May/June, 1978
page five
Report To
Our Stockholders
Editor’s note: At the annual stockholders meeting April 19, a complete transcript
was made of the proceedings. The meeting included a number of outstanding reports.
We thought employees who were not able to attend might like to read an actual
account of the proceedings. Here it is, only slightly edited for clarity.
T. H. Davis: We will call the meeting
to order, the 1978 annual meeting of
Piedmont Aviation, Inc. I must apologize
for the little delay here with mixed
emotions. It’s not so good to get an air
line annual meeting started off behind
schedule. But, on the other hand, we are
certainly delighted to see such a good
representation of our stockholders. This
is probably the largest crowd we have
ever had for one of our stockholders’
meetings. We are most grateful to you
for being here and we want to extend a
very, very cordial welcome to all of you,
and particularly to those of you who are
here from out of town. I see quite a num
ber of people that are not our good, loyal
Winston-Salem citizens. We are certainly
delighted that you are here and apprecia
tive of your interest in your Company.
At this time, I would like to appoint a
proxy committee to tally the proxies
for the meeting. We will have Mr. Audree
Long, controller of the Company, and Mr.
David Riggan of Ernst & Ernst serve on
that committee. You gentlemen will tally
the proxies and bring us your report as
soon as you can, please.
While we are waiting for our proxy
report, we want to bring you up to date
with any information that will be of
interest to you on the status of your Com
pany. We’ll elaborate a little bit on what
was included in the annual report with
reports from various members of manage
ment. In my own case, it is particularly
pleasing to have this opportunity to re
peat, as it were, the fact that 1977 was
the most outstanding year financially,
and in many other ways, for your Com
pany. You all received your annual report
and it is not my intention to burden you
and take up your time to repeat what
you have already read. There are a few
factors that I would like to cover that
might be of some interest to you. Insofar
as the results of last year, it could be
categorized as the result of a very, very
dedicated effort by a lot of good people.
Piedmont has certainly been fortunate in
having now about 3,600 total employees
who have really been out there on the
firing line doing a good job. This is
evidenced by our continued, very favor
able position insofar as passenger com
plaints are concerned. A lot of you who
have been to our earlier annual meetings
have heard me expound at some length,
and even brag, on the position that Pied
mont has traditionally maintained insofar
as being one of the best in the industry
in this regard. The CAB established
several years ago what is called their
Office of Consumer Afl^airs. And, at that
time, the Board started a program of
tallying the number of complaints they
received on the scheduled airline industry.
They do it on the basis of number of
complaints per 100,000 passengers
boarded so that all of us are considered
on an equal footing. Traditionally, Pied
mont has been in either the best or the
next best, or certainly not below the
third, position in the entire industry in
sofar as receiving the fewest passenger
complaints are concerned. I must regress
to admit that in December, January and
February, we back-slid. Out of 20 air
lines that the CAB considered, we slipped
down to sixth place. This is embarrassing
to us and a situation we are not going to
tolerate. I am very happy to say that in
the last report we came back up to num
ber two. The report is issued monthly.
We want you to know the whole truth
and nothing but the truth. We did get
behind for awhile but, if we keep moving
back up into second or third place in the
industry on a month-to-month basis, we
will wind up taking 1978 in good fashion
again. Obviously, that sort of thing has
a very direct bearing on our revenues
or how many of our customers come back
to us. I think the fact that we are able
to maintain our position despite the
relatively difficult operating conditions
we have is notable. By relative, I mean
relative to other similar size and similar
type of airlines. We serve a territory in
and out and across the worst weather
and mountainous area that probably
exists in the United States. A lot of
people have the feeling that in the Rocky
Mountains they have a worse situation
than we have back here. But that is not
the case. In most instances out there, the
valleys are big and they can have run
ways about ten miles long if they want
to, even though the mountains are obvi
ously considerably higher than they are
here, and they do have some very severe
weather. But their’s isn’t the type of fog
that we have experienced, for example,
around here yesterday and today. And
this past winter we had more than our
share of fog conditions as well as ice,
sleet and snow, as many of you are well
aware. Again, I think our people are
entitled to considerable commendation
for sticking in there and rendering a
good service to our customers.
