Blaming a cutthroat fare war, AirCal said late Friday that it expects to report a loss for the final quarter of 1985.
It will be the first quarterly loss for the Newport Beach airline in more than two years. AirCal officials did not disclose how far they expected to sink into the red for the fourth quarter but said the airline expects to report a profit for the full year.
John Pincavage, an airlines analyst with Paine Webber in New York, earlier in the week forecast that AirCal would sustain a loss of $3 million to $4 million for the fourth quarter while reporting net income of about $11 million for the year.
Pincavage attributed the expected quarterly loss in large part to a blistering air-fare war on the West Coast corridor that started when United Airlines, coming back into the market after a prolonged employee strike in July, dropped its fares to attract customers. But the fare cuts really gained momentum in September and have continued, Pincavage said.
Another factor in the price war, Pincavage said, was last summer's entry of Continental West airlines, which in an attempt to forge a reputation as a low-cost carrier, introduced a $29 fare from Los Angeles to San Jose.
Also contributing to AirCal's fourth-quarter loss, Pincavage said, was PSA's expanded presence at John Wayne Airport. By purchasing 20 BAe-146 jets--which are so quiet that they are exempt from Orange County's takeoff restrictions--PSA succeeded in supplanting AirCal as the dominant carrier at the airport.
In response, AirCal announced Thursday that it has placed a $100-million order for six of the BAe-146 aircraft.
The fourth-quarter loss will mark the first setback for AirCal since 1983, when it reported a $2.93-million loss for the year. The airline bounced back by initiating employee layoffs and salary cuts and changing its schedule to maximize flights on the profitable Los Angeles-San Francisco corridor.
Despite the anticipated quarter loss, AirCal reported 156.3 million passenger miles (the number of miles flown by a paying passenger) for the quarter, up from 133.1 million for the same quarter of 1984.
AirCal said it achieved an 18.8% increase in revenue passenger miles for all of 1985. The airline said it flew 1.84 billion passenger miles last year, compared to 1.5 billion in 1984.