Western Airlines Annual Report 1982

THE YEAR AT A GIANCE
(in millions of dollars)
Operating revenues . .. . ............................... .
Operating expenses . .................................. .
Operating loss. . .................. . .... . ......... .
Other Income (Expenses):
Interest expense, net ..
Gains on disposition of property and equipment .
Gain on pension plan termination .
Other, net . ....... . .... . .. .... .. . . .. . . . ... . ... . . . .
Loss before income taxes . ......................... .
Income tax benefits . . ..... .
Net loss ..................................... ... . .
Passengers carried (000) . . .. . .. . . .. . ... . .. ... . . .
Available seat miles (000,000) ........ . .
Revenue passenger miles (000,000).
Passenger load factor-actual(%
).
- breakeven (%
) . .
COVERING WESTERN
1982
1,065.3
1,096.1
(30.8)
( 46. 7)
7.4
15.9
6.6
( 4 7.6)
(3.6)
(44.0)
8,441
15,125
8,893
58.8
63.l
1981
1,059.8
1,125.8
(66.0)
( 45.0)
16.9
1.3
(92.8)
(19.4)
(73.4)
8,402
14,496
8,548
59.0
65.8
% Change
1
(3)
(53)
4
(56)
408
(49)
(81)
( 40)
4
4
(4)
Route lines tell the Western story of 1982 and,
as shown on our cover, will be a colorful part of
Western's television advertising in 1983.
Featured in Western's new "We've Got A Name"
marketing campaign, the starburst route lines
are a familiar part of all current television
commercials. A detailed Western route map
appears on Pages 10 and 11.
DESCRIPTION OF BUSINESS
Western Air Lines, Inc. is a commercial airline
serving the continental United States, Alaska,
Hawaii, Canada and Mexico. It is the tenth
largest domestic airline in terms of revenue
passenger miles in the United States.
The company provides domestic air trans-
WESTERN
AIR LINES, INC.
1982
ANNUAL REPORT
portation services primarily in the western
portion of the United States with operations
centered at its principal hub in Salt Lake City
Western provides services to and from 63
airports, on routes extending from New York
and Washington, D.C. in the east to Honolulu
and Anchorage in the west.
LETTER TO
SHAREHOLDERS
This 1982 report does not tell the story that
all of us at Western wanted to bring to you;
however, it does bring a story of progress and
accomplishments.
The fact that Western reported a loss of S4 4
million for 1982, its third consecutive year of
losses, is a major disappointment even though
these results are a substantial improvement
over 198l's loss of S73.4 million. Early in the
year, we had projected a profit by the third
quarter-which we achieved.
The improved performance is more satis-
fying, however, when viewed in light of the
changes and growth that took place at Western
during 1982. Never in its long history has
Western done so much growing in terms of
flying and cities served. This was made
possible by increasing the utilization of all
available resources-men, women, machines
and facilities. In human terms that meant
sacrifice and determination on the part of all
Western employees.
Westem's Salt Lake City hub, which was put
into operation on May 1, represented the
greatest single achievement of 1982. Over-
night your airline grew from a daily level of
29 flights at Salt Lake City to 59 flights (which
increased to 7 5 in September and will be at
100 by June of this year). The hub provides
convenient flight connections for approximately
300 city pairs daily.
The airline's critics broadcast far and wide
that Salt Lake City would never work as a hub ...
that the local market was too small, the weather
was too bad and whatever else they could find
wrong. Most had never been to Salt Lake City,
seen Westem's modem facility there or known
about the hometown status Salt Lake City
bestows on this airline.
Western has proven them wrong as we knew
we would - Utah has welcomed Westem's
expansion and supports the new travel and
shipping services we have brought to the
community. Today, local boardings represent
2
44 percent of our Salt Lake City business, much
higher than the 30 percent experienced at
other major carriers' hubs.
Weather has presented little problem to
Western in Salt Lake City, but that is partially
because we were prepared for most eventu-
alities. All Western aircraft have been equipped
with the most up-to-date low visibility landing
systems available for each model. Moreover,
at Salt Lake City we utilize a highly success-
ful fog seeding operation. All of this means
Western can operate in conditions some of our
competitors can't.
Using the Salt Lake City hub, Western has
expanded into 17 new markets west of the
Mississippi, and we now offer more flights to
more cities in the west than any other .airline.
To these new cities and the ones traditionally
served by Western we bring the best possible
connections to and from major eastern com-
mercial and government centers-New York City,
Chicago, Kansas City and all three Washington,
D.C. area airports- plus Alaska, Hawaii and
Mexico along with Western Canada.
The hub-and-spoke concept of operation
gives an airline on-line feed opportunities that
were not possible in the old linear route sys-
tems. In other words, when Western boards a
passenger or shipment in one city, in many
cases we now keep that business all the way
to the destination, rather than turning it over
to a competitor. This gives Western more control
of its market. Western now has 58 percent of
its domestic market availability in monopoly or
one-other carrier markets. In April 1982, before
the hub, that percentage of virtually exclusive
markets stood at 21.
Westem's operating costs in 1982 exper-
ienced a decline from the 1981 fourth quarter
level of 8.13 cents per available seat mile to
6.99 cents for the fourth quarter of 1982. At the
same time, however, Western experienced a
decline in its yield - or average revenue per
passenger mile- from 11.38 cents in the fourth
quarter of 1981 to 10.0 2 cents for the final
quarter of 1982. These yield declines cost us
more in lost revenues than we were able to
achieve in expense reductions. Had we been
able to hold the 1981 yield levels, Western
would have been profitable in 1982.
These conditions are the inevitable result of
oversupply in a commodity market. In the
airline industry, this has led to fare wars and
emphasizes the necessity for an airline to
continue reducing operating costs to live within
this economic climate.
Mature airlines that have grown up in the
regulated era during the last 40 to 50 years
became unproductive in terms oflabor efficiency
and effective use of resources. In the past year,
Western has worked diligently with the unions
representing its labor force to reverse those
trends which developed under the protection
ofregulation. We consider steps toward reversal
as essential to Western's profitability in the future.
We expect that more low-cost operators may
enter the marketplace as the economy improves,
and we must be prepared to meet them head-on
with cost efficiency in operations and supe-
rior services. Western is only one of many
"mature" airlines in this squeeze.
Western has in operation one of the youngest
aircraft fleets in the industry with an average
aircraft age of 7.125 years, but even at that
we have undertaken an appearance spruce-up
program which will be completed for most of
the fleet by late Spring. Aircraft interiors will
be refurbished and those that need it will get
an exterior paint job. At the same time all
ground personnel who are in contact with the
customer will graduate from newly developed
training programs this Spring, and we will
implement the latest improvements in our
automated reservations/passenger service
system by June.
We call it the "new" Western, but as our
advertising approach says "Western ... We've
Got A Name To Live Up To'.' We are doing every-
3
thing in our power to keep Western on a course
to full recovery and future growth. We appre-
ciate your support and hope you will encourage
your friends, relatives and neighbors to fly
Western whenever possible.
'(l_-_Q
Neil G. Bergt
Chairman of the Board and
Chief Executive Officer
April 4, 1983
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Despite improved operating results in 1982,
Western reported a net loss for the third consecutive
year. In December 1981 Western's new manage-
ment embarked on a rebuilding program that
resulted in an extensive route realignment and
creation of a connecting center at Salt Lake City
beginning May 1, 1982. The major objectives of
the program were to create a system that would
enable Western to control a greater share of the
travel emanating from cities served and increase
utilization of existing resources.
During 1980 and 1981, the company had
responded to its losses by reducing available seat
miles (ASM's). From 1979 to 1981 ASM's decreased
13-percent, including a seven percent reduction
from 1980 to 1981. Traffic, in terms of revenue
passenger miles (RPMs ), declined only three per-
cent from 1980 to 1981. This decrease in RPMs was
more than offset by a 10 percent increase in pas-
senger revenue per revenue passenger mile (yield).
As a result, passenger revenue rose seven percent.
However, this level of revenue growth was not
adequate to support Western's cost base.
Operating expenses were up eight percent in
1981, despite the reductions in ASMs and RPMs.
Although fuel consumed dropped eight percent,
fuel expense rose 10 percent due to price increases.
Wages, salaries and employee benefits rose five
percent due to rate increases which were not entirely
offset by reductions in the number of employees.
Other operating expenses were up 11 percent,
primarily due to a 20 percent increase in commis-
sion expense and a 34 percent increase in adver-
tising. Because travel agency commission rates can
no longer be established jointly by the scheduled
airlines, increased competition for the agents'
business caused the average commission rate paid
by Western to rise from 8.9 percent in 1980 to
10.4 in 1981.
In 1982 Western's total operating expenses
decreased 2.6 percent from 1981 levels despite a
4.3 percent increase in ASMs and a four percent
increase in traffic. Although the company lowered
its unit costs through increased flying, the gain in
passenger traffic was obtained in part from selling
Western's product at a lower price. Yield declined to
10.42 cents in 1982, down 6.4 percent from 1981
and up only 3.2 percent from 1980. Passenger
4
revenue declined slightly as the four p rcent in-
crease in traffic was more than offset by lower yield.
The decline in yield resulted from a greater pro-
portion of passengers traveling on discount fares
and greater discounts in those fares, both due to
increased fare competition with other airlines.
During early 1982 Western obtained pay cuts
and/or productivity improvements from most of
its employee groups and reduced the number of
active employees. These actions caused a decrease
in wages, salaries, and employee benefits, despite
increased ASM production.
Most of the wage concessions granted during
1982 expired or are scheduled to expire in early
1983. In late 1982 and early 1983 Western entered
into negotiations with its labor unions for a contin-
uation or reinstatement of the concessions granted
in early 1982, as well as additional concessions
from some unions. There can be no assurance that
such concessions will be obtained.
Certain actuarial assumptions were changed in
1982 for some of the company's pension plans,
causing an additional S7 .2 million reduction in
labor expense.
Fuel expense declined four percent in 1982 due
to price reductions that more than offset a two per-
cent increase in consumption. Further price reduc-
tions are anticipated in 1983. Western expects to
consume more fuel in 1983 than in 1982 due to
expanded operations.
