For Imperial Airlines, Bizarre Twists Linger
About the only thing up in the air at Imperial Airlines these days is the bankrupt company’s future.
Clouds of secrecy shroud the commuter airline, as an unidentified group of investors from Kansas City--which only a month ago bought the company--last week unceremoniously threw the Carlsbad-based company into Chapter 11 reorganization.
Adding intrigue to the already mysterious business dealings is the involvement of former financier C. Arnholt Smith, who helped broker the deal with the Kansas City group, according to sources close to Imperial.
Smith’s involvement gives the story another bizarre twist because the Kansas City group bought Imperial from Smith’s ex-wife, Helen. Neither Helen Smith nor C. Arnholt Smith could be reached for comment.
Imperial’s main goal now is to “get the requirements of Chapter 11 in place,” according to bankruptcy attorney N. James Richardson.
The direction of that reorganization, however, remains uncertain, sources close to the company say. Officials are still trying to decide whether to secure a capital infusion and get the company’s idled nine planes back into the air or look for someone to buy the assets, thereby virtually liquidating the company.
Meanwhile, the wheelings and dealings at Imperial last month would have made good material for a soap opera.
Originally, Merchant Airways, a Los Angeles-based holding company, had made an offer to purchase the Carlsbad-based commuter airline.
“We had a terrific plan for them, a plan that was economically feasible,” according to one Merchant Airways source.
Imperial accepted the deal, but at the last minute turned it down.
Enter United Imperial, the mystery group out of Kansas City that bought majority interest in Imperial from Helen Alvarez Smith for an undisclosed amount on Jan. 10.
Soon after the purchase, United Imperial decided to also buy Pacific Coast Airlines in Santa Barbara and merge it with Imperial. The combined company would have given the mystery group a significant foothold in the commuter airline market serving Southern California as well as the central coastal region of the state.
At the last minute, however, the deal soured, as United Imperial was reportedly unable to secure the financing to buy Pacific Coast, which has been in Chapter 11 reorganization bankruptcy for several years.
Merchant Airways, meanwhile, re-enters the scene and buys Pacific Coast. And, in a strange twist, Pacific Coast hires Imperial President Henry Voss as its general manager.
Despite the weird machinations, Imperial remains “fully capable of making it,” according to James Harmon, the company’s former president who is now a consultant to Imperial. He is also the brother of Helen Smith.
It was Harmon, a former president of Golden West Airlines, who tried to maneuver through the severe financial turbulence that has rattled the company since the fall of 1984, when United Airlines removed Imperial from its “preferential treatment” reservation list.
That action was ordered by the Civil Aeronautics Board because it was concerned that carriers were using the list as a weapon against smaller airlines.
The removal meant that Imperial showed up on reservation computer screens as the 17th or 18th priority flight instead of the first, Harmon said in an interview last week.
“That just about killed Imperial’s interline business (shuttling passengers to a major carrier) overnight,” he said.
Monthly passenger counts dropped from about 34,000 in November, 1984, to less than 10,000 in December, 1985, Harmon said.
That translated into a $4-million loss for the fiscal year ended July 31, 1985, compared to a break-even year in the previous 12 months.
Imperial is reportedly negotiating with a major trunk airline to become a designated carrier, which would again give it interline status, according to company sources.
More to Read
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.