVE FIGURES FOR 1950)
ASSETS
Current Assets: 1951 1950
Cash in banks and on hand $ 3,222,954 $ 1,634,673
Accounts receivable:
United States Post Office Department 139,851 355,508
Other United States and State Government Depts. 335,289 308,254
Interline and agents' traffic balances 540,187 440,229
Customers' accounts receivable 199,617 168,965
Other 295,438 104,930
1,510,382 1,377,886
Less allowance for doubtful accounts 25,000 14,661
1,485,382 1,363,225
Inventory of parts and supplies at the lower of
cost or replacement market 323,873 245,315
Prepaid expenses 484,121 482,010
Total Current Assets 5,516,330 3,725,223
Sundry securities
Properties and equipment at cost (Note 1):
16,962 11,187
Flying equipment 8,831,906 8,392,621
Buildings on and improvements to leased property.... 2,989,534 2,984,093
Other property and equipment 1,626,032 1,557,444
13,447,472 12,934,158
Less allowance for depreciation 6,859,113 6,313,139
6,588,359 6,621,019
Deposits on equipment purchase contracts (Note 2) 1,313,375 --
Routes, contracts and leases, less amortization $92,220....
Deferred charges:
96,459 112,939
Unamortized overhaul and pre-operational
expense of aircraft 119,347 158,454
Claim for recaptured mail pay (Note 3) 126,000
Other 25,640 27,746
270,987 186,200
$13,802,472 $10,656,568
!
LIABILITIES
Current Liabilities: 1951 1950
Current portion of long term notes
Accounts payable
Accounts payable -- taxes collected from others
Air travel plan deposits
Accrued salaries, wages, taxes, insurance and other...
Unused transportation
Federal taxes on income --
estimated
Total Current Liabilities
$ 861,000
669,987
246,095
209,950
1,208,730
430,373
1,454,891
5,081,026
$ 440,500
642,527
204,270
202,725
332,845
264,141
889,764
2,976,772
Notes payable --
Secured (Note 1)
Less amount due within 12 months
Amount due after 12 months
2,785,000
861,000
1,924,000
2,671,597
440,500
2,231,097
Provision for contingencies (Note 3) 200,000 200,000
Minority stockholders' interest in subsidiary 10,319 12,468
Shareholders' Equity:
Common stock --
$1.00 par value per share
Authorized 2,000,000 shares (Note 4)
Issued 550,164 and 525,164 shares respectively... 550,164 525,164
Capital surplus 2,967,425 2,768,247
Earned surplus from December 31, 1934 (Note 1) 3,069,538 1,942,820
6,587,127 5,236,231
$13,802,472 $10,656,568
Commitments and contingent liabilities (Note 2)
STATEMENT OF CONSOLIDATED INCOME
FOR THE YEAR ENDED DECEMBER 31,1951
(WITH COMPARATIVE FIGURES FOR 1950)
Operating Revenue:
Passenger
Mail
Charter and other transport services
Express, freight and baggage
Incidental revenue --net (Note 5)
Operating Expenses:
Flying operations
--
Ground operations
Flight equipment maintenance --
direct
Ground and indirect maintenance
Passenger service
Traffic and sales
Advertising and publicity
General and administrative
Depreciation
Operating Income
Non-operating Income:
Gain on disposition of property
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 5)
STATEMENT OF CONSOLIDATED EARNED SURPLUS
1951 1950
$13,687,903 $10,865,079
1,211,975 2,090,031
131,368 730,557
506,715 497,028
743,553 63,798
16,281,514 14,246,493
4,016,622 3,842,598
2,330,450 2,066,144
1,345,389 1,184,305
817,576 801,796
1,036,101 894,083
1,384,410 1,177,997
586,227 476,492
1,232,699 1,043,190
998,279 1,124,127
13,747,753 12,610,732
2,533,761 1,635,761
480,435 15,646
21,237 2,322
501,672 17,968
123,801 153,531
18,828 18,180
26,361 25,464
51,385 13,176
220,375 210,351
2,815,058 1,443,378
1,425,000 689,704
1,390,058 753,674
758 3,474
$ 1,389,300 $ 750,200
Amount as of December 31, 1950:
As reported at December 31, 1950 $ 2,374,927
Less: Additional Federal income taxes for years 1948-1950 194,107
Provisions for contingencies including
recapture of 1948 mail pay (Note 3) 200,000
Refund of 1948 mail pay by subsidiary company
net of applicable Federal tax credit 38,000
432,107
As adjusted 1,942,820
Add Net income for year ended December 31, 1951 1,389,300
3,332,120
Deduct Dividends paid in cash, $0.50 a share 262,582
Amount as of December 31, 1951 (Note 1) $ 3,069,538
STATEMENT OF CONSOLIDATED CAPITAL SURPLUS
Amount as of December 31, 1950 $ 2,768,247
Add Excess of proceeds over par value of 25,000 shares
of Common Stock issued upon exercise of option 209,375
2,977,622
Deduct Expenses incurred in connection with issuance 10,197
Amount as of December 31, 1951 $ 2,967,425
NOTES TO FINANCIAL STATEMENTS
Note 1. Long Term Notes. During 1951 the Company borrowed
$3,500,000 from the Bank of America under a credit agree
ment which, though authorizing a total borrowing of
$8,000,000, limits maximum outstanding indebtedness at any
one time to $6,500,000. The proceeds of additional loans
under the credit agreement are to be used solely for the pur
chase of new Douglas DC-6B aircraft referred to in Note 2.
