Western AirLines Annual Report 1955

G)[iQ[iQQOGJ [?@[;)[?[?
Ii
the year in brief ...
Seat miles produced ............................. .
Seat miles sold ................................. .
Passengers carried .............................. .
Total operating revenues ......................... .
Operating income ............................... .
Net income ................................... .
Dividends paid ................................. .
Common stock outstanding ....................... .
Income per share ............................. .
Dividends per share ........................... .
Cash and U.S. Government securities ................ .
Working capital ................................ .
Investment in property and equipment. .............. .
Long-term debt ................................ .
Total shareholders' equity ........................ .
Shareholders' equity per share ..................... .
Number of employes . ......... . ................. .
Wages and salaries paid .......................... .
COVIR
Majestic surf of the Pacific Ocean is one of the most inspirinR scenes in
the wonderland served by Western Air Lines. (Photograph hy Don
Knight, courtesy of Pictorial California.)
1955
870,596,000
514,677,000
1,092,578
$ 31,039,523
4,033,346
1,981,685
667,391
743,463
2.67
0.90
$ 5,943,898
2,783,613
23,377,936
3,484,307
$ 12,429,987
16.72
2,130
$ 11,057,216
1954
721,255,000
402,255,000
834,910
24,480,779
1,975,676
1,458,699
429,277
716,213
2.04
0.60
3,949,365
1,489,717
23,468,369
3,754,918
10,786,153
15.06
1,864
9,239,386
lhe president's letter
to shareholders, employes, customer's and friends:
In its thirtieth year of continuous operation in serving the West, the nation's
senior airline achieved new heights of financial success, route development and
stature as a major regional air carrier.
Net income for 1955 amounted to $1,981,685, or $2.67 a share, compared
with returns for the previous year of $1,458,699, or $2.04 a share.
Total operating revenues reached the highest peak in three decades at
$31,039,523, an increase of 27 per cent over 1954's record level.
During the year, shareholders received four regular and two extra dividends, all
of 15 cents a share, for a total dividend distribution of 90 cents a share.
Substantial progress in the company's program of strong regional route devel-
opment was won in a key Civil Aeronautics Board decision granting Western
authority to inaugurate competitive air service over the popular route linking
San Francisco-Oakland with Denver, via Reno and Salt Lake City.
In 1955, the company enjoyed the first full year of operations based on its new
DC-6B fleet. These planes have proved ideally suited to Western's 5,525-mile
system and are the keys to airline service judged by experts as "second to none'.'
Delivery of 13 additional DC-6Bs in the next 19 months will provide the com-
pany with a completely modern fleet of aircraft for service between principal
cities of the West.
Western's progress during 1955 accurately reflected the general prosperity
enjoyed throughout the nation during the greatest business year in U. S. history,
and it was accelerated by the unique dynamics of western growth and development.
Your attention is invited to the detailed report on following pages. It is a review
of 1955-the year in which Western Air Lines produced more, sold more and
earned more than ever before in its 30-year history.
February 10, 1956
Western Air Lines Building
Los Angeles International Airport
Los Angeles 45, California
P R E S I D E N T
cD ru rum cD
e rnin s
Setting new revenue records in each quarter of 1955,
Western Air Lines ended the year with net income,
after taxes, at a 30-year high.
Earning $1,981,685, or $2.67 a share, the company
topped by 36 per cent the income of $1,458,699, or
$2.04 a share, for 1954.
Per-share earnings for 1954 included 52 cents from
gains on the disposal of property, while such gains
accounted for only 5 cents of 1955 per-share earnings.
Operating income for the year was a record
$4,033,346, an increase of 104 per cent over the 1954
figure of $1,975,676.
This major enhancement of operating income, while
reflecting the general improvement of business condi-
tions during the first half of the year compared with
the same 1954 period, is evidence of the company's
soundly-planned expansion of volume.
With seat-mile production rising steadily through
increased utilization of the new DC-6B fleet, and gains
in travel mileage sales surpassing the production pace,
Western at year's end soared past the $1 -million
profit milestone for the first time.
dv eds
Climaxing five consecutive years of regular dividend
payments, the board of directors of Western Air Lines
declared two extra dividends during 1955, for a total
distribution for the year of 90 cents a share.
Regular quarterly dividends were declared payable
on March 15, May 16, August 15 and November 15,
while the extras were distributed to shareholders on
March 15 and December 15.
All six 1955 dividends were of 15 cents each on out-
standing shares of capital stock.
For the past five years, dividends have been paid
regularly. The extra dividends paid in 1955 marked
the first such distribution of earnings in the history of
the company.
v nu
Registering the most substantial one-year increase in
the company's records, total operating revenues for
1955 were $31,039,523, up $6,558,744 over the previ-
ous year, a 27 per cent increase.
brief balance sheet
Western owns:
Cash and U.S. Govt. securities ..
Owed by others ............. .
Materials and supplies ....... .
Buildings and improvements, ne
Flight and other equipment, net.
Deposits on new equipment. .. .
Prepaid expenses ........... .
Deferred charges ............ .
Western owes:
Notes payable .............. .
Accounts payable ............ .
Income taxes ............... .
Tickets sold but not yet used .. .
Excess of what is owned
over what is owed,
1955
$ 5,943,898
2,605,502
317,455
2,177,687
9,030,052
2,290,107
744,668
222,835
23,332,204
5,334,307
2,823,956
2,010,524
733,430
10,902,217
1954
3,949,365
1,791,652
282,036
2,242,955
10,903,178
769,794
265,221
2QJ04,201
5,180,918
2,739,222
903,243
594,665
9,418,048
or shareholders' equity ... ...... . $12,429,987 ___!Q,786,153
Accounting for 93 per cent of the record total, pas-
senger revenues were $28,755,616 for the year com-
pared with $22,423,388 for the previous 12 months,
an increa e of 28 per cent.
