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.
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.
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.
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.
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.
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.
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.
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.
States Bankruptcy Court intervened after a creditor brought
suit against Eastern Airlines. The court very much aware of
Lorenzo's labour practice, appointed Martin Shugrue as
temporary trustee over Eastern.
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.