The debt is secured by certain property and equipment
(principally aircraft, engines, propellers and the Los Angeles
hangar and office building, having a cost value of approxi
mately $9,000,000, together with a variable portion of the
related spare parts) and by the shares of Inland Air Lines,
Inc. evidencing the Company's investment therein.
The credit agreement provides, among other
things, that dividends to be paid shall be limited
1 the extent of consolidated net income realized
subsequent to June 30, 1950, that minimum consolidated net
worth shall be $5,000,000 plus 50% of the annual consolidated
earnings subsequent to December 31, 1950, and that the
excess of consolidated current assets over consolidated current
liabilities, exclusive of the current portion of long term debt,
shall not be less than $1,000,000 or a greater amount deter
mined by projecting average monthly expenses (exclusive of
depreciation), which greater amount as of December 31, 1951
approximated $1,125,000. The combined effect of the afore
mentioned minimum consolidated net worth requirement and
the limitation on the payment of dividends to earnings real
ized subsequent to June 30, 1950 is to restrict earned surplus
as of December 31, 1951 in the amount of $2,177,061 leaving
the balance of $892,477 as unrestricted; the amount of unre
stricted earned surplus is, however, subject to a further limi
tation which issues from the above cited requirement to main
tain minimum working capital. As of December 31, 1951 the
working capital requirement operates to restrict an additional
amount of $721,173, leaving $171,304 available for dividends.
The indebtedness bears interest at 3%% per annum; in
addition, a commitment fee of t of 1% per annum is required
until July 1, 1953 on the unused portion of $6,500,000. The
principal is payable monthly in stipulated amounts aggre
gating $652,500 for the year 1952 and $1,305,000 annually
in subsequent years. Additional principal payments are to be
made annually on or before April 1 of each year commencing
with 1952, in amounts equal to 33%% of consolidated net
income after taxes of the preceding calendar year after ad
justments for property sales when related proceeds are
remitted to the lender (for 1951 such payment shall be
measured by net income for the period from April 1 to
December 31, 1951). Accordingly, as of December 31, 1951
an amount of $208,500 is included in the current portion of
long term notes. Final maturity of all loans is December
31, 1957.
Note 2. Commitments and Contingent Liabilities. In March, 1951 the
Company contracted for five new Douglas DC-6B aircraft
and 7 spare engines at an approximate cost of $5,500,000;
the first aircraft is scheduled for delivery in September, 1952.
Related financing has been arranged as commented upon in
Note 1 above; as of December 31, 1951 contract advance
payments of $1,313,375 had been made.
The minimum annual rental liability under long term leases
covering real property leased to the Company and its sub
sidiary amounted to approximately $190,000 as of December
31, 1951.
As of December 31, 1951 the Company and its subsidiary
were contingently liable for claims and lawsuits in which they
are or may be defendants and for asserted fines and penal
ties but the management and its counsel believe the ultimate
liability, if any, will not materially affect the financial position.
Though provision has been made for all known income tax
liabilities, the Federal income tax returns of the Company for
1950 and 1951 and of the Subsidiary for the year ended
June 30, 1951 are subject to examination by the U. S. Treasury
Department.
On February 3, 1952 the Board of Directors declared a
cash dividend payable on March 15, 1952 of 15tf a share,
aggregating $82,525.
Note 3. Mail Revenue. On November 27, 1950 the Civil Aero
nautics Board issued a tentative decision specifying a rate of
compensation for the period prior to January 1, 1949, which
would have required a refund of mail pay by the Company
in amount of $686,565 applicable to the year 1948. Exceptions
thereto were filed and on June 26, 1951 the Board adopted
a final decision and it reduced the amount of mail pay re
fundable to $342,973. On July 25, 1951 the Company filed a
Petition for Reconsideration to which the Board responded
in an Opinion and Order under date of October 12, 1951
which claims mail pay refundable in amount of $334,639.
