Western Air Lines Annual Report 1956

1956
the year in brief ...
Seat miles produced
Seat miles sold ...
Passengers carried
Total operating revenues
Operating income
Net income
Dividends paid:
Cash
Stock
Common stock outstanding
Income per share
Dividends per share:
Cash --
Stock
Total shareholders' equity
---
--
---
--
'
Shareholders equity per share .............. .
Cash and U.S. Government securities
Working capital
I I I I I I I I I I I
Investment in property and equipment
Long-term debt ...
Number of employes
Wages and salaries paid
-
-
-
-
1956*
740,174,000
458,131,000
928,746
$ 28,187,773
2,513,250
3,044,458
$ 601,519
595,170
779,131
3.91
0.80
4%
14,991,235
19.24
$ 6,609,264
4,599,548
29,571,905
9,677,000
2,343
$ 10,283,297
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
-
12,429,987
16.72
5,943,898
2,783,613
23,377,936
3,484,307
2,130
11,057,216
---
---
---
----
*Operations were suspended from January 9 to March 22 because of a strike.
cover
On the softly rolling hillsides of California, warm sunshine and rich earth
combine elemental forces of nature in a carefully tended vineyard to
produce grapes for select wine to be served aboard the famed "cham-
pagne flights" of Western Air Lines. (Photograph by Wine Institute.)
the president's letter
To shareholders, employes, customers and friends:
The year 1956 was a year of substantial progress for Western Air Lines but,
perhaps more important, a year of preparation for future growth and development.
Recovering quickly from the first-quarter suspension of service, the company
closed 1956 by setting a 31-year earnings record.
In addition to paying cash dividends for the sixth consecutive year, Western
distributed the first stock dividend in its history.
Popularity of Western's - deluxe services, particularly the famed "champagne
flights," increased steadily as the traveling public continued to exercise its pref-
erence for the new concept of airline hospitality.
Successful completion of a financing plan for a $48,000,000 equipment program
assures the company of necessary tools with which to build for the future.
A new era of air transportation in the West is anticipated by the purchase contracts
signed in 1956 for a fleet of propjet airliners and a comprehensive, systemwide
electronics reservations system. Increased efficiency of Western's men and women,
new employes as well as veterans, will be achieved in the company's training center,
on which construction began late in the year.
Material progress was made in 1956 in Western's route development program,
and the inauguration of service over valuable new routes is expected to play a major
role in 1957 operations. Strong civic efforts throughout the West now are being made
to obtain a permit from the Mexican government which will enable the company
to start the long-delayed non-stop schedules between Los Angeles and Mexico City.
An early decision is expected on Western's bid for authority to operate a new
complex of routes serving Phoenix.
The following pages present details of Western's accomplishments and plans for
expansion. Your attention is invited to the "Decade of Growth" section for a concise
presentation of the company's record.
Western faces the future with a skilled and experienced staff, an accelerated
program of equipment modernization, the confident hope of new route franchises
and the prospect of increased earnings.
PRESIDENT
February 8, 1957
Western Air Lines Bu ilding
Los Angeles International Airport
Los Angeles 45, Cal iforn ia
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- ual report
earnings
Establishing a 31-year record, Western Air Lines
closed the year 1956 with net income, from all
sources, of $3,044,458, or $3.91 a share, based on
779,131 outstanding shares of common stock.
Earnings in 1955, computed on 743,463 shares,
were equal to $2.67 a share, a total of $1,981,685.
Indicative of the company's complete recovery
from a first-quarter strike which halted operations
for 73 days and was responsible for a net loss from
operations of $ 1.03 a share, is the $2.36 a share
net profit earned from operations during the last
three quarters of the year.
During 1956, the company realized $2.58 a share
from the sale of retired aircraft. It is anticipated
that the last two Douglas DC-4 aircoaches in the
company's fleet will be sold in 1957.
With the exception of the first quarter, the com-
pany continued to increase revenues during each
quarter of 1956 over the records of previous years.
brief balance sheet
Western owns:
Cash and U.S. Govt. securities ..
Owed by others
..........
Materials and supplies
.. . ...
Buildings and improvements, net
Flight and other equipment, net .
Deposits on new equipment ...
Prer,aid expenses .........
Deferred charges .... . . . ..
Western owes:
Owed to vendors and others . . .
Income taxes .. . ........ .
Tickets sold but not yet used .. .
Note payable ...... . .... .
Debentures ............ .
Excess of what is owned
over what is owed, or
shareholders' equity ......... . .
1956
$ 6,609,264
3,267,448
386,543
2,140,645
15,074,931
3,360,213
735,138
500,898
32,075,080
3,138,518
2,249,956
818,371
6,000,000
4,877,000
17,083,845
$14,991,235
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
2,823,956
2,010,524
733,430
5,334,307
~.902,217
12,429,987
Operating income for the year was $2,513,250,
compared with the 1955 figure of $4,033,346.
However, for the last nine months of 195 6
operating income was $4,105,167, more than for
the entire year of 1955 and 16.7 per cent over the
like 1955 period.
The breakeven load factor and its relationship
to the actual passenger load factor continued to be
favorable. Although the breakeven load factor for
the last nine months of 1956 increased to 52.2 per
cent from 50.8 per cent for the comparable 1955
period, it remained one of the lowest in the airline
industry. When evaluated in relation to the actual
load factor of 61.8 per cent, compared with 59.6
for the same 1955 period, the operating profit
margin showed improvement from 8.8 to 9.6. This
gain, coupled with the increase in volume, explains
the rise in operating profit level for the last nine
months of 1956.
dividends
In addition to four regular cash dividends of 20
cents each, the board of directors of Western Air
Lines declared a 4 per cent stock dividend during
1956.
