At 91, Ted Vallas has a lofty ambition: starting an airline
At a time when major air carriers are filing for bankruptcy and merging to stay in business, is there anyone crazy enough to pull a Richard Branson and launch a new airline from scratch?
There is — and he’s old enough to be Branson’s father.
Ted Vallas, 91, is the man behind California Pacific Airlines, which he hopes will soon be flying out of Carlsbad in northern San Diego County.
In case you think he’s kidding — and the serious-minded nonagenarian doesn’t joke about business — he has already invested $6.2 million of his own money. Vallas has secured a gate at McClellan-Palomar Airport and has leased one airplane, a new 72-passenger, narrow-body Embraer jet.
The plan is to start with service to not-too-distant cities such as San Jose, Oakland and Sacramento and eventually expand to more distant destinations.
Vallas, who made a fortune building and running golf courses, has no illusions about enjoying a long career in the airline industry.
“I’m at the end of my line,” said Vallas, whose sky-blue eyes give him the spry look of a younger man. “This is going to be, in a sense, my legacy.”
Airline analysts say his chances of success are slim. The industry is littered with failed airlines and idealists whose big dreams never took flight. Vallas was one of those dreamers. He owned a charter airline that he sold in 1997 after he became a victim of an embezzlement scheme.
“It’s not the most sane way to make a living,” said Henry Harteveldt, an airline analyst with Atmosphere Research Group in San Francisco. “But if you do your homework and take a disciplined approach, then maybe you can make some money.”
Vallas’ target market is the 1 million or so residents of northern San Diego County who must drive to San Diego International Airport, John Wayne Airport in Santa Ana or even Los Angeles International Airport to catch flights.
It’s an underserved market, he said, and he has the cost advantage of being nonunion, unlike most major airlines.
Several years ago, Vallas funded his own marketing survey, which found that 40% of passengers who fly out of San Diego’s airport live in northern San Diego County.
“I’m only doing it because there’s a golden opportunity here,” he said. “The demand is here, and that is a proven demand.”
If Vallas’ airline flops, it won’t be because his work ethic. He puts in nine hours a day at his office in an industrial park about a mile from the airport. He spends an additional four hours nightly at his home in Encinitas crunching numbers and studying Federal Aviation Administration regulations.
And even then, he said, he has energy to play a round of golf each Saturday.
June, his wife of 62 years, doesn’t complain, Vallas said. “She has never objected to what I do.”
Vallas, who grew up in Iowa, traces his passion for planes to his enlistment in the Navy at age 18 during World War II. “A Navy pilot was considered choice back then,” he said.
Even now his neatly furnished office is adorned with drawings of airplanes. There is also a black-and-white portrait of him, looking clean-cut and serious, in his Navy uniform. But he was never a Navy pilot.
Vallas said he had just started in pilot training school when he was deployed to a new aircraft carrier and eventually assigned to gunner duty on dive bombers and torpedo planes. The war ended without him getting back to pilot training.
After the Navy, Vallas earned a master’s degree in business administration from California Western University in San Diego, now called California Western School of Law, and launched a series of business endeavors, including a wind tunnel and instrumentation firm.
Seeing an opportunity in the growing popularity of golf, be bought several courses over the years and renovated them.
He became wealthy enough that in 1980 he bought Air Resorts Airlines, a charter carrier with 18 planes based at San Diego International Airport that flew to Burbank, Phoenix, Tucson and other cities.
The airline thrived, he said, primarily by flying college athletes to competitions and military staff between bases. But Vallas sold it in 1997 after becoming a victim of embezzlement. An insurance broker pocketed funds that were meant to pay the airline’s premiums, he said.
According to court records, the broker was convicted and sentenced to 15 months in prison and three years’ probation, and ordered to pay $125,000 in restitution. The airline was not cited, but Vallas said he didn’t want to deal with the financial mess that resulted. Under a new owner, the airline eventually went out of business.
Vallas said he saw his chance to get back into the airline business several years ago when San Diego County invested $24 million to build an 18,000-square-foot terminal at McClellan-Palomar Airport. The terminal was completed in 2009, and the county has since rebuilt the runway as well.
The only commercial air service at the airport is offered by United Express, a regional carrier that flies solely to LAX. Local business leaders said the county’s investment in the airport made sense because it gave executives from such local businesses as Hewlett-Packard Co., Sony Corp.and BAE Systems easy access to flights from north San Diego County.
“Time is money,” said Debra Rosen, chief executive of the San Diego North Chamber of Commerce. “In addition, the airport creates more jobs for the region, and that’s what it’s all about, right?”
In addition to his personal funding, Vallas said he has raised $3.8 million from local investors and is looking for an additional $6 million.
John Todd, 65, a retired Marine and former Oceanside City Council candidate, met Vallas through a mutual friend and was so impressed by the airline’s business plan that he agreed to invest. He declined to say how much.
“Ted Vallas and his team are experienced leaders, and the plan is focused on the business end as well as the flying of aircraft,” he said. “Starting an airline is not for the faint of heart or those with a low risk tolerance. Market data indicates this effort can succeed.”
Airlines are high-risk investments. In the last 10 years alone, eight major airlines — including American, Delta, United and US Airways — have filed for bankruptcy protection. Delta recently shut down Comair, its regional carrier based in Cincinnati, saying the smaller planes are not as fuel-efficient as larger jets.
“A lot of people have lost a lot of money on airlines, including many savvy investors,” said Betsy Snyder, a director at Standard & Poor’s in New York.
She recalled investment guru Warren Buffett’s famous quote about investing in airlines: “How do you become a millionaire? Make a billion dollars and then buy an airline.”
Vallas is undeterred. Nine decades of experience have convinced him that he can get California Pacific Airlines off the ground. Eventually, he said, he’ll turn over the operation to younger executives.
“I want to stay on long enough to make sure we pursue our niche,” Vallas said, “and stay focused on the business plan.”
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