For part 1 in this series see:
For part 2 in this series see:
Literally one of the last deals Acker pursued was the acquisition of 5 white tail Boeing 727-227 Advanceds Boeing had not delivered to Braniff due to its failure. These would be part of the big push to take up the slack left from Pan Am’s retrenchment of National’s North-South route network to Florida. Unfortunately Acker on taking up the Pan Am gauntlet repealed the retrenchment and Pan Am was back with a vengeance just at the time the new 727s joined the fleet. This was just the first part of a larger competitive struggle that damaged Air Florida.
Acker’s departure also hurt the carrier’s stock price. Prior to his leaving it had been a whopping $17 a share but by the new year it was down to less than $6.50. This was both a reflection of the god-like status Acker had gained in the market place as a wizard and his dumping of his entire 450,000 share stock load into the market place.
Further the economy was already heading south when in August 1981 the PATCO strike hit and although this was routed by the Reagan Administration (when Reagan sacked all the air traffic controllers) it caused chaos in the schedules. It hurt everybody but Air Florida with mountains of debt (now at higher interest rates) was more susceptible than others.
The bad news continued to pile up for Air Florida, which on January 13, 1982 suffered its first fatal accident. I won’t go into the details of the accident here (Wikipedia has the details of the crash), however the loss of Flight 90 and the death of 78 aboard the 737 would be a shattering blow to Air Florida at a time when it was weakened. Part of the issue was the high profile of the crash and the well-publicised and emotive image of an effectively complete Air Florida 737 tail and rear fuselage fished out of the Potomac River on a barge proudly displaying the QH colours for all to see.
Much has been made of the crash and its impacts on the airline, but alone it is unlikely to have been a massive long-term issue. It certainly caused a temporary and sizeable (c.100,000 seat) cancellation of bookings but the wide range of other challenges (debt, the economic downturn, competition and Acker himself) would be the factors that would lead to the airline’s eventual demise. By the end of the first quarter of 1982 the airline was in the red with a $14 million loss.
Competition continued to bite at the airline’s profitability as well. Alongside the newly, and temporarily revitalised Pan Am, Eastern and Delta were fighting it out in the market place to Florida. Additionally, several deregulation startups like Northeastern International and American International were also participating in what became a fare war.
With all the mounting problems it was little surprise that a change in leadership was needed and in May 1982 Eli Timoner (who had also suffered a stroke) announced that Donald J. Lloyd-Jones would become President and CEO, with Timoner staying on as Chairman. Lloyd-Jones had been a high-ranking American Airlines executive since 1972. He said:
“I left American because I saw a better opportunity at Air Florida”
I imagine he came to regret the statement and his move to QH. Second quarter losses amounted to $15.7 million and despite the hope of a profitable third quarter losses continued. It was clear changes needed to be made. Lloyd-Jones undertook a major restructuring which included shrinking to profitability. The DC-10 fleet was slashed and the almost brand new 727s dumped. The last 727 service was on October 1, 1982 but several of the aircraft remained on the books until mid-1983. It was simply cheaper not to fly them. Five 737-2T4s on order were cancelled also, but the 757 order somehow optimistically survived.
The schedule was also heavily reduced with for example services from New York reduced from nine to six. Along with this came redundancy for a third of the workforce (1,200 people). On the flip side the airline pivoted to increase flights to the Caribbean and Central America where competition was less fierce.
Despite the cuts the tough operating environment continued and Air Florida still made a loss in the first quarter of 1983 of $11 million, with revenues of $53.7 million (down 29.2% due to the cuts). Even so Lloyd-Jones said he was encouraged as the airline was profitable in March for the first time in 20 months. In many ways the achievements of Lloyd-Jones was quite impressive. When he joined debt was at $220 million but he had reduced that to $175 million by the end of 1982. In addition to the cuts the fleet restructuring, replacing newer aircraft with older cheaper ones, and streamlining to just 737s (and the leased DC-10) helped to make the airline more sustainable.
Unfortunately for Lloyd-Jones 1983 wasn’t to be as kind to his airline as he hoped. Having to pay (along with Boeing) over $50 million in compensation to survivors of the crash of Palm 90 couldn’t have helped Air Florida’s desperate finances either. During the first quarter of 1984 it lost another $8.4 million. By April 1984 the game was up for Lloyd-Jones who was ousted due to ‘policy differences’ and replaced by a J.R.K Tinkle.
It mattered little as the airline was on its last legs despite securing a loan of $5 million from General electric Credit (which allowed it to pay a $2 million debt to the Airline Clearing House that had seen it suspended) and selling off 4 737s for $47 million. It had debts all over the place, for example it was forced to give up its long-term lease and all its capital equipment at Orlando International when it couldn’t pay a $634,000 debt. Interline agreements with Delta and Eastern were not renewed and the airline began defaulting on employee’s medical insurance payments.
The end came abruptly on July 3, 1984, the day before the busy Independence Day holiday, leaving thousands of passengers stranded. The debts stood at a staggering $221 million (of which $140 was secured). The airline’s 1,200 staff who had just accepted a 10% pay cut a month earlier were all terminated and the 11 remaining aircraft in the fleet grounded.
Vague hopes of ever getting Air Florida into the air again never eventuated and in September 1984 the remaining assets were purchased by Midway Airlines for $53 million. Ultimately it seems that Ed Acker far from being the wizard he was credited with grew Air Florida in a completely unsustainable way and jumped ship just as the airline had to face the debt crisis that he instigated. It is highly likely that the airline would have failed in the crazy early 80s era of deregulation anyway but saddled with such a vast debt load it had little hope. In fact, it is impressive it survived for as long as it did.
1982. Knight. J. Air Florida: Small Skyrocket Airline Already Had Hit Bumpy Weather. Washington Post
1982. Shavin, M. Donald J. Lloyd-Jones joins Air Florida. UPI
1983, Salpukas, A. LOSSES POSTED BY DELTA, UNITED AND AIR FLORIDA, New York Times
1983. Air Florida gets stronger. Flight International
1984. Potts. M. Air Florida Files for Bankruptcy. Washington Post
2006. Young, B. Air Florida. Airliners # 98
I'm Richard Stretton: a fan of classic airliners and airlines who enjoys exploring their history through my collection of die-cast airliners. If you enjoy the site please donate whatever you can to help keep it running: