Following the federal Airline Deregulation Act in 1978, Air California expanded its service to several destinations in neighboring states. In the 1980s, in addition to its California routes, it was flying to Chicago (ORD), Seattle (SEA), Anchorage (ANC), and Vancouver, B.C. (YVR) as well as to other destinations in the western U.S.
The airline was renamed AirCal in 1981, and it was merged into American Airlines in 1987.[5][6]
History
Startup
Air California originated in a December 1965 meeting in Corona del Mar by William Myers, Alan M. Kenison, Mark T. Gates, Jr., William L. Pereira, Jr. and Lud Renick to discuss air service from Orange County to San Francisco. At the time, air service from Orange County Airport was minimal. The population of Orange County in 1967 was about 1.2mm, up from only 216,000 in 1950. At that time, Orange County was the fastest growing in the country. California was then home to the largest intrastate airline in the United States, Pacific Southwest Airlines (PSA), which came to dominate the air travel within California. Air California was designed, in part, to do what PSA would not: serve Orange County. Airport officials had asked all major west coast carriers about serving Orange County Airport and none were interested.[7][8]
As a result of the meeting, Air California was incorporated in April 1966 and the same month, applied to the California Public Utilities Commission (CPUC) as a California intrastate airline for its first route, from Orange County Airport to San Francisco Airport at a fare of $14.85. The CPUC approved the application in September, requiring a minimum of five frequencies per day.[9] In December, Air California had an initial public offering and the airline launched its first services January 16, 1967, using two Lockheed Electra aircraft.[10][11] Total capital raised by first flight was $5.3mm, including $2.5mm from the stock offering.[8]
In October 1967, Air California took delivery of two more Electras, for a total of four.[12] San Jose and Oakland were added. In 1968, the airline added two DC-9s to the fleet, but by year end both the DC-9s and the Electras had been phased out in favor of six 737-200s. Ontario and Burbank were added. [13][14]
Financial distress leads to first failed PSA merger, sale
Original Air California logo, used from 1967 to 1977
As the nearby table shows, Air California's initial financial results were poor. In December 1969 it agreed to a merger with PSA, citing its financial results.[15][16] Air California shareholders approved the deal, but shortly thereafter, in May 1970, PSA withdrew from the deal, citing a "negative view" by the CPUC. Within a week, Air California's CEO had resigned, and a new buyer surfaced, Westgate-California Corporation (WCC).[17] In June 1970, WCC acquired 60% of the carrier, which was approved by the CPUC on the grounds that Air California's future was in doubt.[18] In July 1971, WCC pumped $2.5mm into Air California, buying shares that increased its stake to 81%.[19]
In April 1971, Air California provided flight attendant training to Southwest Airlines during its startup phase.[20]
Air California Financial Results, 1967 thru 1973[21]
(USD 000)
1967
1968
1969
1970
1971
1972
1973
Operating revenue
4,354
8,849
13,686
16,144
19,729
22,905
27,023
Operating expense
5,295
9,992
15,540
15,950
20,304
21,905
23,956
Operating result
(941)
(1,143)
(1,854)
194
(575)
1,000
3,067
Interest
(258)
(616)
(564)
(596)
(460)
(376)
(343)
Pre-tax net
(1,199)
(1,759)
(2,418)
(402)
(1,035)
624
2,724
Operating margin
-21.6%
-12.9%
-13.5%
1.2%
-2.9%
4.4%
11.3%
Pre-tax margin
-27.5%
-19.9%
-17.7%
-2.5%
-5.2%
2.7%
10.1%
WCC ownership was a mixed blessing. WCC's owner was C. Arnholt Smith, a powerful San Diego businessman and banker, owner of the San Diego Padres baseball team, a close associate and funder of President Richard Nixon and owner of the United States National Bank (USNB) of San Diego, largest bank in that city[22] and the 10th largest in California.[23] Smith was highly controversial, accused of lining the pockets of his family and friends through self-dealing, including with WCC, USNB and others, of making illegal campaign contributions, and more.[24][25] WCC made a loss, its first in 11 years, in 1971.[26]
There was one immediate benefit from WCC ownership: Air California was able to take its seventh 737, delivered to Westgate and turned over to Air California in September 1970. The eighth was delivered in May 1971. First-class ("Fiesta") service and Palm Springs made their debut in 1969, San Diego in 1970, though Burbank was suspended. In 1971, Sacramento was added to the network. [27]
Second failed PSA merger, parent company bankruptcy & scandal
In mid 1972, WCC agreed to sell Air California to PSA.[28] WCC told the CPUC that Air California showed no signs of making money and WCC would not further support it.[29] In February 1973 the CPUC agreed, against heavy opposition, including from its own legal staff,[30] to allow the merger to proceed.[31] But by then the merger also faced opposition from the US Department of Justice on anti-trust grounds.[32] For instance, the combination would have had an 81% market share on the Los Angeles Basin to San Francisco Bay market and even higher market shares on individual submarkets.[33] These market shares show how successful were the California intrastate carriers in driving off the far larger CAB-regulated carriers pre-deregulation.
