Western Air Lines Annual Report 1960

years of service to the west
WESTERN
AIRLINES
LINES ANNUAL REPORT
AIR
WESTERN
ANNIVERSARY EMBLEM
Symbolizing thirty-five years of continuous
operation in serving the West, this emblem
will be used extensively throughout 1961 to
mark an important milestone in the history
of the nation's oldest airline. Western be
gan operations on April 17, 1926, with the
sturdy little Douglas M-2 bi-plane which
appears between the company's dates of
service. Illustrating Western's established
position in the Jet Age is the soaring tur
bine-powered Boeing 720B, newest addition
to the fleet, fastest in commercial service.
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.
30 Broad Street
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.
629 South Spring Street
Los Angeles 14, California
annual meeting
Fourth Thursday in April
in Los Angeles, California
the
president's
letter
To Shareholders, Employees, Customers and Friends:
The following pages contain a report of the company's operations, achievements
and problems during 1960, the year of Western's entry into the Jet Age. Forthe
entire domestic air transport industry, 1960 was in many respects an abnormal
year. Due to the introduction of new jet equipment and theunfortunatetroubles
related to the Lockheed Electra aircraft, many increases in expenses occurred.
Notwithstanding these difficulties, Western's financial results were among the
best in the industry and the outlook for the future is good. During1960,Western
had one of the best on-time schedule-performance and employee-productivity rec
ords in the industry.
Prosecution of applications for vitally needed, long-hauljetroutestoHawaiiand
between California and Texas was completed before the CivilAeronauticsBoard
and decisions in both these cases are expected soon. It is essentialthatWestern's
route structure be strengthened by the addition of long-haul jet routes in order
to permit the economical operation and good utilization of large jet aircraft,
which cannot be operated economically solely on short-haul trips.
On April 17, 1961, Western, which is America's pioneer airline, will celebrate
its thirty-fifth anniversary. We anticipate that the company'sprogress and pros
perity will match that of the region which we are privileged to serve inwhatis
the most flourishing and dynamic area of North America.
The support of Western's loyal shareholders, employees and customers in
providing and using the finest air transportation in the West is gratefully
acknowledged by the Board of Directors and the management of the company.
March 10,1961
Western Air Lines Building
Los Angeles International Airport
Los Angeles U5, California
President
highlights
of 1960
1960
Seat miles produced 1,776,076,000
Seat miles sold 1,034,481,000
Passengers carried 1,721,619
Total operating revenues $ 69,077,068
Operating income 6,099,659
Net earnings and special item 2,439,376
Dividends paid:
Cash $ 1,357,464
Stock 1,770,497
Common stock outstanding 1,430,730
Earnings and special item per share 1.70
Dividends per share:
Cash--annual rate 1.00
Stock 5%
Total shareholders' equity 32,584,329
Shareholders' equity per share 22.77
Cash and securities $ 20,885,262
Working capital 17,092,511
Properties and equipment at cost 60,203,939
Long-term debt 23,010,000
Number of employees at year end 2,730
Wages and salaries paid $ 19,477,514
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
1.090,918
4.60
18,265,546
11,980,236
55,731,571
23,178,000
2,962
17,704,404
eCLVTllYigS In I960, for the twelfth suc
cessive year, Western Air Lines generated a
profit, the third largest in the company's 35-
year history. Earnings totaled $2,439,376, or
$1.70 a share based on the 1,430,730 shares of
common stock outstanding on December 31,1960.
Operations accounted for the major portion
of earnings, amounting to $2,333,660, equal to
$1.63 a share, and the company registered net
gains from property disposal of $105,716, or
$0.07 a share.
In 1959, earnings reached an all-time high of
$5,016,656, or $4.60 a share based on 1,090,918
shares, the number outstanding on December
31, 1959, adjusted for the 1960 stock dividend.
Operations in 1959 contributed $4,806,203, or
$4.41 a share, to earnings, while net gains from
the disposal of property totaled $210,453, or
$0.19 a share.
Despite extraordinary expenses related to
the company's entry into the Jet Age, higher
operating costs and revenues lost because of
the slowdown of the Electra, increased depre
ciation charges resulting from accelerated ob
solescence and a general business downturn,
Western's operating income of $6,099,659 for
1960 was second only to the record $11,130,599
realized in 1959.
dividends: Shareholders of Western
Air Lines for the tenth consecutive year re
ceived cash dividends in 1960, continued by the
Board of Directors at the increased quarterly
rate of $0.25 which became effective in the final
quarter of 1959.
Quarterly cash dividends were paid on March
4, May 18, August 5 and November 11. In addi
tion, a 5 per cent stock dividend was distributed
on March 23, 1960.
Western's directors took dividend action at
sessions held in Los Angeles, Phoenix and Min
neapolis, in accordance with company policy to
meet in key cities on the Western system.
A regular quarterly cash dividend of $0.25
was declared at the board's initial meeting of
1961 held on February 13 at the company's Los
Angeles International Airport headquarters.
The dividend was paid on March 10 to share
holders of record on February 24.
VeVeTIUGS ' Western Air Lines 1960
operating revenues of $69,077,068 established
a 35-year high, despite the Electra slowdown
and the general economic downturn experi
enced throughout most of the year. The pre
vious record was set in 1959 when operating
revenues totaled $63,253,971.
Revenues resulted generally from the same
sources as in 1959, although a significant
change occurred in the relationship between
first-class and coach traffic.
The company's first-class deluxe passenger
services in 1960 decreased to 57.3 per cent of
total revenues, compared with 62.5 per cent in
1959, while aircoach passenger services rose to
35 per cent, as against 30.3 per cent the year
before.
Passenger traffic accounted for 92.3 per cent
of the 1960 income dollar; freight and excess
baggage contributed 3.5 per cent; mail was
2 per cent; and, all other sources, including
property gains, accounted for 2.2 per cent.
