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WESTERN AIR LINES ROUTES 
PROPOSED ROUTES 
Western/Continental Alaska Interchange 
Western/Continental Alberta Interchange 
Western/Braniff Alberta Interchange 
`Service suspended by order of the CAB through February 1979 
 Western Air Lines, lnc.,1977Annual Report 
Table of Contents 
0 Chairman's Letter 
5 Financial Review 
6 Management's Discussion 
8 Shareholders, Stock and Financial Position 
10 Flight Equipment 
11 Marketing 
12 Ground Properties and Facilities 
12 Regulatory Matters 
14 Fares and Rates 
1 5 Pending Legal Proceedings 
16 Management 
16 Employees 
17 Ten Years of Western Progress 
20 Accountants' Report 
21 Balance Sheets 
23 Statements of Earnings 
24 Statements of Changes in Financial Position 
25 Statements of Shareholders' Equity 
25 Notes to Financial Statements 
Cover: A Western DC-10 at sunset in Los Angeles. 
Inside: In recognition of the wide geographical repre 
sentation Western's board of directors gives the company 
the board members have been portrayed against a 
backdrop of their home areas. 
Description of Business 
Western Air Lines, Inc., is a certificated air carrier en 
gaged in scheduled air transportation of passengers, 
cargo and mail over approximately 32,000 route 
miles. The company serves 42 cities in 15 states, 
Canada and Mexico. Western has competition from 
other airlines on substantially all of its routes. It is 
regulated by the United States and certain state and 
foreign governments. 
 Chairman's Letter 
Fellow Shareholders: 
In 1977, Western achieved another year of profit 
able operations, continuing a pattern of consistent 
earnings which has been maintained with but one 
exception for nearly three decodes. Net income was 
$14,362,000, or $1.09 per shore, compared to 
$14,965,000, or $1.10 per shore, in 1976. 
For the sixth consecutive year, Western paid divi 
dends on its common shores. In both 1977 and 
1976 these payments produced the highest cosh 
dividend yield of any trunk airline common stock. 
On February 21, 1978, Western paid another reg 
ular cosh dividend of 10 cents per shore. This marked 
the 23rd consecutive cosh dividend paid to holders 
of Western's common stock. 
Although the industry generally reported higher 
earnings for the year, much of this improvement 
did not result from growth in operating income, but 
related instead to non-operating items such as gains 
on aircraft soles, profits from subsidiaries, debt retire 
ment at o discount and flow-through of investment 
tax credits. 
I am pleased to report that our strong emphasis 
on productivity in every division of the company 
continued to show gratifying returns in 1977. Al 
though it was the first full year of operation of our 
two major new routes --Los Angeles-Miami and 
Honolulu-Vancouver -- we were able to hold the 
increase in number of employees to six percent, 
notwithstanding our double-digit growth in traffic, 
capacity and revenues. Total operating revenues 
per Western employee improved by eight percent. 
This gain in productivity, reflecting efforts and team 
work of the entire organization, was one of the fac 
tors which enabled us to hold our breakeven load 
factor at 55.8 percent, the some level it had been 
in 1976. 
Constant striving for improved performance is 
on essential response to the continuing inflationary 
trend in the cost of labor, fuel and other supplies 
and services. Our DC-10 utilization in 1977, for 
example, was highest in the trunkline industry for 
this type of jet. Western is also the notion's most 
fuel-efficient airline, in terms of revenue passenger 
miles flown with the fuel that we consume. 
Our overall traffic growth was satisfactory, with 
revenue passenger miles gaining 10 percent. This 
compared to on industry overage for oil U.S. trunk 
airlines of seven percent. Western's increase in cargo 
ton miles was 17 percent, compared to six percent 
for the industry. Our capacity, measured in available 
seat miles, was up 11 percent; the industry overage 
3 
was six percent. 
Combined with several small fore increases, 
growth in traffic made it possible for Western to 
attain o 14 percent increase in operating revenues 
but increased expenses outpaced the increase in 
revenues. Expanded operations, coupled with the 
inflationary spiral, caused our operating expenses 
to rise 16 percent over 1976. 
Western was not the only carrier to be plagued 
with inflationary pressures. Of every expense dollar, 
the airlines now ore required to spend approxi 
mately 60 cents for labor and fuel olone, and infla 
tion in these two major cost areas will continue to 
be one of the most formidable challenges facing 
our industry. 
Producers of goods and services normally con 
pass cost increases through to the consumer. This 
is not the cose with airlines, ond the prospects for 
improvement ore uncertain. It is encouraging that 
the new chairman of the Civil Aeronautics Board has 
expressed the view that prospective costs should be 
used to determine the need for fore increases. If this 
concept is followed by the CAB, airlines could receive 
some fore relief this year. 
Meanwhile, "Super Saver" discounts of 30 percent 
and more ore being made available on virtually 
every domestic route. There is no empirical evidence 
concerning elasticity of demand for our product, and 
we connot accurately predict what effect these deep 
discounts will hove on industry profits. But it is our 
hope that they will begin to penetrate an untopped 
moss market for air transportation. 
Your company is not taking a wait-and-see pos 
ture but has matched all competitive Super Saver 
filings, initiated reduced fares in markets that need 
generative assistance, such as Los Angeles-Miami, 
and will do oil possible to maintain or improve its 
market position and profits. 
During 1977, high priority was given to aggressive 
marketing strategies, cost control, regulatory 
matters and fleet planning, all of which contribute 
to both profitability and future growth. 
We ore gratified with the success of our Honolulu- 
Vancouver service which was inaugurated in June 
of 1976 and produced a profit during 1977. Our 
Los Angeles-Miami route has been much more dif 
ficult to develop. Although our shore of the nonstop 
traffic increased from 36 percent in January 1977 
to 51 percent by October 1977, the route neverthe 
less showed o loss for the year. We ore hopeful that 
growth of the overall market through Western's in- 
 novalive promotional programs and new low fores 
will improve our operating results on this segment 
in 1978. 
As a result of fhe new bilateral agreement be 
tween the United States and Mexico, signed in 
January 1978, we expect to receive approval to odd 
Mexico's second largest city -- 
Guadalajara -- to 
Western's route system. Inauguration of service be 
tween Los Angeles and Guadalajara is planned for 
June 00. An attractive tourism center, Guadalajara 
has a strong community of interest with California. 
We believe fhaf offer a reasonable period of 
development this will be a profitable route. 
Western has continued to move forward with its 
fleet modernization program, taking delivery in 
1977 of seven new Boeing 727s and ordering two 
McDonnell-Douglas DC-lOs plus five additional 727s 
for 1978 delivery. At the some time, we sold at 
prices in excess of fheir book values four of our 
aircraft that ultimately would hove hod to be retired 
for environmental reasons. We also reached agree 
ments for the sole of nine ofher aircraft for delivery 
to purchasers in 1978 and 1979. 
At its first meeting of 1978, your board ofdirecfors 
approved a plan fo exercise options for the pur 
chase of two more DC-1 Os and five 727s for delivery 
during 1979. We hove negofiafed options for addi 
tional delivery positions in 1980 and 1981. 
As your company nears its 53rd year of operation, 
it has o strong route system linking some of the most 
dynamic areas of Norfh America, if has on aggres 
sive managemenf feam and a well-controlled oper 
ation which gives us confidence for an opfimistic 
ouflook. 
Bofh challenges and opportunities lie ahead of us 
in an economic environment that may be different 
from that in which we operate today. These eventu 
alities ore being given coreful attention, and I believe 
that we ore in a sound position to meet them, 
l Your continued confidence ond support ore 
appreciated and will assist us in making 1978 
another successful year. 
Arthur F. Kelly 
Chairman and Chief Executive Officer 
Arthur F. Kelly 
Chairman and Chief Executive Officer 
March 20, 1978 
4 
 Financial Review 
1977 1976 1975 
Change 
1977 1976 
vs. vs. 
1976 1975 
Operating revenues: 
Passenger $614,581 544,1 88 465,081 13% 17 
Cargo 47,613 37,926 31,329 26 21 
Other 29,270 23,091 22,563 27 2 
691,464 605,205 518,973 14 17 
Operating expenses: 
Wages, salaries and employee benefits 263,083 226,367 201,661 16 12 
Fuel 137,969 108,279 93,134 27 16 
Depreciation and amortization 34,973 38,058 36,054 -8 6 
Other 233,306 202,643 179,563 15 13 
669,331 575,347 510,412 16 13 
Operating income 22,133 29,858 8,561 -26 249 
Other income (expenses): 
Interest expense, net (7,058) (8,889) (8,524) -21 4 
Gain on sole of equipment 4,549 1,809 379 151 377 
Other --net 3,388 1,237 3,919 174 -68 
Earnings before provision for 
foxes on income and cumulative 
effect of accounting change 23,012 24,015 4,335 -4 454 
Provision for foxes on income 8,650 9,050 (825) -4 * 
Earnings before cumulative effect 
of accounting change 14,362 14,965 5,160 -4 190 
Cumulative effect of accounting change . . 
-- -- 
7,160 -- 
-100 
Net earnings $ 14,362 14,965 12,320 -4% 21 
Earnings per common shore: 
Primary: 
Earnings before cumulative effect 
of accounting change $ 1.09 1.10 0.34 
Cumulative effect of accounting 
change -- -- 
0.47 
Net earnings $ 1.09 1.10 0.81 
Fully diluted: 
Earnings before cumulative effect 
of accounting change $ 0.95 0.98 0.33 
Cumulative effect of accounting 
change -- -- 
0.41 
Net earnings $ 0.95 0.98 0.74 
Passengers carried (000) 8,757 8,098 7,531 8% 8 
Available seat miles (000,000) 14,964 13,450 1 1,696 1 1 15 
Revenue passenger miles (000,000) 8,589 7,834 7,103 10 10 
Passenger load factor --actual (%). . . . 
57.4 58.2 60.7 -1 -4 
-- 
breakeven(%).... 55.8 55.8 59.8 -- 
-7 
Note: In thousands of dollars except per shore amounts. 
*Not computed. 
5 
 Management's Discussion 
Western's net earnings for 1977 were $14,062,000, 
compared to $14,965,000 for 1976. Net earnings 
for 1977 included $2.4 million resulting from the 
extension of depreciable lives of 727 and 737 air 
craft and $2.1 million from gain on soles of aircraft. 
Net earnings for 1976 included $600,000 ond 
$930,000, respectively, from these items. 
Items in the table on Page 5 which in the opinion 
of Western's management need explanation ore 
discussed in the following sections. A ten-year finan 
cial ond statistical summary appears on Page 17. 
Increases in operating revenues in 1977 over 
1976 and 1976 over 1975 resulted from growth in 
traffic, ond to a lesser degree, increases in passen 
ger yield (overage revenue per passenger mile). 
Passenger revenues constitute close to 90 percent of 
Western's operating revenues and 93 percent of 
passenger revenues come from coach ond econ 
omy travelers. 
The following fable shows increases ond de- 
creases in operating revenues and traffic. 
