Western Air Lines, Inc. 1964 Annual Report 
 Highlights of 1964 
Operating 
Seat miles produced 
Seat miles sold 
Passengers carried 
Passenger load factor -- 
actual % 
-- 
breakeven point % 
Financial 
Total operating revenues 
Operating income 
Net earnings 
Cash dividends paid 
Common stock outstanding 
Earnings per share 
Cash dividends per share (current annual rate of $0.80) . 
Total shareholders' equity 
Shareholders' equity per share 
Cash and short-term securities 
Working capital 
Properties and equipment at cost 
Long-term debt 
Number of employees at year end 
Wages and salaries paid 
`Adjusted to give retroactive effect to the May 1964 three-for-one stock split. 
1964 1963 
3,388,541,000 2,929,673,000 
1,964,512,000 1,615,189,000 
3,532,978 2,812,640 
58.0 55.1 
44.6 43.6 
$117,644,586 $ 99,427,036 
$ 26,898,495 $ 21,317,947 
$ 13,351,027 $ 9,424,826 
$ 2,789,923 $ 1,573,803 
4,292,190 4,292,190 
$ 3.11 $ 2.20 
$ 0.65* $ 0.37 
$ 54,013,089 $ 43,451,984 
$ 12.58 $ 10.12 
$ 22,421,395 $ 16,227,395 
$ 8,826,579 $ 6,580,448 
$142,382,008 $121,725,177 
$ 26,970,000 $ 32,940,000 
4,092 3,513 
$ 29,039,955 $ 24,748,998 
WESTERN'S ROUTES 
PROPOSED ROUTES 
 Western Air Lines, Inc. 1964 Annual Report 
3 President's Letter 
5 Year in Review 
18 Ten Years of Growth 
20 Balance Sheet 
22 Earnings and Retained Earnings 
23 Source and Application of Funds 
24 Notes to Financial Statements 
24 Accountants' Report 
25 Directors and Executive Staff 
 Brief Statement of Earnings 
1964 1963 
WESTERN'S REVENUES CAME FROM: 
Passengers 
Coach $ 97,885,129 $ 77,209,226 
Deluxe 13,546,912 16,703,444 
111,432,041 93,912,670 
Express, freight and baggage . . 
3,718,470 3,247,853 
Mail 1,560,611 1,320,254 
Other income 1,786,920 1,585,724 
Gain on disposition of property . . 
- 
333,939 
118,498,042 100,400,440 
WESTERN'S EXPENSES WERE: 
Wages and salaries 29,039,955 24,748,998 
Social security, group insurance 
and retirement plans .... 
2,871,590 2,321,131 
Taxes 14,412,402 11,194,149 
Aircraft fuels 11,916,955 10,550,751 
Depreciation and aircraft 
write-down 11,718,062 10,980,060 
Materials and repairs 11,410,040 9,724,424 
Utilities and services 6,503,793 5,186,520 
Service to passengers 4,023,212 3,095,603 
Rentals and landing fees .... 
3,313,110 2,966,259 
Advertising and publicity .... 
3,243,993 2,722,875 
Insurance 2,721,579 3,466,687 
Interest 1,946,968 2,322,109 
Other costs 2,025,356 1,696,048 
105,147,015 90,975,614 
NET EARNINGS $ 13,351,027 $ 9,424,826 
Financial Statements in Brief 
Brief Balance Sheet 
1964 1963 
WESTERN OWNS: 
Cash and short-term securities 
. . 
$ 22,421,395 $ 16,227,395 
Owed by others 9,017,038 8,848,113 
Expendable parts and supplies . . 
1,687,777 1,661,804 
Building, construction and 
improvements, net 7,566,885 2,509,904 
Flight and other equipment, net . 
72,386,562 68,651,705 
Deposits on new equipment . . . 
9,673,244 11,081,171 
Prepaid expenses 1,020,101 1,649,715 
Deferred charges and other . . . 
398,819 571,756 
124,171,821 111,201,563 
WESTERN OWES: 
Owed to vendors and others 
. . 
11,588,798 11,464,612 
Federal income taxes -- 
current and deferred 
. . . 
20,900,771 15,311,443 
Deferred investment credits 
. . 
2,789,000 963,000 
Tickets sold but not yet used . 
1,940,163 1,910,524 
Notes payable -- 
current and long-term . . . 
32,940,000 38,100,000 
70,158,732 67,749,579 
EXCESS OF WHAT IS OWNED 
OVER WHAT IS OWED, OR 
SHAREHOLDERS' EQUITY 
. . . . 
$ 54,013,089 $ 43,451,984 
8.9% for retained earnings 
2.4% for cash dividends 
20.0% for all other expenses 
4 
 YEAR IN REVIEW 
EARNINGS 
Earnings reached an all-time high of $13,351,027, or 
$3.11 a share, in 1964, the 16th consecutive year in 
which the company has reported a profit. 
The previous record was set in 1963 when earnings 
were $9,424,826, or $2.20 a share. 
Per-share earnings for both years are based on the 
4,292,190 shares of stock outstanding since May 1964 
when a three-for-one stock split became effective. 
Western's 1964 earnings were derived entirely from op 
erations. 
Operating income totaled $26,898,495, equal to 
22.9 percent of total operating revenues, compared to 
$21,317,947, or 21.4 percent of 1963 operating revenues. 
Earnings before taxes totaled $25,751,027, or $6 a 
share; the provision for taxes, both current and deferred, 
amounted to $12,400,000, equal to $2.89 a share. 
Deferred investment tax credits amounted to $2,789,000 
as of December 31, 1964, compared with $963,000 at 
December 31, 1963. These deferred amounts represent 
the unamortized investment credit, allowed as a deduction 
from federal income taxes, related to the purchase of air 
craft and equipment as provided by the Revenue Acts of 
1962 and 1964. Western has elected to follow the ac 
cepted practice of amortizing these credits to earnings 
over the productive life of the related equipment, rather 
than use the alternate accounting method of taking the full 
amount into income in the year in which the investment 
credit is realized. 
DIVIDENDS 
For the 14th consecutive year, shareholders of Western 
Air Lines received cash dividends in 1964. 
The cash dividend rate was increased twice during the 
year. At its February meeting, the board of directors in 
creased the dividend from 35 cents to 45 cents a share. 
This was paid on dividends of March 6 and May 15. Fol 
lowing the three-for-one stock split, a dividend of 15 cents 
a share was paid on the new shares on August 3. 
At its October meeting, the board of directors again 
increased the dividend rate --to 20 cents a share, effec 
tive with the dividend paid on November 6. This resulted 
in a total payment equal to 65 cents on the new shares 
during the year. 
At the first regular board meeting of 1965, held in Las 
Vegas on January 25, a quarterly dividend of 20 cents 
was voted, payable on March 1 to stockholders of record 
on February 10. 
REVENUES 
Operating revenues for 1964 exceeded $100 million for 
the first time in the company's 39-year history, totaling 
$117,644,586, an 18.3 percent increase over 1963. 
The number of passengers carried increased 25.6 per 
cent and seat miles sold increased 21.6 percent. 
Although the number of passengers carried and total 
revenues reached new highs, the yield per seat mile sold 
decreased from 5.82 cents in 1963 to 5.67 cents for 1964. 
The continuing decline in yield resulted from increased 
use of coach travel, a further decline in deluxe travel and 
expansion of the company's low-cost "Thriftair" service 
which operates in the Los Angeles-San Francisco, Los 
Angeles-Oakland and Los Angeles-Las Vegas markets. 
Seat miles sold in coach service increased 30 percent, 
while deluxe decreased 25.9 percent. 
Western's income dollar was derived from: passenger 
traffic, 94 percent (82.6 percent from coach and 11.4 
percent from deluxe); express, freight and excess bag 
gage, 3.2 percent; mail, 1.3 percent; all other sources, 
1.5 percent. 
EXPENSES 
Total operating expenses for 1964 amounted to $90,746, 
091, up 16.2 percent over 1963. Costs other than depre 
ciation increased 15.6 percent and depreciation increased 
20 percent. 
Contributing to the depreciation increase were the 
addition of Boeing 720B fanjets to the fleet and the accel 
eration of Electra depreciation. Under the revised depre 
ciation policy, the company's Electras will be depreciated 
to a residual value of approximately $100,000 per aircraft 
by the end of 1966. 
The 12 Boeing 720B's in the Western fleet at the end 
of 1964 are presently scheduled for depreciation to a resid 
ual value of approximately $700,000 per aircraft in 1973. 
The increase in costs other than depreciation during 
1964 accompanied an expansion of 15.7 percent in seat 
mile production. And, although the cost of labor, services 
and materials continued to increase, the cost of produc- 
5 
 ing a seat mile was held to 2.68 cents, compared to 2.67 
cents in 1963. 
The break-even load factor (percentage of seats pro 
duced which must be sold to produce a break-even of 
expenses and income) increased from 43.6 percent in 
1963 to 44.6 percent in 1964, largely because of the 2.6 
percent decline in the revenue yield per seat mile sold. 
The provision for taxes (both currently payable and 
deferred), though materially greater than in 1963 because 
of increased earnings, is at a lower effective rate. The 
rate reduction resulted from favorable changes of the 
1964 Revenue Act and the beneficial effect of the invest 
ment credit referred to in the Earnings section. 
FINANCES 
Western continues in a sound financial condition. 
As indicated in the Statement of Source and Applica 
tion of Funds, $30,543,303 was provided by operations 
(earnings before reduction for depreciation, deferred 
taxes and charge equivalent to investment credit). Funds 
disbursed included $3,461,351 for the new headquarters 
and maintenance facility and $16,337,452 for aircraft and 
Every Wednesday morning, the 27 officers and department 
directors who make up the executive staff of Western Air 
Lines meet to review the company's progress, discuss new 
developments and exchange ideas on the need for new 
programs. These face-to-face problem-solving sessions, 
involving every department of the company, permit West 
ern's management to make the timely decisions that are 
required by the company's rapid growth and the increas 
ing complexity of airline operations. 
Marvin W. Landes, Vice President-Service Harold W. Caward, Flight Operations 
 other property; $5,970,000 for payments on long-term 
debt; and $2,789,923 in cash dividends to shareholders. 
Working capital totaled $8,826,579, an increase of 
$2,246,131 over 1963. The ratio of current assets to 
current liabilities was $1.35-to-$l, slightly higher than 
for 1963. 
Cash and short-term securities totaled $22,421,395, an 
increase of $6,194,000 over December 31, 1963. 
Long-term debt at December 31, 1964, totaled $26,- 
970,000, consisting of $6,300,000 of notes payable to 
bank and $20,670,000 payable to insurance companies, 
exclusive of current maturities of $5,970,000. A full sum 
mary of debt, interest rates and repayment schedules is 
shown in Note 2 of the financial statements. 
At December 31, 1964, deferred federal taxes on in 
come amounted to $15,080,000, including $3,040,000 
for the year 1964. 
Effective January 1, 1965, a new credit agreement with 
the Bank of America was negotiated to provide for bor 
rowings up to $15,000,000 on a revolving basis during 
a two-year period, ending March 1, 1967. The balance as 
of that date will then be repayable over a subsequent four- 
year period. These funds are intended for use in the financ 
ing of the six Boeing 720B's which will be delivered in 
1965. 
Coincident with this credit agreement, changes were 
made in all credit agreements to reduce the amount of 
required working capital, permitting the company to lower 
long-term debt and to reduce the need for short-term 
securities. 
Interest on debt amounted to $1,946,968 in 1964, com 
pared to $2,322,109 for 1963. Interest income from short 
term investments (cash in excess of current needs) totaled 
$800,000, compared to $500,000 in 1963. 
SHAREHOLDERS AND STOCK 
On April 23, 1964, at the company's annual meeting, 
Western Air Lines shareholders voted to increase the num 
ber of authorized shares from 2,000,000 to 10,000,000 
shares of $1 par value stock and approved a three-for-one 
split of the shares outstanding. 
The vote on the amendment was 1,284,297 in favor 
and 9,795 opposed; 90.5 percent of all shares were voted 
in person or by proxy at the meeting. 
The action, which became effective on May 4, increased 
the number of Western shares outstanding from 1,430,- 
730 to 4,292,190. 
At the close of 1964, the stock was held by approxi 
mately 14,000 stockholders, residing in each of the 50 
states and several foreign countries. 
