Given the 1980s merger frenzy and increasing power of the richer trunk airlines it is questionable whether AirCal could have survived on its own, but was American Airlines a good fit? History would show that it clearly was not and AA's plans for California would not succeed. Nonetheless the owners of AirCal exited the scene with a decent pay off and American's plans certainly made more sense than USAir's contemparaneous plans for PSA. Here's the story of American's Californian punt.
American's takeover of AirCal was symptomatic of the 1980s. Airline mergers were rife - some of which should never have been allowed (I'm thinking Northwest and Republic for example). Although there were few competition worries surrounding this merger (AirCal was only the 17th largest airline in the US at the time and there was no route overlap) the wisdom of a large conservative corporate taking over a small agile personality rich company is still highly suspect.
American inherited a fleet with which it had no commonality. It had never operated Boeing 737s in its entire history but now found itself with 737-100/200 and 300s plus a small number of British Aerospace 146s, which again were not operated by AA or its Eagle commuters. In essence what American was really buying was AirCal's existing route network and frequent flyer base, with the aircraft just an addon.
This decision was made in October 1988 more than a year after the AirCal purchase. With an investment of $50 million the hub opened on December 2 and would operate 86 daily flights to 20 cities. The plans called for 175 daily flights to 52 cities by American and American Eagle employing 2,300 people by the end of 1991. This was an increase from the pre-hub position of 59 daily flights and 250 employees. You can easily see how the purchase of Aircal enabled this strategy of creating a West Coast network to feed and link to from its primarily East-West existing system. American even began operating international servies from San Jose to Tokyo.
Unfortunately American's dream of making San Jose a viable hub would falter (just as the plans did at Raleigh and Nashville). In California the issue was competition, particularly from Southwest Airlines. It is hard to imagine, given their years of brand recognition, flexibility and vitality, that Southwest would have been able to penetrate California so easily if PSA and AirCal had of survived as independent airlines. Against American and a collection of the US majors Southwest must have seen a huge opportunity.
Below: American's preferred short-medium haul jet the McDonnell Douglas MD-80
1988, October. American Airlines Selects San Jose Airport for Hub. Los Angeles Times
1990, October. American Airlines to Halt O.C. Flights to San Francisco : Air service: The airline plans to drop its five daily round trips Nov. 1 because they have not been profitable. Los Angeles Times
1992, May. Southwest Airlines Expands California Service. UPI.com
American Airlines Battles A History of Unsuccessful Mergers. Dallas News
American Airlines. Aeromoes Fleet Pages