Other operating expenses include costs such as
commissions, food and beverage, aircraft and
ground equipment rentals, advertising, aircraft main-
tenance and expenses related to contract services
provided to other aircraft operators. Contract service
expenses increased S13.9 million in 1982, while
related revenues rose 126 percent from S20.5
million to S46.4 million.
Other income (expense) includes gains on asset
dispositions of S7.4 million, S16.9 million, and S32.1
million in 1982, 1981, and 1980, respectively. A gain
of S15.9 million from termination of a pension plan
is included in 1982 results.
Improved operating results in 1983 and future
years will depend in large part on an increase in
load factor and/or yield and continued reductions
in expense levels. Without these improvements
Western, and the airline industy in general, may
well be unable to return to profitability.
IQUIDI1Y D CAPITAL RESOURCES
W stem's cash and cash quivalents totall ct S4 7.4
millionatD cember31, 1982, upfromS24.l million
at D cember 31, 1981. Westem's cash balances
fluctuate significantly from day-to-day The company's
working capital deficit increased slightly from S 111. 2
million at December 31, 1981 to S115.4 million at
December 31, 1982. Because airlines typically have
no product inventories and have substantial airline
traffic liabilities due to advance ticket sales, minimal
or negative working capital balances are not
uncommon. Since mid-1981 cash generated from
operations has not been sufficient to fund debt
repayment. However, Western has made all sched-
uled debt repayments by supplementing cash from
operations with cash from other sources.
In order to maintain liquidity during 1981, 1982
and to date in 1983, Western has sold certain assets,
terminated certain pension plans, and instituted
new borrowing and financing arrangements. The
most significant of these transactions were as follows:
In December 1981 Western sold two Boeing 737
aircraft for S 11 million and leased back the aircraft.
See ote 10 to Financial Statements.
In April 1982 Western sold for S21 million, with
recourse, the conditional sales contracts arising
from an earlier sale of two DC-10 aircraft. See Note
10 to Financial Statements.
In April 1982 the company terminated a pension
plan and received S15.9 million. It terminated
another pension plan in January 1983 and received
S20.6 million to date in 1983 and expects to receive
an additional S5.5 million in 1983.
During December 1982 Western sold S 12.5
million principal amount of 12 percent convertible
subordinated debentures due December 1992.
These debentures are convertible into common stock
at S5.50 per share, subject to adjustment in certain
cases. Interest is payable semi-annually
In December 1982 Western entered into a term
loan and security agreement to borrow S33.4 million
from an affiliate of an aircraft manufacturer. At the
same time Western placed an order for three 737-300
aircraft and utilized S3 million of the proceeds as
deposits for those aircraft. The term loan requires
quarterly payments of principal and interest with
the final payment due December 1988. The interest
rate is two percent above the London InterBank
Offered Rate ("LIBOR"). otes under this agreement
5
ar s cur ct by thr 737 and thr e 727 aircraft
and 15 ngin s.
Effective January 18, 1983, W stem enter d into
a S30 million revolving credit agreement with a
group of financial institutions. The amount available
under this line decreases to S25 million on June 30,
1983 and to S12.5 million on July 31, 1983. All
amounts advanced must be repaid by August 31,
1983. The interest rate on funds borrowed is one-
and-a-half percent per annum above a fluctuating
interest rate based on the higher of Citibank's base
rate or a computed rate based on various other
interest rates. Upon signing the agreement, Western
paid a fee of one quarter of one percent of the
commitment and issued 550,000 warrants to
purchase Western common stock at S5.625 per
share. A borrowing fee is required and up to
250,000 additional warrants may be issued upon
any draw under the line. In March, Western drew
down S 10 million under this line. There are several
conditions precedent to the company's ability to
draw further, and thus there can be no assurance
that such funds will be available.
In addition, during 1982 Western sold other
assets and obtained other financing which gener-
ated approximately S14.6 million.
With the exception of one 7 2 7 aircraft and 4
engines, all ofWestem's owned aircraft and engines
are pledged as collateral for debt and other
obligations. In addition, some of the Company's
agreements require that collateral be maintained at
specified levels. See ote 6 to Financial Statements.
Although Western would be able to incur a small
operating loss and still cover the S52.4 million of
required debt repayments in 1983, an operating
loss comparable to 1982 would result in insufficient
cash to cover such repayments. If this were to occur,
part of the company's scheduled debt repayments
would have to be made utilizing cash from its line
of credit, asset sales, additional new borrowings
and/or sale of equity securities. o assurance can be
given that sufficient cash could be generated from
such sources.
Western has on order three Boeing 737-300
aircraft scheduled for delivery in 1985 and six 767
aircraft and three 767 spare engines scheduled for
delivery in 1986. The total commitment for the
acquisition of these aircraft and spare engines is
approximately S4 50 million. Long-term s cured
debt or capital lease financing is expected to be
utilized to finance these acquisitions, although no
assurance can be given that such methods of financ-
ing will be available. Western also holds options for
the purchase of six additional 767 aircraft which
would be delivered in 1987. Western would require
waivers from its lenders to complete these trans-
actions. See Note 3 to Financial Statements.
Western's financial resources are not as great as
those of certain of its competitors, and, therefore,
whether the current economic recession continues
or abates, adverse economic developments that can
be absorbed by companies with greater resources
might substantially affect the ability of Western, with
its more limited resources, to meet its obligations.
Financial Covenants: As a result of net losses, in
the fall of 1981 Western's equity became insufficient
to meet the covenant requirements of various loan
agreements. In early 1982 Western's lenders waived
the company's defaults under its loan agreements
until August 31, 1982, and granted the company
a S30 million line of credit, which was entirely
drawn down during the first quarter of 1982. This
loan was repaid in April 1982 with proceeds from the
termination of a pension plan and the sale of certain
receivables. As part of the agreement under which
the defaults were waived and the line of credit was
granted, Western secured the loans of its previously
unsecured lenders with 29 of its aircraft and 7 7
of its engines.
On August 31, 1982 Western and its creditors
entered into a Master Credit Terms Agreement
(Master Agreement) which contained new loan
covenants based in part on forecasted results of
operations. These covenants, as amended, require
maintenance of certain levels of net worth, cash flow
and debt-equity ratios ( all as defined in the Master
Agreement). The Company has sought and obtained
relaxation of these loan covenants on two subse-
quent-occasions in order to avoid violating cove-
nants and to provide additional cushion in 1983.
Included in the Master Agreement are provisions
which prohibit payment of dividends and redemp-
tions of capital stock, and generally restrict additional
borrowings, capital expenditures and rental com-
mitments. The nature of the covenants is such that
lender approval is required for nearly all significant
transactions.
6
Western's agreements with its lenders prohibit
capital expenditures in excess of S12 million p r
year, and prohibit lease obligations where th aggre-
gate annual rentals under such leases would exceed
four percent of the most recent 12 month revenues
without the lenders' prior consent. These provisions
may limit the ability of Western to acquire additional
aircraft or exercise options to acquire aircraft.
SHAREHOLDERS AND STOCK
As of December 31, 1982, the 13,043,746 shares
of outstanding Western common stock were held
by approximately 15,000 individuals and insti-
tutions. Holders of the common stock last received
a dividend in the third quarter of 1980. Certain
lending agreements to which Western is a party
prohibit the payment of dividends by it, whether
in cash or stock, and prohibit redemptions of capital
stock, without the prior consent of the lenders.
There were 1,196,870 shares of the preferred
stock outstanding held by approximately 1,240
individuals and institutions as of December 31, 1982.
The company has omitted payment of the quarterly
dividends on the Series A Pref erred Stock since
the first quarter of 1982. So long as dividends remain
in arrears on the Series A Pref erred Stock, no cash
dividends may be paid on the company's common
stock The total amount of the dividends in arrears
at December 31, 1982 was 52,394,000. If six
dividends are omitted, the holders of preferred stock
have the right, voting as a class, to elect two additional
members to the company's Board of Directors at
the next Annual Meeting of Shareholders. Various
loan agreements currently prohibit payment of
dividends on preferred stock Consequently, the
dividend normally payable on March 31, 1983
was omitted.
Wes tern's common and pref erred stock are traded
on the ew York and Pacific Stock exchanges.
Market prices for the past two years are listed below:
S2 Series A
Common Stock Preferred Stock
1981 High Low High Low
First Quarter 10 8 261
t1 21
Second Quarter 1 l7/a 8 30 221
/a
Third Quarter 11 3/t 6 291
/t 155/a
Fourth Quarter 81/a 45/a 203/t 14
S2 Series A
Common Stock Pref erred Stock
1982 High Low High Low
First Quart r 55
~ 31
/2 16 10
S cond Quart r 61
/4 33
/a 15 85/o
Third Quart r 61/o 3 15 91/2
Fourth Quart r 6 3 15 10
From 1938 to 1978 the airline industry was subject to
the comprehensive economic regulatory jurisdiction
of the Civil Aeronautics Board (CAB). Under that
framework of regulation, authority to operate new
services could be obtained only by proving a public
need therefore, competition was restricted, rates
and fares were tightly controlled, intercarrier
arrangements for cooperative purposes were closely
supervised and mergers and consolidations between
air carriers were carefully scrutinized.
The Airline Deregulation Act of 197 8 ( the "Deregu-
lation Act'1 materially changed the statutory scheme
of regulation of domestic air transportation. Under
the Deregulation Act, the CAB lost its authority with
respect to domestic routes on December 31, 1981,
and its authority over fares and intercarrier trans-
actions, including mergers, as of January 1, 1983.
Under the Deregulation Act, the CAB will go out of
existence as of January 1, 1985, and certain of its
functions will be transferred to other government
departments. The Deregulation Act made no
changes in the law as it relates to authority to engage
in foreign air transportation, except the CAB's power
to grant exemptions for temporary authority was
liberalized. Nevertheless, the United States govern-
ment has followed a practice of trying to convince
foreign governments that multiple carrier desig-
nations on international routes should be authorized
by intergovernment agreement. A few countries
have acceded to the position of the United States
government; Mexico and Canada have not.
