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California Airlines Fly Into Oblivion

November 01, 1987|TONI TAYLOR | Taylor, an authority on the travel industry, lives in Los Angeles.

The era of what seems like rubber-stamp approval of airline mergers may be ending.

For two or three years not one significant merger/acquisition proposal put to the Department of Transportation has been rejected. In fact, it appears that many of them have not even been seriously questioned.

Texas Air . . . you want Continental? You got it. Delta . . . you want Western? Take it, it's yours. TWA . . . Ozark? Done.

American . . . Air Cal? Northwest . . . Republic? No problem. Sign the papers.

Texas Air went beyond just buying Continental, of course. It later gobbled up Frontier and People Express and folded them into one, under the Continental name.

The Department of Transportation has consistently taken a laissez-faire approach to the subject of consolidation of airlines, to the point at which it has earned the reputation of being soft on mergers. Its actions seem to indicate that it believes deregulation amounts to nothing more or less than a license to merge.

Until now, that is.

Unprecedented Ruling

There didn't seem to be any real reason to think that the department's position would change. Now, however, maybe it finally has.

For the first time in years a department law judge has recommended that a proposed airline merger should be disapproved as anti-competitive.

The companies involved are two of the more successful small carriers, USAir and its intended acquisition, Piedmont. Judge Ronnie Yoder has decided that a merger would stifle competition in certain markets, to the public's disadvantage.

Yoder's position, however, has yet to be embraced by the department. He can only suggest his views; the final decision rests with others in the department.

It's significant, perhaps, that he has advanced the anti-competitive argument. Some people think it hasn't been advanced nearly often enough.

Yoder took the opportunity in his ruling to criticize the department--his employer--for its failure to take the question of competition sufficiently into consideration in merger approvals. He recommended strongly that those in the department who must make the final decision start to look at mergers differently.

New-Competition Theory

The department has always presumed that, no matter what two airlines get together, there is always the potential for new competition to come into the marketplace to keep the merged carriers honest. Now comes a judge saying that's not necessarily so.

The details of the USAir-Piedmont case are less important, perhaps, than the apparent shifts in thinking that they suggest.

Critics of the department's earlier, hands-off merger policy warned that it would leave the country with only a handful of major airlines controlling pricing, capacity, scheduling, et al. In such an environment, the public's interests could hardly be well protected.

California has been losing its home-based airlines at supersonic speeds.

Continental, a proud, pioneering airline based in Los Angeles, relocated its headquarters to Houston after its takeover by Texas Air.

Western, also Los Angeles-based, was not only one of the industry's oldest airlines at 60, but it seemed to have recovered from the disruptions that deregulation brought. The airline was once again making money and seemed set to remain healthy for another six decades.

Instead, it disappeared earlier this year. Atlanta-based Delta, stronger and cash-rich, bought Western without opposition from the DOT or just about anybody else.

Young California Carrier

JetAmerica hadn't been around nearly as long, but it was California's own nevertheless, based in Long Beach. Then Alaska Airlines bought it out, kept its services . . . and discontinued the name.

Surveying the scene from Dallas, members of the management team of giant American Airlines decided that they wanted a piece of California as well. How better to do it than by buying Air Cal?

After a quarter of a century, Newport Beach-based Air Cal went the way of the others and became an unnamed part of somebody else.

Maybe I have an overdeveloped sense of history, but I still have a funny feeling when I follow my "traditional" travel patterns, such as Los Angeles-Seattle, on which I always used Western, or Los Angeles-Oakland, in which I preferred Air Cal, but now find that I'm flying Delta and American.

Well, there's always PSA (San Diego-based Pacific Southwest Airlines), isn't there? Probably not for long.

Sometime early next year PSA's 40-year independent career is expected to come to a halt when its planes, people and route structure become a part of the aforementioned USAir. That acquisition met no government opposition.

It's not progressing as well as USAir had hoped; what's holding it up is labor problems. The prospective buyer hasn't yet got a handle on how to satisfy some of PSA's unions after the takeover, always a contentious subject.

Closing the Book

But it will. And when it does, the book will close on another four decades of California airline history. And that, I'm not ashamed to admit, makes me sad.

Continental, Western, Air Cal, PSA . . . were not inconsequential players in the airline game. These were, in their own way, giants.

In competition with one another they provided quality service and low fares, within this state and on interstate routes. If I exclude JetAmerica from that list, it is not a comment on its quality of service, merely on the brevity of its operation as an independent entity.

I don't mean to imply that any or all of the takeover/mergers that cost us these airlines should have been disallowed by DOT. I just think it might have been better, in these cases and in many others, if the department had been a little more anxious to question the proposal, a little less anxious to apparently wield the rubber stamp.

Already there has been an awful lot of consolidation of the airline industry. Some people call it shrinkage.

We're getting ever closer to the point, it seems, at which we'll have only that handful of carriers controlling everything.

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