NEW YORK, NOV. 27 -- A federal bankruptcy judge handed Eastern Air Lines a major victory over its creditors today, giving the carrier a $135 million cash infusion to keep it flying until the end of March.
The struggling airline said it needed the cash because bad publicity had scared away passengers and made its suppliers nervous about doing business with an airline whose fate seemed so uncertain.
Eastern trustee Martin R. Shugrue Jr. said the ruling was "clearly a major victory for Eastern." Then parroting the ad campaign Eastern has been running up and down the East Coast, Shugrue predicted, "We will be around in 1990. We will be around in 1991 and for a long time after."
U.S. Bankruptcy Judge Burton R. Lifland said he awarded the money to Eastern because he still has confidence in Shugrue's business judgment and because closing down the carrier on the eve of the busy holiday season could cause considerable disruption to the traveling public. He noted that the Justice Department, on behalf of the Transportation Department, had previously warned that the liquidation of the airline potentially could strand countless holiday travelers.
There are also the interests of Eastern's 18,000 employees to be considered, Lifland said.
The emergency cash request was fought bitterly by Eastern's creditors, which include such companies as American Telephone & Telegraph Co., Boeing Co. and Airbus Industrie. They argue that the carrier should be closed immediately to avoid any further losses and give travelers enough time to make alternative holiday plans.
Joel Zweibel, an attorney for the creditors, said his committee would meet to consider what steps it would take next. Previously, the creditors have suggested they might file a motion to force Eastern into involuntary bankruptcy, which in turn would force the carrier to sell off its planes, routes and other assets piecemeal.
During the hearing today, Zweibel protested that the airline has no chance of surviving and that its problems extend far beyond those created by adverse publicity.
Lifland chided the creditors, reminding them that they had "a duty not to deliberately harm the estate or interfere with its business." Their push for liquidation, he said, "at some juncture seemed to resemble a campaign."
Eastern estimates that the bad publicity in recent weeks has cost it between $55 million and $70 million through lost passenger bookings and supplier demands for cash payments.
American Express Co., for example, has required Eastern to put up a $10 million deposit to protect the credit-card company against losses.
The latest $135 million comes on top of a $15 million cash infusion Lifland granted the carrier only a few weeks ago. At that time, the judge said Eastern could have another $15 million Dec. 3 if it was meeting its financial projections. But Shugrue said today that he could not run an airline while having to come back to court at short intervals to ask for additional funds.
Shugrue, in a motion filed with the court, said he needed the money "before the flying public determines that Eastern is finally headed into liquidation."
Payment of the $135 million left approximately $45 million in an escrow account set up to pay the unsecured creditors. The fund once totaled nearly $1 billion.
Eastern filed to reorganize under the protection of bankruptcy law in March 1989, after being crippled by a strike by its three unions. Shugrue was appointed trustee by the court last April after the creditors demanded that former Eastern owner Frank Lorenzo be stripped of control.