Air Transport World

Eastern is earning its wings in new markets.

Miami--The doubters had a field day when Eastern Airlines announced its intention of developing a new hub at Kansas City. Their reaction: "Kansas City? With St. Louis so close? No way." But the doubters were wrong. Almost as soon as the new question started in mid-December last year with 15 committed aircraft, Eastern became the dominant carrier at K.C., now with 40 flights a day--and more to come--load factors are running well over 60%, and yields are high.

In retrospect it's clear that the thinking of EAL's planners was right on target. There was a service void at Kansas City following Braniff's departure, United's concentration on its Chicago and Denver hubs, and TWA's decision not to buck its own expansion at St. Louis by beefing up Kansas City. There were studies showing that Kansas City could generate substantial nonstop traffic of its own, in addition to supplying feed passengers. It could enable Eastern to tap a new reservoir--the westbound traffic from the Great Lakes area and the Northeast. It was a market not invaded by low-cost, low-fare carriers, so fares and yields could be expected to remain strong. And, as icing on the cake, studies indicated that EAL's Kansas City passengers would largely be new, not diverted from other Eastern services.

The planners were right. No one competes with Eastern across-the-board in Kansas City. As Eastern sees it, the big competition comes from the TWA/Ozark hub operations in St. Louis. But even here, Eastern thinks it has a marketing edge: hassle-free connections for passengers at the relatively uncrowded K.C. hub. The same feature may also wean many eastwest connecting passengers away from Chicago's busy O'Hare hub, Eastern believes. Happy experience

The carrier's happy experience at K.C. is only one of the reasons President and CEO Frank Borman is breathing easier these days. The first two quarters of 1984 produced operating profits--a total of $59.7 million for the half year, although there was a net loss of $52.3 million for the period. A hard-won labor settlement, bought at the cost of 25% of the airline's stock, should return about $370 million in savings this year through wage givebacks and less-restrictive work rules. The lenders have taken the rubber band off their line-of-credit wallet. Air Florida is out of the Northeast-Florida market, at least for now. The push by People Express into new areas such as California, Chicago and Detroit is expected to reduce that carrier's pressure on Eastern. "We've been bearing the brunt of their operation in the East and Northeast," says Borman. "Now they're spreading the misery around and the other airlines are learning how to spell PEOPLEExpress too, the hard way." And on a personal level, Eastern's board has presented Borman with a five-year employment contract, ending in May 1989.

With the airline freed of some of the distractions which have beset it in the last few years, Borman says, Eastern is now in a position to pursue its long-range strategy more effectively and refine its short-range tactics. …

Log in to your account to read this article – and millions more.