Eastern Air Lines was one of the "Big Four" airlines (along with United, Delta and American) that dominated the passenger airline business in the United States for nearly 50 years. It started flying officially as Eastern from 1930 (after its predecessor company was founded in 1927) and operated until 1991, when it ceased operations during the first Gulf War.
Eastern was an innovative airline company– it created the hourly "power" shuttle between New York, Washington and Boston. It was the first airline to order and operate the Boeing 727 and the Boeing 757. It was also the first US airline customer of Airbus– taking deliveries of the Airbus A300 in 1972. In the 1980s, it was the largest airline in terms of passengers in the world and the largest airline operating to Latin America and the Caribbean, with a major hub in San Juan, Puerto Rico. It bought all of the Latin routes of Braniff Airlines in 1982. Its two famous CEOs were Captain Eddie Rickenbacker, the World War I flying ace who received the Congressional Medal of Honor, and was CEO from 1935 to 1963; and Colonel Frank Borman, who orbited the earth in Gemini VII in 1966 and circled the moon in Apollo VIII in December 1968.
1927 - 30
The birth of Eastern Air Lines is associated with the name of Clement Keys, a former financial editor of The Wall Street Journal, who was an untiring promoter of multimillion-dollar aviation corporations in the 1920s and 1930s. In early 1929, Keys decided to purchase a small Philadelphia-based airline known as Pitcairn Aviation, Inc., which had been formed on September 15, 1927.
Keys sold Pitcairn to North American Aviation, then a holding company for a number of airline and aircraft companies in which he was one of the key shareholders. On January 17, 1930, Pitcairn’s name was changed to Eastern Air Transport, Inc. and soon after, the airline expanded its routes to include Atlanta, Miami, and Boston and in August to Richmond, Virginia. Its fleet at the time consisted of three Ford Trimotors and two Fokker F-X aircraft. These were joined soon by Curtiss Condors and Kingbirds. World War I ace Eddie Rickenbacker served as general manager of Eastern.
1930 - 34
In 1930, the company was sold, renamed to Eastern Air Transport, and became 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 a major piece of legislation created by Congress in 1934 that would affect the aviation industry. In essence, this Act authorized the awarding of government mail contracts to private carriers, established the rates for transporting mail and set airmail rates. Contracts were awarded by the United States Postal Service through a competitive bidding process. This Act required air carriers to separate themselves from manufacturers of aircraft (many air carriers were owned at that time by Boeing and Lockheed). This Act inspired owners of aircraft and investors to start up air carrier services, providing the United States with new airmail services.
Eastern Air Transport was one of several carriers that grew out of the Air Mail Act of 1934, but it had participated in the “Spoils Conference” with Walter Brown, General Postmaster. As a result, Eastern Air Transport was forbidden from bidding for new airmail contracts. To get around the law and be allowed to bid again, Eastern Air Transport changed its name to Eastern Air Lines.
The awarding of airmail contracts by the postal service was at that time very lucrative for the airmail carriers. They would do whatever they had to do in order to obtain a contract. For example, when the Houston/ Corpus Christi/ Brownsville Air Mail Route was placed up for bid, Braniff Airlines bid on it for 1/10th of one cent per mile, while Eastern Air Lines bid to fly this route zero cents per mile. As a result, Eastern was awarded the contract.
1934 - 38
In the 1930s, Eastern acquired a number of companies such as the Wedell-Williams Transport Corporation in order to expand its routes. In April 1938, North American Aviation finally sold Eastern because of criticism that it was unfair for a single company to both produce and operate aircraft as North American did. Rickenbacker, with the help of some of his associates, bought Eastern for $800,000 from North American.
Rickenbacker was responsible for setting up Eastern’s Great Silver Fleet, a famous fleet of DC-2 aircraft that operated up and down the East Coast. One of the first DC-2s became the first commercial airplane to touch down at Washington, D.C.’s new National Airport in June 1941. Into the late 1930s, Eastern was enjoying increasingly larger profits year after year.
1941 - 45
In 1941, Eastern joined in supporting the war effort. In March 1942, it began military support flights connecting Florida, Pennsylvania and Texas, and later in the year, routes were added to Trinidad in the Caribbean. In September 1942, Eastern created its Military Transport Division (MTD), based in Miami comprised of a fleet of Curtiss C-46 Commando aircraft.
