2 Airline Leaders Have Different Flight Plans

To hear Paul Barkley and Bruce Kennedy talk, it’s hard to believe that both manage regional airlines.

Especially when the two talk about what their industry will look like after a continuing wave of mergers and acquisitions subsides.

Their opinions are as different as the graphics painted on the sides of their jetliners.

Pacific Southwest Airlines Chairman Barkley is arguing that a “strategically sound mid-sized airline” need not be gobbled up by a major trunk carrier.

“With labor costs declining, interest rates coming down and fuel bills cut in half, we reported record profits for the third quarter,” Barkley said recently, contending that PSA was poised for a return to profitability.

Alaska Air Group Chairman Kennedy said he hopes his airline will remain independent, but two weeks ago he acknowledged that “logic tells you the big guys are going to have it all eventually.”

Kennedy’s logic seems to be supported by the record number of airline mergers and acquisitions that have been completed during the past year.

Just recently, American Airlines said it would acquire Orange County-based AirCal for $225 million, and Alaska Air Group said it would spend $68 million to acquire Horizon Air. In recent months, Delta grabbed Western, Northwest acquired Republic, and Texas Air has been trying to merge Eastern into its system.

But despite repeated predictions by airline industry analysts that both regional carriers will be acquired, PSA and Alaska Airlines have remained stubbornly independent.

The two airlines have other similarities:

- Both began service with a single plane and gradually built fleets that include some of the nation’s most quiet and efficient jets.

- The two regional airlines’ planes fly far beyond what their names suggest. San Diego-based PSA has ventured out of the Pacific Southwest with service to the Pacific Northwest, and Seattle-based Alaska Air, thanks to a unique agreement with American Airlines, offers service to Chicago and Washington, D.C.

- PSA was wracked by a 52-day pilots’ strike in 1980 that forced the airline to halt scheduled service. Air Alaska lost millions of dollars last year when machinists struck for three months.

The big difference between the two regional airlines is that Pacific Southwest Airlines has not been profitable since 1979 and Alaska Air has been registering profits for the last 14 years.

“PSA always seems to be positioning itself for profitability,” Kennedy claimed recently during a San Diego visit to boost his airline’s decision to start service to San Diego on Monday. “They seem to operate in somewhat of a reactive mode” when a new competitor appears.