Western Airlines Annual Report 1976

Notice to Stockholders
A rule adopted by the Civil Aeronautics Board
("CAB") in July 1970, as amended on December 29,
1972, imposes obligations on certain stockholders of
air carriers. Any person who owns as of December 31
of any year or subsequently acquires, either benefi
cially or as a trustee, more than 5% of any class of
capital stock of an air carrier must file with the CAB a
report containing the information required by Part
245.12 of the CAB's Economic Regulations on or before
April 1 as to the capital stock owned as of December 31
and/or a report containing the information required
by Part 245.13 of the CAB's Economic Regulations
within 10 days after acquisition as to the capital stock
acquired after December 31. Any bank or broker which
holds as trustee more than 5% of any class of capital
stock of an air carrier on the last day of any quarter
of a calendar year must file with the CAB within .30
days after the end of the quarter a report in accord
ance with the provisions of Part 245.14 of the CAB's
Economic Regulations.
Any person required to report under either Part
245.12, Part 245.13 or Part 245.14 of the CAB's Economic
Regulations who grants a security interest in more
than 5% of any class of capital stock of an air carrier
must within 30 days after granting such .security inter
est file with the CAB a report containing the informa
tion required in Part 245.15. Any stockholder who
believes that he may be required to file such a report
may obtain further information by writing to the
Director, Bureau of Operating Rights, Civil Aero
nautics Board, Washington, D.C. 20428.
Eorm 10-K: Stockholders may obtain free of charge a
copy of the company's annual report on form 10-K as
filed with the Securities and Exchange Commission
by writing to the Secretary, P.O. Box 92005, World
Way Postal Center, Los Angeles, California 90009.
Cover: Western's DC-10 over Miami Beach.
The company started serving Miami on
August 1,1976.
1
Western Air Lines, Inc., 1976 Annual Report
Description of Business
Western Air Lines, Inc. is a certificated air carrier
providing scheduled air transportation over approxi
mately 32,000 route miles. The company serves 41
cities in 15 states, Canada and Mexico. Western has
competition from other airlines on substantially all
of its routes. It is regulated hy the United States, cer
tain state and foreign governments.
Index
3 Chairman's Letter
5 Financial Review
9 Corporate Review
17 Western's Route System
21 Ten Years of Western Progress
23 Balance Sheets
25 Statements of Earnings
26 Statements of Changes in Financial Position
27 Statements of Shareholders' Equity
27 Notes to Einancial Statements
32 Accountant's Report
34 Corporate Officers
Cliairnians Letter
I ho year 197(i, in which WcstcM ii completed its lirst
hall-ceiiturv of continuous service, was an excellent
one in many respects. We are pleased to report that
your company achieved a net profit of nearly $15
million, or $1.10 j)er share. This was a ^ratilyim; level
of earnings in \'iew of all factors which impacted our
industry.
Western's oj)eratins4 revenues passed the $()()() mil
lion mark foi' the first time. We were able to add more
than 5,0()() miles to onr route system and increase our
ax ailahle seat miles 15 percent while holdini; operat
ing expenses to a 1.5 j)ercent increase. Onr hreakeven
load factor (the {)oint at which we realize a profit) was
reduced significantly from 50.8 percent in 1975 to 55.8
percent in 1976.
Onr passenger traffic for the year increased 10 }X*r-
cent, and cari^o traffic, which includes air freiy,ht and
mail, increased 24 percent. Althoinj;h Western's aver
age passenger load factor in 1976 was down slightly
to 58.2 percent, it remained one of the hij^hest in the
industry.
(iivil Aeronautics Board decisions <!;aye us two new
lon^-haul routes duriny; the year, one coverini; the
2,700 miles between Honolulu and \5mcouyer,
and the other--onr first transcontinental route --from
l.os ,\ny,eles to Miami/Ft Lauderdale.
These two route additions are extremely important
to Western. While they initially added to our expense
level and reduced our averai^e load factor, they offer
substantial potential for profitable operation. Both
are leisure-oriented routes which have had monopoly
ser\ ice until now, and oni' company has the experience
to de\elop them, pins a record of success in the mar-
kc'tin^ of vacation travel.
Our idtimate ^oal is to capture an equal share of
the Cialifornia-Florida market. Nearly two-thirds of
the traffic which flows over this route orijj;inates at
West Ooast cities lony; served by Western and in which
your company is well identified. In addition, we are
working with criuse ship o])erators and government
tourist bureaus in Florida, the Bahamas and the
Oarihhean to develop traffic into these areas.
Our confidence that Western can effectively com
pete on these two new routes is based on the fact that
we have won the No. 2 position in terms of passengers
carried between the Mainland and Hawaii, despite
heavy competition from many other carriers. Our
record in this was recognized by Air Transport World
mai;azine when it pre.sented Western with its 1976
"Market Development Award" for "outstanding per
formance in the development of the Hawaiian
market!'
While we believe that through ai2;^ressive market-
ini; programs,cost controls and continued route devel-
oj)ment, we can make 1977 an even better year than
1976, there are several non-controllahle matters facing
your com])any and the entire industry which could
adversely affect our profit j)osition in the future.
Among the most noteworthy of these are deregnla-
tion, noise abatement (and ecjuipment replacement)
and fuel j)ricing.
For nearly four decades, the air transportation
system in the ILS. has grown and developed under
regnlation by the (!ivil Aeronautics Board, that deter
mines which carriers provide serx ice over which
routes and oversees the level of fares and rates.
Although this system is admittedly not {)erfect, it has
nevertheless given the American public the finest air
transportation in the world --both in terms of price
and service for the consumer --and it has encouraged
economic viability for the airlines in producing that
service.
The past two years have seen a number of deregula
tion pro])osals come forth. These are based on the
premise that the public would get better service at less
cost if the airlines were given greater freedom to enter
and exit markets of their choice and given greater
flexibility in setting their own fares. We strongly sup
port free enterprise, hut we also maintain that particu
larly in the area of route authority and pricing, air
transportation shoidd he regarded and regidated as a
public utility. If a maximum number of communities
are to continue to receive good passengei', mail and
cargo .service by air, at reasonable fares and rates, the
present regidatorv system must he })reserved.
The erosion of such a federal regulatory pattern by
irresponsible changes under the guise of pid)lic
interest will lead only to a deterioration of the world's
best transportation network with little or no perma
nent reduction in fares.
We recognize that some limited })rocedural changes
mav be constructive, hut this can be accomplished by
the Civil Aeronautics Board pursuant to pro\'isions
of the Federal Aviation Act now in eliect. Accordingly,
we believe it unwise and unnecessary to enact any of
the pending deregidation projjosals.
The noise abatement issue, as explained in the body
of this report, has had a sidistantial im})act on West
ern fleet ))lanning, as well as on most of the industry.
In essence, we will be required to replace prematurely
or modify more than half of our present aircraft within
the next eight years. Legislation has been introduced
in Congress which, if approved, will help reduce the
financial burden created by having to comply with
.5
the new FAA noise requirements, but it will not pro
vide a complete solution.
Western's present j)lan calls for ultimately replacing
all 720 aircraft with a comhination of quieter Boeins;
727s and McDonnell Dous>;las DC-fOs. At the same
time, we will modify all Boeing 737 aircraft which
remain in the fleet and either modify or replace the
five 7{)7s. While this will be a costly program overall,
it will result in fewer aircraft types in oiir fleet, which
in the lon|> run shoidd ]>roduce improved economy
and efficiency of operations.
Of continuing concern also is the price of jet fuel.
Although Western is one of the most efficient fuel
users in the industry, our total hill for 1976 amounted
to $108 million, compared to $93 million in 1975 and
$44 million in 1973 before the fuel crunch took effect.
Almost all of the increase experienced has been the
residt of price escalation. Our last major contract
covering fuel prices ex])ired on December 31, and
fuel prices are now based on "open market" conditions.
As a residt, we are estimating that our cost will con
tinue to rise in 1977. With an expected consumption
of 386 million gallons, each cent-a-gallon increase
results in nearly $4 million annual increase in fuel
expense.
Labor costs in the airline industry continue to pre
sent a difficidt control problem, and Western's are no
exception. We will be or are presently negotiating new
agreements with unions representing aj)j)roximately
88 percent of our labor force. In each of these, we are
studying ways to attain the increased jnoductivity
which we feel is essential if we are to keep W'estern's
oj:)eration reasonably j)rofitable.
Western has a sound record on which to stand and
we are proud to he serving 41 cities, 15 states, Canada
and Mexico, as part of the nation's vital transporta
tion system. We will do our best to operate Western's
routes in a manner which will provide good service
to the traveling and shijiping pidilic at reasonable
fares and rates and, at the same time, return sullicient
})rofit to justify the continuation of a sound dividend
Cdiairman and Chief Executive Officer
March 21,1977
4
Financial Review
1976 1975 1974
1976 vs.
Amount
Che
1975
%
inge
1975 vs
Amount
Operating revenues:
Passenger $544,188 1465,081 $437,345 79,107 17 27,736
Cargo 37,926 31,329 27,662 6,597 21 3,667
Other 23,091 22,563 23,390 528 2 -827
605,205 518,973 488,397 86,232 17 30,576
Operating expenses:
Wages, salaries and employee benefits 226,367 201,661 182,334 24,706 12 19,327
Fuel 108,279 93,134 71,437 15,145 16 21,697
Depreciation and amortization . . .
38,058 36,054 40,478 2,004 6 -4,424
Other 202,643 179,563 155,788 23,080 13 23,775
575,347 510,412 450,037 64,935 13 60,375
Operating income 29,858 8,561 38,360 21,297 249 -29,799
Other income (expenses):
Interest expense, net (8,889) (8,524) (10,334) (365) 4 -(1,810)
Gain on disposal of equipment . . .