Increases (Decreases) 
1977 vs. 1976 1976 vs. 1975 
Amount % Amount % 
(000s) (000s) 
Operating Revenues 
Passenger $ 70,393 13% $ 79,107 17% 
Cargo 9,687 26 6,597 21 
Other 6,179 27 528 2 
$ 86,259 14 $ 86,232 17 
Revenue Passenger Miles 
48 States and Canada 489,931 1 1 318,848 8 
Hawaii 190,565 9 286,921 16 
Alaska 30,946 6 98,859 22 
Mexico (55,468) (9) 16,596 3 
Charter (mostly Hawaii) 98,969 87 9,702 9 
754,943 10 730,926 10 
Cargo Revenue Ton Miles 22,336 17 26,336 24 
Dominic P. Ren do 
President ond Chief Operating Officer 
Although revenue passenger miles on scheduled 
flights increosed in 1977, the growth was smaller 
than in 1976 because traffic on the company's Mexico 
routes declined in 1977. This decline was caused by 
the devaluation of the peso, which hod on unfavor 
able effect on sales in Mexico. The Los Angeles- 
Miami and Honolulu-Vancouver routes, added to 
the company's system in the summer of 1976, con 
tributed 69 percent of the increase in revenue pas 
senger miles in 1977 compared to 21 percent in 
1976. 
Of the four major areas shown in the chart above, 
the fastest growing area in 1977 wos the 48 States 
and Canada. Although the Los Angeles-Miomi route 
contributed significantly to this growth rate, the 
remainder of the 48 States and Canada market 
also experienced on increased rote of growth. 
Most of the 1977 increase in traffic on Hawaii 
routes come from the Honolulu-Vancouver segment. 
The rote of growth on other Hawaii segments de 
creased in 1977, os did the rote of growth of seats 
offered for sole in this market. 
Alaska routes, which experienced the highest 
growth rote in 1976, continued to grow in 1977 
but the rote of traffic growth decreased because of 
the completion of the oil pipeline. 
The four percent increase in overage revenue per 
passenger mile in 1977 was caused by fore in 
creases and, to o lesser degree, a reduced propor 
tion in the use of discounted fores. Fare increases 
were the reason for the improvement in 1976. 
Cargo revenues for the post three years hove in- 
6 
 Increases (Decreases) 
Miguel M. Dlasquez 
Member, Board of Directors 
Mexico 
creased primarily because of traffic growth. In addi 
tion, 1977 revenues were increased by $2 million 
from current and retroactive mail rate adjustments. 
"Other" revenues increased principally from ex 
panded charter business in 1977. 
Operating expenses in both periods increased 
largely because of inflation and expanded opera 
tions with wages, salaries and employee benefits 
and fuel having the largest dollar impact. Increases 
in these categories represent 71 percent of the total 
increase in operating expenses and of this roughly 
two-thirds relate to inflation and one-third to ex 
panded operations. 
The following fable shows increases and decreases 
in operating expenses and available seat miles. 
1977 vs. 1976 1976 vs. 1975 
Amount % Amount % 
(000s) (000s) 
Wages and salaries 
(including paid vacations) $ 27,586 15% $ 20,389 12% 
Employee benefits 9,130 24 4,317 13 
36,716 16 24,706 12 
Fuel 29,690 27 15,145 16 
Depreciation (3,085) (8) 2,004 6 
Other 
Rentals 5,198 22 4,220 22 
Materials and repairs 4,423 13 3,080 10 
Commissions 4,391 16 5,007 23 
Services purchased 3,044 17 1,567 9 
Food and beverages 2,775 13 2,925 16 
Property and fuel faxes 1,877 16 2,140 23 
Advertising and publicity 1,582 14 488 4 
Landing fees 468 4 2,063 21 
Other 6,905 16 1,590 4 
30,663 15 23,080 13 
$ 93,984 16 $ 64,935 13 
Available seat miles 1,510,367 1 1 1,753,917 15 
Periodic wage increases in collective bargaining 
agreements were primarily responsible for increases 
in wages, salaries and employee benefits. Pilots, 
flight attendants, and mechanics and related em 
ployees and stock clerks reached amended agree 
ments in 1977. The higher wage rates resulting from 
these agreements had a significant effect on the sec 
ond half of 1977. Scheduled periodic increases in 
the amendments will continue to be reflected in 
future periods. The company's agreement with agent 
and clerical personnel was opened for amendment 
in 1978 and is currently in mediation. 
Employee benefit costs consist mainly of pensions, 
group insurance and payroll taxes. Pensions increased 
in 1977 from higher wages for all employees and 
from improved benefits as provided for in the 
amended agreements. Higher pension expense in 
Revenue Dollar 
(dollars in thousands) 
Percent 
of total 
Charter 
. . . 
$ 7,178 1% 
Transport Related 15,208 2 
Other 6,884 1 
Coach Passenger Service.... . . . 
572,794 83 
Deluxe Passenger Service . . . 
41,787 6 
Cargo 47,613 7 
$691,464 100% 
7 
 1976, os compared to 1975, reflected wage increases 
and on increase in the number of employees par 
ticipating in the plans. The cost of group insurance 
benefits was higher in 1977, and payroll taxes in 
creased in both periods because of legislated changes. 
Fuel expense escalated in both periods because 
of higher prices and greater consumption. Higher 
prices represented 65 percent of the increase in 
1977 with 35 percent coming from greater con 
sumption. In 1976, 45 percent of the increase was 
attributable to higher prices and 55 percent to 
greater consumption. 
The reduction in depreciation expense in 1977 
primarily reflects the extension of the depreciable 
lives of 727 ond 737 aircraft from 12 years to 15 
years ond 14 years, respectively. 
Rental expense was affected by the leasing of 
additional aircraft: five 727s delivered in the spring 
of 1977, one DC-10 in June 1976 and one in June 1975. 
Materials and repairs expense reflects higher costs 
for parts and scheduled airframe maintenance in 
1977. The 1976 increase came from scheduled re 
placements of engine components and higher costs 
for parts. 
Commissions to travel agents increased because 
of traffic growth and a higher proportion of total 
sales being made by travel agents. 
Increases in food and beverage expense in both 
1977 and 1976 resulted from more passengers 
being carried and higher costs. 
Operating income in 1977 decreased despite traf 
fic growth and some fare increases because Western 
was unsuccessful in offsetting inflated operating ex 
penses that were coupled with expanded opera 
tions. Traffic growth and fare increases had out 
paced inflation in 1976 and thereby resulted in 
higher operating income than in 1975. 
"Interest expense, net" decreased in both periods 
because of an increased level of capitalized interest 
Victor L. Drown 
Member, Board of Directors 
Utah 
related to deposits for aircraft on order for delivery 
in 1977 and 1978. Gain on sale of equipment re 
flects the disposition of four aircraft in 1977 and one 
aircraft in 1976. 
In 1975 "Other-net" included interest income of 
$2.1 million related to a federal tax refund. 
Provision for faxes on income is reconciled to the 
tax rate of 48 percent in Note 6 of Notes to Finan 
cial Statements. 
Shareholders, Stock ond Financial Position 
The company's net earnings per common share for 
the year 1977 were $1.09 of which 40 cents was 
paid to holders of common stock through quarterly 
cash dividends of 10 cents per share in March, June, 
Expense Dollar 
Percent 
(dollars in thousands) of total 
Rentals 
. . . . 
$ 28,901 4% 
Food and beverages 24,245 4 
Other 88,808 13 
Wages, salaries and 
employee benefits . . . . 
263,083 39 
Fuel 
.... 
137,969 21 
Depreciation 34,973 5 
Materials and services 59,744 9 
Commissions 31,608 5 
$669,331 100% 
8 
 August and November; the remaining 69 cents per 
share was retained to help pay for equipment on 
order and for other corporate purposes. 
At the Annual Meeting held on April 28,1977, 
the shareholders voted to amend the company's 
Certificate of Incorporation to increase the number 
of authorized shores of common stock of the com 
pany from 25 million to 35 million and to authorize 
the issuance of a new class of preferred stock con 
sisting of 25 million shores which may be issued in 
one or more series. 
Load Factor--Actual vs. Breakeven 
Pursuant to this authorization, 1.2 million shares 
of $2.00 Series A Cumulative Convertible Preferred 
Stock without par value were offered to the public 
in October 1977. These shores ore now held by 
approximately 2,100 individuals and institutions. 
This preferred stock has o stated value of $25 per 
shore and is entitled to $2.00 per shore in dividends 
each year, payable ot the rote of 50 cents per 
quarter. The proceeds from the sole of the preferred 
stock are to be used for general corporate purposes, 
including financing the acquisition of new aircraft. 
Net earnings after dividend payments and the 
sole of preferred stock increased shareholders' 
equity to $154.1 million ot the end of 1977 com 
pared to $117.1 million at the end of 1976. Excluding 
the $30 million item representing the stated value 
of the preferred stock, equity per shore of common 
sfock was $9.81 compared to $9.25 of the end 
of 1976. 
As of December 31,1977, fhere were oufstanding 
12,659,000 shores of Western common stock held 
by approximately 17,800 individuals and institu 
tions. The common stock was traded on the New 
York Stock Exchange at the following prices: 
1977 High Low 
First Quarter 10% 8 
Second Quarter 9% 8% 
Third Quarter 6% 7 
Fourth Quarter 
1976 
7% 6% 
First Quarter 1 ^7/e 9% 
Second Quarter 1 1 9% 
Third Quarter 12% 10 
Fourth Quarter 10% 8% 
An additional 3,000,000 shares ore reserved for 
issuance upon conversion of the preferred stock and 
2,429,000 shares ore reserved for issuance upon 
conversion of the company's 5K% Convertible Sub 
ordinated Debentures. Holders of the debentures 
received interest payments on February 1 and 
August 1. The debentures ore held by approximately 
700 individuals and institutions. 
Western's long-term debt was $ 100,661,000 at the 
end of 1977, compared to $110,420,000 at the end 
of 1976. The reduction resulted from scheduled 
payments on notes to insurance companies, re 
demption of subordinated sinking fund notes and 
purchases of debentures which ore to be applied 
to meet sinking fund payments in 1979. A complete 
listing of long-term debt is contained in Note 7 of 
Notes to Financial Statements. 
The company has a bank loan agreement which 
provides a $75 million revolving line of credit 
available until December 31,1978, at which time it 
can be replaced by a term note maturing on June 
30,1983. The entire $75 million provided by this 
agreement is available for the purchase of new 
equipment or for other corporate purposes. 
Sources of working capital totaled $106,250,000 
for 1977, compared to $87,717,000 in 1976. In 
addition to net earnings from operations, major 
I im 
70% 
1974 1975 1976 1977 
M Actual 
p Breakeven 
60% 
9 
 sources of working capital in 1977 were issuance of 
preferred stock for $30 million, reimbursement to 
Western of $18,775,000 in advance deposits on air 
craft which were leased and proceeds from the sole 
of aircraft of $7,924,000. 
Applications of working capital totaled $89,581,000 
in 1977, compared to $102,471,000 in 1976. Pur 
chases of property and equipment and advances 
thereon totaled $74,151,000. Included were advance 
deposits of approximately $38 million on five 727s 
and two DC-lOs scheduled for delivery in 1978. The 
total cost for the purchase of two 727s in 1977 was 
$21.2 million. Reductions in debt required $9,800,000 
and cash dividends used $5,630,000. 
Flight Equipment 
In 
Operation* 
1978 
Delivery 
1979 
Delivery 
1980/81 
Options 
DC-10 ~J ** 2 2 4 
727-200 28** 5 5 10 
737-200 23 
720D 13 
707-300C 5 
76 7 7 14 
`As of March 15, 1978 
**Four DC-lOs and eleven 727s ore leased. (See Note 8 of Notes 
to Financial Statements.) 
Western's fleet planning department is continu 
ously studying currently available and proposed 
aircraft types in order to select the most suitable 
aircraft for the company's routes. Operational effi 
ciency and marketing desirability ore key factors in 
these studies. The wide-bodied McDonnell Douglas 
DC-10 and the Boeing 727-200 ore the best aircraft 
available for fulfilling the company's present needs. 
These aircraft also comply with federal noise 
regulations that become effective on January 1, 
1977. Aircraft which donot meet the noise standards 
will hove to be replaced or modified on o timetable 
which calls for partial compliance by certain dotes 
and total compliance by January 1, 1985. Western 
intends to meet this timetable by selling its 720B's 
and 707s, by modifying an undefermined number 
of 737s ond selling the balance of those aircraft. 
The company plans to retain a number of these 
737s for service on the routes for which they are 
most suitable, if modification is economically and 
operationally feasible. Cost of this modification can 
not be precisely estimated. 
Legislation has been introduced in Congress which 
would provide financial assistance to the airlines in 
the form of credits against a new excise tax on pas 
senger fores and cargo rotes which will enable them 
to use the proceeds of the tax to assist in financing 
the cost of modification of noncomplying aircraft and 
of acquisition of replacement aircraft. The amounts 
and kind of assistance the airlines may receive will 
depend upon the final form of the legislation. In any 
event, these modifications ond replacements will 
place a substantial financial burden on Western 
with or without the legislation. The requirements for 
additional capital expenditures undoubtedly will 
Member, Board of Directors 
Alaska 
entail new lease, debt and/or equity financing. 
In addition to replacing older aircraft, Western has 
token other important steps to increase the capacity 
and efficiency of its fleet. One of these steps has 
been to increase coach seating capacity. The DC-10s, 
for example, will undergo modifications in 1978 
to reduce first class seating from 46 seats to 24 seats 
per aircraft while coach seating will be increased 
from 208 to 228. 
In the third quarter of 1977, Western added 11 
seats to each of its 727s. The additional capacity 
produced by this modification was equivalent to 
Western's purchasing 214 additional airplanes. Recent 
adjustments of Western's all-coach 737s increased 
seating capacity from 99 to 104 which in total was 
equivalent to purchasing one additional airplane. 
Aircraft scheduling also plays an important pah- 
in overall fleet efficiency. Western is proud of its 
record of aircraft utilization which in 1977 averaged 
eight hours and 27 minutes per aircraft per day, up 
from seven hours and 54 minutes in 1976. Western 
leads all operators of the DC-10 Series 10 in average 
daily utilization. These aircraft flew an average of 
11 hours and 23 minutes per aircraft per day for 
Western in 1977 while the average daily utilization 
by all other operators was eight hours and 50 
minutes. 
During 1977 three 720B's and one 737 were sold 
and one 720B was removed from operations in 
connection with a sale in 1978. The company also 
has agreements to sell eight additional aircraft in 
1978 and 1979. All of these aircraft have been sold 
at prices in excess of their net book values. 
Western's excellent record of aircraft maintenance 
has proven to be a valuable asset when aircraft 
that are surplus to the company's needs are put on 
the market for sale. 
10 
 Marketing 
The air travel marketplace is highly competitive. 
Western faces head-to-head competition on nearly 
every one of its route segments. 
Evidence of this competition con be found in 
promotional fores such as "Super Savers," which 
Western and most carriers ore now offering on 
nearly oil routes and in the fact that the customer 
traveling between most major markets can choose 
from two or more airlines. 
Passenger Revenue  1970=100% 
Passenger Revenue 
Scheduled Revenue Passenger Miles 
Yield 
Western carried 8,757,000 passengers in 1977, on 
8 percent increase over the 8,098,000 passengers 
carried in 1976. 
Western has developed worldwide and many- 
faceted marketing programs on on aggressive basis. 
These ore coupled with directing the attention and 
talents of the entire company toward providing o 
highly consumer-oriented product. 
Recognizing the potential of connecting traffic 
from cities throughout the world into the Western 
route system and the fact that the devalued U.5. 
dollar has stimulated "Visit USA" business, Western is 
successfully marketing its product in many areas of 
the world. The company is represented by soles 
agents in Europe, South America, the Orient, Austra 
lia and New Zealand and maintains its own off-line 
offices in Tokyo, Toronto, New York, Chicago, Dallas 
and Washington, D.C. In 1977, interline traffic con 
tributed estimated revenues of $196 million. 
In the United States, the travel agent continues 
to be the primary distribution source for Western's 
product and the company is a recognized leader 
in the development of oir travel business by and for 
the travel agent. 
Major tour operators in the United States and 
abroad also hove become volume sources of voca 
tion package business. 
Western, which serves oil of the major ski areas 
in Utah, Colorado, Wyoming, Alaska, the Pacific 
Northwest and Western Canada, suffered along with 
ski resorts in these areas in early 1977 from the lock 
of snow and resulting loss of business. The 1978 
winter snows hove brought a substantial rebound 
in ski travel and this has strengthened first quarter 
traffic in these markets. 
Triangle routings, which were created by Western 
many years ago, continue to be promoted success 
fully in the Hawaii, Alaska, British Columbia, Mexico 
and Florida markets. 
Charters, which hove appeal to large segments 
of the public, were on increasingly important part of 
Western's business in 1977 with revenues from this 
source increasing 69 percent to $7.2 million. Plans 
coll for continued evaluation of the market for addi 
tional charter opportunities, although Super Saver 
fares, which offer similar discounts with more individ 
ual freedom, may erode this market. 
Western's routes serve many leisure destinations, 
but the most significant charter and tour markets 
are Hawaii, Mexico, Alaska, Canada and Florida. In 
order to participate in the Florida cruise business;for 
example, Western must not only compete with the 
other airline certificated to serve the Los Angeles- 
Miami market on o scheduled basis, but also with 
airlines which operate charters. 
In addition to the varied opportunities Western's 
routes offer for pleasure travel, the company oper 
ates in fost-growing regions from the standpoint of 
business traffic. Western's recent research indicates 
on improved balance between business and vaca- 
 lion travelers in the West. Marketing programs are 
underway to better identify and serve the frequent 
traveler. 
For both business and pleasure travelers, Western 
offers dependable service. In 1977, Western's flights 
averaged an 80.5 percent on-time record system- 
wide and approximately 98 percent of scheduled 
flights were completed without cancellation. On- 
time operations are receiving still greater emphasis 
in 1978. 
Exclusive programs with major cruise lines off the 
Florida coast have helped Western capture 50 per 
cent of the Los Angeles-Miami market, which the 
company has served since August 1976. An active 
"off season'campaign to develop summer travel be 
tween British Columbia and Hawaii helped the com 
pany boost revenues on the Honolulu-Vancouver 
route, which also was inaugurated in 1976. 
Cargo marketing, including air freight, mail and 
small package services, resulted in Western's 
achieving a 17 percent growth in cargo ton miles, 
the highest rate of any trunk carrier and almost 
three times greater than the industry average. 
Ground Properties and Facilities 
Improved passenger facilities at Calgary and a new 
air cargo terminal at Denver were among the most 
significant facilities improvements completed in 1977. 
Calgary International Airport's new passenger 
terminal, which was opened in November, gives 
Western the advantages of additional counter and 
office space, improved frans-border arrival and 
deparfure facilities plus enclosed second-level load 
ing facilities and, for fhe firsf time, a Horizon Boom. 
The Denver air cargo building, constructed by the 
City and County of Denver and leased by Western, 
was opened in May and will be used exclusively by 
the company. 
A number of construcfion projects under way in 
1977 will be completed and opened during 1978. 
Adjacent to Los Angeles International Airport, 
where Western maintains its general offices and 
principal maintenance base, a four-story office 
strucfure will be complefed fhis year and leased to 
Western. 
Western is building a new air cargo terminal at 
Seattle-Tacoma International Airport. This facility will 
open this spring, giving the company expanded 
freight handling capacity at this important gateway 
to Alaska. 
Salt Lake City, Phoenix, San Diego and Helena 
have new passenger terminals under construction. 
The Salt Lake City structure will be occupied exclu 
sively by Western and will make the company the 
first airline to provide Salt Lake City passengers with 
enclosed second-level loading. 
Regulatory Matters 
Western operates its routes under certificates of 
public convenience and necessity granted by the 
Arthur G.Linkletter 
Member. Board of Directors 
Californio 
Civil Aeronautics Board and is obligated to provide 
safe and adequafe service, equipmenf and facilities 
and to establish just and reasonable fares. 
Legislafion was introduced in both houses of the 
Congress during 1976 and again in 1977 which pro 
poses a relaxation of CAB control over fare changes 
and easier entry into and exit from markets. Enact 
ment of fhis legislation, which has been popularly 
termed "regulatory reform," could have a dramafic 
impact on Western's operations but, at this stage 
and with bills pending in both the House and Senate, 
it is too early to assess the likelihood of any particu 
lar bill being enacted or its precise impact if enacted. 
In addition to CAB regulation, the Federal Aviation 
Administration regulates the safety aspects of airline 
operations and exercises jurisdiction over certain 
personnel, aircraft, ground facilities and other tech 
nical aspects of operations. The U.S. Postal Service 
has jurisdiction over the transportation of mail. 
During fhe past several years and continuing into 
1978, Western has been active in a number of route 
cases before fhe Civil Aeronautics Board. 
CAB route case decisions frequently are appealed 
to the federal courts. An appeal by several unsuccess 
ful applicants in the Miami-Los Angeles Competitive 
Nonstop Cose, in which Western was awarded (in 
1976) its firsf transcontinental route, resulted in o 
remand to the CAB for reconsideration of that part 
of its decision which resulted in the selection of 
Western over Pan American World Airways as the 
carrier to serve fhe route. 
Responding to the remand, fhe CAB has reopened 
the case for the purpose of determining whether 
Western or Pan American should temporarily 
operate the route pending a decision in a new case 
called the Miami-Los Angeles Low Fore Case. Western 
12 
 John H.Myers 
Member, Board of Directors 
Minnesota 
believes the CAB's attempt to grant only "temporary 
authority" in the reopened proceeding is contrary 
to the court's mandate. 
In the Oklahoma/Denver-Southeast Points cose, 
Western was unsuccessful in its bid to acguire Denver- 
Atlanta and Denver-Tulsa-Florida authority. Western 
and other unsuccessful applicants hove appealed 
this decision to the U.5. Court of Appeals for the 
District of Columbia Circuit and a decision is pending. 
International route authority is dependent on a 
Fuel Expense  1970=100% 
350% 
300% 
250% 
200% 
150% 
100% 
50% 
1973 1974 1975 1976 1977 
Fuel Expense 
Gallons Consumed 
i Average Cost Per Gallon 
number of steps in addition to the CAB regulatory 
proceedings. Bilateral air transport agreements be 
tween the U.5. and other countries define the scope 
of the international authority which may be granted 
to U.5. carriers. After appropriate proceedings the 
CAB mokes a recommendation to the President, 
who gives the ultimate approval os to the carrier 
selected to operate a particular international route. 
In the existing agreement between the U.5. and 
Canada--signed in 1974 --provision was mode for 
nonstop authority for a U.S. carrier between San 
Francisco/Los Angeles and Calgary/Edmonton. The 
California-Alberta Route Proceeding was instituted 
by the board in August 1975 and in February 1978 
the CAB decided to choose another carrier instead 
of Western to operate the route. This decision 
requires the approval of the President before if will 
become effective. 
In the U.S.-Mexico bilateral agreement, signed in 
January 1978, the cities of Son Francisco and 
Guadalajara were added to Western's existing route 
between Los Angeles/San Diego and Mexico City/ 
Acapulco. On January 27, Western asked the CAB 
for permission to start initial Guadalajara-Los 
Angeles service by June 30,1978. Inasmuch os the 
required amendment to Western's existing certificate 
is routine, it is unlikely that prolonged proceedings 
will be involved. 
Western also is on applicant for additional new 
routes which hove been authorized in the new 
agreement with Mexico. Included ore Los Angeles 
to Mazatlan, Puerto Vallarta, Zihuafanejo, Manzanillo 
and La Paz. 
Another Mexico route currently involved in CAB 
proceedings is Miami/Tampa-Mexico City. Pan 
American has proposed to suspend its Mexico- 
Florida operations and applications for certification 
and exemption authority to replace Pan American 
hove been filed by Western and three other carriers. 
Undoubtedly a route cose will be instituted for the 
purpose of selecting o replacement carrier to 
operate the Miami-Tampa-Mexico City route. 
In the Transatlantic Route Proceeding, com 
menced by the CAB in 1973 ond ultimately con 
cluded by Presidential approval in January 1978, 
Western hod sought, unsuccessfully, to provide 
service from Minneapolis/St. Paul to London, Paris 
and Frankfurt. The London segments involved were 
dependent on the U.S.-United Kingdom bilateral 
agreement which was concluded in 1977 without 
naming the Twin Cities os one of the 14 U.S. terminal 
points. The agreement provides, however, for the 
naming of an additional U.S. city, colled the "wild 
cord" city, for service by a U.S. carrier to London. 
Western is now attempting to hove the Twin Cities 
named os that "wild card'' city and is seeking 
authority to provide nonstop service between the 
Twin Cities and London. 
The U.S.-U.K. agreement also contains authority 
for a U.S. carrier to operate between Anchorage 
13 
 and London. Western has applied to operate this 
route and will be a strong contender for it when the 
CAD initiates a formal proceeding. 
In the domestic route area, the company's request 
in the Western Route Realignment Cose for realign 
ment and consolidation of its interstate routes into 
o single linear route, was granted by the CAD 
effective February 15,1978. The realignment deci 
sion serves to remove restrictions which in the post 
hove impeded Western's operating flexibility. New 
Reno-Twin Cities nonstop service, being inaugurated 
April 30, was mode possible by this decision. 
In the West Coast-Alaska Investigation, Western is 
seeking nonstop authority between Anchorage and 
the Californio cities of Los Angeles and Son Francisco. 
Hearings were held in Portland, Anchorage and 
Washington, D.C., in October. A decision by the 
administrative low judge is expected in late June. 
Western also is on applicant in the Phoenix-Las 
Vegas-Reno Nonstop Proceeding in which the ad 
ministrative low judge has found that other carriers 
should be certificated to perform the service. Peti 
tions for discretionary review hove been filed by 
Western and several other carriers. 
In the Las Vegas-Dallas/Ft. Worth Service Investiga 
tion, Western is proposing to serve the Los Vegas- 
Dallas/Ft. Worth route with three doily roundtrips. 
The administrative law judge selected a Texas- 
based carrier to operate the route and Western has 
petitioned the board for discretionary review. 
The company is also seeking Los Angeles-Colum- 
bus and Los Angeles-Columbus-Philadelphia au 
thority in another cose in which briefs hove been 
submitted to the board. 
Wages, Salaries & Employee Denefits  1970=100% 
200% 
150% 
100% 
50% 
1970 1974 1975 1976 1977 
Robert H. Volk 
Member, Board of Directors 
Californio 
Other new route coses in which Western is on 
applicant include: 
The Southeast Alaska Service Investigation wos 
instituted to determine whether service by an air 
carrier or air carriers is necessary between Seattle, 
Ketchikan, Juneau, Yakutat, Cordova and Anchor 
age. This case arose out of the CAD's seven-year 
suspension of Western's authority to serve Ketchikan 
and Juneau (and Alaska Airlines' temporary author 
ity to provide substitute service in these markets) 
which will expire in February 1979. Darring a con 
trary decision by the CAD, Western is anticipating the 
resumption of Southeast Alaska service in 1979. 
The California-Nevada Low-Fore Proceeding was 
started in November 1977 in response to on appli 
cation made by o Californio intrastate carrier. The 
cose currently involves so-called "low-fore'' service 
from both Los Vegas and Reno to 11 cities in Cali 
fornio. Several other carriers also ore applicants for 
similar authority. 
The Twin Cities-Los Vegas/Phoenix/San Diego 
cose was instituted to determine whether there is o 
need for competitive service on these nonstop 
routes which Western presently serves. Three local 
service and three trunk carriers ore applicants. 
Also awaiting CAD approval ore two equipment 
interchange agreements. During 1977, Western op- 
plied to the board for approval of these agreements 
with Continental for one-plone service between Col- 
gory and Houston via Denver and with Draniff for 
one-plone service between Edmonton, Calgary and 
Do I las/Ft. Worth also vio Denver. Western hopes to 
begin these services in 1978. 
Wages, Salaries & Employee Benefits 
Average Number of Employees 
Available Seat Miles 
Fares and Rates 
Western's passenger fores fall within six geograph- 
14 
 icol areas --domestic U.S., Mainland-Hawaii, intra- 
California, Pacific Northwesf-Alaska, Mexico and 
Canada --with each area regulated separately by 
the Civil Aeronautics Board, agencies of other 
national governments, or, in the case of intra- 
California markets, by the state public utilities com 
mission. 
During 1977 and early 1978, a great deal of 
public attention was focused on discount fares such 
as "Super Saver." While these fares initially were 
limited to the transcontinental markets, early in 
1978 they were expanded to many other routes. 
Western which introduced Super Saver fares in West 
Coast-Miami markets in January 1978 in an effort 
to keep the market competitive and to stimulate 
traffic will offer these fares on all Mainland routes 
beginning April 1. 
Basic passenger fares--those which do not involve 
advance booking, minimum/maximum stays and 
capacity limitations --increased in 1977. Domestic 
U.S. (48 states) fares were increased a total of seven 
percent during the year. Mainland-Hawaii fares were 
increased two percent, as were Canada-U.S. fares. 
Proposals to increase Mexico-U.S. fares an aver 
age of five percent were approved by the CAB and 
by Mexican authorities for effectiveness in March 1978. 
In addition to these changes in 1977/78, Western 
plans to propose a three percent domestic fare in 
crease for effectiveness in May. The CAB also has 
before it cases involving the structure and level of 
Mainland-Hawaii and 48 Stafes-Alaska fares. 
While fare increases have contributed to Western's 
yield (average revenue per passenger mile) 
improvement from 7.05 cents in 1976 to 7.34 cents 
in 1977, the company still has the lowest yield in 
the industry. The competitive necessity of meeting 
new discount fares could serve to erode the yield 
improvement experienced in 1977. 
Air freight rates underwent increases averaging 
11 percent during 1977 and additional increases 
of approximately the same magnitude are antici 
pated in the first half of 1978. The "de-regulation" 
of air cargo service which was legislated through 
the Omnibus Aviation Act in November 1977 has 
raised many questions regarding the CAB's power 
to approve or disapprove rate increases in this area. 
While the Act would appear to give carriers the right 
to adjust their fares without prior CAB approval, the 
board still holds certain powers related to preda 
tory or discriminatory rates. 
Another important element in Western's airfreight 
revenues, the income from carriage of the U.S. mail, 
is subject to rates established by the CAB following 
input from the carriers and the U.S. Postal Service. 
During the course of the board's most recent investi 
gation into mail rates, Western received a tempo 
rary retroactive rate adjustment for the period 1973- 
1977 which contributed $2 million in additional rev 
enue to 1977 results. 
15 
Pending legal Proceedings 
Western and other airlines are parties to numerous 
actions in which property owners, especially in the 
area of Los Angeles International Airport, seek to 
enjoin certain operations at airports and/or to re 
cover damages because of aircraft noise and engine 
emissions. Most of these cases have been brought 
against the airport proprietor (usually the City of 
Los Angeles) which in turn has cross-complained 
against the airlines for indemnification. 
The amounts alleged to be involved are very 
large. For example, the aggregate amount of dam 
ages sought in cases against the City of Los Angeles 
has been reported by the city to be in excess of 
$3 billion, and the aggregate amount of damages 
sought in actions to which Western is a party as 
cross-defendant is in excess of $36 million. However, 
Western and its counsel in these cases believe that 
the damages claimed are in no way a realistic mea 
sure of the airlines' exposure, and that in most cases 
the request for relief is wholly out of proportion to 
any actual damage which may have been suffered. 
Western's counsel in these actions, which also 
represents most of the other airlines, is of the opinion, 
based on the current state of the law, that the air 
lines have substantial defenses to the imposition of 
any liability. Moreover, in each case to date in which 
the issue of the airlines' duty to indemnify the airport 
proprietor has been tried, the airlines have obtained 
favorable rulings. 
Nevertheless, all the issues of law involved in 
these matters have not been finally settled, and the 
relative rights and liabilities among such property 
owners, airport proprietors, airlines and federal, 
state and local governments are not entirely clear. 
Unfavorable decisions against Western in these 
actions, while not expected, could have a materially 
adverse effect on the company. Further, any exten 
sive liability of airport proprietors in these cases 
could result in higher costs to airlines, for example, 
through increased landing fees. 
In light of this type of litigation, certain commu 
nities which own and operate airports, including Los 
Angeles and San Diego, have imposed or are con 
sidering imposition of limitations on frequency or 
timing of flights, or upon the proportion of an air 
line's fleet which may continue to operate without 
complying with federal noise standards. Enforcement 
of such restrictions at a major airport served by 
Western could have a materially adverse effect on 
Western's operations. 
Until recently, Western was a defendant, along 
with Northwest Airlines, Inc., in an action brought 
by Alaska Airlines, Inc. in the United States District 
Court in San Francisco alleging that the defendants 
attempted to restrain trade and monopolize com 
merce by trying to eliminate the plaintiff as a com 
petitor between Seattle and Anchorage in violation 
of the anti-trust laws. The action has been disposed 
of by agreement among the parties, at essentially 
 no cost to Western. 
Western and three other airlines ore defendants 
in on action brought by a defunct tour operator/ 
travel agency in the United States District Court in 
Son Francisco in which the defendants ore charged 
with having conspired and attempted to monop 
olize the group leisure tour market in competition 
with said agency. Also, in a civil action brought by 
district attorneys of eight Californio counties in the 
Californio Superior Court for Santo Clara County 
against three airlines, including Western, the defen 
dants ore charged with unfair competition and un 
fair business practices involving the some defunct 
tour operator/travel agency. Doth complaints seek 
injunctive relief, plus in the first cose three times actual 
damages according to proof plus punitive damages, 
and in the latter cose civil penalties and restitution of 
economic losses suffered by customers of said agency. 
