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Trump Shuttles Into a New Field With His Purchase of Eastern Line

October 16, 1988|WILLIAM SPOSATO | Reuters

NEW YORK — Donald Trump's purchase of the Eastern Airlines shuttle is the real estate developer's first big foray out of the world he knows best and into an industry that has seen spectacular failures by those who underestimated its complexity.

Trump announced Wednesday that he would buy the Eastern shuttle system for $365 million in cash, a move that gives Eastern's parent company, Texas Air Corp., needed time to try to restore the rest of Eastern to profitability.

Trump has been one of the most successful and publicized captains of capitalism this decade. His name has become a household word, his books best sellers and his gold-colored Trump Tower in New York one of the city's tourist meccas.

The Trump name goes everywhere he does, and the airline will be no exception. It will be called the Trump Shuttle, and in his usual modest way, Trump said he will run it "like a diamond."

It will join Trump Plaza, a New York residential cooperative, Trump Parc, a condominium overlooking Manhattan's Central Park, Trump Castle Hotel & Casino and Trump Plaza Hotel & Casino, two Atlantic City operations.

At a news conference announcing the shuttle deal, which took place at one of Trump's other recent purchases, the venerable Plaza Hotel just off New York's 5th Avenue, he was clearly enthusiastic about his new project.

He talked glowingly about the Eastern shuttle, and even spoke of flying on it with his wife, Ivana.

"If you'd told me a year ago that I would have an opportunity to own such an asset, I wouldn't have believed it," he said.

But he also indirectly admitted that he knew little about the business.

Speaking about Eastern's on-time performance, now among the highest in the industry, Trump prefaced his remarks with, "Knowing not a lot about this industry. . . ."

Airline analysts say that an airline is a complex business, requiring a solid line management that can coordinate planes and crews with the passengers and the need to fill all the seats with each flier paying as much as the market will bear.

Some Spectacular Failures

The industry has seen some spectacular failures, including People Express Inc., and the now re-formed Braniff Airways.

Even some old-line carriers have run into serious problems. Pan Am Corp. has sold off asset after asset for cash infusions that have failed to turn the company around. Trans World Airlines was losing money when taken over by investor Carl Icahn and numerous smaller carriers looking for niches in the deregulated market have failed.

But those who know Trump say he has few worries about his airline venture.

"If he were nervous about it, he wouldn't get in it," said Richard Levy, a real estate associate.

In addition, airline analysts say the shuttle is a unique airline business. It is a going operation with a steady demand, a good profit and a strong niche. It caters mainly to business travelers, connecting New York with Boston and Washington.

"If you are going to get into the airline industry, this is probably the least risky way to do it," said Edmund Greenslet of the aviation consulting group ESG Aviation, based in Cos Cob, Conn.

Eastern says the shuttle earned $30 million before tax on revenues of around $180 million, a very healthy profit margin.

While the Eastern shuttle has faced increasing pressure from the 2-year-old Pan Am shuttle, analysts do not see any crisis ahead for it. In addition, it has a knowledgeable management, including Bruce Nobles, recently hired away from Pan Am.

Greenslet noted that Trump "is not going to run an airline. He's going to own it."

Trump certainly has the cash to get the shuttle through any bad times. His fortune is estimated at anywhere from $1 billion to $3 billion, with the higher figure his own estimate.

Some observers have speculated that Trump may use the shuttle to ferry gamblers to his Atlantic City casinos. When asked about the possibility, he called it "an interesting concept," noting that the shuttle planes are less active on the weekends. But such a service would require an upgrading of the Atlantic City airport.

Trump now has a helicopter service from New York to Atlantic City. The six aircraft each seat about 24 passengers.

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