1,809 379 9,575 1,430 377 -9,196
Other, net 1,237 3,919 4,222 -2,682 -68 -303
Earnings before provision for
taxes on income and cumulative
effect of accounting change . .
24,015 4,335 41,823 19,680 454 -37,488
Provision for taxes on income
....
9,050 (825) 17,725 9,875 * -18,550
Earnings before cumulative effect
of accounting change 14,965 5,160 24,098 9,805 190 -18,938
Cumulative effect of accounting change --
7,160 --
-7,160 -100 7,160
Net earnings $ 14,965 $ 12,320 $ 24,098 2,645 21 -11,778
Earnings per share:
Primary:
Earnings before cumulative effect
of accounting change $ 1.10 $ 0.34 $ 1.59
Cumulative effect of accounting
change
Net earnings $ 1.10
0.47
$ 0.81 $ 1.59
Fully diluted:
Earnings before cumulative effect
of accounting change $ 0.98 $ 0.33 $ 1.41
Cumulative effect of accounting
change
Net earnings
Passengers carried (000)
$ 0.98
8,098
0.41
$ 0.74
7,531
$ 1.41
7,391 567 8 140
Available seat miles (000,000) ....
13,450 11,696 11,124 1,754 15 572
Revenue passenger miles (000,000) . .
7,834 7,103 6,747 731 10 356
Passenger load factor--actual (%) .
58.2 60.7 60.7 -2.5 -4 -
--
breakeven (%) .
55.8 59.8 56.0 -4.0 -7 3.8
Note: In thousands of dollars except per share amounts.
*Not computed.
5
Management's Discussion
The adjacent table of Financial Review compares Western's
activities during the past three years --1976, 1975 and 1974.
Items in the table which in the opinion of Western's manage
ment need explanation are discussed in the following section.
A 10-yearfinancial and statistical summary follows the
report's Corporate Review.
Western's net earnings of $14,965,000 for 1976 repre
sented a 21 percent increase from the $12,320,000
reported for 1975. Comparing the two years, but exclud
ing a $7,160,000 after-tax credit from a change in the
company's method of accounting for maintenance of
aircraft in 1975, the 1976 earnings were almost triple
those of 1975. Earnings in both years were substantially
below the record 1974 earnings of $24,098,000.
Operating revenues increased primarily because of
higher passenger revenues reflecting traffic growth
and higher average revenue per passenger mile
(yield). Traffic growth was 10 percent in 1976 and five
percent in 1975. Yield increased six percent in 1976
and one percent in 1975 as a result of fare increases.
Cargo revenues increased on traffic growth of 24 per
cent in 1976 and 14 percent in 1975.
Passenger revenues constitute 90 percent of West
ern's operating revenues and of these passenger
revenues 93 percent come from coach and economy
travelers.
Negotiated increases as a result of collective bargain
ing were the primary factor in the increases shown in
wages, salaries and employee benefits. The greatest
impact was from wage increases. These agreements
are open for amendment in 1977 and early 1978.
Included in the 1976 increase was a $4.3 million
increase in the costs of retirement plans, group insur
ance and payroll taxes. The major factor was higher
pension expenses due to higher wages and participa
tion in the plans by a larger number of employees.
Costs of retirement plans for 1976 were $1.2 million
lower than they would have been had not certain actu
arial assumptions been changed. The 1975 increase of
$5.5 million was attributable mainly to higher group
insurance premiums. In both years payroll taxes
increased because of legislated changes.
In 1976, 55 percent of the fuel expense increase
reflected higher consumption and 45 percent reflected
price increases. Western increased its available seat
miles by 15 percent in 1976 but used only nine percent
more fuel.The 1975 fuel expense increase was due to
price increases. Effective January 1, 1977, Western's
fuel prices were no longer under contract and are
subject to open market conditions.
The 1976 depreciation and amortization expense
would have been $1.2 million greater if the depre
ciable lives of 727 and 737 aircraft had not been
extended from 12 years to 15 and 14 years, respectively.
In 1975 this expense showed a decrease because the
depreciable lives of the 720B aircraft were extended to
Dominic P. Renda
President and Chief Operating Officer
6
1978. Amortization of pre-opcrating; costs increased
in 1976 because of costs incurred in inaugurating
services on the bos Angeles-Mianii and Honolulu-
Vancouver routes.
"Other" expenses increased approximately S23
million in both 1976 and 197.6. The major increases
were in travel agent commissions, passenger food
expense, rentals, materials and repairs for aircraft
maintenance and Mutual Aid expenses.
The proportion of total sales being made by travel
agents continued to increase and together with traffic
increases resulted in the increases in travel agent
commission expen.ses--by 15 million, or 2.3 percent,
in 1976 and $2.5 million, or 13 percent, in 1975.
Traffic growth was also the cause of a $2.9 million,
or 16 percent, increase in passenger food expense
in 1976.
Rentals increased 22 percent in both years, or by
$4.2 million in 1976 and $3.5 million in 1975. Contrib
uting factors were leases of two DC-10 aircraft, one in
June 1976 and one in ]une 1975, and the leasing of a
DC-10 hangar and a parking structure in April 1975.
Materials and repairs for aircraft maintenance
increased by $2.9 million, or 10 percent, in 1976 as the
result of a greater number of cyclical replacements of
engine components and higher costs for parts. In 1975
higher prices of parts and materials resulted in the
$3.6 million, or 14 percent, increase.
Mutual Aid increased $3.6 million in 1975 because
of payments made to other carriers under this agree
ment but declined sharply in 1976. See Note 11 of Notes
to Financial Statements.
Traffic growth and fare increases in 1976 outpaced
inflation and resulted in higher operating income. In
1975 Western's inability to offset inflated operating
expenses with either traffic growth or fare increases
resulted in lower operating income than in 1974.
In 1976 interest expense increa.ses reflect the issu
ance of $23 million in principal amount of the 10%
Subordinated Sinking Fund Notes. The decrease in
"Other--net" resulted from the fact that 1975 included
$2.1 million in interest income related to a federal tax
refund. See Note 6 of Notes to Financial Statements.
These were partially offset by gain on the sale of a
737 aircraft.
The 1975 interest expense decrease was produced
by a combination of a reduction of outstanding debt
and a reduction in interest rates on the bank debt.The
gain on sale of equipment decreased from 1974 to 1975
because 10 aircraft were sold in 1974.
The provision for taxes on income is reconciled to
the tax rate of 48 percent in Note 6 of Notes to Finan
cial Statements.
Financial Position
Sources of working capital totaled $87,717,000 in 1976.
Working capital from operations increased from
$45,412,000 in 1975 to $54,807,000 in 1976 because of
higher earnings. The other major source was the issu
ance of $23,000,000 in principal amount of 10% Subor
dinated Sinking Fund Notes.
Applications of working capital were $102,471,000.
Expenditures for the repurchase of common stock
totaled $30,527,000. Reductions in debt totaling
$20,000,000 included scheduled maturities of long
term tlebt and that portion of the revolving fund
credit which management intends to repay in 1977.
Purchases of property and equipment, including
advance deposits of approximately $25 million, were
$42,362,000.
Seven 727 aircraft are scheduled for delivery in 1977
at an approximate cost of $78 million. Western will
lease five and purchase two out of internally gener
ated funds. During January 1977, Western exercised
options to purchase five 727 aircraft and agreed to
purchase two DC-10 aircraft, all for delivery in 1978,
at a total cost of approximately $116 million. These
orders are subject to lender approval.
The aircraft to be delivered in 1977 and 1978 will
accommodate forecast traffic growth and will also
replace some of those aircraft which Western will
retire before January 1, 1985, in accordance with cur
rent noise regulations. External equity and debt finan
cing or a combination thereof will be required.
The Bank Loan Agreement, dated June 30, 1976,
provides Western with a $75 million revolving line of
credit until December 31, 1978. On this date the line
of credit can be replaced by a term note in an amount
not to exceed $75 million which will mature on June
30,1983, with quarterly payments of principal starting
March 31,1979.
Operating Income--(Dollars in Millions)
0.9% from other
2.1% from transport related
0.7% from charter
6.3% from cargo
6.0% from deluxe passenger service.
Operating Revenue 84.0 % from coach passenger service-
Dollar
39.3% for wages, salaries
:
and employee benefits -
j 18.8% for aircraft fuel
} 6.6% for depreciation
j 5.8% for materials and repair
! 5.0% for utilities and services
] 4.7% for commissions
I 3.7% for food and beverages
2.0% for advertising and publicity
14,1% for other
7
Finance and Administration
Division is headed by Robert O.
Kinsey, Senior Vice President-
Finance and Administration, with
(from left) Pan! V. Donahue, Vice
President-Procurement; FI.S.Gray,
Vice President-Financial Planning;
Dan A. Zaich, Vice President-
Personnel Relations; Richard O.
Hammond, Vice President and
Treasurer, and Roderick G. Leith,
Vice President and Controller.
Corporate Review
Annual Meeting
I'he 1977 meeting; of sliarcholders will be held at the
Beverly Hilton Hotel, Beverly Hills, Calif., on April
28. Formal notice of the meeting and proxy material
are enclosed with this report.
Shareholders, Stock and Debentures
As of December 31, 197h, there were 12,659,(K)() shares
of Western stock outstanding, d'he number of shares
outstanding had been reduced in May by 2,508,832
from 1975's year-end total of 15,164,000 after share
holders approved at the 1976 annual meeting the com
pany's proposal to purchase Kirk Kerkorian's hold
ings. At that meeting 85.4 percent of all outstanding
shares were represented in person or by proxy.
An additional 2,465,(XK) shares are reserved for the
conversion of the company's 574% Convertible Subordi
nated Debentures. Holders of the debentures received
interest payments on February 1 and August 1.
Shareholders' equity at December 31, 1976 was
$117,100,000, or $9.25 per share, compared to
$137,938,000, or $9.10 per share, at the end of 1975.