In the opinion of Western's counsel, these actions will 
not result in any material liability to Western. 
Western is also involved in various other litigation, 
including certain coses alleging discrimination in 
employment practices or violation of the anti-trust 
lows which management believes will not hove o 
materially adverse effect upon Western. 
Management 
Western's management organization is headed by 
o board of directors which includes representation 
from Alaska, Hawaii, Mexico, the Midwest, the 
Pacific Northwest and the Rocky Mountain States as 
well as California. 
Newly elected to the board of directors in 1977 
was Seattle attorney Gerald Grinstein, 45, succeed 
ing James D. Garibaldi, a Los Angeles attorney who 
retired and was named a director-emeritus. 
Two Western officers--Arthur F. Kelly, chairman 
and chief executive officer, and Dominic P. Renda, 
president and chief operating officer--are members 
of the board of directors. Mr. Kelly, 65, completed 
his 40th year with Western and his 28th year as a 
company officer in 1977. Mr. Renda, 64, completed 
his 30th year in the industry in 1977 having served 
as an officer of Western for 25 of those years. 
Other principal officers of Western include 
Richard P. Ensign, 59, senior vice president- 
marketing; Anton B. Favero, 64, senior vice president 
--operations; Robert O. Kinsey, 61, senior vice presi 
dent-finance and administration; James L. Mitchell, 
56, senior vice president--corporate planning; 
Gerald P. O'Grady, 64, senior vice president--legal 
and secretary; Richard O. Hammond, 48, vice presi 
dent and treasurer, and Roderick G. Leith, 49, vice 
president and controller. 
Mr. Ensign, who previously served as a Western 
officer from 1963 to 1971, held senior officer positions 
with Pan American World Airways, Inc., between 
1971 and 1975 when he returned to Western. Mr. 
Mitchell served as an officer of Western from 1965 
to 1968 when he became a vice president of 
Continental Air Lines, Inc. He returned to Western in 
early 1977. 
Western is proud of its management staff which 
reflects a combination of expertise and experience. 
The officers of Western have an average age of 54 
years and an average of 25 years of service with 
the company. Members of the second echelon of 
management average 46 years of age and hove 
on overage of 17 years of service with Western. 
A complete listing of oil company officers and 
their functions is detailed on Page 29 of this report. 
The principal occupation of each Western officer is 
his position with the company. 
Employees 
Western employed on average of 10,413 people 
during 1977, compared to 9,799 during 1976. 
Wages and salaries for 1977 amounted to 
$216,004,000, up 15 percent from $188,418,000 in 
the previous year. Social Security taxes and company 
contributions to group insurance and employee 
retirement plans increased 24 percent to $47,079,000 
in 1977. 
The company is committed to a policy of equal 
employment opportunity with hiring and advance 
ment being determined on the basis of merit and 
ability. This company policy is the basis for viable, 
results-oriented affirmative action plans which are 
submitted annually to government agencies. 
Labor unions represent approximately 87 per 
cent of Western's employees. These unions include 
the International Brotherhood of Teomsters, Air Line 
Pilots Association, Association of Flight Attendants, 
Brotherhood of Railway and Airline Clerks, Sindicato 
Nacional de Trabajadores de Aviacion y Similares 
and the Transport Workers Union. 
Following is the contractual status of each of these 
collective bargaining groups: 
Employee Group 
Number of 
Employees 
1/1/78 Union 
Contract 
Open for 
Amendment 
Flight Attendants 1,772 ALPA/AFA Nov. 30, 1979 
Agent & Clerical 3,701 DRAC Jon. 1,1978 
(In Mediation) 
Canada 46 DRAC To be negotiated 
after settlement 
of U.S. Contract 
Mexico 150 SNTA Jon. 18,1979 
Pilots 1,479 ALPA Sept. 1,1979 
Flight Superintendents 
Mechanics & Related 
31 TWU April 30,1978 
Employees 
Stock & Stores 
1,842 IDT Jon. 1,1979 
Employees 118 IDT Jan.l, 1979 
16 
 Ten Years of Western Progress 
(In thousands except per shore amounts and other items indicated by*) 
Summary of Operations 1977 1976 1975 1974 1973 1972 1971 1970 1969k 1968 
Operating revenues: 
Passenger $614,581 544,188 465,081 437,345 376,722 342,851 295,807 274,792 220,530 205,753 
Cargo0 47,613 37,926 31,329 27,662 23,040 20,819 20,231 18,745 16,472 13,459 
Other 29,270 23,091 22,563 23,390 21,524 10,321 12,009 9,926 5,245 4,454 
Total operating revenues 691,464 605,205 518,973 488,397 421,286 373,991 328,047 303,463 242,247 223,666 
Operating expenses: 
Wages, salaries and employee benefits 263,083 226,367b 
t 
201,661 182,334 165,363 147,282 127,075 113,116 97,156 78,535 
Fuel 137,969 108,279 93,134 71,437 44,510 40,137 38,663 37,357 32,857 27,191 
Depreciation 34,973C 38,058c 36,054c 40,478 38,304 36,224 35,144 36,583 34,821 25,051 
Otherd. 233,306 202,643 179,563 155,788 132,987* 126,741 1 10,859 104,596 89,814 73,207 
Total operating expenses 669,331 575,347 510,412 450,037 381,164 350,384 31 1,741 291,652 254,648 203,984 
Operating income (loss) 22,133 29,858 8,561 38,360 40,122 23,607 16,306 1 1,811 (12,401) 19,682 
Interest, principally on long-term debt (9,650) (9,675) (8,964) (11,495) (10,505) (10,240) (11,278) (14,589) (15,437) (8,634) 
Interest capitalized' 2,592 786 440 1,161 1,489 1,453 116 3 689 2,098 
Gain (loss) on sale of equipment 4,549 1,809 379 9,575 945 582 1,349 1 1 1 26 (73) 
Other income and expense, net 3,388 1,237 3,919 4,222 3,235 2,1 14 3,1 14 1,009 (151) 88 
Earnings (loss) before taxes on income and cumulative 
effect of accounting change 23,012 24,015 4,335 41,823 35,286 17,516 9,607 (1,655) (27,274) 13,161 
Taxes on income (tax credits)9. 8,650 9,050 (825) 17,725 14,900 6,300 3,150 (2,250) (15,075) 4,725 
Earnings (loss) before cumulative effect of accounting change 14,362 14,965 5,160 24,098 20,386 1 1,216 6,457 595 (12,199) 8,436 
Cumulative effect of accounting change* -- -- 
7,160 - - - - - - - 
Net earnings (loss) $ 14,362 14,965 12,320 24,098 20,386 1 1,216 6,457' 595 (12,199) 8,436 
Earnings (loss) per common share:h J 
Primary: 
Before cumulative effect of accounting change $ 1.09 1.10 0.34 1.59 1.35 0.75 0.43 0.04 (0.81) 0.56 
Net earnings (loss) $ 1.09 1.10 0.81 1.59 1.35 0.75 0.43 0.04 (0.81) 0.56 
Fully diluted: 
Before cumulative effect of accounting change $ 0.95 0.98 0.33 1.41 1.21 0.68 0.41 0.04 (0.81) 0.54 
Net earnings (loss) $ 0.95 0.98 0.74 1.41 1.21 0.68 0.41 0.04 (0.81) 0.54 
Pro-forma amounts assuming the accounting change is applied 
retroactively: 
Net earnings (loss) $ 14,362 14,965 5,160 24,608 16,074 10,573 8,247 3,290 (10,664) 9,527 
Net earnings (loss) per common share--primary"' $ 1.09 1.10 0.34 1.63 1.07 0.70 0.55 0.22 (0.71) 0.64 
Net earnings (loss) per common share--fully diluted".' $ 0.95 0.98 0.33 1.44 0.96 0.65 0.52 0.22 (0.71) 0.60 
Cash dividends paid per share on common stock1) $ 0.40 0.40 0.47 0.39 0.23 0.08 - - 
0.16 0.33 
Other Financial Data 
Return on investmentm(%)* 9.4 9.7 8.0 13.1 12.3 8.5 6.7 5.4 1.1 7.6 
Average common shares outstanding":' 12,659 13,601 15,163 15,125 15,050 15,030 15,012 15,01 1 15,010 14,981 
Shareholders'equity $154,122 117,100 137,938 132,718 113,652 96,723 86,397 79,905 79,310 93,862 
Long-term debt $100,661 110,420 107,617 114,917 124,387 130,487 152,040 174,184 197,150 183,718 
Property and equipment--net $329,178 308,112 309,685 307,307 269,374 239,029 216,738 247,426 285,757 284,787 
Total assets $462,644 431,133 420,093 396,825 377,457 342,531 340,352 355,168 367,588 349,039 
Operations 
Airplanes operated at end of year* 77 75 75 72 74 71 70 72 78 64 
Passengers carrieddk 8,757 8,098 7,531 7,391 7,382 6,931 6,206 6,188 5,752 5,693 
Available seat miles 14,963,762 13,450,395 11,696,478 11,123,544 11,175,518 10,300,178 9,776,869 9,839,299 8,509,441 7,096,229 
Revenue passenger milesdk 8,588,786 7,833,843 7,102,917 6,747,451 6,476,087 5,995,925 5,251,989 5,159,081 4,021,296 3,841,864 
Passenger load factor--actual (%)* 57.4 58.2 60.7 60.7 57.9 58.2 53.7 52.4 47.3 54.1 
--breakeven point (%)* 55.8 55.8 59.8 56.0 52.4 54.4 52.2 52.2 53.1 50.7 
-- 
profit margin (point difference)* 1.6 2.4 0.9 4.7 5.5 3.8 1.5 .2 (5.8) 3.4 
Average revenue per passenger mile* $ .0734 .0705 .0665 .0660 .0593 .0578 .0577 .0542 .0551 .0537 
Average length in miles per passenger trip* 966 963 943 913 877 865 846 834 699 675 
Operating expense per available seat mile* $ .0447 .0428 .0436 .0405 .0341 .0340 .0319 .0296 .0299 .0287 
Cargo revenue ton milesdk 157,291 134,955 108,619 95,239 76,474 76,233 73,249 68,646 60,514 47,446 
Average number of employees* 10,413 9,799 9,357 9,696 9,826 9,383 8,951 8,961 9,286 8,052 
17 18 
 Notes Applicable to Five fears Ended December 01,1977 
(in thousands of dollars except per share amounts) 
(a) See Note 13 of Notes to Financial Statements. 
(b) Effective January l, 1976, Western amended certain plans to comply with pension legislation and to 
streamline benefits. In addition the actuarial method was changed for one plan and certain actuarial 
assumptions were changed for all plans. These amendments and changes decreased expense in 1976 
by approximately $1,200 and increased net earnings by $600 or $0.04 per share (primary). 
(c) Effective October 1, 1976, the estimated depreciable lives of fifteen 727 aircraft and twenty-four 737 
aircraft were extended from 12 years to 15 and 14 years, respectively. For 1977, depreciation expense 
was decreased by approximately $4,800 ($1,200-1976); earnings before cumulative effect of accounting 
change and net earnings were increased by approximately $2,400 or $0.19 per share primary ($600 
or $0.04-1976). 
Effective January 1, 1975, the estimated depreciable lives of eighteen 720D aircraft were extended to a 
common expiration date of December 31,1978. For 1975, depreciation expense was decreased by 
approximately $5,300; earnings before cumulative effect of accounting change and net earnings were 
increased by approximately $2,600 or $0.17 per share (primary). 