But then, in May 1973,[34] The U.S. Securities and Exchange Commission sued to place WCC in receivership on the grounds of serious malfeasance by Smith, plus the outside auditors withdrew their certification of Air California's accounts for 1971 and 1972, and those of WCC for 1971.[35] Trading was halted in Air California and WCC stocks. Unsurprisingly, almost exactly a year after it had been made, the PSA offer for Air California lapsed.[36] In October, USNB was seized by the FDIC, knocking out the foundation of Smith's empire.[22] In February 1974, WCC filed for Chapter X bankruptcy.[37] Chapter X bankruptcy was eliminated in a 1978 bankruptcy reform, but under it, WCC operated under the control of trustees, who managed it in the interests of shareholders.[38] The bankruptcy dragged on for eight years, with WCC selling pieces of itself along the way, until it was finally liquidated in 1982.[39] Therefore, from 1974 until it was sold in 1981, Air California was in the odd situation of being owned by a bankrupt company run by trustees rather than conventional management.
Role of the California regulator
Prior to 1979 US airline deregulation, as a California intrastate carrier, Air California was economically regulated by the CPUC, in contrast to most US airlines of the era, which were economically regulated by the Civil Aeronautics Board (CAB), the agency responsible for then-tight Federal airline regulation. Prior to 1965, the CPUC only had the right to regulate intrastate ticket prices. So long as they followed CPUC tariffs, anyone was free to start an intrastate California airline, to enter and leave specific markets and to choose their own frequencies. However, in 1965, the CPUC gained the right to regulate airline certification, market entry/exit and service quality for California intrastate airlines.[40] In effect, the CPUC became a kind of mini-CAB for California intrastate airlines.