Express, freight and excess baggage revenues,
accounting for 3.8 per cent of total revenues, were up
22 per cent at $1,185,296, compared to $968,487, for
1954.
Reflecting the company's subsidy-free status, mail
service revenues of $862,014, while 13 per cent over
the previous year's total of $763,586, represented only
2.8 per cent of total operating revenues, lowe t in
We tern's history. The company continued to be an
revenue and Income
(in millions)
active participant in the Post Office Department's
experimental, space-available movement of 3-cent sur-
face mail aboard scheduled airliners.
sal s
Passing the one-million mark for the first time in it
hi tory, Western in 1955 carried 1,092,578 air trav-
elers as traffic was increased 31 per cent over the previ-
ou year' total of 834,910.
Passenger revenues climbed to an all-time high of
$28,755,616 as the company aggre sively merchan-
dised its expanded operations featuring deluxe DC-6B
service.
An increase of 21 per cent in total seat-miles pro-
duced was more than matched by a 28 per cent boost
in seat-miles sold.
The company's deluxe services, highlighted by the
now-famed Californian "champagne flights;' accounted
for the major por.
tion of 1955 traffic gains as 40 per
cent of all seat-miles sold were in this category.
The "champagne flights;' now established as a new
standard of airline service, were advertised, promoted
and sold . as an entirely new concept of luxury travel.
Including such innovations as reserved seating, gour-
met meals, special wine, soft mus!c and souvenir gifts,
the service was sold as a '-'package" to record numbers
of western travelers.
The Californian service, inaugurated in 1954 and
substantially expanded during the past year, has won
wide public acceptance and has been acclaimed by
travel authorities as "second to none'.'
At the same time, scheduled aircoach travel, pio-
neered by Western in 1949, showed a 12 per cent
increase in volume. Economy aircoaches accounted
for one-third of the company's total passenger traffic.
Keynoting sales of its new services, the company
accelerated its activities, engaging in extensive adver-
tising and sales promotion programs embracing tele-
vision, radio, newspaper and magazine campaigns, as
well as increased distribution of posters, films, dis-
plays and direct-mail literature.
The company's no-deposit "Charge-A-Flight" credit-
card plan for regular air travelers achieved major
revenue status in 1955, generating $900,000 worth of
transportation. The company's 27,000 cards, repre-
senting 19,000 accounts, now are accepted by leading
hotels and car-rental agencies for immediate identifi-
cation and credit privileges.
Substantial revenue increases were achieved from
convention travel, military traffic, sales-incentive pro-
grams, charter flights and athletic transport services,
the latter a specialty for many years which is partic-
ularly popular with leading universities on the com-
pany's system and with professional baseball teams of
the Pacific Coast League.
Joint sales programs with connecting airlines at
principal travel gateways, packaged holiday trips pro-
moted in cooperation with resort hotels, increased
emphasis on the economic advantages of family-plan
travel, and participation with other air carriers in hun-
dreds of joint fares resulted in material revenue gains
during 1955.
ales of transportation by Western's travel agents
increased 31 per cent, interline sales by other carriers
for travel on the company's sy tern were up 34 per
cent, and sales on Western-is ued Universal Air Travel
Plan cards were boosted 33 per cent during the year.
dollar
expe ses
An increase of 25 per cent in available ton-miles flown
was the major factor in the rise of total operating
expenses in 1955 to $27,006,177, a 20 per cent increase
over 1954.
Integration of the DC-6B fleet, expansion of deluxe
services, steady rise of supplies, parts and equipment
costs, and increases in personnel compensation all con-
tributed to the $4,501 ,074 climb in operating expenses,
as did a 22 per cent increase in depreciation on flight
equipment.
At the same time, the unit cost of producing a reve-
nue ton-mile was reduced materially to 49.1 cents in
1955, compared to 52.7 in 1954 and 53.5 in 1953.
With one of the airline industry's lowest "break-
even" passenger load factors, reflecting the lowered
unit cost, the company was able to improve and expand
its services at reasonable additional expense.
Operating expenses were further reduced by the
efficient utilization of manpower and facilities at the
company's Los Angeles maintenance and overhaul
base, as exemplified in service contracts fulfilled for
Pan American World Airways, Compania Mexicana de
Aviacion and Scandinavian Airlines System.
finances
A record business year in 1955 resulted in substantial
improvements in the company's financial position.
Working capital was increased 87 per cent from
$1,489,717 in 1954 to $2,783,613 at the close of 1955.
Cash and U. S. government securities totaled
$5,943,898, compared to $3,949,365 for the previous
year, an increase of 50 per cent.
Principal asset of the company was its flight equip-
ment, listed at $17,950,247. Together with buildings
and improvements on leased property, and other equip-
ment, properties and equipment totaled $23,377,936,
less $12,170,197 allowance for depreciation for a net
of $11,207,739.
In 1955, $1,801,040 was obtained under a credit
agreement, established with several western banks
headed by the Bank of America, and payments of
$2,071 ,651 were made. At the same time, Westem's
long-term debt was reduced by $270,611 during the
year from $3,754,918 in 1954 to $3,484,307 on
December 31.
Deposits on equipment-purchase contracts totaled
$2,290,107 at the close of the year covering 13 DC-6B
aircraft.