Shareholders' equity in 1964 increased to an all-time 
high of $54,013,089, or $12.58 a share, compared to 
 or 
h'/C R Ve AR 
_ 
IT 4 U St Rr'iR 
(S ) 93 
/ Lo 3/1 
'/ LZ) (/C9) 
/ / 5~ /IS 
/07 
Z7 3 5* 
( (Cj ) 
2oS 
/C5 / 7 5" 
35 7 
5*0 i 3o * 
4r14 
,004 /, VtV 
IT 
J. Judson Taylor, Vice President and Treasurer 
 1963 equity of $43,451,984, or $10.12a share (adjusted). 
On the New York Stock Exchange, 2,585,500 shares of 
the company's stock were traded during the year. On 
the Pacific Coast Stock Exchange, 174,795 shares were 
traded. 
BOARD OF DIRECTORS 
Since the last annual report to shareholders, several 
important changes have been made relating to the board 
of directors. 
In July, Vernon 0. Underwood, president, treasurer and 
chief executive officer of Young's Market Company of Los 
Angeles, was elected to the board to replace the late 
Hector C. Haight. 
Mr. Haight, Los Angeles businessman, who had been 
a member of the board since 1950, was stricken by a 
heart attack and died on May 13. 
In October, Otis Chandler, publisher of the Los Angeles 
Times, was elected to the board to succeed Sidney F. 
Woodbury, president of the Pine Street Company of Port 
land, who retired from the Western board after 15 years 
of service to become a director-emeritus. 
Also announcing his retirement as an active director to 
become a director-emeritus was Robert E. Driscoll, hono 
rary chairman of the board, First National Bank of the 
Black Hills, Rapid City, South Dakota, after 13 years on 
Western's board. 
In January of 1965, L. Welch Pogue, senior partner of 
the Washington, D.C. law firm, Pogue and Neal, and a 
member of Western's board since 1949, resigned from the 
board to avoid possible conflict of interest in the activities 
of his law firm which had been retained to represent 
another major airline on CAB route matters. 
At the first regular board meeting of 1965 in Las Vegas 
on January 25, Howard C. Westwood, senior partner in 
the Washington, D.C. law firm of Covington & Burling, 
who has specialized in air transportation matters, and 
J. Judson Taylor, the company's vice president, treasurer 
and chief financial officer, were elected to the board. 
ANNUAL MEETING 
The 1965 meeting of shareholders will be held at the 
Beverly Hilton Hotel, Beverly Hills, on April 22. On or 
about March 15, stockholders will receive a notice of 
the meeting and proxy material. 
EQUIPMENT 
During 1964, Western took delivery of two Boeing 720B 
fanjet aircraft and ordered five others for delivery in 1965. 
Addition of the two 122-passenger 720B's, one in May 
and the other in September, increased the jet fleet to 
12 planes and permitted the company to increase the 
number of passenger seat miles produced by 15.7 per 
G. G. Brooder, Vice President 
cent over 1963, from 2.9 billion seat miles in 1963 to 
3.4 billion in 1964. 
The first of six aircraft to be delivered in 1965 (one 
which was ordered in 1963) was received in January. One 
will be delivered in March, one in May, two in June and 
one in July, increasing the jet fleet to 18 aircraft. 
Four of the new planes will be equipped with 146 seats 
for use in the company's new Jet Commuter service on 
the highly competitive Los Angeles-San Francisco/Oak 
land route. Introduction of this service on April 1 and its 
extension to other high-density routes later in the year, 
will permit the company to dispose of a majority of its 
piston-powered Douglas DC-6B's during 1965. 
At year's end, Western operated a fleet of 38 aircraft 
-- 
the 12 720B fanjets, 12 Lockheed Electra M's and 14 
DC-6B's. 
As the company converts its fleet to jet aircraft, flight 
crews who are being upgraded to 720B's must undergo 
extensive retraining. To reduce the time that planes must 
be held out of service for training flights, Western ac 
quired a jet simulator in 1964. The trainer is a full-scale 
electronic duplicate of the 720B which will permit crews 
to become thoroughly familiar with the characteristics of 
the aircraft, "fly" complete airline trips and encounter 
every possible flight condition without leaving the ground. 
Under Western's Federal Aviation Agency-approved 
simulator training program, crews will become fully quali 
fied with fewer actual flights in the aircraft, training will 
8 
 Jet simulator pilots use closed-circuit television system to make visual "landings" at this model airport. 
Willis R. Balfour, Agency and Interline Sales 
 New jet engine test cell permits Western to run-up its fanjet engines after overhaul. 
Terrell S. Shrader, Industrial Relations 
 Fully instrumented test cell control panel. 
be more comprehensive and jet training costs will be 
greatly reduced. 
The simulator, which is installed in the company train 
ing building, provides visual flight references through a 
closed-circuit color television system which scans a three- 
dimensional model of an airport and surrounding terrain 
and projects the picture in the pilot's windshield. 
FACILITIES 
In January 1965, construction of a new company head 
quarters and expanded main maintenance base was com 
pleted. Located at the entrance to Los Angeles Interna 
tional Airport, the attractive new $5.2 million building 
contains the company's administrative offices, modern 
maintenance shops and a hangar which can accommo 
date three large jet aircraft. 
Maintenance facilities include shops which will permit 
the company to overhaul its own jet engines and a special 
engine test cell. 
The old headquarters, which Western has occupied 
since 1947, will be refurbished for use by an expanded 
Los Angeles reservations center and by other departments. 
During the year, the company moved into modernized 
Anton B. Favero, Maintenance; FI. S. Gray, Budget 
Richard B. Ault, Engineering 
 New "Cafe Ole" cup for Fiesta Flights to Mexico 
terminal facilities at Seattle and participated in planning 
which will provide new structures or improvements at 
Rapid City, Yellowstone Park, Portland and Sacramento in 
1965 and at San Diego, Palm Springs, San Francisco and 
Denver in 1966. 
Western also is continuing to provide passenger con 
veniences with new all-weather passenger loading bridges 
already installed at Los Angeles, San Francisco and Seattle 
and others planned for Portland, Denver and Minneapolis/ 
St. Paul. 
SALES AND SERVICE 
Despite increased service by competitors on many of the 
company's routes, Western boarded a record 3,532,978 
passengers in 1964, compared to 2,812,640 in 1963, an 
increase of 25.6 percent. 