The company's stock was held by approximately
16,900 shareholders of record at year's end, compared
to approximately 17,500 shareholders at the end of
1975. The stock is traded on the New York and Pacific
Stock Exchanges.
The following table sets forth the range of sale
prices of the stock on the New York Stock Exchange:
1975 High Low
First Quarter 9V2 57/8
Second Quarter 87/8 71/8
Third Quarter 91/2 6%
Fourth Quarter 93/8 6^4
1976
First Quarter 117/8 91/8
Second Quarter 107/8 91/8
Third Quarter 125/8 10
Fourth Quarter 101/4 83/4
Dividends
Shareholders received four regular cash dividends
during 1976. These dividends in the amount of 10
cents per share were paid in March, June, August and
November.
In January 1977, the hoard of directors declared the
first regular quarterly cash dividend of 1977 in the
amount of 10 cents per share, payable on February 28
to shareholders of record on February 8.
Equipment and Facilities
At the end of 1976, as at the end of 1975, Western oper
ated 75 jet aircraft.
One McDonnell Douglas DC-10 was added to the
fleet in June and one Boeing 737 was sold during the
first quarter.
Scheduled for delivery during 1977 are seven
Boeing 727-200s.'Fhree of the 727s are being delivered
in March, two in May and the remaining two in
December. Western has arranged to lease the five air
craft being delivered in the spring.
In January 1977 the company announced it had
reached agreements to purchase two DC-lOs and five
727s for delivery in the first half of 1978. In addition
to these firm orders, Western obtained options on two
additional DC-lOs for delivery in 1979 and on 10 addi
tional 727s for delivery in 1979 and 1980.
The two DC-lOs and the five 727s being acquired
in 1978 are part of the company's re-equipment pro
gram designed to meet anticipated traffic growth and,
at the same time, to bring the fleet into conformity
with new regulations limiting aircraft noise emissions.
The F'ederal Aviation Administration has issued
aircraft noise abatement regulations which require
that all airline aircraft meet FAA noise standards
which have previously applied only to newly manu
factured aircraft within specified periods prior to
January 1, 1985. To meet the standards, non-conform
ing aircraft must either he replaced by newer, quieter
aircraft or modified to reduce their noise output. Four-
engine aircraft must be replaced or modified on the
following schedule: one-quarter of the aircraft within
four years, one-half of the aircraft within six years
and all aircraft within eight years. Two- and three-
engine aircraft must be replaced or modified to meet
the standards within six years with one-half of such
aircraft to be replaced or modified within four years.
The company presently has in its fleet 24 two-engine
Boeing 737 aircraft and 23 four-engine aircraft (five
Boeing 707s and 18 Boeing 720B's) which do not com
ply with the prescribed noise limitations. (By the end
of 1977 all of its three-engine aircraft will meet the
noise standards prescribed in the regulation.) Within
the prescribed time limits, the company presently
intends to modify some of its two-engine aircraft and
to dispose of the remainder, and to replace all eighteen
720B aircraft. The total cost of retrofit of two-engine
aircraft cannot be estimated with any degree of cer
tainty until a decision is made as to the number to be
modified, but it has been decided that such retrofits
are economically and operationally feasible. Retrofit
of the five 707 aircraft may be economically and opera
tionally feasible, but such does not seem to he the
case with the eighteen 720Bs.
9
Western became the first U.S. carrier to connect
Vancouver, B.C. (top) and Honolulu on June 25,1976.
Legislation has been introdnced in Congress which
wonld provide financial assistance to the airlines by
authorizing them to collect surcharges on passenger
fares and cargo rates. Funds produced by such sur
charges would be available for use by the airlines to
assist in financing the costs of modification of non
complying aircraft and of acquisition of replacement
aircraft. The legislation also propo.ses that grants be
made to the airlines from funds in the Airport and
Airways Development Trust Fund to finance the pro
gram if and to the extent that funds produced by the
surcharges are insufficient for that purpose. The
amount and kind of financial assistance which the
airlines may receive from this legislation will depend
upon whether and in what form it is enacted. In any
event, with or without governmental assistance the
requirement that all Western's aircraft, except the
DC-lOs and 727-200s, be modified or prematurely
replaced in eight years or less will impose a substan
tial financial burden upon Western.
Western's Fleet
1977 1978
Owned Leased Delivery Delivery
DC-10 3 4 -
2
B707--300C 5 - - -
B720B 18 -- -
-
B727-200 15 8* 5 5
B737-200 24 --
-- --
As of March 1,'j, 1977.
65 12 5 7
*I'wo were delivered in early March 1977.
Western continued to modernize and, in some cases,
expand its ground facilities at a number of locations
during 1976. A new all-purpose building including
an air cargo terminal was constructed at Honolulu
and a new cargo terminal/maintenance building was
completed at Salt Lake City. A new Western cargo
facility at Denver's Stapleton International Airport
is scheduled for completion in mid-1977 and one is in
the design development stages at Seattle-Tacoma
International Airport. Major expansion to the pas
senger terminal buildings at Salt Lake City, San Diego,
Phoenix and Honolulu will give Western improved
passenger facilities.
Fares and Rates
Most of Western's fares and rates underwent changes
in 1976. Western's passenger fare structure is divided
into six geographical areas--domestic U.S., Hawaii,
intra-California, Alaska, Mexico and Canada--with
each area regulated separately by the Civil Aeronau
tics Board, agencies of other national governments or,
in the case of intra-California markets, by the state
Public Utilities Commission.
Domestic U.S. fares were increased one percent in
February and two percent in March, in May and in
September while fares between Alaska and the "Lower
48" fares were increased three percent in October.
Although the company applied for a five percent
increase in all Mainland-Hawaii fares, effective May
15, the increase was approved only for discount fares.
The Hawaii discount fares underwent another 4.5 per
cent increase on January 1, 1977, and regular fares
went up two percent.
California intra-state fares were increased eight per
cent in January and fares between the U.S. and Canada
were increased seven percent in May.
These fare increases were partially responsible for
a six percent increa.se in Western's average yield in
1976. Nevertheless, our system average yield was still
the lowest in the industry at 7.05 cents. For the 12
months ended September 30, 1976, the industry aver
age was 7.52 cents, whereas Western's average was
only 6.9 cents, or eight percent below the industry
average.
Operating Income --(Dollars in Millions
1976
\975 1 H 8.6
1974
1973
1972
38.4
40.1
11
Corporate Planning Division
headed by James L. Mitchell,
Senior Vice President-Corporate
Planning, with (from left) VV. Jeffrey
Terrill, Director-Regulatory
Proceedings; Carleton E. Nesbitt,
Director-Profit Planning; William
E. Lindsey, Director-Fleet Planning;
Charles S. Fisher, Vice President-
Schedule Planning; Eugene D.
Olson, Vice President-Data
Processing and Systems; Peter
P. Wolf, Vice President-
Communications.
While Western continues to try to improve its yield
throui^h fare increases and reduced emphasis on dis
count fares, it has maintained certain discount fares
for the purposes of stimulatinj; specific markets or
attracting large group movements as well as for the
purpose of remaining competitive in other markets.
Air freight rates underwent increases in April, Sep
tember and October.
Marketing
Western's 1976 marketing was headlined by a new
advertising theme entitled,"We've Got A Good Thing
Going'' and highlighted by the challenges of inaugu
rating two major new routes--Honolulu to Vancouver,
in June and the company's first transcontinental route,
Los Angeles to Miami/Ft. Lauderdale, in August.
A total of 8,098,000 passengers were carried in 1976,
compared to 7,531,000 in 1975. Passenger load factor
for the year was 58.2 percent, compared to 60.7 per
cent in 1975.
The two new routes are primarily vacation-oriented,
and they have given Western yet another opportunity
to demonstrate its marketing expertise in such mar
kets. Marketing over both routes was launched with
attractive Triangle Fares. For example, over the Los
Angeles-Miami route, this fare permits travelers to
take a side trip to Mexico City for no additional cost.
This same theme has been used most successfully for
a number of years in the California-Alaska-Hawaii
market.
Western is increasingly optimistic about the
potential of its first transcontinental route. Since
approximately two-thirds of the traffic on this route
historically has been generated on the West Coast--
where Western is experienced in promoting leisure
travel --the company is in an excellent position to
stimulate new traffic to Florida and the Caribbean.
Within four months after service was launched, the
company had established commitments with two
major cruise ship lines operating out of Miami and
was launching joint advertising programs with these
operators as well as tourism organizations in Florida
and the Caribbean.
As part of its continuing program of joint advertis
ing and promotion with the Hawaii Visitors Bureau,
the company will be concentrating new efforts on the
promotion of traffic between Hawaii and Western
Canada.
The company's success in the Hawaii market was
recognized nationally in January 1977 when it received
the third annual Market Development Award from
Air Transport World magazine. The award was pre
sented for Western's "...outstanding performance in
the development of the Hawaiian market. From a non
existent position in this market prior to 1969, it has
moved upward rapidly to become the second-largest
airline to Hawaii, carrying close to 850,000 passengers
in 1976!'
More updating of Western's services to the traveling
public during the year resulted in the installation of
high-speed ticket printers at 15 locations, the develop
ment of a fare quote system which covers 90 percent of
the possible itineraries in the reservations computers
and the placing of an 18-month schedule in these same
computers. The 18-month schedule now makes it pos
sible for Western's sales force to confirm space by
specific flight and time for individuals and groups
who are making long-range travel plans.
The Alaska pipeline construction plus the new busi
ness attention it has focused on Alaska continued to
have a favorable impact on Western's passenger and
cargo traffic between the Mainland and the 49th state.
Systemwide, Western's cargo, expressed in revenue
ton miles, increased 24 percent for the year. Cargo
marketing studies, plus the increase in the use of air
transportation for mail by the U.S. Postal Service,
indicate that this portion of Western's business will
continue to grow at a healthy rate.