Regular quarterly cash dividends were paid on
March 15, May 15, August 15 and November 15;
the stock dividend was distributed to shareholders
on August 20.
While cash dividends have been paid regularly
since 1951, the 1956 stock dividend was the first
such distribution in Western's history.
On February 1, 1957, the board of directors
declared the first quarterly cash dividend of the
year in the amount of 20 cents a share and, in addi-
tion, declared a further 4 per cent stock dividend.
Both are payable to holders of'record on February
15, 1957, the cash dividend on March 1 and the
stock dividend on March 5.
sales
First-class passenger revenues during the last nine
months of the year were up 19 per cent over the
7
similar 1955 period. At the same time, aircoach
revenues were down 11.5 per cent, notwithstanding
a 24.8 per cent reduction in economy-class seat
mile production.
During the year, 928,746 passengers boarded
the company's aircraft for flights averaging 493
miles in length; in 1955, Western carried 1,092,578
passengers on trips averagihg 4 71 miles.
Primary attention was paid to development of
the important new route opened in the summer of
1956 linking San Francisco and Denver, via
Oakland, Reno and Salt Lake City.
While emphasis in 1956 was placed on Western's
famed deluxe services, with particular programs
directed toward the popular "champagne flights,"
aircoach services continued to merit substantial
patronage from western air travelers. The delivery
of additional new DC-6B aircraft in 1957 is
expected to provide the means of expanding the
company's economy services.
Keeping pace with Westem's development, and
preparing for future growth, five more modem
sales offices were opened during the year. Stra-
tegically located and featuring attention-winning
company identification, new offices were established
in Panorama City (San Fernando Valley), Sioux
Falls and Reno, while facilities in Seattle and Great
Falls typified the company's program of continu-
ing modernization.
The fuller utilization of credit purchasing in
t 956 was clearly evident in greater usage of Uni-
versal Air Travel Plan cards. Similarly, Western's
own "Charge-A-Flight" program, a no-deposit
credit-card system designed for regular on-line
travelers, was expanded substantially during the
year.
Sales campaigns were accelerated among the
company's travel agents and interline associates,
and detailed attention was devoted to convention
solicitation, all types of government travel and
attractive tours designed in cooperation with top-
ranking resort areas.
revenues
Total operating revenues for 1956 were $28,187,773,
compared with $31,039,523 for the previous year.
While total operating revenues for the year de-
creased 9.2 per cent from the level of 1955,
revenues for the last nine months of 1956 were
10.4 per cent greater than for the same period in
1955.
statement of source and disposition
of funds for 1956
Source of funds:
Net income ............ .
Depreciation ........... .
Deferred federal taxes
on income .......... .
Sale of capital stock . . . . . . . .
Conversion of debentures . . . .
Sale of debentures-net of
conversions ......... .
1956 bank loan .......... .
Less: reductions in long-term
bank loans .......... .
Disposition of funds:
Planes and other equipment
including contract deposits ..
Dividends
Cash .............
Payments in lieu of fractional
shares-1956 stock dividend
Deferred charges ........ .
Increase in working capital,
excluding cash and
U.S. Government securities
Increase in cash and
U.S. Government securities ..... .
$ 4,877,000
6,000,000
10,877,000
4,684,309
601,519
13,150
$ 3,044,458
2,294,214
418,000
8,460
123,000
6,192,691
12,080,823
9,372,158
614,669
278,061
_ 1,150,569
_!1,415,457
~ 665,366
3.1c
2.scl
I 18.1c
Passenger revenues were $26,249,113, account-
ing for 93.1 per cent of the 1956 total operating
I
revenues.
Express, freight, excess baggage and other oper-
ating revenues were $1,163,179 for 1956, account-
ing for 4.1 per cent of operating revenues.
Mail revenues continued to be free of any ele-
ment of subsidy and accounted for 2.8 per cent of
total operating revenues in 1956.
expenses
Total operating expenses for the year were
$25,674,523, compared with a 1955 total of
$27,006,177. The 1956 cost of doing business,
however, is more clearly expressed in the expenses
which obtained during the last nine months of the
year. In this period, the operating expenses were
$22,678,931, compared with $20,752,392 for the
same J955 period. This 9.3 per cent increase in
expenses reflected,, in part, the higher cost of airline
operation and, in large measure, the cost of expand-
ing deluxe seat mile production. The increase, how-
ever, compared favorably with the 10.4 per cent
increase in revenues realized and, as noted above,
still gave Western one of the lowest breakeven load
factors in the industry.
Western's income dollar
from U.S. mail
~
-
from express,

freight and
excess baggage
from aircoach vB
passenger
services
from all other
u
sources
including
.
property gains
from deluxe
-
~
passenger ,J ,
services
66.7c 9.6c
Depreciation of equipment rose from $2,150,945
in 1955 to $2,294,214 during the year. The increase
was primarily associated with the six new DC-6B
aircraft added to the fleet in 19 5 6, with the effect
offset in part by a decrease resulting from full depre-
ciation of the Convair fleet late in 19 5 5.
finances
The year 1956 was marked by continued improve-
ment and expansion of the financial structure of
Western Air Lines.
Coincident to the company's $48,000,000 equip-
ment program announced in 1956, Western in June
effected a successful public offering of $5,000,000
in 4 per cent convertible subordinated deben-
tures due June 1, 1971.
Proceeds of the debenture sale were used to
retire the then existing bank loan, which released
from mortgage the aircraft and other properties
pledged as security. This action enabled the com-
pany to obtain from the Bank of America National
Trust and Savings Association an unsecured long-
term loan of $6,000,000, at 4 per cent interest, and
to arrange for the future sale of unsecured long-
term notes to The Prudential Insurance Company
of America in the amount of $12,000,000 at 4
per cent interest.
