3/09/1989: Eastern Airlines Files for Chapter 11 Bankruptcy

3/09/1989: Eastern Airlines Files for Chapter 11 Bankruptcy

DALLAS – Today in Aviation, a major American airline since 1926, Eastern Airlines (EA) filed for Chapter 11 bankruptcy protection in Federal Court in 1989.

In its early years, EA was led by WWI aviation ace Eddie Rickenbacker and was one of the “Big Four” domestic airlines founded by the Spoils Conferences of 1930. From the 1930s until the 1950s, it enjoyed a near-monopoly on air travel between New York and Florida, and it continued to dominate the market for decades afterwards.

Amid the US airline deregulation period in the late 1970s and early 1980s, labor disputes and high debt loads strained the airline under the leadership of former astronaut Frank Borman. Frank Lorenzo acquired Eastern in 1985 and moved many of its assets to his other airlines, including Continental Airlines (CO) and Texas Air Corporation. 

The 1989 filing came as the airline attempted to survive its ongoing financial crisis. EA was in the midst of a crippling labor dispute, costing the carrier an estimated US$4m per day. Owner Frank Lorenzo had ordered the lockout of EA’s engineers and ground crews.

Several of the EA’s Airbus A300s were subsequently transferred over to Texas Air Corp’s other airline Continental (CO), as part of the asset strip. Photo: San Diego Air and Space Museum, Public domain, via Wikimedia Commons.

Sympathy Strike

In sympathy, the airline’s Pilots and Flight Attendants called a strike. Aside from its Boston-New York-Washington air shuttle and some Latin American flights, EA was forced to ground most of its domestic operations.

Speaking at the time, the airline’s CEO Phil Bakes said, “The pilots’ strike has not only paralyzed our operation and severely inconvenienced customers, but has precipitated a looming cash crisis at Eastern that can only be avoided, regrettably, by bankruptcy protection.”

Bakes hoped the bankruptcy would provide time to persuade its employees to return to work while preserving cash. However, its pilots and engineers planned to use the process to create their own way of reorganizing the 60-year-old airline.

EA sourced a trio of ex-Alitalia DC-10-30s for its flagship Miami-London Heathrow route from June 1985. Photo: Ken Fielding/https://www.flickr.com/photos/kenfieldingCC BY-SA 3.0, via Wikimedia Commons.

Selling off Assets

The airline had a staggering US$2.5bn in debt. Its reorganization plans would see numerous assets sold. This included its lucrative Eastern Air Lines Shuttle being sold to Donald Trump, who renamed the operation the Trump Shuttle (TB) before selling it to US Airways (US) on April 7, 1992.

Lorenzo sold other parts of the business to Texas Air Holding Company and its subsidiary Continental Airlines (CO). But these transactions were seen as detrimental towards EA. In 1990 the bankruptcy courts removed EA from Texas Air’s control to turn around its ailing fortunes.

But EA would never emerge from Chapter 11 bankruptcy. On January 19, 1991, the United States then third-largest airline was grounded permanently.

Featured Image: Eastern was one of the launch customers of the Boeing 757, putting the type into service on January 1, 1983. Photo: Ted Quackenbush (GFDL 1.2 or GFDL 1.2), via Wikimedia Commons.

European Deputy Editor
Writer, aviation fanatic, and Airways European Deputy Editor, Lee is a plant geek and part-time Flight Attendant for a UK-based airline. Based in Liverpool, United Kingdom.

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