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0:00 Welcome To Grounded
0:59 Back In The Late 80s
2:23 Enter Donald Trump
5:11 Pan Am vs Donald Trump
6:57 Flaws Revealed
8:54 Next Time
In the late 1980s, everyone wanted to own an airline. North America saw an explosion of carriers catering to all demographics and niches – and there was no more lucrative market than the northeastern shuttle routes of New York to Chicago and to Washington. In this game was Pan Am Shuttle, and Eastern Shuttle – shuttle services that were the most profitable parts of their respective airlines.
But bigger problems brewed at Eastern with the rise of low-cost carriers, like People Express Airlines, who cut deeply into its profits. Various pivots failed to make enough profit and facing massive wage cuts, pilots of eastern went on strike. The airline was forced to sell off routes and subsidiary carriers, like Eastern Airlines Shuttle.
Enter our titular character Donald Trump, who back in the late 80s was riding on the coattails of success with his New York real estate empire. Meeting then president of Eastern Airlines Frank Lorenzo at a party, he managed to band together a bank deal to sell the shuttle service to himself for a cool price of $365 million – far more than the cost to start up his own airline at the time, but would come with the share of the market that Eastern Airlines Shuttle dominated with Pan Am.
Part of this deal includes the entire fleet of 17 Boeing 727s, landing facilities and gates at each of the three cities that the carrier flew to, and the right to put his TRUMP brand on the aircraft and the uniforms. Speaking of the staff, over 1000 Eastern employees were transferred to the new venture and saved their jobs.
On the first day of business, Trump got work, adding his own unique spin to the business. Essentially these shuttle airlines operated as a no-frills low cost operation to keep out low-cost-carriers and to rival against ground-based transport like buses and trains. Trump had a different idea and converted the airline into a luxury carrier.
What do we mean by luxury? Trump spent over $1 million on each plane to revamp the planes in his new trump livery and had the interiors redecorated with maple wood veneer, chrome seat belts, and gold-colored lavatories with marble benches. Much like the apartment that Trump lived in at the time. Keep in mind, these aircraft were only worth $4 million US.
To be fair, the upgrades were not just vain surface-level details but included free meals for all passengers (such as trump steaks), free champagne, beer and wine and technology like self-check-in , inflight telephones, and rentable laptop computers.
Needless to say, that these features quickly allowed Trump to regain market share against Pan Am, and control 40% of the northeast air shuttle market. Trump had seemly conquered the airline business – much where others had failed.
With competition heating up between Pan Am Shuttle and Trump shuttle,
the real estate magnate went a little too far and criticized the safety record of Pan Am – a big no-no in the competitive airline game.
“I’m not criticizing Pan Am,” Trump said that day. “I’m just speaking facts.”
And as luck would have it, it would bite him when his own plane suffered a nose gear failure in August 1989 arriving in Boston.
“It was the most beautiful landing you’ve ever seen “It went all the way down the runway. By the time it landed at the end, the front just touched very softly. Everybody got off. Nobody was injured. They were shaken up. But they were fine,”
This PR disaster revealed that the airline was losing money and that in 18 months had spent over half of the money, $128 million, it had cost to buy.
You see several flaws with this airline. It focused on opulence rather than convenience – focusing on the image of a successful, rich man airline rather than what CEOs and business leaders wanted. Sure, passengers could dine on the very best while in flight, but it was only a 45-minute flight… there was not enough time to even pop the bottle when the seat belt line turned on.
By the 1990s, over 100 employees had been let go and many of the perks had vanished, such as free coffee in the terminals. Limping for another year, it was clear that a luxury shuttle model had not worked, and trump was forced out of the business. The $245 million in loans and the $135 million in personal guarantees were washed away and he only took a loss of $35 million.
US Airways would step in and take control of the airline and another ten years, profit-sharing with the option to buy it in 1997 for the original $245 million. The new owners scrapped the holden toilets and dropped the name.
Ironically, in the early 90s, the Washington Post ran a 450 business travelers survey in the three shuttle markets of New York, Chicago and Washington, asking them what the first airline shuttle came to mind.
Their answer? Eastern.