Available Seat Miles vs. Revenue Passenger Miles
13,450
1975 L
L Ll.:! ii. j
7,103
.!
.i 11,696
1974 6,747
1973 6,476
5,996
124
11,176
Millions
Seat Miles
300
Passenger Miles
13
Marketing Division headed by
Richard P. Ensign, Senior Vice
President-Marketing, with (from
left) Bert D. Lynn, Vice President-
Advertising and Sales Promotion;
Jack M. Slichter, Vice President-
Field Management; Willis R.
Balfour, Vice President-Sales and
Service; Lawrence H. Lee, Vice
President-Inflight Service, and
J.S. Neel,Vice President-Marketing
Administration.
Route Proceedings
Western is involved in a number of route proceedings
now under consideration by tbe (livil Aeronautics
Board. If approved, tbe company's proposals in these
cases woldd give Western access to new cities or would
provide new service between cities presently served
by tbe company.
riie Civil Aeronautics Board did award to Western
two e.xtremely inn)ortant new routes in 1976. First, in
February came tbe award of a 2,7()()-mile segment
between N^uicouver, British Columbia, and Honolulu.
\Vith this new service, inaugurated June 25, Western
became the first U.S. flag carrier to provide service
between tbe 5()tb state and Canada.
In March the CAB gaveW'estern a long-sought-after
transcontinental route --covering tbe 2,.`145 miles
between Los Angeles and Miami/Ft. Lauderdale.
Although tbe decision is tbe subject of appeals by
.some unsuccessfid applicants, we inaugurated service
over this route on August 1.
In tbe Oklahoma-Denver-Southeast Points Investiga
tion, Western .seeks to provide nonstop service between
Denver and Atlanta,Tidsa, Tampa and Miami as well
as between Tulsa and Florida points. Western also pro
posed through service via Denver between Calgary/
Fdmonton and Tulsa and Florida and from Salt Lake
City and San Francisco to Florida. A route for Western
was not recommended in tbe administrative law
judge's initial decision,which was issued in November;
however, the case is being reviewed by the five-member
board, and Western continues to be an active applicant.
This case should be concluded in 1977.
I'wo important international route cases are cur-
rentlv awaiting initial decisions by CAB administra
tive law judges.
The first is an international route case which will
be decided by the end of 1977 involving new U.S. flag
carrier routes between tbe California cities of San
Francisco and Los Angeles and the Canadian cities of
Calgary and Edmonton. These routes were added by
amendment of tbe U.S.-Canadian bilateral agreement
in 1974. In the second. Western is seeking to extend its
route system to Tokyo from the U.S. gateway cities of
Seattle/Tacoma and Portland.
In September, the CAB awarded a nonstop route
between Calgarv/Edmonton and Las Vegas to Hughes
Airwest. I bis is a route which Western had been
actively seeking.The company has appealed this deci
sion to a federal court of apj^eals.
Western also has applications in pending cases for
the following routes: Los Angeles to Columbus, Ohio,
and Pbiladeljjbia; Sacramento to Denver; Spokane
to Billings and Denver; Las Vegas to Dal las/Et. Worth;
LasVTgas to Reno and Sacramento to Seattle/l'acoma.
4'be Transatlantic Route Proceeding m which Western
sought to provide tbe first direct service from Minne
apolis/St. Paid to London, Paris and Frankfurt was
sent to the White House for Presidential approval in
1976. It did not include a recommendation for Western.
However, the White House returned the decision to
tbe CAB for further consideration and for what West
ern hopes will he a more favorable decision.
Another important apjjlication now under CAB
consideration is Western's route realignment proposal
which would consolidate all Mainland route segments
into one linear segment and eliminate certain out
dated conditions which impede Western's ojierating
flexibility.
Western is also seeking additional routes into
Mexico from the California cities of .San Francisco,
Los Angeles and San Diego. The company currently
serves Acapulco from Los Angeles and Mexico City
from Los Angeles and San Diego. Application has
been filed to also provide .service to La Paz, Mazatlan,
Puerto Vallarta, Guadalajara, Manzanillo and
Zihuatanejo. No action has been taken on this applica
tion pending possible amendment to the bilateral
agreement between the United States and Mexico
which is due to expire April .30,1977.
Another case which recently has been set for hear
ing is the West Coast-Alaska Investigation in which West
ern is seeking nonstop authority from Los Angeles
and San Francisco to Anchorage as well as nonstop
authority from Portland and Seattle to Fairbanks.
Passenger Load Factor--Actual vs. Breakeven
Actual
Breakeven
Legal Division headed by (erald
P. O'Grady, Senior V'ice President-
Legal and Secretary, with (from
left) Thomas J. Greene, Assistant
Secretary and Director-Corporate
Law; Henry M. deButts, V'ice
President-Regidatory Law, and
Donald F. Drews, Director-
Properties and Facilities.
FAIRB^KS
KODIAK
KETCHIKAN
,\ VANCOUVER
SEATTL^TACOMA
SPOKANE
WHO F/y-LS
OCATELLO
iRENO COLUMBUS
SACRAM^I CHEYENNI
LAS VEGAS
TULSA
ONTAI
OKLAHOMA Cr
DALLAS?^ ^
FORT WORTH
JAM PA
:atlan
HONOLULU
HILO
MANZANILLO
Western's Route System
WESTERN AIR LINES SYSTEM
PROPOSED ROUTES
Western/Continental Interchange
`Service temporarily suspended by order of CAB
ANCHORAG
CALGARY
GREAT FALLS
MINNEAPOLIS/ST. PAUL
N PIERRE
=
SIOUX FALLS
RAP D CITY
BILLINGS
SHERIDAN
SAN FRANCISCO
OAKLAND
SAN JOSE
LOS ANGELES V PALM SPRINGS ^
V \ PHOENIX
SAN DIEGO
(TO LONDON)
(TO FRANKhUHiT
(TO PARIS)
--^
PHILADELPHIA
ATLANTA
JUNEAU*
EDMONTON
ZIHUATANEJO
ACAPULCO
MIAi^ - S
FORT LAUDERIII/VLE'
W
^ GUADALAJARA
0 VALLARTA
MEXICO CITY
17 18
Management Changes
Iwo new directors were elected to Western's board at
the annual meeting in April. They were Robert H.
Volk, chairman of llnionamerica, Inc. (now Westmor
Ciorporation) and Roy Ash, president of Idtton Indus
tries from 1961 until 1972 and Director of the Office of
Management and Budget from 1972 until 1975.
Mr. Ash's election required approval by the Civil
Aeronautics Board because he is also a director of
Bankamerica Corporation; Bank of America has been
one of Western's major lenders for many years. After
CAB action on an application for such approval was
not forthcoming for nearly 10 months, the application
was withdrawn, and he will not stand for election as a
member of the hoard this year.
With shareholder approval of the purchase of Kirk
Kerkorian's holdings, Mr. Kerkorian and five other
directors who are or had been associated with him did
not stand for re-election. They included Fred
Benninger, who had served as Western's chairman
since 1971; James D. Aljian, Peter M. Kennedy, Walter
M. Sharp and William Singleton.
Following the annual meeting, the board elected
Arthur F. Kelly, formerly president and chief execu
tive officer, as chairman and chief executive officer,
and elevated Dominic P. Renda, formerly executive
vice president, to president and chief operating officer.
Early in 1977, James L. Mitchell was elected senior
vice president-corporate planning to succeed Robert
O. Kinsey, who became senior vice president-finance
and administration following the retirement of
Charles J. J. Cox on January 31,1977.
Mitchell returned to We.stern after eight years with
Continental Airlines where he was most recently vice
president of regidatory proceedings. He first joined
Western in 1946 and was named assistant vice presi
dent of research in 1965. Kinsey was controller and
assistant to the president at Pacific Northern Airlines
prior to the 1967 merger of PNA into Western. He
came to Western as vice president and assistant to the
president and was elected senior vice president-
corporate planning in 1974.
Cox had been with Western for 25 years having
joined the company as controller and assistant trea
surer in 1951. He was elected vice president and con
troller in 1966, vice president-finance in 1969 and
.senior vice president-finance in 1972.
Edwin W. Mitchell, who joined Western in 1941, was
elected vice president-maintenance to succeed Jo.seph
M. Fogarty who retired on September 30, 1976.
Mitchell was previously director of base maintenance
in Los Angeles. Fogarty was hired by National Parks
Airways (which was merged into Western) in 1931 and
retired from Western after completing more than 45
years of service.
Personnel
As of December 31, Western employed 10,113 people,
compared to 9,4,30 at the entl of 1975.
Wages and salaries for 1976 amounted to .'S188,418,000,
up 12 percent from the 1168,029,000 in the previous
year. Social Security taxes and company contributions
to group insurance and employee retirement plans
increased 13 percent, from $3.3,632,000 in 1975 to
$37,949,000 in 1976.
Western is committed to a policy of equal employ
ment. Job assignments are determined on the basis of
qualifications without discrimination in race, color,
creed, age, sex or national origin.
The company confirms its continuous commitment,
and, in this regard, maintains Equal Employment
Opportunity/Affirmative Action Plans which are filed
with the Federal Aviation Administration and the
Department of the Interior (in Alaska).
Approximately 88 percent of the company's
employees are represented by labor unions. These
unions include the International Brotherhood of
Teamsters, Air Line Pilots Association and Associa
tion of Flight Attendants (affiliate of ALPA), Brother
hood of Railway and Airline Clerks (U.S. and Canada),
Sindicate Nacional de Trabajadores de Aviacion y
Similares (in Mexico), and the Transport Workers
Union. Following is the contractual status of each
group of these employees:
Employee Group
Number of
Employees
12/31/76 Union
Contract Open
for Amendment
Flis^ht .-Xttenclants 1 ,.')86 ALPA/AFA Aug. 1, 1977
Assent & Clerical 3,674 BRAC Jan. 1, 1978
--
Canada 39 BRAC Jan. 1,1978
--
Mexico 155 SNTA Jan. 1,1978
Pilots 1,374 ALPA Sept. 1. 1977
Flight Superintendents 33 TWU April .30, 1978
Mechanics & Related 1,921 IBT Nov. 16,1976
Employees (Presently in
mediation)
19
Operations Division headed by
Anton B. Favero, Senior V'ice
President-Operations, with (froi
left) Mark E. Leafstedt, Director
Operations Budgets and Cost
Control; Robert V. Johnson, Vic
President-Flight Operations;
Richard B. Ault,\'ice President
Engineering, and Fldwin \V.
