Western Air Lines Annual Report 1953

1953 1952
Seat Miles Flown ..................... 613,814,000 453,332,000
Seat Miles Sold ....................... 359,965,000 298,931,000
Passengers Carried .................... 838,732 774,079
Total Operating Revenues ............. $22,876,797 18,595,063
Net Income .......................... 1,184,864 1,232,114
Dividends Paid ....................... 429,128 404,369
Common Stock Outstanding ........... 715,213 715,213
Income per Share ................... 1.66 1.72
Dividends per Share ................ 0.60 0.60
Cash and U.S. Government Securities ... $ 4,041,436 5,090,998
Working Capital ...................... 755,134 1,307,994
Investment in Property and Equipment .. 18,854,100 17,430,349
Notes Payable to Bank ................ 3,727,244 4,618,837
Total Shareholders' Equity ............ $ 9,746,451 8,990,715
Shareholders' Equity per Share
of Common Stock ................... 13.63 12.57
Number of Employees ................ 1,813 1,649
Wages and Salaries Paid ............... $ 8,708,869 7,436,27-5
WESTERN AIR LINES
This is the twenty-eighth annual report of
America's Oldest Airline. The year 1953 was a
period of transition, and continued growth and
development for your Company. A fleet of new
Douglas DC-6B' s, one of the most modern and
efficient airliners flying today, was placed in
service early in the year. A new, direct service
was inaugurated between Minneapolis/ St. Paul
and Los Angeles, via Rapid City, Casper, and
Salt Lake City, and major improvements were
effected in service offered on the Company's
other routes.
The traffic handled by Western in passen-
gers, mail and cargo during 1953 substantially
exceeded the volume for any other year in
its history. Total operating revenues increased
23% to an all-time record. Operation of the new
route and introduction of the DC-6B's added
approximately 35% to the seat-miles flown by
the Company during the year. As a result of
this increase in service offered to the public,
together with increased costs for wages, mate-
rials and other items, total operating expenses
were approximately 29% above the previous
year. Although rising costs are of constant con-
cern, it should be pointed out that during 1953
the Company was able to reduce its unit costs
materially.
Earnings
Net income for th year, aft r taxes, amount d
to $1,184,864 or $1.66 per share of capital stock
outstanding. This compar d with $1,232,114 or
$1.72 per share for 1952. Although net earnings
did not quite equal those of the year preceding,
the integration of new aircraft, inauguration
of a new route and additional services, coupled
with a decrease in unit costs, place your Com-
pany in an improved competitive position for
future traffic and earnings.
One of the most serious problems facing the
air transportation industry in recent years has
been the necessity for absorbing the cost in-
creases inherent in an inflationary economy
without _
corresponding increase in the level of
fares. This industry is one of the few segments
of our nation's business that has absorbed
substantially higher costs with no material
increase in the price of its product. The fare
paid by Western's passengers during 1953
averaged 5.(34 cents per passenger-mile, or
slightly less than the average level of 5.76
cents paid in 1948. During the same five years
the cost-of-living index rose steadily. Neverthe-
less, Western in that period reduced its unit
operating costs from 35.0 cents per available
ton-mile in 1948 to 29.7 cents for 1953. This
achievement was made possible by the intro-
duction of more modern and efficient aircraft,
greater efficiency of op ration, teamwork of
the Company's personnel, and a steadily
incr asing volume of traffic.
Dividends
In 1953 the Company paid four quarterly divi-
dends of 15 cents each, or a total of 60 cents
per har , the same as paid in the previous
y ar. At its first quarterly meeting in 1954, the
24
21
18
15
3
Board of Directors declared a dividend of 15
cents per share, payable March 15, 1954, to
shareholders of record March 1, 1954.
Finances
The financial condition of the Company re-
mains fundamentally sound. Cash and United
States Government securities as of December
31, 1953, totaled $4,041,436. During the year
Western increased its investment in fixed assets
by $1,423,751, completed progress payments
amounting to $479,301 on four additional
DC-6B airplanes to be delivered in the fall of
1954, and reduced notes payable by $891,593.
As a result, net working capital decreased from
$1,307,994 at the close of 1952 to $755,134 at
the end of 1953. The balance of the purchase
price of the DC-6B aircraft which are on order
will be financed by additional borrowings of
$3,600,000 at time of delivery in accordance with
terms of the existing bank credit agreement.
