Western Air Lines Annual Report 1959

ANNUAL REPORT
THE EXECUTIVE STAFF
Terrell C. Drinkwater
President
D.P. Renda
Vice President
Legal and Secretary
William C. Jennings
Assistant Secretary
J. Judson Taylor
Vice President
and Treasurer
John W. Simpson
Assistant Secretary
Charles J. J. Cox
Controller and
Assistant Treasurer
Thomas M. Murphy
Assistant to the
President
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
561 South Spring Street
Los Angeles 14, California
Chemical Bank New York Trust Co.
100 Broadway
New York 15, New York
Trustee for Debentures
Union Bank
760 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
THE
PRESIDENT'S
LETTER
HIGHLIGHTS
OF1959
To Shareholders, Employees, Customers and Friends:
For you, and for those of us entrusted with the management of Western Air Lines,
1959 was a year of considerable progress and consequent satisfaction. The chronicle of
the company's achievements is evident in the statistical data contained in the "Decade
of Growth" section of this 34th Annual Report.
The continued and increasing success of Western, the nation's senior airline, is attribut-
abl~ to the wise and farsighted guidance of a fine Board of Directors, the enthusiastic
support of our stockholders, and the hard work of an experienced complement of
employees.
Western continues to be dedicated to its mission of serving the fast-growing West.
During the year, the company introduced the Lockheed Electra turbo-prop airplanes
which proved popular and profitable, implemented the first system-wide electronic
reservations unit in the United States, and streamlined the route system by eliminating
smaller communities more suited to subsidized local service airline operations.
Continued careful planning should assure Western of future accomplishments at least
equal to those of the past. Plans call for the operation of Boeing turbo-jets this Summer.
Applications for new and important jet routes to Hawaii and Texas are being prosecuted
vigorously before the Civil Aeronautics Board, with decisions expected late this year, or
early in 1961.
March 9, 1960
Western Air Lines Building
I ,,. , o o... ~. B-~
Los Angeles International Airport
Los Angeles 45, California
Seat miles produced .. . .. . .. . ... . .. ..... .. . . . .
Seat miles sold . . .. . ..... .. ...... . . . ........ .
Passengers carried . ....... .. . ... . ... . . .... . . .
Total operating revenues .. . .. . ..... . .. .. . . ... .
Operating income .. . .. .. .. .... .... . .. . .... .. .
Net earnings .. . ..... . .. . .. .. . . . .. .. . ....... .
Dividends paid:
Cash .. . . .. . . ..... .... .. . ... .. .. . ... . .. . . .
Stock . ... . . . .. . .. . .. . ... . . ... . .. ... . . . .. .
Common stock outstanding . . . .. .. . . .... . .. . .. .
Earnings per share . .. .. . . . .... . .. . . .. ...... .
Dividends per share:
Cash-annual rate .... . .......... . ...... .
Stock ....................... . .. . ... .. . .
Total shareholders' equity . .. . . .. .. . .......... .
Shareholders' equity per share ...... . ..... . . . . .
Cash and U.S. Government securities . . .. . .... . . .
Working capital ... . ........... .. ... . .. . ..... .
Properties and equipment at cost . ........ . .... .
Long-term debt .... . ..... .. .... . ............ .
Number of employees . . . ... . ......... . ..... . . .
Wages and salaries paid ...................... .
PRESIDENT
1959
1,623,007,000
982,010,000
1,689,278
$ 63,253,971
$
11,130,599
5,016,656
853,934
1,185,468
1,040,952
4.82
1.00**
4%
24,545,292
23.58
$ 18,265,546
11,980,236
55,731,571
23,178,000
2,962
$ 17,704,404
0 0perations were suspended from February 21 to June 10, 1958, because of a st ri ke.
"As adopted during fourth quarter 1959.
1958*
981,740,000
533,443,000
970,498
33,970,204
1,055,791
1,402,340
731,861
807,238
9651
037
1.45
0.80
4%
18,996,428
19.68
6,520,798
5,319,511
46,319,339
19,748,000
2,547
11,946,734
EARNINGS
Western Air Lines set a new earnings record in 1959
of $5,016,656, or $4.82 a share based on the 1,040,952
shares of common stock outstanding on December 31.
(The 1959 earnings per share after adjustment for the
1960 stock dividend are equal to $4.60 a share.)
The 1959 earnings were realized mainly from opera-
tions, net income from this source totaling $4,806,203,
or $4.62 a share, while net gains from the.disposal of
property amounted to $210,453, or $0.20 a share.
For comparison, net income in 1958, reflecting a
suspension of operations due to a pilots strike, was
$1,402,340, or $1.45 a share based on the 965,037
shares outstanding at the end of the year, as adjusted
for the 1959 stock dividend. This resulted from net
property gains of $1,522,386, or $1.58 a share, reduced
by a net loss from operations of $120,046, equal to a
deficit of $0.13 a share, with both per-share figures
adjusted for the .1959 stock dividend.
Comparisons of the 1959 results with those of 1957
are included in this report because 1958 figures were
distorted by this strike. In 1957, the company earned
$2,401,914, equal to $2.62 a share based on 917,782
shares outstanding at the year's close, as adjusted for
1958 and 1959 stock dividends.
The company's previous top earnings were recorded
in 1956 when net income totaled $3,044,458, or $3.48
a share adjusted for the stock dividends through 1959.
DIVIDENDS
In recognition of higher earnings, the Board of
Directors of Western Air Lines increased the regular
quarterly cash dividend rate from $0.20 to $0.25 effec-
tive with the November 20, 1959 payment. Share-
holders received quarterly dividends of $0.20 a share
on March 20, May 15 and August 14, and a 4 per cent
stock dividend was distributed on April 3.
These payments marked the ninth successive year
that Western has paid cash dividends to its shareholders.
Continuing the company's established policy of con-
ducting quarterly meetings in key cities on the system,
directors took these dividend actions at sessions in Mex-
ico City, Los Angeles, Seattle and Denver.
At the initial meeting of the current year, held on
January 18, 1960 at the company's Los Angeles Inter-
national Airport headquarters, a 5 per cent stock divi-
dend was declared in addition to the regular quarterly
cash dividend of $0.25. The cash dividend was paid on
March 4 and the stock dividend will be distributed on
March 23.
ANNUAL REPORT
REVENUES
Operating revenues of Western Air Lines in 1959
also reached a 34-year peak, totaling $63,253,971
compared with 1958 revenues of $33,970,204 and
$42,218,951 in 1957, the previous record high.