Passenger revenues increased 18.7 percent, from 
$93,912,670 in 1963 to $111,432,041 for 1964. 
The overall load factor increased to 58 percent, com 
pared to 55.1 percent for 1963. 
Revenues from air cargo shipments (freight, express, 
excess baggage, air mail and regular first class mail) 
increased from $4,568,107 in 1963 to $5,279,081 in 
1964. 
Following a theme of "Expand the Market," Western's 
1964 sales and service efforts were directed toward de 
veloping new sources of company business. 
Planned programs were based on the continuing expan 
sion of low-cost service, benefits of group travel, extended 
credit plans, improved handling of customers and their 
baggage and closer working relationships with travel 
agents, tour operators, hotels, other airlines and surface 
carriers. 
Responding to public demand for economy service, the 
company continued to lead the domestic airline industry 
in this area, providing 88 percent of its product at aircoach 
or economy fares. 
The low-cost ($11.43) Thriftair service --established in 
1962 on the Los Angeles-San Francisco route and ex 
panded to Los Angeles-Las Vegas in December 1963 -- 
was extended to Los Angeles-Oakland in the summer of 
1964. The success of Thriftair was instrumental in making 
Western the No. 1 airline at Los Angeles International Air- 
Spacious new hangar will accommodate three jet aircraft. 
12 
 Bert D. Lynn, Advertising and Sales Promotion; Philip E. Peirce, Ground Services 
port during the first six months of 1964, as the company 
boarded approximately 20 percent of the total traffic. 
Approximately six percent of Western's passenger rev 
enues were derived from Los Angeles-San Francisco/Oak 
land Thriftair service last year. Late in 1964, the Los 
Angeles-San Francisco segment was subjected to con 
siderable diversion following the introduction of three- 
engine jet shuttle service by another carrier. 
In order to improve its position in this, the most heavily 
traveled air route in the world--though not the most profit 
able -- 
the company will launch an all-out effort on April 1 
with four-engine, 146-passenger Boeing 720B fanjets 
which were ordered early in 1964 for this purpose. 
The company made numerous improvements in its 
service to communities throughout the 12-state system. 
Included were: first pure-jet service to Sacramento; exten 
sion of Electra service to Denver-Calgary and Salt Lake 
City-Great Falls routes; improved Long Beach-San Fran 
cisco and Palm Springs-San Francisco service; and sub 
stitution of 720B's for Electras on the Los Angeles-San 
Diego-Mexico City route, which at year's end gave Western 
all-fanjet service to Mexico. 
Richard P. Ensign, In-Flight Services 
 Memphis E. Sullivan, Traffic James L. Mitchell, Research 
To increase its participation in convention business and 
to stimulate group vacation travel, Western broadened its 
group fares to include groups of 25 with no previous 
affinity and in early 1965, filed tariffs to extend the fares 
to all domestic cities on the system. 
Western, which pioneered the use of non-airline credit 
cards for air travel, continued to expand its credit facili 
ties. Already honoring American Express, BankAmericard, 
Diners' Club, Hilton Carte Blanche, the industry-wide Uni 
versal Air Travel Plan, Western's own Charge-A-Flight and 
the "Fly Now --Pay Later" plan, the company broadened 
some of its agreements to include installment payment 
Ray Silvius, Public Relations 
plans for terms up to 24 months, others to include ground 
tours and limited travel on other airlines which is in con 
junction with travel on Western. 
Continuing to take advantage of the natural vacation 
areas on the WAL system, the sales force produced and 
sold a record number of packaged tours in conjunction 
with hotels, railroads, bus and steamship companies, 
other airlines and U-drive companies. 
Major emphasis was placed on the company's 13th 
annual wintertime "Sun Break" campaign, an expanded 
summertime "Fly North" program, a "Let's Go Mexico" 
campaign which featured publication of a special full- 
color Sunday supplement and, to participate in New York 
World's Fair traffic, interline circle trips to the East via 
Canada and Mexico City. 
To increase the company's identification and sales in 
off-line areas, the company expanded its Eastern, Midwest 
and Southern region marketing activities by establishing 
new offices in New York and Chicago and extending the 
area supervised by the company's Dallas office. 
Familiarization tours and seminars were conducted for 
travel agents, who, during 1964, accounted for 38 percent 
of WAL passenger revenues. 
Western, the first airline to offer special baggage rates 
for golf equipment, extended the special rate to ski and 
bowling gear during the year. 
Charles J. J. Cox, Controller and Assistant Treasurer 
 Stanley R. Shatto, Vice President-Operations 
The company streamlined many of its reservations, 
baggage-handling and check-in procedures for added pas 
senger convenience, introduced in-flight service innova 
tions which provided improved food and beverage service 
and, through the establishment of a high level working 
group which analyzes day-to-day flight movements, made 
substantial improvements in the company's on-time 
operations. 
ROUTE DEVELOPMENT 
Western continued to seek long-haul additions to its route 
system in 1964. 
In addition to filing new applications, the company con 
tinued its long battle for a route to Hawaii. Still outstand 
ing at the beginning of 1964 was the Civil Aeronautics 
Board's decision on a petition for reconsideration which 
Western had filed on November 29, 1963. In the petition, 
the company asked the CAB to reconsider its decision of 
November 8, 1963, in which it terminated by a 3-2 vote 
both the domestic and international phases of the Trans 
pacific Route Case without either granting or denying 
Western's applications for California-Hawaii domestic au- 
James W. Stone, System Chief Pilot 
Kenneth W. Kendrick, Purchasing and Stores 
 thority. The minority members favored giving California- 
Hawaii authority to Western in accordance with the board's 
decision of December 7, 1960. 
In order to protect its legal rights while awaiting a deci 
sion on the petition, the company filed on January 6,1964, 
a petition with the United States Court of Appeals for the 
District of Columbia Circuit, requesting that it review and 
set aside the CAB's November 8, 1963, decision. 
On March 3, 1964, the CAB denied Western's petition 
for reconsideration. 
On May 12, 1964, Western argued its case before the 
court, taking the position that federal law requires the 
CAB to act on outstanding applications after a proceeding 
has been completed and also requires that authorization 
for a new service be issued when a finding is made, such 
as was made in this case, that additional service is re 
quired by public convenience and necessity. The CAB in 
its decisions of November 8, 1963 and March 3, 1964, 
did not revoke the findings made in its decision of Decem 
ber 7,1960, that new California-Hawaii service is required, 
but instead has attempted to hold those findings in abey 
ance pending a future proceeding. 
