Revival of Eastern Airlines Sought by Investors : Transportation: The bankrupt carrier may be back in the skies late this year, an acquisition group official says.
ATLANTA — A private group said Monday it plans to start a new airline from the remnants of bankrupt Eastern Airlines and has begun raising money from foreign investors.
The carrier, to be named “New Eastern,†will be flying by November or early December, John Mitchell, chairman of Airline Acquisition Corp., said at a news conference.
Eastern, crippled by bitter labor disputes, operated under Chapter 11 bankruptcy protection for nearly two years and ceased flying in January.
Mitchell said the group has already raised money from investors in Mexico and the Middle East and has tentative loan commitments of about $550 million. But some airline industry officials voiced doubt that the carrier would ever fly.
“We have been skeptical, and we haven’t seen anything to change our mind,†said John Braden, spokesman for Hartsfield International Airport in Atlanta.
The new airline will be based in Atlanta, where Miami-based Eastern had a large hub.
Charles Miller, a spokesman for the acquisition group, conceded that the group has not yet recruited the U.S. investors that it needs to own an airline under federal law. At least 51% of a U.S. carrier must be U.S. owned.
About 170 former Eastern pilots have invested about $850,000 for start-up costs, he added.
The group wants New Eastern to begin with 42 daily flights to 12 major airports on the East Coast and within a year reach 150 daily flights to 40 cities.
The group said it expects to close by Oct. 15 on a $550-million capitalization package. It has commitments for $160 million in equity for the new carrier, mainly from foreign sources, Mitchell said.
It needs $90 million more in equity and $300 million from debt instruments, he said.
The only potential investor that Mitchell named was Cousourio Cintemex of Mexico. Additional equity is being sought from Middle Eastern sources, he said.
Miller said the investment bank Lehman Bros. has been hired as the group’s financial adviser.
The group hopes to buy some of Eastern’s assets through federal bankruptcy proceedings, but “a completely new aircraft design and service product†is being developed, he said.
Atlanta Aviation Commissioner Ira Jackson told reporters that he has received several proposals for lease of Eastern gates at the Atlanta airport.
TWA last week bid for some old Eastern gates.
The group said it has hired Russell Thayer, a 40-year veteran of American, Pan American and Braniff airlines, to recruit a management team for New Eastern.
It also said it has agreements with Trans National Travel Inc. of Boston for the new airline’s flights to be used in travel packages.
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