(d) 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; July 14 to October 30, 1974; 
November 5 to December 18, 1973. Mutual aid payments included in "other" operating expenses, 
amounted to $899--1976, $4,832 -- 
1975, $1,203 --1974 and $1,870 -- 
1973. Operations of a competing 
intrastate carrier were partially suspended during the fourth quarter 1973. 
(e) In 1975 Western changed its method of accounting for costs of major flight equipment maintenance 
from 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. Western believes this method is preferable 
because if better reflects changes in the physical manner in which airframes and engines are maintained 
and is the method followed by the other fen major U.5. airlines. The $7,160 cumulative effect of this 
change on prior years ($13,785 less deferred income taxes of $6,625) is included in net earnings for 
the year 1975. This change had no other material effect on net earnings for 1975. Periods prior to 
December 31, 1974 have not been restated. The pro forma amounts reflect the retroactive effect of 
this change on net earnings for the periods prior to December 31, 1974. 
"Other" operating expenses for 1973 were reduced by approximately $7,900 ($3,950 or $0.27 per 
share (primary) after taxes), because of a reduction in reserves for engine overhauls caused by con 
verting from a program of complete overhauls to one of regular inspections at shorter hourly periods 
and overhauls as needed. 
(f) If Western did not follow a policy of capitalizing interest related to deposits on aircraft purchase contracts, 
earnings before cumulative effect of accounting change and net earnings would have been decreased 
as follows: 1977 --$1,088, 1976-$198, 1975-$28, 1974-$412 and 1973-$607. Earnings before cu 
mulative effect of accounting change per share (primary) and net earnings per share (primary) would 
have been decreased by $0.09, $0.01, $0.03 and $0.04 for 1977, 1976, 1974 and 1973, respectively. 
Earnings per share would not have been affected in 1975. 
(g) The provision for taxes on income before cumulative effect of a change in accounting principle are 
summarized as follows: 
1977 1976 1975 1974 1973 
Current income taxes 
Federal 
State 
Deferred federal income taxes 
Deferred investment credits 
$(1,025) 
1,150 
(550) 
1 1,900 
4,405 
1,075 
2,350 
4,145 
(5,425) 
225 
9,905 
(2,555) 
5,325 
1.375 
8,300 
5.375 
5,775 
1,700 
4,050 
5,800 
Amortization of deferred investment 
1 1,475 1 1,975 2,150 20,375 17,325 
credits (2,825) (2,925) (2,975) (2,650) (2,425) 
$ 8,650 9,050 (825) 17,725 14,900 
In 1975 the Internal Revenue Service concluded examinations of Western's federal income fax returns 
through 1972. Western was successful in accelerating depreciation for tax purposes which resulted in a 
refund for certain of the years under review. The provision for faxes on income for 1975 includes 
reclassifications relating to timing differences (decreased current federal income taxes of $4,025 and 
restored deferred investment credits of $1,130, which are offset by increased deferred federal income 
taxes of $5,155). 
19 
 (h) Earnings per share data are based on the weighted average number of shares of common stock 
outstanding during the respective years, adjusted when applicable to give retroactive effect to 5% and 
0% stock dividends paid in 1974 and a 3% stock dividend paid in 1973, as follows: 1977 -- 
12,659,000; 
1976-13,601,000; 1975-15,163,000; 1974-15,125,000 and 1973-15,050,000. The fully diluted per 
share data are based on the following number of shares: 1977 -- 
15,913,000, 1976 -- 
16,066,000; 1975 
-- 
17,628,000; 1974--17,590,000 and 1973 -- 
17,516,000. Net earnings are reduced by dividends on 
preferred stock to determine primary net earnings. Outstanding stock options have no material dilutive 
effect on earnings per share. 
(i) Cash dividends per share on common stock are stated on the basis of Western's shares outstanding at 
the date such dividends were declared, adjusted when applicable for 5% and 3% stock dividends paid 
in 1974 and a 3% stock dividend paid in 1973. 
Notes Applicable to Ten Years Ended December 01, 1977 
(j) Stock split was 2/2 for l in 1972. A stock dividend was 10% in 1971. Per share data are adjusted to give 
retroactive effect. 
(k) Operations of other carriers were substantially suspended from June 30 to October 2, 1972; December 
15, 1971 to April 10, 1972; July 8 to December 14, 1970. Western's operations were suspended from July 29 
to August 16,1969. 
(l) Includes $560 from involuntary conversion of an aircraft. 
(m) The methodology used to compute the rate of return is the CAB Corporate Return on Investment. 
Report of Independent Certified Public Accountants 
Peat, Marwick, Mitchell 8c Co. 
CERTIFIED PUBLIC ACCOUNTANTS 
555 SOUTH FLOWER STREET 
LOS ANGELES, CALIFORNIA 00071 
The Board of Directors 
Western Air Lines, Inc.: 
We have examined the balance sheets of Western Air Lines, Inc. as of December 31, 1977 and 1976 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, 1977 and 1976 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 applied on a 
consistent basis. 
YHJittJdULSL- * . 
February 17, 1978 
20 
 Balance Sheets 
WESTERN AIR LINES, INC 
December 31, 1977 and 1976 
(in thousands of dollars) 
ASSETS 1977 1976 
Current Assets: 
Cosh $ 6,748 1 1,476 
Certificates of deposit 
Commercial paper ot cost and accrued interest 
14,710 7,748 
(which approximate market) 27,459 25,91 1 
48,917 45,135 
Receivables (net of allowance for doubtful accounts 
of $1,594-1977 and $1,845-1976) 
Flight equipment expendable parts, at average cost 
57,255 48,951 
(less allowance for obsolescence of $11,914 -- 
1977 
and $11,525-1976) 13,645 16,31 1 
Prepaid expenses and other current assets 6,379 6,264 
Total current assets 126,196 1 16,661 
Properties and Equipment at Cost (Notes 2, 3 and 4): 
Flight equipment 
Facilities and ground equipment 
Deposits on aircraft purchase contracts 
474,700 
102,607 
40,641 
480,136 
94,137 
19,418 
Less allowance for depreciation and amortization 
617,948 
288,770 
593,691 
285,579 
329,178 308,1 12 
Deferred Charges and Other Assets 7,270 6,360 
$462,644 431,133 
See accompanying notes to financial statemenfs. 
21 
 LIABILITIES AND SHAREHOLDERS' EQUITY 1977 1976 
Current Liabilities: 
Accounts payable $ 31,405 28,760 
Salaries, wages and vacation benefits payable 27,783 23,345 
Accrued liabilities (Note 5) 20,140 13,912 
Income taxes payable (Note 6) 1,739 5,825 
Advance ticket sales 32,704 29,563 
Current portion of debt (Note 7) 8,300 27,800 
Total current liabilities 122,071 129,205 
Long-term Debt (Note 7) 100,661 11 0,420 
Deferred Credits (Notes 6 and 8): 
Deferred federal faxes on income 54,569 47,007 
Unamortized investment credits 18,610 17,644 
Other 12,611 9,757 
85,790 74,408 
Shareholders' Equity (Notes 7, 9, 10 and 11): 
Preferred stock--authorized 25,000,000 shares 
$2.00 Series A Cumulative Convertible 
$25.00 stated value per share 
Issued 1,200,000 shares 30,000 
Common stock--authorized 35,000,000 shares 
$1.00 par value per share 
Issued 12,659,000 shares 12,659 12,659 
Additional paid-in capital 27,227 28,937 
Retained earnings 84,236 75,504 
154,122 117,100 
Commitments and Contingent Liabilities (Notes 3 and 8) 
$462,644 431,133 
22 
 Statements of Earnings 
Years ended December 31, 1977 and 1976 
(in thousands of dollars except per share amounts) 1977 1976 
Operating revenues: 
Passenger $614,581 544,188 
Cargo (Note 13) 47,613 37,926 
Other 29,270 23,091 
691,464 605,205 
Operating expenses: 
Wages, salaries and employee benefits (Note 5) 263,083 226,367 
Fuel 137,969 108,279 
Depreciation and amortization (Note 2) 34,973 38,058 
Other 233,306 202,643 
669,331 575,347 
Operating income 22,133 29,858 
Other income (expenses): 
Interest, principally on long-term debt 
Interest capitalized 
Interest income 
Gain on sale of equipment 
Other --net 
(9,650) 
2,592 
2,302 
4,549 
1,086 
(9,675) 
786 
1,941 
1,809 
(704) 
879 (5,843) 
Earnings before provision for taxes on income 23,012 24,015 
Provision for taxes on income (Note 6) 8,650 9,050 
Net earnings $ 14,362 14,965 
Earnings per common share (Note 12): 
Primary $ 1.09 1.10 
Fully diluted 0.95 0.98 
See accompanying notes to financial statements. 
23 
 Statements of Changes in Financial Position 
Years ended December 31,1977 and 1976 
(in thousands of dollars) 1977 1976 
Sources of Working Capitol: 
Net earnings $ 14,362 14,965 
Add (deduct) items which did not affect working capital: 
Depreciation and amortization (Note 2) 34,179 36,132 
Taxes (Note 6): 
Deferred income taxes (550) 2,350 
Deferred investment credits 11,900 4,145 
Amortization of deferred investment credits (2,825) (2,925) 
Gain on sale of equipment (4,549) (1,809) 
Other (3,010) 1,949 
Total from operations 49,507 54,807 
Proceeds from issuance of preferred stock (Note 9) 30,000 -- 
Reimbursements of deposits and capital expenditures 
upon leasing of aircraft and facilities 18,775 7,295 
Proceeds from sole of equipment 7,924 3,771 
Proceeds from issuance of long-term debt -- 
23,000 
Other--net 44 (1,156) 
106,250 87,717 
Applications of Working Capitol: 
Purchase of property and equipment and 
advances thereon 74,151 42,362 
Repurchase of common stock (Note 11) -- 
30,527 
Reduction of long-term debt including 
transfers to current liabilities 9,800 20,000 
Cosh dividends 5,630 5,312 
Preoperating costs related to route development -- 
4,270 
89,581 102,471 
Increase (decrease) in working capital $ 16,669 (14,754) 
Summary of Increases (Decreases) in Working Capitol: 
Cosh, certificates of deposit and commercial paper $ 3,782 7,751 
Receivables 8,304 412 
Expendable ports and prepaid expenses (2,551) 688 
Accounts payable, advance ticket sales, accrued 
and other liabilities 7,134 (23,605) 
Net increase (decrease) $ 16,669 (14,754) 
See accompanying notes to financial statements. 
24 
 Statements of Shareholder^ Equity 
Years ended December 31, 1977 and 1976 
(in thousands of dollars) 
Preferred 
Sfock 
$25.00 
Stated 
Value 
Common 
Stock 
$1.00 
Par Value 
Additional 
Paid-in 
Capital 
Retained 
Earnings 
Shareholders' 
Equity 
Balance at January 1, 1976 $ - 
15,164 37,461 85,313 137,938 
Exercise of sfock options -- 
4 32 -- 
36 
Repurchase of common sfock . . . 