Western's expense dollar
9.9c
Ii
8.3cr
39.9c
for gasoline
and oil
for materials,
supplies and
parts
for local, state
and federal taxes
for depreciation
of equipment
for wages and
salaries
for all other
expenses
These new financial resources, together with
funds to be generated by earnings and deprecia-
tion, are expected to provide the monies necessary
to cover the $48,000,000 equipment program
which is the keystone of the company's plans for
growth and expansion.
Particular significance is attached to the com-
pany's success in obtaining funds on an unsecured
basis. Of equal importance is the establishment of
a line of credit in the insurance company market.
Working capital at the close of 1956 totaled
$4,599,548, an increase of $1,815,935 over 1955.
The ratio of current assets to current liabilities also
improved from $1.41-to-$1 in 1955 to $1.72-to-$1
in 1956.
As the statement of source and disposition of
funds summarizes, $665,366 of the increase in
working capital during the year was in cash and
U.S. Government securities, which totaled
$6,609,264 at the close of 1956.
The investment in aircraft and other properties
was $29,571,905, a net increase of $6,193,969 over
the previous year.
Shareholders' equity increased $2,561,248 to
reach a total of $14,991,235 at year's end. This
reflected an increase of $1,847,769 in earned sur-
plus, $677,811 in capital surplus and $35,668 in
common stock.
equipment
A major decision of 1956 was a purchase con-
tract for a fleet of new Lockheed Electra prop-
j et airliners. The contract for nine 400-mph,
turbine-propeller Electras calls for delivery to
Western in 1959-60. Designed for economical ver-
satility, the Electras are expected to place the com-
pany in the vanguard of jet-age competition.
At the same time, the company contracted to
purchase four Douglas DC-6Bs for delivery in
1958, in addition to the six new planes delivered
during 1956 and the seven which will join the fleet
in 1957. By mid-1958, the company expects to
have 25 DC-6B.s, which have proved ideally
adapted to competitive operation on West~rns
6,350-mile system.
At the close of 1956, the company was operating
a fleet of 30 planes composed of 14 60-passenger
DC-6Bs, two 66-passenger DC-4 Coachmasters,
nine 40-passenger Convair 240s and five 22-
passenger DC-3s.
Four DC-4s and three DC-3s were retired from
service and sold during 1956. It is anticipated that
the remaining DC-4s will be sold in 1957, and the
DC-3s retired when long-sought route adjustments
are accomplished.
At the close of the year, construction began at
Los Angeles International Airport on the com-
pany's new training center, the first complete air-
line school in the West. Scheduled for completion
in 1957, the two-story building will provide techni-
cal training facilities for Western personnel. The
modern center, together with a DC-6B flight simu-
lator, a complex electronic device capable of dupli-
cating conditions of flight, which will be used ex-
tensively for training of pilots and flight engineers,
will cost approximately $1,000,000.
An important program was undertaken in 1956
to equip the company's fleet with the most ad-
vanced electronic devices. Aerial surveillance will
be provided through a "seeing-eye" radar system
now being installed in Western 's DC-6B s and
scheduled for installation in the new Electra fleet.
A new era of fast airline reservations ervice is
forecast for early 1958 when work is completed
on the company's electronic reservations system,
the mo t comprehensive airline network ever de-
Western's new training
center wi 11 be the first
complete airline school
in the West.
Lockheed Electra
propjets will place
Western in the
vanguard of jet-age
competition.
signed. A long-term lease for this . .intricate system
was signed at the close of 1956. When completed,
the electronic network will expedite automatically
more than 90 per cent of all flight reservations.
Designed specifically for Western, the new system
will enable passenger service personnel to keep
pace with the planned growth ahead.
At year's end, detailed analyses of pure jet air-
craft specifications and performance ratings were
the subject of intense study by company officials.
passenger revenues
annual by quarters with percentage increase in comparison to 1951
millions O
1151 100%
, ... - "'
10 12 14 16 18 20 22 24 26 28
Ill fourth quarter
third quarter
second quarter
first quarter
"" - 1"%
1155
1151
millions 0 8 10 12 14 16 18 20 22 24 26 28
*Operations were suspended from January 9 to March 22 because of II strike.
shareholders and stock
At the close of 1956, there were issued and out-
standing 779,131 shares of the company's capital
stock, an increase of 35,668 shares over the 743,463
shares outstanding at the end of 1955.
This increase resulted from issuance of 29,101
shares as a 4 per cent stock dividend, 5,807 shares
upon conversion of debentures, and 760 shares
through exercise of stock options.
The company's stock is held by approximately
7,000 individual shareholders, an increase of about
10 per cent over 1955. Shareholders reside in every
state in the nation and in several foreign countries.
During the year, shareholders' eGuity increased
from $12,429,987 to $14,991,235; book value of
each outstanding share increased from $16. 72 in
1955 to $19.24 at year's end.
On the New York Stock Exchange, 360,100
shares were traded in 1956 at prices ranging from
a low of 181/s to a high of 251/s, with a closing
price of 24, up $2.75 a share from the 1955
closing level of 22.
At the annual meeting of Western shareholders,
held in Los Angeles on April 19, 1956, approxi-
mately 88 per cent of all outstanding stock was.
represented either in person or by proxy.
On October 10, 1956, at a special shareholders
meeting held at the company's general offices, an
amendment to the certificate of incorporation
eliminating provision for cumulative voting was
approved by a majority in excess of 2 to 1 as 86 per
cent of outstanding shares were voted.
personnel
Preparation for planned growth keynoted Western
Air Lines personnel development programs dur-
ing 1956.