Air California did not make a net profit for the first five years (though it broke even on an operating basis in 1970; see table) and CPUC regulation was critical to its survival. In 1969 the CPUC said "From the beginning we have recognized the need to protect Air California from destructive competition, at least until it becomes a viable operator."[41] This took four forms: (i) CPUC ensured that other than some minor routes, Air California did not compete with PSA, leaving the carriers with largely non-overlapping route networks. This left Air California free to concentrate its energies on competing with CAB carriers on its routes, which had higher costs. (ii) The CPUC approved higher airfares for Air California than for PSA was authorized on similar routes. (iii) The CPUC stopped the further new entry of intrastate airlines. (iv) in at least one case, the CPUC restrained PSA growth with the explicit goal of helping Air California.[42] In fact, from 1965 onward, the CPUC certified only one other carrier, Holiday Airlines, which for some reason chose to fly only to Lake Tahoe.[43]
Orange County Airport duopoly and financial stability
Air California 737-200 in 1980
Since its parent company was mired in bankruptcy, it was timely that Air California's fortunes took a turn for the better, becoming solidly profitable from 1973 onward. In this, Air California was helped not only by the CPUC, but also by its duopoly at Orange County Airport. From 1967 until late 1980, the only two carriers at Orange County were Air California and Bonanza Air Lines (and Bonanza's successors, Air West in 1968 and Hughes Airwest in 1970). This was driven by lack of facilities. It's hard to overstate how important this was: in the mid-1970s, Air California relied on Orange County Airport for up to 75% of its passengers.[44] In 1979, the FAA determined that this was, unsurprisingly, discriminatory, leading to the airport opening to other airlines.[7]
In February 1975, Holiday Airlines collapsed, with Air California and PSA both getting emergency CPUC authorization to back fill for Holiday at Lake Tahoe Airport, which the CPUC required be flown with Electras.[45] Air California acquired three.[46]
Intrastate no more, sale to new owners and AirCal
In 1977, still in Chapter X bankruptcy, WCC bought out Air California's minority shareholders and made it a wholly owned subsidiary, in furtherance of its intent to reorganize with Air California as its main business.[47] In 1977-78 Air California added two 737-100 aircraft from Aloha.[48] But Air California ended the 1978 flying to Reno, Nevada; it was no longer an intrastate airline.[49] With out-of-state expansion spurring it on, Air Cal ended 1979 with 11 737s and had 16 at the end of 1980, but by then the Electras were gone.[50][51]
In October 1980, Air Florida announced it had purchased interests in the to-be-reorganized WCC from two WCC creditors.[52] This kicked off a bidding war for post-reorganization WCC, which Air Florida ultimately won in November for $47mm.[53] WCC at the time owned only Air California, plus a Puerto Rican tuna cannery, but Air Florida would have to wait until WCC completed its reorganization and in the meantime, the WCC trustee was still in charge, with a mandate to get the best deal for WCC investors. The losing bidder in the WCC auction thus bid for Air California at a price that would give a better return for WCC investors. And when the dust settled on that auction in May 1981, the new group won, with a bid of $61.5mm. This was AirCal Investments, a vehicle for two Orange County real estate developers, William Lyon and George Argyros. WCC's trustee didn't bother to hide his satisfaction with the outcome. He preferred local ownership. He had been angered by the surprise bid by Air Florida to buy WCC, had in fact put Argyros and Lyon together in the first place, when each had separately inquired.[54][55]
The airline that Lyon and Argyros bought came, as of April 6, 1981, with a new name (AirCal) and a new image. Landor Associates did the new livery, Mary McFadden did the new uniforms.[56]
Air California/AirCal Financial Results, 1979 thru 1986
In April 1967, Air California was operating 48 nonstop Lockheed L-188 Electra propjet flights a week from Orange County (SNA) to San Francisco (SFO). It added Orange County (SNA) to San Jose (SJC) and Oakland (OAK) flights around the beginning of 1968.
By May 1968, the airline was operating 92 flights per week from SNA to SFO, primarily using Douglas DC-9-10 twin jets, as well as 50 flights a week from SNA to SJC, with most continuing on to OAK.
By 1976, Air California was operating nonstop intrastate jet service between Orange County and San Francisco, San Jose, Oakland, Sacramento, San Diego and Palm Springs; between San Diego and Oakland and San Jose; between Ontario and Oakland and San Jose; and between Palm Springs and San Francisco, San Jose and Oakland.[66]
In the early to mid-1970s, Air California offered school field trips for inner-city school children in Los Angeles to Sacramento at $25 (equivalent to US$154in 2023) per ticket. The school children would be taken on a tour of the California State Capitol, Governor's Mansion, and Sutter's Fort.
When the airline introduced the new McDonnell Douglas MD-80, one could (for several hours at Burbank Airport) purchase discounted one-way passes (good for one year) for flights to San Jose and Oakland. The pass price was $9.80 one way/$19.60 round trip, with a purchase limit of four round-trip passes. Later that year, San Francisco was added to the pass program as well.
