Pacific Southwest Airlines (PSA) was a low-cost airline in the United States headquartered in San Diego, California, that operated from 1949 to 1988. Founded by Kenny Friedkin and J. Floyd Andrews, it was the first substantial scheduled discount airline. PSA called itself "The World's Friendliest Airline" and painted a smile on the nose of its airplanes, the PSA Grinningbirds. The Los Angeles Times called PSA "practically the unofficial flag carrier airline of California for almost forty years"."Southwest Airlines has a flashback – emphasis flash." Los Angeles Times. March 3, 2009. Retrieved on February 18, 2010.
For three quarters of its existence, PSA operated as a California intrastate airline. PSA's early success as an intrastate airline served as a model for Southwest Airlines, which did in Texas what PSA had done in California.Voices of San Antonio: Herb Kelleher (Dec 2017 interview, published to YouTube on Mar 29, 2018) After the Airline Deregulation Act of 1978, PSA expanded to cities in other US western states and Mexico. However, PSA's performance in the new deregulated era was disappointing relative to that of Southwest and PSA's former fellow California intrastate carrier AirCal.
In 1986, USAir agreed to purchase PSA, the transaction closed in 1987 and PSA was integrated into USAir in 1988. The PSA acquisition gave USAir a network on the West Coast, but by 1991 USAir had largely withdrawn from California in the face of fierce fare wars driven, in significant part, by the spread of Southwest. Today's American Airlines Group continues to protect the PSA trademark by using it as a name for a regional airline subsidiary, PSA Airlines. PSA did not survive for long after deregulation, but its influence lives on through the continued success of Southwest.
History
Startup, early competition PSA started as an offshoot of San Diego–based Friedkin Aeronautics, the flight school Kenny Friedkin started to train returning GIs. When GI business dried up, on May 6, 1949, Friedkin started flying once a week from San Diego to Oakland via Burbank with a $1,000-a-month leased Douglas DC-3. Friedkin obtained information from a travel agent upon starting the airline due to lessons learned from a failed precursor airline (Friedkin Airlines).;Trinkle, Kevin, PSA History . Retrieved June 2, 2011 Reservations were initially taken at a World War II surplus latrine refitted as a ticket office. The original fare from Burbank to Oakland was $9.99. In July 1951 PSA added a flight to San Francisco. Oakland was dropped in 1954, but restored to the system in 1965. DC-3s went in and out of the fleet, but the total number was never more than four.
PSA was one of eight California intrastate carriers that started flying in the 13 month period from January 1949 through January 1950 - but only California Central Airlines (CCA) and PSA lasted longer than a year. CCA started in January 1949 and through its demise in February 1955 was larger, and flew better equipment (Martin 2-0-2s) than PSA. But CCA was not as focused as PSA (which stuck just to the San Diego to Bay Area route) and ultimately went bankrupt. PSA bid on CCA in the bankruptcy auction, but lost to a group composed of Allegheny Airlines and Southwest Airways (no relation to today's Southwest Airlines) which shut CCA immediately, leaving PSA as the only intrastate competitor.
+ California Central Airlines and Pacific Southwest Airlines annual passengers, 1949–1954 Passengers 1949 1950 1951 1952 1953 1954 California Central Airlines73,48793,045145,101190,187148,091162,012 Pacific Southwest Airlines15,01145,39075,99592,484115,028102,124
Better aircraft, expansion
In 1955, four Douglas DC-4s replaced the DC-3s, with PSA painting rectangles around the windows to make them resemble the more modern Douglas DC-6.
In January 1958, PSA scheduled 37 DC-4s a week Burbank to San Francisco (29 of which originated in San Diego) and four nonstops San Diego to San Francisco; United Airlines, Western Airlines and TWA then scheduled a total of 241 nonstop flights each week from Los Angeles to San Francisco, plus 49 flights a week from Burbank to San Francisco. About half of these flights by the competition were First Class only ($22.05); the rest carried coach passengers for $13.50, all fares subject to then 5% federal excise tax. In July 1958 PSA shifted some flights from Burbank to Los Angeles International Airport (LAX); that year it carried 296,000 passengers.
In late 1959, PSA began flying Lockheed Electra turbopropsAirlift December 1959 with 92 seats and a six-seat lounge, replacing 70-seat DC-4s. In 1963 PSA got its sixth Electra; by then it carried more passengers between the Bay Area and Los Angeles than any other airline. Total PSA passengers climbed from 355,000 in 1959 to 1,305,000 in 1963 and 5,162,000 in 1970.Aviation Week 20 January 1964, 22 February 1971
Public company On March 16, 1962, founder Kenny Friedkin, only 47 years old, died of a cerebral hemorrhage. He had lived to see his airline become a success, but it was still tiny, with only five aircraft. J. Floyd Andrews, one of Friedkin's fellow founders, took over. Andrews's era was tumultuous, PSA achieving a high national profile. This was the era of hot-pant clad flight attendants on pink-liveried aircraft, a classic image of California in the late 1960s and early 1970s. As discussed below, PSA became utterly dominant in the intra-California market, but also overreached to the point it almost went bankrupt.
Less than a year later, PSA went public, with a February 14, 1963, initial public offering, 313,000 shares (100,000 of them primary) at $19. Preparations had been underway for some time. PSA had an unusual corporate structure, with its aircraft owned through three companies owned by founders (Friedkin and others). In January 1962, these were merged into PSA. Prospectus facts that caught the eye of one observer included: With only five 98-seat Electras, PSA nonetheless had the second-highest passenger marketshare in San Francisco, and the fifth largest in Los Angeles. Speedy 20 minute aircraft turnarounds and no-frills service. Nine months profit to September 30, 1962, of over $1 million (at a time when the Los Angeles to San Francisco fare was just $13.50) 937,000 passengers carried between San Francisco and Los Angeles in 11 months ending November 30, 1962, compared to 642,000 in the same period the prior year.
+ Pacific Southwest Airlines Financial Results, 1955 thru 1965 (USD 000) 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 Op revenue 1,588 2,265 3,126 3,930 4,776 8,130 10,300 14,205 17,852 20,773 24,015 Op profit 64 120 399 663 909 21 1,127 3,402 4,952 5,946 4,410 Net profit 244 59 197 322 456 0 310 1,369 2,252 2,946 2,035 Op margin 4.1% 5.3% 12.8% 16.9% 19.0% 0.3% 10.9% 23.9% 27.7% 28.6% 18.4% Net margin 15.4% 2.6% 6.3% 8.2% 9.5% 0.0% 3.0% 9.6% 12.6% 14.2% 8.5%
CPUC era, 1965–1978 Until 1965, as an intrastate airline PSA had a free hand in terms of how and where it flew within California. The California Public Utilities Commission (CPUC) was limited to regulating PSA's prices. So long as PSA stayed within the boundaries of an intrastate airline, the federal Civil Aeronautics Board (CAB), which otherwise tightly regulated US airlines, had no say, though as with any US airline, the Federal Aviation Administration (FAA) operationally regulated PSA. As of September 17, 1965, the CPUC had new powers over California intrastate airlines of economic certification (PSA was grandfathered) route entry/exit and service quality (e.g. frequency).
PSA was in favor of this. In the early 1960s, a number of new entrant California intrastate carriers had come and gone, the most notorious being Paradise Airlines, which had a terrible accident in 1964. PSA believed it would benefit from market stability, but observers predicted that over time the CPUC would become just as restrictive as the CAB, which, in fact, happened. From 1965 through US airline deregulation in 1978, the CPUC certified only two intrastate airlines: Air California and Holiday Airlines. From September 17, 1965, through 1978, PSA had to apply to the CPUC for all new routes, generally in competition with Air California.
Air California and lost opportunity Despite having total network freedom, PSA evolved its network minimally from 1949 to 1965: it served only five airports: San Diego, LAX, Burbank, San Francisco and Oakland. In 1965, Orange County Airport (later John Wayne Airport (SNA)), had a new runway. It approached PSA (among other airlines) about serving it (SNA had long-standing minimal service from Bonanza Air Lines), and like the others, PSA demurred. This was a mistake: The CPUC certificated Air California to bring intrastate air service to Orange County, and the airport became a big deal. The County was the fastest growing in the nation in the 1960s, population increasing from 700K in 1960 to 1.4mm in 1970. There was a lot of demand for Orange County service. Having certificated Air California, the CPUC was open about its desire that Air California survive, so it kept PSA out of Orange County, gave other desirable routes to Air California and otherwise took steps to protect it. The CPUC assigned routes to PSA or Air California but rarely both. Despite a rocky first five years, Air California survived and the CPUC ensured minimal competition between it and PSA.
PSA tried to buy Air California twice: In December 1969, an ailing Air California agreed to a merger, but the CPUC was slow to approve. In May 1970, PSA withdrew, citing the slow CPUC, and almost immediately thereafter, San Diego tycoon C. Arnholt Smith took control of Air California through his Westgate-California Corporation (WCC). In mid 1972, PSA agreed to buy WCC's majority stake in Air California. Against heavy opposition, the CPUC agreed to the merger when WCC said it would no longer fund Air California losses. However, the US Department of Justice sued to prevent the merger, noting PSA had a 70% intra California market share and Air California had an 11% share. By now a year had passed. PSA withdrew from the merger after Air California auditors withdrew certification of 1971 and 1972 financial statements, one of the first steps in a scandal that enveloped C. Arnholt Smith including the 1973 seizure of his bank, the largest in San Diego, and the 1974 bankruptcy of WCC.
1960s–1970s fleet
PSA’s fleet changed constantly in the 1960s and 1970s. The 1960s started with Electras, then Boeing 727-100s arrived in 1965, PSA's first pure jet. The last Electra flight was September 1968 By 1969, PSA was swapping out 727-100s and replacing them with bigger 727-200s plus 737-200s. At the beginning of 1970, the fleet comprised one 727-100, 16 727-200s and nine 737s. In the late 1960s PSA also briefly had DC-9s, the justification was to train pilots of other airlines. As discussed below, the L-1011s made a brief appearance in 1974-1975, but by then PSA was shedding the 737s; the last left in the fleet in 1976. In 1975, Lockheed Electras returned to support flights to Tahoe (see below). Other than the Electras (required to operate to Tahoe), PSA settled on 727s in the late 1970s, acquiring used 727-100s as well as additional new 727-200s.
PSA entered Tahoe after Holiday Airlines collapsed. Holiday basically served nowhere other than Tahoe, a choice that sealed its fate. PSA applied to the CPUC for Holiday's routes in 1974 Holiday said it couldn’t afford to defend itself in front of the CPUC and went out of business in February 1975. The CPUC split the Tahoe routes between Air California and PSA on an emergency basis, but required the two carriers use Electras for Tahoe. One of PSA's first actions of the deregulated era (which started January 1, 1979) was to exit Tahoe, citing the high cost of Electras in a fleet that otherwise comprised 31 727s.