Eastern Airlines Reported Nearing Liquidation

Eastern Airlines may shut down and face liquidation as early as next week, it was reported today.

Eastern’s operating cash has dwindled perilously low, the Wall Street Journal said in a report attributed to unidentified “people familiar with the company’s finances.”

U.S. Bankruptcy Judge Burton Lifland, who has repeatedly released cash from Eastern’s escrow account to keep the carrier operating, was told of Eastern’s cash problems last Thursday, the newspaper said.

Trustee Martin Shugrue has been trying to find buyers for Eastern assets, but with little success during a time of overall decline in the airline industry. Lifland indicated last week that Eastern had “at most several days” to find buyers for its assets, the report said.

Lifland in late November released $120 million over the objections of creditors, who protested that Eastern has consistently failed to turn its finances around since entering Chapter 11 bankruptcy on March 9, 1989.

Eastern filed for Chapter 11 protection after a crippling strike by its three unions.

Shugrue said the latest infusion would ensure operations through March, when, he claimed, Eastern would be poised to break even. Lifland indicated reluctance in November to see Eastern’s 17,000 employees lose their jobs before the holidays.

The report said Eastern has about $100 million left in reserve for unsecured creditors and about $500 million for secured creditors. The unsecured creditors, such as Airbus Industrie and Boeing Co., are owed $1 billion by Eastern, which would have to use at least some of its remaining funds for the costs of a shutdown.

The court has a special fund set aside to reimburse Eastern ticket-holders in case of a liquidation. Eastern has complained that past liquidation reports have hurt ticket sales.