The General Passenger Fare Investigation,
pending before the Civil Aeronautics Board
since 1956, was concluded in 1960. The board
awarded a fare increase of 2.5 per cent, plus
$l-a-ticket, to domestic trunklines, effective
July 1. The rate rise did not affect Western's
Mexican route, nor did it go into effect for
California intrastate operations until January
9, 1961, following long-delayed approval by
another regulatory agency, the state Public
Utilities Commission.
BRIEF BALANCE SHEET
In its final order, issued on November 25,
1960, the CAB established definite standards
for the determination of fair rates of return
for commercial airlines and for the evaluation
of future requests for fare increases. A reason
able rate of return on investment for the "Big
Four" airlines was determined to be 10.25 per
cent, while the rate for the other eight trunk
lines, including Western, was set at 11.125 per
cent. As yet, no procedural techniques have
been outlined by the CAB for the implementa
tion of this philosophy.
expenses: Total operating expenses in
1960 rose to $62,977,409, a 21 per cent increase
over 1959 costs. A portion of this rise reflected
increased production; seat-miles produced in
creased 9 per cent and ton-miles produced were
up 6 per cent. The greater portion of this in
crease in costs, however, reflected extraordinary
expenses related to the Electra slowdown, ac
celerated depreciation and obsolescence on the
DC-6B fleet, substantially increased flying
equipment rentals and costs related to West
ern's inauguration of service in the Jet Age.
As a result, total operating expenses were
30.34 cents per ton-mile produced for 1960, as
compared with 26.57 cents in 1959; cost per
seat-mile flown amounted to 3.55 cents, as
against 3.21 cents the year before.
Expenses of flying operations climbed 16 per
cent in 1960 to $19,151,441 from $16,522,550,
while maintenance costs totaled $9,374,066, a
38 per cent rise from $6,805,737 in 1959. Both
increases involved problems encountered in the
operation and maintenance of the Electra air
craft, problems now being solved through the
joint efforts of the operators, the manufacturer
and government agencies. The higher costs also
reflected the greater expenditures inherent in
operating larger equipment.
Depreciation and amortization in 1960 totaled
$9,321,477, a figure 46 per cent above the 1959
total of $6,387,565. The higher amount reflects
not only the increase caused by the acquisition
of new equipment but also that generated by
a recognition of the accelerated obsolescence
of the DC-6B fleet.
Normal useful life of the DC-6B for depreci
ation and amortization purposes originally was
set at seven years, but the company recognized
the accelerated obsolescence of this airplane as
Western owns: 1960 1959
Cash and securities $20,885,262 $18,265,546
Owed by others 5,548,200 6,387,821
Expendable parts and
supplies 1,185,313 947,499
Buildings and improvements,
net 2,195,838 2,036,858
Flight and other equipment,
net 28,841,177 32,952,735
Deposits on new equipment... 9,807,456 2,439,047
Prepaid expenses 1,132,637 1,130,893
Deferred charges and other... 572,347 506,416
70,168,230 64,666,815
Western owes:
Owed to vendors and others.. 7,493,928 6,955,964
Federal income taxes--
current and deferred 4,378,452 7,449,070
Tickets sold but not yet used 1,411,521 1,338,489
Notes payable-
current and long-term 24,300,000 22,500,000
Debentures -
1,878,000
37,583,901 40,121,523
Excess of what is owned
over what is owed, or
shareholders' equity $32,584,329 $24,545,292
STATEMENT OF SOURCE AND
DISPOSITION OF FUNDS FOR 1960
PER SHARE
Source of funds:
AMOUNT
Net earnings and special item. ..
$1.70 $ 2,439,376
Depreciation and maintenance
reserve provision 6.23 8,907,160
Deferred federal taxes on income.. .51 723,000
$8.44 12,069,536
Sale of capital stock 5,246,920
Bank borrowings, net of $1,290,000
reduction during the year 1,710,000
19,026,456
Disposition of funds:
Planes and other equipment
including contract deposits
Cash dividends, including $70,885
for fractional interest of
stock dividend
Deferred charges and other
Increase in Working Capital
12,322,991
1,428,349
162,841
5,112,275
$19,026,456
Newest aircraft in the Western Air Lines fleet, the Boeing 720B turbo-fan jetliner, rolls from production
line ready for installation of Pratt & Whitney JT3D-1 engines. 720B will be fastest commercial airliner.
of July 1, 1959, and, again, as of January 1,
1960. If the original seven-year period had
been continued, depreciation and amortization
would have totaled approximately $2,400,000
less in 1960 and $1,160,000 less in 1959.
Western's DC-6B fleet now is scheduled for
reduction to 10 per cent residual values in the
following order: Ten aircraft acquired prior
to 1957 by December 31, 1961; seven acquired
in 1957 by December 31, 1962; and, nine ac
quired in 1958 by December 31, 1963.
finances: Western Air Lines entered its
35th year in a sound financial position.
Working capital during 1960 increased to
$17,092,511, which was $5,112,275 above the
1959 level. The ratio of current assets to cur
rent liabilities also improved significantly in
1960 --
$2.47 to $1, compared with $1.81 to $1
in 1959. Working capital and current assets
were significantly higher due to the delayed
delivery of the Electra prop-jets scheduled
originally for early 1960.
Long-term debt amounted to $23,010,000 on
December 31, 1960, as against $23,178,000 at
the end of 1959. The debt was composed of
notes payable to banks totaling $5,730,000, and
$17,280,000 in notes payable to insurance
companies.
Western had on order four Boeing 720B
turbo-jets and six Lockheed Electra prop-jet
aircraft at the close of 1960. The 720Bs are
scheduled to be delivered at the rate of one-a-
month during April, May, June and July of
1961. Three of the Electras were delivered by
February 15, 1961, with the remaining three
scheduled for delivery on or before April 30,
1961.
