Pacific Southwest Airlines

Pacific Southwest Airlines (PSA) was a low-cost US airline headquartered in San Diego, California, that operated from 1949 to 1988. 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."
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. 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 The PSA acquisition gave USAir a network on the West Coast, but by 1991 USAir had largely withdrawn from California in the face of fierce fare wars driven, in significant part, by the spread of Southwest.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.
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). 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.
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 turboprops 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.
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:
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.
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:
PSA tried to buy Air California twice:
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.
In 1967 PSA was finally allowed to use offshore airway V25 to San Diego, despite being an intrastate airline.
An early indication that, for J. Floyd Andrews, PSA was not enough came in December 1968 with an audacious bid for Western Air Lines, then under attack by Kirk Kerkorian. Western was four times the revenue of PSA, and as an interstate carrier, regulated by the CAB. It was unclear how this would work, putting together two airlines with different regulators, whether CAB approval would be forthcoming. PSA pulled the bid in April 1969, citing deteriorating Western results. By that time, Kerkorian was, while not a majority owner of Western, difficult to dislodge, controlling nine out of 21 seats on the board. As outlined in a section below, PSA instead pursued a non-airline acquisition strategy.
Southwest Airlines was founded in 1967, but grueling legal challenges caused its operational start to be delayed until June 1971. Founder Rollin King took inspiration from PSA. Founding president Lamar Muse was open about the debt to PSA, saying "we don't mind being copycats of an operation like that", including hotpants. PSA hosted King and Muse for a four day visit in 1971 and gave them a copy of PSA's FAA operating manuals, from which Southwest created its own in what Muse said was "primarily a copy-and-paste procedure". PSA helping Southwest made sense in 1971, with each airline strictly limited to flying within its state and seemingly no prospect of that ever changing. Mutual admiration was expressed monetarily: in 1978, Southwest management and directors owned 6% of PSA, while PSA directors and management owned 10% of Southwest.
In July 1968, PSA bought rental car company Valcar, a former Hertz subsidiary with a west-coast presence. Like PSA, Valcar had a budget orientation, but PSA couldn't make it work and shut it down in 1971, after failing to sell it.
In April 1969, PSA bought the San Franciscan Hotel in downtown San Francisco. In June, PSA bought the Islandia in San Diego's Mission Bay. In June 1971, PSA committed to a to-be constructed hotel at the Los Angeles Hollywood Park Racetrack (now the site of SoFi Stadium), and in December 1971, committed to a to-be constructed hotel within the Queen Mary attraction in Long Beach The synergies were not obvious. None of the hotels were located at airports, none of them were value-oriented. In 1973, CEO Andrews called the hotels "a complete flop" and in 1974 gave three of them to Hyatt to run. It took years for PSA to extricate itself. In 1979, PSA finally sold the San Franciscan but had yet to sell the Queen Mary hotel.
In August 1970, PSA started buying radio stations. By 1975, its four stations were for sale. PSA also bought a catamaran. In 1973, PSA created a holding company, "PSA, Inc." for the airline and many non-airline subsidiaries.
In late summer 1970, PSA ordered five Lockheed L-1011 widebody aircraft, deliveries starting 1972. In the next 12 months, the L-1011 engine maker, Rolls-Royce, went bankrupt, and Lockheed required a US government bailout to avoid the same. In December 1971, PSA cancelled the order, but Lockheed said it couldn't. In September 1972, PSA signed a new order, deliveries starting 1974. PSA grounded its two L-1011s after eight months. A 300 seat aircraft never made sense in a business model that depended on quick aircraft turnarounds. Economics presented to the CPUC showed L-1011 per-seat costs no better than a 727 despite being twice as large. PSA refused the last three aircraft and was stuck paying a 15-year lease on the first two. It entered into years of litigation with Lockheed.
By 1975, losses from diversification and L-1011s brought PSA to the brink of bankruptcy. Operating losses on rental cars, radio stations and hotels through 1974 (not including cost of acquisition) were almost $9M. Through 1977, PSA lost another $1M on discontinued businesses and recognized $18mm in L-1011 losses. In 1982, PSA took another $4.2M loss against its two L-1011s, still unable to find a home for them. PSA's troubles attracted national attention. PSA went to the CPUC asking for a fare increase to bail them out. The CPUC excoriated PSA, questioning management competency at length and especially withering about a 1974 $8mm share buyback. In March 1976, J. Floyd Andrews gave up the CEO position, and in May, resigned as chair of the board.