The airlines presently operate in an environment
of unrestricted competition in domestic air trans-
portation. Carriers no longer have an obligation to
provide service but can start and stop service on
any route virtually at will, subject to slot and gate
availability, and have complete freedom in pricing
their products. However, the air traffic controller's
strike has temporarily limited flights at 22 busy
airports in the United States.
7
In December 1981 Western agreed in principle
to acquire Wien Air Alaska, Inc. (Wien), a regional
airline based in Alaska, from Eagle International
Corporation (Eagle), a corporation owned by
Neil G. Bergt. Eagle had previously agreed to pur-
chase Wien from Household International, Inc.
(Household). At the same time that Western had
agreed to acquire Wien, Mr. Bergt became Chairman
and Chief Executive Officer of Western. In July 1982
the Civil Aeronautics Board approved the combi-
nation of Wien and Western, but imposed conditions
upon Mr. Bergt and Alaska International Air, Inc.,
a cargo airline owned by Mr. Bergt, which Mr. Bergt
and Eagle found unacceptable. After the ruling was
reconsidered by the Civil Aeronautics Board, but
without significant alterations to the conditions,
Eagle terminated its agreement with Household, and
Western and Eagle mutually agreed to terminate
their agreement. Household subsequently filed suit
against Eagle and Mr. Bergt seeking specific per-
formance of the Eagle agreement to acquire Wien.
Western is not a party to that action. Mr. Bergt
has remained as Chairman and Chief Executive
Officer of Western.
Air Florida Systems, Inc., which in early 1982
had obtained CAB approval to acquire Western and
held approximately 12.6 percent of Western's
common stock, sold that stock in November of 1982.
WESTERN'S FI
In Operation* 1985-1986
Owned** Leased Delivery 198 7 Options
DC-10-10 7 3
DC-10-30 1
727-200 33 14
737-200 10 4
737-300 3
767-200 6 6
*As of March 2, 1983
**See "Pledged Assets" below.
Inauguration of services to small and medium-sized
cities increased the importance to Western of the
two-engine 7 3 7 s and, to a lesser extent, the three-
engine 727s. At the end of 1982, Western acquired
two new 7 37-200s in a lease arrangement with Alaska
International Air and placed an order with Boeing
Aircraft Company for three new 737-300s for deliv-
ery in 1985. See ote 10 to Financial Statements.
During 1982, Western moved delivery on its
six Boeing 767 aircraft from 1984/1985 to 1986.
Options held by Western for an additional six 767s
were moved to delivery in 1987.
Western's present fleet is in compliance with
federal noise regulations with the exception of 12 of
its 14 Boeing 7 3 7 s. These aircraft are expected to
be retrofitted at a cost of approximately S300,000
each in advance of the 1988 deadline for compliance.
GROUND PROPERTIES AND EQUIPMENT
Western's general offices and principal overhaul and
maintenance base are located at Los Angeles Inter-
national Airport. These facilities, including a DC-10
hangar and a parking structure completed in 197 5,
have been built by Western as improvements on
leased land. The lease on the land and buildings
expires in 1993, subject to the right of the City of
Los Angeles to terminate the lease on March 31,
1988, or any March 31 thereafter. Upon such termi-
nation or expiration, the improvements revert to the
city Western also leases hangars at Seattle/Tacoma,
San Francisco, and Minneapolis/St. Paul, as well as
terminal facilities at most airports served, plus ticket
and administrative offices throughout its system.
Public airports are utilized for flight operations
generally under contractual arrangements with
municipalities or agencies controlling them.
During 1983 and 1984 Western plans to under-
take certain improvements in its passenger terminal
facilities at Salt Lake City to accommcxlate its growing
hub operations and at Los Angeles to integrate with
new second level roadways which are being con-
structed. If these plans are consummated Western's
share of the cost is estimated to be S12.5 million.
PLEDGED ASSETS
A substantial portion of Western's assets, including
all but one of its owned aircraft and all but 4 of
its owned engines, is pledged as collateral to secure
debt and other obligations. For additional informa-
tion, see Note 6 to Financial Statements.
THE PEOPLE OF WESTERN
Management: Western's Chairman and Chief
Executive Officer Neil G. Bergt was elected to his
post on December 8, 1981. The 4 7-year-old Western
leader also is chairman and sole owner of Alaska
International Industries, which has as its main
subsidiary an Alaska cargo airline-Alaska Inter-
8
national Airlines. Bergt assumed th leadership role
at Interior Airways, AIA's predecessor, in 1970 and
bought out other shareholders of the company
in 1979.
The position of President and Chief Operating
Officer was held by Ned P DeWitt from July 23, 1982
through January 6, 1983, at which time DeWitt
resigned to pursue other interests. DeWitt came to
Western from Six Flags Corp., Los Angeles, where
he served as president and chief executive officer.
Other principal officers of Western include:
Andre C. Dimitriadis, Senior Vice President-
Finance and Chief Financial Officer, joined the
company in May 1982 after having served as Vice
President-Finance and Chief Financial Officer at
Air California for two-and-a-half-years. Dimitriadis,
4 2, was with Pan American World Airways from
1973 through 1979, serving as assistant treasurer
from 1977 through 1979.
George M. Kamats, Senior Vice President-
Operations, joined Western in October 1982.
Moving to Western from Capitol Air where he had
served as Vice President and Chief Operating Officer
since 1980, Kama ts, 4 7, started his airline career
in 1961 and held senior executive posts with Alaska
International Air, Great orthern Airlines and Inter-
national Air Leases during the 1970s.
Lawrence H. Lee, 55, Senior Vice President-Salt
Lake City, has been a Western employee since 194 3
and held officer posts since 1968. He was elected
a senior vice president in 1982 and was given
responsibility for setting up Western's hub.
George M. Sullivan, 60, Senior Vice President-
Alaska, joined the airline in April of 1982 after
completing 15 years as the Mayor of Anchorage.
Craig B. Benedetti, 30, serves as Western's Vice
President- Marketing. Prior to joining Western as
director-economic forecasting in June 1981,
Benedetti was with Trans World Airlines where he
worked in business planning and forecasting func-
tions from 1977.
Thomas J. Greene, 45, is the company's Vice
President, General Counsel and Secretary Greene
has been with Western since 1969.
Glen L. Stewart, 40, serves as Vice President and
Controller and has been at Western since 1969.
Employees: Western's employees made substantial
contributions to the company's financial recovery
efforts in 1982, which helped make possible the
reduction in Western's cost per available seat mile.
The number of active Western employees during
1982 averaged 9,760, down from an average of
10,120 in 1981. At January 31, 1983, Western had
10,066 active employees. Labor unions represent
approximately 92 percent of Western's employees.
These unions include the Air Line Pilots Association,
Air Transport Employees, Association of Flight
Attendants, International Brotherhood of Teamsters,
Sindicato Nacional de Trabajadores de Aviacion y
Similares; and the Transport Workers Union.
Since December 1981, Western has obtained pay
cuts and productivity improvements from most of
its employees. It is estimated that such changes saved
Western in excess of S50 million in 1982.
The contractual status of each ofWestern's collective
bargaining groups as of January 31, 1983 follows:
Number of
Employees Union Amendment
Mechanics and Related
Employees and Stock
Clerks 1,788 IBT 7-1-83
Pilots 1,493 ALPA 5-1-84
Flight Attendants 1,983 AFA 1-1-83
(In mediation)
Agent & Clerical
U.S. 4,600 ATE 1-1-83
(In negotiation)
Canada 122 ATE 7-1-82
(In conciliation)
Mexico 212 S TA 1-19-84
Flight Superintendents 26 1WU 11-1-83
Ground School Instructors 34 IBT 7-1-83
LEGAL PROCEEDINGS
During the last several years Western and other
airlines have been parties to numerous actions
regarding the subjects of aircraft noise and engine
emissions. Such actions have included both suits
brought directly against the airlines and cross-
complaints against the airlines in suits brought
against airport proprietors. Unfavorable decisions
in such actions could have a material adverse effect
on the company
While extensive in recent years, such litigation
has substantially diminished during the last year
and Western does not believe any material liability
will result to Western. In light of this litigation,
however, operators of certain airports, including
those at Los Angeles, San Jose, Orange County and
9
San Diego, and Washington D.Cs National, have
imposed or are considering imposition oflimitations
on frequency and timing of airline flights or upon
the proportion of any airline's fleet which may con-
tinue to operate without complying with specified
noise standards. In general, enforcement of such
restrictions at a major airport served by Western
could have a material adverse effect upon its
operations.
Western is also involved in various other litigation,
including cases alleging discrimination (including
age discrimination) in employment practices. In one
such action involving the ability of Western pilots
to continue after age 60 as second officers, a judg-
ment was entered during 1981 directing the
company to allow three pilots to continue working
as second officers after age 60 and awarding those
pilots back pay and attorney's fees. That case
presently is on appeal, and at least one other similar
action has been filed. Western does not believe such
claims will result in any material liability to Western.
A California firm which acted as a consultant for
Western during part of 1982, filed a complaint in
the Superior Court of the State of California for the
County of San Francisco against Western, Neil G.
Bergt and others for breach of contract, fraud,
defamation and other claims. The total damages
sought, including compensatory and punitive
damages, exceed S 10 million. Western does not
believe the action will result in any material)iability
to Western.
- -Chicago
San Fr

Orleans
lxtapa/ Zihuatanejo
Acapulco
New York
Baltimore
Dulles W~shington, D.C.
National
Puerto Vallarta
WESTERN TODAY
Salt Lake City is the focal point of Westem's
domestic U.S. route system today with 100
flights a day interconnecting cities of all sizes
in the West with each other and with major
centers in the Mid-West and on the East Coast.
*Seasonal Service
WESTERN YESTERDAY
Before the May 1, 1982, launch of its hub-
and-spoke system at Salt Lake City, Westem's
market lines were linear and featured fewer
on-line connecting opportunities.
