Auction Splits Up Eastern Airline Assets

Much of what remains of Eastern Airlines was divided early this morning among scavenging carriers who attended an all-night auction for gates, landing slots and other assets thrown up for grabs when Eastern stopped flying last month.

When the 15-hour session behind closed doors ended early today, Eastern’s attorneys estimated that they had brought in between $75 million and $100 million more than the grounded airline could have gotten through earlier transactions set up between Eastern and some of the industry’s stronger players.

“This is just the beginning,” Eastern lawyer Bruce Zirinsky said. “We have a lot more assets to sell off.”

Eastern is being liquidated after it ran out of cash and stopped flying on Jan. 18, almost two years after it filed for Chapter 11 bankruptcy protection amid a crippling strike.

The auction was ordered last week by U.S. Bankruptcy Judge Burton R. Lifland, who planned to consider the bids later today.

The Justice Department then plans to review the bids for possible antitrust issues by Thursday.

At least one of the bids must be considered by another bankruptcy court.

Continental Airlines, which has also landed in Chapter 11 proceedings, made the top bid for Eastern facilities at New York’s LaGuardia airport, including terminal space and 35 landing slots, by agreeing to assume $54 million in Eastern debt. The judge overseeing Continental’s bankruptcy case in Wilmington, Del., will also be asked today to approve that transaction before Lifland could consider it, lawyers said.

Should Continental’s judge refuse, Eastern has obtained backup bids for the LaGuardia assets.

The Eastern auction, at a mid-town Manhattan hotel, ran so long in part because of arguments over the fate of three gates at Los Angeles International Airport, three gates at Chicago’s O’Hare and 21 landing slots at O’Hare, according to lawyers and airline officials who attended the session.

United Airlines had initially bid $60 million for all of those assets.

But Delta Air Lines entered the fray, and ended up claiming the Los Angeles gates for $21.7 million, according to a list of the top bids provided by Eastern’s lawyers. United got the Chicago assets for $54 million.

The auction also broke up an earlier deal through which Northwest Airlines had hoped to buy 76 landing slots at Washington National Airport for $23.2 million.

Delta ended up with five slots for $5.4 million, and United got the rest for $35.5 million.