Swift Air to Acquire Eastern Airlines – EAL Brand Retained
June 16, 2017
Charter airline Swift Air will acquire Eastern Airlines according to an internal email sent to Eastern employees from CEO James Tolzien. The iconic, resurrected Eastern Airlines brand is expected to remain and replace the Swift Air brand, however.
The New Eastern, which began operations in May 2015 operating charter flights for sports teams and to Cuba, has been facing financial challenges in recent months. As a result, its primary investor, billionaire Vincent Viola has been trying to find a buyer for the beleaguered carrier with the Swift acquisition or a shutdown becoming a constant rumor. Viola was at the center of controversy when he was considered to be President Donald Trump’s nominee for United States Secretary of the Army, before withdrawing from consideration, owing to difficulties of divesting of his investments.
There has been additional turbulence in the resurrected brand’s brief history. The airline’s founding CEO Ed Wegel left Eastern in October 2016. A few weeks later on October 27, while carrying Mike Pence on a charter during the Presidential campaign, an Eastern 737-700 skidded off the runway while landing at New York LaGuardia.
Over the last few months, Eastern has had to return several aircraft to lessors. As of right now, the Eastern fleet stands at only three aircraft. One cause of Eastern’s hardship is ironically the United States’ easing of travel restrictions with Cuba under former President Obama.
Once a steady flow of income for Eastern, the charter market to Cuba has suffered with the introduction of scheduled commercial air service to the Caribbean nation. Ironically, the Trump Administration’s reversal of key aspects of Obama’s Cuban travel policies could further reduce already tepid demand for travel between the nations. This could lead to further reductions in scheduled commercial service, and provide an opening to the charters.
The “New Eastern” had intended to begin a scheduled operation with a focus on connecting secondary U.S. markets with the Caribbean and Latin American destinations. A hub in San Juan was under consideration as well. The new company had licensed the branding for One Pass, the original Eastern’s loyalty program.
Eastern has 20 Mitsubishi MRJ-90s and 10 Boeing 737-MAX 8’s on order. The status of these is unclear.
Swift Air, based in Phoenix, has been operating for nearly 20 years. The relatively low key carrier operates charter flights for major professional sports teams and tour operators with a fleet of 13 Boeing 737-300s and 400s.
The email to employees alerting them to the merger reads as follows:
- “Dear Eastern Employees,
As you know, the company has gone through an incredible reorganizational effort as we’ve worked to re-trench our operations and move toward profitability. We followed up our meetings in March with the return of N280EA in April, the cancellation of unprofitable customer contracts (Guyana, Puerto Rico) and projects (Amadeus, new hangar) in May, and are in the process of returning both N279EA and N278EA in the next two weeks. We have made some difficult decisions regarding staff levels, bringing our total headcount from 240 to 103……about the level that we expect to maintain for the foreseeable future. We continue to measure, monitor, and improve everything we can every day……..and truly hope that all of you are doing the same.
At the meeting in March we also discussed the fact that our shareholders have received several offers to buy or merge the airline and while none were imminent at the time, I promised to keep you informed to the best of my ability about the future of the company. After careful review by our board and several outside advisors, one opportunity stood out as the best option among many. As of 5:30PM today, we have signed definitive documents with Swift Air and I wanted you all to hear it from me first.
In the broadest sense, the deal will make us part of a 20 aircraft airline that will allow us to serve our customer base with exponentially increased economies of scale and flexibility, gives our shareholders the opportunity to participate in the rapid growth of a very profitable company, and ensures the Eastern brand not only survives, but grows.
Swift is in the process of certifying to operate 800s, and it is contemplated that our aircraft and business will move over to them in late August or early September – once the transition is complete, all of Swift’s 800 fleet will be branded with the Eastern name and logo.
Clearly this decision impacts all of us, and between now and the end of August when the closing is expected to occur, I will keep you informed every step of the way. In the next few weeks Nick and I will be working closely with the Swift executive team to determine the infrastructure requirements of the newly combined company – at preliminary meetings this week, it became clear that the combined entity will be fast-growing and will need more space, equipment, and talent.
This transitional planning effort will undoubtedly result in offers for some employees to join the new venture, and financial retention incentives for those who do not. I can assure you both executive teams will work diligently to ensure the best possible outcome for everyone, and will communicate accurately and timely as decisions are made.
I realize this news may be disconcerting to many of you, but I hope you will join me in viewing this as a very positive development; it is simply the next exciting chapter of the Eastern Air Lines story.
I want to take this opportunity to thank all of you for everything you have done and will continue to do. You all have remained steadfast in the face of an enormous amount of difficult organizational change, and I ask you to stay the course – we have a great team, and we need to remain diligent, work efficiently, and fly safely…”