Equity of the shareholders increased from
$8,990,715 at the close of 1952 to $9,746,451 at
the end of 1953, representing a gain in book
value per share from $12.57 to $13.63. The
shareholders' equity as of the close of 1952 was
passenger revenue
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1949 so 51 52 53
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total revenue

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1949 50 51 52 53
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revised to reflect a charge to earned surplus
of $190,820 necessitated by an adverse decision
of the United States Supreme Court in connec-
tion with a 1948 mail compensation case which
had been pending for . several years.
Revenues
Total operating revenues increased from
$18,595,063 in 1952 to $22,876,797 for 1953,
an increase of 23%, and a new record for the
Company. Contributing substantially to this
gain were the normal growth of air travel, the
economic growth of the areas served, the
inauguration of service over the new route
between Minnesota and California, and the
improved and augmented service made pos-
sible by the new DC-6B equipment.
The number of passengers carried increased
from 774,079 in 1952 to 838,732 for 1953.
Passengers carried by Western during 1952
traveled an average distance of 386 miles and
paid an average of $20.99 for their tickets,
exclusive of federal transportation tax. During
1953 the average distance traveled increased
to 429 miles and the average passenger paid
$24.19 for his ticket, exclusive of tax. The Com-
pany's average revenue per passenger-mile
during 1953 amounted to 5.64 cents as com-
pared with 5.44 cents the prior year. The
greater yield per passenger-mile resulted from
the fact that the Company's principal increase
in service during the year was in first-class
rather than air coach schedules. Although pas-
senger traffic is by far the most important
source of revenue to Western, representing
89% of total revenues in 1953, substantial gains
were also experienced in express, freight, and
excess baggage. These categories totaled
$846,063, as compared with $661,987 for 1952,
an increase in these revenues of 28%.
Expenses
Operating expenses for 1953 totaled $20,385,466
as compared with $15,759,745 for the year pre-
ceding, an increase of 29%. The increase in
expenses was largely the result of the additional
service made possible by the DC-6B aircraft,
trend of operating revenues
milllons of dollars
simplified s tatement ol Income
although increased cost of wages, materials and
other expense items was a substantial factor.
Total aircraft operating expenses, which in-
clude flying operations, the direct cost of main-
taining flight equipment, and depreciation on
this equipment, increased during the year by
$3,010,233 or 42%. All ground and indirect
expenses increased $1,615,488 or 19%. For the
year 1952, total operating expenses per avail-
able ton-mile flown amounted to 32.5 cents.
In 1953 however, this unit cost was reduced to
29.7 cents per available ton-mile. At the same
time, Western's passenger breakeven load fac-
tor was reduced from 54.9% in 1952 to 51.6%
for 1953.
Aircraft and Facilities
In addition to the new DC-6B aircraft which
were placed in scheduled service during 1953
by the Company on its Pacific Coast route and
between Minnesota and California, important
additions and improvements were made in
other flight equipment and ground facilities.
This continuing program resulted in comple-
tion during the year of the following important
projects, most of which had been started in
1952: The Company's five Douglas DC-4 air-
craft which are utilized in air coach service
were scheduled through the maintenance shops
and received complete overhaul, including re-
furbishing of the cabin interiors. Interiors of
the nine Douglas DC-3 and ten Convair air-
craft were likewise modernized in keeping with
the new cabin decor of Western's fleet. Engines
used on the Convairs were modified to permit
interchange with engines of t):ie new DC-6B
aircraft. In addition to improving the operat-
ing characteristics of the Convair-Liners, this
change also afforded the benefits of mainte-
nance efficiency and economy which result
from the highest practical degre of standardi-
zation. Another area of improvement which
involved substantial expenditur was the in-
stallation of latest types of radio and naviga-
tional equipment on all aircraft, including
engine analyzers on ach of the four D -6B's.