A decision is expected from the court in the near future. 
The company continues to remain hopeful that these legal 
issues will be resolved successfully and that Western will 
be permitted to inaugurate the service originally author 
ized by the CAB between California and Hawaii. 
During the year, Western filed an application with the 
CAB for routes between the Pacific Northwest and major 
cities in the Southwest and Midwest. This application will 
be heard in the CAB's new route proceeding known as 
the Pacific Northwest-Southwest Service Investigation, in 
which hearings are scheduled to begin during 1965. The 
company's application seeks authority to provide the first 
one-carrier service over several major routes which will 
serve the following cities: Seattle/Tacoma, Portland, Spo 
kane, Boise, Salt Lake City, Albuquerque, Casper, Denver, 
Wichita, Kansas City, St. Louis, Oklahoma City, Tulsa, Dal 
las/ Ft. Worth, San Antonio, Houston, and New Orleans. 
The company also filed an application during the year 
for authority to provide service between Los Angeles on 
the one hand, and Toronto/Montreal, Canada, on the 
other; and between Minneapolis/St. Paul, on the one 
hand, and Toronto/Montreal on the other. The company 
also has pending before the CAB an application to provide 
service between Vancouver, Canada, and Seattle, Port 
land, and San Francisco/Los Angeles. These applications 
for Canadian service are under consideration in connec 
tion with negotiations now in progress between the United 
States and Canada. If these negotiations result in a bi 
lateral agreement which will authorize a U.S. carrier to 
Charles S. Fisher, Flight Schedules 
Peter P. Wolf, Communications 
 provide the proposed new service, then the CAB will con 
duct hearings on these and other applications in order to 
determine which of the carrier-applicants should be se 
lected. These hearings would probably be held during 1965. 
On January 6, 1965, Western terminated its service to 
Huron, South Dakota, under a CAB order authorizing such 
service to be taken over by a federally subsidized carrier, 
North Central Airlines. This action is a part of a program 
to delete from Western's system cities which do not gen 
erate enough traffic to justify trunkline service without 
federal subsidy. 
International negotiations between the governments of 
the United States and Mexico conducted during May and 
June resulted in the extension of the bilateral agreement, 
under which the company operates its Los Angeles-San 
Diego-Mexico City route, from August 15, 1964, to June 
30, 1965. Negotiations between the United States and 
Mexico for a new bilateral agreement will be held prior to 
the expiration of the present agreement. 
PERSONNEL 
As of December 31, there were 4,092 employees on West 
ern's employment roster, compared to 3,513 in 1963. 
Wages and salaries amounted to $29,039,955 in 1964. 
Recognizing the contribution each employee makes to 
ward the success of the company, Western introduced a 
new employee recognition program in 1964 which features 
an annual awards dinner for employees who complete 25, 
30, 35 or 40 years of service and annual luncheons for 
employees who complete 10, 15 or 20 years. 
Receiving engraved plaques which symbolize the com 
pany's appreciation for their service were two employees 
with 35 years of service, 13 with 30 years, 43 with 25 
years, 183 with 20 years and 305 with 15 years of service. 
Ninety percent of Western's employees are represented 
by five labor unions. Agreements which cover the com 
pany's pilots, mechanics and dispatchers will be open for 
negotiation during 1965; work rule discussions also will 
be held with stewardesses and clerks, whose basic con 
tracts run until 1966. 
During the underwriter's 1964 reporting period, a total 
of $492,532 in insurance benefits was paid to employees 
and their families for hospitalization ($428,498), accident 
and sickness coverage ($22,034) and group life insurance 
($42,000); 3,643 employees participated in the group 
insurance program. 
As of December 31, there were 1,762 employees eligi 
ble (by length of service) to participate in the company's 
insured, contributory retirement income program; 1,219 
of these employees actually participated in the program, 
now in its 13th year of operation. 
Arthur C. Smith, Sales Administration 
John VJ. Simpson, Law Director and Assistant Secretary 
 Ten Years of Growth 
Financial 
Shareholders 
Operations 
Revenues:** 
Passenger 
Express, freight and excess baggage 
Mail 
Other 
Total Revenues 
Operating Expenses:** 
Depreciation and amortization 
Payroll 
Other 
Total Operating Expenses 
Operating Income** 
Interest** 
Other Income and Expenses -- 
Net** 
Provision for Taxes on Income** 
Net Earnings from Operations** 
Extraordinary Items (Less Applicable Income Taxes) :** 
Gain on disposition of property 
Write-down of aircraft 
Net Earnings** 
Net earnings from operations per share! . 
Extraordinary items per share! . . 
Total 
Dividends paid per share.- 
Cash! 
Stock 
Shares outstanding --actual** . . . . 
-- 
adjusted**! . . . 
Shareholders'equity -- 
total** . . 
Shareholders'equity --a share! . . . . 
Working capital** 
Long-term debt** 
Properties and equipment -- 
net** . . . 
Total assets** 
Route miles at end of year 
Airplanes at end of year: 
Boeing 720-B 
Boeing 707 --leased 
Lockheed Electra II 
Douglas DC-6B 
Other aircraft -- 
piston powered . . . 
Airplane miles flown** 
Ton miles produced** 
Ton miles sold** 
Seat miles produced** 
Seat miles sold** 
Express, freight & mail ton miles sold**. 
. 
Passengers carried 
Express, freight & mail tons carried . . . 
Passenger load factor -- 
actual % 
-- 
breakeven point % 
Average length in miles per passenger trip . 
Average revenue per passenger mile . . . 
Employees at end of year 
1964 
$111,432 
3,718 
1,561 
934 
117,645 
11,718 
29,040 
49,988 
90,746 
26,899 
(1,947) 
799 
25,751 
12,400 
13,351 
$ 13,351 
$ 3.11 
3.11 
0.65 
4,292 
4,292 
$ 54,013 
12.58 
8,827 
26,970 
79,953 
124,172 
9,474 
12 
12 
14 
32,442 
401,999 
203,539 
3,388,541 
1,964,512 
14,136 
3,532,978 
18,992 
58.0 
44.6 
556 
$ .0567 
4,092 
f Based on shares outstanding at close of respective periods adjusted to give 
*Operations were adversely affected by strike. 