Mitchell, Vice President-
Maintenance.
Ten Yeai's of Western Proi^ess
Financial 1976 1975 1974
Operating^ revenues;'^
Passen2;er $544,188 465,081 4.37,.34.5
Cargjo 37,926 31,.329 27,662
Other 23,091 22,.563 23,.390
Total operatintr revenues 605,205 518,973 488,.397
Operatinir expenses:^
VV'atres, salaries and employee benefits 226,367 201,661 182,3.34
Fuel 108,279 93,1.34 71,4.37
l)ej)reciation 38,058 .36,054 40,478
Other 202,643 179,56.3 155,788
Total operating; expenses 575,347 510,412 4.50,037
Operating; income (loss)^ 29,858 8,.561 38,360
Interest expense, net of amounts capitalized^. (8,889) (8,524) (10,.3.34)
Gain (loss) on disposal of equipmentZ 1,809 379 9,.575
Other income and expense, net^ 1,237 3,919 4,222
Earning;s (loss) before taxes on income and cumulative
effect of accounting; chang;e^ 24,015 4,3.35 41,82.3
Taxes on income (tax credits)^. 9,050 (825) 17,725
Earning;s (loss) before cumulative effect of accountini^ change ^ .
14,965 5,160 24,098
Cumulative effect of accounting change^ --
7,16(d -
Net earnings (loss)"^ S 14,965 12,.320 24,098
Earnings (loss) per share:
Primary:
Before cumulative effect of accounting change $ 1.10 0..34 1.59
Net earnings (loss) $ 1.10 0.81 1.59
Eully diluted:
Before cumulative effect of accounting change S 0.98 0..3.3 1.41
Net earnings (loss) $ 0.98 0.74 1.41
Pro-forma amounts assuming the accounting change is applied
retroactively:
Net earnings (loss)^ $ 14,965 5,160 24,608
Net earnings (loss) per share --primary >-2 $ 1.10 0..34 1.6.3
Net earnings (loss) per share --fully diluted $ 0.98 0.3.3 1.44
Return on investment (%) 9.7 8.0 13.1
Cash dividends paid per share $ 0.40 0.47 0.39
Average shares outstanding'-^:^ 13,601 15,163 15,125
Shareholders'equity ^ $117,100 137,938 132,718
Long-term debt 7 $110,420 107,617 114,917
Property and equipment --net $308,112 309,685 307,307
Total assets^ $431,133 420,093 .396,825
Operations
Airplanes operated at end of year 75 75 72
Passengers carried^'^ 8,098 7,531 7,391
Available seat miles'^ 13,450,395 11,696,478 11,123,.544
Revenue passenger miles 3.7 7,8.33,843 7,102,917 6,747,451
Passenger load factor--actual (%) 58.2 60.7 60.7
--
breakeven point (%) .55.8 59.8 56.0
--
profit margin (point difference) 2.4 0.9 4.7
Average revenue per passenger mile $ .0705 .0665 .0660
Average length in miles per passenger trip 963 943 913
Operating expense per available seat mile $ .0428 .04.36 .0405
Cargo revenue ton miles^'^ 134,955 108,619 95,2.39
Average number of employees 9,799 9,.357 9,696
1. Stock dividends were: 3% and 57o in 1974, 3% in 1973 and 10% in 1971. Stock split was: 2V!i for 1 in 1972.
2. Per share data are adjusted to f^ive retroactive effect to stock splits and stock dividends.
3. Operations of other carriers were substantially suspended from October 23 to November 16, 1976; September 1,
1975 to January 4,1976; December 6 to December 21,1975; [uly 14 to October 30, 1974; November 5 to December
18, 1973; June 30 to October 2,1972; December 15, 1971 to April 10,1972; July 8 to December 14, 1970. Operations
of a competing intrastate carrier were partially suspended.during the fourth quarter, 1973. Western's operations
1973 1972 1971 1970 19693 1968 1967
376,722 342,851 295,807 274,792 220,5.30 205,753 178,527
23,040 20,819 20,231 18,745 16,472 13,459 11,802
21,524 10,321 12,009 9,926 5,245 4,454 3,209
421,286 373,991 328,047 303,463 242,247 22.3,666 193,5.38
165,363 147,282 127,075 113,116 97,156 78,535 64,024
44,510 40,137 38,663 .37,-357 .32,857 27,191 21,9.37
38,304 36,224 35,144 .36,583 .34,821 25,051 20,085
132,987 126,741 110,859 104,-596 89,814 73,207 62,152
381,164 350,384 311,741 291,652 254,648 203,984 168,198
40,122 23,607 16,306 11,811 (12,401) 19,682 25,-340
(9,016) (8,787) (11,162) (14,586) (14,748) (6,536) (3,011)
945 582 1,349 111 26 (7.3) (304)
3,235 2,114 3,114 1,009 (151) 88 321
35,286 17,516 9,607 (1,655) (27,274) 13,161 22,346
14,900 6,,300 3,150 (2,2-50) (15,075) 4,725 10,125
20,386 11,216 6,457 595 (12,199) 8,4,36 12,221
20,386 11,216 6,457^ 595 (12,199) 8,4.36 12,221
1.35 0.75 0.43 0.04 (0.81) 0.-56 0.82
1.35 0.75 0.43 0.04 (0.81) 0.-56 0.82
1.21 0.68 0.41 0.04 (0.81) 0.-54
1.21 0.68 0.41 0.04 (0.81) 0.-54
16,074 10,573 8,247 3,290 (10,664) 9,527 13,263
1.07 0.70 0.55 0.22 (0.71) 0.64 0.89
0.96 0.65 0.52 0.22 (0.71) 0.60
12.3 8.5 6.7 5.4 1.1 7.6 10.6
0.23 0.08 -- --
0.16 0.3.3 0.33
15,050 15,0.30 15,012 15,011 15,010 14,981 14,892
113,652 96,723 86,-397 79,905 79,310 93,862 90,016
124,387 130,487 152,040 174,184 197,1.50 183,718 80,189
269,374 239,029 216,7.38 247,426 285,757 284,787 183,106
377,457 342,531 340,352 355,168 -367,588 349,039 2.31,342
74 71 70 72 78 64 51
7,382 6,931 6,206 6,188 5,7-52 5,693 5,108
11,175,518 10,300,178 9,776,869 9,8-39,299 8,-509,441 7,096,229 5,879,442
6,476,087 5,995,925 5,251,989 5,159,081 4,021,296 3,841,864 3,-327,160
57.9 58.2 53.7 52.4 47.3 -54.1 .56.6
52.4 54.4 52.2 52.2 53.1 -50.7 49.5
5.5 3.8 1.5 .2 (5.8) 3.4 7.1
.0597 .0578 .0577 .0542 .0551 .0537 .0537
877 865 846 8.34 699 675 651
.0341 .0340 .0319 .0296
.
.0299 .0287 .0286
76,474 76,233 73,249 68,646 60,514 47,446 38,940
9,826 9,383 8,951 8,961 9,286 8,052 6,920
were suspended from July 29 to Aui^ust 16,1969.
4. See Note 2 of Notes to Financial Statements.
5. Includes $560,000 from involuntary conversion of an aircraft.
6. The methodolof;^ used to compute the rate of return is the CAB Corporate Return on Investment.
7. OOO's omitted.
22
Balance Sheets
WES FERN AIR LINES, INC.
Dt'CcMiibor :il, 1976 and 1975
(in tliousaiuls of dollars )
ASSETS 1976
Current Assets:
Cash
(-ertificatos of dcj)osit
Coniinercial paper at cost and accrued interest
(which approximate market)
Receivables (net of allowance for doubtful
accounts of $1,S45--1976 and $950--1975)
Flight equi})ment expendable parts, at average
cost (less allowance for obsolescence of
$11,525-1976 and $9,65.5-1975)
Prepaid exj^enses and other current assets
Total current assets
Properties and Equipment at Cost (Notes 2, 3 and 4):
Flight equi{)ment
Facilities and ground eciuipment
Deposits on aircraft purchase contracts ....
Less allowance for tlepreciation and amortization
$ 11,476
7,748
25,911
45,L55
48,951
16,311
6,264
116,661
480,1.36
94,1,37
19,418
593,691
285,579
.308,112
Deferred Charges and Other Assets:
Preoperating costs
Other
4,.504
1,856
6,360
$431,133
See accompanying notes to financial statements.