As airline deregulation was being debated, for most of the country, it promised lower prices. But California already had lower prices, set by the CPUC. By comparison, in Texas, Southwest Airlines set its own fares, the Texas Aeronautics Commission didn’t get involved. The concern (and expectation) was deregulation would lead to higher prices. California legislators and governor Jerry Brown wanted the CPUC to remain in charge of any airline that did over 50% of its business in California. This amendment was voted down in the relevant US House of Representatives subcommittee by one vote. Instead, deregulation as passed included strong Federal preemption – states had little say over an airline with a Federal certificate.
By then, the CPUC had become the restrictive bureaucracy observers had predicted when it was given additional powers in 1965, second-guessing (in glacial and burdensome processes that could and did last for years) everything California intrastate carriers did, and even itself, as exemplified in the role the CPUC played in the 1975 demise of Holiday Airlines. PSA also played a special role at the CPUC. It was assumed to be the most efficient carrier, therefore CPUC fares were set relative to what would make the highest permissible profit for PSA – all other carriers operating in California then had to toe that line. So PSA had ample reason to regret its support of that 1965 legislation. However, under the Airline Deregulation Act, the minute PSA started flying to Nevada in December 1978, it was free of the CPUC. The CPUC didn’t take that lying down. The CPUC sued in Federal court to overturn the Airline Deregulation Act, lost, appealed, and lost again.
As the regulated era drew to a close, PSA suffered a terrible crash in September 1978 when a 727 collided with a small plane over San Diego, fatal to all on both aircraft and to some on the ground. It was made worse for PSA by:
1978 wasn't through with PSA yet. At the end of 1978 it transpired corporate raider Harold Simmons had accumulated a 20% stake. When PSA, appealing to investors, referred to a 30-year history of success, Simmons printed ads summarizing PSA’s far-from-successful 1970s financials and noting 1977 profits were about half those of 1971, despite revenues almost twice as large. But as PSA said, Andrews was gone. Simmons evinced no desire to "destroy" PSA, seeing it instead as a takeover candidate from which he could profit. PSA won a shareholder vote to implement takeover defenses with just a bit more than 50% but the company had post-dated the shareholder record date to ensure Simmons couldn’t vote his whole stake. Simmons said he’d sue. In the end, PSA paid him off by giving him some aircraft in exchange for his stake. To be fair, notwithstanding Flight 182, PSA’s 1978 financials were somewhat better, but significantly flattered by an accounting change.
As PSA headed towards deregulation, both the airline and Wall Street thought it would be a winner. But in December 1978, Paul Barkley, then PSA’s chief operating officer (later CEO), spoke about the deregulated future a few weeks away. He expected something fairly sedate, quite different from the bitter Darwinistic struggle that would engulf the industry:
Dallas-Fort Worth–based Braniff International Airways was the first trunk carrier to fail after deregulation. US trunk airlines were the descendants of the original 16 airlines certified by the CAB and thereafter regulated to be the main US carriers. Braniff had been successful just prior to deregulation, but Harding Lawrence, Braniff’s imperious long-time leader, expanded the carrier excessively immediately after deregulation, resulting in its May 1982 bankruptcy and shut-down. Until Continental did so in 1983, no one knew an airline could recover from Chapter 11 bankruptcy.
In October 1982, PSA announced a cheap and low-risk deal to expand into a new geography: under an eight year contract, Braniff would fly 25 to 30 727s from its Texas base with PSA colors and marketing, employing 1,500 Braniff employees (who would have to agree to lower wages and higher productivity) as well as gates and takeoff/landing slots. These slots were key Braniff assets. In the wake of the August 1981 air traffic controllers strike, the FAA had limited air traffic control capacity, so allocated each airline takeoff/landing slots at specific airports. When Braniff collapsed, those rights were temporarily allocated to others. If Braniff flew again, it could recover those rights, grounding some operations at other carriers. It was a strong competitive lever.
