Years Later, Eastern Airlines’ Pitch Remains the Same: Buy Me, Fly Me : Aviation: Trustee Martin Shugrue wants to stop selling assets and dust off fleet of jets for service. Investors aren’t jumping to pay $100 million.
The last time the world saw much of Martin Shugrue, he was talking about rebuilding a broken-down airline.
As the replacement for ousted Eastern Airlines chief Frank Lorenzo four years ago, Shugrue starred in television commercials telling employees how he would turn around Eastern and reverse its shrinkage.
These days he’s saying many of the same things about the same broken-down airline.
He’s trying to sell a majority stake in Eastern for $100 million. That’s how much he figures it would cost to get the airline, which is still in bankruptcy court, flying as soon as October.
Shugrue is still the court-appointed trustee trying to raise money to pay the airline’s debts. The creditors think Eastern has a better chance trying to make money as an airline than running a yard-sale of used planes and parts.
Shugrue has his eye on dusting off some of the 50 Eastern jets parked in the Mojave Desert and serving cities east of the Mississippi where he thinks Eastern can charge less than what passengers are paying now.
Unlike the flotilla of new airlines advertising lower fares, he’s convinced this one can stand out from the crowd. With “The New Eastern Airlines” painted on the side, the upstart would have instant name recognition.
In the ads of 1990, Shugrue told employees gathered in an airplane hangar that Eastern was going to get a little better each of the next 100 days. “My staff has been saying it’s more like the 100 million days,” Shugrue said this past week in a joking reference to the cash he’s trying to raise.
Those TV commercials made the balding, dark-eyed Shugrue about as recognizable as Lee Iacocca for those few months before the Persian Gulf War grounded worried travelers, draining Eastern’s cash and leading to its shutdown.
Since then, Shugrue has sold about $1 billion worth of Eastern’s assets to pay debts.
But with a glutted market for used airplanes, the banks and other creditors that wound up owning Eastern’s jets came to Shugrue and suggested that he stop the selling and try to make the best of what’s left.
Peddling used airline equipment is not the career that Shugrue, a pilot, set out on 26 years ago.
“I’ve spent my entire life building airlines rather than taking them apart. It hasn’t been quite as exciting as building something and trying to move forward, but it hasn’t been dull,” Shugrue said in an interview.
Shugrue, 53, started in 1968 as a pilot and flight engineer at Pan American World Airways, eventually rising to vice chairman before leaving in a management shake-up in 1988.
He worked for a year as one of the many presidents of Continental Airlines who worked under Lorenzo. Later, Shugrue was brought in by U.S. Bankruptcy Judge Burton Lifland to run Eastern after Lorenzo was forced out amid mounting losses at the airline.
Any investors willing to commit the kind of money Shugrue is seeking would get control of the company, he said.
The new owners could very well want someone else to run the company and Shugrue won’t say whether he wants the job.
As far as who might buy the company, “We are knocking on the doors of all the usual suspects,” Shugrue said. “Every player ever interested in an airline deal.”
The money Shugrue is seeking is a lot in any business, but particularly for a new airline. Many of the new carriers started much smaller than Shugrue anticipates, financing themselves with $10 million or less.
Those institutions which have turned Shugrue away so far have pleaded distaste for investing in an airline in general, not just Eastern, Shugrue said.
He plans a no-frills coach class of service with few restrictions on when passengers can fly and when they have to buy their tickets. Resurrecting an idea he pushed in Eastern’s final months, Shugrue also plans to put first-class sized seats in the front of the plan and charge fares typical of today’s economy class.
Initially the airline would fly to eight cities, chiefly from Atlanta and Indianapolis, with 14 DC-9 jets.
All ties with the old airline would be severed, including frequent flier awards and labor contracts.
But on both counts, Eastern’s new owners must salve some old wounds with both former customers and employees.
Shugrue wouldn’t speculate on whether Eastern customers would be given at least part of their old frequent-flier balances, but said, “You can expect a very aggressive marketing program to develop the old customer base.”
The Eastern name brings name recognition, but for many the airline’s 62-year history will be remembered for the final years of labor strife and financial uncertainty.
If anyone buys Eastern, part of the package will be a relationship with the Machinists union, which considers itself the certified representatives of Eastern ground crew workers.
Shugrue said ex-Eastern workers would be given preference in hiring.