*000 omitted. 
1963 1962 1961* 1960 1959 1958* 1957 1956* 1955 
93,913 81,170 59,737 64,356 59,194 31,459 39,243 26,249 28,756 
3,248 2,964 2,271 2,473 2,256 1,305 1,596 954 1,185 
1,320 1,427 1,231 1,393 1,295 732 1,067 775 862 
946 809 1,013 855 508 474 313 210 236 
99,427 86,370 64,252 69,077 63,253 33,970 42,219 28,188 31,039 
9,762 11,895 11,211 10,000 6,643 4,136 3,011 2,294 2,151 
24,749 21,840 17,987 19,478 17,704 11,947 14,335 10,283 11,057 
43,598 41,254 32,864 33,323 27,696 16,831 20,076 13,009 13,775 
78,109 74,989 62,062 62,801 52,043 32,914 37,422 25,586 26,983 
21,318 11,381 2,190 6,276 11,210 1,056 4,797 2,602 4,056 
(2,322) (2,286) (1,889) (1,330) (1,127) (1,023) (780) (394) (262) 
621 483 (119) 438 180 74 90 31 10 
19,617 9,578 182 5,384 10,263 107 4,107 2,239 3,804 
9,800 4,875 125 3,050 5,456 227 2,233 1,205 1,860 
9,817 4,703 57 2,334 4,807 (120) 1,874 1,034 1,944 
191 889 807 105 210 1,522 528 2,010 38 
(583) (578) -- -- -- -- -- -- -- 
9,425 5,014 864 2,439 5,017 1,402 2,402 3,044 1,982 
2.29 1.10 0.01 0.54 1.47 (0.04) 0.65 0.38 0.72 
(0.09) 0.07 0.19 0.03 0.06 0.50 0.18 0.73 0.01 
2.20 1.17 0.20 0.57 1.53 0.46 0.83 1.11 0.73 
0.37 0.33 0.33 0.33 0.27 0.24 0.23 0.22 0.25 
-- -- -- 
5% 4% 4% 4% 4% -- 
1,431 1,431 1,431 1,431 1,041 928 849 779 743 
4,292 4,292 4,292 4,292 3,273 3,034 2,886 2,751 2,728 
43,452 35,601 32,017 32,584 24,545 18,996 17,469 14,991 12,430 
10.12 8.29 7.46 7.59 7.50 6.26 6.05 5.45 4.56 
6,580 12,364 5,505 16,841 11,518 5,320 4,688 4,600 2,784 
32,940 39,488 36,097 24,790 25,272 19,748 16,827 9,677 3,484 
71,162 62,859 58,493 33,302 37,546 31,035 24,652 17,216 11,208 
111,202 98,830 85,697 72,433 67,223 49,596 44,017 32,075 23,332 
9,474 9,545 8,827 8,827 8,827 9,153 8,799 6,350 5,525 
10 7 4 
-- -- 
2 2 
12 12 12 6 5 -- 
14 16 19 27 27 27 21 14 8 
-- -- 
-- 
4 5 8 14 16 23 
29,035 25,262 20,624 25,996 25,689 16,449 21,896 14,851 18,335 
352,038 307,570 224,819 207,554 196,178 123,416 137,640 86,196 100,015 
168,002 137,492 101,232 109,316 103,741 56,710 74,468 48,481 54,999 
2,929,673 2,402,344 1,718,854 1,776,076 1,623,007 981,740 1,175,071 740,174 870,596 
1,615,189 1,307,173 957,560 1,034,481 982,010 533,443 702,727 458,131 514,677 
12,291 11,574 8,987 9,538 8,899 5,309 7,118 4,667 5,828 
2,812,640 2,128,225 1,529,137 1,721,619 1,689,278 970,498 1,379,653 928,746 1,092,578 
16,250 16,037 12,364 13,354 12,792 8,010 11,537 8,200 10,332 
55.1 54.4 55.7 58.2 60.5 54.3 59.8 61.9 59.1 
43.6 48.0 55.5 53.3 50.0 54.1 53.5 56.6 51.3 
574 614 626 601 581 550 509 493 471 
.0582 .0623 .0632 .0626 .0605 .0595 .0558 .0573 .0559 
3,513 3,078 2,794 2,730 2,962 2,547 2,773 2,343 2,130 
effect to stock dividends and to the May 1964 three-for-one stock split. 
 Western Air Lines Inc, Belance Sheet December 31, 1964, with comparative figures for 1963 
Assets 
CURRENT ASSETS: 
Cash 
Short-term securities (approximating market) . , 
Receivables: 
Traffic balances (net of allowance for 
doubtful accounts $125,000) .... 
U.S. and State Government Departments . . 
Other 
Expendable parts and supplies 
Prepaid expenses 
TOTAL CURRENT ASSETS 
Deposits on equipment purchase contracts (Note 3) . . 
Properties and equipment at cost: 
Flight equipment 
Buildings on and improvements to leased property . 
Other property and equipment (including construction 
in progress) 
Less allowance for depreciation and maintenance . 
Deferred charges and other assets 
See accompanying notes to financial statements 
1964 1963 
$ 4,338,795 $ 3,550,685 
18,082,600 12,676,710 
7,466,941 6,591,951 
876,649 956,493 
673,448 1,299,669 
9,017,038 8,848,113 
1,687,777 1,661,804 
1,020,101 1,649,715 
34,146,311 28,387,027 
9,673,244 11,081,171 
119,191,490 106,433,995 
4,736,322 4,738,364 
18,454,196 10,552,818 
142,382,008 121,725,177 
62,428,561 50,563,568 
79,953,447 71,161,609 
398,819 571,756 
$124,171,821 $111,201,563 
20 
 Liabilities 
1963 
1964 
CURRENT LIABILITIES: 
Current maturities of long-term debt (Note 2). 
Accounts payable 
Accrued salaries and wages 
Other accrued liabilities 
Air travel plan deposits 
Unused transportation 
Federal taxes on income -- 
estimated (Note 1) 
TOTAL CURRENT LIABILITIES 
. . . . 
