In this article: Politics, union busting, Florida tourism, Donald Trump, Newt Gingrich, Frank Lorenzo and more.
It’s been thirty years this week since a devastating strike essentially killed Miami-based Eastern Airlines, which just a few years earlier had been the largest airline in the western world. The downfall of Eastern was not only a devastating blow for the state of Florida, but a casebook example of how management/labor relations could be completely destroyed at a company.
At midnight on March 4, 1989 a machinists walk out was joined by pilots and flight attendants conducting a sympathy strike and crippling the airline. The best background on the situation at Eastern aired a month before the strike on PBS’ iconic Frontline program.
The Eastern Airlines strike short-circuited Florida’s economy sending it into a recessionary state before most of the rest of the country. It also had massive political implications and almost ended the career of Newt Gingrich. Donald Trump’s purchase of the Eastern Air Shuttle which was completed soon after the strike began would expose the poor business acumen of the future President.
It could however be argued Eastern’s downfall and that of Pan Am as well (Eastern was the largest non-government employer in south Florida throughout the 1970’s and 1980’s, and Pan Am by the 1980’s was in the top five), led the area to diversify its economy more, making Miami an international trade and business destination and forcing Fort Lauderdale and Palm Beach also to become less reliant on tourism and aviation jobs.
In terms of Tampa and Orlando, Eastern gradual collapse was devastating, but other airlines rushed to fill the void, most notably Delta and US Air.
For many years Eastern was the undisputed leader in flights to Florida. Then following Atlanta-based Delta’s merger with Northeast Airlines in 1972, a robust and intense competition between Eastern and Delta broke out. At the time of the Delta-Northeast merger, Eastern flew to the most cities in Florida and had large operations at Miami, Tampa, Fort Lauderdale and Orlando.
By the late 1970’s Delta, based in Atlanta and Eastern which moved its headquarters from New York to Miami in 1975 had route systems that were largely identical. Both airlines competed vigorously on routes to/from the Sunshine State and both competed in Atlanta, the largest hub for both airlines, and up the Eastern seaboard.
Eastern though was the dominant airline in the most important part of the country business-wise in the 1970’s, the Northeast. But the carrier had routinely been passed over for route awards by the Civil Aeronautics Board (CAB). Part of it was Eastern’s classic Northeastern elite Republican orientation politically which gave the airline no sympathy among Democrats as well as the feeling among authorities in the then-regulated industry that Eastern was a behemoth and need not get any bigger.
But in reality Eastern was a largely regional airline, albeit a huge one. The airline lacked the national network United, American and TWA had at the time, though Eastern’s concentration of services in the Northeast, Mid-Atlantic, Atlanta and Florida made the airline actually bigger by 1980 than those aforementioned airlines.
Additionally, it was much harder to charge premium fares for trips to Florida which was largely a tourist destination in the 1970’s than to California or the Midwest which were more business-oriented. Eastern’s reliance of Florida-bound tourist traffic , snowbirds and retirees was one of the fundamental flaws in why the airline never was as profitable as its massive size should have made it.
The US Airlines we deregulated in late 1978. Eastern with its bloated labor contracts and highly concentrated regionalized route network was not ready for deregulation.
By the start of 1980, Eastern was the largest airline in the western world, eclipsed worldwide only by Soviet state owned carrier Aeroflot. However, by 1985, Eastern was only slightly bigger than Delta, a traditional cautious and conservative southern airline that had focused on customer service. Eastern’s reputation for poor customer service and constant labor strife led the airline into decline.
Another factor undermining Eastern was the influence of Miami-based Air Florida, who trashed airfares between the Northeast and Florida. Air Florida was more nuisance than anything but its presence in the early 1980’s helped in many ways to hasten the downfall of both Eastern, and Pan Am which was also heavily dependent on traffic to/from Miami. Air Florida even heavily competed with Pan Am on international routes out of Miami forcing the venerable carrier to shift service to New York from some destinations abroad or drop the cities outright.
