Many people are interested in former transportation companies, whether they were trucking companies, railroads, airlines or ocean lines. Collectively they are called “fallen flags,” and the term describes those companies whose corporate names have been dissolved through merger, bankruptcy or liquidation.
This FreightWaves Classics article provides an overview of Eastern Airlines, which was one of the major American airlines for 65 years (1926-1991).
Since the barnstorming days of pilots and rickety airplanes following World War I, landing a contract to carry U.S. mail was the key to making a living flying planes. As the airline industry began in the late 1920s, U.S. mail contracts were still incredibly valuable – they provided a steady income stream and lent legitimacy to any “airline” that had them. (U.S. mail was effectively the first and most important air cargo.)
Congress passed the Air Mail Act of 1930. Using its provisions, Postmaster General Walter Folger Brown (appointed by President Herbert Hoover) held a secret meeting with the executives of top airlines, which was later named the “Spoils Conference.” At the meeting, executives of the invited airlines divided among their airlines the air mail routes.
Following the division of the routes, Brown awarded contracts to carry U.S. air mail to those airlines that participated in the meeting, which effectively prevented smaller carriers from bidding. Eastern Air Transport (as it was known at the time) was one of the “Big Four” domestic airlines created by the Spoils Conferences of 1930.
In the late 1970s and early 1980s, during the period just after airline deregulation, labor disputes and high debt loads strained Eastern, which at that time was led by former astronaut Frank Borman. In 1985 Eastern was acquired by Frank Lorenzo; he transferred many of Eastern’s assets to his other airlines, which included Continental Airlines and Texas Air. Labor disputes continued and there was a crippling strike in 1989. The once-mighty Eastern Airlines ran out of cash and credit and was liquidated in 1991.
While the majority of Eastern’s competitors were focusing on transcontinental flights, its specialty was the East Coast, and it was able to establish a near monopoly on a number of routes. Throughout 1933, Eastern acquired contracts for routes that spanned key cities from New York to Miami. Eastern’s bread-and-butter was the demand for quick passenger travel between the northeastern states and the vacation areas of Florida.
The airline also expanded its routes to include Atlanta, Miami, Boston and Richmond, Virginia. Its fleet at the time consisted of three Ford and two Fokker F-X aircraft, which were supplemented by Curtiss Condors and Kingbirds. Eddie Rickenbacker, a widely known World War I flying ace, served as the airline’s general manager.
Eastern Air Lines was created from several other earlier companies, including Florida Airways and Pitcairn Aviation. Founded in Philadelphia in September 1927, Pitcairn Aviation won a contract to fly U.S. mail between New York City and Atlanta in the late 1920s. In 1929, Clement Keys purchased Pitcairn. Keys then sold Pitcairn to North American Aviation, then a holding company for a number of airline and aircraft companies in which he was one of the key shareholders. Early in 1930, Pitcairn’s name was changed to Eastern Air Transport, Inc. After being purchased by General Motors and experiencing a change in leadership after the Airmail Act of 1934, the company was renamed Eastern Air Lines.
The Rickenbacker era
Rickenbacker, with the financial backing of several associates, bought Eastern from General Motors in April 1938. Complex negotiations were concluded when Rickenbacker gave GM’s CEO Alfred P. Sloan a certified check for $3.5 million (more than $64.35 million today). In addition to its U.S. mail contracts, Eastern had a near monopoly in passenger air travel between New York and Florida from the 1930s until the 1950s. Even afterward – until it went out of business – Eastern dominated these routes.
In March 1939 Eastern had 15 weekday departures from Newark, two from Chicago to Miami, one from Tampa to Atlanta and one from Tallahassee to Memphis. Those flights and their returns were Eastern’s complete scheduled operation. Then as throughout much of its history, Eastern was the fourth-largest airline in the country by passenger miles (103 million in 1939).
Rickenbacker established Eastern’s Great Silver Fleet, a fleet of DC-2 aircraft that operated on the East Coast. In June 1941, one of Eastern’s aircraft became the first commercial airplane to land at Washington, D.C.’s new National Airport.
During World War II, Eastern supported the U.S. war effort, providing military support flights that connected bases in Florida, Pennsylvania and Texas. In September 1942, Eastern went a step further, forming its Military Transport Division, a fleet of Curtiss C-46 Commando aircraft that was based in Miami.
