Casinos, aftershave, even steak - Donald Trump has tried his hand at many things. But one venture he wants you to forget is his brief and ultimately unsuccessful stint at running an airline. Thomas Haynes examines how it all came about, and what went wrong.
It’s one of those things that people tell you as a random fact: “Did you know Donald Trump started an airline?” You almost don’t believe it at first because unless you were in the north eastern United States in the late 1980s, you probably wouldn’t remember.
Called Trump Shuttle, the story of Trump’s foray into the airline industry began in 1988 when a worker’s strike at Eastern Air Lines drove the carrier to a halt. Its shuttle division was the only profitable part of the business and so, an open auction was held to sell it off to raise capital.
The businessman’s holding company, The Trump Organization and America West Airlines, were the final two to be considered for the sale. But after a meeting with Frank Lorenzo, the president of Eastern, the acquisition was subsequently completed by Trump for $365m. The money was sourced from a consortium of banks.
Thinking it would complement his other businesses, Trump had wanted an airline for some time and now, he finally had one.
As part of the deal, he received 29 Boeing 727s including eight -100s and 21 -200s. He then spent a reported $1m refitting the interiors and painting the exteriors with his signature ‘Trump’ logo.
If you’re wondering what the eventual fate of these aircraft was, as of today all 29 airframes – which were purchased by Eastern in the 1960s and 70s – have now either been broken up or withdrawn from use.
On June 8, 1989, the inaugural Trump Shuttle services were full of fanfare and celebration. The airline offered hourly flights between three airports on the US east coast: Boston/Logan, New York/La Guardia and Washington/Reagan.
On-time performance was one of the company’s most important selling points, but the one thing Trump couldn’t control was the weather. This meant that the first New York/La Guardia to Boston/Logan flight departed 45 minutes late.
Speaking at a press event later that day, Trump said: “We were the first plane out this morning, we were the most successful flight this morning, we had more people than anyone else and I think we had better service than anyone else.”
The price tag of $365m was considered to be very high at the time, compared with launching a carrier from scratch. But what Trump was paying for was market share, and he most certainly got it.
Within two months, Trump Shuttle had snapped up around 40-50% of the north eastern high frequency market from Pan Am Shuttle, another big player in the region.
Trump pushed for the airline to provide a luxury product offering which included leather seats, marble-finish lavatory, and seatback mounted airphones. This set it apart from what came before as its predecessor had opted for a “no-frills” experience.
Trump’s acquisition of Eastern’s shuttle business created more than 1,000 jobs, the majority of which were filled by previous employees of the then Florida-based company. Many of the workers who had previously been on strike jumped at the opportunity because Trump didn’t cut pay or seniority.
All seemed to be going well for the airline until August 10, 1989 when a Trump Shuttle flight had to make an emergency landing in Boston when the nose wheel landing gear failed. No one was injured but the Boston Globe newspaper reported that the malfunction was due to errors made by Eastern personnel prior to the sale.
In an attempt to restore public confidence, Trump personally flew on the next service from Boston, but unfortunately for him, this event marked a turning point in the airline’s fortunes.
By November of 1989, traffic figures had started to decline and towards the end of the year, an economic recession began in the region, which deflated demand for the airline’s services.
The Iraqi invasion of Kuwait in August the following year added to the carrier’s woes as it caused jet fuel prices to double. Despite relative success in the beginning, with an increasing cost base and low demand, both Pan Am Shuttle and Trump Shuttle were losing money. In fact, according to Time magazine, the latter was never profitable.
The losses were a burden for Trump, who was also struggling financially in part due to his three Atlantic City casinos, which were not doing well.
In a bid to turn around the airline’s fortunes, Trump replaced its CEO and had 100 employees dismissed. He blamed them for the financial losses.
By the end of August 1990, the new managers had come up with a three step plan to profitability: use additional available aircraft for charter operations to the Caribbean and Mexico, offer weekend trips to Atlantic City and replace the older 727-100s with -200s to improve the overall reliability of the services. The following month, Trump missed a $1.1m interest payment for the airline.
The beginning of the Gulf War in January 1991 caused a further spike in fuel prices and decreased customer demand. Eastern Air Lines, the former operator of Trump Shuttle shut down the same month, and Pan Am was also struggling.
In April, the Trump Organization announced that it was close to a deal between Citibank and Northwest Airlines, the latter would operate the shuttle in return for relieving Trump of his $135m share of the shuttle’s debt.
Delta Air Lines agreed to take control of the competing Pan Am Shuttle in July but Northwest’s acquisition of Trump Shuttle was cancelled in the August, reportedly because the unions demanded parity with Northwest employees and Trump refused to adjust the price to reflect this.
At this point, the airline’s creditors, who effectively now controlled the carrier, were keen to sell it and approached USAir as a result. In December 1991, the Arizona-based firm ultimately agreed to take operational control of Trump Shuttle for up to ten years, with an option to buy it after five.
The New York Times reported that Trump would be relieved of at least $100m of his loan guarantee leaving him owing between $25 and $35m at the end of his ownership of the company.
The brand lived on for another three months after which it was merged into a new corporation called Shuttle Inc, which began operating as USAir Shuttle on April 12, 1992. US Airways then purchased the remainder of the company in November the same year.
US Airways Shuttle as it was then known, remained in operation until October 2015 when its parent organisation merged with American Airlines, at which point the shuttle became American Airlines Shuttle.
Donald Trump’s venture into the airline business largely wasn’t very successful. A combination of situational factors that impacted the whole industry and bad timing were most likely to blame for its failure.
In the process, the man who appeared to be able to make anything turn to gold couldn’t do it with the airline business.