The last time Trump bought an airline, it didn’t end well. Now, budget carriers are asking him for help

Washington (CNN) — It was the late 1980s, and Eastern Airlines was on the brink of bankruptcy after years of financial problems, labor issues and struggling to adapt to deregulation.

Businessman Donald Trump saw an opportunity and seized it. He purchased the airline’s most profitable asset, the Eastern Shuttle, which flew between New York, Washington and Boston, for $365 million. The deal – which some experts considered overpriced – included landing rights, 21 older Boeing 727 planes, and terminals, all of which Trump promised to make luxurious.

“What I want to do is run it as a diamond: an absolute diamond,” Trump said in a press conference at The Plaza hotel announcing the deal in 1988.

“I don’t know how profitable it is going to be. I think I would enjoy running it,” he told CNN when he was fending off a competing offer from America West Airlines.

But Trump’s airline was never profitable, and it lasted just a few years before he lost control to his creditors who sold it to USAir, later known as US Airways.

“An economic recession that caused big corporations to cut back on air travel and Middle East tension as Iraq invaded Kuwait (causing jet fuel to double), placed enormous pressure on the Trump Shuttle,” according to US Airways.

The story of the Trump Shuttle mirrors some of the challenges airlines are facing this year as they come to the former airline owner turned two-term president for help.

Budget carrier Spirit Airlines is reportedly seeking a $500 million financial bailout to keep itself from having to halt operations altogether. That’s separate from another $2.5 billion other discount carriers, like Frontier, Allegiant and Breeze, are asking for to endure the current spike in jet fuel prices caused by the war in Iran.

The Trump Shuttle

On the first day of flying, June 8, 1989, Trump cut ribbons inaugurating service at his terminals with a string quartet, champagne and a lavish buffet.

“We are going to give the best service. We are going to have the most beautiful planes. We have the best terminals,” Trump told CNN at the launch party at LaGuardia Airport.

He launched million-dollar-a-plane upgrades that included gold-plated fixtures, maple veneer, and leather seats.

Henry Harteveldt is president of Atmosphere Research Group and a travel industry analyst. He also was the first marketing director of the Trump Shuttle.

“Mr. Trump saw the air shuttle as a platform to not just enter commercial aviation, but as something that would be the foundation of what would eventually become a larger carrier,” Harteveldt said.

Trump Shuttle operated flights every hour on the hour. Like Eastern, the airline promised passengers that if a flight was full, the shuttle would roll out a second plane – even for just one passenger.

The 727s were white and painted with just one word on them, “TRUMP,” in hopes the airline would rapidly grow beyond northeastern shuttle service and the paint job would not have to change, Harteveldt said.

“I hope my name does a lot for the shuttle itself, but I hope the shuttle does a lot for my name,” Trump said after the deal was approved.

But all of the parties and optimism came at the wrong time.

Just a few months after the first flights, the United States entered a recession, which curtailed some business travel – the primary customers for the shuttle. About a year after the first flights, Iraq invaded Kuwait, sending jet fuel prices soaring. The three engines on Trump’s 727 jets burned more fuel than the two-engine jets used by some other airlines and couldn’t fly coast to coast.

The luxury touches for the 45-minute flights, which Trump heralded at the airline’s launch, didn’t turn out to be enough. The compounding effects of high fuel costs, the debt that helped finance the purchase, and the upgrades to the planes accumulated quickly.

About a year after taking off, the airline defaulted on the first of its loans, and by 1992 the airline was turned over to creditors who sold it to USAir.

The deal ended with Trump no longer responsible for some of the $245 million in loans left, and $100 million of the $135 million Trump personally guaranteed was forgiven, according to the Boston Globe, citing news reports at the time.

“I got out at a good time,” Trump told the Globe in 2016. “I walked away saying, ‘I’m smart.’ It’s good to get great financing … I felt successful. The market had crashed. I didn’t lose anything. It was a good thing.”

However, the legacy of the Eastern shuttle still continues. After Trump, it continued through mergers at US Airways and now is operated by American Airlines.

Budget carriers ask Trump admin for aid

Now, 34 years after the demise of the Trump Shuttle, high gas prices are again linked to unrest in the Middle East. Trump might, in a way, be back into the airline business, but this time with taxpayer money.

Amid the ongoing war with Iran, budget carriers are coming to Trump asking for a bailout to help alleviate high costs of fuel.

Spirit Airlines, which is in bankruptcy proceedings, has struggled to make money since the end of the Covid pandemic. A deal could include $500 million in federal assistance in exchange for a percentage of government ownership of the airline, according to a source familiar with the discussions.

The Association of Value Airlines, a trade group representing ultra-low-cost carriers like Allegiant, Avelo, Frontier, Spirit and Sun Country Airlines, says it wants $2.5 billion in federal assistance aside from the Spirit bailout. It advocates that support would help keep fares lower throughout the industry.

The average price of jet fuel, the second largest cost for airlines after labor, has doubled since early February, rising far faster than gasoline or crude oil prices. Airlines are raising fares and fees to try to recapture fuel costs but expect more price hikes will come.

“The market dominance of the country’s biggest airlines has never been greater, and smaller value airlines are disproportionately impacted by higher fuel prices,” the group said in a statement this week. “Value airlines play a critical role in the affordability and accessibility of air travel.”

On Monday, reporters questioned Transportation Secretary Sean Duffy about bailout requests to help the budget carriers.

“I don’t have that money,” Duffy said, noting Congress might have to get involved.

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