Skeletons In Eastern's Hangar

By RICHARD BEHAR

Advertisements usually rely on persuasion rather than outright pleading. Not this summer's TV campaign starring Martin Shugrue Jr., the macho court- appointed trustee of bankrupt Eastern Air Lines. In the latest spot Shugrue, an intense Jack Nicholson look-alike, touts the airline's virtues and exhorts would-be passengers, "We're there! Try it!"

Getting people to fly Eastern became an even more daunting task last week when a federal grand jury in Brooklyn indicted the company and nine of its managers for a conspiracy that involved falsifying repair records and failing to maintain its aircraft. The 60 counts are the first criminal charges for poor maintenance ever leveled against an airline. They cover a period from 1985 to October 1989, six months before Shugrue took command from union-buster Frank Lorenzo, head of Eastern's parent, Continental Airlines Holdings. The indictment is a major blow to the trustee's struggle to revitalize the airline, which has been losing more than $1 million a day since a machinists' strike began last year.

In announcing the charges, U.S. Attorney Andrew Maloney contended that upper management forced underlings "to keep the aircraft in flight at all costs" at three major airports: John F. Kennedy International and LaGuardia in New York City and Hartsfield International in Atlanta. Many charges involve an illegal practice known as pencil whipping, or signing off on work that has not been performed. Mechanics allegedly failed to perform maintenance on cockpit gauges, landing gear, radar and fuel systems. While no accidents resulted from the neglected work, "thousands of innocent passengers may have been put at risk every day," Attorney General Dick Thornburgh declared.

Eastern contends that the violations have long since been remedied and that it now operates a safe airline. The Federal Aviation Administration, which has fined the company more than $12 million since 1987, agrees. Moreover, Eastern officials say the airline is being victimized by malicious strikers who have made exaggerated claims in grand-jury testimony, as well as by politicians and prosecutors hungry for scapegoats. "The U.S. Attorney has explained to us that Eastern is being used to send a message to the airline industry," complains Eastern spokesman James Ashlock. But critics of Eastern ask why, if the airline is earnest, it has failed to discipline any of the nine men named in the indictment, seven of whom were still employed as of last week.

Whatever the prosecution's outcome, few airline experts expect Eastern to lure enough business travelers to remain independent. The company will lose at least $500 million in 1990, and is currently filling 63% of its seats on its 800 daily flights -- up from 53% in May but far below the 80% needed to break even. Moreover, the recent gain is due more to deep discounting than to Shugrue's aggressive ad campaign.

One suitor for Eastern's planes and gates is Northwest Airlines, whose chairman, Alfred Checchi, is a friend of Shugrue's. Will the indictment frighten him off? Not likely. "The die is cast. Eastern has a limited life," says analyst Robert McAdoo. "The indictment may even scare creditors enough to enable a company like Northwest to cut a sweeter deal." Though Eastern's absorption by a rival would increase airline concentration and reduce competition further, some travelers seem untroubled. Says Christopher Witkowski, director of the Aviation Consumer Action Project, a group formed by Ralph Nader: "If the allegations are borne out, Eastern would no longer deserve the faith of the flying public. It will have broken the public trust."