The initial deal failed when Braniff pilots refused to agree to lower seniority than PSA pilots in the event PSA ever merged with the PSA-Braniff operation (to ensure PSA pilots always got first pick of flying). Pride as well as pay was in play: PSA was perceived as junior-league relative to Braniff. A new deal with Braniff simply equipped a new carrier with Braniff equipment to fly under contract to PSA, sidestepping Braniff’s unions. Braniff would even loan PSA the funds. Further, the FAA noted if Braniff resumed flying it was entitled to its takeoff/landing slots, but a new airline that just happened to use Braniff assets was not. The deal died in March 1983. A second iteration of Braniff did start flying in 1984 without PSA help, ultimately without success, possible due to Texas already being home to Southwest (which, expanding westward, had already entered PSA’s home city of San Diego in January 1982), American Airlines (which viewed Dallas-Fort Worth as its own, having moved its headquarters there in 1979) and Continental Airlines, which in 1983 would go through a bankruptcy that dramatically lowered its costs.
Meanwhile, PSA was making money, but not by flying passengers. In 1982 and 1981 it sold aircraft and tax credits on aircraft to make a net profit while still producing an operating loss.
In the years prior to deregulation, PSA said it must be ready for the day it was able to fly outside of California. When the day came, PSA management saw themselves as one of the natural beneficiaries of deregulation (see prior sections). But in fact, PSA did poorly. As the nearby table shows, AirCal’s nominal growth from 1978 (the last year of regulation) to 1985 was double that of PSA, Southwest was nearly triple. Perhaps most striking was the comparison of PSA with Piedmont Airlines, which pre-deregulation had been a local service airline regulated by the CAB. Piedmont was smaller than PSA in 1978 but well over twice its size in 1985. Piedmont also had an unbroken string of profits since deregulation.
A July 1984 Los Angeles Times article noted PSA had been hanging fire since deregulation; management always waiting for some obstacle to clear. For instance, waiting to swap out the 727 fleet it had at deregulation (yet the abortive 1982/1983 Braniff deal would have doubled-down on 727s), which were too large and too fuel inefficient (given the rise in fuel prices, which PSA also blamed) and too labor intensive (given its three person cockpit vs two places for the MD-80). 727s were a big factor in driving the company to ordering 20 BAe-146 aircraft in late 1983, which were both smaller and extremely quiet (an advantage in California where noise politics was a factor at airports like Orange County, Long Beach and Burbank). PSA may have overcorrected – PSA ultimately configured BAe-146s with only 85 seats vs 150 for the MD-80s and 175 for the 727-200s. In one respect, PSA was lucky: the BAe-146 was eventually notorious for fairly significant engine problems that PSA management never had to deal with because it sold the company before they became well known. As a stopgap, the airline also acquired four 110-seat used DC-9s from Air Canada in 1983. PSA did not prioritize a single fleet type.
But if looking for reasons for underperformance, management might have considered itself, since it was of long-standing. William Shimp, CEO and Chairman from 1976 to 1984, joined PSA in 1949. Paul Barkley, who succeeded Shimp, had been a C-suite officer at PSA since 1967. Notwithstanding the disastrous experience of the 1970s, management never lost its taste for diversification, diverting corporate attention from the airline. PSA, Inc.'s 1983 annual report noted energy subsidiaries involved in fuel supply and distribution and oil and gas exploration and production, as well as aviation-related subsidiaries providing engine maintenance, aircraft leasing and flight training.
In 1984, following another poor year in 1983, PSA asked for wage givebacks from airline employees. Employees would reduce pay by 15% in exchange for 15% of pre-tax airline profits and a 15% stake in the airline. Note, "airline profits", not the holding company, PSA, Inc., which included aircraft leasing and fuel distribution among other businesses. After some back-and-forth, employees went along with this in late 1984. Employees got to nominate four directors to the airline board. Famed retailer Sol Price of Price Club (a Costco constituent) and FedMart was one such employee director. Another requirement was a separate publicly-traded stock for the airline. On July 28, 1986, there was an initial public offering for the airline (1.8mm shares at $7). Meanwhile, to eliminate confusion, the parent company (which retained its own stock listing) was renamed "PS Group, Inc.". In the midst of this activity, the holding company continued to diversify. In September 1985, it added to its oil and gas investments.
1986 was the year of the airline merger – Republic into Northwest, Ozark into TWA, Western into Delta Air Lines and others. In November, AirCal accepted an offer from American Airlines. On December 8, USAir announced an agreement to purchase PSA for $400mm. The combination had its skeptics: USAir’s pre-PSA California presence was 12 flights per day to Pittsburgh and Indianapolis so its brand awareness among Californians was minimal. The purchase closed May 29, 1987, but PSA and USAir pilot union chapters fought over transition agreements, delaying the merger of PSA into USAir beyond the original January 1, 1988, date.