The Post Office Department implemented the Order of
October 12, 1951 by offsetting the claimed overpayment to
the extent of one-eighth thereof per month, approximately
$42,000, against mail pay earned subsequent to October
1, 1951.
Management is of the opinion that the position of the
Civil Aeronautics Board is legally wrong and should not be
sustained in an appeal for review now pending before the
United States Circuit Court of Appeals; the Post Office
Department has also filed an appeal from the Board's order
in which they assert that the Company should refund an
additional amount of $447,000; pending the final outcome
of this matter the Company has established a provision for
contingencies of $200,000 measured by the amount of the
claimed overpayment as determined by the Board net of a
related Federal tax credit, which based on the tax position
of the Company as of December 31, 1951 would be at least
38% thereof.
Note 4. Options to Purchase Capital Stock. 35,000 shares were re
served as of December 31, 1951 under a Restricted Stock
Option Plan adopted by the Board of Directors on April 10,
1951 under authorization of the shareholders. Such plan per
mits the allocation of not in excess of 5,250 shares to an
officer and 1,750 shares to a key employee. As of February
15, 1952, 31,000 shares have been allocated to twelve officers
and key employees; options had been issued in accordance
with the plan for 22,300 of the allocated shares with option
prices ranging from $11.88 to $14.14 a share. The option
prices are established by determining the average of the high
and low sales prices for the Company's stock on the New York
Stock Exchange on the day the officer or key employee asks
for an option under the allocation previously made. The term
of each option granted shall be five years from the date
granted and the right to grant options under this plan shall
terminate April 9, 1956.
Note 5. Revenues Subject to Renegotiation. Under applicable Federal
statutes, incidental revenues of the Company for 1951 in gross
amount of approximately $1,100,000 are subject to renegotia
tion. In the opinion of management the ultimate refund, if
any, will not have a materially adverse effect on the financial
position of the Company.

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, 1951 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 confirm receivables from
United States and State Government departments but we
satisfied ourselves by other means as to these items.
In our opinion, 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, 1951 and the results of their
operations for the year then ended, in conformity with gen
erally accepted accounting principles applied on a basis
consistent with that of the preceding year.
PEAT, MARWICK, MITCHELL & CO.
Los Angeles, California
February 27,1952
SILVER ANNIVERSARY YEAR
When Western Air Lines in April of 1951 commemorated
its silver anniversary, it became the nation's first airline
to complete 25 years of continuous operation. But many another
"first" was added to Western's history in 1951. Pictured here
are a few of the highlights in a record-breaking year.
YESTERDAY--Celebration of the 25th birthday of
America's oldest airline caused people throughout the
nation to reflect upon the breathtaking progress made in
a quarter-century by air transportation. In newspapers and
magazines,the public saw this rare photograph of Western's
first planes, the little silver-and-red M-2s, preparing to take
off for their initial flights in 1926.
TODAY--This scene of passengers boarding a huge
Western Coachmaster for the historic inaugural of day
light, border-to-border economy flights on the Pacific
Coast points up the tremendous contrast between 1926
airline pioneering and the efficient, dependable service of
the present. Today, Western carries 10 times more pas
sengers in a single day than flew with the company during
its entire first year of its operation.
LOOKING AHEAD--Men of vision plan for the future.
Here, Donald W. Douglas, left, president of Douglas Air
craft Company, and Terrell C. Drinkwater, Western's
president, compare models of the historic Douglas M-2,
Western's first plane, and the modern DC-6B, luxurious
sky giant which will join the company's fleet late in 1952.
When Western purchased the M-2s from Douglas in 1926,
the cost was $11,000 for each plane. The five DC-6Bs
ordered in 1951 will cost more than $1,000,000 each.
NATIONAL DEFENSE--Symbolic of Western's par
ticipation in the national defense program during 1951 is
this view of ramp crewmen and American Red Cross
officials loading whole blood for swift transfer to Far
Eastern battlefields. Many times the mercy shipments went
all the way on Western aircraft engaged in the Korean Air
lift. Serving every major military installation in the West,
the company transported thousands of uniformed pas
sengers, tons of vital materials and mail.
DIRECTORS--Here are the men who direct Western's
destinies--the board of directors and executive staff.