To meet operating r quirements of its
DC-6B's in the Pacific Northw st and the in-
Where our Income came from: 1953
Passengers ................. $20,302,792
Mail ....................... 875,587
Express, freight and baggage .. 846,063
Gain on disposal of property .. 137,814
Other income ................ 1,752,423
23,914,679
And how It was used:
Wages and salaries ........... 8,708,869
Social security, group insurance
and retirement plan ...... 523,285
Gasoline and oil ............. 3,219,067
Materials, supplies
and repair parts ......... 2,255,037
Depreciation and obsolescence. 1,740,585
Advertising .................. 708,847
For service to passengers ...... 756,734
Rentals and landing fees .... . . 620,714
Insurance .................. 759,276
Interest . ................... 188,447
Taxes other than income taxes .. 658,712
Utilities and services .......... 662,087
Other costs .................. 678,155
Total .................. 21,479,815
Amount remaining before
Federal taxes on Income . .. 2,434,864
Less Federal taxes on Income . 1,250,000
Net Income ................... $ 1,184,864
creased service offered to that area, the Com-
pany during 1953 completed a new hangar
building at the Seattle-Tacoma International
Airport and a new passenger terminal building
at Portland International Airport. At the same
time, sales, reservations, and passenger han-
dling facilities were improved to meet the
steady increase in traffic. Streamlined and
centralized reservations control procedures
were established during the year; efficient,
automatic ticketing machines were placed in
service at key terminals; and downtown and
airport ticket offices in a number of the major
cities were modernized for greater operating
utility and customer appeal.
It is anticipated that delivery of four addi-
tional DC-6B's in the fall of 1954, one of which
is a r plac m nt for th DC-6B lost in April of
1953, may nabl the Company to retire some
f its old r and less efficient aircraft. With nine
22-pa s ng r DC-3 aircraft still in servic , it
1952
16,250,201
719,266
661,987
26,154
1,927,190
19,584,798
7,436,275
335,012
2,104,793
1,977,205
1,082,344
512,284
588,809
535,936
515,788
108,539
533,278
573,732
548,689
16,852,684
2,732,114
1,500,000
1,232,114
simplified balance sheet
is planned ultimately to replace as many as
possible of these airplanes with the more mod-
ern and efficient pressurized Convair-Liners
wherever traffic potential and airport conditions
warrant.
Mail Pay and Taxes
Mail compensation received by the Company
increased 21.7% during the year to $875,587.
This amounted to only 3.8% of Western's total
operating revenues, and included no el~ment
of subsidy. The increase in total compensation
was due to greater ton-mileage of mail carried,
since the service rate of 53 cents per ton-mile
received by the Company remained unchanged
during both 1952 and 1953.
Late in 1953, the Civil Aeronautics Board
instituted a proceeding to review the Com-
pany's mail rate as of January 1, 1954, together
with another proceeding to investigate the air-
mail rate structure of the thirteen domestic
trunk lines.
Although it is impossible to predict the final
service rate which the Civil Aeronautics Board
will establish for the Company, it is believed
unlikely that the proceedings will result in
any material reduction in the Company's mail
compensation.
In addition to the provision for federal in-
come taxes for 1953 in the amount of $1,250,000,
Western paid directly to the federal govern-
ment $325,186 in fuel and lubricant taxes, and
collected for the federal government the sum of
$2,550,209 in transportation taxes on persons
and property. There is some possibility that
Passenger Revenue ,
Air Coach . 20.3.% .
,;-
'?other 3.?%
We own: 1953
Cash and U.S. Govt. securities $ 4,041,436
Owed to us by others ......... 1,639,492
Materials and supplies ........ 383,575
Buildings and improvements, net 2,322,383
Flight and other equipment, net. 7,521,714
Deposits on new equipment .... 1,154,038
Prepaid expenses ............ 790,727
Deferred charges, net ......... 65,426
17,918,791
We owe:
Notes payable ............... 3,727,244
Accounts payable ............ 2,963,035
Income taxes ................ 842,045
Tickets sold but not yet used .... 640,016
8,172,340
Excess of what we own over
what we owe,
or shareholders' equity .... $ 9,746,451
the 15% transportation tax will be reduced
during the coming year. This levy initially was
enacted primarily to discourage civilian use of
transportation facilities during World War II,
and its repeal or reduction should have a
stimulating effect on air travel.
Air Coach Services
Passenger revenue produced by the Company's
air coach services during 1953 increased only
$118,815 or 2.6%, due primarily to the fact that
equipment was not available for additional
Coachmaster schedules until late in the year.
As a result, virtually the entire increase in pas-
senger revenues during the year was attribut-
able to first-class services.
During 1952 air coach service produced
27.9% of the Company's passenger revenues.
With the substantial increase in first-class serv-
ices in 1953, air coach revenues for that year
amounted to but 22.9%. Although Western did
not materially increase its air coach schedules
during 1953, the Company believes that the
demand for coach services between major
population centers will continue to grow.