New York
Chtc.ago
Kansas City
New Orleans
Seasonal Service
Arizona is on Mountain Standard Tune
11
(In millions except per share amounts and other items indicated by *)
1982 1981 1980 1979 1978 1977 1976 1975 1974 1973
Summary of Operations
Operating Revenues:
925.8 949.6 465.l 437.3 376.7
Passenger . s 887.9 827.7 734.0 614.6 544.2
Cargo, charter, and other . . ... ' '
.. ' .
139.5 110.2 107.8 104.4 100.5 76.9 61.0 53.9 51.1 44.6
Total operating revenues . . . . ..
'
. . '
.. 1,065.3 1,059.8 995.7 932.l 834.5 691.5 605.2 519.0 488.4 421.3
Operating Expenses:
Wages, salaries, and employee benefits( c) .. 368.5 403.4 384.2 356.6 309.4 263.1 226.4 201 .7 182.3 165.4
Fuel . 312.0 326.6 296.4 225.7 154.9 138.0 108.3 93. l 71.4 44.5
Otherfa) _ . . '. .... 415.6 395.8(c) 360.9 331.6 315.3 260.9 235.l 211.1 192.5 168.3
Total opera ting expenses 1,096.1 1,125.8 1,041.5 913.9 779.6 662.0 569.8 505.9 446.2 378.2
Operating income (loss) (30.8) (66.0) (45.8) 18.2 54.9 29.5 35.4 13. l 42.2 43.1
Interest expense, net . (46.7) (45.0) (38.5) (24.9) (20.2) ( 17 .5) (16.3) (14.4) ( 15.3) (13.0)
Gains on asset dispositions and other income, net . . . . . . . . . 14.0 18.2 35.1 46.1 10.7 7.8 3.1 4.3 13.8 4.2
Gain on pension plan termination . 15.9
Earnings (loss) before income taxes and cumulative effect of a
change in accounting principle . (47.6) (92.8) (49.2) 39.4 45.4 19.8 22.2 3.0 40.7 34.3
Income taxes (benefits) . (3.6) (19.4) ( 19.6) (2.1) 6.9 7.1 8.2 (1.5) 17.2 14.4
Earnings (loss) before cumulative effect of a change in accounting principle (44.0) (73.4) (29.6) 41.5 38.5 12.7 14.0 4.5 23.5 19.9
Cumulative effect of a change in accounting principle(b) 16.2 7.2
Net earnings (loss) . ( 44.0) (73.4) (29.6) 41.5 54.7 12.7 14.0 11.7 23.5 19.9
Earnings (Loss) per Common Share:
Primary:
Before cumulative effect of a change in accounting principle . s (3.56) (5.81) (2.46) 2.99 2.82 0.96 1.03 0.30 1.55 1.32
Net earnings (loss) . . ..... . .
s (3.56) (5.81) (2.46) 2.99 4.09 0.96 1.03 0.77 1.55 1.32
Fully Diluted:
Before cumulative effect of a change in accounting principle . s (3.56) (5.81) (2.46) 2.31 2.15 0.85 0.92 0.29 1.38 1.18
Net earnings (loss) . s (3.56) (5.81) (2.46) 2.31 3.04 0.85 0.92 0.70 1.38 1.18
Other Financial Data:
Cash dividends paid per share of common stock ... . .........
s 0.25 0.40 0.40 0.40 0.40 0.47 0.39 0.23
Total assets . s 808.6 834.6 917.0 821.4 710.1 574.9 515.1 488.3 448.8 431.7
Property and equipment - net . . . . . . . .
. . . . .
s 634.8 662.4 718.8 634.6 519.7 427.9 378.6 367.6 350.3 316.4
Longterm obligations- less current installments s 411.5 401.9 435.l 318.3 265.7 214.5 192.5 175.4 167.4 178.0
Shareholders' equity . . . . ... . .
s 77.6 121.7 197.3 232.6 198.5 147.4 112.1 133.9 129.3 110.8
Operations:
70
Airplanes operated at end of year* .... 72 71 76 78 77 75 75 72 74
Passengers carried . 8.4 8.4 9.1 11.2 10.4 8.8 8.1 7.5 7.4 7.4
Available seat miles 15,124.6 14,495.8 15,515.6 16,630.5 16,254.9 14,963.8 13,450.4 11,696.5 11,123.5 11,175.5
Revenue passenger miles . . . . . . . . . . .
. . . . ... 8,892.6 8,547.9 8,832.1 10,494.8 10,634.8 8,588.8 7,833.8 7,102.9 6,747.5 6,476.1
Passenger load factor- actual (%
)* . 58.8 59.0 56.9 63.1 65.4 57.4 58.2 60.7 60.7 57.9
- breakeven point (0o )* . . . .
. . . . . . . . . ...... 63.1 65.8 62.0 63.2 61.1 56.1 56.0 59.7 56.1 52.5
-profit margin (point difference)"' (4.3) (6.8) (5.1) (0.1) 4.3 1.3 2.2 1.0 4.6 5.4
Average revenue per passenger mile* . . . -
. . ..
s .1042 .1113 .1010 .0807 .0720 .0734 .0705 .0665 .0660 .0593
Average length in miles per passenger trip* . . .... 1,053 1,017 965 926 994 966 963 942 902 877
Operating expense per available seat mile*. s .0725 .0777 .0671 .0550 .0480 .0442 .0424 .0433 .0401 .0338
Cargo revenue ton miles . 156.1 151.3 163.2 162.0 176.3 157.3 135.0 108.6 95.2 76.5
Average number of employees* .. 9,760 10,120 10,657 l l,256 10,787 10,413 9,799 9,357 9,696 9,826
(a) Changes in the estimated useful lives of certain aircraft (b) Effective January 1, 1978, Western changed its method of (c) During 1982, actuarial assumption changes to pension (e) Effective January 1, 1981 Western revised its procedures
were implemented in January 1978 and October 1976. accounting for post-1971 investment credits for financial plans were made reducing expenses by S7.2 or S0.55 per for recognizing commission expense to more closely
These changes increased net income in 1978 and 1977 rep:::>rting purposes from the deferral to the flow-through share (primary). identify the expense with the period in which the related
by approximately S 1.5 or S0.12 per share (primary), and method. The cumulative effect of the change amounting ( d) Cash dividends on Series A Pref erred Stock for 1982 are revenue is recognized. The effect of this change was to
S2.4 or S0.19 per share (primary), respectively. to S16.2 or Sl.27 per share (primary) has been included in arrears. reduce the 1981 net loss by S3.3 or S0.26 per share (primary).
in net earnings for 1978.
12 13
1

December 31, 1982 and 1981
(In thousands of dollars)
ASSETS
Current Assets:
Cash and cash equivalents, including time
deposits of S36,024 and commercial paper
at cost of S7,221 which approximates
market-1982 . . .... .
Receivables (less allowance for doubtful accounts
of S3,491-1982 and S2,959-1981) ......... .
Receivable from sale of aircraft . . . . . . . . . . . . . . .
Flight equipment expendable parts at average cost
(less allowance for obsolescence of S 16,364-1982
and S15,422-1981) . . . . . . . . . . .. . .. .
Other current assets . . . . . . . . . .. . .. .
Total current assets. . . . . . . .
Property and Equipment at Cost:
Flight equipment. . . ...... .
Facilities and ground equipment.
Deposits on equipment purchase contracts .
Less allowance for depreciation and amortization .. . ...... . . . . .
Other Assets . . . . . . . . . .
See accompanying Notes to Financial Statements.
14
1982 1981
s 47,350
82,667
21,362
17,366
168,745
850,957
140,471
27,017
1,018,445
383,691
634,754
5,137
S 808,636
24,057
89,311
20,212
20,953
12,646
167,179
828,276
139,400
21,508
989,184
326,737
662,447
4,944
834,570
LIABILITIES AND SHAREHOLDERS' EQUI1Y
Current Liabilities:
Current installments of debt . . . . . . . . . . . . . . . . . . . . . . .
Current installments of capital leases . . . . . . . . . . . . . .
Notes payable ..... . ....... . ... ... ............ .. ..... . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Airline traffic liability. . . . . . ....... .
Salaries, wages and vacation benefits payable . . ..... .
Other accrued liabilities . . . .. .......... .. .... .
Total current liabilities . . . . . . . . . . . . . . .
Long-term Obligations, Less Current Installments:
Debt.......... . . . . . . . . ..... .
Capital leases . . . . .............. . . .
Deferred Credits and Other Liabilities:
Deferred taxes on income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Def erred gain on sale and lease back of aircraft . . . .
Other........ . . . . . . . . . . . ........ .
Shareholders' Equity:
Preferred stock-authorized 25,000,000 shares,
S2 Series A Cumulative Convertible, S25 stated
value per share. Liquidation preference at
stated value plus accrued and unpaid dividends.
Outstanding 1,196,870 shares-1982 and
1,196,920-1981 . . . . . . . . . ....
Common stock-authorized 35,000,000 shares,
Sl par value per share, outstanding 13,043,746
shares-1982 and 13,043,621-1981 . . . ............. .
Additional paid-in capital . . ............... .
Retained earnings ..................................... .
Commitments and Contingent Liabilities
15
1982 1981
s 43,038
9,406
13,109
61,189
89,821
40,363
27,191
284,117
300,671
110,856
411,527
10,747
7,001
17,599
35,347
29,921
13,044
31,061
3,619
77,645
S808,636
26,650
7,962
20,000
76,504
81,006
41,838
24,460
278,420
302,700
99,184
401,884
11,002
9,335
12,265
32,602
29,923
13,044
31,062
47,635
121,664
834,570
Years ended December 31, 1982, 1981, and 1980
(In thousands of dollars except per share amounts)
Operating Revenues:
Passenger ..... .
Cargo . . ....... .
Contract service and other.
Operating Expenses:
Wages, salaries, and employee benefits . . . . . ..... .
Fuel ... . .... . . . . . . . .. ..... .
Depreciation and amortization ..
Other. . . .. ......... . . .. .... . . .
Operating loss . . . . . . . . . .