PSA thus still existed under USAir ownership when on December 7, 1987, a fired USAir employee used his credentials (which had not been recovered from him) to sneak a gun on board PSA Flight 1771. En-route, he shot, among others, the flightcrew, causing the aircraft to crash, killing everyone on board. The fact pattern of a (former) USAir employee killing PSA crew and passengers overshadowed the last days of PSA.
PSA finally merged into USAir on April 9, 1988. PS Group had long since banked what it was paid for its PSA, creating a well-funded life-raft for select former PSA executives, among which Chairman Paul Barkley. By the time the merger was consummated, PS Group had used some the PSA money to buy a stake in a travel agency business, to go along with its aircraft leasing and oil & gas interests.
The successors of PSA and AirCal, USAir and American, raised prices, reflecting their higher costs. In early 1990, the last-minute roundtrip fare from Los Angeles to Sacramento was $456, over $1000 in 2024 dollars. State legislators were increasingly irate, finally proposing a raft of bills to punish the carriers, even suggesting a state-owned airline, but the market had already taken care of the problem. United Airlines had already announced an increase in frequency on Los Angeles to San Francisco from 16 to 27 per day and Southwest Airlines had announced it was entering Burbank with 10 a day service to Oakland at a last-minute fare of $59 one way, $29 in advance.
The resulting Los Angeles Basin to San Francisco Bay fare war was brutal, made worse when Iraq invaded Kuwait thereby spiking oil prices, collapsing demand for international travel and tipping the US into the Gulf War. In January 1991, in announcements only two weeks apart, first American and then USAir gutted the former AirCal and PSA systems, throwing in the towel less than five years after offering to buy the former intrastate airlines.
The indirect legacy of PSA is Southwest Airlines, originally a Texas intrastate airline that PSA inspired. Southwest inspired low-cost airlines globally. PSA therefore was a key company in the advent of low-cost air travel.
Another legacy stems from Kenny Friedkin's son Thomas H. Friedkin, a PSA pilot in 1962 when his father died. A year later, Tom's mother (Kenny's widow) died, making him the largest PSA shareholder. Tom had a seat on the Board of Directors but continued as a full-time pilot for the airline. Tom astutely invested in a Toyota distributorship in the late 1960s, Gulf States Toyota, now a multi-billion dollar business run by Tom's son, Kenny's grandson, Dan Friedkin.
PSA was known for its sense of humor. Founder Ken Friedkin wore Hawaiian shirts and encouraged his pilots and stewardesses to joke with passengers. Its slogan was "The World's Friendliest Airline", and its recognizable trademark was a smile painted on the nose of each plane and an accompanying advertising campaign declaring "Catch Our Smile". Because of the major San Diego flight schedule and its discount fares, military personnel nicknamed PSA the "Poor Sailor's Airline." After PSA was bought by USAir, ex-PSA mechanics would occasionally paint smiles on USAir planes as a joke.
In the 1960s PSA was known for the brightly colored flight attendant uniforms, with miniskirts; in the early 1970s the fashion changed to hotpants. A PSA flight attendant, Marilyn Tritt, wrote a book about her tenure at the company titled Long Legs and Short Nights.
Throughout PSA's lifetime, the flight attendants, with their humor, over-the-top passenger service, and sense of duty, helped to create a loyal passenger following. One flight attendant, Sandy Daniels, with the help of a frequent flyer, started the "Precious Stewardess Association". Frequent fliers would bring tasty treats to the crew, particularly on morning flights. In turn, PSA started the "Precious Passenger Association", with certificates and free drinks given to friendly and helpful passengers.
PSA headquarters were a windowless gray-brown building on Harbor Drive in San Diego, California. The building was San Diego International Airport's commuter terminal until 2015 when it was converted into administrative offices of the San Diego County Regional Airport Authority.
There were other attempted hijackings which resulted in no injuries and the surrender of the hijacker(s). These incidents are not included. The following are notable hijackings because of fatalities or because the aircraft flew to another country:
PSA served the following domestic destinations in the U.S. at various times during its existence.
As of April 9, 1988, at the time of the merger, Pacific Southwest Airlines' fleet consisted of the following aircraft:
Pacific Southwest Airlines previously operated the following aircraft: