Smaller Planes, Lower Fares Offered : Imperial Airlines Goes After the Discount Commuter

James Harmon has been in the airline business for 20 years, long enough, he figured, to know the difference between a slight market fluctuation and a longer-term trend.

So when his Carlsbad-based Imperial Airlines was told that its elimination from United Airlines’ “preferential treatment” list for reservation bookings would last only a couple of months, he assumed his company could handle it.

That was one year ago and, by all indications, Harmon assumed incorrectly, because Imperial is paying the price: By month’s end, about 20% of Imperial’s 210 employees will be furloughed, polite airline jargon for being laid off.

Still, Harmon isn’t looking back. “In hindsight, I don’t think we could have done anything else,” he said last week. “We didn’t want to change our system and then in three months be back (to where we were).”

Indeed, just prior to United’s elimination of Imperial from its preference list--the Civil Aeronautics Board ordered it because it was concerned that carriers were using it as a weapon against smaller airlines--Imperial was flying the crest of unprecedented growth. Monthly passenger count was topping 29,000 and annual revenues soared to $14 million--both record performances for the 18-year-old commuter airline firm.

About 85% of Imperial’s passengers were “interlined,” meaning that Imperial was primarily shuttling travelers from San Diego to Los Angeles and Orange County airports to connect with major carriers’ flights.

Immediately after the United action--which meant that Imperial’s flights were listed far down on the reservation computer, instead of first, where 80% of all reservations are made--Imperial’s interlined load factor dropped 20% and future bookings fell 40% within 30 days.

Monthly passenger counts dropped from an average 19,000 and last year’s revenues have dropped by about $4.5 million. Concurrently, operating expenses increased $400,000 per year because of United’s new policy of charging a $2.50-per-passenger commuter booking fee.

Imperial officials believed that their low-priority computer reservation status at United would soon change, however. “There were assurances from United,” maintained one Imperial source. “But if you rely on something and it doesn’t happen, then who’s to blame?”

Harmon doesn’t seem to be dwelling on that aspect. Instead, he’s going about the task of “restructuring” Imperial--concentrating less on interlining with the major carriers and more on becoming a discount commuter.

Imperial makes 24 round trips daily to Los Angeles and Santa Barbara from San Diego, and more than a dozen between Orange County and Los Angeles.

Rates between here and Los Angeles have been slashed from $35 to $29 each way. The response, said Harmon, has been a 30% increase in reservations. He predicted that passenger count in October may reach 28,000, or just shy of the high-water mark of a year ago.

But the makeup of Imperial’s fleet and personnel will change in the process.

Most of the anticipated 40 layoffs will come from the ranks of Imperial’s 56 pilots and nine flight attendants.

And the company’s three, 36-passenger Shorts Brothers SD-360 planes, which were introduced two years ago to boost Imperial’s load factor and reverse its image as a small-plane commuter, appear destined for a storage facility in Phoenix, Ariz.

To replace them, Imperial will reactivate two of its 18-passenger Brazilian-made Bandierante turboprops, bringing its operating fleet to six.

The switch will save operating expenses, said Harmon, because it takes five crew members to staff a Shorts 360 and only 2 1/2 crew members to staff a Bandierante.

However, the change might reinforce the historical fear that has plagued Imperial’s would-be customers, some travel agents claim.

“A lot of people won’t fly them because of their fear of flying small planes,” one agent said.

The restructuring has left Imperial officials “very optimistic,” said Harmon, who added that, despite the layoffs, “morale is very good.”

“We had to experiment and look at different organization ideas,” he said. “I think we’ve hit on one that’s successful.”