How Donald Trump Bought – and Lost – an Airline

Barbara Peterson has an outstanding article on Donald Trump and the Trump Shuttle.

The Eastern Airlines Shuttle concept began with no advance tickets and no check-in even. If you showed up for a flight, you were promised a seat. There was hourly service, more seats than passengers, so this usually wasn’t a problem.

Occasionally though the flights were oversubscribed and the airline made a big show of pulling out another plane for just that one last passenger (or – on the Sunday after Thanksgiving the first year of service – for more than one additional planeload of passengers for the last flight of the night).

The Eastern Shuttle, which began in 1961, was sold and became the Trump Shuttle in 1989.

Trump had paid $365 million for the assets of the Eastern shuttle operation and its 17 planes, which he’d spun as a great deal—negotiated down from the $400 million asking price. But later, as the closing was delayed by Eastern’s bankruptcy and other bidders emerged, Trump tried to get Eastern chief Frank Lorenzo to lower the price, since the value of the asset had indeed diminished. Instead Trump ended up taking five additional planes as compensation, which he described as a victory in his book The Art of Survival, published in 1990, when the airline was still flying. “This allowed me to refurbish my fleet without taking any planes out of service,” he said.

True, but the shuttle needed only 16 planes to operate a full hourly schedule at its three cities, with one or two jets as spares, and extra aircraft are anathema to an airline—they don’t make money sitting on the ground.

Here’s Donald Trump on with David Letterman just after the acquisition:

Trump spent $1 million a plane on refurbishments including:

..thick maroon carpeting, maple-veneer paneling, beige leather seats, and even faux marble sinks and gold-colored fixtures in the lavatories.

“The bathroom was a work of art,” joked Nick Santangelo, who ran maintenance and engineering at the shuttle. “They used ideas from the hotel business, which wasn’t bad, but they didn’t always work.” Older jets in particular guzzle fuel and airline executives are obsessed with saving even a few ounces of weight. Not so Trump: “At first they wanted to put in a ceramic sink, that was too heavy,” said Santangelo. “Then one of his henchman decided they were going to put brass handles on the doors you use to get out in an emergency. Normal handles weigh a few ounces, and these things probably weighed five pounds each… you’d kill to save one pound, and they wanted to add 20 to 30 pounds to each plane.”

Still, the airline lured customers with frills like airport concierges who would book same-day reservations at fancy restaurants; gourmet food and drink and tarted-up departure lounges. “We spent a lot on service,” recalls Harteveldt. “Bagels and coffee in the morning; boxed dinners with sliced chateaubriand and salad; the flight attendants hustled to serve everyone meals and then pour two or even three rounds of drinks” in the 45 minutes the plane was in the air.

Trump had only put in $20 million of his own money, and the airline didn’t make nearly enough to service its debt. With no buyers, Trump lost the airline and the banks that had financed the Trump Shuttle deal contracted with US Air to run the operation in 1992. US Air only part-owned the operation (they purchased the remainder in 1997), taking a 40% stake and a 10 year management contract.

Ultimately Trump lost much more than his original investment, forfeiting over $100 million he had personally guaranteed.

While there’s no more gold fixtures in the lavatories, there is a first class cabin on what’s now a mostly regional jet operation.

In 2003 US Airways added first class to the Shuttle — not because they thought they could sell first class seats, but removing coach seats didn’t hurt their ability to carry passengers since the planes rarely went out fully booked. Instead this meant they didn’t even need a dedicate subfleet of aircraft for the operation, and for all intents and purposes the ‘Shuttle’ became just like any other route.

One interesting thing the Peterson piece reminded me of that I had forgotten was Trump’s offer to take over American Airlines just a year into his foray as an airline operator. Trump likely never had financing for his offer, and may have been looking to simply make a trading profit on the American shares he did buy (an amount below the SEC reporting threshold). He ultimately lost money on the offer, though, caught up in the 1989 Friday the 13th stock market mini-crash.

And now of course it’s the American Airlines brand (though in some sense America West) that takes over what was once the Trump Shuttle.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. He’s gonna make great deals. We are going to have a great, great country with wonderful, wonderful people (no minorities please). He is really entertaining though….

  2. I had to laugh .. “Flight attendants hustled to serve everyone meals..,” BA staff served full service meals and drinks on their routes to Glasgow and Edinburgh for YEARS with no problem. It’s when they adopted the mean American culture of nickelling and diming and ended up with where we are now (a free drink and some potato chips) that betrayed passengers and left routes on which they have monopolies driven to the lowest common denominator, just like American business models. A race to the bottom and still the rats fly with these scoundrels and continue to moan about it ( although the morning is now called blogging). Changed times but no betterment in customer care or value for money. Profit. Profit. Profit at expense of everything.

  3. Typo!
    Morning = moaning!! Dimmed auto correct. Don’t you hate it when the iPhone thinks it’s cleverer than you!

  4. He’s not the sharpest tool in the shed, but he’s got bravado. So did the punk ass kid that almost got us beat up by a biker gang when I was 22, so I guess that’s not really a selling point.

