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Interview: Eastern CEO Talks 777 and Strategy as Traffic Picks Up
Despite diminished demand, shrinking fleets and network cuts affecting airlines around the world as a direct result of the COVID-19 crisis, Eastern Airlines made headlines earlier this month as it acquired its largest aircraft yet and applied to serve its first regularly scheduled domestic flight.
It’s important to distinguish which Eastern Airlines we are discussing. The original Eastern Air Lines shut down in 1991 and the rights to its iconic livery and name are currently owned by iAero Airways, the airline that acquired all the assets of the 2015, all 737-version of Eastern Air Lines which stopped flying in 2017.
This article discusses Eastern Airlines, formerly known as Dynamic International Airways. Recently rebranded as Eastern, the Wayne, Pennsylvania-based airline focuses on charter flights and recently began operating regularly scheduled passenger flights.
AirlineGeeks spoke with President and CEO Steve Harfst recently to discuss the airline’s strategy amid current industry conditions.
Purchasing a 777 During a Pandemic
On May 29, Harfst and his team closed a transaction to acquire the carrier’s first 777 jet, expanding into a new fleet type. N771KW, a Boeing 777-200ER began its flying career with Singapore Airlines in 2002 and was stored in Victorville in February 2020. Harfst saw an investment opportunity with this aircraft and knew that the relatively low cost of acquisition would create long-term benefits for the company.
“Our business model is based on wholly-owned aircraft and engines. So being opportunistic in the marketplace to take advantage of value when it’s presented is what we do. We saw a good opportunity to enter the triple seven aircraft type and complete this transaction. We think long term, the triple seven is going to be a good platform for us,” Harfst said.
Up until last month, Eastern’s entire fleet was made up of four 767-200ERs and four 767-300ERs, all of which are fully owned by the airline. The airline’s first 777 is currently undergoing routine maintenance checks and is preparing to undergo the full certification effort with the FAA to add the fleet type to Eastern’s operations specifications.
The 777 will wear Eastern’s new livery which the airline recently debuted on one of its 767-200s. As of last week, the all-white 777 was in the paint shop receiving the unique new colors. Onboard, Eastern is overhauling the 406-seat single-class configuration. The airline plans to add the aircraft into service sometime in the fourth quarter.
“It will be a mixture of economy and premium economy seating. It will be standardized with our 767-300 fleet once that fleet is reconfigured as well. We will not have a first class, business class type of traditional layout, it will be more of a single class charter type configuration,” Harfst said.
The Benefits of Being a Small U.S. Carrier
While busy purchasing a new aircraft, Eastern has also been learning some of the benefits and challenges of operating a small U.S. airline during a time of unprecedented downfall in travel demand. As a small company, Harfst claims that Eastern has been able to be a lot quicker and react at a faster pace than some of the larger airlines.
“Being a small company, we’ve been able to be very nimble and reactive and quick to deploy our airplanes and pockets of the market where there’s been demand. We’re taking it one step at a time. If you’re small and able to have a resourceful team, which we do, we were able to take advantage of opportunities and deploy our airplanes,” Harfst said.
As border restrictions became implemented in March, Eastern began scheduling flights to repatriate Americans from South America. The airline has carried over 17,000 passengers from these operations and is slowly returning its focus on charter and commercial flights as demand for repatriation flights dies down.
“We see a balance between charter and scheduled service in the future, but certainly scheduled services are going to grow because it started from nothing. We are focused on getting back to that business segment once those airspace restrictions start to be rescinded and travel starts to open up,” Harfst added.
Looking Towards the Future
Charter operations have always been at the core of the carrier’s business model, originating from the Dynamic Airways days and this is not going to change. In January, however, the airline inaugurated its first regularly scheduled commercial flight between New York-JFK and Guayaquil, Ecuador.
“There are a lot of small, secondary, or niche types of markets that aren’t big enough for big legacy airlines to commit capacity to, but still have viable demand. And with our cost structure and the way that we’ve built our company, we think we can operate limited frequency in these smaller markets and do well and provide a service that doesn’t exist today. Namely giving people a chance to fly nonstop in markets that require one or two stops,” Harfst said.
He continued to state: “There’s a big world out there and a lot of markets and airlines, even with their codeshare partners, still can’t serve every single market. We think that there is a decent number of markets that are big enough for us to serve on a limited frequency model that a larger airline wouldn’t think is big enough to commit to daily plus service.”
The airline’s focus right now is inbound traffic to the U.S. and finding markets that lack nonstop service from its primary focus spots in New York and Miami to begin with.
Additionally, Harfst sees the narrow-body low-cost markets in the U.S. being pretty full, so the airline doesn’t see the need to compete in those markets. The carrier, however, intends to serve domestic routes in the future as well. Most recently, the airline applied to operate three weekly flights between New York City and San Diego.
“We’re still in the assessment phase and the route authority is pending and waiting to be processed by the DOT. But given what’s going on in the industry and the reduction of capacity within the U.S., we think there are going to be similar opportunities domestically. The New York, San Diego market was an example of a market that was going to have excessive to abandoned and reduced capacity, so we saw an opportunity there,” Harfst said.
While Harfst didn’t elaborate on any other potential U.S. routes, it is clear his airline intends to file more routes with the Department of Transportation (DOT) in the future. As Harfst’s airline sets out to connect secondary markets in the U.S., David Neelman’s new Breeze Airways intends to do the same thing. One big difference, however, is the aircraft in use. Neelman’s carrier will be using new Airbus A220s with high cost of ownership, while Harfst’s carrier flies older aircraft at a lower cost of ownership.
“There just seems to us that there’s opportunity out there for a niche operator to carve out a niche strategy on all the fundamentals of running a good airline,” Harfst said, referring to his airline’s strategy.
Given the current state of the industry and the mass aircraft retirements across the globe, Eastern sees the potential of acquiring more second stage aircraft in the coming years. While the airline has not yet confirmed any new purchases, the removal of fleets such as Air Canada’s 767 and Delta’s accelerated 777 retirements may present interesting opportunities for Eastern.
From assembling a resourceful team to establishing their own identity for Eastern without letting go of the rich past history, the airline has been busy this past year building a foundation to grow from. While COVID-19 has thrown a major curveball at the carrier, Harfst is ready to slowly return to the airline’s core charter and commercial strategy in the coming months and ultimately scale the business over the next few years.
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