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No Early Rush To Change Airlines, But Observers See Problems

April 14, 1988

HOUSTON (AP) _ Travelers didn’t rush to cancel flights on Eastern or Continental airlines Thursday in response to an unprecedented federal investigation, but travel industry people predicted business at both lines will suffer.

In Eastern’s home base of Miami, an employee of Barry White Travel Agent Inc. said no one had made travel changes through the agency.

″We haven’t had anybody cancel. Eastern is very strong in Miami. The majority of people take Eastern,″ said the agent, who did not give her name.

No changes were made through Dulaney Travel Agency in Dallas either, agent Crystal Lennon said.

Eastern spokesman Karen Ceremsak said the airline had not seen any drop in bookings.

But Isabel Chalen, owner of Four Corners Travel Agency in Miami Beach, Fla., said she foresaw problems for the airline from the government’s probe into the finances and safety of Texas Air Corp., parent of Eastern and Continental.

″Some of my customers already don’t want to fly on Eastern anymore,″ she said. ″I am pretty sure that it is not going to get any better.″

Indeed, Patti Engle, a traveler waiting to board an Eastern flight in Fort Lauderdale, Fla., said: ″It concerns me a lot. I wish I knew this before it was 20 minutes before my flight.″

And in Atlanta, Marissa Barker of Golden Jet Travel said she had several customers change future Eastern flights to Delta Air Lines because ″they’re just really concerned that Eastern won’t be around.″

″I even changed my flight from Eastern to Delta this morning,″ she said. ″I’m concerned that maybe they aren’t safe. I’ve heard so many bad things about Eastern.″

The Department of Transportation announced Wednesday it would investigate whether Texas Air and its management were ″fit, willing and able″ to carry commercial air traffic.

The government has investigated small airlines and has revoked the operating licenses of some minor carriers, but analysts said this was the first inquiry involving major U.S. airlines.

Texas Air’s airlines together account for 20 percent of all U.S. air traffic. Continental is the country’s fourth largest airline, while Eastern is the sixth largest.

Financial analysts predicted that the federal inquiry, added to the company’s financial and labor headaches, could drive more passengers away.

″That announcement alone is a potential problem to an airline or airline system that can ill afford the publicity, given its already well publicized problems - from labor issues, to safety, to Continental’s service record,″ said Anthony Hatch of Argus Reserach Corp.

″They’re not getting enough people on the planes because they have such a bad reputation, whether it’s deserved or not. Add this issue and it’s hard to quantify the effect on people’s decisions. God knows what will happen if the government does indeed find they are unfit,″ he said.

Houston-based Texas Air had record losses of $466 million last year and has an overall debt of around $5.4 billion.

Louis Marckesano of Janney Montgomery Scott Inc. in Philadelphia said recent disputes between Texas Air Chairman Frank Lorenzo and the unions had contributed to a loss of confidence in Eastern and he predicted the investigation would do further damage.

In a separate action on Wednesday, the Federal Aviation Administration announced a civil penalty of $823,000 against Miami-based Eastern because of ″recurring trends″ in connection with violations of safety regulations.

The fine was imposed just over a year after Eastern agreed to pay a $9.5 million penalty in connection with other safety violations.

The latest fine is based on findings from an investigation in September and October, but Eastern now has an opportunity to challenge it. If the airline can produce evidence the FAA considers valid, the fine could be reduced.

Eastern ran full-page ads in newspapers Thursday, including the Washington Post and the New York Times, saying it welcomed the investigation because it will show the airline is operating safely and has been unfairly treated by federal authorities.

″We’re confident the outcome will be a very good one,″ Eastern President Phil Bakes said.

In addition to Eastern and Continental, Texas Air also owns Rocky Mountain Airways, Britt Airways, Bar Harbour Airlines and Provincetown-Boston Airlines.

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