  5. Gary

    I generally like your articles and, even when I have a different POV, I respect your writing and views from the wing!. . Perspective all depends on where we sit and which window we are looking out of.

    But Barbara Peterson’s article on the Trump Shuttle is a hit piece on Trump the man. Clearly an aviation buff like you know the history of Eastern and the Air Shuttle. . . Lorenzo decimated Eastern. But others have failed too. . NY Air was not mentioned why? NY Air failed. . .US Shuttle was no where near a true shuttle but another route. . .Even Delta had to reformulate after taking over the Pan Am shuttle and use it as a feeder with regional jets. . .

    And others have struggled many failed in Air travel. . .What about the liberal Chicago Pritzkers who tried to revive Braniff and FAILED. . or revived Pan Am and failed. .or all the bankruptcies? Bigger and more iconic companies have failed. . Pan Am, TWA, Braniff, Eastern, Northwest, Western, the old Continental, Northeast, People Express, the old Frontier, Air Florida, Aloha, Allegheny. . Even America West . . .need I go on? And all the mergers or shall we say takeovers. . North Central, Southern, Then Republic, Ozark, Piedmont, PSA, Hughes Airwest, Mohawk, Air Cal to name a few.

    And even a mogul like Richard Branson needed to seek new investors to help Virgin Atlantic and DL now owns over 40%!!!

    Branson is often quoted saying the way to make a million dollars in the airline industry is to start with a hundred million.

    So please no political pieces here. . stay true to the cause and share the View from the Wing not from psudo-journalists aka propagandists who takes Bruce Nobles at his word but not Trump even though the guy was fired!!!

    Thanks

  6. @Joe it was Warren Buffett who is known for the quip about becoming a millionaire quickly by starting out with a billion dollars and investing in an airline from his experience owning preferred debt at US Airways (though he ultimately recouped his full investment).

    The US Air Shuttle operated as a true Shuttle, though they brought it to an end before Delta did in 2005. Delta only moved to RJs in the mid-2000s. Remember that what killed the shuttle business was Acela and post-9/11 security theater.

    Branson has always played with other people’s money, predominantly licensing his brand — a business model much like Trump’s actually.

    There’s no question a lot of money has been lost in the airline business. And also that Frank Lorenzo was ultimately a much bigger disaster than Trump’s short-lived foray into the business. Though the basic facts in both Peterson’s piece and my post are also correct. Indeed, Trump lost over $100 million of his own money in his short stint in the business even though he put up little of his own money. And his bid for American Airlines was smoke and mirrors the result of which is he lost more money.

  7. @James Alexander: I don’t know how you can argue there’s been no improvement in value for money. If you look at historical prices for airfare, tickets are MUCH cheaper now than in the “good old days”. Air travel has become accessible to the masses, so obviously the quality of the service will also change. It’s like you’re riding a public bus and complaining about how it lacks the comforts of the chauffeured limousine you used to take back in the 80s.

  8. Thought I’d add some context, since I worked at the Shuttle and was quoted in the article.

    We didn’t spend $1 million/aircraft on the repainting and cabin interior retrofits, but the actual number was still very high – IIRC, between $500K and $600K per plane (most of the repainting and cabin interior mods were done at a facility in Florida I believe in the Orlando area, although I don’t recall whether the facility was at MCO, Sanford, or elsewhere). A lot of maintenance work was needed on the aircraft. Eastern (EA) did the bare minimum, reflecting their poor financial situation. However, the maintenance work would have had to be conducted regardless of what we did with exterior painting and to the interiors.

    Our serviceable in-air time, the time between the seat belt sign being turned off after take-off and turned on prior to landing, was between 27 and 31 minutes. It’s accurate to say our FAs hustled to deliver the service. I was aboard one LGA-BOS flight where air traffic was light, and one of the pilots announced a 30-minute flight time. I joined the FAs to help hand out the meal boxes. We offered just coffee or water to drink; I don’t recall anyone complaining.

    Re: NY Air, it didn’t fail. NY Air was part of Texas Air, and competed against EA prior to Texas Air Corporation (TAC) buying EA. A condition imposed on TAC’s purchase of EA was that NY Air had to exit the LGA shuttle routes. TAC sold the slots, but not NY Air’s gates, to Pan Am (NY Air continued to serve LGA, just not LGA-BOS/LGA). NY Air was merged into CO on February 1, 1987, the same day we folded the original PeoplExpress into CO (I was CO’s marketing manager at the time and was involved with both of these mergers).

    Overlooked in Barbara’s article was that Trump also said he would buy Continental. I don’t recall what progress, if any, he made with that, but it made for an interesting period during our working relationship with CO, since Trump Shuttle was part of the OnePass program.

  9. Sorry but I was a F/A on the Trump Shuttle. We did not offer 2 and 3 rounds of drinks. If someone wanted another drink and we were not landing, we gave it to them. Also part of the failure was that Women did not care to take the Trump Shuttle.

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