Eastern Airline has a
history that dates back to 1927. At that time, Pitcairn Aviation Inc. a mail
carrier had been created to provide mail services to the United States
Postal Service.
In 1930, the company was sold and then renamed to Eastern
Air Transport. was one of several carriers that developed and flourished as
a result of the Air Mail Act of 1934.
The Air Mail Act of 1934 was major piece of legislation created by Congress
in 1934 that would effect the aviation industry.
In essence, this Act
authorized the awarding of government mail contracts to private carries,
established the rates for transporting mail and it set the airmail rates.
Contracts were awarded through the United States Postal Service, and contracts
were awarded through a bidding process. This act as well required air carriers
to separate them selves from manufactures of aircraft. As many air carriers were
owned at that time by aircraft manufactures. This Act inspired owners of
aircraft and investors to start up air carrier services, providing airmail
service.
Eastern Air Transport was one of
several carriers that grew out of the Air Mail
Act of 1934. However, Eastern Air Transport had
participated in the "Spoils Conference" with
Walter Brown, General Postmaster. As a result,
Eastern Air Transport was not allowed to
participate in the biding of airmail contracts.
To get around the law, Eastern Air Transport
then changed its name to Eastern Airlines.
The awarding of airmail contracts
by the postal service was at that time very
lucrative for the airmail carriers. These
carriers would do whatever they had to do in
order to obtain a contract. For example the
Houston Corpus Christi Brownsville Air Mail
Route was placed up for bid. Braniff Airlines
bid on this route for 1/10th of one cent per
mile, while Eastern Airlines had bid to fly this
route zero cents per mile. As a result, Eastern
was awarded the contract. The Air Mail Act of
1934, forced Eastern Airlines to separated from
it parent company, North American Aviation. As
this act did not allow airline carriers to be
owned by aircraft manufactures.
Captain Eddie Rickenbacker, an automobile racer entered into World War
I. He became a volunteer fighter pilot. Rickenbacker was responsible for
shooting down several aircraft and balloons during the war. After the war,
Rickenbacker became president of Eastern Airlines in 1938, after several
unsuccessful attempts to operate an automobile company. In 1954, Rickenbacker,
became chairman of the board at Eastern Air Lines until 1963.
During the 1970' and 1980's it was a very difficult time for the airlines.
With the passing of the Airline Deregulation Act of 1978 airline carries
were provided with new freedoms to expand their route systems and the flexibility
to develop innovative pricing structures. This flexibility allowed the
carrier to further grow into new markets.
However, deregulation brought
about airfare wars. Airlines were competing to remain competitive in the
market, waged airfare wars against their rivals. Many air carriers were
having great difficulty in keeping their doors open.
Eastern Airlines was not exempt from having to contend with price wars
as well as being a participant. This placed many air carriers in an vulnerable
state to unwanted hostile takeovers and mergers. Eastern fighting to keep
its doors open, sold majority share holdings to Frank
Lorenzo, owner of Texas Airlines.
Lorenzo, filed for restructuring of Eastern Airlines under the bankruptcy
laws. Lorenzo in his desire to have greater control over the airline industry
brought in non union workers and created a new air fare war that many airlines
could not compete against a non union airline. Eastern further offered
upscale service such as its first class seats to coach prices This further
eroded the airline industry, carrier after carrier had filed for bankruptcy.
Lorenzo, was now placed into a position that he could pick and choose which
airline he would take over. Lorenzo on a hunt, took over several airlines
such People Express, Continental, New York
Air, etc.
Frank Lorenzo was not satisfied. Driven by profits, Lorenzo requested
machinists of Eastern Airlines to take a pay cut. However, the machinist
union refused to do so. This brought about a war between labor and management.
The machinist union IAM (International Association of Machinist and Aerospace
Workers) called for a strike. The strike brought about air passenger delay
and the company began loosing millions in daily revenues.
The United States Bankruptcy Court intervened after a creditor brought
suit against Eastern Airlines. The court very much aware of Lorenzo's labor
practice, appointed Martin Shugrue as temporary trustee over Eastern. Eastern was unable to overcome its fiscal downfall and as a result was
forced to close its door.
Many had accused Lorenzo of selling off assets
and transferring Eastern's aircraft to Texas Air. Other accusations included
depleting Eastern's pension fund. Many felt Lorenzo was only interested
in purchasing defunct air carriers in order to strip the carriers of its
assets. This was a major blow to Lorenzo's credibility in the business
community.