To meet requirements for additional
frequency and an economy-fare service, 66-
passenger DC-4 Coachmaster flights were in-
revenue dollar
1952
5,090,998
1,434,403
305,950
2,172,103
7,530,367
674,737
812,166
208,351
18,229,075
4,618,837
3,034,074
1,071,882
513,567
9,238,360
8,990,715
augurated on December 15 with a daily round-
trip between Minneapolis/St. Paul and Los
Angeles, making one stop at Salt Lake City.
Economy flights are also operated with
Coachmasters between all major cities on the
Pacific Coast, and between Los Angeles and
Las Vegas, Nevada. On December 15, 1953, the
Company introduced a new excursion flight
with a special round-trip fare between San
Diego and Las Vegas, via Palm Springs, Calif.,
linking these famous resort centers for the first
time with direct air service.
Route Structure
At the close of 1953 the Western Air Lines
system consisted of 5525 route miles, serving
44 cities in twelve Western states and the Prov-
ince of Alberta, Canada.
On February 1, 1953, operations were started
with Convair-Liners over the important new
route between Minneapolis/St. Paul and Los
Angeles, with intermediate stops at Huron,
Pierre, and Rapid City, South Dakota; Casper,
Wyoming; Salt Lake City, Utah, and Las Vegas,
Nevada. On March 1, 1953, an additional first-
class service was inaugurated with DC-6B
equipment on a one-stop schedule.
Early in 1953 the Company filed with the
Civil Aeronautics Board applications for a
route between Denver, Colorado, and San
Francisco-Oakland, California, via Salt Lake
City, Utah; and between Denver and San
Diego, California, via Phoenix, Arizona. Strong
civic support is being extended on behalf of
Western's applications to provide vitally
needed regional trunkline air service between
these areas. The first-mentioned application has
been consolidated in the "Denver Service Case"
and hearings in that case are scheduled to
begin in May, 1954.
Suspension of operations at El Centro, Cali-
fornia, and Yuma, Arizona, ordered by the Civil
Aeronautics Board in 1952, remains in effect.
The Company has asked the Board to lift this
suspension and approve the extension of service
from Yuma into Phoenix.
The certificate of public convenienc and
nee ssity issued to Western by the Civil A ro-
W ESTERN 'S
nautics Board and approved by the President
of the United States in 1946 for a route between
Los Angeles and Mexico City remains inactive
in the absence of a bilateral agreement be-
tween the Governments of the United States
and Mexico allowing reciprocal airline routes.
The status of this operation and its future
development remains uncertain.
Although the Company is still anxious to
serve the city of Calgary in the Province of
Alberta, Canada, a service which is needed, this
service cannot be provided until an agreement
is reached between our Government and that
of Canada. Conferences contemplating review
of the existing bilateral agreement between the
two countries are scheduled to be held in the
near future, but it is impossible to predict what
the outcome of these conferences may be.
Personnel
Throughout the past year the Company has
enjoyed excellent employee relations, and
wishes to acknowledge the loyal and efficient
service of its personnel. At the end of the year,
employees totaled 1,813, of whom about 90%
were represented by the seven labor unions
which have been certified as bargaining repre-
sentatives for various employee groups. Nego-
tiations presently are underway with respect to
several proposed new contracts. Contract
negotiations in 1953 generally"resulted in higher
wage rates.
The Company's group insurance program
continues to receive good acceptance. Of the
eligible employees, some 65% carry the life
Twenty-five years of continuous service with Western Air Lines
was completed during 1953 by veteran employees (left to right),
W. Edgar Eatchel, general foreman, Frank Eastman, dispatcher,
and Fred Kelly, captain.
insurance coverage, 86% the sickness and acci-
dent coverage, and 83% the hospitalization
benefits. This latter coverage was increased
and broadened at the start of 1954. Effective
July 1, 1952, with the approval of the share-
holders, a Company-wide contributory Retire-
ment Plan was placed in effect. Approximately
90% of eligible employees are now participat-
ing in this program.
Employees and their families have continued
to utilize the Company's liberal policy with
respect to emergency and vacation transporta-
tion on a space-available basis.
During 1953 the Triple- Club, an educa-
tional and entertainment organization of em-
ployees in the Los Angeles area, sponsored a
number of successful activities. The Western-
aire Federal Credit Union, an employee organi-
zation chartered in 1948, continued its progress
during the year. As of December 31, 1953,
members' savings amounted to $535,000, and
outstanding loans totaled $520,000. Since 1949
the Credit Union has paid a dividend of 5%
per year to depositing members.