Following World War II, Eastern became an even stronger airline, using new aircraft and expanding its routes. In 1950, the company upgraded its fleet with an order for the new Lockheed L-1049 Super Constellation airplane. Eastern also successfully acquired Colonial Airlines in 1956, which was based in Canada; that acquisition led to Eastern’s first service to Montreal and Ottawa. Eastern also began flying to Mexico in 1957; using the DC-7, it started a New York-New Orleans-Mexico City service.
On April 30, 1961, Eastern inaugurated the Eastern Air Lines Shuttle. At its start, 95-seat Lockheed Constellation 1049s and 1049Cs flew from New York’s LaGuardia Airport every two hours (8:00 a.m. to 10:00 p.m.), to Washington’s National Airport and to Boston’s Logan Airport. The Shuttle concept was successful; flights soon became hourly (7:00 a.m. to 10:00 p.m.) from each city. Among other features, the Shuttle emphasized convenience and simplicity, which were quite revolutionary at a time when air travel was still considered a luxury.
Rickenbacker had led Eastern into a period of growth and innovation; at one point the airline was the most profitable of its peers in the post-war era, never needing a subsidy from the federal government. However, in the late 1950s Eastern’s position slipped due to federal subsidies to some of its rivals and even more so by the coming of the jet age. On October 1, 1959, Rickenbacker was forced from his position as CEO. He was replaced by Malcolm MacIntyre, who was regarded as a brilliant attorney, but who had no experience in airline operations. Rickenbacker’s removal by the Eastern board of directors was because of his reluctance to purchase expensive jets. In a rare miscue, he underestimated the public’s favorable outlook on the faster service provided by jet aircraft. MacIntyre was succeeded by Floyd D. Hall, who took over in mid-December 1963. At that point Rickenbacker, who was 73, resigned his positions as Director and Chairman of the Board on December 31, 1963.
The jet age
In November 1959, Eastern Air Lines opened its terminal at New York City’s Idlewild International Airport (renamed John F. Kennedy International Airport after the president’s assassination). In 1960, Eastern’s first jets, Douglas DC-8-21s, began to be used for the longer flights (like the non-stops from Chicago and New York to Miami). Eastern added Boeing 720s in 1962 and Boeing 727-100s in 1964, which Eastern, American Airlines and United Airlines had helped Boeing develop. On February 1, 1964, Eastern was the first airline to fly the 727. Eastern changed its logo and paint scheme at that time, which included the “hockey stick” design. Later, Eastern purchased the Lockheed L-1011 TriStar aircraft, and was also the first U.S. airline to purchase the Airbus A300, and the Boeing 757.
Eastern inaugurated its first coast-to-coast flight in 1969. As noted above, Eastern already flew to several locations in Canada and to Mexico City. The airline’s International expansion continued when Eastern opened routes to markets such as Santo Domingo and Nassau, Bahamas. Services from San Juan, Puerto Rico were also expanded. When Braniff International shut down in 1982, Eastern took over its South American route network and also began service to London Gatwick in 1985. That year Eastern was the largest IATA airline in terms of passengers and operated in 26 countries on three continents.
Events and issues of the 1970s and 1980s
For years Eastern had been headquartered in New York City. Frank Borman was appointed president of Eastern Air Lines in late 1975. Shortly afterward he moved Eastern’s headquarters to Miami-Dade County, Florida.
While New York and Miami were two of Eastern’s most important hubs, Atlanta had become one of the two busiest airports in the nation (along with Chicago O’Hare). Eastern’s hub in Atlanta competed directly with Atlanta-based Delta Air Lines. The competition meant that neither airline’s margins were as good as they should have been for flights from Atlanta. However, Delta’s workforce included fewer unionized members, which helped the airline along with an expanding international route network from Atlanta. Following the industry’s 1978 deregulation, these factors worked in Delta’s favor.
Passage of the Airline Deregulation Act of 1978 meant that the airlines gained new opportunities to expand their route systems and the flexibility to develop innovative pricing structures, which allowed the carriers to further grow into new markets.
However, deregulation also brought about airfare wars. Airlines were competing against each other to remain competitive. A number of airlines had difficulty staying in business, and Eastern was not exempt from the price wars.
Eastern became the first airline to begin using the new Boeing 757. However, these aircraft had been ordered back in 1978 (before deregulation); Borman and his managers had believed that the airplane’s low cost of operation would help the airline for years because of rising fuel prices. But higher oil prices did not occur, and the debt Eastern carried from the purchase of 757s and the Airbus A300 purchases in 1977 were a major drag on profitability. Eastern was paying over $700,000 in interest each day before the airline sold a ticket, fueled or boarded a single aircraft.