At year's end, company rosters carried the names
of 2,343 employes, comprising the largest staff in
the past 10 years. The payroll was increased by
213 men and women over the 1955 total of 2,130
employes.
While average length of service is 5 .4 years, 40
per cent of all employes have been with Western
for more than five years, and 25 per cent have
served more than 10 years.
The men who fly and service the company's air-
craft have the highest average length of service.
Flight captains have an average of 14.4 years with
the company, while maintenance foremen are
credited with an average of 16.4 years of service.
Western's 47 stations are managed by men with
an average of 13.3 years on company rosters, a
slight margin over the 13 .2-year average of depart-
ment directors.
Seventy-one per cent of Western personnel are-
men, including 18 veterans who wear 25-year serv-
ice pins; 29 per cent of the company's employes
are women.
At the close of 1956, Western had signed work
agreements with each of the seven labor unions
representing approximately 90 per cent of all
employes.
At the close of the year, a substantial majority
of Western employes was participating in the com-
pany's group insurance program, including 94.5
per cent subscribing to accident and sickness insur-
ance, 88.7 per cent availing themselves and their
families of the group plan's hospitalization cover-
age, and 70.4 per cent carrying group life insur-
ance policies.
In line with the company's policy of providing
the maximum practical protection for employes,
hospital benefits were increased in 1
.956 and addi-
tional coverage was prov_
ided for major medical
expenses. The program is available to all men and
women and is financed jointly by the company and
its personnel.
During the year, Western employes and their
families received $205,066 in benefits from the
group insurance plan, including $58,500 in acci-
dent and sickness benefits and $118,966 for hospi-
talization.
On December 31, 77 per cent of eligible employes
were participating in the company's contributory
retirement program, a plan inaugurated in 1952.
During the year, a variable annuity plan for pilots
was inaugurated. Through 1956, the company had
expended approximately $500,000 for past-service
policies at no cost to employes. In addition, the
company had paid approximately $1,400,000 for
current-service costs, representing 121 per cent of
the approximately $1,160,000 paid by employ es
themselves.
Through the company's liberal free-transporta-
tion policy, employes and their families received
an average of 1,140 space-available passes monthly
during 1956's period of normal operations. If com-
puted on first-class rates, this free transportation
on Western's system and on the routes of other
airlines with which the company enjoys reciprocal
agreements could have cost employes approxi-
mately $1,425,000 during the year.
The Westernaire Federal Credit Union, operated
by and for the company's employes, enjoyed a
record year, reporting total assets of $988,305 at
the close of 1956. Providing personalized savings
and loan service to Western personnel, the WFCU
showed a net profit of $49,506 for the year. The
organization paid a 5 per cent dividend on shares
(savings) for the sixth consecutive year, and 5
per cent of all interest paid by borrowers in 1956
was returned upon vote of the WFCU board of
directors.
Participation of company officials in industry-
wide programs received exceptional recognition
in 1956 when the Air Transport Association of
America, the national organization of U.S. sched-
uled airlines, paid tribute to Western as the only
airline in history to provide top officers of three
principal AT A divisions in the same year.
To increase managerial effectiveness of staff
Douglas OC-6Bs are
ideally adapted to
operation on Western's
6,350-mile sysiem.
members in their present positions, and to prepare
key men for greater responsibilities in the future,
the company in 1956 completed arrangements for a
comprehensive management development program
to be inaugurated in 1957.
The industrial-education program was designed
in co9peration with the faculty of the University
of Washington's College of Business Administra-
tion. It will include an intensive, graduate-level
session at the university and a special study course
to be conducted at company headquarters.
property and long-term debt
1MI
depreciation
net book value
-
long-term debt - ~ ~ - -
in millions
1153 1154

1955 1151
route development
In 1956, Western Air Lines made substantial prog-
ress in its continuing program of strong route
development. Gains of immediate value were
scored, and considerable success was achieved
toward long-range goals.
During the summer, the Civil Aeronautics
Board held hearings in the Service to Phoenix Case
in which the company is seeking to provide the
Arizona capital new, direct service to Denver,
Salt Lake City and Palm Springs, and additional
service to Los Angeles and San Diego.
The CAB's Bureau of Air Operations has rec-
ommended that the company be granted a new
route from San Diego to Denver, via Phoenix, and
Western is now awaiting the examiner's initial
decision. A final CAB decision is expected by mid-
1957.
These proposed routes can be integrated advan-
tageously with Western 's present north-south route
brief statement of income
Western' income came from:
Passengers .. _ ......... .
Express, freight and baggage .. .
Mail ................ .
Gain on disposal of property .. .
Other income ........... .
Western's expenses were:
Wages and salaries ...
Social security, group insurance
and retirement plans .... .
Gasoline and oil ......... .
Materials and repair parts .... .
Depreciation and obsolescence .
Advertising ........... .
For service to passengers .... .
Rentals and landing fees .... .
Insurance ... .
Interest .............. .
Taxes ............... .
Utilities and services ...... .
Other costs . . . . . . . . . . . .
Net Income . ............ .
1956*
$26,249,113
954,210
775,481
2,694,415
270,248
30,943,467
10,283,297
853,786
3,729,882
2,235,558
2,316,439
873,097
1,487,768
759,975
652,770
393,610
2,766,848
737,691
808,288
27,899,009
$ 3,044,458
1955
28,755,616
1,185,296
862,014
50,522
~654
_}1,134,102
11,057,216
834,757
4,230,217
2,434,167
2,173,145
818,411
1,469,340
746,279
770,432
261,890
2,758,183
789,230
809,150
29,152,417
1,981,685
Operations were suspended from January 9 to
March 22 because of a strike.
structure to provide Phoenix, for the first time,
one-carrier or one-plane service to the northern
tier of states now served by the company, a region
extending from the Pacific Northwest to the Twin
Cities. Western is the only applicant which can pro-
vide service to Phoenix from this major area of the
United States.