These aircraft, together with orders for
other major items, represented purchase com
mitments, at year-end, approximating $26,000,-
000 in excess of previously paid deposits.
The company's lease agreement for the Alli
son engines and Aeroproducts propellers used
on the Electras provides for rentals, when all
units are received, of approximately $1,500,000
a year through 1964.
Under an agreement with The Boeing Air
plane Company, Western has been leasing two
Boeing 707 turbo-jet aircraft, with spare en
gines, since May 1960. While the lease period
terminates July 1, 1961, the company has an
option to extend the agreement to January
1, 1962.
Western's 1960 financing program, imple
mented in March and April, arranged for funds
in the amount of $19,735,000. Through a rights
offering to shareholders, 238,455 shares were
issued at $23 per share for an aggregate of
$5,485,000 before issue costs of $237,545. Bank
and insurance company agreements were signed
for $14,250,000 of additional borrowings. Of
this amount, $3,000,000 was borrowed in 1960
and the agreements contemplate the balance of
WESTERN'S INCOME DOLLAR
$11,250,000 will be borrowed in 1961. In antici
pation of the financing program, Western's
convertible subordinated debentures were re
tired primarily by conversion into stock of the
company.
The funds, arranged through the 1960 financ
ing program, will supplement the funds to be
generated by normal operations. In 1960,
operations generated $12,069,536, equivalent to
$8.44 a share, in comparison to $11,490,299, or
$10.53 a share, in 1959.
shareholders and stock:
Western Air Lines had 1,430,730 shares of
common stock issued and outstanding on
December 31, 1960, an increase of 389,778
shares over the 1,040,952 total outstanding at
the end of 1959. The shares were held by
approximately 8,500 stockholders, located in
every one of the 50 states of the U. S.
Included in the increased number of shares
were 54,606 distributed as a 5 per cent stock
dividend, 96, 717 shares issued upon conversion
of debentures and 238,455 shares issued under
a rights offering in April.
Shareholders' equity in 1960 established a
new all-time high for the company's 35 years
of operations, totaling $32,584,329, or $22.77
a share, compared with 1959 equity of $25,-
545,292, equal to $22.50 a share, adjusted for
the 1960 stock dividend.
On the New York Stock Exchange, 474,300
shares of the company's stock were traded in
1960 at prices ranging from a low of 17% to
a high of 35%, with a closing price for the
year of 19%. A total of 40,943 Western shares
was traded on the Pacific Coast Stock Ex
change, with a high of 35% and a 17% low.
The year-end closing price was 18%.
Western reported monthly financial results
to nationwide information media throughout
the year, and informed stockholders directly
of the company's progress and development
through regular publication of its Share
holders Report.
Western's 1959 Annual Report again won
Financial World's Merit Award, and the
company was honored with a Management-
Shareholders Award for its 1960 stockholder
relations program by the United Shareholders
of America, Inc., a national non-profit research
organization.

:tm 3.5 from express, freight and excess baggage
2.0 from mail
I
,*1 2.2 from all other sources, including property gains
WESTERN'S EXPENSE DOLLAR
31.5 for wages and salaries
"12.8 for aircraft fuels
7.1 for local, state and federal taxes
iimH 16.8 for depreciation and flying equipment rentals
for materials, supplies and parts
22.1 for all other expenses
equipment: On June 1, Western Air
Lines entered the turbo-jet era by inaugurating
service between major Pacific Coast cities with
two leased Boeing 707 jetliners.
The company has been operating these 707s
in combined aircoach-deluxe configuration,
offering passengers 71 economy accommoda
tions, 42 first-class seats and a four-place
lounge.
Operation of the 707s contributed signifi
cantly to lifting the company's passenger seat-
mile production during 1960 to a new record
of 1,776,076,000, compared with the previous
high of 1,623,007,000 set in 1959.
Following two accidents in Texas and
Indiana involving Lockheed Electra aircraft
operated by other airlines, the Federal Avia
tion Agency on March 25, 1960 imposed a speed
restriction, lower than the contract specifica
tions, on all Electras operated by U. S. airlines,
including Western.
Lockheed Aircraft Corporation, after the
most intensive investigation of aircraft struc
ture in the history of aviation, proposed mod
ifications of the aircraft to the FAA, which,
after thorough testing, approved the changes
late in 1960 and removed the speed restriction
on modified Electras on December 31.
Modification of the six Electras in the West
ern fleet during 1960, performed at the expense
of Lockheed, is scheduled to be completed by
April 1961. In February of the current year,
the company took delivery of three additional
Electras, all modified, and the last three of the
original orders for 12 are scheduled for accept
ance on or before April 30, 1961.
During 1960, Western sold two DC-3 aircraft
and one Convair 240, all two-engine equipment.
Early in the current year, the company be
came an all four-engine airline with the
retirement of the last four of its 40-passenger
Convair aircraft, all of which since have been
sold. In February 1961, Western sold a DC-6B
airliner to the Los Angeles Dodgers baseball
team.
With the acceptance of three new Electras
in February 1961, the company's fleet now con
sists of 37 planes, including the two leased
Boeing 707s, nine Electras (four in combined
configuration offering 54 deluxe and 18 air-
coach seats, and five 96-seat aircoaches) and
26 Douglas DC-6Bs (20 deluxe 60-passenger
models and six 96-seat aircoaches). The three
additional Electras to be delivered will be in
combined configuration cabin design.
While 1960 marked the company's entry into
the Jet Age with leased aircraft, 1961 will be
highlighted by delivery of the Boeing 720B
turbo-fan jets to be accepted from April
through July 1961. The 600-mph-plus speed of
the 720B will rank it as the fastest commer
cial airliner in service.
Western's $1,750,000 hangar at Minneapolis-
St. Paul International Airport was officially
dedicated early in 1961. The company is leas
ing the modern maintenance facility from the
Metropolitan Airports Commission of the Twin
Cities..