Outlook
Western Air Lines is fortunate to be located in
and to serve the most promising and rapidly
growing area of the United States. Many of
the 44 cities on the Company's system have
made record gains in population and industrial
activity during the past few years, and there is
every indication this trend will continue. As
the West continues its economic development
in the years ahead, the demand for air transpor-
tation will likewise increase, and your Company
proposes to share in that growth as the regional
trunk airline for the Western states and the
Province of Alberta, Canada, which it is
privileged to serve.
The Company is owned by some 6500 share-
holders, of whom a large proportion live in the
West. Grateful acknowledgment is made of the
extent to which they have availed themselves
of Western's services, and have encouraged
their friends and associates to do so.
Considerable attention currently is being
devoted by many airlines and manufacturers
to the development and utility of jet aircraft
and helicopters. The Company is keeping in
c~os_e touch with these developments. The jet
a1rlmers presently being designed for commer-
cial service are intended for long-range opera-
tions, and it does not appear likely there will be
a place for this type of aircraft in Western's
equipment program for many years to come.
Development of the helicopter is along lines
of short-haul, intracity, and airport shuttle
operation, and in this type of air service the
~elicopter probably will play an increasingly
important role.
During 1954 your Company will devote its
efforts to increasing the dependability and effi-
ciency of its operation, improving its service to
the public, and providing the finest air trans-
portation available in Western America.
Respectfully submitted,
President
February 26, 1954
Western Air Lines Building
Los Angeles International Airport
Los Angeles 45, California
Operating Revenue:
Passenger ................................. .
Express, freight, excess baggage and other .... .
Charter and other transport services ........... .
Incidental revenue - net (Note 2) ............ .
Mail ..................................... .
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 ..... .
Other .................................... .
Income before Federal Taxes on Income ... .
Provision for Federal Taxes on Income ( Note 3) .. .
Net Income ......... . .................. .
Amount reported as of December 31, 1952 ......... .
Deduct retroactive mail pay adjustment ( Note 6):
Provision for refund of 1948 mail pay ......... .
Related Federal tax credit ...... . ............ .
Provision for contingencies created in 1951. . . . .
Adjusted amount as of December 31, 1952 .......... .
Net Income for 1953 ............... ...... ....... .
Dividends paid in cash - $0.60 a share ............ .
Amount as of December 31, 1953 ( Note 1) ..... .... .
1953
$20,302,792
846,063
43,503
808,852
22,001,210
875,587
22,876,797
6,557,636
2,775,060
2,177,944
1,116,157
1,477,868
2,044,680
749,434
L768,302
1,718,385
20,385,466
2,491,331
137,814
58,381
196,195
188,447
22,200
42,015
252,662
2,434,864
1,250,000
$ 1,184,864
$ 781,639
390,819
390,820
200,000
1952
16,250,201
661,987
8,766
954,843
17,875,797
719,266
18,595,063
4,658,975
2,478,858
1,739,368
960,103
1,179,019
1,684,652
554,454
1,485,680
1,018,636
15,759,745
2,835,318
26,154
32,319
58,473
108,539
21,240
31,898
161,677
2,732,114
1,500,000
1,232,114
$3,897,283
190,820
3,706,463
1,184,864
4,891,327
429,128
$4,462,199
POii TH Y AII ND D
D C M II 31 0
1953
(with comparative figures for 1952)
POii TH YAII ND D
D C M II a1. 1953
balance sheet ....