Temporary authority granted to the company in
1952 to provide service over the Salt Lake City-
Casper-Rapid City "cut-off" route was made per-
manent in 1956 by the CAB. This award permits
Western to continue, on a permanent basis, its
popular one-stop flights between Los Angeles or
San Francisco and Minneapolis-St. Paul, via Salt
Lake City, as well as local service between the
cities involved.
In the past year, progress also was made in
Western's program to suspend service in favor of
subsidized local service carriers at smaller com-
munities which are not generating sufficient traffic
to justify trunkline air service.
shareholders' equity
20
18
16
14
12
10
1146 1953 1954 1955 1956
Hearings were held in the Seven States Area
Investigation in which Western is seeking to elimi-
nate from its system Scottsbluff, Alliance, Chad-
ron, Hot Springs, Spearfish, Brookings, Mankato
and Rochester.
Similarly, procedural steps were taken, and a
hearing scheduled in 1957, in the Montana Local
Service Case, involving the proposed elimination
of Western service at Lewistown, Cut Bank-Shelby,
Jackson, Logan and Ogden.
Substantial operating economies can be realized
through successful completion of these two cases,
particularly in elimination of uneconomical DC-3
equipment and consequent standardization of the
company's fleet into Convair 240 and Douglas
DC-6B aircraft prior to acquisition of the propjet
Lockheed Electras.
Over the company's formal protests, the CAB
included in the Montana Local Service Case an
investigation into the possibility of substituting
local service carrier operations for Western's service
to Pocatello, Idaho Falls, Butte and Helena. The
company is making strenuous efforts to block this
proposal and feels. confident that it can establish
the fact that these cities can best be served by
Western.
In 1956, prehearing conferences were held in
two other route cases of top importance to West-
ern; hearings are expected to be scheduled in
1957. In the Dallas to the West Case, the company
is applying for authority to link Los Angeles and
San Francisco-Oakland with Dallas, with inter-
mediate stops at Las Vegas, Phoenix, El Paso,
Albuquerque and Ft. Worth. In the Chicago-
Milwaukee-Twin Cities Case, the company is seek-
ing to extend its system from Minneapolis-St. Paul
to Milwaukee and Chicago.
During the year, Western also filed applications
for authority to serve Sacramento and Reno on its
coastal route, to extend its coastal route to Van-
couver, British Columbia, and to serve Boise and
Spokane on a route between Salt Lake City and
Portland and Seattle. Procedural steps in these
cases should be taken in 19 57.
In the international picture, the U.S. Govern-
ment was unsuccessful in 1956 in its efforts to
obtain bilateral agreements with Mexico and
Canada, pacts which are required to permit West-
ern to inaugurate service on its U.S.-approved
routes to Mexico City and Calgary.
However, enthusiastic demands for action by
civic organizations in Los Angeles and other key
western cities give promise to a real possibility
that Mexico ultimately will sign an agreement with
the U.S., an act which would permit the company
to inaugurate Los Angeles-Mexico service author-
ized 10 years ago by the CAB. Western also is
confident that our government will continue in 1957
to press for the necessary amendment to its air
agreement with Canada.
The General Passenger Fare Investigation Case
was instituted in 1956 by the CAB to determine
the advisability of changing the level of fares
charged by all domestic trunkline carriers. Hear-
ings will be held in 1957 at which the company
will oppose vigorously any attempt to decrease
existing fares, considered by reputable economists
to be at "bargain" level today.
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Looking forward to a pleasant, relaxing
trip, passengers board a powerful,
300 mph Western DC-6B. Seat selection
is provided at check-in time, eliminating
any last-minute rush for personal
preferences. Couples traveling together
consistently praise this gracious service.
"Hunt breakfast," served from
unique chafing-dish cart, is WAL's
English-style service complimenting
deluxe luncheon and dinner
menus. Featuring steaks, chops,
Canadian bacon and sausage, the
breakfast also offers an appealing
selection of hot pastries. WAL
served 115,400 breakfasts to
morning passengers in 1956.
Carefully trained stewardesses
display features of Californian
flights, including special label
champagne, orchid corsages,
select cigars and attractive menu
cards designed for mailing.
Although champagne has captured
the public's imagination, WAL
stewardesses last year served
193,000 glasses of milk and
1,231,000 cups of coffee.
the "Champagne Flight" story
"None better!"
This accolade from one of the world's most experienced air travelers
tells the story of Western Air Lines deluxe flights far more effectively than
does a summary of statistics.
Based on new standards of personalized luxury and implemented with
carefully developed techniques of hospitable service, the Californian flights,
introduced to the traveling public only 32 months ago, have won popular
favor at a rate unprecedented in the commercial airline industry.
Publicity, advertising and person-to-person recommendations all have
played their roles in spreading the fame of the smartest service provided
by a U.S. air carrier. Millions of television viewers smile when the
appealing "Relaxed Bird" rides across their screens comfortably perched on
a DC-6B airliner. Dozens of friendly anecdotes are recounted about "the
only way to fly." As the result of the company's sales and merchandi ing
programs, the "champagne flights" have become widely known,
firmly established features of the western kies.
However, proof of the success of the new concepts, careful training
and ingenious presentations which are combined to produce the
Californian service is demonstrated by the public preference surpassing
that credited to any other airline ervice now being offered to travelers.
Fresh from Hawaii, multi-hued orchids, presented on woven trays,
are the single most popular "extra" among women passengers.
Colorful corsages create festive aura of relaxation during interlude
before meals are served. During 1956, women aboard WAL
airliners pinned 117,076 orchid corsages on dresses, suits or furs.