Starting about 1985, Eastern ramped up its cargo operations on overnight flights. Thirty freight companies used the overnight service, and Eastern coupled it with “Moonlight Specials” aimed at passengers who were willing to fly on a red-eye for a reduced price. The Moonlight Special flights operated between midnight and 7:00 a.m., and served 18 U.S. cities and connected primarily to Houston’s Intercontinental Airport. Reporter Eric Schmitt of The New York Times referred to the service as “a hybrid of late-night, red-eye flights and the barebones People Express approach to service.” The aircraft cargo holds were reserved for such cargo as express mail, machine tool parts and textiles. With a focus on cargo, Eastern limited each passenger to two carry-on bags. Eastern also charged for the bags and charged between $0.50 and $3 for beverages and snacks. An Eastern flight attendant quoted in the Times article said that the passengers on the special flights were “a cross-section of families, college kids, illegal aliens and weirdos from L.A.”
Nonetheless, because of the debt from its fleet and competition from no-frills airlines that started up after deregulation, Eastern began losing money and had annual losses for several years. By late 1985 its debt stood at $3.5 billion.
Sale to Texas Air
Unable to compete profitably, Borman agreed in 1986 to sell Eastern for only $615 million to Texas Air, which was led by Frank Lorenzo. He already owned Continental Airlines, Frontier Airlines, New York Air, People’s Express and Texas Air. (Lorenzo had also sought to buy TWA, but lost a bidding war to another corporate raider, Carl Icahn.) Lorenzo used Eastern’s core assets for his other airlines, devising various ways to make money for his other properties.
To make matters worse, the Federal Aviation Administration (FAA) imposed a $9.5 million fine against Eastern Air Lines in February 1987 for safety violations. At the time, it was the largest fine assessed against an airline by the FAA in its history.
Phil Bakes had replaced Borman as the president of Eastern Air Lines. In 1988 he announced the lay-off of 4,000 employees and the elimination and/or reduction of service to airports in the western United States; he said that Eastern was going “back to our roots” in the East.
Throughout Lorenzo’s ownership, Eastern was crippled by severe labor unrest. On March 4, 1989, Lorenzo locked out Eastern’s mechanics and ramp service employees, who were represented by the International Association of Machinists and Aerospace Workers (IAM) and had been asked to accept severe cuts in pay and benefits. Lorenzo’s actions were a major concern to the pilots’ and flight attendants’ unions; they feared Lorenzo would come after them next. Pilots were represented by the Air Line Pilots Association (ALPA) and flight attendants were represented by the Transport Workers Union (TWU). The two unions called a sympathy strike; it effectively shut down the airline’s domestic operations. Due to the lockout and sympathy strike, Eastern was forced to cancel hundreds of flights, which resulted in the loss of millions of dollars in revenue.
In 1989, Lorenzo sold the Eastern Air Lines Shuttle operations to Donald Trump (it became the Trump Shuttle). He also sold other pieces of Eastern to his Texas Air holding company and its Continental Airlines subsidiary, at terms that were not favorable to Eastern.
The result of the strike, a weakened airline structure (due to the retrenchment and sale of key pieces of the company), high fuel prices, an inability to compete after deregulation and other financial problems, Eastern was forced to file for bankruptcy protection on March 9, 1989. This move allowed Lorenzo to operate the airline with non-union employees, which did further public relations and employee relations damage.
In 1990, a court removed Eastern from Texas Air’s control, citing mismanagement and neglect. An examiner appointed by the bankruptcy court overseeing the Eastern bankruptcy reported that Eastern was shortchanged in numerous transactions by Texas Air. An example was the purchase far below market value by Texas Air of Eastern’s System One, a computer reservation operation. The court appointed a trustee to oversee Eastern’s operations, and the airline attempted to remain in business. However, it was too little, too late.
Easten Air Lines stopped flying at midnight on Saturday, January 19, 1991. Following the announcement, 5,000 of the airline’s 18,000 employees lost their jobs immediately. Because of the concentration of jobs in those cities, the Eastern shutdown impacted Miami and New York City in particular.
During its tenure, Eastern Air Lines pioneered numerous innovations in the airline industry. It was an industry leader for decades and while its demise was caused by several factors, greed and poor management were among the most notable.
Information and photographs/images for this article came from the Silverliners website (www.thesilverliners.org), which is a treasure trove of information! Although originally formed by Eastern Air Lines flight attendants in 1954 by former EAL flight attendants, with the loss of EAL and the opportunity to fly for other airlines, Silverliners began welcoming current flight attendants and flight attendants from 60 other airlines. FreightWaves thanks the Silverliners!