Case Study: Eastern Airlines

Improved Essays
Eastern Airlines, once one of the largest iconic airlines in the industry, known for its growth due to The Air Mail Act of 1934, also became known for it’s power struggles and a an ongoing to war with themselves, precisely between management and workers. Like many carriers in the industry during the 1970’s and 1980’s, Eastern was subjected to difficulties due to deregulation which brought on competition within the market, airfare wars as well as waged wars against competitive rivals and in-house management. During those times mostly all industry carries struggled to keep their business up and running and out of bankruptcy, however many lost the battle and were subjected to hostile takeovers, mergers as well as eventually closing their doors …show more content…
Rickenbacker believed in the growth of the company through the growth of its people. His main focus was improving salaries, working conditions, increasing and improving maintenance and passenger service, and providing stock options to the employees. After the acquisition of Eastern by Rickenbacker and his partners he continued to operate under the same work ethics as when he was just the general manager. Rickenbacker’s work ethics and operational philosophies allowed Eastern to be the first airlines in the industry to operate without governmental assistance (subsidies). During his 25 years of head of Eastern, the company never operated in the red and profited each year. They were able to pay their investors and employees reasonably both before and after WW all without assistance from the government and taxpayers dollars. Many would say the success of Eastern was due to Rickenbackers management and the hard working persona he brought to …show more content…
As a result Frank Lorenzo took over operations and demanded lower labor cost with wage cuts and layoffs in order to save the company. Despite the merger with Texas Air, Continental went into bankruptcy in order to reorganize and get out of existent contracts. With lower wages restrictions and expansion to the eastern, western and the Great Plains region due to actuation of People Express and Frontier, Continental became one of the largest airlines in the United States. As a result of Lorenzo’s success with Continental, he was able to acquire Eastern and in doing so brought the same concepts, reorganizing tactics and financial planning to Eastern in an attempt to save the company and regrow it’s reputation within the

Related Documents

  • Improved Essays

    So, this makes difficult for the new entries to come to the market. SkyWest inc. started their own low-cost airlines which are United’s Ted and Delta’s Song. Due to this the major carriers faced lot of loss in revenues from their low-cost competitors. They have invested a large amount on planes and hangars which also makes hard for the new entries. Moreover, there are regulations after the 9/11 attack and it makes more hard for the new entries to enter the market.…

    • 874 Words
    • 4 Pages
    Improved Essays
  • Improved Essays

    It is argued by Tibergen (2004) that due to deregulation of the government and privatisation of airlines, that it often resulted in a large amount of changes in business strategies which often were signing alliances with other companies or the formation of lower cost carrier. In the case of the airline Qantas it resulted in both as it formed an alliance with Emirates and the low cost carrier, Jetstar was created. Sarina’s and Lansbury’s central argument is that after major debates with trade unions, it was revealed that employment relations strategies are an important factor in order to remain a successful business at long term. Following this argument, they mainly support the view that Qantas and jetstar adopted a “hybrid road” business strategies. To do so, they rely on different frameworks used by previous studies.…

    • 1610 Words
    • 7 Pages
    Improved Essays
  • Improved Essays

    Turnover at SAS is unheard of and saves them tens to hundreds of millions of dollars every year. Even before I learned that SAS has never had a losing quarter, I would have guessed that this was a successful company. Employees will put forth more effort in their job if they feel they are appreciated . He even says in the video that a “happy employee leads to…

    • 1284 Words
    • 5 Pages
    Improved Essays
  • Improved Essays

    After a drop in fuel prices in 2009 the cost of fuel has drastically increased. While there is nothing they can do about the cost of fuel, they can look to exchange older plane and planes used on longer routes with new more fuel efficient plans. Another thing they can do is try to pick their routes based on revenue and fuel consumption. While this is not the only thing they need to worry about when picking their routes, it should definitely be a big part of their consideration. Porters Five Forces Threat of new entrants The threat of new entrants is currently low.…

    • 2600 Words
    • 11 Pages
    Improved Essays
  • Great Essays

    Team Case Study Rebecca Sweet, Raven Wilson, Brittany Williams, Selena Cox Fayetteville State University Air Express Industry Bargaining Power of Buyer The bargaining power of buyer’s states that the capability of buyers lowering the prices that are charged by companies and demanding prices be increased so, they can afford to make new and better quality products. Looking at the bargaining power of suppliers, air freight companies are powerful when it comes to dealing with distributors because they can easily forward integrated. The two largest buyers between 1978 and 1981 were Emery Air Freight and Airborne Express. They were created to keep the competitive advantage in overnight shipping. However, around 1980, customers…

    • 1427 Words
    • 6 Pages
    Great Essays
  • Improved Essays

    The Walmart corporation considers 34 hours per week to be full time and is proud to say 74% of their employees are full time (“Fact Sheet-Wages”). As stated in the article “Workplace Fairness” written by the organization Workplace Fairness which is a non-profit organization working to promote and preserve employee rights “ Walmart reported a net income of over $11 billion last year- surely plenty to remedy some questionable workplace practices-yet stories persist about wage law violations and inadequate health care” (Workplace Fairness 1) . Walmart has been underpaying their employees for years until they were faced with extreme pressure from their workers and the public. In 2016 Walmart announced they would be increasing their starting pay to nine dollars per hour, but if a Walmart worker has that starting pay and works a mere 34 hours per week 52 weeks per year they will make about $15,912 for a yearly salary. This amount does not consider the employee taking any vacation time or any weeks off per year.…

    • 1276 Words
    • 6 Pages
    Improved Essays
  • Great Essays

    To counter this, flights were cut by 20% and 16% lay-offs were materialized within weeks. but Southwest held on to its no lay-offs promise. This promise is only made possible through the past organizational culture practices that resulted in strong sustainability, especially, financially. • Southwest CEO Gary Kelly, noted that they are always building a “supportive, active and fun” culture. The importance of this culture is evident in the creation of its Local Culture Committees and a Corporate Culture Committee .The success of this culture is evident since Southwest has received the least customer complaints since 1987.…

    • 1243 Words
    • 5 Pages
    Great Essays
  • Superior Essays

    Pre-merger, American Airlines has over $800 million in labor costs, some of the highest in the industry, they were able to reduce labor and pension expenses while under bankruptcy protection (Bolte, 2014). Post merger labor and pension costs are still a significant expense. American Airlines will need to balance its desire to control these expenses with its desire to attract and retain good employees. Having good employee is an essential part of keeping customers satisfied. As an organization that sells a service, every decision that American Airlines makes should keep in mind its customers.…

    • 1510 Words
    • 7 Pages
    Superior Essays
  • Superior Essays

    The number of competitors and their capabilities has become the main driver of competitive rivalry in the market. The market attractiveness will decrease when there are many competitors offering similar products and services. The entry of low cost carriers have increased the competitive level in airline industry. Besides, the tight regulation of the airline industry whereby safety become paramount leading to high operating cost. The competitive rivalry seems to be in the mature stage of business cycle.…

    • 1270 Words
    • 6 Pages
    Superior Essays
  • Improved Essays

    Downsizing Case Study

    • 2187 Words
    • 9 Pages

    An example of a company having to rehire after a recovered industry is that United States’ airlines laid people off after 9/11 because business plummeted, however when the market improved they had to spend money to rehire (“The Case Against Layoffs”). Southwest Airlines was the only airline to not downsize, and now they are the largest American airline and they have a market larger than all of its competitors combined (“The Case Against Layoffs”). This evidence is a good argument against downsizing because Southwest Airlines did not downsize—even in a time of a drought in the market—and they are extremely successful now. Financial managers who gain this knowledge will spread it to their colleagues and pass it down through generations, therefore decreasing the use of downsizing by…

    • 2187 Words
    • 9 Pages
    Improved Essays