Current assets for 1955 totaled $9,611 ,523; current
liabilities were $6 827,910 for the year. This reflected
an improvement in the assets-liabilities ratio from
$1.28-to-$1 in 1954 to $1.41-to-$1 in 1955.
Symbolizing modern service for the
modern West, the company's DC-68 fleet appears
in impressive new design scheme.
Illustrating 30 years of progress,
modern DC-6B overwhelms 1926 M-2, first plane
of Western, America's oldest airline.
Earned surplus was $6;805,915 on December 31,
1955, as compared with $5,491,621 at the close of
1954, while capital surplus was increased from
$4,578,319 to $4,880,609 by the excess of proceeds
over par value of 27,250 shares of capital stock issued
under the company's restricted stock-option plan.
equipment
Serving 45 cities in 12 western states and Canada over
its 5,525-mile system, the company established a per-
fect safety record in 19 5 5 while operating a fleet of 31
planes composed of eight 60-passenger Douglas
DC-6Bs, six 66-passenger Douglas DC-4 Coachmas-
ters, nine 40-passenger Convair 240s and eight 22-pas-
senger Douglas DC-3s.
Western now has on order 13 additional DC-6Bs,
six for delivery in 1956, seven in 1957.
Under active study during the year were specifica-
tions and performance estimates of both turboprop
and jet aircraft as applicable to Western's system, pres-
ent and future. While no orders have yet been placed
for future delivery of these new types of airliners, deci-
sions will be made soon and new equipment ultimately
will be introduced into the Western fleet in line with
requirements of planned growth and development.
At the same time, attention was given by manage-
ment to developments in the passenger helicopter field,
particularly to performance in short-haul operations
at metropolitan centers.
shar hol ers & stock
At the close of 1955, there were issued and outstanding
743,463 shares of the capital stock of the company
held by approximately 6,500 individual shareholders.
During the year, shareholders' equity increased from
$10,786,153 to $12,429,987. Book value for each share
of outstanding stock increased to $16.72 at y;ear's end
from $15.06 in 1954.
Trading in Western stock was considerably more
active in 1955 than during the previous 12 months.
On the New York Stock Exchange, 553,700 shares
were traded at prices ranging from a low of 16'1/s to a
high of 25, with a closing price of $22 a share, up
$4 from the 1954 closing level.
On the Los Angeles Stock Exchange, 13,080 shares
were traded within a range of 18 low and 24 high,
closing at 21 . On the San Francisco Stock Exchange,
where the company's stock enjoys unlisted trading
privileges, 17,874 shares were traded at prices ranging
between a low of 17 and a high of 25%, with a
closing price of $22 a share.
At the annual meeting of shareholders, held in Los
Angeles on April 21, 1955, approximately 92 per cent
of all outstanding stock was represented in person or
by proxy.
personnel
Reflecting a record year of expansion and growth, the
personnel rosters of Western Air Lines at the close of
19 5 5 carried the names of 2,130 employes, comprising
the largest payroll in nine years.
Average length of employe service is 5 .5 years, while
flight captains have an average seniority record of 13 .5
years. Twenty-one per cent of all employes have been
with the company for more than 10 years; 39 per cent
have served for more than five years.
Seventy-two per cent of Western personnel are men,
28 per cent are women. For each employe, the com-
pany, on December 31, had a gross investment of
$11,000 in property and equipment as compared with
$4,500 in 1946.
At the close of the year, 78 per cent of eligible
employes were participating in the company-wide con-
tributory retirement program, a plan inaugurated in
1952 when Western made arrangements to pay past-
service premiums. During 1955, the company contrib-
uted $444,032 to the retirement program while par-
ticipating employes remitted $283,196 for their por-
tion of current-service premiums.
A majority of employes also availed themselves of
protection offered in the company's group insurance
program, a plan considered one of the finest available.
Subject to extension and revision in line with economic
developments, the program is available to all employes
and is financed jointly by the company and its personnel.
brlel statement of Income
fronl1 1955 191
At the end of the year, 87 per cent of Western
employes subscribed to the accident and sickness insur-
ance provided in the group plan, 89 per cent availed
themselves and their families of the hospitalization
coverage, and 68 per cent carried group life insurance.
In addition to these insurance programs, the com-
pany maintains a liberal free-transportation policy for
employes and their families, both on Western's system
and on routes of other scheduled airlines with which
the company has reciprocal agreements. An average
of approximately 1,000 space-available passes were
issued monthly during 1955. If computed at first-class
rates, this transportation could have cost employes
nearly $1 ,500,000 during 1955.
The Company Progress Council, an employe-man-
agement forum established in 1954, continued to work
constructively toward increased efficiency of personnel
and procedures during the year. Membership includes
the vice-presidents in charge of the company's divi-
sions, officials of labor unions representing employe
groups, and representatives of other personnel
organizations.
With 77 per cent of employes as members, the
Westernaire Federal Credit Union, operated by and for
employes, reported its most successful year. Showing
a net profit of $47,079, the WFCU provided person-
alized loan service to company personnel and paid a
5 per cent dividend on shares (savings). The organi-
zation closed the year with total assets of $899,156.
Approximately 88 per cent of all employes were
represented by seven labor unions, three of which were
seeking new contracts at the close of 1955.