In the current year, Western is scheduled to
occupy new, modernized terminal facilities in
Salt Lake City, Minneapolis, Phoenix and Los
Angeles.
personnel: Western Air Lines, at the
close of 1960, operated installations in 34 cities
in 12 western states, Canada and Mexico, and
Graduated from Western's own training center,
carefully instructed stewardess class poses with
supervisor on steps of Lockheed Electra prop-jet.
BRIEF STATEMENT OF EARNINGS
had 2,730 employees on its personnel rosters.
The total number of employees was down nearly
8 per cent from the 1959 figure of 2,962 despite
increased revenues, a fact which merited in
dustry recognition for employee productivity.
With 13 men wearing 30-year service em
blems, Western continued to hold one of the
highest seniority standings in the airline
business.
At year's end, 4.5 per cent of all employees
were credited with 20 years or more seniority;
28 per cent of personnel had at least 10 years
experience; and, a record 54 per cent enjoyed
service rating of more than five years. Sixty-
six per cent of employees were men, 34 per
cent women. Eighty-six per cent of total per
sonnel, or 2,348 employees, were represented
by the seven labor unions holding agreements
with the company.
During 1960, Western signed a new contract
with the Brotherhood of Railway & Steamship
Clerks, Freight Handlers, Express and Station
Employees effective to June 30, 1963.
Working agreements were in force at the
close of the year with the Air Line Dispatch
ers Association, the Air Line Stewards &
Stewardesses Association and the International
Association of Machinists.
Contract revisions were being negotiated
with the Air Line Pilots Association, the Com
munications Workers of America and the
Flight Engineers International Association. In
addition, work-rule discussions were underway
with the IAM.
Participation by employees in the company's
voluntary group insurance program continued
high during 1960 with 92.7 per cent of per
sonnel subscribing to one or more of the in
clusive types of coverage offered. Group
hospitalization policies covered 89.7 per cent
of employees, and of the 2,422 men and women
subscribing to this plan 1,321 also carried
family-member coverage. Next most popular
protection under the insurance program, joint
ly financed by the company and its employees,
was group accident and sickness coverage, sub
scribed to by 85.6 per cent of those eligible.
The group life insurance plan attracted par
ticipation by 71 per cent of employees.
During the underwriter's reporting period,
which does not coincide with the calendar year,
Western's income came from: 1960
Passengers $64,355,851
Express, freight and baggage 2,473,101
Mail 1,392,850
Gain on disposal of property .
103,716
Other income 1,372,471
1959
$59,193,763
2,256,634
1,295,348
254,453
795,141
69,697,989 63,795,339
Western's expenses were:
Wages and salaries 19,477,514 17,704,404
Social security, group
insurance and
retirement plans 1,693,286 1,607,847
Aircraft fuels 8,577,434 8,179,127
Materials and repair parts. ..
6,550,224 4,012,311
Depreciation 9,321,477 6,387,565
Rentals of flying equipment 1,998,254 334,789
Other rentals and
landing fees 1,734,367 1,532,083
Advertising and publicity 2,405,435 2,221,073
For service to passengers 2,963,929 2,828,662
Insurance 1,599,375 1,119,768
Interest 1,154,058 1,047,217
Taxes 4,793,943 7,254,829
Utilities and services 3,331,971 2,913,762
Other costs 1,657,346 1,635,246
67,258,613 58,778,683
Net earnings and special item $ 2,439,376 $ 5,016,656
a total of $459,815 in insurance benefits was
collected by company employees and family
members.
At the close of the year, 1,050 employees,
representing 71.4 per cent of those eligible,
were participating in the company's insured,
contributory retirement-income program, now
in its ninth year of operation. In addition to
this plan, a variable pension plan of the trus
teed type was continued for pilots.
During 1960, the retirement programs cost
$692,799 for current and past services. The
company contemplates that the remaining past-
service cost of the insured plan will be funded
over the next four years at an annual expense
of $106,000.
In its first full year of operation, the Em
ployee Services Office established in 1959,
became a popular center for a wide variety of
employee activities and company-sponsored
BOEING
107M
along mt kobccmsi
JUNE I,19b0
Inauguration of Boeing 707 turbo-jet service along
the Pacific Coast was a highlight of 1960. Actress
June Lockhart christens famed Champage Flight.
Symbolizing pride of Westerners in very successful
Boeing 707 jetliners, employee's young son gazes
in awe at huge aircraft poised for regular flight.
events. Keystone of Western's employee-infor
mation program, the monthly publication
Flight Times, was expanded in coordination
with the new services office.
Savings and loan service was provided to
88.2 per cent of company employees by the
independent Westernaire Federal Credit Union
which established new activity records during
the year. The government-accredited organiza
tion closed the year with $1,935,446 in assets.
sales and service: Inauguration
of Boeing 707 turbo-jet service along the
Pacific Coast and operation of the company's
electronic reservations network at an increased
level of efficiency were highlights of the West
ern Air Lines sales and service programs
during 1960.
The company carried a record number of
1,721,619 passengers, compared with 1,689,278
in 1959, the prior high. Passenger revenues
totaled $64,355,851, up 9 per cent over $59,-
193,763 the previous year.
Western also established a new high in cargo
revenues. Including express, freight and excess
baggage, cargo accounted for $2,473,101 of
total operating revenues, a 10 per cent increase
over the $2,256,634 figure recorded in 1959.
Mail revenues, including both service pay
ment for regular air mail and the non-priority
carriage of surface mail by air, totaled $1,-
392,850 as against $1,295,348 the year before.
The company registered a 100 per cent gain
in revenues from charter flights and other
transport service, as a result of its emphasis
on group travel and special handling of athletic
teams. Revenues from this source amounted to
$606,791 in 1960 versus $302,848 in 1959.
