Air Transport World

PSA: 'We're taking back our market'. (Pacific Southwest Airlines)

PSA: "We're taking back our market'

The airline that was held up as a shining example of the potential benefits of a deregulated industry, and that so far has been one of the experiment's big disappointments, finally appears to be on the verge of realizing its promise.

Pacific Southwest Airlines began life on May 6, 1949, flying a leased Douglas DC-3 once a week between its San Diego hometown and Oakland via Burbank. By 1970 it had fine-tuned the concept of low-fare, high-frequency, commuter-oriented intrastate air service that was emulated so successfully the following year by Southwest Airlines. It carried five million passengers in 1970 in an all-jet fleet of 16 Boeing 727s and nine 737s, and it had put "fun' into flying by painting broad smiles on the noses of its airplanes and dressing its flight attendants in hot pants.

PSA's subsequent push to get out from under the regulatory thumb of the California Public Utilities Commission and allow interstate passengers to take advantage of its low fares helped to spur passage of the Airline Deregulation Act of 1978. But, says new president Russell L. Ray, PSA itself "started late in understanding the consequences of deregulation'--so late that it came close to becoming one of the free market's casualties. "If it hadn't been for Paul Barkley,' says Ray of the chief executive of the carrier and its parent PSA Inc., "this airline would have spun in a couple of years ago' under its burden of high labor costs and heavy debt.

Barkley was the architect of the new structure that he and Ray hope will remedy the failings of the past. Completed at the end of 1985, it is composed of a new-generation fleet of McDonnell Douglas MD-80s and British Aerospace 146s, a realigned route system designed to achieve "competitive dominance' in the California Corridor, cost-saving labor agreements, and a balance sheet strengthened in January by a $100-million senior note offering. Ray and Senior VP-Finance George M. Shortley expect this structure to return the airline to its traditional profitability in 1986.

The 50-year-old Ray became president, chief operating officer and a director of the airline subsidiary of PSA Inc. last August after earlier enjoying "two good careers'-- 14 years at Eastern Airlines including 10 years as VP-marketing, and 10 years as director of the commercial airline sales operation at Lockheed. He told ATW he feels "fortunate' to be at PSA because of its "unique work ethic.'

Ray expected PSA's financial turnaround to be accomplished during 1985, but "two extraordinary negatives' intervened, he says. The first was "unexpected delays' in BAe 146 deliveries because of labor problems in England, preventing PSA from taking advantage of the productivity gains contained in labor agreements that went into effect at the beginning of last year. The second was the September invasion of California markets by Continental West, which triggered severe fare wars. …

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