1982 1981
S 925,735 949,576
68,020 62,983
71,5 I 5 47,282
1,065,270 1,059,841
368,503
311,999
61,751
353,815
403,428
326,606
63,632
332,129
1,096,068 1,125,795
(30,798) (65,954)
===========
Other Income (Expenses):
Interest, principally on long-term obligations ...... . . .
Interest capitalized . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . .
Gains on disposition of property and equipment .
Gain on pension plan termination . . . . . ....... .
Other, net . . . . . . . . . . . . . ........ .. . .. . .
Loss before income taxes . . . . . . . . . . . . . . . . . . . .
Income tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . .. .. .
Loss per common and common equivalent share .
See accompanying Notes to Financial Statements.
16
(49,195)
2,508
5,604
7,385
15,930
994
(16,774)
(47,572)
(3,556)
==
S (44,016)
S (3.56)
(49,836)
4,805
4,641
16,869
(3,333)
(26,854)
(92,808)
(19,408)
(73,400)
(5.81)
1980
887,901
63,821
44,033
995,755
384,201
296,365
61,310
299,640
1,041,516
(45,761)
(43,507)
4,940
3,168
32,099
( 178)
(3,478)
(49,239)
(19,607)
(29,632)
(2.46)
Years ended December 31, 1982, 1981, and 1980
(In thousands of dollars)
Sources of Working Capital:
Net loss . . ................... .
Add (Deduct) Items Which did not Affect
Working Capital:
Depreciation and amortization.
Def erred income taxes .
Gains on disposition of property and equipment . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . .....
1982
$(44,016)
59,968
(432)
(7,385)
(2,508)
1981
(73,400)
61,780
(18,617)
(16,869)
(4,005)
= = = = = =
Total provided ( used) by operations . . . . . . . . .
Proceeds from issuance of long-term obligations .
Proceeds from disposition of property and equipment . . ..
Reimbursement of deposits and capital
expenditures upon acquisition of flight equipment .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . .
Total sources .
Applications of Working Capital:
Reduction of long-term obligations including
transfers to current liabilities . . . .. . . . . . ......... .
Purchase of and deposits on property and equipment .
Cash dividends on pref erred stock .
Cash dividends on common stock.
Total applications .
5,627
62,986
9,269
2,269
80,151
53,349
30,933
(51,111)
73,212
61,208
15,457
4,000
102,766
106,400
49,810
2,394
84,282 158,604
===="""" =======~= ...................................................
Decrease in working capital. . . . . . . . S (4,131) (55,838)
~~~~=
Summary of Increases (Decreases) in Working Capital:
Cash and cash equivalents . . . . . . . . . .
Receivables, net . . . . . . .. . .. . ................ .
Receivable from sale of aircraft . . ............ .
Flight equipment expendable parts, net ...... . ... . . .
Other current assets . . . . . . . . . . . . . . . . . .
Current installments of debt . . ............ .
Current installments of capital leases . . . ..... .
Notes payable . . . . . . . . . .. .. .
Accounts payable . . . . . . . . .. ...... .
Airline traffic liability . . . . . . . . . . . . . . . ... . ... .
Salaries, wages and vacation benefits payable .
Other accrued liabilities ... .. ..... .
Decrease in working captial . . . . . . . . . . . . . .
See accompanying Notes to Financial Statements.
17
S 23,293
(6,644)
(20,212)
409
4,720
(16,388)
(1,444)
6,891
15,315
(8,815)
1,475
(2,731)
S (4,131)
(10,281)
(32,548)
20,212
(5,955)
4,621
(2,894)
(779)
(20,000)
(17,539)
9,052
1,786
(1,513)
(55,838)
1980
(29,632)
60,146
(21,219)
(32,099)
(3,557)
(26,361)
198,350
50,120
10,746
172
233,027
81,667
171,123
2,394
3,258
258,442
(25,415)
(15,975)
16,568
6,887
2,256
(7,539)
(803)
(4,612)
(19,044)
(3,186)
33
(25,415)
Years ended December 31, 1982, 1981, and 1980
(In thousands of dollars)
Series A
Preferred
Stock
Balance at December 31, 1979 .. S29,923
Conversion of debentures .
Cash Dividends:
Preferred stock. .
Common stock .
Net loss . . . . . . . . . .
Balance at December 31, 1980. 29,923
Exercise of stock options .
Conversion of debentures .
Cash dividends on preferred
stock. ... .. . . . . . . . .
Net loss .. . . . . . . . .
BalanceatDecember31, 1981 . 29,923
Other items. ... .. .. . (2)
Net loss . . . . . ..... . .
Balance at December 31, 1982 . . S29,921
See accompanying Notes to Financial Statements.
(In thousands of dollars except per share amounts)
Note I. Summary of Significant Accounting Policies
Property and Equipment
Additional Total
Common Paid-in Retained Shareholders'
Stock Capital Earnings Equity
13,030 30,959 158,713 232,625
1 4 5
(2,394) (2,394)
(3,258) (3,258)
(29,632) (29,632)
13,031 30,963 123,429 197,346
12 90 102
1 9 10
(2,394) (2,394)
(73,400) (73,400)
13,044 31,062 47,635 121,664
(1) (3)
(44,016) (44,016)
13,044 31,061 3,619 77,645
Owned property and equipment, exclusive of residual values, are depreciated over the estimated useful lives by the
straight-line method. Assets recorded under capital leases are amortized over the life of the lease by the straight-line
method. The estimated useful lives and residual values of owned aircraft are as follows:
Estimated
Useful Life
Residual
Value
DC-10 . . 16 years lOqo
727 . 15 years 150
737 .. 14 years 15qo
Estimated useful lives of ground equipment range from four to ten years. Buildings and improvements on leased property
are depreciated over the life of the lease. Amortization expense for assets recorded under capital leases is included in
depreciation and amortization expense.
Interest Capitalized
Certain interest costs, primarily related to deposits on aircraft purchase contracts, are capitalized and amortized over the
lives of the related assets.
Investment Credits
Investment credits are accounted for by the flow-through method.
18
Obsolescence of Flight Equipment Expendable Parts
An allowance for obsolescence of expendable parts is accrued over the estimated useful lives of the related aircraft types.
Revenue Recognition
Passenger sales are recorded as airline traffic liability, a current liability, until recognized as revenue as services are
provided by Western, refunded, or billed by other carriers for transportation provided by them. Cargo and Contract service
and other revenues are recognized as services are provided and billed.
Reclassification
Certain amounts in the 1981 financial statements have been restated to conform to the 1982 presentation.
Note 2. Lease Commitments
Western leases certain flight equipment and facilities and ground equipment. Lease terms for flight equipment are 11
to 15 years for 727 aircraft, 4 to 12 years for 737 aircraft, and 15 to 18 years for DC-10 aircraft. Lease terms for facilities
and ground equipment range up to 29 years. Interest expense is accrued for capital leases on the basis of the outstanding
obligations. Equipment under capital leases included in the balance sheets at December 31, 1982 and 1981, follows:
1982 1981
Flight equipment . S159,306 137,283
Ground equipment 2,006 2,006
161,312 139,289
Less allowance for amortization . 66,620 57,501
S 94,692 81,788
At December 31, 1982, minimum lease payments under leases expiring after December 31, 1983, were as follows:
Capital Operating
Leases Leases
1983 s 24,239 25,320
1984 23,809 24,067
1985 19,624 19,883
1986 19,630 15,883
1987 19,552 15,197
Thereafter l I0,321 140,467
Total minimum lease payments . 217,175 240,817
Less amount representing interest . 96,913
Present value of capital lease obligations . 120,262
Less current installments of capital leases 9,406
Long-term capital lease obligations . SI I0,856
Rental expense for operating leases amounted to S33,222, S25,967, and S20,050, in 1982, 1981, and 1980, respectively
Note 3. Commitments and Contingent Liabilities
At December 31, 1982, Western had on firm order flight equipment which included three 737-300 aircraft scheduled
for delivery in 1985, six 767 aircraft scheduled for delivery in 1986 and three 767 spare engines scheduled for delivery
in 1986. Western recorded deposits on these orders which amounted to S18,799 as of December 31, 1982. The balance
of the purchase price on delivery will be approximately S430,000.
Western has options to purchase six 767 aircraft for delivery in 1987. Deposits on these options amounted to S1,125 at
December 31, 1982. Outstanding commitments for flight equipment modification and spare parts amounted to approximately
S2,600 and for facilities and ground equipment amounted to approximately S2,300 as of December 31, 1982.
The following schedule shows the amount of purchase commitments due in each of the next five years:
1983
1984 ..
1985 ..
1986
1987
19
s 5,891
32,328
120,579
276,102
S434,900
.. ,
(In thousands of dollars except per share amounts)
In April 1982 Western sold certain receivables to Associates Commercial Corporation ('~sociates") which had been
received in connection with the sale in 1981 of two DC-10 aircraft to a company controlled by George E. Batchelor.
See Note 10 to Financial Statements. If the buyer of the aircraft defaults under the agreement with Associates, Western
is obligated to make immediate payment to Associates of the full amount then due, after which Western would have
the right under the agreement to take title to and possession of the related aircraft. The balance of the receivables at
December 31, 1982 was S21,600.
For information regarding the status of legal proceedings al December 31, 1982, see "Legal Proceedings" on page 9
of this report.
Note 4. Retirement Plans
Western has retirement plans which cover substantially all employees. Western's contributions lo the Company-sponsored
plans, together with the participants' required contributions, are sufficient lo fund current service costs annually and
prior service costs over ten to twenty years. Actuarial gains and losses are amortized over ten-year periods.
Western participates in a collectively bargained multi-employer pension plan and is, therefore, subject to the provisions
of the Multi-employer Pension Plan Amendments Act of 1980. Under this complex law, the union plan's Board of Trustees,
as sponsor, is required to obtain an actuarial valuation of the present value of vested and nonvested accumulated plan
benefits. Western has been advised that its share of the liability for unfunded vested benefits in this plan is not available.
Accordingly, the table that follows excludes data applicable to this multi-employer pension plan.