The company's total revenues were derived from
substantially the same sources as in 1957, with passen-
ger traffic accounting for 92.8 per cent; freight, express
and excess baggage 3.5 per cent; mail 2 per cent; and
all other sources, including property gains, 1. 7 per cent.
A Civil Aeronautics Board decision is hoped for this
year in the General Passenger Fare Investigation, a
complex proceeding that was instituted on May 10,
1956, by the CAB. Certain intervening temporary in-
creases were granted, and on May 27, 1959 the CAB
examiner's initial decision was issued recommending
a further increase of $1 per passenger ticket. The com-
pany cannot predict what the final decision will be.
EXPENSES
While operating revenues in 1959 exceeded those of
1958 by 86.2 per cent and 1957 by 49.8 per cent, oper-
ating expenses were held to increases of 58.5 per cent
over 1958 and 39.3 per cent over 1957.
Western Air Lines operating expenses totaled
$52,123,372 in 1959, compared with $32,914,413 in
1958 and $37,422,237 in 1957.
In 1959, operating income totaled $11,130,599, as
against $1,055,791 in strike-affected 1958 and the pre-
vious high of $4,796,714 in 1957.
Management recognized the accelerated obsolescence
of the Douglas DC-6B aircraft and adjusted deprecia-
tion accordingly. As of July 1, 1959, the useful life for
DC-6B airframes and engines was shortened and resid-
ual values were reduced from 15 to 10 per cent.
These revisions increased depreciation by $1,160,000
and decreased net income by approximately $557,000.
Total operating expenses were 50.24 cents per reve-
nue ton-mile for the year 1959, as compared with 58.04
cents for 1958 and 50.25 cents for 1957. Total cost per
seat-mile flown was 3.21 cents in 1959, compared with
3.35 cents in 1958 and 3.18 cents in 1957.
Western's total expense dollar in 1959, contrasted
with 1957, included 32.9 cents for wages and salaries,
as against 37.9 cents two years before; 13.9 cents for
aircraft fuels, versus 15.5 cents; 12.3 cents for local,
state and federal taxes, compared with 9.2 cents; 10.9
cents of depreciation, against 7.4 cents; 6.8 cents for
materials, supplies and parts, versus 8.2 cents; and 23.2
cents for all other expenses, compared with 21.8 cents.
brief balance sheet
We1tem owns:
Ci!IISh and U.S. Government
securities . . . . , . .... . .. , . . . ..
Owed by others ...............
Expendable parts and
supplies ff,
Buildings and improvements,
net
Flight and other equipi:nent,
net .. '
.. ..
~
...... .
.. '
.... .....
Deposits on new equipment
Prepaid expenses
Deferred charges and other ..
Western owes:
Owed to vendors and others
Federal income taxes-
current and deferred . ... . .
Tickets sold but not yet used
Notes payable-
current and long-term .....
Debentures l,,,,. , ,, ,
Excess of what is owned
over what is owed, or
1959
$18,265,546
6,387,821
947,499
2,036,858
32,952,735
2,439,047
1,130,893
506,416
64,666,815
6,955,964
7,449,070
1,338,489
22,500,000
1,878,000
40,121,523
1958
$ 6,520,798
5,769,421
662,276
2,129,052
28,905,983
4,208,493
1,131,126
268,389
49,595,538
5,047,091
2,699,272
904,747
18,700,000
3,248,000
30,599,110
shareholders' equity . . . . . . . . . . . $24,545,292 $18,996,428
statement of source and
disposition of funds for 1959
Source of funds:
Net earnings ................. . $ 5,016,656
Depreciation and other
non-cash charges . ...... . 6,368,643
Deferred federal taxes on
income . . . . . . . . . . . . . . . . 105,000
Sale of capital stock .......... 49,967
Insurance company notes .... $ 6,000,000
Less reductions in
long-term bank notes . . 1,200,000 4,800,000
16,340,266
Disposition of funds:
Planes and other equipment
including contract deposits 8,553,757
Dividends-cash . . . . . . . . . . . . . . 853,934
Deferred charges . . . . . . . 271,850
Increase In Working
Capital .. . . .. . .. .. .. .. . . . .. .. . .. . 6,660,725
$16,340,266
FINANCES
Working capital of Western Air Lines rose $6,660,725
during 1959, totaling $11,980,236 at the end of the
year. The ratio of current assets to current liabilities
was $1.81 to $1, an improvement over the prior year
ratio of $1.61 to $1.
Long-term debt totaled $23,178,000 at December
31 , 1959; it was $19,748,000 at the close of 1958. The
debt included $4,020,000 of bank notes, $17,280,000
of insurance company notes and $1,878,000 of con-
vertible subordinated debentures. After the close of the
year, the debentures were called for redemption at
103.5 per cent on February 23, 1960, and $1,822,000
of these debentures were converted into common stock.
The company had on order at December 31, 1959
seven Lockheed Electra aircraft, which together with
related equipment orders represented a purchase com-
mitment exceeding deposits made at year-end of ap-
proximately $14,500,000.
This amount is to be reduced by approximately
$3,600,000 when an amendment to a lease agreement,
now in process, is concluded. This agreement pro-
vides for lease, instead of purchase, of Allison engines
and Aeroproducts propellers for the Blectras, and will
amount to an annual rental of approximately $1,500,-
000 when all units are received.
Western signed agreements with The Boeing Airplane
Company on February 15, 1960, providing for the pur-
chase of three Boeing 720 turbo-jet aircraft. The three
aircraft, scheduled for early 1961 delivery, involve a
purchase commitment of approximately $14,000,000.
In addition, the company arranged to lease from
Boeing, for a 14-month period, with an option to renew
to January 1, 1962, two Boeing 707 turbo-jets and
spare engines.
Arrangements for financing these purchases to the
extent not provided for by internal sources currently
are being negotiated.
SHAREHOLDERS AND STOCK
There were 1,040,952 shares of Western Air Lines
common stock issued and outstanding on December
31, 1959, an increase of 113,032 over the 927,920
total outstanding at the end of 1958.
The increase was comprised of 37,935 shares dis-
tributed as a 4 per cent stock dividend, 71 ,962 shares
issued upon conversion of debentures, and 3,135 shares
issued through exercise of stock options. (In 1960,
96, 71 7 shares were issued upon conversion of deben-
tures and 54,606 shares will be issued upon payment
of the 5 per cent stock dividend in 1960.)
C
Ordered for delivery in early 1961, the new Boeing 720
turbo-jet is illustrated in artist's -conception as the air-
craft will appear in familiar Western Air Lines design.
