Pacific Coast Air Halts Service; May Be Sold

Santa Barbara-based Pacific Coast Airlines said Friday that it has suspended passenger service for at least 15 days and that negotiations are under way to sell the company, which for the past four years has been reorganizing under Chapter 11 protection.

People who have bought tickets will be “accommodated” on other carriers, according to spokeswoman Trena Pauley. About 160 employees, 25 of them pilots, have been furloughed, and only 15 employees remain, she added.

Pacific Coast’s 60 daily flights to eight cities were trimmed last month to 17 flights, as the company prepared for its purchase by Merchant Airways, a Los Angeles holding company. However, Merchant “never put a penny into the company,” Pauley said, and the deal was called off late last week.

Merchant Airways officials could not be reached for comment.

Executives of Merchant, who had taken over office space at Pacific Coast, last week disclosed that they had made an offer in December to purchase Imperial Airlines, another commuter airline based in Carlsbad, about 30 miles north of San Diego. Imperial later was bought by a group called United Imperial from Kansas City, Mo. That group, which has refused to make public the identities of its investors, has since filed for protection under Chapter 11 of the U.S. Bankruptcy Code and suspended all of Imperial’s flights.

Imperial’s previous owner was Helen Alvarez Smith, ex-wife of former financier C. Arnholt Smith, whose fraud-ridden U.S. National Bank collapsed in 1973. At the time, it was the largest bank failure in the country’s history.

C. Arnholt Smith introduced the Kansas City group to his ex-wife and helped broker the sale, according to sources familiar with the deal.

Ironically, United Imperial had offered to buy Pacific Coast but called off the deal late last month after it was reportedly unable to arrange financing.

Pauley declined to identify the owners of Pacific Coast, describing them only as two investors from Los Angeles.

She said they are now negotiating to sell the company. Until then, she said, the company is undergoing an “internal reorganization” and has grounded its 10 Handley Page 15-passenger turboprop planes.