On longer flights, snack service provides
the social conversation center for
passengers, particularly those who
choose to relax in the comfortable DC-6B
lounges. Known for more than three
decades for Western hospitality, WAL
has enjoyed a substantial increase in
complimentary reaction to the company's
service since inauguration of the
"champagne flights."
At the conclusion of
Californian flights, men are
offered select cigars upon
deplaning. The premium cigars,
enclosed in special wrappers,
have proved ideal parting
gifts. Serving as post-flight
reminders of pleasant trips,
195,950 cigars were presented
to passengers last year.
Pleased passengers
leave their Western
airliner after a
comfortable
pressurized flight.
Speed, comfort and
cleanliness of
high-standard air
travel won a record
number of
passengers for the
nation's airlines in
1956, promise to
attract additional
thousands this year.
Most famous feature aboard
Californian flights is the private stock
champagne, considered a prestige
beverage throughout the world.
Served as a pleasant introduction to
a fine luncheon or dinner, champagne
has won great favor among WAL
passengers.
Western meals are justly famous.
Selected with -demanding care,
menus are designed to appeal to
every taste. Meals are varied
to provide a maximum of fresh,
in-season fare. Steak dinners are
the most popular, and WAL served
120,458 during 1956, as well as
241,535 other luncheons and dinners.
financial summary
Revenues:**
Passenger ............... .
Express, freight and excess baggage .
Mail .......... .
Other ......... .
Total Revenues
Operating Expenses:**
Depreciation .
Payroll ...... .
Other ...... .
Total Operating Expenses
Operating Income**
Other Income** ............ .
Provision for Federal Taxes on Income**.
Net Income** ..
Earnings per sharet .
Dividends paid per share:
Cash ......... .
Stock ............. .
Shares outstanding** ........... .
Shareholders' equity-total** ...... .
Shareholders' equity-a sharet
Working capital** ........ .
Long-term debt** . . . . . . . . . .
Properties and equipment-net**
Total assets** ........... .
operating statistics
Route Miles I I o o o o
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 employes end of year
- 1955 1954 1953 1952
$26,249 28,756 22,423 20,302 16,250
954 1,185 968 846 662
775 862 764 875 719
210 236 326 853 964
28,188 31,039 24,481 22,876 18,595
2,294 2,151 1,761 1,718 1,019
10,283 11,057 9,239 8,367 7,067
13,098 13,798 11,505 10,300 7,674
25,675 27,006 22,505 20,385 15,760
2,513 4,033 1,976 2,491 2,835
2,331 ~ ) 333 ~ ) (103)
4,844 3,832 2,309 2,435 2,732
1,800 _] ,850 850 1,250 1,500
$ 3,044 ~-~ 1,459 1,185 1,232
$ 3.91 2.67 2.04 1.66 1.72
0.80 0.90 0.60 0.60 0.60
4%
779 743 716 715 715
$14,991 12,430 10,786 9,746 8,991
19.24 16.72 15.06 13.63 12.57
4,600 2,784 1,490 755 1,364
9,677 3,484 3,755 2,072 2,903
17,216 11,208 13,146 9,844 9,702
$32,075 23,332 20,204 18,123 18,564
- 1955 1954 1953 1952
6,350 5,525 5,525 5,525 5,016
86,196 100,015 80,261 68,580 48,557
48,481 54,999 42,669 38,088 31,434
928,746 1,092,578 834,910 838,732 774,079
4,034 4,897 3,283 3,284 3,243
4,166 5,435 4,276 4,206 3,729
14,851 18,335 15,842 14,450 12,631
740,174 870,596 721,255 613,814 453,332
458,131 514,677 402,255 359,965 298,931
2,212 2,621 1,669 1,610 1,358
2,455 3,207 2,556 2,100 1,524
% 61.9 59.1 55.7 58.6 66.0
493 471 482 429 386
$ .0573 .0559 .0557 .0564 .0544
2,343 2,130 1,864 1,813 1,649
*Operations were suspended from January 9 to March 22 because of a strike.
teased on shares outstanding at close of respective years .
.. 000 omitted.
1951 1950 1949 1948 1947
13,688 11,395 8,471 7,813 10,114
507 497 313 483 410
1,212 2,090 2,504 1,293 1,570
875 264 246 31 282
16,282 14,246 11,534 9,620 12,376
998 1,124 1,335 1,164 1,845
6,084 5,353 4,855 4,973 5,773
6,666 6,133 4,374 4,225 5,423
13,748 12,610 10,564 10,362 13,041
2,534 1,636 970 (742) (665)
280 (196) (258) (186) (192)
2,814 1,440 712 (928) (857)
1,425 690 391 (589) 88
1,389 750 321 (339) (945)
2.52 1.43 0.61 (0.65) (1.80)
0.50
550 525 525 525 525
6,396 5,045 4,295 3,974 4,314
11.63 9.61 8.18 7.57 8.21
435 981 243 (315) 1,410
1,924 2,231 3,113 3,551 3,800
6,588 6,621 7,171 8,094 6,292
13,802 10,657 10,579 12,946 10,756
1951 1950 1949 1948 1947
5,016 5,016 4,727 4,727 4,725
43,036 44,515 32,034 29,534 35,757
27,549 24,697 16,383 14,660 20,887
691,322 619,624 422,193 353,569 491,680
3,419 2,150 1,359 1,543 1,722
3,191 3,396 2,435 2,702 2,252
11,487 11,783 9,496 8,707 9,607
401,720 414,169 299,503 243,771 312,615
259,693 233,118 155,747 135,724 194,923
1,449 978 567 574 733
1,282 1,442 926 1,089 912
64.7 56.3 52.0 55.7 62.4
376 376 369 384 396
.0527 .0489 .0544 .0576 .0519
1,459 1,279 1,226 1,285 1,529
for the year ended
december 31, 1956
(with comparative
figures for 1955)
for the year ended
december 31, 1956
statement of income
Operating Revenues: 1956*
Passenger $26,249,113
Express, freight and excess baggage . 954,210
Charter and other transport services . 119,371
Mail. 775,481
Incidental revenue (net) 89,598
28,187,773
Operating Expenses:
Flying operations 7,569,605
Ground operations 3,057,060
Flight equipment maintenance (direct). 2,962,525
Ground and indirect maintenance . 1,34~,207
Passenger service . 2,345,838
Traffic and sales . 2,716,774
Advertising and publicity . 944,265
General and administrative . 1,587,249
Employe welfare . 853,786
Depreciation . 2,294,214
25,674,523
Operating Income. 2,513,250
Non-Operating Income:
Gain on disposition of property . 2,694,415
Other . 61,279
2,755,694
Non-Operating Charges:
Interest . 393,610
Other . 30,876
424,486
Income before Federal Taxes on Income . 4,844,458
Provision for Federal Taxes on Income (Note 1) 1,800,000
Net Income. $ 3,044,458
statement of surplus
earned surplus
Amount as of December 31, 1955 .................. . $ 6,805,915
Net income for 1956 ....................... . 3,044,458
Excess of proceeds over par value of:
5,807 shares of stock issued upon
conversion of debentures .... -
760 shares issued under restricted
stock option plan ....... . -
Excess of market value over par value
of stock paid as a stock dividend (Note 2) . -
9,850,373
Dividends paid:
Cash -$0.80 a share. . ..... . 601,519
Stock---4% (Note 2) ........ . 595,170
Amount as of December 31, 1956 (Note 3) $ 8,653,684
operations were suspended from January 9 to March 22 because of a strike.
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
34,350
296,240
3,831,685
1,850,000
1,981,685

capital surplus
4,880,609
-
117,192
7,700
552,919
5,558,420
-
-
5,558,420
annual report
assets
Current Assets:
Cash ..
U.S. Government Securities at cost.
Receivables:
Traffic balances (net of allowance
for doubtful accounts $40,000) ..
U.S. and State Government Departments .
Other ..................
Materials and supplies ............... .
Prepaid expenses ......... .
Total Current Assets .
Sundry securities ......... .
Properties and equipment at cost:
Flight equipment .. . ..
Buildings on and improvements to leased property .
Other property and equipment . . . . . . . . . . . . ..
Less allowance for depreciation . . . . . .
Deposits on equipment purchase contracts (Note 4)
Deferred charges . ........... . . . ...
$ 4,625,094
1,984,170
2,028,677
1,039,722
199;049
3,267,448
386,543
735,138
10,998,393
74,051
23,801 ,634
3,531,863
2,238,408
29,571,905
12,356,329
17,215,576
3,360,213
426,847
$32,075,080
1955
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
207,244
23,332,204
balance sheet
as of December 31, 1956 (with com parative fi gures for 1955)
liabilities
Current Liabilities:
Current portion of bank debt.
Accounts payable ..... .
Accounts payable - taxes collected from others .
Accrued salaries and wages.
Other accrued liabilities .
Air travel plan deposits .
Unused transportation ..
Federal taxes on income (estimated) .
Total Current Liabilities .
Long-term debt (Note 3):
Note payable to bank (net of current
portion included in current liabilities).
4 1/ 4% convertible subordinated debentures
due June 1, 1971 .. . . . ......... .
Deferred federal taxes on income (Note 1) ....
Commitments and contingent liabilities (Note 4)
Retirement plans (Note 5)
Shareholders' Equity:
Common stock- $1 .00 par value per share
Authorized 2,000,000 shares (Notes 3 and 6)
Issued 779,131 and 743,463 shares respectively .
Capital surplus ..... .
Earned surplus (Note 3) .
$ 1,200,000
1,174,868
409,446
1,046,206
219,423
288,575
818,371
1,241,956
6,398,845
4,800,000
4,877,000
9,677,000
1,008,000
779,131
5,558,420
8,653,684
14,991,235
$32,075,080
1955
1,850,000
853,998
338,239
1,120,309
227,935
283,475
733,430
1,420,524
6,827,910
3,484,307
3,484,307
590,000
743,463
4,880,609
6,805,915
12,429,987
23,332,204
PEAT, MABw1cK, MITCHELL & Go.
CBRTJPIP.D PUBLIC AOOOUNT.A.NTS
(INooPOAT1No Tuo111.PsoN, Moss & Co.)
618 SOUTH SPRING STRltl!r:T
lA)S ANOELES 14, 0.4LIPOBNIA
ACCOUNTANTS' REFORT
The Board of Directors
Western Air Lines, Inc.:
We have exam1ned the balance sheet of
Western Air Lines, Inc. as of December 51, 1956
and the related statements of inccae 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 accollllting records and such other auditing
procedures as ve considered necessary in the
circumstances.
In our opinion, the accanpe~ng balance
sheet and statements of incane and surplus present
fairly the financial position of Western Air Lines,
Inc. at December 51, 1956 and the results of its
operations for the year then ended, in conformity
with generdly accepted accounting principles
applied on a basis consistent with that of the
weceding year.
Los Angeles, California
?ebruary 8, 1957
notes
to financial statements
Note 1. Federal Taxes on Income. Federal income tax re-
turns through 1954 have been examined by the U.S. Treasury
Department. Provision has been made for all known income tax
liabilities.