Shareholders' equity rose to a new high of $24,545,-
292, or $23.58 a share, at the end of 1959, a gain of
$5,548,864 over 1958 total equity of $18,996,428,
equal to $19.68 a share, adjusted for the 1959 stock
dividend.
On the New York Stock Exchange, 408,100 shares
of the company's stock were traded in 1959 at prices
ranging from a low of 26 to a high of 38, with a closing
price for the year of 35. Western stock traded on
the Pacific Coast Stock Exchange numbered 18,576
shares, with a high of 371/2 and a low of 27. The
closing price at year-end was 35.
Throughout the year, a stockholders-information
program, based on publication of Western's Share-
holders Report, provided news of pertinent corporate
progress and development. The company's 1958 An-
nual Report again won the Financial World's Merit
Award.
EQUIPMENT
Successful introduction of the first Lockheed Electra
service in the West highlighted the Western Air Lines
equipment program in 1959. Ordered in 1956, the
Electras were placed in regular service by Western on
August 1, 1959. At the end of the year, the company
was operating five of these aircraft, capable of cruising
at more than 400 miles per hour, and had seven more
on order from Lockheed, scheduled for delivery by
August 1960.
The new fleet of spacious Electras was instrumental
in boosting the company's passenger seat-miles pro-
duced during 1959 to a record high of 1,623,007,000,
/
WAL Boeing 707 turbo-jet, shown during factory roll-out,
is scheduled to go into service on key Western routes
in Summer of 1960 under lease agreement with Boeing.
compared with 981,740,000 in strike-affected 1958
and the previous record of 1,175,071,000 set in 1957,
the last comparable full year of operation.
During the year, Western retired the last two of its
22-passenger DC-3 aircraft and sold one 40-passenger
Convair 240. With an additional Electra delivered in
January 1960, the company's fleet currently consists
of 38 planes, including six 66-passenger Electras, 27
Douglas DC-6Bs (21 deluxe 60-passenger models, six
96-seat aircoaches) and five Convair 240s.
The company in February 1960 signed agreements
with The Boeing Airplane Company providing for the
purchase of three Boeing 720 turbo-jet aircraft for
delivery in April, May and June 1961. An option for
the delivery of a fourth 720 in December 1961 was
included in the contract.
To enable the company to offer jet service commenc-
ing in the Summer of 1960, Western is arranging to
lease from Boeing two 707 turbo-jets for a period
through January 1, 1962.
Under terms of the Boeing agreements, Western also
has an option to purchase five additional 720s for de-
livery early in 1962 at the rate of one-a-month starting
14 months after the option is exercised, at prices pre-
vailing at the time the option is exercised.
Construction of a hangar for Western at Minne-
apolis-St. Paul Internfltional Airport began in August
1959 and is scheduled for completion in 1960. The
new hangar will house two DC-6Bs and one Electra,
or two turbo-jet aircraft. The company will lease the
$1 ,750,000 facility from the Metropolitan Airports
Commission of the Twin Cities, which is erecting the
structure as a part of its modern terminal complex.
WESTERN'S income dollar
---62.5
----30.3
/3.5
1/2.0
- - - -::...---- 1.7
from deluxe
passenger
services
from aircoach
passenger
services
from express,
freight and
excess baggage
from mail
from all other
sources,
including
property gains
WESTERN'S expense dollar
-32.9
----13.9
-----12.3
----10.9
______ 6.8
----23.2
for wages and
salaries
for aircraft
fuels
for local, state
and federal taxes
for depreciation
for materials
supplies and
parts
for all other
expenses
MANAGEMENT AND PERSONNEL
Membership of the Western Air Lines Board of
Directors was increased to 14 at the 1959 fourth-quar-
ter meeting with the election on October 23 of Mr.
Edwin W. Pauley, noted oilman, industrialist and for-
mer U.S. State Department officer.
Mr. Pauley, who directs widespread petroleum and
business enterprises from his headquarters in Los An-
geles, California, has enjoyed successful careers in
industry, education and government as an international
oil authority, a 20-year member and former chairman
of the University of California Board of Regents, and
the former U.S. representative, with the rank of am-
bassador, on the Allied Commission on Reparations
following World War II.
As a member of Western's board, he joined the 13
other directors who all were re-elected by the share-
holders at the annual meeting held on April 23 when
ballots representing 85.3 per cent of outstanding stock
were cast, in person or by proxy.
Western was named one of the 500 best-managed
companies in the U.S. for the second consecutive year
by the American Institute of Man~gement, a non-
profit research organization dedicated to the improve-
ment of corporations.
With one of the highest seniority ratings in the air-
line industry, Western closed the year with 2,962 em-
ployees on its personnel rosters, a 16 per cent increase
over 1958 and a 7 per cent rise over 1957.
During the year, five employees were awarded 30-
year service pins,. thus joining a select fraternity of
veteran airline men. Twenty-year emblems now are
worn by 2.5 per cent of the company's personnel, 24
per cent of Western employees enjoy seniority of 10
years or more, and 41.4 per cent are credited with
more than five years service.
At the end of 1959, 68.5 per cent of employees
were men, 31.5 per cent women. Eighty-seven per cent
of total personnel, or 2,577 employees, were repre-
sented by the seven unions with which the company has
labor agreements.
Western signed new contracts with two unions dur-
ing the year, the Air Line Stewards & Stewardesses As-
sociation and the Air Line Dispatchers Association.
Agreements will be opened for negotiation in 1960
with the Brotherhood of Railway & Steamship Clerks,
Freight Handlers, Express & Station Employees, the
Air Line Communication Employees Association, the
Air Line Pilots Association, and the International
Association of Machinists, the latter for the limited
The company won plaudits for continuing development
of special in-flight services like the Champagne, Hunt
and Fiesta Flights, all originated by Western Air Lines.
discussion only of working rules. Three contracts may
be reopened in 1961, and one in 1962.
Employee participation in the company's inclusive
group insurance program continued at a high level
during 1959 with 93.4 per cent of total personnel sub-
scribing to one or more of the varied types of coverage
offered. Group hospitalization insurance protected 88
per cent of eligible employees, while 84.2 per cent
participated in the group accident and sickness cover-
age, and 68.8 per cent contributed to the purchase of
life insurance under the plan which is jointly financed
by the company and its employees. A total of $325,679
in insurance benefits was paid to Western personnel
and members of their families during the 1959 insur-
ance reporting period.
At the end of 1959, 76.8 per cent of 1,268 eligible
employees were participating in Western's insured con-
tributory retirement income program, now in its eighth
year. In addition, a variable pension plan of the trus-
teed type was activated during the year for pilots in
accordance with terms of the company's agreement
with the ALP A.