c as ol December 31, 1953
(with revised comparative figures for 1952-Note 6)
1953 1952 1953 1952
Current Assets: Current Liabilities:
Cash ............ . .... . ........ . ..... . .. . ........... $ 3,045,126 2,603,698 Current portion of long term notes ................... $ 1,655,000 1,716,000
U.S. Government Securities at cost. ............ . . . ... . . 996,310 2,487,300 Accounts payable .................................. 1,162,876 1,491,627
Receivables: Accounts payable - taxes collected from others ........ 342,107 266,953
Traffic balances ....... . .. .... .. . ... . ....... . .. . .. 1,009,307 791,560
Accrued salaries, wages, taxes, insurance and other .... 1,213,252 1,045,569
U. S. and State Government Departments ........... 355,616 386,216
Air travel plan deposits ........... . ................. 244,800 229,925
Other ( net of allowance for doubtful accounts $25,000) 274,569 256,627
Unused transportation ............... . .............. 640,016 513,567
1,639,492 1,434,403
Inventory of parts and supplies at the lower Federal taxes on income - estimated .. . . ............. 842,045 1,071,882
of cost or replacement market . ... . ............. . .. 383,575 305,950 Total Current Liabilities ....... . ................. 6,100,096 6,335,523
Prepaid expenses ... . . . .. ........ . . . . ... . . . . . ... .. . .. 790,727 812,166 Notes payable - secured ( net of current portion included
Total Current Assets . ..... . .. .. . .. .. . .. . .......... 6,855,230 7,643,517 in Current Liabilities) (Note 1) . ................... 2,072,244 2,902,837
Sundry securities ... .. ............. . .......... . .......... 16,377 17,421
Deferred Federal taxes on income (Note 3) ............... 204,000
Properties and equipment at cost ( Note 1):
Shareholders' equity:
Flight equipment . ... . . . ......... . . . . . . . . . . . . . ...... 13,801,038 12,757,010
Buildings on and improvements to leased property .. . . . .. 3,294,762 3,014,066
Common stock - $1.00 par value per share
Other property and equipment .. . .... . ... . .. . .... . . .... 1,758,300 1,659,273 Authorized 2,000,000 shares ( Note 4)
18,854,100 17,430,349 Issued 715,213 shares .... . .. . .. . . .. ............ 715,213 715,213
Less allowance for depreciation .......... . .. ... . .. 9,010,003 7,727,879 Capital surplus ( no change during year) ............. 4,569,039 4,569,039
9,844,097 9,702,470 Earned surplus from December 31, 1934 ( Note 1) ...... 4,462,199 3,706,463
Deposits on equipment purchase contracts (Note 2) . ....... . . 1,154,038 674,737 9,746,451 8,990,715
Routes, contracts and leases, less amortization $135,660 ... . ... 66,625 88,825 Commitments and contingent liabilities ( Note 2)
Def erred charges .. ... . .. .. . .. . .... . . . ................... . 186,424 102,105 Retirement plan ( Note 5 )
$18,122,791 18,229,075 $18,122,791 18,229,075
, Rf.PORT
~NTANTS ----
California
Los Angeles, 26 1954
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Note 1. Notes Payable-Secured. The long term notes payable of $3,727,244 together
with the related equipment purchase borrowings to be obtained in 1954 of $3,600,000
are repayable in monthly amounts aggregating $1,305,000 annually plus interest at
the rate of 3 % per annum. Additional principal is to be repaid on or before each
April 1 in amount equal to 33 % of net income of the preceding calendar year.
The indebtedness is secured principally by aircraft, engines, propellers and the Los
Angeles hangar and office building representing a total cost of approximately $14,750,000.
The related bank credit agreement includes, among other things, conditions and require-
ments which effectively limit the amount of earned surplus distributable as cash dividends.
The greatest amount of earned surplus is restricted by the requirement that the excess
of current assets over current liabilities ( exclusive of the current portion of long term
debt) shall not be less than $1,000,000 or a greater amount measured by average monthly
expense ( exclusive of depreciation), which greater amount as of December 31, 1953
approximated $1,625,000. Earned surplus as of December 31, 1953 was accordingly
restricted in the amount of $3,677,065 leaving $785,134 not so restricted.
In 1953 the credit agreement was amended to provide $2,700,000 of the equipment-
purchase borrowings above referred to and arrangements were made to increase this
amount to $3,600,000 to be used for the acquisition of the Douglas DC-6B aircraft
referred to in Note 2. The maximum indebtedness is limited to $6,500,000. The commit-
ment fee on the unused portion is of 1 % per annum.
Note 2. Commitments and Contingent Liabilities. The Company is acquiring in 1954
four new Douglas DC-6B aircraft with delivery scheduled to commence in August which
represent a commitment at December 31, 1953 of approximately $4,800,000 as to which
advance payments of $1,154,038 were made.
Though provision has been made for all known income tax liabilities, the Federal income
tax returns ~or the years 1952 and 1953 are subject to examination by the U. S. Treasury
Department. The Company has not been subject to the excess profits .tax.
Under applicable Federal statutes incidental revenues of the Company for 1951, 1952
and 1953 in respective gross amounts of $1,050,000, $1,700,000 and $1,500,000 are
subject to renegotiation. In the opinion of management the ultimate refund, if any, will
not have a materially adverse effect on the financial statements of the Company.
As of December 31, 1953 the Company was contingently liable for claims and law suits
in which it is or may be a defendant but management and its counsel believe the ultimate
liability, if any, will not materially affect the financial statements.
Note 3. Deferred Federal Taxes on Income. The necessity certificates which covered
four DC-6B aircraft and the new Seattle hangar permit the deduction for Federal tax
purposes of accelerated depreciation during the first five years. The additional depre-
ciation deduction, which is in excess of the depreciation recorded on the books of account,
results in 1953 in a deferral of Federal taxes on income of $124,000. The Federal tax so
deferred is included in the Federal tax provision reflected on the Statement of Income
and is being set aside to offset the estimated Federal tax effect in those future years when
the depreciation recordable on the books of account will be more than that amount
allowable for Federal tax purposes.
There is also included in the deferred tax account the amount of $80,000 which repre-
sents the tax deferral occasioned by the involuntary gain resulting from the loss of a
Douglas DC-6B aircraft.
Note 4. Options to Purchase Capital Stock. 35,000 shares were reserved as of Decem-
ber 31, 1953 under a Restricted Stock Option Plan. 31,000 shares have been allocated,
as of February 15, 1954, to twelve officers and key employees; options have been issued
for 30,000 of the allocated shares with option prices ranging from $8.49 to $14.14 a
share. 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. Retirement Plan. The cost of the insured contributory retirement plan as
charged to operating expenses in 1953 totaled $361,552 for both current and past serv-
ices. Management contemplates that the remaining past service cost will be funded over
a period of approximately ten years and will require annual payments of $106,000.
Note 6. 1948 Mail Pay. The United States Supreme Court on February 1, 1954 affirmed
a decision of the United States Court of Appeals for the District of Columbia Circuit
which will require a gross refund of mail pay for 1948 in the amount of $781,639
($334,639 has been previously recaptured); the case was remanded to the Civil o-
nautics Board and under its administrative procedures the Compan might r~ re 1e
but not in excess of $447,000. Earned surplus has been charge w1tJi am~t of tqe
mail pay involved less an applicable Federal tax credit. The relate rovisioh for o(_n-
tingencies created in 1951 has been restored to earned surplus. (The compara v~l>alan
sheet figures as of December 31, 1952 have been accordingly rev1scu.--~--.J1.,--...-a.._
~~zi.f!i~~-fiE~~~~~
_ _.
--
--
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,_..,,.,._
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Revenues:*
Passenger ..................... $
Mail ..........................
Express, freight and excess baggage.
Other .........................
Total Revenues ...............
Operating Expenses: *
Depreciation ...................
Other .........................
Total Operating Expenses .......
Operating Profit (Loss)* ...........
Other Income or (Charges) * ........
Provision for Federal Taxes on Income':'
Net Income (Loss)* ............. $
Earnings per sharef ................ $
Dividends paid per share ........... $
Route Miles ..................... .
Available Ton Miles':' ............. .
Revenue Ton Miles,;, .............. .
Passengers and Tonnage Carried:
Revenue passengers .... ......... .
Mail tons ..................... .
Express and freight tons ......... .
Revenue Miles Flown:*
Airplane miles . . ............... .
Passenger seat miles ............ .
Passenger miles ................ .
Mail ton miles ................. .
Express and freight ton miles ..... .
Other Statistics :
Passenger load factor ............ %
Average length in miles per
passenger trip ................ .
Average revenue per passenger mile $
Number of employees end of year ..
* 000 omitted
t based on shares outstanding at close
of respective years.
