Western AirLines Annual Report 1954

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WESTERN : AIRLINES
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1954: ANNUAL
REPORT
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stock
transfer
agents
Western Air Lines Building, 6060 Avion 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 Los Angeles
New York Trust Company N ew York
Listed and traded on New York Stock Exchange
and Los Angeles Stock Exchange
Traded on San Francisco Stock Exchange
third Thursday in April General Offices Los Angeles
Guthrie, Darling & Shattuck Los Angeles
Peat, Marwick, Mitchell & Co. Los Angeles
a year of growth. .1954 ,asa
Seat Miles Produced .............. .-.. 721,255,000 613,814,000
Seat Miles Sold ..................... 402,255,000 359,965,000
Total Operating Revenues ............ $24,480,779 22,876,797
Net Income ........................ 1,458,699 1,184,864
Dividends Paid ..................... 429,277 429,128
Common Stock Outstanding .......... 716,213 715,213
Income per Share ................. 2.04 1.66
Dividends per Share .............. . 0.60 0.60
Cash and U.S. Government Securities .. $ 3,949,365 4,041,436
Working Capital .................... 1,489,717 755,134
Investment in Property and Equipment. 23,468,369 18,854,100
Long Term Debt .................... 3,754,918 2,072,244
Total Shareholders' Equity ............ $10,786,153 9,746,451
Shareholders' Equity per Share ........ 15.06 13.63
Number of Employees ................ 1,864 1,813
Wages and Salaries Paid .............. $ 9,239,386 8,367,963
1954, the twenty-ninth year of America's senior
airline, was successful from the standpoint of
earnings, growth and expansion. This result was
attained notwithstanding a disappointing first
six months common throughout the airline in-
dustry. In June, Western inaugurated its now
famed "Californian" flights which have estab-
lished unprecedented standards of passenger
service for domestic airlines. At the same time
the Company put into effect a no-deposit credit
plan, "Charge-A-Flight", for travel on Western's
system. In the fall, four Douglas DC-6B aircraft
were added to the fleet, making it possible to
expand and improve service throughout the
Company's system. Late in the year a six million
dollar order was placed for five more of these
airplanes for delivery in 1956.
In both transportation offered and transpor-
tation sold, Western reached new high levels.
Although the narrowing of the profit margin in
the first six months was an unfavorable factor,
this trend was reversed by mid-year. Operating
profit for the last six months of 1954 was accord-
ingly 18% in excess of that earned in the com-
parable period in 1953. Contributing to the im-
provement were a resumption of the uptrend
in general business conditions, inauguration of
the "Californian" flights, other refinements in
service, and f1.dditional schedules made possible
by delivery of the four new airplanes.
Earnings
Net income for 1954, after taxes, amounted to
$1,458,699 or $2.04 per share, as compared with
$1.66 per share earned during 1953, and $1.72
per share in 1952. Gains on disposition of prop-
erty were 52 per share in 1954 as compared
with 11 per share in 1953.
For several years the airlines have had to
absorb the cost increases inherent in an
inflationary economy without the benefit of
related increases in the level of fares which
have been sought by the industry but denied
by the Civil Aeronautics Board. This remains a
serious problem, and will continue to demand
attention. Nevertheless, significant progress has
been made in reducing Western,'s unit costs.
This has been accomplished through the intro-
duction of additional modern and efficient air-
craft, increase in volume of traffic, and the
attainment of greater efficiency and produc-
tivity by the Company's personnel.
Dividends
In 1954, the Company paid four quarterly divi-
dends of 15 each or a total of 60 per share,
the same as paid in the previous two years. At
its first quarterly meeting in 1955, the Board
of Directors declared a regular dividend of
15 per share plus an extra dividend of 15
per share for a total of 30 per share payable
March 15, 1955 to holders of record on March
2, 1955.
Revenues
All types of traffic reflected increases over the
previous year with the exception of mail and
incidental revenues. Gross revenues were
$24,480,779-up 7%. Passenger revenues for
the year 1954 were $22,423,388, an increase of
10% over the previous year. Express, freight,
and excess baggage revenues totaled $968,487,
an increase of 15%. Mail revenue amounted
to $763,586, representing only 3% of Western's
total operating revenues. Like most of the other
major domestic airlines, Western receives no
subsidy for carrying mail. Incidental revenues
decreased $530,952, as expected, due to the
termination of a maintenance contract with an
air carrier engaged in the Korean airlift.