1975
$ 10,.546
16,878
9,960
37,.384
48,5.39
14,943
6,944
107,810
477,816
88,241
613
566,670
256,985
309,685
1,045
1..5.53
2..598
$420,093
23
LIABILITIES AND SHAREHOLDERS' EQUITY 1976 1975
Current Liabilities:
Accounts payable
Salaries, wages and vacation benefits payable
Accrued liabilities (Note 5)
Income taxes payable (Note 6)
Advance ticket sales
Current portion of debt (Note 7)
Total current liabilities
$ 28,760
28,345
13,912
5,825
29,563
27,800
129,205
Long-Term Debt (Note 7) 110,420
Deferred Credits (Notes 6 and 8):
Deferred federal taxes on income
Unamortized investment credits
Other
Shareholders' Equity (Notes 7, 9 and 10):
Common stock --$1.00 par value per share
Authorized 25,000,000 shares
Issued 12,659,000 shares-1976 and 15,164,0(X) shares-1975
Capital in excess of par value
Retained earnings
47,007
17,644
9,757
74,408
12,659
28,937
75,504
117,100
Commitments and Contingent Liabilities (Notes 3 and 8)
$431,133
$ 28,857
19,680
13,088
679
27,546
15,750
105,600
107,617
42,435
18,645
7,858
68,938
15,164
37,461
85,313
137,938
$420,093
24
Statements of Earnings
For the vcars ended December 31, 197b and 1975
(in thousands ol dollars except per share amounts)
197b 1975
Operating revenues:
Passenger 1544,188 I4b5,081
(largo 37,92b 31,329
Other 23,091 22,5b3
b()5,2()5 518,973
Operating expenses:
Fuel 108,279 93,134
Wages, salaries and employee henelits (Note 5) 22b,3b7 201,bbl
Depreciation and amortization (Note 2) 38,058 .3b,054
Other (Note 11) 202,b43 179,.5b3
575,347 510,412
Operating income 29,858 8,5b 1
Other income (expenses):
Interest, principally on long-term debt (9,b75) (8,9b4)
Interest capitalized 78b 440
Interest income 1,941 3,b30
(iain on sale of equi}>mcnt 1,809 379
Other --net (704) 289
Farnings helore provision lor taxes on income
and cumulative effect of a change in accounting
(5,843) (4,22b)
princi{)le 24,015 4,335
Provision for taxes on income (Note b) 9,050 (825)
Farnings before cumidative effect of a change
in accounting principle 14,9b5 5,lb0
(Inmnlative effect of a change in accounting principle (Note 2) . .
--
7,lb0
Net earnings S 14,9b5 1 12,320
Farnings per share (Note 12):
Primary:
Farnings before cumidative effect of a
change in accounting principle $ 1.10 $ 0.34
(lumulative effect of a change
in accounting prineijile --
0.47
Net earnings $ 1.10 $ 0.81
Fully tliluted (assuming conversion of debentures):
Farnings before cumulative effect
of a change in accounting principle $ 0.98 $ 0.33
(Inmidative effect of a change
in accounting principle --
0.41
Net earnings $ 0.98 $ 0.74
See accompanying notes to financial statements.
25
Statements of Changes in Financial Position
For the years ended December 31,1976 and 1975
(in thousands of dollars)
Sources of Working Capital:
Earnings before cumulative effect of a change
in accounting principle
Add (deduct) items which did not affect working capital:
Depreciation and amortization (Note 2)
Taxes (Note 6):
Deferred income taxes
Deferred investment credits
Amortization of deferred investment credits
Ciain on disposal of property and equipment
Other
Total from operations before cumulative effect
of a change in accounting principle
Cumulative effect of a change in accounting princij)le
in 1975 amounting to $7,160 which did not affect
working capital (Note 2)
Total from operations
Reimbursements upon leasing of DC-10 aircraft and facilities.
Proceeds from disposal of {)roperty and equipment
Proceeds from issuance of long-term debt
Other--net
1976
$ 14,965
36,132
2,350
4,145
(2,925)
(1,809)
1,949
54,807
54,807
7,295
3,771
23,000
(1,156)
87,717
Applications of Working Capital:
Purchase of property and equipment
and advances thereon
Repurchase of common stock (Note 10) ....
Reduction of long-term debt including transfers
to current liabilities
Cash dividends
Preoperating costs related to route development
Increase (decrease) in working capital
42,362
30,527
20,000
5,312
4,270
102,471
$(14,754)
Summary of Increases (Decreases) in Working Capital:
Cash, certificates of deposit and commercial paper
Receivables
Expendable parts and prepaid expenses ....
Accounts payable, advance ticket sales, accrued and
other liabilities
Net increase (decrease)
$ 7,751
412
688
(23,605)
$(14,754)
See accompanying notes to financial statements.
1975
$ 5,160
34,781
9,905
(2,555)
(2,975)
(379)
1,475
45,412
45,412
15,882
2,535
8,450
2,816
75,095
41,985
15,750
7,126
64,861
$10,234
$10,017
9,401
3,834
(13,018)
$10,234
26
SlaleiiitMils of Shareliolders Equity
For the years ended December 31, 1976 and 1975
(in tlionsands of dollars )
Balance at |annarv 1, 1975
Kxercise ol stock oj)tions
Net earnin^;s
(iash dividends
Balance at Decembei' 31, 1975
Kxercise of stock options
Rej)nrcbase of common stock
Net earnings
(iasb dividends
Balance at December 31,1976
(Notes 7, 9 and 10)
See accompanving notes to financial statements.
(lonimon
Stoc k (lapital in
SI.00 Excc'ss ol Rotainc'd Sha rc'holdcrs'
'ar \'alnc* Par \'aliic` Earnings Ecpiity
$15,1.59 $37,440 $80,119 $132,718
5 21 --
26
-- --
12,320 12,.320
-- --
(7,126) (7,126)
15,164 .37,461 85,31.3 1.37,9.38
4 .32 --
.3()
(2,.509) (8,.5.56) (19,462) (.30,.527)
-- --
14,965 14,965
-- --
(5,312) (5,312)
$12,6.59 $28,9.37 $75,.504 $117,100
Notes to Financial Statements
(In tlionsands of dollars excejit per share amounts).
Note 1. Summary of Significant Accounting Policies.
Property and Equipment: Propertv and ecpiipment,
exclusive of residual values, are depreciated ovei' esti
mated nsefid lives bv the straight-line method. Main
tenance and repairs are expensed as incurred. (See
Note 2.) Major l enewals and betterments are charged
to jii'opertv and eqnijiment accounts.
Preoperating Costs: Significant costs, such as those
for traffic jiromotion and personnel training, related
to the inangnration of service over major new routes
and to the introduction of new tvpes of aircraft arc
deferred and amortized over five vears.
Interest Capitalized: Interest related to dejiosits on
aircraft jiurchasecontracts iscapitalized and amortized
over the useftd lives of the aircraft.
Investment Credits: Investment credits generated by
acquisition of assets are amortized to income on a
straight-line basis over the useful lives of the related
assets. Amortization for financial statement purposes
may exceed accumulated amounts utilized on West
ern's tax returns to the extent of available deferred
lederal taxes on income on the accompanving balance
sheets.
Obsolescence of Expendable Parts: An allowance for
obsolescence of flight ccjuipment exjiendable parts is
accrued over the useftd lives of the related aircraft
types.
Advance Ticket Sales: Passenger ticket sales are
recorded as a current liahilitv until hilled by other
carriers for trans])ortation provided by them or until
recognized as revenues for services provided bv West
ern. At December 31, 1976, S12,.343 (1975-Sl 1,476) was
estimated to he })ayahle to other carriers and $17,220
(1975 --$16,070) was estimated to be related to trans
portation to be pro\'ided b\AVestern.
Note 2. Depreciation and Amortization.
The estimated useful lives and residual values of air
craft are as follows:
Estimated Rcsidttal
I'sclul I.ile N'ulue
DC-IO 16 years 10%
727 l.'j years* 13%
I'M 11 years* 13%
707 12 years 13%
720B C.ommoii Retirement Date --
December 31. 1978 Slot)
*Elle(tiye October 1. 1976 tbe estimated dejireciable lices ol lilteeii
727 iiircrtilt and twenty-loni 737 tiirc ralt were extended Irom 12 years.
1 his change recognizes mtinagement's decision to continue using
these iiircralt beyond the period in which they would base become
hilly de|)reciated. For 197(). depreciation expense was decreased
approximately SI.200; net earnings was incieased by approximately
S600 or SO.01 |)er share (primary).
Khe estimatctl useful lives of ground ecini})ment
range from four to ten years. For buildings and
im])rovements on leased property, the estimated use
ful lives are generallv the periods of the leases.
"Other" operating expenses included de])reciation
and amortization expense of $350 in 1976.
In 1975 Western changed its method of accounting
for costs of major flight equipment maintenance from
27
one of charging; such costs to reserves (accumulated
by charges to income on an hours-flown basis) to one of
direct expensing of such costs as incurred. The $7,f60
cumulative effect of this change on prior years ($13,7H5
less deferred income taxes of $6,625) is included in
net earnings for the year f975. This change had no
other material effect on net earnings for 1975.
Note 3. Commitments and
Contingent Liabilities.
At December 31, 1976 WTstern had on order seven 727
aircraft for deliverv in 1977.The total purchase {)rice,
including related spares, is estimated to be $78,000 of
which approximately $23,500 has been paid in advance
dejiosits. Lease financing for five of these aircraft is
being finalized.
During January, 1977, subject to lender ajiproval.
Western exercised options to }>urchase five 727 air
craft and agreed to purchase two DC-10 aircraft for
deliverv in 1978. The cost of these aircraft will be
approximately $116,000.
Outstanding commitments for flight ecpiipment
modifications amounted to approximately $6,200 anti
lor lacilities and ground equipment amounted to
approximatelv $2,500 at December 31, 1976.
At December 31, 1976 various legal actions were
pending against the Citv of Los Angeles anti various
cross complaints were pending against Western anti
other airlines because of aircraft noise and engine
emissions. Western's counsel in these actions, which
also rejnesents most of the other airlines, is of the
opinion that the airlines have substantial tlefenses to
the imposition of any liability.
Along with Northwest Airlines, Inc., Western is a
tlefentlant in an action brought by Alaska Airlines,
Inc. alleging vit)lation of anti-trust laws on particidar
routes common to all three airlines. In the o})inion of
Western's counsel, such action will not result in any
material liability to Western.
Western is also involved in various other litigation,
including certain cases alleging discrimination in
emplovment {practices, that management believes will
not have a materially adverse effect upon Western.