Cost of these retirement programs in 1959 was
$773,731 for current and past services. It is expected
that remaining past-service costs will be funded over
the next five years at an annual expense of $106,000.
To provide professional administration of employee
recreation, education and incentive programs, an em-
ployee services department was established within the
company's Administration Division in 1959.
Flight Times, monthly employee-information pub-
lication, continued to highlight the company's internal
communications program during the year, supple-
mented by frequent issues of bulletins, notices and
other information pieces.
The Westernaire Federal Credit Union, providing
savings and loan service to 77.8 per cent of company
employees in 1959, reported total assets of $1,671,628,
with net earnings of $69,717 available for dividends.
SALES AND SERVICE
Introduction of turbine-powered aircraft, inaugura-
tion of service over new routes, and aggressive cam-
paigns to market and service the company's product-
scheduled air transportation - keynoted the Western
Air Lines sales and service programs during 1959.
During the year, the company carried 1,689,278
passengers, an increase of 7 4 per cent over the abbrevi-
ated 1958 total of 970,498, and a 22 per cent rise over
the 1957 total of 1,379,653.
Total passenger revenues for the year were $59,193,-
763, a gain of 88 per cent over the $31,459,203 re-
ported in 1958 and 51 per cent above the 1957 total of
$39,243,111.
Deluxe services accounted for 67 per cent of the
1959 passenger revenues, as contrasted with 70 per
cent in 1958 and 75 per cent in 1957. Aircoach serv-
ices, correspondingly, accounted for 33 per cent of the
1959 passenger revenues, compared with 30 per cent
in 1958 and 25 per cent in 1957.
Cargo revenues, including express, freight and excess
baggage, were $2,256,634, up 73 per cent over the
$1,304,919 figure for 1958 and 41 per cent above 1957's
total of $1,596,246. Mail revenues, including both
service payments for regular air mail and the non-
priority carriage of surface mail byair,came to $1,295,-
348 during the year, compared with $732,441 in 1958,
and $1,067,404 during the previous year.
In all, passenger traffic accounted for 92.8 per cent
of Western's total revenues in 1959, while cargo con-
tributed 3.5 per cent and mail 2 per cent.
brief statement of earnings
Westem's Income came from:
Passengers
Expr~ss, freight and baggage
Mail ,
Gain on d!sposal of property
Other income . .. .. .... .. . .. .. .
Western's expenses were:
Wages and salaries . .. .. .. . .. .
Social security, group
insurance and
retirement plans .. ... .... . .
Aircraft fuels ....... . .... .. . . .
Materials and repair parts ... .
_
Depreciation .............. . .. .
Advertising and publicity . . . .
For service to passengers .. . .
Rentals and landing fees . ... .
Insurance ......... . ......... . .
Interest ........ .. .... .. .. . ... .
Taxes ..... .. .. . ...... .. ... . .. . .
Utilities and services . .... .. . .
Other costs ........ .. . ....... . .
1959
$59,193,763
2,256,634
1,295,348
254,453
795,141
63,795,339
17,704,404
1,607,847
8,179,127
4,012,311
6,387,565
2,221,073
2,828,662
1,866,872
1,119,768
1,047,217
7,254,829
2,913,762
1,635,246
1958*
$31,459,203
1,304,919
732,441
2;120,386
560,193
36,177,142
11,946,734
909.524
5,126,302
2,254,901
4,135,612
1,410,912
1,595,177
941,473
743,948
1,023,340
2,032,759
1,667,328
986,792
58,778,683 34,774,802
Net earnings . . . . .. . . .. .. . . . . . . . .. $ 5,016,656 $ 1,402,340
* Operations were suspended from February 21
to June 10, 1958, because of a strike.
Passenger load factor during the year was 60.5 as
the company exceeded the 1.5-billion mark in the pro-
duction of seat-miles for the first time. The load-factor
figure, best recorded since 1956, was accompanied by
a 50 per cent breakeven figure, lowest in nine years.
Average length of passenger trips during 1959 was
581 miles, a 6 per cent improvement over the 550-mile
average in 1958.
The company's electronic reservations network, the
Resetron, which is leased, was installed with engineered
capacity for anticipated major traffic increases during
the 1960 introduction of turbo-jet aircraft.
A reservations office was established in Seattle in
1959 to handle expanded business volume in the Pacific
Northwest. Specialized reservations centers are planned
for installation at Salt Lake City and Denver during
1960, as well as expansion of facilities at San Francisco
and Los Angeles.
New air travel sales centers were established during
the year in Calgary, Portland, Oakland and Santa
Monica, California, while offices on San Francisco's
Union Square were modernized to provide increased
service and company identification.
As a part of the company's program of accelerating
the development of interline revenues, off-line sales
offices were opened in Dallas, Texas, and Vancouver,
British Columbia.
In preparation for the August 1 debut of the com-
pany's new fleet of Lockheed Electras, extensive cour-
tesy flights were operated during which more than
5,000 guests were invited aboard the 66-passenger,
jet-powered aircraft for preview flights.
The Electras promptly set traffic records over prin-
cipal routes linking Los Angeles, San Francisco, Port-
land, Seattle-Tacoma, Phoenix, Salt Lake City and
Minneapolis-St. Paul.
The company's feature services, the Champagne
Flights, Hunt Breakfasts and Fiesta Flights, continued
to merit public approval as several refinements were
added during the year. The company was praised for its
original champagne service, cited as " ... possibly the
most effective promotion ever devised by an airline'.'
Western stepped up its program of economy traffic
development through intensified aircoach advertising
in major population areas to keep pace with continued
success of its deluxe services.
In a milestone move to increase the convenience of
credit flying, Western in September signed contracts
with The Diners' Club and the Hilton Credit Corpora-
tion (Carte Blanche) enabling approximately 2,000,000
national cardholders to include the purchase of trans-
portation on the company's routes on their monthly
credit statements. Addition of the two systems to
Western's own Charge-A-Flight program and the in-
dustrywide Universal Air Travel Plan broadened the
company's credit facility to four different cards.
Another campaign conducted during 1959 was
directed at building more effective teamwork with
authorized travel agents. This won recognition from
such organizations as the American Society of Travel
Agents.
Inauguration of service to Calgary on June 1 opened
a new resort area-Banff, Lake Louise, Jasper National
Park- which will be featured during 1960 in a pro-
motional campaign based on the warm-weather appeal
of northern vacation areas, a logical counterpart of
Western's annual "sun country" program highlighting
the wintertime attractions of southern California,
Nevada, Arizona and Mexico. During 1959, an exten-
sive retail sales tie-in program was the key to the most
Hold on1 th'"rt! l.o~al F,ul) Oir.1., on !11'" P1<'1fic Co.11 .. t v.ill brook MfJ
o.lu.rring of their- fo.\orite Hunt Br('~kfa .. t flip:hh. Trur, \\ l'~lr-rn Air,
hnl"'!'J k'!n '" a ldnph- bre11kfo .. 1 1,-un .. ,eal.<i an,! <"hQpd llu1 1hi j ..
huJly otentation. ft',i MIJc1u
(ju,,,: one l'llwa, .. exprtt~ 1hr IK"'I
from \'\',-..,tr-rn. L.ikr- m~1
1 J<'l-po~er,.d fJr<'tra .. , 32'{ fo._trr Along tht'
WC-,1 Coa .. t. )!'I thert-'!. no r,1ra fari for the hl'~ur, . no 0 'je1 "urd,aq::to"
for tht" 11pet:d, And i that ,.,11 't nubu-,u >Ui,c, what ,,. ?
WESTERN AIRLINES
I "' '"" T, ..., , ....
~
.~ ....... ,
,,,,,., ..
,
..... ....
Award-winning national advertising campaign for
Western Air Lines features series of unique sketches by
famed artist Ronald Searle in The New Yorker Magazine.
Colorful pageantry marked the inaugural of Western
service to Calgary in the Province of Alberta, Canada.
comprehensive "sun break" campaign undertaken by
the company.
Emphasis was placed on color newspaper advertis-
ing and television commercials during the year. West-
em's well-known TV figure, "The Relaxed Bird;' was
selected as the best advertising character in the medi-
um, both in the western U.S. and in Mexico during
1959.
Celebrations marking the 50th anniversary of
powered flight in both Canada and Mexico offered
special opportunities for community relations efforts
in both countries.
Service Division personnel are scheduled for inten-
sive training during 1960 following introduction of
three new plans of instruction during the year. Station
employees now are undergoing uniform technical
training; passenger service personnel are participating
in a quality-assurance program; and stewardess super-
visors, contemplating careful preparation of a record
number of students during 1960, are engaged in a
management-development course. Concurrently, main-
tenance and flight training programs will be conducted.
ROUTE DEVELOPMENT
Inauguration of new service to Canada, renewal of
authority to serve Mexico, and participation in three
major Civil Aeronautics Board proceedings marked an
exceptionally active year of route development pro-
grams for Western Air Lines.
The company's inaugural of the first U.S. airline
service to Calgary, key city of the Province of Alberta,
Canada, on June 1, was accompanied by colorful cere-
monies. A week-long program of civic activity by the
inaugural delegations was highlighted by an official
reception at Edmonton, the provincial capital, which
Western has served since 1950.
The new route provides direct, one-carrier air serv-
ice betwen the heart of oil-rich Alberta and Jilajor
Rocky Mountain and Pacific Coast centers. Initial
flights were authorized as the result of an international
conference at which changes in the U.S.-Canadian
trans-border air agreement were announced on April
10. The same agreement terminated Western's author-
ity to serve Lethbridge, Alberta.
At another series of international meetings, the
governments of the United States and Mexico agreed
to a one-year extension of the bi-lateral pact which
authorizes the company to operate its 1,555-mile Los
Angeles-Mexico City route. Additional negotiations
are expected to be held prior to the expiration of the
extension on June 30, 1960. It is anticipated that the
agreement will be renewed.
On March 12, the day Hawaiian statehood was ap-
proved by Congress, the company filed an application
with the CAB for authority to provide service between
Honolulu and Hilo, Hawaii, and San Francisco-Oak-
land, Los Angeles and San Diego. Western proposes
to link the 50th state with seven major western metro-
politan centers through these Pacific Coast gateways.
The company's plans, which call for one-plane jet
service for the first time between the new state and San
Diego, Phoenix, Salt Lake City, Denver and Minne-
apolis-St. Paul, were presented in detail at CAB hear-
ings held during February 1960 at Washington, D.C.
A decision in the complex Trans-Pacific Route Case,
involving the applications of several other airlines, may
be reached before the end of 1960, or early in 1961.
In the Southern Transcontinental Service Case,
second CAB proceeding in which the company is seek-
ing long-haul, high-density routes ideally suited for
turbo-jet operation, Western, and other applicants,
have requested authority to inaugurate service between
Los Angeles and San Francisco-Oakland, in California,
and Dallas and Houston, in Texas, via intermediate
points including San Diego, Las Vegas and Phoenix,
now on the company system, and the new cities of
Albuquerque, New Mexico, and El Paso, San Antonio
and Fort Worth, Texas. A decision in this proceeding
may be expected early in 1961.
During 1959, Western also participated in the Pacific-
Southwest Service Case involving an examination of
the air service needs of an area bounded by San Fran-
cisce>, Reno, Las Vegas, San Diego and the Pacific
coastline. In this proceeding, the company is asking
for the right to operate direct service between Los
Angeles, Sacramento and Reno; direct service between
San Francisco and Las Vegas, which would provide
one-carrier flights between the Pacific Northwest and
the Nevada resort center; and San Diego-Long Beach-
San Francisco and Palm Springs-Ontario-San Fran-
cisco schedules by elimination of a restriction now re-
quiring stops at Los Angeles. The company also is
vigorously opposing proposals for unnecessary dupli-
cation of its services over routes in the area covered
by the case. The final CAB decision in this proceeding
is anticipated during 1960.
The year brought to completion Western's program
of route modernization through termination of service
to 13 additional small communities in accordance with
CAB policy of separating trunkline operations from
subsidized local service operations wherever possible.
During 1959, Western was replaced by subsidized local
Visitors formed long lines to inspect Western's new fleet of Lockheed Electra prop-jets during pre-inaugural introduction.
service carriers at Ogden and Logan, Utah; Jackson,
Wyoming; Lewistown and Cut Bank, Montana; Alli-
ance, Chadron and Scottsbluff, Nebraska; Brookings,
Hot Springs and Spearfish, South Dakota; and Man-
kato and Rochester, Minnesota.
In other route action during 1959, the CAB denied
the company's application for authority to operate be-
tween Minneapolis-St. Paul and Chicago, and approved
withdrawal of an application to serve the Calgary-
Spokane, Washington, route. When the latter case was
set for hearing, the issue of service from Spokane to
Portland and Seattle was not included. Since acquisi-
tion of the Spokane-Calgary .segment would have
resulted in a gap in the company's system, the Western
application was withdrawn.
Graphically displaying the present
system (solid lines) and proposed
services (broken lines) of Western
Air Lines, this map also illustrates
the programs undertaken during an
active year of route development.
SAN SAllAIIE#TI 11110
FIANC~~

~D


IUIIA
LOS AN5WS~l"Wl~-
~NC-... .... -.,._,__..
IW:H
t.N
DIHO





,,,,...,,, ~,t
:::-
~LI
During 1959, the CAB instituted proceedings in two
cases in which the company expects to participate dur-
ing 1960. One case will cover an examination of the
need for air service between the South Dakota-Wyom-
ing region and Chicago. The second will consider the
air service requirements of an area including, generally,
Texas, Oklahoma, New Mexico and Colorado. In this
proceeding, the Southwestern Area Local Service Case,
the company seeks authority to carry local traffic be-
tween Houston, Dallas and Fort Worth in the event it
is authorized to serve these cities in the pending South-
ern Transcontinental Service Case.
At the close of 1959, Western service was being pro-
vided to 34 cities in the 12 western states, Canada and
Mexico over an 8,827-mile system.
EDIIIDNTDN
CAI.CAil
THESE WELL-KNOWN PEOPLE WERE WESTERN PASSENGERS IN 1959
Famous, dedicated, busy personalities are regular company customers
Vienna Philharmonic Orchestra arrives for symphony concert
"Miss Indian America"
represents original
citizens of the West
Carl Sandburg, the
laureate of U.S.
verse, pauses on tour
financial summary
Revenues: *'~
Passenger . . . . ...
Express, freight and excess baggage
Mail ............................ . . .
Other .. . . . .. ... .
Total Revenues .... . . . ......... .
Operating Expenses:**
Depreciation
Payroll . . . . . . . .. . ... . ..... ...... .. . . .
Other ..
Total Operating Expenses ..... .
Operating Income **
Gain on disposition of property ** ....... .
Interest''''
Other Income and Expenses-net**.
Provision for Taxes on Income ** .... . . .
Net Earnings **
Earnings per share0 ......... .. .......... .
Dividends paid per share:
Cash0 ....
Stock
Shares outstanding** 0 ... . ..... .
Shareholders' equity-total *"
Shareholders' equity-a share0 ........ .
Working capital ""
Long-term debt**
Properties and equipment-net"* .... . . .. .
Total assets ** ..... .
opera ting s ta tis tics
Route Miles
Available Ton Miles **
Revenue Ton Miles ** ......... .. .
Passengers and Tonnage Carried:
Revenue passengers ..... .
Mail tons .. .
Express and freight tons .
Revenue Miles Flown:*"
Airpiane miles
Passenger seat miles .... ........... .
Passenger miles ...
Mail ton miles
Express and freight ton miles .
Other Statistics:
Passenger load factor:
Actual .....
Breakeven point .
Average length in miles per
passenger trip .. ... .
. %
.... %
Average revenue per passenger mile
Number of employees end of year ..
$
$
$
$
$
A DECADE OF GROWTH
1959
59,194
2,256
1,295
508
63,253
6,388
17,704
28,031
52,123
11,130
254
(1,047}
180
10,517
5,500
5,017
4.82
0.84
4%
1,041
24,545
23.58
11,980
23,178
34,990
64,667
1959
8,827
196,178
103,741
1,689,278
5,994
6,798
25,689
1,623,007
982,010
3,766
5,133
60.5
50.0
581
.0605
2,962
1958*
31,459
1,305
732
474
33,970
4,136
11,947
16,831
32,914
1,056
2,120
(1,023)
74
2,227
825
1,402
1.45
0.76
4 %
965
18,996
19.68
5,320
19,748
31,035
49,596
1957
39,243
1,596
1,067
313
42,219
3,011
14,335
20,076
37,422
4,797
708
(780)
90
4,815
2,413
2,402
2.62
0.73
4 %
918
17,469
19.03
4,688
16,827
24,652
44,017
1958* 1957
9,153 8,799
123,416 137,640
56,710 74,468
970,498 1,379,653
3,754 5,367
4,256 6,170
16,449 21 ,896
981,740 1,175,071
533,443 702,727
2,159 3,092
3,150 4,026
54.3
54.1
550
.0595
2,547
59.8
53.5
509
.0558
2,773
1956*
26,249
954
775
210
28,188
2,294
10,283
13,009
25,586
2,602
2,694
(394}
31
4,933
1,889
3,044
3.48
0.69
4%
875
14,991
17.13
4,600
9,677
17,216
32,075
1955
28,756
1,185
862
236
31,039
2,151
11,057
13,775
26,983
4,056
51
(262)
10
3,855
1,87.3
1,982
2.28
0.77
868
12,430
14.33
2,784
3,484
11,208
23,332
1956* 1955
6,350 5,525
86,196 100,015
48,481 54,999
928,746 1,092,578
4,034 4,897
4,166 5,435
14,851 18,335
740,174 870,596
458,131 514,677
2,212 2,621
2,455 3,207
61.9
56.6
493
.0573
2,343
59.1
51.3
471
.0559
2,130
1954
22,423
968
764
326
24,481
1,761
9,239
11,456
22,456
2,025
508
(160)
(15)
2,358
899
1,459
1.75
0.51
836
10,736
12.90
1,490
3,755
13,146
20,204
1954
5,525
80,261
42,669
834,910
3,283
4,~76
15,842
721,255
402,255
1,669
2,556
55.7
51.1
482
.0557
1,864
1953
20,302
846
875
853
22,876
1,718
8,367
10,246
20,331
2,545
138
(188}
(6)
2,489
1,304
1,185
1.42
0.51
835
9,746
11.68
755
2,072
9,844
18,123
1953
5,525
68,580
38,088
838,732
3,284
4,206
14,450
613,814
359,965
1,610
2,100
58.6
51.8
429
.0564
1,813
1952
16,250
662
719
964
18,595
1,019
7,067
7,578
15,664
2,931
26
(109)
(20)
2,828
1,596
1,232
1.48
0.51
835
8,991
10.77
1,364
2,903
9,702
18,564
1952
5,016
48,557
31,434
774,079
3,243
3,729
12,631
453,332
298,931
1,358
1,524
66.0
54.6
386
.0544
1,649
1951
13,688
507
1,212
875
16,282
998
6,084
6,617
13,699
2,583
480
(124)
~ )
2,863
1,474
1,389
2.16
0.43
642
6,396
9.96
435
1,924
6,588
13,802
1951
5,016
43,036
27,549
691 ,322
3,419
3,191
11 ,487
401 ,720
259,693
1,449
1,282
64.7
53.4
376
.0527
1,459
"Operations were suspended from February 21 to June 10, 1958, and from January 9 to March 22, 1956, because of strikes.
