When Eastern Air Lines started to come apart at the seams, it first tried to save itself from impending collapse. One move was to sell its Eastern Air Lines Shuttle services that operated between New York, Boston, and Washington D.C. to a very familiar name, Donald Trump. The-then 38-year-old service was a cash cow for Eastern. But the Trump Shuttle could not replicate its success and was sold on to USAir in just three years’ time.
In October 1988, Frank Lorenzo, the then-chairman of Texas Air, the parent company of Eastern Air Lines, shook hands with Donald Trump to handover Eastern Air Lines shuttle services between three of the biggest cities on the U.S. Northeast Coast for $365 million. The deal included everything that an airline would need, including 17 Boeing 727 aircraft, equipment and employees. The service, which was once a monopoly, now had to compete with Pan Am’s own shuttle service between the three cities on the East Coast.
The deal almost fell through in 1989, when Eastern’s mechanics went on strike in March 1989. Trump haggled to bump down the original acquisition price of $365 million, as the union’s strike, supported by the carrier’s pilots and flight attendants, eroded its value, argued the then-real estate magnate. The unions were against the deal, as it would push the airline into bankruptcy – its shuttle services were the only remaining profitable operation in Eastern Air Lines, argued the collective. A judge ruled that the workers’ concerns were “overdrawn and inconclusive,“ reported Bloomberg at the time. In addition, Trump himself guaranteed employment to former Eastern employees, including the fact that he would recognize existing labor agreements and the airline’s unions.
Troubling start
To sweeten and conclude the deal, Eastern added four extra 727s, concluding the negotiations in April 1989. On June 9, 1989, Trump Shuttle was ready to depart from New York LaGuardia Airport (LGA) in a terminal, surrounded by “tuxedos and curiosity,” read headlines. The strikes forced Trump Shuttle to retreat and attempt a steep climb up the hill, as Pan Am’s market share on the corridor only grew. Following the temporary stoppage under Eastern Air Lines colors, Trump’s newest venture owned 26% of the market, a deep drop from the previous share of more than 50%, reported The New York Times.
Trump Shuttle Boston-New York flight tickets. Source: AIR TICKETS HISTORY
The troubling start would hinder Trump Shuttle’s attempt to gain momentum and out-run its opposition. The all-Boeing 727 airline would fail to clear hurdles, including the fact that one of its aircraft would be involved in an incident two months after it started operations. A Trump Shuttle 727 was forced to make an emergency landing in Boston Logan International Airport (BOS) after a front landing gear failure made for a sparkling landing. To avoid any long-lasting backlash, Trump himself boarded a shuttle flight from New York to Boston the next day.
After all, he wanted to establish the “best transportation system of any kind in the entire world,” the businessman was quoted by The New York Times as he introduced the Trump Shuttle to anxiously awaiting passengers in June 1989. A crash just two months following its first flight was not a good look for the airline that was to ensure the best transportation system in the entire world.
Rolling down the hill
A recession and a spike in oil prices made the Trump Shuttle hill climb even steeper. A gas-guzzling tri-jet, including free food, hot drinks and reading material were putting a lot of pressure on the airline’s costs, where the competition was already cut-throat. To add salt to the wound, passenger numbers began dwindling as well, as the recession slowly started to put pressure on all businesses, including airlines. So, Trump Shuttle was trying to compete for a market that was only shrinking, in 727s that were decorated like private jets. Reports pointed to the fact that the airline spent $1 million to refurbish the interiors of its aircraft when a used 727 was worth around $4 million back then. A fair few things were going against the newly-inaugurated company, which was promising a revolution on the Northeast corridor.
Nevertheless, it was successful enough to cover its operating costs. Debts, however, was another question as the loans that were taken out had to be repaid. The Shuttle was not able to turn a profit in its existence, as it lost $128 million throughout the first 18 months of flying under the Trump banner. Its owner was forced to pump as much as $7 million of cash per month just to keep it flying. Bruce Nobles, a former executive who ran the airline, was quoted by Fortune that Trump Shuttle was on sale for several months – yet, no buyers were ready to take up the high-interest debt.
In September 1991, negotiations between Northwest Airlines and Trump’s bankers fell through. Unions were asking for equal pay as their would-be Northwest colleagues. The airline would have agreed if the banks had lowered the interest rate on the airline’s debts. The banks presented a firm no, according to reports by The Washington Post. Three months later, another party presented a deal that satisfied every party – USAir. The airline agreed to a deal with Citibank, which controlled Trump Shuttle after the company had defaulted on its debt.
The shuttle carrier owned $245 million of debt, in addition to $135 million that was personally guaranteed by Trump. According to reports at the time, bankers relieved $100 million of the personal debt, while the remaining $35 million had to be repaid by the owner. USAir had the option to outright purchase the airline, which had been operated by Citibank as Shuttle, Inc., after five years of operations. It exercised its rights in 1996, as the Northeast operation was re-branded to USAir Shuttle.
“Mr. Trump said he’d wanted to own the shuttle for years because he likes the idea of owning it. It was not a financial decision as far as I can tell,” commented Nobles, the former chief executive who was at the helm of Trump Shuttle until he was fired in June 1990.