Eastern Air Lines is actively searching for a partner to help keep the airline flying and avoid liquidation.
The airline's trustee, Martin R. Shugrue, said yesterday in a speech here before the International Aviation Club that the airline currently is "in discussions with two such potential partners whose investment interest in Eastern is real," though he declined to identify them.
Shugrue's speech came amid a swirl of rumors that Eastern may soon be forced to shut down operations and sell off the company's planes, routes and facilities piecemeal unless it can quickly come up with a new source of cash.
Shugrue said Eastern has developed a new business plan, but, he said "with the turmoil in the industry today, Eastern admittedly faces an uphill struggle. ... " He also said that the airline is seeking to sell additional assets in an effort to raise cash.
The airline filed for bankruptcy protection from its creditors in March 1989, shortly after its machinists, joined by its pilots and attendants, went on strike.
Revenue at the airline is below a projection of just a month ago and, in the last week, Eastern planes were flying less than half full despite a major campaign to attract passengers with discount tickets. "The yield is way down," a source said. "They're giving tickets away."
Late last November, the airline withdrew the last $135 million set aside in a special escrow account to keep Eastern flying. That money is now almost gone, according to sources, and Eastern could be forced to shut down operations within a matter of days unless it quickly finds a marriage partner with a large dowry.
Sources familiar with Eastern's finances said the airline's cash on hand has dwindled to $46 million at the beginning of the year. Without further cash from airline operations or the sale of additional assets, the $46 million could be nearly depleted by now.
An Eastern spokesman said yesterday the airline would not discuss its cash position.
Eastern President Bob Gould discounted rumors that the carrier was considering liquidating, saying such reports were not unusual for a company in Eastern's financial condition.
The airline is scheduled to meet Tuesday in federal bankruptcy court with its secured creditors, who have asked the court to assure them of "adequate protection."
The funds that Eastern has used to finance its losses and keep it operating have come from money that had been put in escrow for Eastern's unsecured creditors.
The unsecured creditors, including major aircraft manufacturers and other suppliers, are owed approximately $1 billion, but only about $100 million is left in the account reserved for their repayment.
Shugrue had said when he received the last cash advance from the creditors that the money would allow Eastern to implement a business plan that could return it to profitability. But the airline industry is facing unprecedented losses as a result of higher costs for fuel and a downturn in the economy.
In the meantime, Eastern has reached a tentative contract agreement with its flight attendants that is expected to save the airline about $17 million a year.