Several things were responsible for the
increase in operating revenues. Integration of
additional DC-6Bs into the Company's fleet
made it possible for Western to improve service
on its entire system, and to offer the only all
four-engine flights on the Pacific Coast. DC-6B
service was extended to San Diego, linking that
area and the Pacific Northwest with deluxe
through flights. DC-6B schedules were also
established between Los Angeles and Oakland
via San Francisco, and between Los Angeles
and Las Vegas, Nevada.
sales and production trend
mllllons of seat miles
1950 51 52 53 54 1950 51 52 53 54
seat mlles sold seat miles produced
On June 1, the Company inaugurated its
DC-6B "Californian" service on the Pacific
Coast. Featuring fine California champagne,
gourmet meals, and reserved seats, these luxury
flights at no extra fare have received wide
public acceptance. On September 26, the
"Californian" service was extended to the
Company's direct route between Minneapolis/
St. Paul and Los Angeles via Salt Lake City,
and on non-stop flights between Seattle/
Tacoma and Los Angeles.
To bring the advantages of modern credit to
frequent travelers in the West, the Company
introduced on June 1 a "Charge-A-Flight"
credit card plan. This no-deposit arrangement
enables the cardholder to charge transporta-
tion, extra baggage, or air freight shipments
anywhere on Western's system on a thirty-day
account. Six thousand "Charge-A-Flight" cards
have been issued, developing substantial new
revenues.
Coachmaster flights, pioneered by Western,
are now being operated between all Pacific
Coast cities served by W stern, between Los
Angeles and Las Vegas, and between Los
Angeles, Salt Lake City, and the Twin Cities.
Air Coach produced 31% of the Company's
passenger revenues during 1954, as compared
with 23% in 1953.
Expenses
Operating expenses for 1954 were $22,505,103,
as compared with $20,385,466 for 1953, an
increase of 10%. Contributing to the increase
were 17% additional available ton miles flown,
the introduction of new aircraft, the inaugu-
ration of "Californian" luxury services, and the
constant rise in wage rates and costs of supplies,
parts and equipment.
This increase is not considered unreasonable,
however, in view of the progressive expansion
and improvement in service offered. The unit
cost of producing a revenue-ton-mile was de-
creased from 53.5 in 1953 to 52.7 in 1954.
Western again in 1954 had one of the lowest
"break-even load factors" in the air transport
industry as reported by the Civil Aeronautics
Board.
Finances
The financial position of the Company was
considerably improved during 1954. At the
year end, cash and United States government
securities totaled $3,949,365. Working capital
totaled $1,489,717, comparing with $755,134 at
the close of 1953. Additions to flight equipment
and other properties during the year amounted
to $5,450,000. The related expenditures, after
applying deposits previously made, were
financed by additional bank loans of $3,600,000
and by funds from other current sources. The
Company's long-term debt at December 31,
1954, was $3,754,918 - an increase of only
$1,682,674 over the amount at December 31,
1953. Financing of the full purchase price of
the five DC-6B aircraft scheduled for delivery
in 1956 has been arranged with several western
banks headed by the Bank of America.
Properties and Equipment
At year end, the Company owned and operated
a fleet of 32 aircraft composed of eight 60-pas-
senger Douglas DC-6Bs, six 66-passenger
Douglas DC-4 Coachmasters, nine 40-passenger
Convair-240s and nine 22-passenger Douglas
DC-3s.
During the year, the Company's operations
at San Francisco International Airport were
moved to a new Terminal Building. Operations
at Portland International Airport were trans-
simplified balance sheet
Western owns: 1954
Cash and U.S. Govt. securities. $ 3,949,365
Owed by others ......... . ... 1,791,652
Materials and supplies ........ 282,036
Buildings and improvements, net 2,242,955
Flight and other equipment, net. 10,903,178
Deposits on new equipment ....
Prepaid expenses ............ 769,794
Deferred charges ... . ........ 265,221
20,204,201
Western owes:
Notes payable .............. 5,180,918
Accounts payable ............ 2,739,222
Income taxes ................ 903,243
Tickets sold but not yet used ... 594,665
9,418,048
Excess of what is owned
over what is owed,
or shareholders' equity . ... $10,786,153
erred to a new and modem terminal building,
providing facilities for the handling of an
increased volume of traffic in the Pacific North-
west. In line with a policy of keeping all facili-
ties modern and efficient, new or remodeled
sales offices were occupied during 1954 or will
be occupied during 1955 in Beverly Hills, Den-
ver, Las Vegas, Long Beach, Minneapolis, Palm
Springs, Rapid City, San Diego, and Seattle.
Shareholders
As of December 31, 1954, there were issued and
outstanding 716,213 shares of the capital stock
of the Company, held by approximately 6,500
individual shareholders residing in each of the
forty-eight states. The shareholders' equity was
increased during the year from $9,746,451 to
$10,786,153. This represents a book value for
each share of stock outstanding of $15.06 at
the end of 1954, as compared with $13.63 at
the close of 1953, or $12.57 in 1952.
During 1954, 440,000 shares were traded on
the New York Stock Exchange within a price
range of $8 low and $18 high. On the Los
1953
4,041,436
1,639,492
383,575
2,322,383
7,521,714
l, 154,038
790,727
269,426
18,122,791
3,727,244
2,963,035
1,046,045
640,016
8,376,340
9,746,451
Angeles Stock Exchange 10,049 shares were
traded between a low of $8 7/s and a high of
$17. On the San Francisco Stock Exchange
9,464 shares were traded within a price range
of $9 low and $18 high. The year end closing
price of the stock on the New York Stock Ex-
change was $18.
At the Annual Meeting of Shareholders in
Los Angeles, on April 15, 1954, approximately
80% of the outstanding stock was represented
in person or by proxy. Appreciation is expressed
to those shareholders who were so represented.
The Company solicits the support of its share-
holders and hopes they will use its passenger
and cargo services and will urge such use by
their friends and associates.
Personnel
One of the greatest assets of Western Air Lines
is its loyal and experienced personnel. At the
end of 1954, the Company had 1,864 employees
- 73% men, 27% women. For each individual
employee, the Company had a gross investment
of $12,600 in property and equipment as com-
pared with $4,500 in 1946. The average length
of service with the Company for all employees
is six years. The average length of service of
pilot captains is 13 years. Seventeen per cent
of the personnel have been with Western ten
years or more, 45% five years or longer, placing
the Company among the highest in the industry
for service longevity.
Approximately 90% of the Company's em-
ployees are represented by seven labor unions.
Contracts with these unions were in effect at the
end of 1954 and no negotiations were pending.
For a number of years the Company has
made available a voluntary employee Group
Insurance Program under which life, accident
and sickness and accidental death and dismem-
berment insurance is provided for employees,
and hospital insurance with medical and surgi-
cal benefits is provided for employees and for
members of their families. All employees are
eligible to participate in this insurance, the
cost of which is borne jointly by the Company
and the employees. Benefits under all coverages
have been broadened from time to time and
the program is now one of the finest available.
Approximately 68% of the employees carry
group life insurance, while about 89% have
availed themselves of the accident and sickness
and hospitalization coverages.
Eighty-six per cent of the eligible employees
are participating in the Company-wide Con-
tributory Retirement Program which was
placed in effect on July 1, 1952, at which time
the Company agreed to pay all past service
premiums. During 1954, the Company con-
tributed $408,857 to the Retirement Program,
and collected and remitted to the insurance
company $250,651 from participating em-
ployees for their portion of current service
premiums.
Another "first" was added to Western Air Lines history
on June 1, 1954, when the Company introduced its
now-celebrated "Californian" flights. Establishing un-
precedented standards for luxury service by a domestic
airline, the "Californian" schedules feature reserved
seats, champagne, filet mignon dinners, vanda orchids
for the ladies, and select cigars for men passengers on
deplaning. These no extra-fare flights have won wide
attention and public acceptance that made possible
steady expansion of the unique "red-carpet" service.
le~s, Freight,
~ age, 3. 9 %
WESTER s revenue dollar
The Westernaire Federal Credit Union
operated by the employees, of which 90% are
members, had another successful year. A divi-
dend of 5% was paid on savings accounts. The
Employees Suggestion System has been con-
tinued with cash awards for suggestions which
have been accepted and adopted to improve
the efficiency of the Company. The Triple-E
employees' club in the Los Angeles area has
continued to work closely with and co-sponsor
activities with such organizations as Boy Scouts
of America, National Polio Foundation, and the
Blood Bank program of the American Red Cross.
The Company maintains for its employees
one of the most liberal free transportation
policies in the industry. During 1954, Western's
personnel and their families were issued 6,994
passes on Western's system, and under arrange-
ments between Western and other scheduled
airlines were issued 3,556 passes on the systems
of other carriers for total space-available trans-
portation which, computed on the basis of
first class rates, would have cost employees
$1,200,000.
To improve the operating safety and effi-
ciency of Western's personnel and procedures,
to develop additional ways and means of
increasing revenues, and to provide a forum for
the exchange of ideas, a Company Progress
Council was established in April, 1954. Its
membership consists of the six Vice Presidents
of the Company, representatives of the seven
labor unions, and representatives of other
employee organizations. Regular meetings are
held during which problems facing the Com-
pany and their possible solutions are discussed.
Many benefits have been and will be derived
from the activities of this Council.
In 1954, a Legal Division was established in
the Company's organization. This new division
is responsible for the Company's legal affairs,
Research, Route Development and Properties.
It is headed by Mr. D. P. Renda who was
elected a Vice President. Mr. Renda has been
an attorney for Western since 1946 and had
served as Assistant Secretary since 1947. Mr.