Depreciation for federal tax purposes will, through 1958, exceed
that recorded on the books of account as a resu It of deducting
accelerated depreciation on the tax returns . Accordingly, the
federal tax provision for 1956 includes $418,000 to offset the
estimated effect on federal taxes which will occur in the years
1959-63 when depreciation recordable on the books of account
will be more than that allowable for federal tax purposes .
Note 2. Stock Dividend. On August 20, 1956, the company
paid a stock dividend of 4% on the shares outstanding as of
August 1, 1956. For the 29,101 shares thus issued and the cash
payments totaling $13,150 in lieu of fractional shares , the earned
surplus account was charged $595,170, with $552,919 being
transferred to capital surplus and $29,101 to the capital stock
account. The charge to earned surplus was based upon the
closing price of $20.00 a share on the New York Stock Exchange
on July 12, 1956, the day preceding the declaration by the board
of directors.
In 1957, on February 1, a like 4% stock dividend was declared
payable March 5, 1957, to shareholders of record on February
15, 1957,
Note 3. Long-Term Debt. The bank loan is repayable at
$100,000 a month commencing February 1, 1957, together with
interest at 4% per annum with final maturity on January 2, 1962.
The convertible subordinated debentures are subject to a sink-
ing fund requirement of 5% per annum effective May 31, 1961,
through May 31, 1965, and 10% per annum effective May 31, 1966,
through May 31, 1970, with maturity on June 1, 1971. The deben-
tures, which are subordinated to the bank and insurance com-
pany debt, are convertible into common stock of the company
based on a conversion price per share adjustable for, among
other things, stock dividends. The effective price as of Decem-
ber 31, 1956, was $21.17 a share with 230,373 shares of the
authorized unissued stock of the company reserved for such
conversion. The related trust indenture also provides for retire-
ment by call at a price of 104.25% through May 31, 1958, decreas-
ing annually until June 1, 1969, when the call price becomes face
value.
On January 2, 1957, the company sold its first note in amount
of $4,000,000 under the 1956 agreement with an insurance
company providing for a total borrowing of $12,000,000. The
agreement provides for a note of $2,000,000 for issue in 1957
and a $6,000,000 note for issue after June 30, 1959, and prior
to January 1, 1961. The agreement calls for interest at 4% per
annum together with a commitment fee of of 1 % on the balance
remaining under the credit agreement until such funds are
drawn down. Principal is repayable at $1,200,000 annually com-
mencing September 1, 1962, and continuing through September
1, 1969, with maturity on September 1, 1970.
The 1956 agreements with the bank and the insurance company
and the trust indenture governing the debentures provide among
other things (including restrictions on additional borrowings)
conditions and requirements which limit the amount of earned
surplus distributable as cash dividends. As a result, earned
surplus as of December 31, 1956, which may be applied to pay-
ment of cash dividends is limited to $2,225,155,
Note 4. Commitments and Contingent Liabilities.
At December 31, 1956, the company had on order eleven Doug-
las DC-6B airplanes, with delivery scheduled for seven in 1957
and four in 1958, and nine Lockheed Electra propjet aircraft for
delivery in late 1959 and early 1960.
These aircraft together with other major items represent a com-
mitment in excess of deposits made at December 31, 1956, of
approximately $30,000,000 for which related financing has been
arranged as set forth under Note 3.
As of December 31, 1956, the company was contingently liable
for claims and lawsuits 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 5. Retirement Plans. The company has an insured con-
tributory retirement plan for all eligible employes, including
officers. Also, as a provision of the labor agreement negotiated
with the pilots in 1956, the company is creating for the pilots,
based on current services, a "variable pension plan" of the
trusteed type subject to approval by the Treasury Department.
The costs of these plans charged to operating expense in 1956
totaled $473,538 for both current and past services . Management
contemplates that the remaining past-service costs of the in-
sured plan will be funded over a period of approximately seven
years and will require annual payments of $106,000.
Note 6. Options to Purchase Capital Stock. Through
December 31, 1956, 29,010 shares (including 760 shares in the
year 1956) have been issued under a restricted stock option plan
for officers and key employes approved by the shareholders in
1951. The option prices ranged from $8.19 to $16.79 a share,
representing a total option price and a total fair value when first
exercisable of $348,279, and a total fair value at dates when
exercised of $541,126. At December 31, 1956, options for 6,240
shares were outstanding and exercisable within five years from
the dates granted at prices ranging from $9.37 to $17.47 a share,
representing a total option price and a total fair value when first
exercisable of $98,420.
board of directors
William S. Bartman
Bartman & Nedow, Attorneys-at-Law
Los A11geles, California
Gordon Y. Billard
J. R. Williston & Co.
New York, New York
Hugh W. Darling
Darling, Shattuck & Edmonds, Attorneys-at-Law
Los Angeles, California
Terrell C. Drinkwater
President
Western Air Lines, Inc.
Robert E. Driscoll
Honorary 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.
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
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
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 President-Operations
Western Air Lines, Inc.
Harry J. Volk
President, Union Bank & Trust Co.
Los Angeles, California
John M. Wallace
Chairman of the Board of Directors
Walker Bank & Trust Co.
Salt Lake City, Utah
Alexander Warden
Publisher, Great Falls Tribune-Leader
Great Falls, Montana
Sidney F. Woodbury
President, Pine Street Company
Portland, Oregon
General Offices
Western Air Lines Building
6060 Avion Drive
Los Angeles International Airport
Los Angeles 45, California
Registrars
Bank of America National Trust &
Savings Assn.
660 South Spring Street
Los Angeles 14, 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
Trustee for Debentures
Union Bank & Trust Co.
700 South Hill Street
Los Angeles 14, California
Stock Listings
listed and traded on
New York Stock Exchange and
Pacific Coast 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
Fourth Thursday in April
at General Offices