USAir to Cut Most California Flights : Airlines: It is the second major carrier to reduce its schedule within the state. Fares are expected to rise.

By DENISE GELLENE

Jan. 26, 1991 12 AM PT

TIMES STAFF WRITER

USAir, a victim of high fuel costs and a bruising West Coast fare war, said Friday that it was cutting most of its flights within California to stem huge losses.

The airline’s dramatic retrenchment virtually undoes its 1986 purchase of Pacific Southwest Airlines and comes two weeks after a bruised American Airlines all but pulled out of California’s north-south corridor.

With two major competitors out of the picture, air fares in the corridor--currently as low as $20 one-way--are expected to rise. “Fares will go up, although I will be appalled to see” a rise in business fares, said Joe Brancatelli, editor of Frequent Flyer magazine.

USAir’s extensive cuts in California are part of a broader retrenchment to help stop a tide of red ink. The airline Friday reported a $454-million loss on $6.6 billion in revenue for 1990. The Arlington, Va.-based airline is also halting service to Portland, Ore., and reducing flights from Baltimore-Washington Airport and Cleveland.

Last summer, USAir laid off 3,600 employees because of losses related to its acquisition of Piedmont Airlines. USAir’s condition worsened lately as the Persian Gulf crisis drove up the price of jet fuel while dampening travel demand.

In California, USAir is pulling out of six airports on May 2: Burbank, Ontario, Palm Springs, San Jose, Oakland and John Wayne in Orange County. It will continue to fly from Los Angeles, San Francisco, San Diego and Sacramento.

By pulling out of the six airports, USAir is reducing its daily departures from California airports by 97 to 192. Most of the remaining flights will go to locations out of the state.

The cutbacks will affect 500 workers in California. USAir spokesman Larry Pickett said an undetermined number of workers would be transfered to jobs in the East. He said he did not know how many workers would lose jobs. USAir said its fourth-quarter results included a $46-million charge for relocations and layoffs.

USAir workers, many of them former PSA employees, were upset by the news. “A lot of us are crying today,” said one USAir employee.

USAir’s shrinking act comes after a yearlong fare war in California triggered when no-frills Southwest Airlines invaded Burbank and slashed one-way fares to the Bay Area to $59 from $164.

Then last spring, United Airlines raised the stakes with half-hourly flights between Los Angeles and San Francisco. Delta Airlines, in slow gear on the West Coast since its 1987 acquisition of Western Airlines, started hourly service between the two cities.

The intense competition earned the air corridor between Los Angeles and San Francisco the nickname “suicide alley.” Airline executives have estimated each airline lost around $12 million in the corridor last year. The current $20 one-way fare promotion is costing the air carriers another $200,000 apiece.

Industry watchers said the low fares helped drive American from the heavily traveled Los Angeles-San Francisco route on Jan. 19, although American blamed the decision on labor troubles with its pilots. The move effectively dismantled Air California, which American acquired four years ago. American continues to fly from its West Coast hub in San Jose to Los Angeles and Orange County.

Spokesman Alan Wayne said Friday that United is “very interested” in obtaining more slots at John Wayne.

A Delta spokesmen had no comment on USAir’s action. Don Valentine, marketing vice president for Southwest Airlines, said, “we have to study this very seriously.”

Houston-based Southwest has expanded rapidly in California during the last three years, pushing aside USAir to become the biggest airline in Burbank and one of the top three in Ontario.

In its fleet, Southwest has 60 aircraft that would meet noise restrictions at John Wayne Airport, but it isn’t clear whether Southwest would try to move in on Orange County. It passed up the chance to fly from Orange County when American discontinued some flights last fall.

USAir’s decision Friday dismantles the extensive PSA network it acquired for $400 million in 1987. San Diego-based PSA was the state’s largest air carrier, with more than 55% of the California market. USAir is believed to have less than 40% of the market currently.

“I am dismayed to see the system dismantled,” said Larry Guske, former PSA vice president-finance.

Industry observers and former PSA executives have said that USAir failed in California because it ignored advice of PSA executives and tried to replace PSA’s well-known image with its own.

“They (USAir) bought two airlines”--PSA and Piedmont--”and turned it into muck,” said Brancatelli. “It is inconceivable that on their own, AirCal and PSA would not have survived.”

Airline industry analysts speculated that USAir might redeploy some of its aircraft on East Coast routes abandoned by Eastern Airlines, which shut down a week ago.

But it was unclear how many aircraft would be available for new service. USAir said it planned to get rid of its fleet of 18 British Aerospace 146 jets--now used at John Wayne Airport--because they are costly to maintain. The airline said its fourth-quarter results reflected a $44-million charge related to disposing of the aircraft.

Times staff writer John O’Dell in Orange County contributed to this story.

USAIR’S REVENUE & EARNINGS

Revenue and net income / loss by quarter Fourth quarter, 1990: USAir posts a loss of $221 million

PSA CHRONOLOGY

Here are some events in the life of Pacific Southwest Airlines:

* May 6, 1949: Pacific Southwest Airlines begins operations, flying a leased DC-3 once a week from San Diego to Oakland.

* 1955: PSA purchases its first airplane, a 70-seat DC-4.

* 1963: PSA sells stock to the public.

* 1965: PSA enters the jet age with the acquisition of five Boeing 727-100s and starts to build a reputation as a low-cost, high-frequency carrier.

* 1970s: PSA flight attendants turn in their military-style suits for miniskirts and boots.

* 1971: PSA carries more than 5 million passengers.

* Sept. 25, 1978: A privately owned Cessna 172 collides with a PSA 727 over San Diego, killing 144 people including 37 employees.

* 1987: USAir Group buys PSA, then the nation’s 15th-largest airline, for $400 million.

* Dec. 7, 1987: A disgruntled former USAir employee allegedly fires shots on board PSA Flight 1771 causing it to crash, which kills all 43 people aboard.

* 1988: USAir blends PSA, previously a wholly owned subsidiary, into the rest of its operations.

* Jan. 25, 1991: USAir Group reports a $63-million net loss and says it will discontinue operations at eight airports--six of them in California. The action leaves only the carrier’s Los Angeles-to-San Francisco route in California, eliminating all but the last of the PSA network.

FLYING CALIFORNIA’S SKIES

With USAir’s withdrawal from many of its California routes, air competition in the state will be noticeably reduced. Map shows major intrastate carriers that serve Southern California airports and major destinations cities.

1. LAX

American

United

Delta

Alaska

Southwest

America West

Pan Am

TWA

2. Burbank

American

United