0Based on s hares outstanding at close of respective periods adjusted for stock dividends paid through 1959.
* *000 omitted.
1950
11 ,395
497
2,090
264
1,124
5,353
6,109
12,586
1,660
16
(154)
~
1,464
714
750
1.22
613
5,045
8.23
981
2,231
6,621
10,657
1950
5,016
44,515
24,697
619,624
2,150
3,396
11,783
414,169
233,118
978
1,442
56.3
49.1
376
.0489
1,279
STATEMENT OF EARNINGS
For the year ended
December 31, 1959
(with comparative
figures for 1958)
Operating Revenues:
Passenger . . . . . . . .. ...... . . . . . .... . ..... .
Express, freight and excess baggage ... . ... .... . . .. .. . . . ... .
Charter and other transport service . . .
Mail .. . . . . . . ...... . . . . . ... . ........ .
Incidental revenue (net) .. .
Operating Expenses:
Flying operations
Maintenance
Passenger service
Aircraft and traffic servicing . .
Promotion and sales . .. .
General and administrative .
Depreciation (Note 1) .. ..
Operating income
Non-Operating Income:
Gain on disposition of property (Note 1) ... . . .
Other . . . . . .. . ... . . . . . ... . ...... . . . . .
Non-Operating Charges:
Interest
Other .
Earnings before Taxes on Income .
Provision for Taxes on Income (Note 2) . . .
Net Earnings (Note 1) .
1969
$59,193,763
2,256,634
302,848
1,295,348
205,378
63,253,971
16,522,550
6,805,737
4,790,681
7,486,631
7,465,717
2,664,491
6,387,565
52,123,372
11,130,599
254,453
286,915
541,368
1,047,217
108,094
1,155,311
10,516,656
5,500,000
$ 5,016,656
"' Operations were suspended from February 21 to June 10, 1958, because of a strike.
1958*
$31,459,203
1,304,919
325,432
732,441
148,209
33,970,204
10,233,643
4,262,936
2,692,591
4,921,652
4,616,833
2,051,146
4,135,612
32,914,413
1,055,791
2,120,386
86,552
2,206,938
1,023,340
12,049
1,035,389
2,227,340
825,000
$ 1,402,340
STATEMENT OF
For the year ended
December 31, 1959
Amount at December 31, 1958 . . .. . ... .
Net earnings for 1959 ........... .
Excess of proceeds over par value of:
71,962 shares of stoc.k issued upon conversion
of debentures ..... .
3,135 shares issued under restricted stock option plan ..
Excess of market value over par value of 37,935 shares
paid as a stock dividend (Note 3) .. .. ................ ..
Dividends paid :
Cash- $0.85 a share .............. .
Stock- 4 % (Note 3) .. .
Amount at December 31, 1959 (Note 4) .................. .
See accompany ing notes to financial statements.
RETAINED
EARNINGS
$ 9,503,345
5,016,656
14,520,001
853,934
1,185,468
$12,480,599
CAPITAL IN
EXCESS OF
PAR VALUE
$ 8,565,163
1,264,213
46,832
1,147,533
11,023,741
$11,023,741
ANNUAL REPORT
Current Assets:
Cash . .. . . .. . . . . . ..... . . . . .. . ... . .. . ..... . . . . ....... . .
U.S. Treasury Bills (Market value $12,377,000) ...... . ... .
Receivables:
Traffic balances (net of allowance
for doubtful accounts $100,000 and $50,000) .. .
U.S. and State Government Departments .. ... . .. .
Other ... .. . .. .. ...... .. ...... . ... . . .... .. ... .
Expendable parts 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 5) .......... .. . .
Deferred charges .. .. . . ... .. . ..... . ..... . ... . . ... .... . ... .. . .
See accompanying notes to financial statements.
assets
1969
$ 5,894,438
12,371,108
4,847,055
1,208,812
331,954
6,387,821
947,499
1,130,893
26,731,759
118,777
47,738,193
3,860,074
4,133,304
55,731,571
20,741,978
34,989,593
2,439,047
387,639
$64,666,815
1958
$ 3,535,824
2,984,974
3,049,283
1,018,038
1,702,100
5,769,421
662,276
1,131,126
14,083,621
96,524
38,759,630
3,873,092
3,686,617
46,319,339
15,284,304
31 ,035,035
4,208,493
171,865
$49,595,538
BALANCE SHEET asotDecember3t,t959
(with comparative figures for 1958)
liabilities
Current Liabilities:
Current portion of long-term notes payable ..... . . . ...... .
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 (Note 2) .. . . ...... .. .
Total Current Liabilities . . .......... .. ...... . ... .
Long-term debt (Note 4):
Notes payable to bank .. . . .. .. ............ .. . . .. . .. . .. .
Notes payable to insurance companies . . ... .. .... .. . . ... .
4 % convertible subordinated debentures
due June 1, 1971 ............... . . ....... . ......... .
Deferred federal taxes on income (Note 2) . ..................... .
Commitments and contingent liabilities (Note 5)
Retirement plans (Note 6)
Shareholders' Equity (Notes 3, 4 and 7):
Common stock-$1.00 par value per share
Authorized 2,000,000 shares
Issued 1,040,952 and 927,920 shares respectively .
Capital in excess of par value .. .. ... . ................ . . .
Retained earnings ..... .. ... ... ........ . ... . .......... .
$
1969
1,200,000
3,087,769
1,010,537
1,584,709
950,799
322,150
1,338,489
5,257,070
14,751,523
4,020,000
17,280,000
1,878,000
23,178,000
2,192,000
1,040,952
11,023,741
12,480,599
24,545,292
$64,666,815
$
1958
2,200,000
1,935,620
814,153
1,134,403
846,715
316,200
904,747
612,272
8,764,110
5,220,000
11,280,000
3,248,000
19,748,000
2,087,000
927,920
8,565,163
9,503,345
18,996,428
$49,595,538
NOTES TO
FINANCIAL STATEMENTS
Note 1. Net Earnings. Net earnings from operations after taxes
were $4,806,203 and gain from disposition of property after taxes
was $210,453. Effective July 1, 1959, the useful life for Douglas
DC-6B airframes and engines was revised from seven years to
the shorter of seven years or December 31, 1961 for units ac-
quired prior to the year 1957 or December 31, 1963 for units
acquired in 1957 and 1958. The residual values also were re-
duced from 15% to 10%. These revisions, made to recognize
accelerated obsolescence, increased depreciation by $1 ,160,000
and decreased net earnings by approximately $557,000.