CAB proceedings
A major stride in the company's long-range program
of regional route development was taken on November
14, when Western won authority from the Civil Aero-
nautics Board to provide competitive service over the
980-mile route linking San Francisco-Oakland with
Denver, via Reno and Salt Lake City. Flights over the
new skyway are scheduled to begin as soon as possible
in 1956 and are expected to prove popular and profit-
able. In addition, the route offers great potential advan-
tages in scheduling, integration of equipment and
future services.
sharehold equllw
dollars r share
1850 1951 1952 1953 1954 1955
Soaring to an all-time record, Western in 1955
carried more than one million air travelers
to cities in 12 states and Canada.
The forty-fifth city on Western's route system was
added on July 16 when service was inaugurated at
Sioux Falls, S.D., population and economic center of
eastern South Dakota.
In a CAB decision of December 15, the company
was authorized to eliminate Richfield and St. George,
Utah, from Route 13. Neither city ever has qualified
for trunkline air service, nor has Chadron, Neb., which
the company also is seeking to remove from Route 35.
Two mail-rate cases of importance affected the com-
pany during the year. In a CAB decision of June 7,
the board instituted a multi-element rate for Western
based on "line-haul" fees paid for actually flying air
mail plus a sliding-scale "terminal charge" to compen-
sate for ground-handling costs. The new subsidy-free
rate became effective October 1 and preliminary figures
indicate it will result in mail service revenues of
approximately 40.6 cents a mail-ton mile.
The second case involved a hearing on the experi-
mental carriage of 3-cent surface mail by air between
cities selected by the Post Office Department. The
company has taken the position that it is willing to
continue carrying this mail, on a space-available basis,
at the present rate of 18.98 cents a ton-mile.
The CAB is expected to schedule for hearings early
in 1956 the company's application to make permanent
the temporary authority granted in 1952 to operate the
Salt Lake City-Casper-Rapid City "cutoff" route, an
award which has permitted Western to provide one-
stop service between Minneapolis-St. Paul and Los
Angeles as well as improved service to the key route
cities. The company is confident that its operating
experience on this route will justify the permanent
authority it seeks.
..--.
- I
- I









-
-
-
-
-
-
-
-
-
-
-
Of major importance in the future development of
the company's routes is the Phoenix Service Case,
involving the entire pattern of air service to the im-
portant Arizona center. Western is seeking a complex
of new routes which would off er direct flights from
Phoenix to Denver, Salt Lake City, Las Vegas, Palm
Springs, San Diego and Los Angeles. Hearings on this
case are expected to be scheduled in mid-1956 by the
CAB.
Also due for hearing in 1956 is a consolidated pro-
ceeding which includes the company's petition to pro-
vide service to Sacramento, California's capital, from
San Francisco-Oakland, Portland, Seattle, Reno and
Los Angeles.
Involving a complete re-appraisal of the local air
service needs of the area roughly bounded by Great
Falls, Casper, Denver, Kansas City, Chicago and the
Canadian border, the Seven States Area Case also
probably will go before the CAB in 1956. Involved in
this inclusive case is the possible-transfer of Western's
operating authority to local-service carriers at several
cities now served by the company, including Alliance,
Scottsbluff, Chadron, Hot Springs, Spearfish, Brook-
ings, Mankato, Rochester, Cut Bank-Shelby and
Lewistown.
Western's 1954 applications to provide additional
service to the Pacific Northwest still await action by
the federal board. One petition is for authority to
operate a 570-mile route from Portland to Calgary,
via Spokane; the second is for permission to serve
Spokane as an intermediate point between Portland
and Seattle on the company's coastal route.
A pair of international cases drew considerable at-
tention during the year and show promise of being
resolved during 1956. Still lacking approval by the
Canadian government is the company's 10-year-old
U.S. certificate to serve Calgary on the Western route
between Great Falls and Edmonton; and, still under
consideration-and the subject of strong civic support
-is the company's 1946 U.S. permit to inaugurate Los
Angeles-Mexico City flights which must be approved
by bilateral agreement between the United States and
Mexico.
Western, as well as nearly every other scheduled
airline in the nation, has filed for judicial review of the
headlined CAB decision of November 15 which, in
effect, created an entire new class of transport, "the
supplemental air carriers'.' The company considers this
unprecedented board action a grave threat to the sound
development of U.S. commercial aviation and will,
during 1956, take an active part in seeking reversal of
this decision which grants broad privileges to 49 non-
scheduled operators who have no obligation to provide
regular service to any points whatsoever.
outlook
Western Air Lines, now established as one of the West's
essential utilities, operates under a federal mandate
outlining the balanced development of a safe, adequate
and dependable domestic air transportation system.
The board of directors and officers of the company,
personally representing every major region of the West,
are dedicated to a studied program designed to insure
steady, constructive growth.
Against a background of the West's soaring popula-
tion, insatiable desire for improved service and steadily
increasing economic strength, Western's management
looks forward with confidence to a successful 1956.
In line with the company's rapid development, new and modern sales offices were
opened during 1955 in the major hotels of key cities on Western's 5,525-mile system.
Each new installation features large, dominant neon signs and attractive company identi-
fication in display areas. In addition to the offices pictured here, a new travel center now
is under construction in downtown Seattle and will be opened early in 1956. Pending
completion of permanent facilities, temporary offices were opened at Sioux Falls, Cal-
gary and in the San Fernando Valley of southern California. In decor and color schemes,
these offices present the company's modern product for a modern West. LAS VEGAS: Riviera Hotel
BEVERLY HILLS: Beverly Hilton Hotel SAN FRANCISCO: Sheraton-Palace Hotel
DENVER: Cosmopolitan Hotel LONG BEACH: Wilton Hot
SAN DIEGO: 241 Broadway SALT LAKE CITY: Hotel Utah
Each of these people is a recognized expert in at least one important phase of modern
airline management. They are the department heads - the "operating directors" -of
Western Air Lines. With a combined total of more than 3 7 5 years of airline experi-
ence, they are the specialists who combine skill and enthusiasm to assure the progress
and development of Western.