-- 
(2,509) (3,556) (19,462) (30,527) 
Net earnings -- -- -- 
14,965 14,965 
Cash dividends --common stock. -- -- -- 
(5,312) (5,312) 
Balance at December 31, 1976.... -- 
12,659 28,937 75,504 1 17,100 
Issuance of preferred sfock 30,000 -- 
(1,710) -- 
28,290 
Net earnings -- -- -- 
14,362 14,362 
Cash dividends 
Preferred sfock (567) (567) 
Common stock -- -- -- 
(5,063) (5,063) 
Balance at December 31,1977 
(Notes 7, 9, 10 and 11) $30,000 12,659 27,227 84,236 154,122 
See accompanying notes to financial sfafemenfs. 
Notes to Financial Statements 
(In thousands of dollars except per share amounts) 
Note 1. Summary of Significant Accounting Policies. 
Property and Equipment: Property and equipment, 
exclusive of residual values, are depreciated over 
estimated useful lives by the straight-line method. 
(See Note 2.) Maintenance and repairs are expensed 
as incurred. Major renewals and betterments are 
charged to property and equipment accounts. 
Preoperating Costs: Significant costs, such as those 
for traffic promotion and personnel training, related to 
the inauguration of service over major new routes 
and to the introduction of new types of aircraft are 
deferred and amortized over five years. 
Interest Capitalized: Interest related to deposits on 
aircraft purchase contracts is capitalized and amor 
tized over the useful lives of the aircraft. 
Investment Credits: Investment credits generated by 
acquisition of assets to the extent used to reduce 
federal income tax liability are amortized to income 
on a straight-line basis over the useful lives of the 
related assets. 
Obsolescence of Expendable Ports: An allowance 
for obsolescence of expendable parts is accrued 
over the useful lives of the related aircraft types. 
Advance Ticket Soles: Passenger ticket sales are 
recorded as a current liability until recognized as 
revenues for services provided by Western, refunded, 
or until billed by other carriers for transportation 
provided by them. At December 31, 1977, $19,561 
(1976 -- 
$17,220) was estimated to be related to 
transportation to be provided by Western and $13,143 
(1976 -- 
$12,343) was estimated to be payable to 
other carriers. 
Note 2. Depreciation and Amortization. 
The estimated useful lives and residual values of air 
craft are as follows: 
Estimated Residual 
Useful Life Value 
DC-10 16 years 10% 
727 15 years* 15% 
737 14 years* 15% 
707 12 years 15% 
720B Common Retirement Date -- 
December 31, 1978$100 
*Effective October 1, 1976 the estimated depreciable lives were 
extended from 12 years. For 1977, depreciation expense was 
decreased by approximately $4,800 ($1,200 -- 
1976); net earn 
ings were increased by approximately $2,400 ($600 -- 
1976) or 
$0.19 ($0.04 -- 
1976) per share (primary). 
The estimated useful lives of ground equipment 
range from four to ten years. For buildings and im 
provements on leased property, the estimated useful 
lives are generally the periods of the leases. 
"Other" operating expenses included depreciation 
and amortization expense of $334 in 1977 ($350 -- 
1976). 
25 
 Note 0. Commitments and Contingent Liabilities. 
At December 31, 1977 Western hod on order five 
727 and two DC-10 aircraft for delivery in 1978. The 
total purchase price is estimated to be $114,100 of 
which approximately $38,100 has been paid in ad 
vance deposits. 
Outstanding commitments for flight equipment 
modifications and spares amounted to approx 
imately $7,800 and for facilities and ground 
equipment amounted to approximately $4,700 at 
December 31, 1977. 
During January 1978, subject to lender approval, 
Western exercisea options to purchase five 727 and 
two DC-10 aircraft for delivery in 1979 at a cost of 
approximately $129,000. External equity or debt 
financing or a combination thereof will be required 
to finance the acquisition of these aircraft. 
For information regarding the status at December 
31, 1977 of legal proceedings, see "Pending Legal 
Proceedings" on page 15 in this Annual Report. 
For discussion of the possible impact of environ 
mental regulations, see paragraphs two through five 
of "Flight Equipment" on page 10 in this Annual Report. 
Note 4. Description of Impact of Inflation 
(Unaudited). 
Inflation is reflected in operating expenses in the year 
in which the price increases occur except for the cost 
of replacing capital assets. Historically, because of 
the regulatory process, fare increases have lagged 
behind these price increases. 
Replacing capital assets, primarily aircraft and 
ground property, with assets having equivalent pro 
ductive capacity has usually required a greater capital 
investment than was required to purchase the original 
productive capacity. These higher acquisition costs 
reflect the cumulative impact of inflation. 
Western's annual report on form 10-K (a copy 
of which is available upon request) contains informa 
tion with respect to year-end 1977 replacement cost 
of productive capacity and the approximate effect 
which replacement cost would have had on the 
computation of depreciation expense for the year. 
Note 5. Retirement Plans. 
The company has retirement plans which cover sub 
stantially all employees. Western makes contributions 
to the company-sponsored plans which, together with 
the participants' 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 $21,908 for 1977 ($18,211 -- 
1976), which included company contributions to a 
union-sponsored plan for mechanics and related 
employees of $2,498 ($1,929 -- 
1976). The increase 
was caused by higher wages and improved benefits. 
For one of the plans, the actuarially computed 
value of vested benefits exceeded the pension funds' 
assets by approximately $7,000 as of the most 
recent valuation date during 1977. 
Unfunded prior service costs of the plans amounted 
to approximately $23,227 at the most recent valua 
tion dates during 1977. 
Note 6. Taxes on Income. 
The provision for faxes on income is summarized as 
follows: 
1977 1976 
Current income taxes 
Federal 
. . 
$(1,025) 4,405 
State 1,150 1,075 
Deferred federal income taxes (550) 2,350 
Deferred invesfmenf credits 11,900 4,145 
1 1,475 1 1,975 
Amortization of investment credits (2,825) (2,925) 
$8,650 9,050 
Deferred income faxes arise from timing differ- 
ences between financial and fax reporting, 
effects of these differences follow: 
The tax 
1977 1976 
Depreciation . . 
$(1,623) 464 
Interest capitalized 679 (164) 
Preoperating expense (668) 1,668 
Employee benefits 792 146 
Other 270 236 
$ (550) 2,350 
Investment credits unapplied on tax returns 
amounted to $9,596 at December 31,1977 ($17,705 -- 
1976) with $3,808 expiring in 1982, $1,903 in 1983 
and $3,885 in 1984. 
Of the $18,610 unamortized investment credit 
balance at December 31,1977 ($17,644 -- 
1976), 
$10,548 ($4,170 -- 
1976) remains from investment 
credits utilized by reduction of taxes paid and $8,062 
($13,474 -- 
1976) is related to investment credits not 
yet utilized for reduction of taxes paid. 
The Tax Reform Act of 1976 provides for 100% 
application of unapplied investment credits against 
federal income fax liabilities for 1977 and 1978. This 
100% application is reduced 10% annually thereafter 
to a 50% application against federal income taxes 
in 1983. 
A reconciliation between the amount of reported 
taxes on income and the amount compured by 
multiplying earnings before provision for taxes on 
income by the federal statutory tax rate of 48% 
follows: 
1977 1976 
Taxes on income at 48% 
Increases (reductions) in taxes resulting from: 
Amortization of deferred invesfmenf 
$1 1,046 1 1,527 
credits 
State income taxes, net of federal 
(2,825) (2,925) 
income fax benefit 598 559 
Other (169) (1 ID 
Taxes on income $ 8,650 9,050 
The federal income tax returns for 1973 and 1974 
are being examined by the Internal Revenue Service. 
26 
 Note 7. Unsecured Debt. 
At December 01,1977 and 1976 debt was as follows: 
1977 1976 
Current portion of debt: 
Revolving bank line of credit $ 19,500 
Current maturities of long-term debt. . . . 
8,300 8,300 
$ 8,300 27,800 
Long-term debt: 
Senior 
5%% installment notes due September 1, 
1981 with annual principal payments 
on September 1 of $4,000 $ 12,000 16,000 
6e% installment notes due September 1, 
1984 with annual principal payments 
of $2,000 on September 1 which will 
increase to $7,000 in 1982 27,000 29,000 
8%% installment notes due November 16, 
1985 with quarterly principal payments 
of $768 starting in 1981 15,362 15,362 
54,362 60,362 
Subordinated 
5%% convertible subordinated 
debentures due February 1, 1993, with 
annual sinking fund payments of 
$1,500 starting in 1979 28,055 29,555 
10% subordinated sinking fund notes 
due April 15, 1984, less unamortized 
discount of $156, with annual sinking 
fund payments of $2,300 starting 
in 1977 18,244 20,503 
46,299 50,058 
$100,661 1 10,420 
The Dank Loan Agreement provides Western with 
a $75,000 revolving line of credit until December 31, 
1978. On this dote the line of credit con be replaced 
by o term note in on amount not to exceed $75,000 
which will mature on June 00, 1980 with quarterly 
payments of principal storting March 01, 1979. The 
interest rote on funds borrowed is 14% over the bank's 
prime commercial rate until June 00, 1979 when it 
will increase to %% over such rote. The commitment 
fee is 14% per annum on the unused portion. At 
December 01,1977, $75,000 was available for future 
drawdowns. 
Although this Dank Loon Agreement does not require 
compensating balances, Western has informally 
agreed to maintain on deposit average balances 
equal to 10% of the total credit available plus 10% 
of borrowings. 
The agreements relating to this line of credit ond 
other long-term debt contain provisions which limit 
retained earnings from which restricted payments 
(cosh dividends and purchases of Western's common 
stock) con be mode. The most restrictive of these 
provisions limited amounts available for such pay 
ments to $16,650 at December 01,1977. 
These agreements also include, among other things, 
requirements pertaining to cash and working capital 
levels and provisions which may restrict additional 
borrowings. 
The following schedule shows the amount of long 
term debt due in the five following calendar years: 
1978 $8,300 
1979 8,300 
1980 9,800 
1981 12,872 
1982 13,872 
At December 01, 1977, 2,429,000 shores of com 
mon stock were reserved for conversion of debentures 
at o conversion price of $11.55 per shore. 
Nofe 8. Lease Commitmenfs. 
Western leases flight equipment and facilities ond 
ground equipment which ore presently accounted 
for as operating leases. These leases ore classified 
below as operating or capital leases by criteria set 
forth in Financial Accounting Standards Board (FASD) 
Statement No. 10. 
Rental expense for 1977 and 1976 was os follows: 
1977 1976 
Capital leases $15,070 1 1,102 
Operating leases 14,079 12,752 
Total $29,149 23,854 
Af December 01, 1977 minimum rental expense 
under leases expiring offer December 01, 1978 was 
as follows: Capital Operating 
Leases Leases 
1978 $ 16,901 8,961 
1979 16,901 8,842 
1980 16,857 8,412 
1981 16,724 8,275 
1982 16,724 7,876 
Thereafter 117,594 83,888 
$201,701 126,254 
The rental expenses for certain leases included in 
the above tabulations ore normalized on a straight- 
line basis. At December 01, 1977 other deferred 
credits in the accompanying balance sheets include 
$5,201 ($5,000 -- 
1976) representing the excess of 
normalized rental expense over cosh payments. 
FASD Statement No. 10 is effective for lease agree 
ments entered into on or after January 1, 1977, for 
which there were no commitments prior to that date. 
Leases primarily for flight equipment, os shown be 
low, will be classified and accounted for as capital 
leases under FASD Statement No. 10. 