Western's passenger load factor during the
year was 58.2, with a breakeven figure of 53.3.
In 1959, the passenger load factor was 60.5
with the breakeven at 50 per cent. The com
pany produced more than 1.7 billion seat miles
in 1960, topping the record of 1.6 billion es
tablished in 1959.
Average length of passenger trips during
the year increased to 601 miles from 581 miles
the previous year, while average flight distance
increased from 297 to 317 miles.
During its second year of operation, the
Resetron, Western's leased electronic reserva
tions network, operated 99.97 per cent of the
22 hours out of every 24 that it was scheduled
to function. With this high rate of perform
ance, the Resetron handled a total of 8,774,879
transactions, including sales, cancellations,
availability-of-space information and flight
data.
A new reservations office was opened in
Denver in July, improving Western's service
to the approximately 10,000 passengers that
enplane at Denver monthly.
The specialized reservations quality-control
section established a continuing program of
assessing the performance of service through
out the company's system.
Preparing for the June 1 introduction of
Boeing 707 service by Western between Los
Angeles, San Francisco, Portland and Seattle-
Tacoma, the company conducted a program of
Jet Age employee orientation for all sales and
service personnel in cities served by the new
aircraft.
The most comprehensive program of
announcement advertising, promotion and pub
licity in Western's history preceded the in
auguration of 707 service, including a special
"Western Air Lines-Boeing Week" in Seattle,
home of the manufacturer.
While the company's well-known deluxe
services, such as Champagne Flights, Hunt
Breakfasts and Fiesta Flights, are expected to
remain major sales items, the steady growth
of economy aircoach travel, up 19 per cent over
1959, evidences the continued penetration the
company is making into new travel markets.
This objective was furthered in 1960 by con
verting some of Western's Electras, formerly
all-deluxe aircraft, into dual configuration, with
both deluxe and coach sections.
When the company receives the remainder
of its 12 Electras from Lockheed this year,
five will operate as high-density, 96-passenger
coaches in recognition of the increased im
portance of the aircoach market.
To develop the nearly 90 per cent of intercity
travel which continues to move by private
automobile, Western launched a unique adver
tising and promotional campaign based on the
"fly-and-drive" theme. Radio and newspaper
advertising were directed at northern areas
on the company's system, advising Winter
vacationers to "Take a Sun Break" with West
ern in southern California, Nevada, Arizona
or Mexico. Major department store cooperative
promotions and publicity activities supported
the campaign.
As a supplement to the most intensive "Sun
Country" program conducted in the past nine
years, the company promoted travel to the
national parks and resorts of Summer vacation
centers located in northern regions of its
system.
Western progressed during 1960 in its con
tinuing program of establishing more effective
teamwork with travel agents and connecting
airlines. Continuing its emphasis on off-line
sales coverage and traffic development, the com
pany expanded its interline agreements during
the year to include nearly all the world's major
air carriers.
Special sales attention was devoted to
Western's service to Mexico. The company
spearheaded a campaign supporting former
President Eisenhower's invitation to "Visit
the USA in 1960." Southern California civic
organizations, hotels and tourist enterprises
joined the campaign, urging our neighbors to
the south to "Visit the USA through the
friendly Los Angeles Gateway." Results were
encouraging, and the important "gateway"
concept was firmly established.
In line with its emphasis on developing
Mexico traffic, Western opened a new East Los
Angeles district office, with prime responsibil
ity for Latin American sales.
Seeking to heighten the operating efficiency
of its finely trained corps of hostesses, the
company conducted an intensive re-training
program during 1960 for all stewardesses. In
addition to the regularly scheduled refresher
classes, the program included checkrides by
supervisors and personal follow-up interviews
for each stewardess.
Supporting its introduction of turbo-jet
service, Western adopted a new color scheme,
featuring silver-gray and red, for ground serv
icing equipment and personnel uniforms.
The company also established industry-wide
on-time aircraft performance records.
In 1960, the company's advertising empha
sized two-color newspaper displays and ani
mated television commercials, winning national
awards and recognition in both categories.
Western's newspaper advertising was judged
best among domestic air carriers, and its famed
Los Angeles Dodgers prepare to depart for Spring
training. Specializing in charter flights for teams,
Western has gained fame in the world of sports.
TV salesman, the "Relaxed Bird," won new
prizes from advertising associations in both
the U. S. and Mexico.
Western accelerated its convention sales ac
tivities during the year, keying them to the
continued increase in major group meetings
in cities and resort areas on its system.
Consistent with the nationwide trend toward
greater use of credit facilities, Western con
tinued to offer its passengers the convenience
of four different credit cards during 1960:
The Diners' Club, Hilton Carte Blanche, the
industry-wide Universal Air Travel Plan and
the company's own no-deposit Charge-A-Flight.
Volume of credit sales transacted through these
cards gained 14.7 per cent during the year.
During 1960, the company relocated or mod
ernized air travel centers at Palm Springs,
Pasadena and Anaheim, California, as well as
on San Francisco's Union Square, in order to
provide improved service and identification.
route development: With long-
haul, high-density air routes economically
suited to jet operations as the goal, Western
Air Lines during 1960 continued its affirmative
route development campaign.
On December 7, the Civil Aeronautics Board
decided, in the Trans-Pacific Route Case, that
Western should be certificated to operate jet
routes linking major western cities with Ha
waii through three Pacific Coast gateways--Los
Angeles, San Francisco-Oakland and San Diego.
The decision was not announced by the CAB
until January 19, 1961, and it was accompanied
by a temporary stay order denying the com
pany operating rights pending further study
and action by the federal regulatory agency.
The board explained that its international
route recommendations in the case, which re
quire Presidential approval because of their
relation to foreign policy, had been largely dis
approved by former President Eisenhower, who
at the same time suggested that the CAB re
consider its domestic awards --
Mainland-to-
Hawaii -- as part of the overall trans-Pacific
air pattern.