Western is required by Federal Aviation Adminis
tration regidations,effective Januarv 1, 1977, to retrofit
or replace aircraft which do not comply with the speci
fied noise limitations. Modifications must take place
according to stipulated timetables and all affected air
craft must be modified or replaced by Januarv 1, 1985.
The company j)resentlv intends to replace its eighteen
72()B aircraft and to retrofit or re})lace an undeter
mined number of its twenty-four 737 aircraft and five
707 aircraft. The cost of replacing and retrofitting
these aircraft cannot be determined with any degree
of certainty. External equity and debt financing or a
combination thereof will be requirefl to finance air
craft necessarv for growth and replacement.
Note 4. General Description of the Impact of Inflation
(Unaudited).
Inflation is reflected in operating expenses in the year
in which the jn ice increases occur except for the cost
of replacing capital assets. Historically because of the
regidatory process fare increases have lagged these
[)rice increases.
Replacing capital assets, j)rimarily aircraft and
ground [)ro})erty with aji.sets having equivalent pro
ductive caj^acity has usually retjuired a greater capital
investment than was required to ])urcha.se the original
productive caj)acity. d'he.se higher acquisition costs
reflect the cumidative imj)act of inflation.
Western's annual report on form lO-K (a copy of
which is available iq)on request) contains information
with resjiect to year-end 1976 replacement cost of
productive capacity and the ajjproximate effect which
re])lacement cost woidd have had on the computation
of depreciation expense for the year.
Note 5. Retirement Plans.
Retirement j>lans cover all classes of emjjloyees. West
ern makes contributions to the comjjany sponsored
plans which, together with the participant's required
contributions, are sufficient to fund current service
costs annually and prior service costs over 10 to 20
years. Actuarial gains and losses are amortized over
ten-year periods.
The cost of retirement plans charged to operating
expense amounted to $18,211 for 1976 ($15,453-1975)
which included company contributions to a union
sponsored plan for mechanics and related employees
of $1,929 for 1976 ($1,724--1975). The increase in ex
pense was caused by higher wages and by a larger
number of employees participating in the plans.
Effective January 1, 1976, Western amended certain
plans to comply with pension legislation and to stream
line benefits. In addition the actuarial method was
changed for one plan and certain actuarial assump
tions were changed for all plans. These amendments
and changes decreased expense in 1976 by approxi
mately $1,200 and increased net earnings by $600 or
$0.04 per share (primary).
Western's actuaries are of the opinion that total assets
under the plans exceed liabilities for accrued vested
benefits. Lhifunded prior service costs of the plans
amounted to approximately $18,897 at December
31,1976.
Note 6. Taxes on Income.
I he provision for taxes on income before cumulative
effect of a change in accounting principle is summa
rized as follows:
1976 1975
Current income taxes:
Federal $4,405 $(5,425)
State 1,075 225
Deferred federal income taxes 2,550 9,905
Deferred investment credits 4,145 (2,555)
11,975 2,150
Amortization of investment credits (2,925) (2,975)
$9,050 $ (825) 28
In 1975 the Internal Revenue Service concluded
examinations of Western's federal income tax returns
throust;h 1972. Western was successful in accelerating
dej)reciation for tax purj)oses which residted in a
refund for certain of the years under review. I'he pro
vision for taxes on income for 1975 includes reclassifi
cations relating to timing differences (decreased cur
rent federal income taxes of $4,025 and restored
deferred investment credits of $1,150, which are offset
by increased deferred federal income taxes of $5,155).
Deferred income taxes ari.se from timing differences
between financial and tax reporting. The tax effects
of these differences follow:
1976 1975
Depreciation $ 464 $9,575
Interest capitalized (IW) (429)
Preoperatint;; expense 1,668 (200)
Other
. .
382 959
$2,3.50 $9,905
Investment credits unapplied on tax returns
amounted to $17,705 at December 31, 1976 ($19,925 --
1975) with $1,502 expiring in 1979, $4,093 in 1980,
$6,176 in 1981, $4,036 in 1982 and $1,898 in 1983.
Of the $17,644 unamortized investment credit bal
ance at December 31, 1976 ($18,645-- 1975), $4,170
($3,082 --
1975) remains from investment credits uti
lized by reduction of taxes paid and $13,474 ($15,563 --
1975) is related to investment credits not yet utilized
for reduction of taxes paid.
A reconciliation between the amount of reported
taxes on income and the amount computed by multi
plying earnings before provision for taxes on income
by the expected tax rate of 48% follows:
1976 197.6
Taxes on income at 48% $11,527 $ 2,081
Increases (reductions) in taxes resultin;^ from:
Amortization of deferred investment
credits (2,925) (2,975)
State income taxes net of federal
income tax benefit 559 117
Other (Ill) (48)
Taxes on income $ 9,050 $ (825)
The federal income tax returns for 1973 and 1974
are being examined by the Internal Revenue Service.
Note 7. Unsecured Debt.
At December 31,1976 and 1975 debt was as follows:
1976 1975
Current portion of debt:
Revolving bank line of credit
Current maturities of long-term debt . .
.
$19,500
8,300
$ 9,750
6,000
$27,800 $15,750
Long-term debt:
Senior
Revolving bank line of credit
5%% in.stallment notes due Se])tember 1,
1981 with annual [trincipal payments
$ -
$ 11,700
on September 1 ol $4,000
678% installment notes due September 1,
1984 with annual principal payments of
$2,(X)0 on September 1 which will
16,000 20,0(X)
increase to $7,0(K) a year starting in 1982
8%7o installment notes due November 16,
1985 with quarterly principal j)ayments
29,0(K) 31,(MX)
of $768 starting in 1981 15,362 15,362
iibordinated
.5V47o convertible subordinated
debentures due February 1,1993, with
sinking fund payments of $1,500
60,362 78,0f)2
a year starting in 1979
107o subordinated sinking fund notes
due April 15,1984, less unamortized
discount of $198,with sinking fund
payments of $2,300 a year starting
29,555 29,555
in 1977 20,503 --
.50,058 29,555
$110,420 $107,617
On June .30, 1976 borrowings under a Bank Loan
Agreement, dated July 1,1968, as amended, which pro
vided a line of credit in the total amount of $65,000
were repaid and a new Bank Loan Agreement w^as
consummated. This new Bank Loan Agreement pro-
vitles Western with a $75,000 revolving line of credit
until December 31,1978. On this date the line of credit
can be re})laced by a term note in an amount not to
exceed $75,000 which will mature on June .30, 1983
with quarterly payments of principal starting March
31, 1979. The interest rate on funds borrowed is 1/2%)
over the bank's prime commercial rate until June 30,
1979 when it will increase to 5/87o over such rate. The
commitment fee is l/27o per annum on the unused
portion. On December 31, 1976 the interest rate for
Western was 6%% and $55,500 was available for future
drawdowns.
Amounts outstanding under this agreement which
management intended to repay within 12 months
were classified as current liabilities. The remaining
amounts outstanding were classified as long-term debt.
Although this Bank Loan Agreement does not
require compensating balances. Western has infor
mally agreed to maintain on deposit average balances
equal to 10%) of the total credit available plus f07o of
borrowings.
The agreements relating to this line of credit and
other long-term debt contain provisions which limit
retained earnings from which restricted payments
(cash dividends and purchases of Western's common
stock) can be made. The most restrictive of these pro
visions limited amounts available for such payments
to $13,666 at December 31,1976.
These agreements also contain, among other things,
requirements pertaining to cash and working capital
levels and provisions which may restrict additional
borrowings.
29
The following schedule shows the amount of long
term debt due in each of the five following calendar
years excluding borrowings under the revolving line
of credit:
1977 J 8,900
1978 8,300
1979 9,800
1980 9,8(K)
1981 12,872
At December 31, 1976, 2,465,000 shares of common
stock were reserved for conversion of debentures at a
conversion price of 111.99 per share.
Note 8. Lease Commitments.
Total rental expense was 123,703 for 1976 (119,483--1975). Rental expense for noncapitalized "financing" leases was
$14,332 for 1976 ($11,740--1975). For disclosure purposes required by regulations of the Securities and Exchange
Commission, a "financing" lease is one which, during the noncancelable lease period, either (i) covers 75% or more
of the economic life of the property or (ii) has terms which assure the lessor a fidl recovery of the fair market value
of the property at the mception of the lease, plus a reasonable return on investment.
At December 31, 1976 minimum rental expense under all noncancelable leases expiring after December 31, 1977
was as follows:
Totals
Flight Airport Other Financing All Other
Flquipment Facilities Facilities Leases Leases
Annually
1977 111,766 $ 4,984 $ 2,652 S15,529 $ 3,873
1978 11,766 4,983 2,592 15,529 3,812
1979 11,766 4,766 2,415 15,575 3,372
1980 11,766 4,343 2,316 15,547 2,878
1981 11,766 4,198 2,133 15,408 2,689
Five-year periods
1982-1986 49,537 19,439 8,061 66,751 10,286
1987-1991 34,361 15,768 6,201 48,310 8,020
1992-1996 --
9,298 1,548 6,434 4,412
Thereafter
1997-2007 6,596 -
3,515 3,081
Flight equipment leases cover six 727 aircraft acquired in 1969 under a lease expiring in 1984, two DC--10 aircraft
acquired in 1973 under a lease expiring in 1991, one DC-10 aircraft acquired in 1975 under a lease expiring in 1991,
and one DC-10 aircraft acquired in 1976 under a lease expiring in 1991. The rental expenses for certain leases
included in the above tabulation are normalized on a straight-line basis. At December 31, 1976 other deferred
credits in the accompanying balance sheets include $5,330 ($5,116--1975) representing the excess of normalized
rental expense over cash payments.