In early 1986, Eastern on the verge of a labor meltdown despite still being one of the two largest airlines in the country. As losses mounted in the early 1980’s, Eastern attempted to slash or freeze wages to become more competitive. The airline’s Chairman, former Astronaut Frank Borman bought fuel efficient jets like the 757 and A 300 (giving Airbus its first US customer) but fuel prices remained low. Irony is had Eastern survived into the mid to late 1990’s, this strategy would have reaped major dividends.
In many ways Borman revolutionized the commercial aviation industry by pushing for more fuel efficiency in planes, though his inability to handle Eastern’s unions led to his ouster when the airline was sold to Texas Air on the verge of collapse in March 1986. Borman had initiated a profit-sharing effort a few years earlier which improved employee productivity, but eventually competition and other factors scuttled everything.
Texas Air run by Frank Lorenzo had bought Continental Airlines in 1983 (previously an airline as aligned with the Democratic Party as Eastern had been with the GOP). Lorenzo brought out of bankruptcy and busted the unions. He later bought Denver-based Frontier Airlines, and Newark-based discount carrier People’s Express and merged those with Continental and his non-union discount carrier New York Air.
Lorenzo’s union-busting instincts squared off against Eastern, a heavily unionized carrier with a high cost structure. Continental benefited from Lorenzo’s desire to either slash Eastern’s costs or perhaps even crush the airline altogether depending on your perspective. Continental/Texas Air began lobbing off prized assets like a computerized reservation system (and charging Eastern to use it), a lucrative Miami-London route, forcing Eastern to shutter its successful Moonlight Special service which competed with Continental’s Houston hub, and the transferring other less notable assets to the point where Eastern was shell of its former self.
By mid 1988 under Lorenzo and Texas Air, Eastern had slipped to the seventh largest US Airline, a fantastic collapse in a short period of time. But the worst was yet to come.
In 1988, as Eastern was rapidly contracting and dealing with repeated labor disputes the Air Shuttle, Eastern’s remaining greatest asset (that had not been handed to Continental) which linked Washington-New York and Boston with hourly flights was sold to Donald Trump. By the time Trump took control of the property in 1989, Eastern had filed for bankruptcy and as noted above it machinists has struck while the flight attendants and pilots also walked out on the job and joined the picket lines after voting to conduct a sympathy strike.
Trump’s shuttle ended up being a financial catastrophe. He immediately began retrofitting the planes with leather seats and other amenities befitting of a luxury carrier not an efficient one looking to merely “shuttle” passengers between major business centers. The Trump Shuttle did pioneer electronic check-in kiosk’s and the renting of laptop computers to passengers but the airline was a financial disaster.
Master Plans by Trump included linking the airline with West Palm Beach (completely illogical for an operation that relied on quick turnaround times) and of course Atlantic City which made zero sense other than to enhance Trump’s businesses. Trump did add small commuter service to Atlantic City but by 1991 the airline was a financial ruin and he was forced to sell to US Air. When the Arlington, VA based airline bought the Shuttle, they returned its service levels and ideals to its Eastern Airlines roots and its became once again a staple of the northeastern business travel.
The creation of the high-speed Acela trains by Amtrak and 9/11 conspired to make the shuttle operation which still exists today less relevant. But it almost didn’t survive the early 1990’s thanks to Donald Trump’s mismanagement.
Another political aside on the Eastern collapse was Newt Gingrich by 1989, the GOP whip in the House of Representatives almost lost his seat thanks to the anger of Eastern’s many Atlanta-based employees. Gingrich’s conservative instincts led him to side with Lorenzo’s management of the airline and oppose any federal mediation or strike board. Lorenzo’s union-busting tactics found fans on the right in US politics.
However, Gingrich represented a district that housed thousands of Eastern employees and he was almost upset in the 1990 Election by Democrat David Worley, surviving by under a thousand votes. American history would have been different had Gingrich gone down to defeat.
In the end, the debilitating strike that began in March 1989 sunk Eastern sunk into bankruptcy. The Latin American network was sold to American Airlines in 1990 and the airline closed up for good in January 1991 while being administered under a bankruptcy court ordered trustee.
Originally posted by The Florida Squeeze on 2019-03-02 13:07:08