$ 5,970,000 
7,006,248 
2,642,393 
1,646,482 
293,675 
1,940,163 
5,820,771 
25,319,732 
Long-term debt (Note 2) 
Deferred federal taxes on income (Note 1) 
Deferred investment credits (Note 1) 
. . 
26,970,000 
15,080,000 
2,789,000 
Shareholders' Equity (Notes 2, 5 and 6): 
Common stock --$1.00 par value per share 
Authorized 10,000,000 shares 
Issued 4,292,190 and 1,430,730 shares 
. 
Capital in excess of par value 
Retained earnings 
4,292,190 
16,500,126 
33,220,773 
54,013,089 
$124,171,821 
$ 5,160,000 
6,658,513 
2,698,200 
1,808,699 
299,200 
1,910,524 
3,271,443 
21,806,579 
32,940,000 
12,040,000 
963,000 
1,430,730 
19,361,585 
22,659,669 
43,451,984 
$111,201,563 
 WESTERN AIR LINES, INC. 
Statement of Earnings and Retained Earnings 
For the year ended December 31, 1964, with comparative figures for 1963 
1964 1963 
OPERATING REVENUES: 
Passenger $111,432,041 $ 93,912,670 
Express, freight and excess baggage 3,718,470 3,247,853 
Charter and other transport service 152,190 205,031 
Mail 1,560,611 1,320,254 
Incidental revenue -- 
net 781,274 741,228 
117,644,586 99,427,036 
OPERATING EXPENSES: 
Flying operations 22,957,569 20,818,768 
Maintenance 16,301,799 13,303,710 
Passenger service 7,835,866 6,694,820 
Aircraft and traffic servicing 14,245,901 12,270,573 
Promotion and sales 13,086,494 11,096,120 
General and administrative 4,600,400 4,162,991 
Depreciation and amortization 11,718,062 9,762,107 
90,746,091 78,109,089 
Operating Income 26,898,495 21,317,947 
OTHER INCOME (EXPENSES): 
Interest expense (1,946,968) (2,322,109) 
Interest income 853,456 639,465 
Other expense -- 
net (53,956) (18,463) 
Earnings before Taxes on Income 25,751,027 19,616,840 
PROVISION FOR TAXES ON INCOME (Note 1) 12,400,000 9,800,000 
NET EARNINGS FROM OPERATIONS 13,351,027 9,816,840 
EXTRAORDINARY ITEMS (Less Applicable Income Taxes): 
Gain on disposition of property -- 
190,939 
Write-down of piston aircraft -- 
(582,953) 
NET EARNINGS 13,351,027 9,424,826 
RETAINED EARNINGS AT BEGINNING OF YEAR 22,659,669 14,808,646 
36,010,696 24,233,472 
CASH DIVIDENDS PAID 
$0.65 per share in 1964 and $0.37 in 1963 2,789,923 1,573,803 
RETAINED EARNINGS AT END OF YEAR (Note 2) $ 33,220,773 $ 22,659,669 
See accompanying notes to financial statements 
 WESTERN AIR LINES, INC. 
Statement of Source and Application of Funds 
For the year ended December 31, 1964, with comparative figures for 1963 
1964 1963 
FUNDS PROVIDED: 
From operations 
Net earnings $13,351,027 $ 9,424,826 
Add back 
Depreciation and maintenance 
reserve provision 12,326,276 11,097,084 
Deferred income taxes 3,040,000 5,791,000 
Charge equivalent to investment credit 
. . . 
1,826,000 798,000 
Total from operations 30,543,303 27,110,910 
From other sources 
Proceeds from disposition of property, 
net of current taxes 88,617 536,715 
Flight equipment lease/sale contracts 182,509 958,626 
271,126 1,495,341 
Total 30,814,429 28,606,251 
FUNDS APPLIED: 
Purchase of airplanes and other property 
and equipment 16,337,452 24,438,314 
Construction of new hangar and general office 
building ($5,202,993 at December 31, 1964) 
. . . 
3,461,351 1,741,642 
Payment of cash dividends 2,789,923 1,573,803 
Reduction of long-term debt 5,970,000 6,548,357 
Other items 9,572 87,788 
28,568,298 34,389,904 
Increase (decrease) in working capital 2,246,131 (5,783,653) 
Total $30,814,429 $28,606,251 
 Notes to Financial Statements 
note i. taxes on income. Federal income tax returns have been 
examined by the U.S. Treasury Department through 1962. The 
1964 provision for income taxes is summarized as follows: 
Current income taxes $ 7,534,000 
Deferred income taxes 3,040,000 
Charge equivalent to investment credit, 
net of amortization of $502,000 .... 
1,826,000 
$12,400,000 
Investment credits are being amortized to income over the lives 
of the related equipment. 
note 2. long-term debt (unsecured). The long-term debt is 
summarized as follows: 
Bank Loans: 
Outstanding 
December 31, 
1964 
Annual 
Payments on 
Principal 
Final 
Maturity 
5% notes payable $ 930,000 $ 600,000 1966 
5%% notes payable 2,930,000 960,000 1967 
5%% notes payable 6,400,000 2,400,000 1967 
Insurance Company Loans 
41/2% notes payable 7,920,000 1,200,000 1970 
5V2% notes payable 5,760,000 600,000* 1975 
6y4% notes payable 9,000,000 
32,940,000 
810,000 1975 
Less current maturities 5,970,000 
$26,970,000 
`Effective September 1, 1966. 
The related agreements with the bank and insurance com 
panies, as amended in January 1965, provide among other 
things (including restrictions on additional borrowings) con 
ditions and requirements which at December 31, 1964 oper 
ated to restrict retained earnings from cash dividend distribu 
tion in the amount of $24,894,194, leaving $8,326,579 not so 
restricted. 
NOTE 3. COMMITMENTS AND CONTINGENT LIABILITIES. At Decem 
ber 31, 1964, the company had on order six Boeing 720B fan- 
jet aircraft. One of these aircraft was delivered in January 
1965 and five are scheduled for delivery by July 1965. These 
aircraft together with orders for other major items represented 
purchase commitments at December 31, 1964 of approxi 
mately $29,500,000 in excess of the related deposits. 