Note 2. Taxes on Income. Federal income tax returns through the
year 1957 have been examined by the U. S. Treasury Depart-
ment. Provision has been made for all known income tax liabili-
ties. Taxes on income include a net provision of $105,000 for
deferred taxes on income resulting from differences between the
charges against income recorded in the accounts and the
related deductions allowable for federal tax purposes. These
differences are primarily in connection with depreciation and
aircraft preoperational costs.
Note 3. Stock Dividends. On April 3, 1959, the company paid a
4 % stock dividend on the shares outstanding on March 6, 1959.
For the 37,935 shares thus issued, retained earnings were
charged $1,185,468, with $1,147,533 being transferred to capital
in excess of par value and $37,935 to common stock. The charge
to retained earnings was based on the closing price of $31.25 a
share on the New York Stock Exchange on February 17, 1959,
the day preceding the declaration by the Board of Directors.
In 1960, on January 18, a 5% stock dividend was declared
payable on March 23 to shareholders of record on February 19,
1960.
Note 4. Long-term Debt. The long-term debt outstanding is sum-
marized as follows :
Outstanding
Bank Loans: December 31, 1959
4% notes payable $ 2,340,000
5% notes payable 2,880,000
Insurance Company Loans:
4 % notes payable 11,520,000
5 % notes payable
4 % convertible
subordinated
debentures
Less current portion
5,760,000
1,878,000"'
24,378,000
1,200,000
$23,178,000
Payable Maturity
$100,000 Jan.2,
a month 1962
$50,000 Sept.1 ,
monthly 1966
effective
Oct.1, 1961
$1,200,000 Sept.1,
annually 1970
effective
Sept. 1, 1962
$600,000 Sept. I ,
annually 1975
effective
Sept. I, 1966
5 % per annum June 1,
from 1961 to 1971
1966 and 10%
per annum
thereafter
*The subordinated debentures, convertible into common
stock of the company at the current conversion price of
$18.83 a share, were called on January 18, 1960 for redemp-
tion on February 23, 1960 at 103 1
h %. The conversion rights
expired on February 15, 1960 and 96,717 of the 99,735
shares of common stock reserved on December 31, 1959
for such conversions were issued as a result of the call.
Said conversions resulted in the transfer from long-term
d0
ebt of $96,717 to common stock and $1,723,948 to capital
in excess of par value.
The 1956 and 1957 agreements with the bank and the insur-
ance companies provide among other things (including restric-
tions on additional borrowings) conditions and requirements
which operated to restrict retained earnings from cash dividend
distribution in the amount of $7,208,693, leaving $5,271,906 not
so restricted. New financing agreements relating to the purchase
of additional equipment referred to in Note 5 are presently being
negotiated.
PEAT, MARWICK, MITCHELL & Go.
Cl!:R'l'tPil!:D PUIILIC ACCOUNT.ANTI!!
e1e 900TB SPlllNO TREBT
LO Al<OELE 14, (:A.LIP.
AQQgrNTANTS' REPCRT
The Board of Directors
Western Air Lines, Inc. :
We have examined the balance sheet of
Western Air Lines, Ino. as of December 31, 1959
and the related statements of earnings, retained
earnings and capital in excess of par value for
the year then ended. Our examination vas made
in accordance vith generally !lccepted auditing
standarda, and accordingly included such tests
of the accounting records and such other auditing
procedures as ve considered necessary in the
circumstances.
In our opinion, the accompanying. balance
sheet and 11tatement1 of earninge, retained earning
and capital in exoe1111 of par value present fairly
the financial position of Western Air Linea, Inc,
at December 31, 1959 and the reeultB of its
operations for the year then ended, in conformity
vith generally accepted accounting principle11
appli11d on a basis consistent vith that of the
preceding year.
Lo11 Angeles, California
February 19, 1960
Note 5. Commitments and Contingent Liabilities. At December
31, 1959, the company had on order seven Lockheed Electra
turbo-prop aircraft, of which one was delivered in January, three
are scheduled for delivery in April, two in July, and one in August
1960. These aircraft together with orders for other major items
represent a purchase commitment in excess of deposits made at
December 31, 1959, of approximately $14,500,000. However, an
engine and propeller lease, when an amendment in process is
concluded, will reduce the above purchase commitment by
approximately $3,600,000. This agreement provides for lease
instead of purchase of the engines and propellers used on all
Lockheed Electra aircraft and will create, when all units are re-
ceived, rentals of approximately $1,500,000 per annum through
1964.
On February 15, 1960, the company executed agreements
with The Boeing Airplane Company providing for the purchase
of three Boeing #720 pure jet aircraft for delivery in the Spring
and Summer of 1961 involving a purchase commitment totaling
up to approximately $14,000,000. Also executed was a lease, for
a period from approximately May 15, 1960 up to approximately
January 1, 1962, for two Boeing #707 pure jet aircraft and spare
engines at a monthly rental of approximately $165,000.
As of December 31, 1959, 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 6. Retirement Plans. The company has an insured contribu-
tory retirement plan for all eligible employees, including officers,
and in addition , the company has in accordance with the pilots'
labor agreement a "variable pension plan," of the trusteed type,
based on pilots' current services. The cost of these plans charged
to operating expense in 1959 totals $773,731 for both current
and past services. Management contemplates that the remain-
ing past service cost of the insured plan will be funded over a
period of approximately five years and will require annual pay-
ments of $106,000.
Note 7. Options to Purchase Common Stock. Through December
31, 1959, 35,338 shares (including 3,135 shares in the year 1959)
have been issued thereby concluding a restricted stock option
plan for officers and key employees approved by the share-
holders in 1951. The option prices ranged from $8.19 to $17.47 a
share, representing a total option price and total fair value when
first exercisable of $442,157, and a total fair value at dates when
exercised of $703,968.
Fir
Blac
THE BOARD
OF DIRECTORS
Harry J. Volk
President
Union Bank
Pogue & Neal
Attorneys-at-Law
Washington, D.C.
John M. Wallace
Chairman, Board of Directors
Walker Bank & Trust Co.
Los Angeles, California Salt Lake City, Utah
Vice President - 0 perations
Western Air Lines, Inc.
Alexander Warden
Publisher
Great Falls Tribune-Leader
Great Falls, Montana
Sidney F. Woodbury
President
Pine Street Co.
Portland, Oregon
HI Y- OU TH YEAR OF CONTINUOUS OPERATION IN SERVING THE WEST