Picking Up Where Braniff Left Off

A controversial new flight plan for California'S PSA

PSA, Inc., which owns Pacific Southwest Airlines, is one of the nimbler members of the stricken air-travel industry. The San Diego-based company reaped a profit of $30.4 million for the first nine months of 1982, but only through deft financial management. Its airline, which flies mainly in California, lost money, a situation PSA hopes to change by building a coast-to-coast empire on the remains of bankrupt Braniff International. Last week a bankruptcy judge in Texas approved a scheme to let PSA do exactly that. The airline hopes to begin nationwide service in May under the ruling, which is already encountering opposition from regulators and rival carriers.

The court-approved plan would give PSA control of a big chunk of the assets of Dallas-based Braniff, which has not flown since it went bankrupt last May. PSA would lease 30 of Braniff's 62 jetliners and fly them under PSA colors. The California airline also would rehire about 2,000 of Braniffs 8,500 laid-off employees and has already started interviewing in Dallas. Most important, PSA would take over Braniffs landing slots at airports in 16 U.S. cities from Texas to New Jersey. The new routes would more than double the size of the PSA flight map, which now spans some 12,000 miles.

The plan could aid both PSA and Braniffs creditors, who include banks, vendors and even other airlines. PSA would gain a vast new market and an east-west system that would feed its California routes. Those benefits impressed Wall Street, where PSA stock jumped 1 3/8%, to 28 1/4%, the day the court ruling was announced. Says Eliot Fried, chief investment officer of Shearson/American Express: "In one shot this would give PSA the base to build a brand-new airline." Judge John Flowers, who approved the plan, said it should enable Braniffs creditors to recover 12-c- of every dollar owed them, or about a third more than they might otherwise get. "I am convinced this is the best that could be achieved under the circumstances," Flowers told a packed courtroom last week.

FAA officials, however, fear that the arrangement may be too good for PSA and too bad for its competitors. The FAA already has reassigned Braniff's 411 landing slots to other airlines, and maintains that it alone can do so. (Flowers ruled that the slots were Braniff assets and thus under his jurisdiction.) Declares Sandy Murdock, the FAA general counsel: "We do not consider those slots to be the property of Braniff, nor do we consider PSA as a legal successor to Braniff." The agency, which also argues that transferring slots to PSA would disrupt air travel for months, has asked the Justice Department to appeal Flowers' ruling.

Carriers ranging from giant American Airlines (estimated 1982 revenues: more than $3 billion) to tiny Muse Air (1982 revenues: $33 million) have objections of their own. Muse, a 1 1/2-year-old Texas firm, holds former Braniff landing rights at Dallas/Fort Worth Airport, and President Michael Muse says that the airline cannot survive without them. PSA, meanwhile, seems unwilling to wait for the wheels of justice to grind. The airline, which is anxious to launch the new routes in time for the summer travel season, insists that it will jettison the consolidation plan and fly off alone unless it can get final clearance by next month. This file is automatically generated by a robot program, so viewer discretion is required.