Earnest H. Brown, a twenty-five year employee
of the Company and its Director of Personnel
since 1942, was elected Assistant Secretary
succeeding Mr. Renda.
Civil Aeronautics Board Proceedings
During 1954 a number of steps were taken
to strengthen Western's position as an inde-
pendent regional trunkline, and it is anticipated
that favorable results will be realized in 1955.
Western operates a 5,525 mile system serving
44 cities located in 12 western states, and in
the Province of Alberta, Canada. A map show-
ing present and proposed routes appears on the
back cover of this report.
The Civil Aeronautics Board has held hear-
ings in the so-called "Denver Service Case,"
which includes Western's application for a new
980 mile route between Denver and San
Francisco/Oakland via Salt Lake City. In
December, the Civil Aeronautics Board's
Bureau of Air Operations recommended the
granting of Western's application, modified to
include Reno, Nevada, as an intermediate point
between Salt Lake City and San Francisco/
Oakland. The final decision in this proceeding
should be forthcoming before the end of 1955.
Hearings were held in December, 1954, on
the Company's application for authority to
serve Sioux Falls, South Dakota, as an inter-

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WESTERN'S expe
mediate point on its routes between Denver
and Minneapolis/St. Paul, and between Rapid
City and the Twin Cities. The final decision
in this case is expected in 1955.
In 1954, the Company filed two applications
to provide additional service in the Pacifi'c
Northwest area. One application is for a
570-mile route from Portland, Oregon, to
Calgary, Alberta, Canada, via Spokane, Wash-
ington, and the other application is for author-
ity to serve Spokane, Washington, as an inter-
mediate point between Seattle, Washington,
and Portland, Oregon, on the Company's Pacific
Coast route. The Company is endeavoring to
have these applications assigned for hearing
in 1955.
No action has been taken by the Civil Aero-
nautics Board on the Company's application
filed in 1953 for an 889-mile route between
Denver, Colorado, and San Diego, California,
via Phoenix, Arizona. It is hoped that this
matter will be set for hearing before the end
of 1955.
simplified statement of income
Western's income came from: 1954 1953
Passengers ................. $22,423,388 20,302,792
Express, freight and baggage .. 968,487 846,063
Mail ...................... 763,586 875,587
Gain on disposal of property .. 507,520 137,814
Other income ............... 352,932 910,736
25,015,913 23,072,992
Western's expenses were:
Wages and salaries .......... 9,239,386 8,367,963
Social security, group insurance
and retirement plan ...... 747,927 611,493
Gasoline and oil ............ 3,627,644 3,219,067
Materials and repair parts .... 1,960,041 1,754,256
Depreciation and obsolescence. 1,783,789 1,740,585
Advertising ................. 681,597 708,847
For service to passengers ...... 938,356 756,734
Rentals and landing fees ...... 684,624 620,714
Insurance ... ......... ...... 801,640 759,276
Interest ................... . 160,196 188,447
Taxes ...................... 1,630,663 1,908,712
Utilities and services ......... 716,557 662,087
Other costs .. ...... ....... .. 584,794 589,947
23,557,214 21,888,128
Net Income ................... $ 1,458,699 _J_.J_ 84,864
Wages and Salaries 42.4%
In a decision issued January 25, 1955, the
Civil Aeronautics Board ordered the continued
suspension of the Company's operations at El
Centro, California, and Yuma, Arizona, until
December 31, 1957, and again denied the Com-
pany's application to extend its route from
Yuma to Phoenix, Arizona.
The Company is still anxious to activate its
certificate of public convenience and necessity
approved by the President of the United States
in 1946, for a route between Los Angeles and
Mexico City. Notwithstanding strong civic
support in Southern California for this needed
service, the Governments of the United States
and Mexico have not yet been able to resolve
a bilateral agreement which would make possi-
ble the inauguration of service over this route.
Similarly, although authorized in 1946 by
the United States Government to provide serv-
ice to Calgary on its route between Great Falls
and Edmonton, Alberta, Canada, Western has
been unable to inaugurate this service in the
absence of an agreement b tween the Govern-
ments of the United States and Canada.
Outlook
The Civil Aeronautics Board through its d ci-
sions has declared that a properly balanced
Under a three-year contract effective January 1, 1955, between
two of the West's pioneer companies, Union Oil Company of Cali-
fornia will supply 55 million gallons of aviation gasoline for Western
Air Lines flights along the Pacific Coast and between Southern
California and Montana via Nevada, Utah, Idaho and Wyoming.
system of domestic air transportation requires
the development of an independent trunk
airline in the West to provide safe, adequate
and dependable service in accordance with the
best interests of the public in that territory.
Furthermore, that the overriding public interest
necessitates, "the preservation of Western as a
strong carrier in the western part of our
country." To develop the Company's services
and route structure, the Board of Directors and
Management have undertaken a sound, long-
range program designed to follow this man-
date.
