Pair Bought Carrier in Bankruptcy Court in ’82 : Risk Pays Off for AirCal Owners
William Lyon stormed into a San Diego bankruptcy court five years ago with one idea in mind: If anyone was going to get hold of a bargain airline, it was going to be him.
It took three days, $61.5 million and an instant partner in the form of fellow Orange County real estate developer George L. Argyros, but Lyon emerged victorious as the new owner of AirCal.
Lyon outbid Air Florida, the initial suitor, out-manuevered PSA, which had expressed an interest, and outclassed a host of other would-be bidders for what he had the vision to see as a diamond in the rough, or more appropriately a gem plucked from the wreckage of its former parent, the then-bankrupt and now-defunct Westgate-California Corp.
It was with the same determination and eye for opportunity that Lyon and Argyros built AirCal into a major competitor in the fiercely competitive West Coast corridor and then sold out Monday to American Airlines.
Since they bought AirCal, the airline has more than tripled in value, selling to American for $225 million, of which $90 million will go to Lyon and Argyros.
“They took large risks, invested their time and money and worked very hard to make it a successful company,” said Robert W. Clifford, AirCal’s former president and chief executive for 11 years until Lyon took over the top job in December, 1982.
By all accounts, both Lyon, 63, and Argyros, 49, have a history of putting their personal fortunes into risky ventures, then turning them into gold. Both were so well-established in Orange County as real estate developers that when they wrestled AirCal from bankruptcy in 1981, many saw their mere involvement as guaranteeing AirCal’s success.
For Lyon, the pattern of success through hard work and a hands-on approach first surfaced with two home-building firms he started. From modest beginnings, he founded William Lyon Co., for years one of Southern California’s largest residential and land development firms, which has built and sold more than 40,000 units.
Nicknamed ‘The General’
A native of West Los Angeles, Lyon had a distinguished military career, which earned him 17 decorations for such assignments as combat missions in Korea. Referred to as “The General” by friends today, he was chief of the Air Force Reserve from 1975 to 1979. Friends trace his initial interest in AirCal to his military service.
“He’s truly an entrepreneur who knows exactly what’s going on. He always knows when the market is there,” said Donald M. Koll, a longtime friend and business associate and chairman of Newport Beach’s Koll Co.
Argyros, Lyon’s co-invester in AirCal, has an even higher profile, largely from a risky investment of his own: In 1981, the same year he teamed up with Lyon to buy AirCal, Argyros bought the Seattle Mariners baseball team, which he still owns. Like Lyon, Argyros is known as a shrewd investor who knows a good buy.
A graduate of Chapman College, Argyros worked as a market box boy, advancing to manager until he decided that the only way to make any real money was by working for himself. He earned a real estate license and borrowed $1,200 to start a business. By 1962, Argyros had started Arnel Development & Affiliates of Santa Ana, which put up apartment units in Orange County.
When AirCal became available, Argyros and Lyon, separately, heard opportunity knock. Herbert Kunzel, bankruptcy trustee of Westgate-California Corp., recalls that they were independently interested in the airline. “I told them to get together,” he recalled. They did, financing the deal with a loan from Wells Fargo.
The company was founded in 1965 by five Orange County investors, who acquired two Lockheed Electra propjets. The airline caught on and within two years had carried more than 1 million passengers.
The company was acquired by Westgate-California, a San Diego conglomerate, in 1970 and continued to grow: By 1972, it carried 1 million passengers in a single year, and for the first time was profitable. But its parent corporation collapsed into bankruptcy in 1974.
In May, 1982, AirCal was purchased for $61.5 million by Lyon and Argyros. They took the company public in 1983, keeping 70% of the stock for themselves.