Jessie L. Bathgate
Chief Stewardess
Charles J. J. Cox
Accounting & Taxation
Robert Gallagher Jr.
Chief Flight Engineer
Earnest H. Brown
Personnel
Richard P. Ensign
In-Flight Services
John I.Good
Cargo Service
Stanley J. Cavill
Chief Pilot
Anton B. Favero
Maintenance
H. S. Gray
Budget
Harold W. Caward
Flight Operations
Charles S. Fisher
Flight Schedules
Edward L. Hallgren
Customer Relations
Arthur L. Hewitt
Agency & Interline Sales
Ronald A. Larson
Regulations &
Organization Control
Philip E. Peirce
Stations
Kenneth 0. Smith
Public Relations
Charles W. Holmes
Stores
Bert D. Lynn
Advertising & Sales
Promotion
Norman P. Rose
Flight Control
M. E. Sullivan
Traffic
James M. Keefe
Properties
James L. Mitchell
Research
Jack M. Slichter
Passenger Services
r::,
I
Frank H. Vosepka
Inspection
Kenneth W. Kendrick
Purchasing
Thomas M. Murphy
Governmental Affairs
Arthur C. Smith
Sales Administration
Peter P. Wolf
Communications
a decade of growth
financial summary 1955 1954 1953 1952 1951 1950 1949 1948 1947 1946
Revenues:*
Passenger .......... $28,756 22,423 20,302 16,250 13,688 11,395 8,471 7,813 10,114 10,474
Express, freight and excess baggage .... 1,185 968 846 662 507 497 313 483 410 318
Mail .................................. 862 764 875 719 1,212 2,090 2,504 1,293 1,570 1,326
Other ................ 236 326 853 964 875 264 246 31 282 118
Total Revenues .......... 31,039 24,481 22,876 18,595 16,282 14,246 11,534 9,620 12,376 12,236
Operating Expenses:*
Depreciation ................ 2,151 1,761 1,718 1,019 998 1,124 1,335 1,164 1,845 1,369
Payroll ............... 11,057 9,239 8,367 7,067 6,084 5,353 4,855 4,973 5,773 5,916
Other ......................... 13,798 11,505 10,300 7,674 6,666 6,133 4,374 4,225 5,423 5,828
Total Operating Expenses ........... 27,006 22,505 20,385 15,760 13,748 12,610 10,564 10,362 13,041 13,113
Operating Income* .................. 4,033 1,976 2,491 2,835 2,534 1,636 970 (742) (665) (877)
Other Income* .......................... (201) 333 (56) (103) 280 (196) (258) (186) (192)
3,832 2,309 2,435 2,732 2,814 1,440 712 (928) (857) (877)
Provision for Federal Taxes on Income* ....... 1,850 850 1,250 1,500 1,425 690 391 (589) 88 (277)
Net Income* ................. $ 1,982 1,459 1,185 1,232 750 321 (339) (945) (600)
--
Earnings per sharet .................. $ 2.67 2.04 1.66 1.72 (1.80) (1.14)
Dividends paid per share ................... 0.90 0.60 0.60 0.60
Working capital* ....................... $ 2,784 1,490 755 1,364 435 981 243 (315) 1,410 (4,557)
long-term debt* ......................... 3,484 3,755 2,072 2,903 1,924 2,231 3,113 3,551 3,800 287
Properties and equipment-net* .......... 11,208 13,146 9,844 9,702 6,588 6,621 7,171 8,094 6,292 7,581
Shares outstanding* ....................... 743 716 715 715 550 525 525 525 525 525
Shareholders' equity-total* ................ 12,430 10,786 9,746 8,991 6,396 5,045 4,295 3,974 4,314 3,665
Shareholders' equity-a sharet ............. . $ 16.72 15.06 13.63 12.57 11.63 9.61 8.18 7.57 8.21 6.98
operating statistics 1955 1954 1953 1952 1951 1950 1949 1948 1947 1946
Route Miles .............................. 5,525 5,525 5,525 5,016 5,016 5,016 4,727 4,727 4,725 4,808
Available Ton Miles* ....................... 100,015 80,261 68,580 48,557 43,036 44,515 32,034 29,534 35,757 35,831
Revenue Ton Miles* ....................... 54,999 42,669 38,088 31,434 27,549 24,697 16,383 14,660 20,887 22,877
Passengers and Tonnage Carried :
Revenue passengers ..................... 1,092,578 834,910 838,732 774,079 691,322 619,624 422,193 353,569 491,680 602,302
Mail tons ............................. 4,897 3,283 3,284 3,243 3,419 2,150 1,359 1,543 1,722 1,852
Express and freight tons .................. 5,435 4,276 4,206 3,729 3,191 3,396 2,435 2,702 2,252 1,640
Revenue Miles Flown:*
Airplane miles ......................... 18,335 15,842 14,450 12,631 11,487 11,783 9,496 8,707 9,607 10,594
Passenger seat miles .................... 870,596 721,255 613,814 453,332 401,720 414,169 299,503 243,771 312,615 301,856
Passenger miles ........................ 514,677 402,255 359,965 298,931 259,693 233,118 155,747 135,724 194,923 214,023
Mail ton miles .......................... 2,621 1,669 1,610 1,358 1,449 978 567 574 733 706
Express and freight ton miles .............. 3,207 2,556 2,100 1,524 1,282 1,442 926 1,089 912 635
Other Statistics:
Passenger load factor ................... % 59.1 55.7 58.6 66.0 64.7 56.3 52.0 55.7 62.4 70.9
Average length in miles per passenger trip .. 471 482 429 386 376 376 369 384 396 355
Average revenue per passenger mile ........ $ .0559 .0557 .0564 .0544 .0527 .0489 .0544 .0576 .0519 .0489
Number of employes end of year ........... 2,130 1,864 1,813 1,649 1,459 1,279 1,226 1,285 1,529 2,396
*000 omitted
tbased on shares outstanding at close
of respective years
for the year ended
december 31, 1955
(with comparative
figures for 1954)
for the year ended
december 31, 1955
statement of Income
OperatlAI RevtRIIIS:
Passen1er .......