This program is being materially accelerated
by the steady growth of the West. In less than
ten years the Los Angeles metropolitan area
alone has absorbed a migration equal to the
combined population of the cities of Pittsburgh
and Baltimore. Similar startling examples can
be cited in other areas served by Western. The
rapid decentralization of industry, develop-
ment of natural resources, including water and
minerals, and the emerging economic inde-
pendence of the West all contribute to the
increasing need for regional air transportation.
With the advent of coast-to-coast, non-stop
flights, the four large transcontinental airlines
must devote their main attention to this highly
competitive long-haul business. Their service
to many intermediate cities is minimized.
Thus, the importance of the regional service
offered by Western within its territory becomes
more and more apparent. The pending regional
route applications discussed elsewhere in this
report are a part of the program the Company
has adopted to provide and improve this inter-
mediate type of air transportation.
Toward the end of 1954, the Postmaster
General started an experiment in transporting
first-class mail by air, by Western and other
airlines, between the major metropolitan
centers on the Pacific Coast. This experiment,
which involves no payment of subsidy, is work-
ing well. It is expected that the public interest
will in the reasonably near future require all
domestic first-class mail to be carried by air
where delivery can be thereby expedited, as
is the case in many other nations.
With pride, announcement is made of the
election of Dr. Donald H. McLaughlin, of San
Francisco, President of the Homestake Mining
Company, to \iVestern's Board of Directors.
Serving on this Board are outstanding civic and
business leaders from practically all sections
of Western Air Lines' system.
Most prognostications of business trends in
the West for 1955 are very optimistic. Western
Air Lines, which is now one of the essential
public utilities of the West, shares this view.
A healthy increase in traffic of all types is fore-
cast. Constant effort will be made to maintain
the Company as the recognized leader offering
the best air transportation services in the West.
Much progress was made in 1954 by the West's
own airline. More is expected in 1955.
Respectfully submitted,
I .. ,oa...c:.. ~~
President
February 18, 1955
Los Angeles, California
statement ol inc
Operating Revenues: 1954 1953
Passenger ......... . ........ . ... . ......... . $22,423,388 20,302,792
Express, freight and excess baggage .... . .... . . 968,487 846,063
Charter and other transport services .......... . 47,418 43,503
Mail ...................... . ............ . . . 763,586 875,587
Incidental revenue - net ................... . . 277,900 808,852
24,480,779 22,876,797
Operating Expenses:
Flying operations ............... . .......... . 7,311,395 6,557,636
Ground operations ....................... .. . 2,960,759 2,775,060
Flight equipment maintenance - direct ....... . 2,602,666 2,177,944
Ground and indirect maintenance ............ . 1,197,839 1,116,157
Passenger service .......................... . 1,743,498 1,477,868
Traffic and sales ............................ . 2,204,549 2,044,680
Advertising and publicity ................... . 723,049 749,434
General and administrative .................. . 1,251,832 1,156,809
Employee welfare .......................... . 747,927 611,493
Depreciation .............................. . 1,761,589 1,718,385
- - - -
22,505,103 20,385,466
Operating Income .. . .................. . 1,975,676 2,491,331
Non-Operating Income:
Gain on disposition of property .............. . 507,520 137,814
Other .................................... . 27,614 58,381
535,134 196,195
Non-Operating Charges:
Interest .. . ........................... . ... . 160,196 188,447
Amortization of routes, contracts and leases ... . 22,200 22,200
Other .................. . ................. . 19,715 42,015
202,111 252,662
Income before Federal Taxes on Income .. . 2,308,699 2,434,864
Provision for Federal Taxes on Income ( Note 1) .. . 850,000 1,250,000
Net Income ................... . .... . . . . $ 1,458,699 1,184,864
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for the year ended
december 31, 1954
(with comparative figures for 1953)
statement of surl,lus
earned
surplus
Amount as of December 31, 1953 . .. .... ........ . $ 4,462,199
Net income for 1954 . ....................... . 1,458,699
Excess of proceeds over par value of
1,000 shares of capital stock issued
under restricted stock option plan . ..... . ... .