The present values, in the aggregate and by major categories, of minimum lease commitments applicable to
noncapitalized "financing" leases at December 31,1976 and 1975 were as follows:
Interest Rates Used in
Computations
Present Values Weighted Average Range
1976 1975 1976 1975 1976 1975
Flight equipment $ 84,251 $ 67,888 9.5% 9.4% 8.4-10..5% 8.4-10.5%
Terminal and hangar facilities 32,416 33,932 7.0% 7.5% 3.7- 9.2%. 3.7- 9.2%
Other facilities 2,131 2,407 9.5% 7.1% 6.9-10.4% 6.9-10.47o
$118,798 $104,227
If (for purposes of disclosure required by regulations of the Securities and Exchange Commission) (i) all of the
above "financing" leases were capitalized, (ii) the related property rights were amortized on a straight-line basis, and
(iii) interest costs were accrued on the basis of the present value of outstanding lease commitments, amortization
would have been $6,992 and interest would have been $9,785 for 1976 (5,564 and $7,848, respectively, for 1975). Net
earnings for 1976 would have been reduced by $1,174 or $0.09 per share (primary) [$802 or $0.05 per share (primary)
for 1975].
The interest rates used in these computations are based on the interest rates of the underlying debt.
In November, 1976, the Financial Accounting Standards Board issued Statement No. 13,"Accounting For Leases'.'
Based on criteria set forth in this document, leases for flight equipment and other facilities will be capitalized in the
financial statements. Capital leases under Statement No. 13 do not include noncapitalized "financing" leases for
terminal and hangar facilities as disclosed in the above tabulation.
Note 9. Stock Options.
Western presentlv has a qnalilied stock option |)lan
adopted in 1964 lor ollicers and a nontinalilied stock
option plan adopted in 1974 lor ollicers and key per
sonnel. I'hese })lans are summarized as lollows:
Number ol Average
Shares Price
|anuarv 1,107.') .
,')0.'),699 S9.66
Options granted l.'),0(K) 8.0()
Options exercised (1,.')89) i').60
Options cancelled and expired (l.'),76}) 8.74
December 01,197.'). .')00,0`16 9.68
Options granted t,0(X) 9.,'')6
Options exercised (1,120) 8.80
Options cancelled and ex])ired (20,678) 11.21
December 01, 1970 479,.')48 9.60
Shares exercisable at:
December 01,1976 :i(K),082 9.80
December 01.197.')
.
201,2.'-)2 9.99
No additional o})tions may be granted under the
1964 stock option plan; however 643,805 shares were
reserved under the 1974 stock option plan at December
31,1976 lor the issuance of additional options.
Note 10. Repurchase of Common Stock.
On April 28, 1976 Western rejtnrchased 2,508,832
shares of its common stock from a shareholder for
S7,307 in cash and 523,000 in jjrincipal amount of 10%
subordinated sinkini; fund notes. (See Note 7.) These
notes were sold to the public on April 29, 1976 at 99%
of princij)al amount.
Note 11. Mutual Aid Agreement.
W'estern is a jiartv to the Mutual Aid Agreement which
])rovides for financial aid in the event that any of the
participating carriers is forced to suspend operations
becau.se of certain tvpes of strikes. Payments to other
carriers included in "other" operating expenses were
5899 in 1976(54,832-1975).
Note 12. Earnings per Share.
Earnings per common share are based on the weighted
average number of shares of common stock outstand
ing which were 13,601,()()() shares in 1976 (15,163,000--
1975). Earnings per common share assuming dilution
trom conversion of the debentures were based on
16,066,000 shares in 1976 (17,628,000-1975). Ont.stand-
ing stock options have no material dilutive effect on
earnings per common share.
Note 13. Quarterly Financial Data (Unaudited).
Summarized quarterly financial data for 1976 is as
follows:
riirco Months KiuU'd
Mar. 01 June 00 Sept. !?() Dec. 01
()perat ing
revenues $ 1 09,48,'') SI 46,272 $166,026 $1,`)0,122
()|)erat ing
income 1,().')() 8,000 16,840 0,929*
Net earnings 1,420 0,812 7,821 1,909*
*()|K"ratin^ income and net earnings were increased bv SI,200 and
StiOO, respectively, as a result ol a change in estimated depreciable
lives ol I'M and 727 aircralt. (See Note 2.)
31
Accountants Report
Peat, Marwick, Mitchell 8c Co.
555 SOUTH FLOWER STREET
LOS ANGELES, CALIFORNIA 90071
The Board of Directors
We have examined the balance sheets of Western Air Lines, Inc. as of December 31,1976 and 1975 and the related
statements of earnings, shareholders' equity, and changes in financial position for the years then ended. Our
examinations were made in accordance with generally accepted auditing standards, and accordingly included
such tests of the accounting records and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the aforementioned financial statements present fairly the financial position of Western Air
Lines, Inc. at December 31,1976 and 1975, and the results of its operations and the changes in its financial position
for the years then ended, in conformity with generally accepted accounting principles consistently applied during
the period subsequent to the change, with which we concur, made as of January 1,1975, in the method of accounting
for costs of major flight equipment maintenance as described in Note 2.
February 25,1977
Board of Directors
President, Inter-American Commercial Arbitration
Commission, Mexico City, Mexico
Victor L. Brown*
Presiding Bishop, The Church ofJesus Christ of
Latter-day Saints, Salt Lake City, Utah
Tames. D ^Garibaldi
Homey at Laxvf.Garibaldi & Sausser,
Los Angeles, California
Chairman ofthe Board, Hickel Investment Company
Anchorage, Alaska
Mii^iiel M. Blasquez Vidor L. Brown
Bert T. Kobayashi, Jr.
Attorney-at-Law, Kobayashi, Koshiba & Watanabe,
Honolulu, Hawaii rfi
.
1 elevtston'Producer and Broadcaster
Chairman ofthe Board, LinkletterEnterprises, Inc.
[rvine, Califomia,
Assistant to the President, SaintJohn's University,
St. Paul, Minnesota
Dominic P. Renda*,i^
Leo H. Dwerlkotte `v'
Las Vegas, Nevada]
Director and Executive, Faberge, Inc.,
Beverly Hills, Califomia
Dr. Donald H. McLaughlin
Edwin W. Pauley
.Arthur G. Linkletter John H. Myers Chairman ofthe Board, Pauley Petroleum, Inc.,
Los Angeles, Califomia
.Vernon .0_Underwood
Chairman ofthe Board and ChiefExecutive Officer,
Young's Market Company, Inc., Los Angeles, Califomia
Chairman ofthe Board, Union Bancorp, Inc.,
Los Angeles, Califomia
Walker Bank & Tmst Company, Salt Lake City, Utah
Arthur G. Woodley
Bellevue, Washington
President, Mountain States Employers Council, Inc.,
Denver, Colorado
Dominic P. Rencta Robert H. \ oik
President and Chief Operating Officer,
Western Air Lines, Inc., Los Angeles, Califomia
Chairman ofthe Board, Westmor Corporation
(formerly Unionamerica, Inc.)
Los Angeles, Califomia
Member, Executive Committee
Directors Emeriti
Attomey-at-Law, Darling, Hall, Rae & Gute,
Los Angeles, Califomia
Chairman ofthe Board, Homestake Mining Company,
San Francisco, Califomia
Chairman ofthe Board and ChiefExecutive Officer,
Western Air Lines, Inc., Los Angeles, Califomia
Corporate Officers
Executive Officers
[Chat? Board and ChiefExecutive Officer
Presideyit and Chief Operating Officer
Corporate Planning Division
James L. Mitchell
Senior Vice President-Corporate Planning
^ice President-Schedule Planning
Vice President-Data Processing and Systems
Vice President-Cornmunications
Finance and Administration Division
1--
` SentorjVice Pj-esident-Finance and Administration
Paul V^Donahue
Vice President-Procurement
Yice President-Financial Planning
Vice President and Treasurer
President and Controller
President-Personnel Relations
Assistant Vice President-Special Projects
\Senior_Vice'^Presiderit-Lesal and Secretarv
iViceTj-esident-Regulatorv Law
Assistant Secretary and Director-Corporate Law
Marketing Division
Sen ioriVi^President-Marketing
Vice President-Sales and Service
Vice President-Passenger Sales
Lawrence H. Lee
Vice President-Inflight Service
Vice President-Passenger Service
[Vice President -Advertising and Sales Promotion
'i^Preside n t-Ma rketing A dministration
^wPPresident-FieId Management
Assistant Vice President-Cargo Sales and Service
Operations Division
Senio^VicPPresident-Operations
reside nt-Engineering
wicCPresident-Flight Operations
Vice President-Maintenance
;
Corporate Affairs
esident-Corporate Affairs
Assistant Vice President-Consumer Affairs
Government and Industry Affairs
NeirS: Stewart
Vice President-Government and Industry Affairs
Regional Officers
Regional Vice President-Seattle/Tacoma
Regional Vice President-San Francisco
iEllHntfan?aaa
Regional Vice President-Hawaii
Regional Vice President-Denver
Regional ViceJ^^esident-Salt Lake City
R egionaijVi^President-Fie Id
R egional Vice Preside nt-Mexico
jResional Vice President-A laska
}Re[ional Vice President-Los A ngeles
Regional Vice President-Minneapolis/St. Paul
The principal occupation ofeach ofthe officers is his position with Western.
General Offices
Western Air Lines Building, 6060 Avion Drive
Los Angeles International Airport
Los Angeles, California 90009
State Registrars/Transfer Agents
Bank of America National Trust & Savings Assn.
Ill West Seventh Street, Los Angeles, California 90014
Debenture and Subordinated Note Trustee
The Chase Manhattan Bank
1 Chase Manhattan Plaza, New York, New York 10015
Stock Listing
New York Stock Exchange
Pacific Stock Exchang
New York Stock Exchange
Pacific Stock Exchange
General Counsel
Hugh W. Darling
Darling, Hall, Rae & Cute
523 West Sixth Street, Los Angeles, California 90014
Independent Accountants
Peat, Marwick, Mitchell &: Co.
555 South Flower Street, Los Angeles, California 90071
Fourth Thursday in April