Aircraft 
Type 
Number 
of 
Aircraft 
Acquisition 
Date 
Lease 
Expiration 
Date 
727 6 1969 1984 
5 1977 1992 
DC-10 2 1973 1991 
1 1975 1991 
1 1976 1991 
If the company accounted for those leases os capital 
leases, the following increases would be reflected in 
the balance sheets ot December 01, 1977 and 1976: 
Assets 1977 1976 
Flight equipment $126,310 90,268 
Facilities and ground equipment.... 2,967 2,967 
Allowance for depreciation and 
amortization 
129,277 
30,513 
93,235 
22,775 
$ 98,764 70,460 
27 
 Liabilities 
Obligations under long-term leases: 
Current portion of debt 
Long-term debt 
$ 6,053 
. .. 
113,804 
4,265 
82,1 17 
$1 19,857 86,382 
Net earnings for the year 1977 would have been 
reduced by $1,638 or $0.13 per share (primary). 
The company used incremental borrowing rates 
in these computations. 
Note 9. Issuance of Preferred Stock. 
On October 6, 1977, 1,200,000 shares of $2.00 Series A Cumulative Convertible Preferred Stock were issued 
at o stated value of $25 per share. The shares of preferred stock are convertible into common stock at the rote 
of 2.5 shores of common stock for each shore of preferred stock, subject to adjustment under certain 
conditions. 
Note 10. Stock Options. 
Western presently has a qualified stock option plan adopted in 1964 for officers and a nonqualified stock 
option plan adopted in 1974 for officers and key personnel.These plans ore summarized os follows: 
1974 Plan 1964 Plan 
Number Number 
of Average of Average 
Shores Price Shores Price 
January 1, 1976 384.770 $ 9.12 1 15,576 $1 1.45 
Options granted 4,000 9.56 - - 
Options exercised (4.120) 8.80 - -- 
Options cancelled and expired (2.575) 10.74 (18.103) 1 1.28 
Balance December 31, 1976 382.075 9.14 97,473 1 1.48 
Options granted 378.500 8.28 - - 
Options cancelled and expired (45,405) 9.15 (21,862) 13.36 
Balance December 31, 1977 715,170 8.69 75,61 1 10.93 
Shores exercisable of: 
December 31, 1977 343,886 8.95 75,61 1 10.93 
December 31,1976 224.645 9.15 81,737 1 1.59 
Options outstanding under the 1964 stock option plan will expire on April 30, 1978. No additional options 
may be granted under this plan. At December 31,1977, 310,710 shores were reserved under the 1974 stock 
option plan for the issuance of additional options. 
Note 11. Repurchase of Common Stock. 
On April 28, 1976, Western repurchased 2,508,832 shares of its common stock from a shareholder for $7,307 
in cash and $23,000 in principal omounf of 10% subordinated sinking fund notes. (See Note 7.) These notes 
were sold to the public on April 29,1976 at 99% of principal amount. 
Note 12. Earnings per Common Shore. 
1977 1976 
Adjustment of net earnings: 
Primary: 
Net earnings $14,062 14,965 
Preferred dividends 567 -- 
Net earnings available for common stock $13,795 14,965 
Fully diluted: 
Net earnings $14,362 14,965 
Reduction in interest expense, net of provision for foxes on income, for the assumed 
conversion of 5%% convertible subordinated debentures 742 756 
Adjusted net earnings assuming full dilution $1 5,104 1 5,721 
Adjustment of shores outstanding (in thousands): 
Weighted overage shores outstanding 12,659 13,601 
Adjustment assuming full dilution: 
Assumed conversion of subordinated debentures 2,539 2,465 
Assumed conversion of preferred stock 71 5 -- 
Total average common shores assuming full dilution 1 5,913 16,066 
Earnings per common shore: 
Primary $ 1.09 1.10 
Fully diluted 0.95 0.98 
Outstanding stock options hove no material dilutive effect on earnings per common share. 
28 
 Note 13. Quarterly Financial Data (Unaudited). 
Summarized quarterly financial data for 1977 and 1976 is as follows: 
Per Shore 
Operating Operating Net Fully 
Revenues Income Earnings Primary Diluted 
1977 
First quarter $164,748 4,257 1,993 0.16 0.14 
Second quarter 165,181 226 1,780 0.14 0.13 
Third quarter 188,825 16,623 8,811 0.70 0.59 
Fourth quarter 172,710b 1,027b 1,778b 0.10 0.10 
1976 
First quarter 139,485 1,056 1,423 0.09 0.09 
Second quarter 146,273 8,031 3,812 0.28 0.25 
Third quarter 166,325 16,842 7,821 0.62 0.53 
Fourth quarter 153,122 3,929 1,909 0.15 0.14 
See Note 2. 
bOperafing revenues and operating income include $2,000 from current and retroactive mail rate adjustments, which increased net 
earnings by $1,000. 
Corporate Officers 
Executive Officers 
Arthur F. Kelly 
Chairman of the Board and Chief Executive Officer 
Dominic P. Renda 
President and Chief Operating Officer 
Corporate Planning Division 
James L. Mitchell 
Senior Vice President--Corporate Planning 
Walter Bambrick 
Vice President--Data Processing and Systems 
Charles S. Fisher 
Vice President--Schedule Planning 
Peter P. Wolf 
Vice President--Communications 
W. Jeffrey Terrill 
Assistant Vice President--Regulatory Proceedings 
Finance and Administration Division 
Robert O. Kinsey 
Senior Vice President--Finance and Administration 
Paul V. Donahue 
Vice President--Procurement 
H.S. Gray 
Vice President--Financial Planning 
Richard O. Hammond 
Vice President and Treasurer 
Roderick G. Leith 
Vice President and Controller 
J.S. Neel 
Vice President--Personnel Relations 
Carl M. Anderson 
Assistant Vice President--Special Projects 
Legal Division 
Gerald P. O'Grady 
Senior Vice President--Legal and Secretary 
Henry M. deButts 
Vice President--Regulatory Law 
Howard L. Culver 
Assistant Vice President--Regulatory Law 
Thomas J. Greene 
Assistant Vice President--Corporate Law and Assistant 
Marketing Division 
Richard P. Ensign 
Senior Vice President--Marketing 
Willis R. Balfour 
Vice President--Sales and Service 
David E. Holt 
Vice President-- Passenger Sales 
Lawrence H. Lee 
Vice President--Inflight Service 
Robert Leinster 
Vice President--Passenger Service 
Bert D. Lynn 
Vice President--Advertising and Sales Promotion 
Jack M. Slichter 
Vice President--Field Management 
John I.Good 
Assistant Vice President--Cargo Sales and Service 
Operations Division 
Anton B. Favero 
Senior Vice President--Operations 
Robert V. Johnson 
Vice President--Flight Operations 
Edwin W. Mitchell 
Vice President--Maintenance and Engineering 
Corporate Affairs 
Roy Silvius 
Vice President--Corporate Affairs 
Wayne B. Lichtgorn 
Assistant Vice President--Consumer Affairs 
Government and Industry Affairs 
Neil S. Stewart 
Vice President--Government and Industry Affairs 
Regional Officers 
William J. Grant 
Regional Vice President--Denver 
Paul R. Harding 
Regional Vice President--San Francisco 
Allen F. Hoss 
Regional Vice President--Hawaii 
Grant G. Murray 
Regional Vice President--Salt Lake City 
Lawrence A. Nichols 
Regional Vice President--Seattle/Tacoma 
Luis Pasquel L. 
Regional Vice President--Mexico 
Raymond M. Waters 
Regional Vice President--Alaska 
Harry L. White 
Regional Vice President--Los Angeles 
Lynn D. Zumbrunnen 
Regional Vice President--Minneapolis/St. Paul 
29 
 Doord of Directors 
Miguel M. Blasquez 
President, Inter-American Commercial Arbitration 
Commission, Mexico City, Mexico 
Victor L. Brown* 
Presiding Bishop, The Church of Jesus Christ of 
Latter-day Saints, Salt Lake City, Utah 
Gerald Grinstein 
Aftorney-at-Law, Preston, Thorgrimson, Ellis, 
Holman & Fletcher, Seattle, Washington 
Walter J. Hickel 
Chairman of the Board, Hickel Investment Company 
Anchorage, Alaska 
Arthur F. Kelly* 
Chairman of the Board and Chief Executive Officer, 
Western Air Lines, Inc., Los Angeles, California 
Bert T. Kobayashi, Jr. 
Attorney-at-Law, Kobayashi, Koshiba & Watanabe 
Honolulu, Hawaii 
Arthur G. Linkletter 
Television Producer and Broadcaster 
Chairman of the Board, Linkletter Enterprises, Inc. 
Irvine, California 
John H. Myers* 
Assistant to the President, Saint John's University 
St. Paul, Minnesota 
Dominic P. Renda* 
President and Chief Operating Officer, 
Western Air Lines, Inc., Los Angeles, California 
Robert H.Volk* 
Chairman of the Board, Westmor Corporation 
Long Beach, California 
'Member. Executive Committee 
Directors Emeriti 
Hugh W. Darling 
Altorney-at-Law, Darling, Hall, Rae & Gufe 
Los Angeles, California 
Leo H. Dwerlkotte 
Las Vegas, Nevada 
James D. Garibaldi 
Aftorney-at-Law, Garibaldi & Sausser 
Los Angeles, California 
Cory Grant 
Director and Executive, Faberge, Inc. 
Beverly Hills, California 
Dr. Donald H. McLaughlin 
Chairman of the Board, Homestake Mining Company 
San Francisco, California 
Edwin W. Pauley 
Chairman of the Board, Pauley Petroleum, Inc. 
Los Angeles, California 
Vernon O. Underwood 
Chairman of the Board and Chief Executive Officer, 
Young's Market Company, Inc., Los Angeles, California 
Harry J. Volk 
Chairman of the Board, Union Bancorp, Inc. 
Los Angeles, California 
John M. Wallace 
Walker Bank 0 Trust Company 
Salt Lake City, Utah 
Arthur G. Woodley 
Bellevue, Washington 
Richard W. Wright 
President, Mountain States Employers Council, Inc. 
Denver, Colorado 
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 beneficially 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 
accordance 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 interest 
file with the CAB a report containing the information 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 Pricing and Domestic Aviation, Civil Aeronautics 
Board, Washington, D.C. 20428. 
Form 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. 
General Offices 
Western Air Lines Building, 6060 Avion Drive 
Los Angeles International Airport 
Los Angeles, California 90045 
Registrar/Transfer Agent--Common Stock 
Bonk of America National Trust & Savings Assn. 
Ill West Seventh Street, Los Angeles, California 90014 
Registrar/Transfer Agent --Preferred Stock 
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--Common Stock 
New York Stock Exchange 
Pacific Stock Exchange 
Stock Listing--Preferred Stock 
New York Stock Exchange 
Pacific Stock Exchange 
Debenture and Subordinated Note Listing 
New York Stock Exchange 
Pacific Stock Exchange 
General Counsel 
Hugh W. Darling 
Darling, Hall, Rae & Gufe 
523 West Sixth Street, Los Angeles, California 90014 
Independent Accountants 
Peat, Marwick, Mitchell & Co. 
555 South Flower Street, Los Angeles, California 90071 
Annual Meeting 
Fourth Thursday in April