Moving to provide the vitally needed new
and improved air service without additional
delay, Western on January 30 filed a motion
with the CAB requesting that the agency
vacate its stay order with respect to the route
awards made to the company. Answers to the
Western motion have been filed with the board
by all parties to the case and the company is
hopeful that the original decision will be re
affirmed quickly.
In September, the company participated in
oral arguments before the CAB in the South
ern Transcontinental Service Case, the second
major proceeding in which Western is seeking
routes appropriate for jet operation.
Earlier, the CAB examiner recommended
route awards to other trunklines, but the com
pany argued strongly the need for a pattern
of regional air service designed specifically for
the California-Texas market.
In this proceeding, the company is seeking
authority to operate jet flights between Los
Angeles and San Francisco-Oakland on the
Pacific Coast and Dallas and Houston, Texas.
Intermediate points which Western proposes to
SEATTLE
TACOMA
serve include San Diego, Las Vegas, Phoenix,
Albuquerque, El Paso, San Antonio and Fort
Worth. A final board decision is expected early
in 1961.
During the Summer, international negotia
tions between the governments of the United
States and Mexico resulted in the issuance of
a bilateral agreement under which the com
pany's authority to operate its 1,555-mile Los
Angeles-Mexico City route was extended for
a period of three years. Although Western's
rights over the route expired on June 30,
operations were permitted during negotiations
for the new agreement, which became effective
on August 15.
On February 6, 1961, an initial CAB exam
iner's decision was issued in the Pacific South
west Local Service Case recommending two
new routes and new operating rights for West
ern in the California-Nevada region. The
company was favored by the examiner to fly
nonstop routes linking Los Angeles with Sac
ramento, Sacramento with Reno, and San
Francisco-Oakland with Las Vegas.
In addition to these new routes, the company
won endorsement of plans to link San Francisco-
Oakland with San Diego, Long Beach, Palm
Springs and Ontario by nonstop flights, elimin
ating a restriction requiring stops at Los An
geles. One-carrier service between the Pacific
Northwest and Las Vegas also will be possible
if the board adopts the examiner's recommen
dations. A final decision is anticipated late
in 1961.
Scheduled for hearing is the Southern Rocky
Mountain Area Local Service Case, a proceed
ing involving the local air service needs of an
area bounded by Los Angeles, Las Vegas, Reno,
Denver, El Paso and San Diego. Western will
prosecute its application for Phoenix-Salt Lake
City rights, and will oppose duplication of its
services being proposed by local service carriers.
FINANCIAL SUMMARY 1960 1959 1958* 1957 1956* 1955 1954- 1953 1952 1951
Revenues:**
Passenger $ 64,356 59,194 31,459 39,243 26,249 28,756 22,423 20,302 16,250 13,688
Express, freight and excess baggage 2,473 2,256 1,305 1,596 954 1,185 968 846 662 507
Mail 1,393 1,295 732 1,067 775 862 764 875 719 1,212
Other 855 508 474 313 2l0 236 326 853 964 875
Total Revenues 69,077 63,253 33,970 42,219 28,188 31,039 24,481 22,876 18,595 16,282
Operating Expenses:**
Depreciation and Amortization 9,321 6,388 4,136 3,011 2,294 2,151 1,761 1,718 1,019 998
Payroll 19,478 17,704 11,947 14,335 10,283 11,057 9,239 8,367 7,067 6,084
Other 34,178 28,031 16,831 20,076 13,009 13,775 11,456 10,246 7,578 6,617
Total Operating Expenses 62,977 52,123 32,914 37,422 25,586 26,983 22,456 20,331 15,664 13,699
Operating Income** 6,100 11,130 1,056 4,797 2,602 4,056 2,025 2,545 2,931 2,583
Interest** (1,154) (1,047) (1,023) (780) (394) (262) (160) (188) (109) (124)
Other Income and Expenses--net** 438 180 74 90 31 10 (15) (6) (20) (76)
5,384 10,263 107 4,107 2,239 3,804 1,850 2,351 2,802 2,383
Provision for Taxes on Income** 3,050 5,456 227 2,233 1,205 1,860 764 1,244 1,589 1,354
Net Earnings (Loss)** 2,334 4,807 (120) 1,874 1,034 1,944 1,086 1,107 1,213 1,029
Special Item:
Gain on disposition of property
less applicable income taxes** 105 210 1,522 528 2,010 38 373 78 19 360
Net Earnings & Special Item** $ 2,439 5,017 1,402 2,402 3,044 1,982 1,459 1,185 1,232 1,389
Earnings per share0 $ 1.63 4.41 (0.12) 1.95 1.13 2.14 1.24 1.27 1.39 1.53
Special item pershare0 0.07 0.19 1.51 0.55 2.19 0.04 0.43 0.08 0.02 0.53
Dividends paid per share:
Cash0 0.99 0.80 0.73 0.70 0.66 0.74 0.49 0.49 0.49 0.41
Stock 5% 4% 4% 4% 4% - - - - -
Shares outstanding**0 1,431 1,091 1,011 962 917 909 876 875 875 673
Shareholders' equity--total** $ 32,584 24,545 18,996 17,469 14,991 12,430 10,786 9,746 8,991 6,396
Shareholders' equity--a share0 22.77 22.50 18.78 18.16 16.35 13.67 12.31 11.14 10.28 9.51
Working capital** 17,093 11,980 5,320 4,688 4,600 2,784 1,490 755 1,364 435
Long-term debt** 23,010 23,178 19,748 16,827 9,677 3,484 3,755 2,072 2,903 1,924
Properties and equipment--net** 31,037 34,990 31,035 24,652 17,216 11,208 13,146 9,844 9,702 6,588
Total assets** $ 70,168 64,667 49,596 44,017 32,075 23,332 20,204 18,123 18,564 13,802
OPERA TING S TA T/ST/CS 1960 1959 1958* 195T 1956* 1955 1954- 1953 1952 1951
Route Miles 8,827 8,827 9,153 8,799 6,350 5,525 5,525 5,525 5,016 5,016
Available Ton Miles** 207,554 196,178 123,416 137,640 86,196 100,015 80,261 68,580 48,557 43,036
