Plane Gamble : PSA’s Takes a Flier on British Jet

PSA flies to some out-of-the-way destinations, but none is as isolated as Blythe, a small California town near the Arizona border.

Each weekend, PSA pilots use Blythe’s airfield to practice takeoffs and landings before jetting back to Lindbergh Field.

The flights serve a purpose, however, because PSA’s pilots are honing their skills on the BAe 146, the plane that airline officials believe will help PSA maintain, if not increase, its share of the profitable but intensely competitive intra-California market.

PSA’s initial decision to make the BAe 146 the workhorse of its airline fleet, however, could be viewed as unlikely as the weekend flights to Blythe.

“We took a hell of a gamble on the 146,” acknowledged Byron H. Miller, vice president of market and fleet planning at PSA, who first saw the airplane at the Paris Air Show in 1983. He added that “there was some (internal) resistance” to PSA’s becoming the first major airline in the world to fly the 100-passenger British Aerospace plane.

“We had our eyes wide open, though,” Miller said. “We knew that (if the strategy works) we’d end up being the big frog in the pond.”

PSA’s strategy is to use the small, fuel-efficient and quiet BAe 146 jets to gain entry to smaller airfields along the “California Corridor” that are without jet service.

According to Civil Aeronautics Board passenger data, that strategy might be working. PSA flew 47.7% of the 6.5 million passengers who traveled along the California Corridor during the fourth quarter of 1984, up 2% from the previous quarter.

Airline industry analysts and observers suggest that PSA, with its “small is beautiful” philosophy, is either way ahead of the competition or flying off on its own.

Although PSA is the first major airline to tie its future to the 85-passenger BAe 146, it isn’t the only airline interested in a smaller jet that can provide economical service to those smaller fields. Airline industry analysts agree that the industry needs a dependable 100-seat aircraft to provide economical service to less-populated destinations.

USAir, which will soon announce a replacement aircraft for an aging segment of its fleet, is considering the new Folker F-100 and a new version of the Boeing 737, called a 737-300. Neither was available when PSA decided to buy the BAe 146.

Although the BAe 146 was included on USAir’s initial shopping list, “it simply wasn’t one of the finalists,” said Jack King, USAir vice president of public affairs. “The others seemed to better satisfy our particular requirements.”

The BAe 146, however, seemed tailor-made for PSA, Miller said, because the plane was in production and it boasted of the fuel efficiency and “good neighbor features” of reduced noise and air pollution.

The BAe 146, a 100-seat (PSA reduced its version to 85 seats), four-engine plane, made its U.S. debut in June, 1983, when Air Wisconsin, a regional commuter based in Appleton, Wis., received the first of six in its fleet.

“It was our first entry into the jet age,” said Watson Whiteside, Air Wisconsin vice president, marketing.

Air Wisconsin used the plane to replace aging propeller-driven planes that were flying to Green Bay, Wis.; Toledo and Akron/Canton, Ohio; Fort Wayne, Ind., and Moline, Ill. The Midwest commuter airline is using the BAe 146 in its “higher-density markets, the one’s we’d previously been serving,” Whiteside said. “We didn’t jump into new segments; we put them into known markets.”

PSA, which took delivery of its first BAe 146 last summer, is using the aircraft to head in the other direction by replacing its older Boeing 727s and supplementing a relatively young fleet of MD Super 80s, made by McDonnell Douglas.

The airline hopes the quiet BAe 146 will win PSA some coveted landing slots at the noise-sensitive fields that are off limits to noisier jets and help PSA work its way into new markets, including Contra Costa County, Concord and Lake Tahoe.

That strategy is in part being forced by competition from airlines such as Southwest, United and AirCal, which are fighting for a passenger base that is growing at an annual rate of only 4%.

“I like to say that since there are more diners at the table, the slice of pie is going to be that much smaller,” Miller said.

PSA is gambling that its smaller planes will allow a return to the more frequent flight schedules that it used in the 1970s, before rising energy costs forced the airline to schedule fewer flights for its fuel-hungry fleet.

Whatever growth PSA enjoys will be linked to how it plugs its rapidly growing fleet of BAe 146 airplanes into a departure schedule that, by year’s end, is expected to have 45% more flights than in the schedule of the year before.

To handle that growth, PSA has taken delivery of 10 BAe 146’s since the first plane flew in from London in June, 1984. PSA expects another 10 to be in service by the end of this year, and the airline must decide what to do with options on 25 more.

PSA’s initial BAe 146 deliveries, however, were delayed, and subsequent deliveries--including some planned for this summer--were also delayed. PSA was forced to divert capital to lease planes from non-competing airlines so it would not have to cut back on newly expanded schedules.

British Aerospace acknowledged that those delivery problems hurt its image in the United States.

“We’re in the position of having to work twice as hard to look half as good,” a British Aerospace spokesman said. “At the beginning of the contract with PSA, one of the factories that builds a part went on strike, and for three months we couldn’t kick another airplane out of the door.

“When you’ve got a company that has bought 20 planes from you, and you can’t deliver the way you said you could, it’s sort of embarrassing. We kind of got a black eye, which we’re living down now.”

The BAe 146 engines, built by Avco Lycoming Engine Group in Stratford, Conn., also raised some corporate eyebrows at PSA. The basic power plant was used to power helicopters in combat during the Vietnam War, but its use in the BAe 146 is the first time it has been used in a commercial airliner.

“We had concern over the engine because of its checkered career in the military,” Miller said, adding that the “calculated risk” paid off when British Aerospace delivered the BAe 146. Avco Lycoming also “made some very good commitments on the reliability and maintenance costs” of the plane’s turbofan engines, Miller said.

Avco Lycoming, whose future engine sales are obviously linked to PSA’s experience, is determined to make sure that PSA’s “operation is a glowing success,” said Joe Mauriello, director of marketing for Avco Lycoming’s Stratford Division.

Both Avco Lycoming and British Aerospace have placed technical representatives at PSA facilities up and down the coast. British Aerospace also stocks parts at a Los Angeles depot, giving PSA “24-hour service if the airline doesn’t have the part in its own storeroom,” said a British Aerospace spokesman.

With that service commitment, Miller said, PSA is free to concentrate on fine tuning in its “small is beautiful” strategy.

PSA’s decision to use the BAe 146 is in keeping with “where PSA wants to be two to three years down road,” suggested Greg Kieselmann, an airline industry analyst with Morgan, Olmstead, Kennedy and Gardner, a brokerage firm in Los Angeles. “They’ll have substantially beefed up their frequencies, and, over time, this aircraft will be heavily utilized in smaller, noise-sensitive airports.”

Although PSA intends to fly its BAe 146s primarily on shorter routes--and especially to those noise-sensitive places where competitors’ planes are at a disadvantage--it also will plug the BAe 146s into longer flights during off-peak hours, hoping to get an edge on competitors using bigger Boeing 727s and 737s. PSA is betting that the BAe 146, which is most efficient on flights of 100 to 250 miles, will maintain its advantage on routes where competitors, flying 737s, are usually given the edge because of that plane’s longer-range speed and fuel efficiency.