Representing every major section of the territory served by
the company, the board includes leaders of long and suc
cessful experience in air transportation, insurance, busi
ness, finance and the law. The year 1951 was marked by
the board's declaration of two dividend payments, first
made to shareholders in 15 years.
TRAVEL PROMOTION--Throughout the year, Western
Air Lines joined civic organizations and Chambers of Com
merce in activities developing increased air travel to the
"Sun Country," famed national parks, winter sports resorts,
dude ranches, and world-known western playgrounds for
all seasons. Shown here are "Miss Sunshine" and repre
sentatives of Palm Springs, Las Vegas, San Diego,
Phoenix and Los Angeles, departing on an air tour of the
Northwest to invite residents to enjoy a "Second Summer."
SUMMARY OF EARNINGS
Revenues:* 1944 1945 1946 1947 1948 1949 1950 1951
Passenger .$ 3,169 $ 5,654 $10,474 $10,114 $ 7,813 $ 8,471 $11,395 $13,688
Mail 837 1,239 1,326 1,570 1,740 2,504 2,090 1,212
Express, Freight and Excess Baggage 155 206 318 410 483 313 497 507
Other 130 132 118 282 31 246 264 875
Total Revenues .$ 4,291 $ 7,231 $12,236 $12,376 $10,067 $11,534 $14,246 $16,282
Operating Expenses: *
Depreciation .$ 321 $ 555 $ 1,369 $ 1,845 $ 1,164 $ 1,335 $ 1,124 $ 998
Other
.
3,677 6,297 11,744 11,196 9,198 9,229 11,486 12,750
Total Operating Expenses .$ 3,998 $ 6,852 $13,113 $13,041 $10,362 $10,564 $12,610 $13,748
Operating Profit (Loss) * .$ 293 $ 379 ($ 877) ($ 665) ($ 295) $ 970 $ 1,636 $ 2,534
Other Income or (Charges) * .$ 6 ($ 20) --
($ 192) ($ 186) ($ 258) ($ 196) $ 280
$ 299 $ 359 ($ 877) ($ 857) ($ 481) $ 712 $ 1,440 $ 2,814
Provision for Federal Taxes on Income* .$ 147 .$ 169 ($ 277) $ 88 ($ 333) $ 391 $ 690 $ 1,425
Net Income (Loss) * .$ 152 .$ 190 ($ 600) ($ 945) ($ 148) $ 321 $ 750 $ 1,389
OPERATING STATISTICS
Route Miles 2,962 3,117 4,808 4,725 4,727 4,727 5,016 5,016
Available Ton Miles* n/a n/a 35,831 35,757 29,534 32,034 44,515 43,036
Revenue Ton Miles* n/a n/a 22,877 20,887 14,660 16,383 24,697 27,549
Passenger and Tonnage Carried
Revenue Passengers .
147,854 303,931 602,302 491,680 353,569 422,193 619,624 691,322
Mail Tons
.
2,267 3,347 1,852 1,722 1,543 1,359 2,150 3,419
Express and Freight Tons 472 754 1,640 2,252 2,702 2,435 3,396 3,191
Revenue Miles Flown:
Airplane Miles * .
4,057 7,279 10,594 9,607 8,707 9,496 11,783 11,487
Passenger Seat Miles " .
73,101 138,852 301,856 312,615 243,771 299,503 414,169 401,720
Passenger Miles * .
63,073 117,106 214,023 194,923 135,724 155,747 233,118 259,693
Mail Ton Miles* 905 1,120 706 733 574 567 978 1,449
Express and Freight Ton Miles* 222 307 635 912 1,089 926 1,442 1,282
Other Statistics:
Passenger Load Factor 86.3 84,3 70.9 62.4 55.7 52.0 56.3 64.7
Average Length in Miles per Passenger Trip. 427 385 355 396 384 369 376 376
Average Revenue per Passenger Mile .$ .0502 $ .0483 $ .0489 $ .0519 $ .0576 $ .0544 $ .0489 $ .0527
Number of Employees End of Year .
1,120 1,674 2,396 1,529 1,285 1,226 1,279 1,459
000 omitted n/a not available
Where in the West do you want to go?
To Canada's Jasper, Banff, and Lake Louise...
Glacier National Park ..
.Yellowstone and the Grand
Tetons ...
Zion and Bryce Canyon National Parks...
the famous all-year recreation areas of Southern
California ...
the Redwood Empire ... the Evergreen
Playground of the Pacific Northwest?
Western serves them all! No matter which is the
vacationland of your choice, it's only a short, pleas
ant flight on a fast, dependable Western Airliner.
This year, See Western America First!
WESTERNAIRLINES
AMERICA'S OLDEST AIRLINE