A comparison of accumulated plan benefits and plan net assets for the Company-sponsored defined benefit plans follows:
January 1,
1982 1981 1980
Actuarial Present Value of Accumulated Plan Benefits
Vested . S120,550 140,331 137,246
Nonvested . 9,212 11,984 9,876
S129,762 152,315 147,122
et assets available for benefits . S132,959 163,995 139,000
The amounts in the table above for 1982 do not include information regarding a defined benefit retirement plan for
non-union employees, which Western terminated during the second quarter of 1982. The termination allowed Western
to recover that portion of excess funds in the plan which related to company contributions, and as a result reduce the
net loss for the year ended December 31, 1982 by S15,930 (S1.22 per share). The Company subsequently adopted a
new, defined contribution pension plan for non-union employees.
The cost of the retirement plans, including the union-sponsored plan, charged to operating expense was 518,802,
S34,711, and S34,193 for 1982, 1981, and 1980, respectively, which included amortization of prior service costs over
periods ranging from 10 to 20 years for certain of the plans.
Actuarial assumption changes to pension plans during 1982 decreased the retirement plan expense. Western adopted
recommendations by its actuaries to revise the assumed rate of return used in determining the actuarial present value
of accumulated plan benefits from six to eight percent. The effect of this and other changes decreased operating expense
for the year by S7,200 (S0.55 per share). A further decrease of S6,500 (S0.50 per share) was caused by the termination
of the retirement plan for non-union employees and a temporary reduction in Company contributions to a pilots' variable
retirement plan.
Termination of the fixed retirement plan for pilots was finalized during January, 1983. The termination allows Western
to recover that portion of excess funds in the plan which relate to Company contributions. Elimination of a deferred
credit related to the plan of S7,900 at December 31, 1982 and cash proceeds of approximately S26,100 (of which S16,600
was received in January) will result in a gain of approximately S34,000. The remaining S9,500 is scheduled to be received
later in 1983. The gain will be reported in the first quarter of 1983. In conjunction with terminating the fixed retirement
plan, Western has begun increased contributions to the variable retirement plan for pilots in 1983. Western has pledged
certain assets to secure its obligations regarding other employee benefits for pilots. See ote 6 to Financial Statements.
Note 5. Income Taxes
Income taxes are summarized as follows:
1982 1981 1980
Current:
Federal . S (3,124) 2,104
State . (791) [492)
(3,124) (791) l,612
20
1982 1981 1980
Deferred:
Provision (2,290) (12,974) (5,073)
Operating loss carryforward 1,964 (5,091) (15,533)
Jnvestmenl credits 71 (54)
(255) (18,065) [20,660)
Amortization of deferred investment credits (177) (552) (559)
S (3,556) (19,408) [19,607)
Under applicable law, investment credits could be applied against 80 percent of Federal income tax liabilities in 1980
and 1981 and 90 percent of the liability in 1982. The Tax Equity and Fiscal Responsibility Act of 1982 reduced the application
to 85 percent for 1983 and beyond.
Def erred income taxes arise from timing differences between financial and tax reporting. The effects of these differences
on income taxes are as follows:
Depreciation and amortization
Sale of lax benefits
Capital leases
Jnterest capitalized
Employee benefits
Gain on sale and leaseback of flight equipment
Other
1982
S (6,868)
72 1
1,464
7 17
1,074
602
S (2,290)
1981
(13,409)
2,560
(1,754)
1,183
(847)
[707)
(12,974)
Reconciliations of income tax benefits at the United States statutory rate to the provision for income taxes follow:
1982 ===- 1981
Income taxes at the United States statutory rate S (21 ,884) (42,692)
Increases (reductions) in taxes resulting from:
Effect of operating loss carryforward for which no tax benefit
may be recognized
Amortization of deferred investment credits
Reversal of investment credits previously recognized on
flow-through method
State income taxes net of federal income tax benefit
Capital gains
IRS audit adjustments
Other
Income taxes s
(13,017) 24,490
(177) (552)
29,362
(427)
4,798
(2,452)
(186) (227)
(3,556) (19,408]
1980
(3,454)
(1,084)
1,140
(718)
(957)
(5,073)
1980
(22,650)
(559)
5,697
(266)
(1,829]
(19,607)
et operating losses of S63,000 have not been utilized on tax returns. For income tax purposes, S34, 100 expires in 1995
and S28,900 expires in 1997. For financial statement purposes, S22,500 of the carryforward has not been recognized
and expires in 1997.
Investment credits available to reduce future years' Federal income tax expense for financial and tax purposes amount
to S55,300 at December 31, 1982. For income tax purposes, available credits expire in the following years:
1992
1993
S 2,700
13,500
1994
1995
SI 7,300
19,000
1996
1997
S2,200
600
In 1981 Western intended to relinquish the right to carryback the 1981 net operating loss to offset prior years' taxable
income, since the company's tax liability in those prior years had been substantially eliminated by application of investment
tax credits. During 1982 Western decided to carryback the 1981 loss to prior years and obtain a refund of the tax that
had been paid. As a result, 1982 amounts shown above reflect increased benefit of net operating losses, substantially
offset by reversal of previously recognized application of investment tax credits.
In November 1981 tax benefits were sold under the provisions of the Economic Recovery Tax Act of 1981. The gain
resulting from this sale of S5,565 is included in Other income ( expenses) on the statements of operations.
21
(In thousands of dollars except per share amounts)
Note 6. Debt and Pledged Assets
At December 31, 1982 and 1981 long-term debt included:
9.55% equipment trust certificates due May l, 1993, with semi-annual
principal payments of S3,458 .
10% equipment trust certificates due April l, 1994, with quarterly
principal payments of s 1,000 .
Floating-rate equipment trust certificates due June 30, 1995
(interest rate 10.5% at December 31, 1982)
with semi-annual principal payments of S2,609 starting June 30, 1984 .
13.29% installment notes due May I, 1995, with semi-annual principal
payments of Sl,100 .
Installment note due October 31, 1987 .
Floating-rate bank notes due September l, 1985 with quarterly principal
payments of S2,000 .
Floating-rate insurance installment notes due September l, 1984
(interest rate 8.50% at December 31, 1982) with annual principal
payments of S7,000 .
7% installment notes due May 4, 1986, with semi-annual
principal payments of S352 .
Floating-rate not payable to manufacturer due December, 1988 with
quarterly installments of Sl,392 .
Deferred deposits with manufacturer, interest at prime rate plus % .
83/4% installment note due November 16, 1985 ...
5% convertible subordinated debentures due February l, 1993, with annual
sinking fund payments of S 1,500 starting in 1984 . . .... .. . . .
12% convertible subordinated debentures due December 1992 .
IO% subordinated sinking fund notes due April 15, 1984, with a sinking
fund payment of S 1,631 in 1983 and a final payment of S6,890 in 1984
Less: Current installments .
1982 1981
s 72,609 79,525
44,992 48,992
60,000 60,000
27,500 29,700
2,752
22,000 27,000
14,000 21,000
2,461 3, 165
33,400
11,257 14,877
9,217 12,289
22,500 22,552
12,500
8,521 10,250
343,709 329,350
(43,038) (26,650)
S300,67 l 302,700
On August 31, 1982, Western and certain of its creditors entered into a Master Credit Terms Agreement which con-
tained new loan covenants based on forecasted results of operations. These covenants require maintenance of certain net
worth levels, cash flows, and debt-equity ratios as defined. Also included in the agreement are provisions which restrict
payment of dividends, redemptions of capital stock and may restrict additional borrowings, capital expenditures, and
rental commitments.
Because management believes that Western will be in compliance with all required covenants based on forecasted
1983 operations, the related debt is classified as long-term obligations. Certain 1981 amounts, which were reclassified
to current liabilities at December 31, 1981 due to non-compliance with required covenants at that time, have been
reclassified to long-term obligations to conform to the 1982 presentation. See "Llquidity and Capital Resources" and
"Financial Covenants" on pages 5 and 6 of this report.
During 1982 Western's Bank Loan Agreement was amended to replace the revolving credit notes with term notes.
The term notes are due September 1, 1985 and require quarterly principal payments of S2,000. The interest rate is 105%
of the prime rate plus 5
/a% until September 1, 1983, then increases by 1
/s% each year. Although the 1978 Bank Loan
Agreement does not require compensating balances, Western had on deposit with its banks until November 1981 non-
interest bearing certificates of deposit of approximately S2,500. Since November 1981 no compensating balances have
been maintained.
During 1982 Western entered into a term loan and security agreement to borrow S33,400 from an affiliate of an
aircraft manufacturer. This term loan requires quarterly payments of Sl,392 with the fmal payment due December 1988.
The interest rate is the LIBOR rate plus 2 percent. These term notes are secured by three B737 and three B727 aircraft
and 15 engines. In addition to the quarterly term loan payments, additional payments to the lender are required. Before
March 28, 1989, a selection by Western of the amount of additional payment due will be made. The options for the
22
additional payments are a percentage of the proceeds from the sale of the aircraft or a percentage of the fair market
value of the aircraft. The percentage of the aircraft sales proceeds or the fair market value that must be paid is 15 percent
for the first year's borrowing increasing by 15 percent each year that a portion of the loan is outstanding until reaching
90 percent during the sixth year. This loan may be prepaid at any time without premium or penalty The net book value
of the six aircraft and 15 engines was S15,212 at December 31, 1982.
During December 1982 a private placement at par of S12,500 of 12% convertible subordinated debentures was made.
These debentures are convertible into Common Stock at S5.50 per share, subject to adjustment in certain cases, and
mature in ten years. Interest is payable semi-annually
Equipment trust certificates and 13.29% installment notes outstanding at December 31, 1982, are secured by 17
aircraft and 51 engines with a net book V3lue of S238, 115 at December 31, 1982. The installment note due October 31, 1987
accrues interest at 21 % and is secured by an aircraft and four engines with a net book value of S2,84 9 at December 31, 1982.
Western has provided security on certain other debt in the form of a chattel mortgage. The chattel mortgage grants
a first priority security interest in 25 aircraft and 68 aircraft engines to certain lenders. The net book value of the aircraft
and engines encumbered was S152,760 at December 31, 1982.
Notes payable at December 31, 1982, consisted of S10,000 of notes with two banks and S3,109 of loans payable to
two financial lending institutions. The notes payable to the banks are scheduled for repayment on September 1, 1983.
The interest rates on these notes ranged from 12 to 19 percent during 1982. The loans from the financial institutions
are secured by Western's Universal Air Travel Card and Western Travelcard receivables, which total S11,043 at December
31, 1982. Under these agreements Western can borrow, up to a limit, a percentage of the receivable balances. The interest
rate is prime plus 3.25 percent on one loan and prime plus 4 percent on the other loan.
Effective January 18, 1983, Western entered into a S30,000 revolving credit agreement with a group of financial
institutions. The amount available for drawdown decreases from S30,000 to S25,000 on June 30, 1983 and further
decreases to S12,500 on July 31, 1983. All amounts advanced must be repaid by August 31, 1983. The interest rate on
funds borrowed is 1 % over an interest rate based on the higher of Citibank's base rate or a rate computed based on
various other interest rates. Upon signing the agreement, Western paid a fee of of 1 % of the commitment and issued
550,000 warrants for the purchase of Common Stock at S5.625 per share subject to adjustment. A borrowing fee is
required and up to 250,000 additional warrants will be issued upon drawdown under the revolving credit. Any amounts
advanced under this agreement will be secured by the chattel mortgage described above. No amounts may be borrowed
under this agreement unless Western's operating cash is below a specified level and certain other conditions are met.
The following schedule shows the amount of long-term debt due in each of the next five years:
1983 543,038 1985 535,677 1987 533,937
1984 51,482 1986 . 26,369
At December 31, 1982, 2,012,522 shares of Common Stock were reserved for conversion of 51/cJii debentures at a
conversion price of S11.18 per share; and 2,272,727 shares of Common Stock were reserved for conversion of 12%
debentures at a conversion price of S5.50 per share.
With the exception of one of its aircraft and 26 of its engines, all of Western's owned aircraft and engines were pledged
as collateral for debt and other obligations at December 31, 1982. Several of the agreements require that collateral
be maintained at specified levels.
In addition to assets pledged as collateral for debt, Western has pledged a portion of its flight equipment spare parts,
six spare aircraft engines, and fuel inventories, with an aggregate book value of approximately S24,000 to secure its
obligation to provide employee benefits in conjunction with the termination of the fixed retirement plan for pilots.
See Note 4 to Financial Statements.
Note 7. Stock Options
Western has two stock option plans for officers and key personnel. The first plan was adopted in 1974, and provides
for options to purchase a maximum of 1,030,000 shares of Western Common Stock at prices not less than the fair market
value of the stock at date of grant.Options granted under the 1974 Plan are not intended to qualify as "Incentive Stock
Options" under the Internal Revenue Code. The options under this plan are exercisable in equal annual increments
over a five-year period and expire ten years after the date of grant. No options may be granted under the 1974 Plan
after January 20, 1984. The second plan is the Executive Stock Option and Stock Appreciation Right Plan (the" 1982 Plan'}
The 1982 Plan provides for granting of incentive stock options, non-qualifying stock options, and stock appreciation rights.
A maximum of 1,800,000 shares of Western Common Stock may be issued under this plan. Options granted under the
1982 Plan expire ten years from the date of grant and the purchase price specified in each option may not be less than
the fair market value of the Common Stock at the date of the grant.
23
.,
(ln thousands of dollars except per share amounts)
The balances of options granted under the plans follow:
Options granted and outstanding al:
December 31, 1982
December 31, 1981
Options exercisable al:
December 31, 1982
December 31, 1981
1974 Plan
Number
of Shares
832,4 15
762,675
661 ,11 5
697,3 19
1982 Plan
Average Number Average
Price of Shares Price
S7.37 1,747,500 S4. 15
S8.55
S8.20 1,747,500 S4. 15
S8.57
At December 31, 1982 and 1981, 962,885 shares of Common Stock were reserved for the exercise of current and future
grants under the 1974 Plan, and 1,800,000 shares were similarly reserved under the 1982 Plan.
Note 8. Loss per Common and Common Equivalent Share
Loss per Common and Common Equivalent Share is calculated as follows:
1982
et loss S44,016)
Preferred stock cash dividends -:::,-=-,======== (2,394)*
Loss applicable to Common Stock .
Weighted average shares outstanding (in thousands)
Loss per common and common equivalent share
* 1982 pref erred stock dividends are in arrears.
Fully diluted earnings per share are not presented due to net losses.
S46,4 10)
13,044
S (3.56)
1981 1980
(73,400) (29,632)
(2,394) [2,394)
[75,794) [32,026)
13,037 13,031
[5.81) [2.46)
The exercise of stock options and conversion of the convertible subordinated debentures and the preferred stock into
common shares has not been assumed, since the effect of such an assumption would be anti-dilutive.
Note 9. Preferred Stock
The shares of S2 Series A Preferred Stock are convertible into Common Stock at the rate of 2.5 shares of Common Stock
for each share of Series A Preferred Stock, subject to adjustment under certain conditions, and may be redeemed in whole
or in part at any time at the option of Western. The redemption price of S26 at December 31, 1982, decreases periodically
until 1987 after which it remains at S25 per share. At December 31, 1982, 2,992,175 shares of Common Stock were
reserved for conversion of Series A Pref erred Stock.
The Company has omitted payment of the quarterly dividends on the Series A Preferred Stock since the first quarter of
1982. The total amount of the dividends in arrears at December 31, 1982 was S2,394. If six dividends are omitted, the holders
of the Series A Preferred Stock have the right, voting as a class, to elect two additional members to the Company's Board
of Directors at the next Annual Meeting of Shareholders. Various loan agreements currently prohibit payment of dividends
on preferred stock. Consequently, it is expected that the dividend normally payable on March 31, 1983, will be omitted.
Note I 0. Related Party Transactions
Since January 1981 Western has entered into several agreements with companies owned or controlled by George E.
Batchelor, who is a holder of approximately 4.90 of the Company's outstanding Common Stock.
In March 1981 Western sold two DC-IO aircraft toa company controlled by Mr. Batchelor. In April 1982 Western sold, with
recourse, the related conditional sales contracts receivable to Associates Commercial Corporation for S21,000 in cash.
In March and June 1981 Western entered into agreements with companies controlled by Mr. Batchelor, pursuant
to which Western maintains the two DC-IO aircraft which were sold to a company controlled by Mr. Batchelor in March 1981.
Under these agreements, Western is compensated for the services it performs at rates based on Western's direct main-
tenance costs per flight hour as reported to the CAB, subject to renegotiation semi-annually on the basis of increases
in such costs. The agreement is for a term of 50 months expiring in August 1985, but subject to termination by either
party for "good cause'.' In April 1982 in connection with the transaction described in the preceding paragraph, Western
agreed to provide maintenance under the terms of these maintenance agreements for two additional DC-IO aircraft
then being purchased from Laker Airways.
In December 1981 Western sold to, and leased back from, companies controlled by Mr. Batchelor two 737 aircraft
for an aggregate cash price of SI 1,000. These leases extend over four years with monthly rental payments of S130 per
24
aircraft, with Western having the right to extend the leases for two additional one-year periods.
In December 1982 Western leased two new 737-200 aircraft from a subsidiary of Alaska International Industries, Inc.
("All"). All is wholly owned by Neil G. Bergt, Chairman and ChiefExecutive Officer of Western. The leases are for a term of
twelve years with options to extend for two years at fair rental value and/or purchase of the aircraft at fair market value
subject to specified minimum amounts at the end of the fifth and each subsequent year. The liability for these capital leases
at December 31, 1982 was 521,000. The rental is S160 per aircraft per month. In addition to amounts paid pursuant to the
leases, Western paid Sl,150 to AIi and its subsidiaries during 1982 to reimburse them for expenditures incurred on behalf
of Western for equipment, facilities and personnel. Approximately S 1,000 of this amount was paid for reimbursement of
expenses billed by All in connection with Mr. Bergt's aircraft expenses while traveling for Western and personnel on
loan to Western (Mr. Frank P Moolin, Jr., then President of All, served as Mr. Bergt's assistant at Western while receiving
his salary from All).
Note 11. Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for 1982 and 1981 is as follows:
March 31 June 30 September 30 December 31
1982
Operating revenues S248,682 257,615 300,510 258,463
Operating income (loss) (6,381) (7,670) 12,627 (29,374)
et earnings (loss) (10,840) 3,058 3,409 (39,643)
et Earnings (Loss) per Common Share:
Primary s (0.88) 0.19 0.21 (3.08)
Fully diluted s (.088) 0.18 0.20 (3.08)
1981
Operating revenues S262, 159 270,844 293,62l 233,217
Operating income (loss) (3,497) (15,003) (3,753) (43,701)
et earnings (loss) (1,692) (8,399) (7,255) (56,054)
Net Earnings (Loss) per Common and
Common Equivalent Share s (0.18) (0.69) (0.60) (4.34)
Western terminated its defined benefit retirement plan for non-union employees. This termination produced a gain for the
second quarter of 1982 of S15,930 (Sl.22 per share).
Western revised certain actuarial assumptions, which increased the net earnings in the third quarter of 1982 by S4,200
(S0.32 per share) and reduced the net loss in the fourth quarter of 1982 by S3,000 (S0.23 per share).
Western revised its procedures for recognizing commission expense in the first quarter of 1981 to more closely identify
the expense with the period in which the related revenue is recognized. The effect of this change on the first through
the fourth quarters of 1981 was to reduce (increase) the net loss by S3,244 (S0.25 per share), S504 (S0.04 per share),
S(l,040) (S0.08 per share), and S630 (S0.05 per share), respectively
The quarterly income tax benefit for the first, second, and third quarters of 1981 are based on the statutory rate. The tax
benefit available for the fourth quarter 1981 was limited for financial reporting purposes to approximately five percent
of the pretax accounting loss because the tax benefit of the remaining net operating loss could not be recognized currently
No investment credits were recognized during 1981 or 1982.
Note 12. Description of Impact of Inflation (Unaudited)
Statement of Financial Accounting Standards No. 33 (SFAS o. 33) prescribes two supplementary income computations
for estimating the impact of inflation. These computations estimate the effects of general inflation ( constant dollars) and
the effects of changes in specific prices ( current cost).
SFAS o. 33 defines constant dollar accounting as a method of reporting financial statement elements in dollars each
of which have the same general purchasing power. Current cost accounting is defined as a method of measuring and
reporting assets and expenses associated with the use or sale of assets at their current cost or lower recoverable amount
at the balance sheet date or at the date of use or sale. Both methods involve the use of assumptions and estimates. Therefore,
the resulting measurements should be viewed as estimates, rather than as precise indicators of the effects of inflation.
The amounts reported in the primary financial statements have been adjusted for depreciation and amortization
expense. Revenues and all other operating expenses are considered to reflect the average price levels and have not
been adjusted. Further, there have been no adjustments made to provisions for income taxes.
Constant dollar values were determined by restating historical costs, accumulated depreciation and amortization,
and depreciation expense of property and equipment into average 1982 dollars using the Consumer Price Index for
25
(In thousands of dollars except per share amounts)
all urban consumers (CPI-U) published by the Bureau of Labor Statistics. Current costs for aircraft were determined by
using the direct pricing method. Current costs for spare engines, parts, and assemblies included in property and equipment
were computed based on the ratio by which the current cost of aircraft fleets exceeds the historic cost of such fleets. Current
costs for other property and equipment were determined by indexation using the CPI-U.
Net (loss) as reported in the statement of operations .
Adjustment to Restate Costs for the Effect of General Inflation:
Depreciation and amortization expense .
Net (loss) adjusted for general inflation .
Adjustment toReflect the Difference Between General Inflation and Changes in Specific Prices (current costs):
Depreciation and amortization expense .
Net (loss) adjusted for changes in specific prices ..
Gain from decline in purchasing power of net amounts owed .
Increase in specific prices ( current cost) of property and equipment held during the year*.
Effect of increase in general price level .
5(44,016)
(34,495)
(78,511)
18,390
5(60,121)
5 18,556
5 35,865
(28,880)
Excess of increase in specific prices over increase in the general price level . 5 6,985
*At December 31, 1982 current cost of property and equipment, net of accumulated depreciation and amortization was 5724,501 .
A five-year comparison indicating the effect of adjusting historical revenues, purchasing power gains or losses on net
monetary items, cash dividends, and Common Stock market prices to dollar amounts expressed in terms of average 1982
dollars as measured by CPI-U follows:
Operating revenues .
Historical Cost Information Adjusted for
General Inflation:
Net earnings (loss) .
Net earnings (loss) per common share .
Net assets at yea~end .
Current Cost Information:
Net earnings (loss) .
Net earnings (loss) per common share .
Excess of increase in specific prices over.
increase in the general price level .
Net assets at yea~end .
Gain from decline in purchasing power of
1982
Sl,065,270
s
(78,511)
(6.02)
349,250
(60,121)
( 4.61)
6,985
198,367*
Year Ended December 31,
1981
1,123,431
(112,472)
(8.82)
407,425
(140,649)
(10.98)
82,788
242,015'''
1980
1,165,033
(66,407)
(5.31)
514,295
(83,091)
(6.59)
133,472
786,169
1979
1,239,718
27,837
l.89
557,715
14,793
.89
7,615
713,339
net amounts owed . 18,556 44,219 54,811 48,888
1978
1,235,079
Cash dividends paid per common share . S .29 .53 .59
Market price per common share at yea~end . S 5.2 5 5.16 10.68 13.80 12.21
Average Consumer Price Index . 289.1 272.4 246.8 217 .4 195.4
*Prior to 1981 direct prices were based on selling prices for new aircraft provided by the Air 'Iransport Association of America. For 1981
and 1982 current appraisals ofWestern's existing fleet were available for determination of current cost.
26
I
I
The Board of Directors
Western Air Lines, Inc.:
Peat, Marwick, Mitchell & Co.
Certified Public Accountants
555 South Flower Street
Los Angeles, California 90071
We have examined the balance sheets of Western Air Lines, Inc. as of December 31, 1982 and 1981 and the related
statements of operations, shareholders' equity and changes in financial position for each of the years in the three-year
period ended December 31, 1982. 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 report dated March 1, 1982, except for certain matters which were as of March 15, 1982, our opinion on the 1981
financial statements was qualified subject to the ability of the Company to continue in existence. The qualification was
considered necessary at that time primarily because of the substantial net losses during the years ended December 31, 1981
and 1980, the certain long-term debt which was, as of December 31, 1981, subject to demand for accelerated payment,
and certain other factors disclosed in the 1981 Notes to Financial Statements. Since the issuance of our aforementioned
report, the Company has concluded new long-term loan agreements, as more fully described in Note 6, which permitted
the Company to reclassify as long-term S 153,369,000 of debt which was previously classified as current debt at December 31,
1981. In addition, the Company has arranged additional financing, effected various operating cost reductions, and
realigned its route system with flight operations now centered at Salt Lake City to more fully utilize its aircraft. These
developments mitigate the conditions that required a qualified opinion for the year ended December 31, 1981 and,
therefore, a qualification is no longer considered necessary. Accordingly, our present opinion on the 1981 financial state-
ments is different from that expressed in our previous report.
In our opinion, the aforementioned financial statements present fairly the financial position of Western Air Lines, Inc.
at December 31, 1982 and 1981 and the results of its operations and the changes in its financial position for each of the
years in the three-year period ended December 31, 1982, in conformity with generally accepted accounting principles
applied on a consistent basis.
March 2, 1983
27
BOARD OF DIRECTORS
Fred Benninger
President
'Iracinda Corporation
Las Vegas, Nevada
Neil G. Bergt
Chairman of the Board and
Chief Executive Officer
Western Air Lines, Inc.
Los Angeles, California
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
Attorney-at-Law
Preston, Thorgrimson, Ellis
and Holman
Seattle, Washington
Walter J. Hickel
Chairman of the Board
Hickel Investment Company
Anchorage,Alaska
Arthur F. Kelly
Western Air Lines, Inc.
Los Angeles, California
DIRECTORS EMERITI
Hugh W. Darling
Attorney-at-Law
Darling, Hall & Rae
Los Angeles, California
Leo H. Dwerlkotte
Las Vegas, evada
James D. Garibaldi
Attorney-at-Law
Los Angeles, California
Dr. Donald H. Mclaughlin
Chairman of the Board
Homestake Mining Company
San Francisco, California
John H. Myers
Assistant to the President
St. John's University
St. Paul, Minnesota
Dominic P. Renda
Los Angeles, California
28
Bert T. Kobayashi, Jr.
Attorney-at-Law
Kobayashi, Watanabe, Sugita
and Kawashima
Honolulu, Hawaii
Arthur G. Linkletter
T
elevision Producer
and Broadcaster
Chairman of the Board
Linkletter Productions
Beverly Hills, California
John G. McMillian
Chairman of the Board and
Chief Executive Officer
Northwest Energy Company
Salt Lake City, Utah
Vernon 0 . Underwood
Chairman of the Board and
Chief Executive Officer
Young's Market Company
Los Angeles, California
Harry J. Volk
Union Bancorp, Inc.
Los Angeles, California
George S. Suddock
Chairman of the Board
Alaska National
Insurance Company
Anchorage,Alaska
Capt. Roy G. Utter
Pilot
Western Air Lines, Inc.
Los Angeles, California
Robert H. Volk
Chairman/Owner
Martin Aviation, Inc.
Torrance, California
John M. Wallace
Walker Bank & '!rust
Company
Salt Lake City, Utah
Arthur G. Woodley
Bellevue, Washington
CORPORATE OFFICERS
Neil G. Bergt
Chairman of the Board and
Chief Executive Officer
Andre C. Dimitriadis
Senior Vice President- Finance
and Chief Financial Officer
George M. Kamats
Senior Vice President-
Operations
Lawrence H. Lee
Senior Vice President-
Salt Lake City
George M. Sullivan
Senior Vice President-
Alaska Region
Harold Achtziger
Vice President-
Airport Operations
General Offices
Western Air Lines, Inc.
6060 Avion Drive
Los Angeles, California 90045
(213) 646-2345
Craig B. Benedetti
Vice President- Marketing
Gordon M. Bethune
Vice President-
Maintenance & Engineering
Jack W Boisen
Vice President-
Personnel Relations
Howard L. Culver
Vice President-
Regulatory Affairs
Thomas J. Greene
Vice President,
General Counsel & Secretary
Steven S. Lay
Vice President-
Passenger & Cargo Sales
Registrar/Transfer Agent-Common & Preferred Stock
Bank of America National Trust & Savings Association
555 South Flower St., Los Angeles, California 90071
Debenture and Subordinated Note liustee
United States Trust Company of New York
4 5 Wall Street, New York, New York 10005
Exchange Listing-Common & Preferred Stock
Debentures and Subordinated Notes
New York Stock Exchange
Pacific Stock Exchange
Notice to Shareholders.
Seth M. Oberg
Vice President-
Flight Operations
Cal Rader
Vice President- Data Processing
and Communications
Glen L. Stewart
Vice President and Controller
C.F. nEvecy
Vice President- Administration
Ticker Symbols
Common Stock
Preferred Stock
5 % Debentures
10% Notes
WAL
WAIA
WALK
WAL.
Independent Accountants
Peat, Marwick, Mitchell & Co.
555 South Flower Street
Los Angeles, California 90071
A rule adopted by the Civil Aeronautics Board ("CAB'1 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 tl1e Director, Bureau of Domestic Aviation, Civil Aeronautics Board,
Washington, D.C. 20428.
Form 10-K: Shareholders 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, PO. Box 92005, World Way Postal Center, Los Angeles, California 90009.
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General Offices: Western Air Lines Building, 6060 Avion Drive, Los Angeles International Airport, Los Angeles, California 9004 5