Suitors’ Interest in Eastern ‘Is Real,’ Shugrue Reports
Eastern Airlines, down to nearly its last dollar, may be near salvation by an interested suitor, its bankruptcy trustee said Tuesday.
“We are in discussions with two such potential partners whose investment interest in Eastern is real,” Martin R. Shugrue Jr., the carrier’s court-appointed trustee, said in a speech to an industry group in Washington. But he declined to identify the interested parties.
The statement by Shugrue came in response to published reports that Miami-based Eastern was so short of cash that it might be forced to liquidate as early as next week.
The Wall Street Journal reported that the airline, unable to pay its bills, could survive only if another company bought it. The newspaper also said that Eastern had been trying to sell some of its assets but had found no buyers.
Eastern’s creditors have been urging a New York bankruptcy court for months to shut down the airline, sell its assets and distribute the proceeds to those it owes money. When Judge Burton R. Lifland allowed Eastern to draw down $135 million from an escrow account late last year--over the strong objections of its creditors--Shugrue said he expected the carrier to be profitable during the first quarter of this year.
In his talk Tuesday and in a written statement, Shugrue never denied the reports that Eastern was on the brink of liquidation. But he blamed the rumors on the airline industry’s broader woes.
“All airlines are operating in a very hostile economic environment today,” Shugrue said, “and the news media continue speculation about the financial performance of every carrier in the industry due to skyrocketing fuel costs, recession and anxiety over the Middle East situation.”
Shugrue pledged that Eastern’s workers would not find out about any major restructuring of the airline by reading the newspaper.
“Now more than ever we must remain professional,” he said. “And when any executive decisions are made . . . the employees of Eastern will be the first to know.”
Shugrue--a pilot who previously was a top executive of Continental Airlines and Pan American World Airways--said the timing of the two potential suitors stemmed from the completion this week of Eastern’s plan for emerging from bankruptcy.
Although he did not describe the plan in detail, Shugrue said it would “fundamentally change the economics and operations of the airline . . . and allow the airline to become profitable this year.”
But he added: “Despite the underlying strengths of this business plan, with the turmoil in the industry today, Eastern admittedly faces an uphill struggle and would benefit greatly from an investment partner.”