Revenue Ton Miles** 109,316 103,741 56,710 74,468 48,481 54,999 42,669 38,088 31,434 27,549
Passengers and Tonnage Carried:
Revenue passengers 1,721,619 1,689,278 970,498 1,379,653 928,746 1,092,578 834,910 838,732 774,079 691,322
Mail tons 6,113 5,994 3,754 5,367 4,034 4,897 3,283 3,284 3,243 3,419
Express and freight tons 7,241 6,798 4,256 6,170 4,166 5,435 4,276 4,206 3,729 3,191
Revenue Miles Flown:**
Airplane miles 25,996 25,689 16,449 21,896 14,851 18,335 15,842 14,450 12,631 11,487
Passenger seat miles 1,776,076 1,623,007 981,740 1,175,071 740,174 870,596 721,255 613,814 453,332 401,720
Passenger miles 1,034,481 982,010 533,443 702,727 458,131 514,677 402,255 359,965 298,931 259,693
Mail ton miles 3,987 3,766 2,159 3,092 2,212 2,621 1,669 1,610 1,358 1,449
Express and freight ton miles 5,551 5,133 3,150 4,026 2,455 3,207 2,556 2,100 1,524 1,282
Other Statistics:
Passenger load factor:
Actual % 58.2 60.5 54.3 59.8 61.9 59.1 55.7 58.6 66.0 64.7
Breakeven point % 53.3 50.0 54.1 53.5 56.6 51.3 51.1 51.8 54.6 53.4
Average length in miles per
passenger trip 601 581 550 509 493 471 482 429 386 376
Average revenue per passenger mile $ .0626 .0605 .0595 .0558 .0573 .0559 .0557 .0564 .0544 .0527
Number of employees at end of year 2,730 2,962 2,547 2,773 2,343 2,130 1,864 1,813 1,649 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 shares outstanding at close of respective periods adjusted for stock dividends paid through 1960.
**000 omitted.
For the year ended
December 31, 1960
(with comparative
figures for 1959)
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 and amortization
Operating income
Non-Operating Expense (Income):
Interest expense
Interest inc'ome
Other expense--net
Earnings before Taxes on Income
Provision for Taxes on Income (Note 1)
Net Earnings
Special Item:
Gain on disposition of property,
less applicable income taxes
Net Earnings and Special Item
1960
$64,355,851
2,473,101
606,791
1,392,850
248,475
69,077,068
19,151,441
9,374,066
5,216,782
8,436,127
8,474,595
3,002,921
9,321,477
62,977,409
6,099,659
1,154,058
(475,331)
37,272
5.383.660
3,050,000
2.333.660
105,716
$ 2,439,376
1959
$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
1,047,217
(242,044)
63,223
10,262,203
5,456,000
4,806,203
210,453
$ 5,016,656
For the year ended
December 31, 1960
RETAINED
EARNINGS
Amount at December 31, 1959 $12,480,599
Net earnings and special item 2,439,376
Excess of proceeds over par value of:
238,455 shares issued, less
expenses of $237,545
96,717 shares issued upon conversion
of debentures
Excess of market value over par value of 54,606 shares
paid as a stock dividend (Note 2)
14,919,975
Dividends paid:
Cash--$1.00 a share 1,357,464
Stock-5 % (Note 2) 1,770,497
Amount at December 31, 1960 (Note 3) $11,792,014
CAPITAL IN
EXCESS OF
PAR VALUE
$11,023,741
5,008,465
1,684,373
1,645,006
19,361,585
$19,361,585
See accompanying notes to financial statements.
ASSETS
I960 1959
Current Assets:
Cash $ 4,401,525 $ 5,894,438
Certificates of deposit 6,035,167 --
U.S. Treasury Bills (approximating market) 8,451,820 12,371,108
Prime commercial paper (approximating market) 1,996,750 --
Receivables:
Traffic balances (net of allowance
for doubtful accounts $100,000) 4,190,713 4,847,055
U.S. and State Government Departments 1,208,126 1,208,812
Other 149,361 331,954
5,548,200 6,387,821
Expendable parts and supplies 1,185,313 947,499
Prepaid expenses 1,132,637 1,130,893
Total Current Assets 28,751,412 26,731,759
Sundry securities 118,754 118,777
Properties and equipment at cost:
Flight equipment 51,039,430 47,738,193
Buildings on and improvements to leased property 4,209,545 3,860,074
Other property and equipment 4,954,964 4,133,304
60,203,939 55,731,571
Less allowance for depreciation 29,166,924 20,741,978
31,037,015 34,989,593
Deposits on equipment purchase contracts (Note 4) 9,807,456 2,439,047
Deferred charges 453,593 387,639
$70,168,230 $64,666,815
See accompanying notes to financial statements
AS OF DECEMBER 31, 1960
(with comparative figures for 1959)
Current Liabilities:
Current portion of long-term notes payable to bank
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 1)
Total Current Liabilities
LIABILITIES
1960 1959
$ 1,290,000 $ 1,200,000
2,925,921 3,087,769
892,506 1,010,537
1,779,054 1,584,709
1,571,747 950,799
324,700 322,150
1,411,521 1,338,489
1,463,452 5,257,070
11,658,901 14,751,523
Long-term debt (Note 3):
Notes payable to bank 5,730,000
Notes payable to insurance companies 17,280,000
4%% convertible subordinated debentures
due June 1, 1971 --
23,010,000
Deferred federal taxes on income (Note 1) 2,915,000
Commitments and contingent liabilities (Note 4)
Retirement plans (Note 5)
Shareholders' Equity (Notes 2 and 3):
Common stock--$1.00 par value per share
Authorized 2,000,000 shares
Issued 1,430,730 and 1,040,952 shares respectively 1,430,730
Capital in excess of par value 19,361,585
Retained earnings 11,792,014
32,584,329
$70,168,230
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
notes to
financial statements
Note 1. Taxes on Income. Federal income tax returns through
the year 1958 have been examined by the U. S. Treasury De
partment. Provision has been made for all known income tax
liabilities. Taxes on income include a net provision of $723,000
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 primarily
in connection with depreciation and amortization.
Note 3. Long-term Debt. The long-term debt outstanding is sum
marized as follows:
Outstanding
Bank Loans: December 31, 1960 Payable
4% notes payable $ 1,140,000 $100,000
a month
5% notes payable 2,880,000
5%% notes payable 3,000,000*
Insurance Company Loans:
4V2% notes payable 11,520,000
5V2% notes payable 5,760,000
6V4% notes payable
Less current portion
24,300,000
1,290,000
$23,010,000
$50,000
monthly
effective
Oct. 1, 1961
$80,000
monthly
effective
Aug. 1, 1962
$1,200,000
annually
effective
Sept. 1, 1962
$600,000
annually
effective
Sept. 1, 1966
$810,000
annually
effective
Sept. 1, 1965
Maturity
Jan. 2,
1962
Sept. 1,
1966
Dec. 31,
1967
Sept. 1,
1970
Sept. 1,
1975
Sept. 1,
1975
`Scheduled borrowings for 1961 contemplate $2,250,000
from the bank and $9,000,000 from the insurance com
panies; applicable commitment fees are Vi and % of 1%
respectively.
The related agreements with the bank and the insurance
companies provide among other things (including restrictions
on additional borrowings) conditions and requirements which
operated to restrict retained earnings from cash dividend distri
bution in the amount of $8,529,792 leaving $3,262,222 not so
restricted.
Note 4. Commitments and Contingent Liabilities. At December
31, 1960, the company had on order four Boeing 720B pure jet
aircraft and six Lockheed Electra prop-jet aircraft. The sched
uled delivery of the Boeing 720B aircraft is one each during the
months of April, May, June and July of 1961. As of February 15,
1961, three of the Electra aircraft have been delivered. The re
maining three Electras are scheduled for delivery in March 1961.
These aircraft, exclusive of the leased engines and propellers
used on all Electras, together with orders for other major items,
represent purchase commitments at December 31, 1960, of ap
proximately $26,000,000 in excess of the related deposits already
paid.
The lease agreement for the engines and propellers used on
the Electras will require, when all units are received, rentals of
approximately $1,500,000 per annum through 1964.
Since May 1960, the company has been leasing two Boeing
707 pure jet aircraft and spare engines. The lease period termi
nates on July 1, 1961 with the company having the right to
extend to January 1, 1962. The monthly rental of this equipment
is approximately $165,000.
In addition to the flight equipment leases, the estimated
minimum annual rentals under long-term leases were approxi
mately $700,000 at December 31, 1960.
As of December 31, 1960, the company was contingently
liable for claims and lawsuits in which it is or may be a de
fendant, but management and its counsel believe the ultimate
liability, if any, will not materially affect the financial statements.
Note 2. Stock Dividends. On March 23, 1960, the company paid
a 5% stock dividend on the shares outstanding on February 19,
1960. For each of the 54,606 shares thus issued $1.00 was trans
ferred to common stock and $30,125 was transferred to capital
in excess of par value. Retained earnings was also charged for
cash payments in lieu of fractional shares in the amount of
$70,885. The charge to retained earnings was based on the clos
ing price of $31,125 a share on the New York Stock Exchange
on January 18, 1960, the day of the declaration by the Board of
Directors.
Note 5. Retirement Plans. The company has an insured con
tributory 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 1960 totals $692,-
799 for both current and past services. Management contem
plates that the remaining past-service cost of the insured plan
will be funded over a period of approximately four years and
will require annual payments of $106,000.
the board of directors
the executive staff
Terrell C. Drinkwater
President
Stanley R. Shatto
Vice President
Operations
G. G. Brooder
Vice President
Stanley Gewirtz
Vice President
Administration
Arthur F. Kelly
Vice President
Sales
Marvin W. Landes
Vice President
Service
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
First National Bank of the Black Hills
Rapid City, South Dakota
Hector C. Haight
Vice President and General Manager
Del Amo Estate Co.
Los Angeles, California
Goodrich Lowry
President
Northwest Bancorporation
Minneapolis, Minnesota
Donald H. McLaughlin
Chairman of the Board
Homestake Mining Co.
San Francisco, California
Edwin W. Pauley
Chairman of the Board and President
Pauley Petroleum, Inc.
Los Angeles, California
L. Welch Pogue
Pogue & Neal
Attorneys-at-Law
Washington, D.C.
D. P. Renda
Vice President
Legal and Secretary
J. Judson Taylor
Vice President
and Treasurer
Charles J. J. Cox
Controller and
Assistant Treasurer
William C. Jennings
Assistant Secretary
John W. Simpson
Assistant Secretary
Thomas M. Murphy
Assistant to the
President
Stanley R. Shatto
Vice President-Operations
Western Air Lines, Inc.
Dudley Swim
Carmel, California
Harry J. Volk
President
Union Bank
Los Angeles, California
John M. Wallace
Chairman of the Board
Walker Bank & Trust Co.
Salt Lake City, Utah
Alexander Warden
Publisher
Great Falls Tribune-Leader
Great Falls, Montana
Sidney F. Woodbury
President
Pine Street Co.
Portland, Oregon