It might also be of some interest to
you to know what your Company is
trying to do insofar as trying to be a
good citizen other than rendering the
service that we are in business to pro
vide. We want to be a good corporate
citizen and, in my judgment, over the
years we have been. As best as I have
been able to determine insofar as the
rest of the industry is concerned, any
way, we are fulfilling these responsibi
lities in a fine fashion. In some respects,
we have been doing considerably more
than most in the airline industry. For
example, a number of years ago your
board of directors saw the wisdom of
establishing a foundation, the Piedmont
Aviation Foundation. The Company an
nually, when it is in a financial position
to do so, contributes to the Foundation.
This program has made it possible for
us, during lean years as well as good
years, to continue our program of con
tributing toward worthy projects and
undertakings. For example, we serve,
as you will recognize I guess, probably
more cities than even the larger airlines
such as American, or even TWA, Delta
and some others. As a consequence, we
are called on a little more frequently by
each of these communities. Obviously,
they each have their own United Way
programs, a very commendable under
taking, and an undertaking in which we
want to participate. Over the years, we
have consistently participated in every
United Way campaign on our system.
Now, as you can appreciate, that is a
pretty good size drain in itself out of
what we are in a position to consistently
contribute to our Foundation. Our board
has been very prudent, in my judg
ment, from a stockholder standpoint, as
well as a personal standpoint.
In addition, the trustees of the Foun
dation have felt that we should also par
ticipate in medical projects. Serving as
many cities as we do, obviously there are
a number of hospital projects and things
of that sort that come up from time to
time. There was one not too long ago
in the Norfolk area, one in the Tri-Cities
area, the Appalachian region, and here
in Winston-Salem. They are scattered all
over the system, of course, and to the
best of our ability we want to help. We
recognize that these facilities are also
helpful to our own people who are
operating and living in these particular
cities. We encourage our own people,
and I’m real proud of the participation
of the individuals in our Company in
all of the cities that we serve, as well
as here, to participate in these worthy
projects.
In addition, we have felt strongly
that we should help the private educa
tional foundations that are established
throughout our system. And we felt that
one of the best ways is to have a part in
the state foundations that most states
have set up for private educational insti
tutions. There is one here in North Caro
lina, one in Virginia, one in West Virginia
and South Carolina — they’re just all
over the system. Each of these states has
its own private foundation for private
educational institutions of higher learn
ing, primarily. We do participate, each
year, in every one of these. These are
the types of things we think you, as our
stockholders, would want us to assume
as responsibilities and to meet them as
best we can. From all I have been able
to gather in looking at various reports,
it’s very infrequent that I see the name
of any airline other than Piedmont.
We are also trying to be a good citizen
insofar as our people and others are
concerned. In that connection, I might
mention our affirmative action program
which has been underway, of course, for
several years. I believe we have just
received our third or fourth approval of
our plan from the Federal Aviation Aid-
ministration, which is the governmental
agency administering our affirmative
action program. Of course, we have had
some suits. We will probably have soma
more. It seems like almost anytime we
have a program of hiring these days
somebody will disagree with it. We can
only bring in so many, of course, and
we try to do the best job we can within
the framework of our affirmative action
program. We admit we are not as far
along as we want to be, but we’re getting
there, and we’re working hard at it. One
recent suit gives a good indication of the
caliber or manner in which our people
who are responsible for this area of
activity, Mr. Wilson, Mr. Welch and
their associates, are handling these situa
tions. They are doing a good job. This
particular situation involved a young
lady who felt that she should bring a
class action suit because she just was
not, I think, fitted for the job that she
was trying to handle. The upshot of it
all was that we won the suit. Not only
did we win it, but the judge put a provi
sion in there that she should reimburse
us for our legal expenses.
