AirCal’s Third-Quarter Net Income Increased 44%

Although AirCal felt the pinch of new competition on some of its routes in September and saw operating income for its third quarter decline from the previous year, the airline said net income for the period was up 44% to $3.3 million from the year-ago $2.3 million.

William Lyon, chairman of the Newport Beach-based regional airline, said the third-quarter earnings were “negatively impacted” in September by a 16-day suspension of service to Lake Tahoe while the runway there was resurfaced and by the entry of Continental West on routes that AirCal flies between Los Angeles and San Jose and Seattle.

Continental West initiated service between Los Angeles and San Jose at $29; AirCal and other competitors cut their $69 to $89 fares to the same level, AirCal spokesman Bill Bell said. AirCal also dropped its fares between Los Angeles and Seattle to $65 from $210 to compete with Continental West, he said. This month, Bell added, Continental West raised its fares somewhat on both routes, and AirCal and others followed suit.

AirCal’s operating income for the third quarter dropped 45% to $3.5 million from $6.4 million. Bell said the decline primarily reflected the airline’s cost of leasing four new Boeing 737-300s. Previously, the airline bought its planes, and the cost of financing was not charged to operating costs, he said.

On the positive side, AirCal officials said the airline had benefited from lower interest payments after it reduced its debt with most of $3.7 million raised last March in a preferred stock offering. It also had to set aside less money to compensate its employees for the wage reductions that they agreed to during the company’s financial troubles in 1983, since most of those concessions had been repaid.