Case Study: Trump Shuttle

President Donald J. Trump (referred to as Trump for the rest of the article) claims to be an expert in the aviation industry, however, his own airline closed after less than three years of domestic operation, despite his relatively successful career as a real-estate mogul.


Trump Shuttle launched to a great fanfare in June 1989, when Trump acquired seventeen Boeing 727s, the necessary landing facilities in three cities (Boston, New York, and Washington DC), and the right to put his name on the company and its aircraft, from Eastern Airlines. By the end of August, 1989, the venture had a strong market share of 40–50%, while running flights from Boston, New York, and Washington DC. Trump had insisted on luxury flights for white collar passengers, complete with marble sinks, chrome buckles and gold fixtures. The airline was also a pioneer in the adoption of new technologies. For example, it introduced some of the first passenger self-service check-in kiosks (in coordination with Kinetics) and partnered with LapStop (a start-up which rented laptops to passengers). Additionally, Trump Shuttle was an early adopter of the GTE Airfone in-flight telephone system, and their flights offered complimentary champagne, beer and wine, along with free meals (chicken and steak were offered on certain flights). It should be noted that Trump tried to maintain a strong competitive position around this time and spent millions on advertisement campaigns.


Two months after launching the airline, one of the aircrafts was forced to crash land at a Boston airport due to maintenance errors prior to the acquisition. Trump personally flew on the next Trump Shuttle to Boston in order to manage the media reaction to this accident. It was reported that Trump called the incident ‘the most beautiful leading you’ve ever seen’.
Additionally, Trump’s luxurious trimmings also caused unforeseeable issues, for example, the marble he insisted on having fixed were too heavy, and the presence of thick luxury carpets meant that the drink carts became harder to move. Also, to save money, Trump reportedly advised cutting cabin staff from three to two, an audacious move that would have violated FAA (Federal Aviation Administration) safety regulations, which requires a pilot, a co-pilot, and an engineer to be on an aircraft during operation. After a year after purchasing the airline, it is believed that Trump pondered selling it and later laid off about 10% of the workforce. Despite these issues, Trump Shuttle received a government contract to ferry U.S. military personnel between the key domestic bases.


Over 18 months of operation, the venture lost $128 million and was sold off by its third birthday. Trump escaped responsibility for $245 million in loans and $100 million in funding, yet he still claimed, and possibly believed that this airline venture had been a success. Trump Shuttle was acquired by Shuttle Inc. which was later acquired by US Airways, which merged with American Airlines during July 2000 at which point the shuttle was christened as American Airlines Shuttle.


It should be noted that Trump Shuttle was never a profitable business. Despite popular belief, the responsibility for the failure of this risky venture doesn’t explicitly fall only on Trump’s shoulders; however, his methodology of management was a major factor to this output. Trump ran his airline like one of his high end real-estate projects (as indicated by the luxurious fixtures and marble sinks) despite both being drastically different markets, a move that incurred major financial costs for Trump Shuttle. Additionally, losses incurred by Trump’s casinos and other similar ventures also had a major impact in the decline of Trump Shuttle as Trump had to liquidate some of his assets, and cede control over several business holdings to his bankers in June 1990 in order to avoid personal bankruptcy.


Several external factors also played critical roles in the downfall of Trump’s airline venture. One such issue was depressed demand was the economic recession that affected the US Northeast in late 1989; this was further made worse by the Iraqi invasion of Kuwait. The Iraqi invasion caused jet fuel prices to double in August 1990. While costs of running the airline rose, many of the corporate customers using the shuttle were cutting travel budgets, making his ever-shrinking customer base drastically smaller.


It can be stated with confidence that Trump’s shuttle venture is a good example of how not to run an airline business. This short case study identifies several external factors which contributed to the rise, fall and subsequent acquisition of Trump Airline. Additionally, this case study has identified how and why this relatively successful venture eventually failed along with the identification of all responsible parties.