> Eastern Air Lines Inc. 1927-1991

   The birth of Eastern Airlines is associated with the name of Clement Keys, a former financial editor of The Wall Street Journal who was an untiring promoter of multimillion-dollar aviation corporations in the 1920s and 1930s. In early 1929, Keys decided to purchase a small Philadelphia-based airline known as Pitcairn Aviation, Inc., that had been formed on September 15, 1927. 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. On January 17, 1930, Pitcairn's name was changed to Eastern Air Transport, Inc. and soon after, the airline expanded its routes to include Atlanta, Miami, and Boston and in August to Richmond, Virginia. Its fleet at the time consisted of three Ford Trimotors and two Fokker F-X aircraft. These were joined soon by Curtiss Condors and Kingbirds. World War I ace, Eddie Rickenbacker, served as general manager of Eastern. While most of the major airlines were focusing on transcontinental flights, Eastern's specialty was the East Coast, and it was here that it established a near monopoly. Through 1933, the airline acquired contracts for a number of routes that spanned from New York to Miami. Eastern catered to the high demand for quick passenger travel between the northeastern states and the vacation areas of Florida.

   In September 1933, the U.S. Senate set up a special committee to investigate allegations of favoritism and excessive government subsidy for the airmail carriers in the country. A major scandal over mail contracts ensued, but the new Roosevelt administration—after a disastrous interlude during which the military flew the mail—restored a revised mail contract system in 1934. Airlines that had benefited from the “Spoils Conference” in 1930 that had distributed key routes originally were not allowed to bid for the new contracts. To get around this problem, many airlines renamed themselves. As a result, Eastern Air Transport became Eastern Air Lines.

   In the 1930s, Eastern acquired a number of companies such as the Wedell-Williams Transport Corporation (in December 1936) in order to expand its routes. In April 1938, North American Aviation finally sold Eastern because of criticism that it was unfair for a single company to both produce and operate aircraft as North American did. Rickenbacker, with the help of some of his associates, bought Eastern wholesale from North American.

   Rickenbacker was responsible for setting up Eastern's Great Silver Fleet, a famous fleet of DC-2 aircraft that operated on the East Coast, one of which became the first commercial airplane to touch down at Washington, D.C.'s new National Airport in June 1941. It was also under Rickenbacker's reign that Eastern became the world's first airline to begin mail service using autogyros. On July 6, 1939, it began an autogyro service in Philadelphia between the city's post office and Camden Airport in New Jersey. The service lasted about a year. During this time, in the late 1930s, Eastern was enjoying increasing profits year after year.

   In World War II, Eastern joined in supporting the war effort. In March 1942, it began military support flights connecting Florida, Pennsylvania, and Texas. Further routes were added to Trinidad in the Caribbean. Eventually, in September 1942, Eastern created its Military Transport Division (MTD) based in Miami comprising a fleet of Curtiss C-46 Commando aircraft. In the civilian sector, Eastern gained a big victory when the Civil Aeronautics Board (CAB), the organization that decided which airline would fly which route, allowed Eastern in June 1944 to compete on the prized New York-Boston route; previously American Airlines had held a monopoly on the route.

   After the war, Eastern became even stronger. In a move to replace its aging DC-3 fleet, in April 1950, the company ordered ten of the new Lockheed L.1049 Super Constellation airplanes. Eastern also successfully acquired a Canadian company, Colonial Airlines, in June 1956 that allowed the airline to begin service to Canadian cities such as Montreal and Ottawa. At the time of the acquisition, Eastern Airlines had an unmatched safety record: it had been operating as an airline for more than 25 years without a single passenger fatality. It was undoubtedly the most important airline on the East Coast of the United States, although it no longer held the monopoly on key routes such as between New York and Miami. Eastern also diversified into Mexico. On July 23, 1957, it began a New York-New Orleans-Mexico City service using DC-7 aircraft.

   In terms of its fleet, Eastern was quick to adopt jet planes . Eastern was the first of the “Big Four” to begin using the Boeing 727 jet that would revolutionize air travel. Eastern's first 727 flight took place on the Philadelphia-Washington-Miami route on February 1, 1964. Eastern also used the Douglas DC-9, beginning February 1965. Rickenbacker had already left Eastern by then, retiring on December 31, 1963 after nearly a quarter century leading the company.

   To expand, Eastern executives were well aware that they would have to extend their routes beyond the East Coast. As a result, in 1967, it began flying passengers to the Bahamas and to Seattle on the West Coast. The company also expanded into the Caribbean in 1971 by acquiring a small Puerto Rican company known as Caribair. Eastern had experienced low growth rates in the early 1960s, but affairs improved in the late 1970s. An important turning point for Eastern was when the CAB granted the airline rights to fly into Los Angeles. Eastern was thus able to inaugurate its first coast-to-coast flight on September 21, 1969, the last of the “Big Four” to do so. At the time, Eastern ranked fourth among this group in terms of passenger-miles flown annually.

   In the 1970s, Eastern's big purchase was that of the European Airbus A-300. Airbus had tried unsuccessfully to break into the U.S. market for many years. After Airbus offered a very generous deal to Eastern, Eastern's new president, former NASA astronaut Frank Borman, agreed to buy 23 of the new jets in the spring of 1978. For Airbus, this was one of the most important breakthroughs into the U.S. market and ensured a reliable customer base for future Airbus models.

   Eastern did not fare well in the 1980s. Under Borman's shaky command, the company was in deep trouble as a result of major disagreements between management and the labor unions, and also because of major debt from purchases in the late 1970s. As Borman ineffectively tried to get pay cuts to compensate for debts, Eastern began to rack up year after year of losses until late 1985, when it had a debt of $3.5 billion. It was at this point that Frank Lorenzo, the infamous airline powerbroker who controlled Continental Airlines, stepped in. After Borman failed to get any significant concessions from his trade unions, Lorenzo bought the whole airline for only $615 million, adding Eastern to his existing prizes of People's Express, Frontier Airlines, Texas Air, and New York Air.

   Lorenzo was ruthless in using Eastern's core assets for his other airlines, devising various ways to use them to make money for his other properties. He let Texas Air “purchase” Eastern's advanced reservation system but issued only an I.O.U. for it. Eastern then had to pay Texas Air a monthly fee of $10 million to use its own system. He “sold” six of Eastern's planes to Continental but paid nothing for them. The result was that, to survive, Eastern had to sell off aircraft and lay off workers in large numbers. As tensions mounted between the labor unions and Lorenzo's harsh tactics, Lorenzo slowly began to dismantle Eastern and sell off its parts. When the unions struck in March 1989, Lorenzo filed for bankruptcy. This gave him some breathing room and allowed him to use strikebreakers to continue operations. By this time, however, Eastern was collapsing under its debt, and finally in January 1991, the airline completely ran out of money to operate. In late 1991, the airline was liquidated. Thus ended the life of one of America's greatest domestic airlines.

—Asif Siddiqi, http://www.repaonline.com