In the civilian sector, Eastern gained a major victory when the Civil Aeronautics Board (CAB), the organization that decided which airline would fly which route, allowed Eastern in June 1944 to compete on the prized New York-Boston route (previously, American Airlines had held a monopoly on the route). This would help Eastern to eventually start its famous Eastern Shuttle.
1950 - 65
After the war, Eastern became even stronger. In a move to replace its aging DC-3 fleet, the company ordered ten of the new Lockheed L.1049 Super Constellation airplanes in 1950. Eastern also acquired a Canadian company, Colonial Airlines, in 1956 that allowed the airline to begin service to Canadian cities such as Montreal and Ottawa. At the time of the acquisition, Eastern Air Lines had an unmatched safety record: it had been operating as an airline for more than 25 years without a single passenger fatality. It was undoubtedly the most important airline on the East Coast of the United States, although it no longer held the monopoly on key routes such as between New York and Miami. Eastern also diversified into Mexico; On July 23, 1957, it began a New York-New Orleans-Mexico City service using DC-7 aircraft.
Eastern was quick and often first to adopt jet aircraft. Eastern was the first of the “Big Four” to begin using the Boeing 727 jet that would revolutionize air travel. Eastern’s first 727 flight took place on the Philadelphia-Washington-Miami route on February 1, 1964. Eastern also used the Douglas DC-9, beginning February 1965. Rickenbacker had already left Eastern by then, retiring on December 31, 1963 after nearly a quarter century leading the company.
1967 - 69
To expand, Eastern executives were well aware that they would have to extend their routes beyond the East Coast. As a result, it began flying new routes to the Bahamas and to Seattle on the West Coast. The company also expanded into the Caribbean in 1971 by acquiring a small Puerto Rico based airline known as Caribair.
Eastern had experienced low growth rates in the early 1960s, but growth improved in the late 1970s. An important turning point for Eastern was when the CAB granted the airline rights to fly into Los Angeles. Eastern was thus able to inaugurate its first coast-to-coast flight on September 21, 1969, the last of the “Big Four” to do so. At the time, Eastern ranked fourth among this group in terms of passenger-miles flown annually.
In the 1970s, Eastern acquired a number of Airbus A-300 aircraft. Airbus had tried unsuccessfully to break into the U.S. market for many years. After Airbus offered a very generous deal to Eastern, its new president, former NASA astronaut Frank Borman, agreed to buy 23 of the new jets in the spring of 1978. For Airbus, this was a critically important breakthrough into the U.S. market and ensured a reliable customer base for future Airbus models.
Eastern experienced great financial difficulties in the 1980s. Under CEO Frank Borman, the company ran into deep trouble as a result of major disagreements between management and the labor unions and also because of a heavy debt load from aircraft and other asset purchases in the late 1970s. As Colonel Borman tried to negotiate pay and benefits cuts to compensate for this, Eastern continued yearly losses until late 1985, when its total debt reached $3.5 billion.
It was at this point that several major investor groups approached Eastern, including Texas Air, which owned Continental Airlines. After Colonel Borman failed to get the required concessions from his trade unions, Texas Air bought Eastern for $615 million in March 1986.
1989 - 91
The management of Texas Air transferred many of Eastern's core assets to Continental. To survive, Eastern had to sell aircraft and lay off workers in large numbers. As tensions mounted between the labor unions and Texas Air, Eastern continued to be dismantled. When the unions struck in March 1989, Eastern was forced to file for bankruptcy. This gave the airline some breathing room and a Trustee was appointed to run Eastern, out of the control of Texas Air.
By this time, however, Eastern was collapsing under its debt. Finally, in January 1991, the airline was out of operating cash. The bankruptcy court was willing to allow more of Eastern's escrowed funds to be provided to Eastern for day-to-day operations; but given the sharp drop off in overall airline traffic due to the first Gulf War, management felt an overriding obligation to Eastern's creditors and employees to stop operations and preserve the remaining cash
Eastern's court-appointed Trustee and Administrator were very careful to preserve the core asset (Eastern's name and trademarks) to allow for the airline to one day be re-launched.