Red Is for Santa Claus

Last week AirCal made airline history. It didn’t set a speed record. Or carry more passengers than any other airline. It made news with a success story that was unusual even for economically sound Orange County.

The story began back in 1982, when AirCal lost $35.6 million and things were going from bad to worse. The company was in trouble, and going down. It had to lighten the load somehow in order to survive. It laid off 700 people, more than one-third of its total work force. Then it asked the remainder of its employees to take a one-year 10% pay cut, promising them that when things got better, the money that they lost would be repaid, with 50% interest, within eight years.

Seasoned employees of the airline industry could see the writing in the sky and realized that refusing to accept the pay cut could push the airline over the edge. So most of them accepted the offer, and the pay cuts were made.

We suspect that more than a few, however, didn’t believe in Santa Claus or the Easter Bunny, or that the promised payday would ever come.

But then things began to happen. Business soared. In 1983 AirCal lost only $2.93 million. In 1984 it made a profit for the first time since 1981. And last month the airline set another record for passenger traffic volume, the 26th time in the last 27 months that it has set a company record for passenger miles flown. It had flown out of the red.

AirCal, to its credit, did not waste time in making good on its word to the employees who agreed to a pay cut to keep the airline in business. Last week AirCal began distributing $11.6 million to employees as the first installment of its repayment promise. The money represented about 90% of the lost wages--plus 50% interest. That’s as historic in the industry as the monthly passenger increases are for AirCal.

And if business continues this year as well as it has started, the other 10% plus interest could be repaid out of 1985’s profits, just three years after the pay cuts were made.

It’s enough to make some of the once-skeptical employees and others start believing again in Santa Claus--and the old-fashioned American business success story.