Express, freight and excess bagage .......
Charter and other transport services .....
Mail ........................................ .
Incidental revenue (net) ....
Dperatin1 Exptlll8S:
flyiq operations ................. ~ . , .. , ....
Ground os,erlitions ...............
flipt equipment maintenance 4111irect> .. .,. ...
General andadministrative . . .. ............... ..
&nplQYe weifare .............................. .
Depreciation
Ope,atiq IIICOllle ......................... .
..........
Gain on dispositien of property ................... .
other ............ -.......................... .
Nta-O,enti11 Chirps:
Interest ..............................
Amortization of routes, contracts and leases ....... .
Other ...............
Income before federal Taxes on Income ...... .
Pr1Ylsin fir Ftdtraf Taxn n <Note 1)
NetllCI ............................ .
1955
$28,755,616
1,185,296
90,633
862,014
145,964
31,039,523
8,710,882
3,332,585
3,135,643
1,343,932
2,479,384
2,699,005
866,736
1,452,308
834,757
2,150,945
27,006,177
4,033,346
50,522
44,057
94,579
261,890
22,200
12,150
296,240
3,831,685
1,850,000
$ 1,981,685
statement ol surplus
Aat1111tt u If Dtce11Hr 31, 1914 ...........
Net income for 1955 ..
Excess of proceeds over par value of
27,250 shares of capital stock issued
under restricted stock option plan .......
Dividends paid. in cash-$0.90 a share
Amtnt u If Dec,..., 31, 1915 (Note 2)
earned aurplua
$ 5,491,621
1,981,685
7,473,306
667,391
$ 6,805,915
1814
22,423,388
968,487
79,932
763,586
245,386
24,480,779
7,311,395
2,980,759
2,682,66G
1,197,139
1,743,498
2,204,549
723,049
1,251,832
747,927
1,761,589
22.505,103
1,975,676
507,520
27~14
5.15,134
160,196
22,200
19,715
202!111
2,308,699
850!000
1!458,699
oapltal aurplua
4,578,319
302.290
4,880,609
4,880,609
Current Assets~
Cash ...........................................
U. S. Government Securities at cost .........................
Receivables:
Traffic balances ...................................
U. S. and State Government Departments .............
Other (net of allowance for doubtful accounts $30,000) .....
Materials and supplies ...........................
Prepaid expenses ................................
Tetal Current Assets . ............................... .
Sundry securities ...........................................
Properties and equipment at cost (Note 2):
Flight equipment ..................................
Buildings on and improvements to leased property ...........
Other property and equipment ............................
Less allowance for depreciation ..............
Deposits on equipment purchase contracts (Note 3) .........
Routes, contracts and leases, less amortization $180,060 .........
Deferred charges ..........................................
1955 assets 1954
$ 3,955,618
1,988,280
1,815,974
571,713
217,815
2,605,502
317,455
744,668
9,611,523
15,591
17,950,247
3,419,722
2,007,967
23,377,936
12,170,197
11,207,739
2,290,107
22,225
185,019
$23,332,204
2,951,955
997,410
1,357,740
271,577
162,335
1,791,652
282,036
769,794
6,792,847
68,728
18,295,082
3,351,564
1,821,723
23,468,369
10,322,236
13,146,133
44,425
152,068
20,204,201
CbcD cDITT@ @UL)@@[? as of December 31, 1955
with comparative figures for 1954
Current Liabilities:
1955 liabilities 1954
Current portion of long-term debt ........................... .
Accounts payable ....................................... .
Accounts payable - taxes collected from others ................ .
Accrued salaries, wages, taxes, insurance and other ............. .
Air travel plan deposits .................................... .
Unused transportation ................ . ................... .
Federal taxes on income (estimated) .......................... .
Total Current Liabilities . ............................. .
Long-term debt-secured (net of current portion included
in Current Liabilities) (Note 2) .............................. .
Deferred federal taxes on income (Note 1) .......................... .
Commitments and contingent liabilities (Note 3)
Retirement plan (Note 4)
Shareholders' Equity:
Common stock - $1.00 par value per share
Authorized 2,000,000 shares (Note 5)
Issued 743,463 and 716,213 shares respectively .......... .
Capital surplus . .. ....... . ...... . . .. ......... .... .. . ..... .
Earned surplus from December 31, 19 34 (Note 2) . .... . ......... .
$ 1,850,000
853,998
338,239
1,348,244
283,475
733,430
1,420,524
6,827,910
3,484,307
590,000
743,463
4,880,609
6,805,915
12,429,987
$23,332,204
1,426,000
1,033,282
299,081
1,137,709
269,150
594,665
543,243
5,303,130
3,754,918
360,000
716,213
4,578,319
5,491,621
10,786,153
20,204,201
PE.AT, MARWIOK, MITCHELL & Go .
CRRT f Pll~D PLJ'BLJO A COUNTANTS
t l N ORPORATtNo T n OMPSON, Moss & Co.)
610 SOUTO SPUINO STREET
LOS A.NOE LES 14 , 0.ALll'Oll.N IA
ACCOUNTANTS I REPORT
The Board of Di.rectors
Western Air Lines, Inc.:
We have examined the balance sheet
of Western Air Lines, Inc. as of December 31,
1955 and the related statements of income and
surplus for the year then ended. Our examina-
tion 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,
1955 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 10, 1956
"'"'''""''-'"
C0NflN[ NT"' I..CV011'[
INOIA '
notes to lln nclal tatements
Note 1. Deferred,....,_, taxes - Inc Depreciation
for federal tax purposes will, through 1957, exceed that
reported on the book of account as a result of deducting
accelerated depreciation in tax returns. Accordingly, the
federal tax provision reftected on the tatement of income
includes $230,000 set aside in 1955 to offset the estimated
effect on federal taxes which will occur in the years 19S8-61
when the depreciatiott recordable on the book of account
wiJJ be more than that allowable for federal tax purposes.
Note 2. Lo .. tenn clel,t (Secured). The not payable of
S ,334,307 ($1,850,000 current and $3,484,307 long term)
toaether with future equipment purchase borrowings under
the credit agreement are repayabl in monthly amounts
aggregating $1,850,000 in 19-'6, increa ing to $2,880,000
in 19-'8, pl int r t at 3 % per annum with final ma-
turity on pt mber I, 1962. The ind btedne is secured
by pecified properf representing a total co of approxi-
mat ly S 19 750 000, including the cost of three Douglas
DC-4 and one Douala OC-3 airer ft Id in 1956 at
ub tantial profit.
The related bank credit agreement includes, among other
things, condition and requirements which effectively limit
the amount of earned surplu di tributable as cash divi-
dend The greatest amount restricted by the require-
ment that cash dividends are not to exceed 50% of the
earninp carried to surplus after January 1, 1954. F.arned
urplus as of De4~l>er 31 1~55, is Meenlingly restricted
in the amount of SS,712,391, leavina Sl,023,$24 not so
restricted.
Net 3. C
I._... cefl-- llulUta... The
company bas orcfeted thirteen new Douslu DC-6B air
craft with delivery acheduled for in 1,56 and seven in
1957. n repteseats a commitment as of December 31,
1955 of approximately $13,SOO,OOO in excess of the deposit
payments already made. ArranpdJellts have bee& made
UIIClcr tile bank credit agreement to provide the related
funds, for which the commitment fee is of 19' per annum.
As of December 31, 1955, the company was contingently
liable for daims 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.
Nete 4. .... ..._.. ,.__ The cost of the insured contribu-
tory retirement plan as charged to operating expenses in
1955 totaled $444,032 for both current and past services.
Management COIi~ that the remaining past service
costs will be funded over a period of approximately eight
years and will require annual payments of $106,000.
Note S. ~ to pwcNH cpltt ... ck. Through
December 31, 19.55, 28,250 shares have been issued under
a restricted stock option plan for officers and key employes,
approved by the shareholders in 1951, at pnces ranging
from $8.49 io $14.14 a share. Options for the 6,750 shares
remaining under the plan are outstanding and are exercis-
able within five years from the date granted, at prices
ranging from $8.19 to $18.17 a share.
IIIIIJ to serve air travelers of the West,
11ant DC-68 Is p0lsed on ramp at
company's Los An1etes headquarters.
board ol directors
Hugh W. Darling
Darling, Shattuck & Edmonds, 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
Consultant, Hughes Aircraft Co.,
Culver City, California
Marvin W. Landes
Vice President-Service,
Western Air Lines, Inc.
Donald H. McLaughlin
President, Homestake Mining Co.,
San Francisco, California
L. Welch Pogue
Pogue & Neal, Attorneys-at-Law,
Washington, D. C.
Joseph F. Ringland
President, Northwestern National Bank of Minneapolis,
Minneapolis, Minnesota
Stanley R. Shatto
Vice Pres_
ident-O perations,
Western Air Lines, Inc.
John M. Templeton
Templeton, Dobrow & Vance,
New York, New York
Harry J. Volk
Vice-President for Western Operations,
The Prudential Insurance Co. of America,
Los /J.ngeles, California
John M. Wallace
President, Walker Bank & Trust Co.,
Salt Lake City, Utah
Alexander Warden
Publisher, Great Falls Tribune-Leader,
Great Falls, Montana
Sidney F. Woodbury
Consultant, Woodbury & Co.,
Portland, Oregon
executive stall
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
Vice President-Legal
G. G. Brooder
Vice-President
Charles J. J. Cox
Controller and Assistant Treasurer
Earnest H. Brown
Assistant Secretary and Director of Personnel
Thomas M. Murphy
Assistant to the President
general offices
Western Air Lines Building
6060 A vion Drive,
Los Angeles International Airport,
Los Angeles 45, California
registrars
Citizens National Trust & Savings
Bank of Los Angeles
457 South Spring Street,
Los Angeles 13, California
The Chase Manhattan Bank
11 Broad Street,
New York 15, New York
stock transfer agents
Security-First National Bank of
Los Angeles
561 South Spring Street,
Los Angeles 14, California
New York Trust Co.
100 Broadway,
New York 15, New York
stock listings
Listed and traded on
New York Stock Exchange
and Los Angeles
Stock Exchange,
Traded on San Francisco
Stock Exchange
general counsel
Darling, Shattuck & Edmonds
Attorneys-at-Law,
523 West Sixth Street,
Los Angeles 14, California
auditors
Peat, Marwick, Mitchell & Co.
618 South Spring Street,
Los Angeles 14, California
annual meeting
Third Thursday in April
at General Offices
Fellow Stockholder:
Los Angeles, California
March 7, 1956
Enclosed is your personal copy of the 1955 Western Air Lines Annual Report
covering our 30th year of continuous operation in serving the West.
As a shareholder, you will find the report's contents of interest, and we believe
you will share our enthusiasm for the future growth and development of the com-
pany which is indicated in this review of a record year.
Most of you know that the company's operations have been suspended since
January 9, 1956, because of a strike by the Brotherhood of Railway and Steamship
Clerks, Freight Handlers, Express and Station Employees (AFL), compounded by
the announced intention of immediate strike at that time by the Air Line Pilots
Association (AFL). A review of our labor situation should be of interest to you.
The BRC is the bargaining agent for approximately 40 per cent of Western1s
employees. Negotiations with the BRC were conducted from June of last year until
the strike began. The BRC actually called a strike on December 16, 1955, but this
strike was prevented by an injunction issued by the United States District Court.
The principal issues in dispute are the BRC's initial demands for a wage increase
of $50 a month for each employee covered by the contract, retroactive to July 1,
1955, and a union shop agreement. The wage demand would increase costs by over
one-half million dollars annually. The company has made several wage proposals
in an effort, first, to prevent the strike, and later, to end it. The most recent pro-
posal offers to the employees a wage rate which is well above the average in the
domestic airline industry in practically all of the many classifications covered by
the contract. For most of the employees so covered, the increase would amount to
approximately $30 a month.
The Brotherhood of Railway Clerks has no union shop agreement with any
domestic airline and Western has refused to accede to this demand, taking the firm
position that our employees must be guaranteed the right, but must not be com-
pelled, to join any union. None of Wcstern's six other union contracts has union
shop provisions. Several hundred of our employees who e jobs are covered by the
BRC contract have sent letters, telegram and petitions to the company clearly and
forcefu1ly stating that they do not want a union shop. We are convinced that a
majority of all of our employees are against it in principle. A great many employees
have expressed the opinion that the company's wage propo al to end the strike i
fair and reasonable and should be accepted by the union negotiators, who have
refused to submit this proposal to a vote of the employees affeckd, although they
have been requested to do so.
The company's contract with the Air Line Pilots Association expired in May
of last year. The principal issue raised by ALPA negotiations was the demand for
additional pension benefits of a variable annuity type over and above the benefits
payable under Western's retirement plan for all employees which was voluntarily
adopted by the company, with the approval of the shareholders, in 1952. Since the
strike started, negotiations have continued with the ALP A and we are now reason-
ably confident that the dispute with the pilots can be very promptly settled.
Throughout December of last year, while negotiations were in progress, both
the BRC and the ALP A made almost daily public announcements of their intention
to strike on short notice, and these announcements, together with the attempted
strike of the BRC on December 16, had an adverse effect upon the company's busi-
ness during December.
In October of last year, the company began negotiations with the International
Association of Machinists (AFL) for a new contract. It is hoped that this contract
will soon be concluded under the direction of the National Mediation Board since
the company has made liberal wage proposals which compare favorably with any
in the industry.
Western's employees are represented by seven unions. Signed contracts are in
effect with all of the unions except the three with which we are presently negotiating.
Officers of the company have been meeting in Los Angeles with union nego-
tiators in lengthy sessions conducted by Mr. Leverett Edwards, Chairman of the
National Mediation Board, in a constant attempt to end the strike and to restore
service as soon as possible. In all of our discussions, the paramount objective of
the company has been to arrive at union agreements, in accordance with the pro-
visions of the Railway Labor Act, which are fair and equitable to all concerned-
our stockholders, our employees, and our customers. That objective is still our guide
in all collective bargaining.
All possible steps have been taken to reduce expenses during the strike. On
January 1, 1956, there were 2,130 employees on the payroll. Today there are
411 employees on duty. Of the remainder, some are on strike, most are on furlough
without pay, a few are voluntarily taking accrued vacations, and some have been
terminated.
As you have been advised, the company now has on order 13 Douglas DC-6B
aircraft, six scheduled for delivery this year and seven in 1957. The 1956 deliveries
will begin in May. At the time these aircraft were ordered, over a year ago, it was
the intention ultimately to dispose of our six Douglas DC-4 non-pressurized coach
aircraft. The market for this type of airplane is now exceptionally strong and, since
the strike started, the company has been able to sell three DC-4 Coachmasters and
one 22-passenger DC-3. These sales have resulted in very substantial profit which
will be sufficient to more than offset the operating losses incurred to date as a result
of the strike.
The Board of Directors and the management of the company are acutely aware
of the hardships and inco.nvenience being suffered by employees, stockholders and
customers during this strike, and are deeply appreciative of the many expressions
of understanding and support that have been received. When operations are resumed,'
which we believe will be soon, we are confident our service will be better than ever
and we earnestly solicit our stockholders and their associates and friends to use
Western Air Lines flights when traveling or shipping in the West.
Sincerely yours,
C\ . ....._
I ,. ,QCl<:.. L > ~
President
EDMONTON
WESTERN
AIRLINES
PRESENT AND l'ROPOSE0 ROUTES