The estimated minimum annual rentals under long-term 
leases, with expiration dates ranging to 1991, were approxi 
mately $1,000,000 at December 31, 1964. 
note 4. retirement plans. The costs of retirement plans charged 
to operating expense in 1964 totaled $1,129,376, including 
$73,164 for past-service costs, thereby leaving approximately 
$660,000 unfunded at December 31, 1964. 
note 5. stock split. On April 23, 1964, the shareholders voted 
to increase the number of authorized shares from 2,000,000 to 
10,000,000 and approved a three-for-one stock split effective 
May 4, 1964. Accordingly, $2,861,460 (par value of shares 
issued) was transferred from Capital in Excess of Par Value 
to Common Stock. 
note 6. options to purchase common stock. The shareholders 
approved on April 23, 1964 a stock option plan for officers 
which reserved 210,000 shares of the corporation's authorized 
and unissued stock for the purposes of the plan. On May 1, 
1964, options were granted for 127,500 shares at an op 
tion price of $39.50 a share (the fair market value on the 
day of grant) which represent total option prices aggregating 
$5,036,250. The options are exercisable in equal annual incre 
ments over a five-year period. 
Accountants' Report 
Peat, Marwick, Mitchell 8c Co. 
CERTIFIED PUBLIC ACCOUNTANTS 
24 
The Board of Directors 
Western Air Lines, Inc.: 
We have examined the balance sheet of Western Air 
Lines, Inc. as of December 31, 1964 and the related statement 
of earnings and retained earnings for the year then ended. 
Our examination was made in accordance with generally accepted 
auditing standards, and accordingly included such tests of the 
accounting records and such other auditing procedures as we 
considered necessary in the circumstances. We have previously 
made a similar examination of the financial statements for 1963 
In our opinion, the accompanying balance sheet and 
statement of earnings and retained earnings present fairly the 
financial position of Western Air Lines, Inc. at December 31, 
1964 and the results of its operations for the year then ended, 
in conformity with generally accepted accounting principles 
applied on a basis consistent with that of the preceding year. 
Also, in our opinion, the accompanying statement of source and 
application of funds presents fairly the information shown 
therein. r\ 
Los Angeles, California 
February 9, 1965 
 Board of Directors 
OTIS CHANDLER, Publisher, Los Angeles Times 
Los Angeles, California 
HUGH W. DARLING, Darling, Shattuck, Hall & Call 
Attorneys-at-Law, Los Angeles, California 
TERRELL C. DRINKWATER, President 
Western Air Lines, Inc. 
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 
Pauley Petroleum, Inc., Los Angeles, California 
STANLEY R. SHATTO, Vice President-Operations 
Western Air Lines, Inc. 
J. JUDSON TAYLOR, Vice President and Treasurer 
Western Air Lines, Inc. 
Executive Staff 
Senior Officers 
TERRELL C. DRINKWATER, President 
STANLEY R. SHATTO, Vice President-Operations 
MARVIN W. LANDES, Vice President-Service 
ARTHUR F. KELLY, Vice President-Sales 
J. JUDSON TAYLOR, Vice President and Treasurer 
DOMINIC P. RENDA, Vice President-Legal and Secretary 
G. G. BROODER, Vice President 
Operations Division 
STANLEY R. SHATTO, Vice President 
ANTON B. FAVERO, Assistant Vice President 
and Director of Maintenance 
HAROLD W. CAWARD, Assistant Vice President 
and Director of Flight Operations 
TERRELL S. SHRADER, Assistant Vice President 
and Director of Industrial Relations 
RICHARD B. AULT, Assistant Vice President 
and Director of Engineering 
PETER P. WOLF, Director of Communications 
CHARLES S. FISHER, Director of Flight Schedules 
JAMES W. STONE, System Chief Pilot 
Service Division 
MARVIN W. LANDES, Vice President 
VERNON 0. UNDERWOOD, President, Young's Market Co. 
Los Angeles, 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, Tribune-Leader 
Great Falls, Montana 
HOWARD C. WESTWOOD, Covington & Burling 
Attorneys-at-Law, Washington, D.C. 
Directors Emeriti 
ROBERT E. DRISCOLL, Honorary Chairman of the Board 
First National Bank of the Black Hills 
Rapid City, South Dakota 
SIDNEY F. WOODBURY, President 
Pine Street Co., Portland, Oregon 
Sales Division 
ARTHUR F. KELLY, Vice President 
BERT D. LYNN, Assistant Vice President and Director of 
Advertising and Sales Promotion 
ARTHUR C. SMITH, Assistant Vice President 
and Director of Sales Administration 
WILLIS R. BALFOUR, Director of Agency and Interline Sales 
RAY SILVIUS, Director of Public Relations 
MEMPHIS E. SULLIVAN, Director of Traffic 
Treasury Division 
J. JUDSON TAYLOR, Vice President and Treasurer 
CHARLES J. J. COX, Controller and Assistant Treasurer 
KENNETH W. KENDRICK, Director of Purchasing and Stores 
H. S. GRAY, Director of Budget 
Legal Division 
DOMINIC P. RENDA, Vice President and Secretary 
JOHN W. SIMPSON, Assistant Secretary and Director of Law 
THOMAS M. MURPHY, Director of State and Community Affairs 
JAMES L. MITCHELL, Director of Research 
JAMES M. KEEFE, Director of Properties 
PHILIP E. PEIRCE, Assistant Vice President 
and Director of Ground Services 
RICHARD P. ENSIGN, Assistant Vice President 
and Director of In-Flight Services 
 39 years of continuous operation in serving the west 
General Offices 
Western Air Lines Building 
6060 Avion Drive 
Los Angeles International Airport 
Los Angeles 9, California 
Registrars 
Bank of America National Trust & 
Savings Assn. 
Ill West Seventh Street 
Los Angeles 14, California 
The Chase Manhattan Bank 
1 Chase Manhattan Plaza 
New York 15, New York 
Stock Transfer Agents 
Security First National Bank 
124 Wes Fourth Street 
Los Angeles 14, California 
Chemical Bank New York Trust Co. 
20 Pine Street 
New York 15, New York 
Stock Listings 
Listed and traded on 
New York Stock Exchange and 
Pacific Coast Stock Exchange 
General Counsel 
Hugh W. Darling 
Darling, Shattuck, Hall & Call 
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 
DESIGNED BY CONRAD CAPUNE LITHOGRAPHED BY GRAPHIC PRESS, INC.