I am also real proud of the participa
tion of our people in other projects. Many
of you may be familiar with the Junior
Achievement program. I think it is one
of the finest things that has come along
in a long, long time. For several years
our Company has sponsored a Junior
Achievement company. It’s been super
vised by some of the employees of our
Company. They have taken the ball and
run with it, so to speak, and are spend
ing an awful lot of their own time and
effort helping high school students learn
the free enterprise system in this way.
In addition, of course, our employees
participate in a lot of Chamber of Com
merce programs and many things of that
general category.
I’m pleased to be able to tell you that
from everything we see now, it looks like
1978 is off to a pretty good start, despite
the weather which caused the lowest
schedule completion factor we have had
since we have been in business, with one
exception. We fell down to only a 93
per cent completion in February. That
is, for all schedules we were able to
complete only 93 per cent. Normally, we
run around 98 to 99 per cent. Obviously,
this did have a very depressing effect on
our revenues during that period. We
must be frank to admit we had Easter in
March this year instead of April. So
that helped us in the first quarter. We
can’t take credit for that. But there are
other factors that we can take a little
credit for. We have been doing our best
to control costs. We have recently
received some information that indicates
that our fuel costs possibly will not be
the tremendous burden this year that
they have been in the last two or three
years. This is obviously an unknown
quantity and depends a lot on what the
OPEC countries do. But there does seem
to be an ample supply, at this point, of
jet fuel and other fuels. We are hopeful
that maybe that factor will also make it
possible for us to bring you at the end
of this year another very good and favor
able report. We are going to dedicate
ourselves to doing just that.
I’ve done a lot of talking and there
are some other gentlemen here who can
give you more insight into certain areas
that make possible the achievements that
we have made and what we want to do in
the future. The 1977 results were good
in very large measure because of the
outstanding performance of our General
Aviation Group. That’s the group that
started this Company in the first place.
We diversified to start an airline opera
tion, but we continued our general avia
tion operations, thank goodness. We have
our senior vice president, Bob Northing-
ton, to bring you the report on general
aviation activities.
R. S. Northington: Thank you, Mr.
Davis. As I have heard many people say,
it’s always easier when you have to get
up and give a report when you’ve had a
good year than otherwise. So, as many of
you I am sure have read in your annual
report, the general aviation activities
of your Company, including our sub
sidiary, Air Service in Greensboro, en
joyed the best year, by far, that we have
ever had in the history of your Company.
In 1977, the total sales were up 30 per
cent over the year before to a total of
$42 million, up from $32.3 million. That’s
quite a substantial increase in our area
of business. But the most important part
was the increase in the net income which
was $704,500 in 1976. In 1977, it was
almost $1.1 million. These increases in
sales and profits were generated mainly
by the sale of airplanes as well as parts
and accessories and fuel sales. Our fuel
sales increased considerably. However,
it is important that we know that the
sales in all of our activities, within gener
al aviation, showed an increase and, of
course, this is very important.
As you will recall, a year ago last
March, almost two years ago now, we
opened an operation in Richmond. It has
done quite well and we expect it to have
a very good year this year. In October
of 1977, we opened a small operation in
Charlottesville, Virginia and it’s doing
quite well. We look for them to have a
good year this year.
The first quarter of this year, 1978,
looks to be excellent. It may be the best
first quarter this area of our operations
has ever had. We are forecasting 1978
to be the best year in our history and to
exceed last year, which was so good. As
I have stated many times before, we
have a lot of very fine, hard working,
dedicated employees and without them
we certainly could not make the pro
gress that we make. And with those
people continuing to work hard and the
continued support of you, our stock
holders, I am sure that we will accomplish
our mutual goals in the future. Thank
you.
Davis: There might well be a few
King Air customers here.
Northington: I hope so.
Davis: See him after the meeting. By
the way, I would like to mention that
(Continued on page six)