Following the federal Airline Deregulation Act of 1978, Air California started flights to Las Vegas and Reno, its first routes outside of the state. It then offered service to Portland, Oregon, and then Seattle, Washington, and Phoenix, Arizona. The growing airline then became a takeover target for larger, national air carriers.
During the 1980s, AirCal had a small fleet of Boeing 737s (series -100, -200 and -300 aircraft); seven McDonnell DouglasMD-80s; and six British AerospaceBAe 146-200s. The BAe 146 allowed AirCal to increase flights at noise-sensitive Orange County Airport since this British-built jet was quieter than other jets. The airline recommenced flights to Lake Tahoe in the early 1980s with jet service, first with MD-80s and later with Boeing 737-300s. In early 1985, the airline was operating nonstop MD-80 jet service between Lake Tahoe and Los Angeles (LAX), San Francisco (SFO), and San Jose (SJC).[67]
By May 1986, AirCal had introduced new flights serving Chicago (ORD), Anchorage (ANC), and its only international destination, Vancouver, British Columbia, Canada (YVR).
AirCal alliance with Muse Air
In 1984, AirCal partnered with Texas-based Muse Air. Connecting flights between the two airlines were published in their respective timetables.
The AirCal January 1, 1984, system timetable listed connections to Muse Air flights from Los Angeles (LAX) and Ontario (ONT) to Austin (AUS), Houston Hobby Airport (HOU), Midland/Odessa (MAF), and New Orleans (MSY).[68] The April 29, 1984, Muse Air system timetable listed AirCal connections from Los Angeles (LAX) to San Francisco (SFO), Oakland (OAK), San Jose (SJC), Sacramento (SMF), Reno (RNO), Portland (PDX), and Seattle (SEA).[69]
AirCal was acquired by AMR Corp., the parent company of American Airlines, in 1987.[6] American continued to fly many former AirCal Boeing 737s as well as the BAe 146s, which at that time were both new types in American's fleet.
American continued to operate former AirCal Boeing 737-300s into Lake Tahoe (TVL) until it turned over all Lake Tahoe service to their regional affiliate American Eagle, which was operating small, commuter turboprop aircraft at that time.
All eight former AirCal Boeing 737-3A4s were later operated by Southwest Airlines. AirCal also had ordered a ninth 737-3A4 (never delivered), which eventually also found its way into the Southwest Airlines fleet. As of April 2017, Southwest had retired all of the former AirCal fleet: N679AA, the last Boeing 737-300 in service, was stored in February 2012.[70]
Incidents and accidents
In 1981, an AirCal Boeing 737-200 crashed while attempting to land at John Wayne International Airport around sunset on Tuesday, February17.[71][72] AirCal Flight 336 was a scheduled flight from San Jose International Airport to John Wayne International Airport. Around 48 minutes into the flight, the crew received clearance for a visual approach to land on runway 19R. As Flight 336 was approaching, another AirCal flight, Flight 931, received clearance to take off from runway 19R.
The controller recognized the potential danger of a collision between the two aircraft and ordered Flight 931 to abort takeoff and instructed Flight 336 to go around. Flight 931 aborted its takeoff, however, Flight 336 did not go around and instead landed on the runway with the landing gear retracted. The aircraft left the runway surface around 900 feet (275m) past the runway threshold, skidded another 1,170 feet (360m) before finally coming to rest 115 feet (35m) to the right of the centerline. All passengers and crew members survived the crash. The Boeing 737-293 aircraft, registered N468AC, was damaged beyond repair and consequently written off.[73]
On June 5, 1986, an AirCal 737 flying from Los Angeles to Portland came within 100 feet of a private plane before the AirCal pilot banked to avoid a collision. No crew or passengers were injured during the incident.[74]
Destinations
Destinations in May 1987
AirCal's May 1, 1987, system timetable listed the following destinations shortly before it was merged into American Airlines:[1]
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