1953 1952
20,302 16,250
875 719
846 662
853 964
- -
22,876 18,595
1,718 1,019
18,667 14,741
20,385 15,760
2,491 2,835
(56) ( 103)
2,435 2,732
1,250 1,500
1,185 1,232
1.66 1.72
0.60 0.60
5,525 5,016
68,580 48,557
38,088 31,434
838,732 774,079
3,284 3,243
4,206 3,729
14,450 12,631
613,814 453,332
359,965 298,931
1,610 1,358
2,100 1,524
58.6 66.0
429 386
.0564 .0544
1,813 1,649
1951 1950
13,688 11,395
1,212 2,090
507 497
875 264
16,282 14,246
998 1,124
12,750 11,486
13,748 12,610
2,534 1,636
280 (196)
2,814 1,440
1,425 690
1,389 750
2.52 1.43
0.50
5,016 5,016
43,036 44,515
27,549 24,697
691,322 619,624
,'.3,419 2,150
3,191 3,396
11,487 11,78,'.3
401,720 414,169
259,693 2,'.33,118
1,449 978
1,282 1,442
64.7 56.3
,'.376 376
.0527 .0489
1,459 1,279
1949 1948 1947 1946 1945 1944
8,471 7,813 10,114 10,474 5,654 3,169
2,504 1,293 1,570 1,326 1,239 837
313 483 410 318 206 155
246 31 282 118 132 130
- -
11,534 9,620 12,376 12,236 7,231 4,291
1,335 1,164 1,845 1,369 555 321
9,229 9,198 11,196 11,744 6,297 3,677
- -
10,564 10,362 13,041 13,113 6,852 3,998
970 (742) (665) (877) 379 293
(258) ( 186) (192) (20) 6
712 (928) (857) (877) 359 299
391 (589) 88 (277) 169 147
- -
321 (339) (945) (600) 190 152
0.61 (0.65) ( 1.80) (1.14) 0.46 0.37
4,727 4,727 4,725 4,808 3,117 2,962
32,034 29,534 35,757 35,831
16,383 14,660 20,887 22,877
422,193 ,'.353,569 491,680 602,302 303,931 147,854
1,359 1,543 1,722 1,852 3,347 2,267
2,435 2,702 2,252 1,640 754 472
9,496 8,707 9,607 10,594 7,279 4,057
299,503 243,771 312,615 301,856 138,852 73,101
155,747 13.5,724 194,92,'.3 214,023 117,106 63,073
567 574 733 706 1,120 905
926 1,089 912 635 307 222
52.0 55.7 62.4 70.9 84.3 86.3
369 ,'.384 396 355 385 427
.0544 .0576 .0519 .0489 .0483 .0502
1,226 1,285 1,529 2,396 1,674 1,120
board of directors
Hugh W. Darling
Guthrie, Darling & Shattuck, Attorneys at Law
Los Angeles, California
Terrell C. Drinkwater
President, Western Air Lines, Inc.
Robert E. Driscoll
Chairman of the Board of Directors
First National Bank of the Black Hills
Rapid City, South Dakota
Hector C. Haight
Los Angeles, California
Marvin W. Landes
Vice President, Western Air Lines, Inc.
L. Welch Pogue
Pogue & Neal, Attorneys at Law
Washington, D. C.
executive staff
Terrell C. Drinkwater, President
Stanley R. Shatto, Vice President - Operations
Marvin W. Landes, Vice President- Service
Paul E. Sullivan, Vice President -
Administration and Secretary
Arthur F. Kelly, Vice President - Sales
J. Judson Taylor, Vice President and Treasurer
D. P. Renda, Attorney and Assistant Secretary
C. J. J. Cox, Controller and Assistant Treasurer
G. G. Brooder, Assistant to the President
Thomas M. Murphy, Assistant to the President
WESTERN AIR Lt.
NES
Joseph F. Ringland
President, Northwestern National Bank
of Minneapolis
Minneapolis, Minnesota
Stanley R. Shatto
Vice President, Western Air Lines, Inc.
Harry J. Volk
Vice President for Western Operations
The Prudential Insurance Company
of America
Los Angeles, California
John M. Wallace
President, Walker Bank & Trust Company
Salt Lake City, Utah
Alexander Warden
Publisher, Great Falls Tribune-Leader
Great Falls, Montana
Sidney F. Woodbury
Chairman of the Board of Directors
Woodbury & Company, Portland, Oregon
general ottices
Western Air Lines Building, 6060 Avion Drive
Los Angeles International Airport
Los Angeles 45, California
registrars
Citizens National Trust & Savings Bank
Los Angeles
Chase National Bank
New York
stock transfer agents
Security-First National Bank of Los Angeles
Los Angeles
New York Trust Company
New York
general counsel
Guthrie, Darling & Shattuck
Los Angeles
auditors
Peat, Marwick, Mitchell & Co.
Los Angeles
EGAS y
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SPRINGS
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CH~ ....
-.,PHOENIX
WESTERN AIR LINES
Present and Proposed Routes