5,920,898
Dividends paid in cash - $0.60 a share . .. . .. .. . 429,277
Amount as of December 31, 1954 (Note 2) . . .. .. . $ 5,491,621
capital
surplus
4,569,039
9,280
4,578,319
4,578,319
for the year ended
december 31, 1954
balance sheet ......... . as ol December 31, 1954
(with comparative figures for 1953)
-------assets--------------- --- - --------- ---- - - - ------- -- . ___ - - - - - -- - - - -- - - - - - - - - - - -- --- - --- - - -- - - I iabi I ities ----- -
Current Assets:
1954 1953
Current Liabilities:
1954 195'3
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,951,955 3,045,126 Current portion of long term debt ...................... $ 1,426,000 1,655,000
U.S. Government Securities at cost ..................... 997,410 996,310 Accounts payable .................................... 1,033,282 1,162,876
Receivables: Accounts payable - taxes collected from others .......... 299,081 342,107
Traffic balances ................................. 1,357,740 1,009,307 Accrued salaries, wages, taxes, insurance and other ....... 1,137,709 1,213,252
U.S. and State Government Departments ........... 271,577 355,616
Air travel plan deposits ............................... 269,150 244,800
Other (net of allowance for doubtful accounts $30,000) 162,335 274,569
Unused transportation ............................... 594,665 640,016
1,791,652 1,639,492
Federal taxes on income- estimated ................... 543,243 842,045
Materials and supplies ................................ 282,036 383,575 Total Current Liabilities . .......................... 5,303,130 6,100,096
Prepaid expenses .................................... 769,794 790,727 Long term debt-secured (net of current portion included
Total Current Assets . ............................. 6,792,847 6,855,230 in Current Liabilities) (Note 2) ........................ 3,754,918 2,072,244
Sundry securities ........................................ 68,728 16,377 Deferred Federal taxes on income (Note 1) .................. 360,000 204,000
Properties and equipment at cost (Note 2):
Commitments and contingent liabilities (Note 3)
Flight equipment .................................... 18,295,082 13,801,038
Retirement plan (Note 4)
Buildings on and improvements to leased property ....... 3,351,564 3,294,762
Other property and equipment ........................ 1,821,723 1,758,300 Shareholders' Equity:
23,468,369 18,854,100 Common stock - $1.00 par value per share
Less allowance for depreciation ................... 10,322,236 9,010,003 Authorized 2,000,000 shares (Note 5)
13,146,133 9,844,097 Issued 716,213 and 715,213 shares respectively ...... 716,213 715,213
Deposits on equipment purchase contracts .................. 1,154,038 Capital surplus ...................................... 4,578,319 4,569,039
Routes, contracts and leases, less amortization $157,860 ....... 44,425 66,625 Earned surplus from December 31, 1934 ( Note 2) ....... 5,491,621 4,462,199
Deferred charges ........................................ 152,068 186,424 10,786,153 9,746,451
$20,204,201 18,122,791 $20,204,201 18,122,791
NEW YORK
ATLANTA
l!!IALTIMORE
l!IILLINOS
!SOSTON
l!!IU,.P-ALO
CHARLOTTE
CHICAGO
CINCINNATI
CLEVll!:L.AND
COLUMBUS
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PEAT, MARWICK, MITCHELL & Go.
CERTIFIED PUBLIC .ACCOUNT.ANTS
616 SOUTH SPRINO STREET
LOS AN6ELES 14, CALIF,
ACCOUNTANTS' REPORT
A,-RICA
AUSTRALIA
CANADA
CONTINENTAl. EUROPE
GREAT BRITAIN
HONG KONG
INOIA
JAPAN
ME)(ICO
SOUTH AMEAICA
The Board of Directors
Western Air Lines, Inc.:
We have examined the balance sheet of Western Air
Lines, Inc. as of December 31, 1954 and the related statements of
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
circumstances.
In our opinion, the accompanying balance sheet and
statements of income and surplus present fairly the financial
position of Western Air Lines, Inc. at December 31, 1954 and the
results of its operations for the year then ended, in conformity
with generally accepted accounting principles applied on a basis
consistent with that of the preceding year.
Los Angeles, California
February 18, 1955
Note 1. Deferred Federal Taxes on Income. Depreciation for Federal tax purposes
will, through 1957, exceed that reported on the books of account as a result of deducting
accelerated depreciation in tax returns. Accordingly, the Federal tax provision reflected
on the Statement of Income includes $156,000 set aside in 1954 to offset the estimated
effect on Federal taxes which will occur in the years 1958-1961 when the depreciation
recordable on the books of account will be more than that allowable for Federal tax
purposes.

Note 2. Long Term Debt-Secured. The notes payable of $5,180,918 ($1,426,000
current and $3,754,918 long term) are repayable in monthly amounts aggregating
$1,305,000 annually plus interest at 3 % per annum with final maturity on December
31, 1960. 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 after adjustments for gains on
disposition of property when the related proceeds are remitted to the lender. The in-
debtedness is secured by specified properties representing a total cost of approximately
$19,750,000.
The related bank credit agreement includes, among other things, conditions and re-
quirements which effectively limit the amount of earned surplus distributable as cash
dividends. The greatest amount 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 $1,300,000. Earned surplus as of December 31, 1954 was
accordingly restricted in the amount of $3,875,904 leaving $1,615,717 not so restricted.
In 1955 the credit agreement was amended to provide an additional $6,000,000 to be
used for the acquisition of the Douglas DC-6B aircraft referred to in Note 3. The com-
mitment fee is of 1 % per annum.
Note 3. Commitments and Contingent Liabilities. The Company has ordered five
new Douglas DC-6B aircraft with delivery scheduled to commence in May 1956.
This represents a commitment as of December 31, 1954 of approximately $6,000,000 .
As of December 31, 1954 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 4. Retirement Plan. The cost of the insured contributory retirement plan as
charged to operating expenses in 1954 totaled $408,857 for both current and past
services. Management contemplates that the remaining past service costs will be funded
over a period of approximately nine years and will require annual payments of $106,000.
Note 5. Options to Purchase Capital Stock. As of December 31, 1954 34,000 shares
were reserved under a Restricted Stock Option Plan approved by the shareholders in
1951 for officers and key employees; in 1954 an option was exercised for 1,000 shares.
Of the reserved shares 30,000 have been allocated and related options have been
granted for 29,500 shares at prices ranging from $8.19 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.
G. G. Brooder
Assistant to the President
Western Air Lines, Inc.
Denver, Colorado
WESTERN AIRLINES
board ol directors
and
executive stall
Stanley R. Shatto
Vice President-Operations
and Director
Western Air Lines, Inc.
Earnest H. Brown
Assistant Secretary and
Personnel Director
Western Air Lines, Inc.
Arthur F. Kelly
Vice President-Sales
Western Air Lines, Inc.
Paul E. Sullivan
Vice President-Administration
and Secretary
Wes tern Air Lines, Inc.
C. J. J. Cox
Controller and
Assistant Treasurer
Western Air Lines, Inc.
Marvin W. Landes
Vice President-Service
and Director
Western Air Lines, Inc.
J. Judson Taylor
Vice President and Treasurer
Western Air Lines, Inc.
Hugh W. Darling
Director
Guthrie, Darling & Shattuck,
Attorneys at Law
Los Angeles, California
Donald H. Mclaughlin
Director
President, Homestake Mining
Company
San Francisco, California
Harry J. Volk
Director
Vice President for
Western Operations
The Prudential Insurance
Company of America
Los Angeles, California
----------------------------------------------------------
Terrell C. Drinkwater
President and Director
Western Air Lines, Inc.
Thomas M. Murphy
Assistant to the President
Western Air Lines, Inc.
Los Angeles, California
John M . Wallace
Director
President, Walker Bank
& Trust Company
Salt Lake City, Utah
Robert E. Driscoll
Director
Chairman of the Board
First National Bank of the
Black Hills
Rapid City, South Dakota
L. Welch Pogue
Director
Pogue & Neal, Attorneys at Law
Washington, D.C.
Alexander Warden
Director
Publisher, Great Falls
Tribune-Leader
Great Falls, Montana
Hector C. Haight
Director
Consultant
Hughes Aircraft Company
Culver City, California
D. P. Renda
Vice President-Legal
Western Air Lines, Inc.
Sidney F. Woodbury
Director
Chairman of the Board
Woodbury & Company
Portland, Oregon
Joseph F. Ringland
Director
President, Northwestern
ational Bank of Minneapolis
Minneapolis, Minnesota
------------------------------WESTERN AIRLINES------
a decade of growth ...
------- financial summary -----------------------------------
1954 1953 1952 1951 1950 1949 1948 1947 1946 1945
Revenues:*
Passenger ..................... $22,423 20,302 16,250 13,688 11,395 8,471 7,813 10,114 10,474 5,654
Mail .......................... 764 875 719 1,212 2,090 2,504 1,293 1,570 1,326 1,239
Express, freight and excess baggage . 968 846 662 507 497 313 483 410 318 206
Other ......................... 326 853 964 875 264 246 31 282 118 132
- - - - - - - -
Total Revenues ............... 24,481 22,876 18,595 16,282 14,246 11,534 9,620 12,376 12,236 7,231
Operating Expenses:*
Depreciation ................... 1,761 1,718 1,019 998 1,124 1,335 1,164 1,845 1,369 555
Payroll ........................ 9,239 8,367 7,067 6,084 5,353 4,855 4,973 5,773 5,916 3,110
Other ......................... 11,505 10,300 7,674 6,666 6,133 4,374 4,225 5,423 5,828 3,187
Total Operating Expenses . . . . . . . 22,505 20,385 15,760 13,748 12,610 10,564 10,362 13,041 13,113 6,852
Operating Profit* .................. 1,976 2,491 2,835 2,534 1,636 970 (742) (665) (877) 379
Other Income* ................... 333 (56) ( 103) 280 ( 196) (258) ( 186) (192) (20)
- - - - - -
2,309 2,435 2,732 2,814 1,440 712 (928) (857) (877) 359
Provision for Federal Taxes on Income* 850 1,250 1,500 1,425 690 391 (589) 88 (277) 169
- -
Net Income* ................... $ 1,459 1,185 1,232 1,389 750 321 (339) (945) (600) 190
* * * - - - - - --
Earnings per sharef ................ $ 2.04 1.66 1.72 2.52 1.43 0.61 (0.65) ( 1.80) ( 1.14) 0.46
Dividends paid per share ........... 0.60 0.60 0.60 0.50
* * *
Working capital* .................. $ 1,490 755 1,364 435 981 243 (315) 1,410 (4,557) 764
Long-term debt* .................. 3,755 2,072 2,903 1,924 2,231 3,113 3,551 3,800 287 170
Properties and equipment- net* ..... 13,146 9,844 9,702 6,588 6,621 7,171 8,094 6,292 7,581 1,631
Shares outstanding* ............... 716 715 715 550 525 525 525 525 525 410
Shareholders' equity - total,:, ........ 10,786 9,746 8,991 6,396 5,045 4,295 3,974 4,314 3,665 2,009
Shareholders' equity-a share f ....... $ 15.06 13.63 12.57 11.63 9.61 8.18 7.57 8.21 6.98 4.90
------- operating statistics -----------------------------------
Route Miles. . . . . . . . . . . . . . . . . . . . . . 5,525 5,525 5,016 5,016 5,016 4,727 4,727 4,725 4,808 3,117
Available Ton Miles':' . . . . . . . . . . . . . . 80,261 68,580 48,557 43,036 44,515 32,034 29,534 35,757 35,831
Revenue Ton Miles* . . . . . . . . . . . . . . . 42,669 38,088 31,434 27,549 24,697 16,383 14,660 20,887 22,877
Passengers and Tonnage Carried:
Revenue passengers .............. 834,910 838,732 774,079 691,322 61~,624 422,193 353,569 491,680 602,302 303,931
Mail tons . . . . . . . . . . . . . . . . . . . . . . 3,283 3,284 3,243 3,419 2,150 1,359 1,543 1,722 1,852 3,347
Express and freight tons. . . . . . . . . . 4,276 4,206 3,729 3,191 3,396 2,435 2,702 2,252 1,640 754
Revenue Miles Flown:*
Airplane miles.. . . . . . . . . . . . . . . . . 15,842 14,450 12,631 11,487 11,783 9,496 8,707 9,607 10,594 7,279
Passenger seat miles ............. 721,255 613,814 453,332 401,720 414,169 299,503 243,771 312,615 301,856 138,852
Passenger miles ................. 402,255 359,965 298,931 259,693 233,118 155,747 135,724 194,923 214,023 117,106
Mail ton miles. . . . . . . . . . . . . . . . . . 1,669 1,610 1,358 1,449 978 567 574 733 706 1,120
Express and freight ton miles. . . . . . 2,556 2,100 1,524 1,282 1,442 926 1,089 912 635 307
Other Statistics:
Passenger load factor ...... .. ..... % 55.7 58.6 66.0 64.7 56.3 52.0 55.7 62.4 70.9 84.3
Average length in miles per
passenger trip ................ 482 429 386 376 376 369 384 396 355 385
Average revenue per passenger mile $ .0557 .0564 .0544 .0527 .0489 .0544 .0576 .0519 .0489 .0483
Number of employees end of year .. 1,864 1,813 1,649 1,459 1,279 1,226 1,285 1,529 2,396 1,674
*000 omitted
t based on shares outstanding at close
of respective years
vacation areas
in 1Neslern America
Puget Sound Playgrounds
Mt. Rainier National Park
Olympic National Park
Columbia River Gorge
Mt. Hood National Forest
Redwood Empire
Golden Gate-Bay Area
California Beaches - Santa Monica and Malibu
Hollywood - Pasadena
Santa Catalina Island
San Diego - La Jolla
Tijuana - Mexico
Palm Springs - Desert Resorts
Las Vegas - Lake Mead
Bryce and Zion National Parks
Cedar Breaks National Monument
Grand Canyon National Park
Great Salt Lake Beaches - Mormon Temple Square
Sun Valley
Grand Teton National Park- Jackson Hole Dude Ranches
Yellowstone National Park
Glacier National Park
Waterton International Peace Park
Canada's Banff and Lake Louise
Jasper National Park
Montana and Wyoming Dude Ranches
Rocky Mountain National Park
Mt. Rushmore National Monument
The Black Hills
Minnesota's "Land of 10,000 Lakes"
served by
WESTERN AIRLINES
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s
PHOENIX
WESTERN AlkUNES
Present and Proposed Routes