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It's Winter, and Carrier Again Is Seeking Union Concessions : Eastern Airlines' Zoom-Bust Cycle Continues

January 13, 1986|DOUGLAS B. FEAVER | The Washington Post

MIAMI — If this is wintertime, Eastern Airlines must be in financial distress, seeking help from its labor unions.

Just a few weeks ago, Frank Borman, Eastern's chairman and chief executive, was on television, telling viewers that the answer to the question "How's the airline doing?" was "Zoom," a word he punctuated with an upward hand motion indicating the type of takeoff Borman experienced as a fighter pilot.

It's still zoom, but it looks more like a power dive from which recovery could be difficult. "Frank shouldn't have done that commercial," a friend of his said.

An internal study by Arlington, Va.-based Avmark Corp. that was leaked to the Wall Street Journal the other day said what many in the industry have said for years: To survive, Eastern must either get long-term economic relief from its labor unions or enter bankruptcy and impose that relief, just as now-thriving Continental Airlines did under Frank Lorenzo in September, 1983.

Charles Bryan, leader of Eastern's machinists, longtime Borman foil and one of the four labor representatives on Eastern's board, had already held a news conference in Atlanta. There, he called for a "change in top management at Eastern," a vaguely disguised repeat of his 1983 call for Borman's resignation.

Further, the three major unions at Eastern, including Bryan's International Assn. of Machinists and Aerospace Workers, have taken preliminary steps to see if they can acquire the airline. Its employees already own about 25% of the airline as a result of earlier wage agreements.

'Serious' About Buy-Out

Bryan said he is "dead serious" about the buy-out proposal. He said phone calls from union members and the general public this week make it "almost unanimous, we've got to stop this craziness. It's a fine line between profit and loss, and when you compound that with threats of bankruptcy" passengers are driven away from the airline.

Both Bryan and Borman denied in interviews that they leaked the board-commissioned Avmark study, although both could have motives for doing so. Borman has said that bankruptcy is not the way he wants to resolve Eastern's long-term financial difficulties.

Early in each of the past three years, Eastern has gone to the brink of financial ruin, wrested temporary concessions from its unions, recovered briefly, then fallen back again as the unions reclaimed deferred wages and as low-cost carriers such as People Express attacked Eastern's traditional routes from the Northeast to Florida with $49 fares.

Last February, Eastern technically defaulted on its $2.4 billion in loans from New York banks, but the unions came around and the bankers restored Eastern to good standing.

The airline went zoom, recording its best first half in history and a $75-million profit for nine months. Then came the $49 fares, and the last three months of 1985 were "a disaster," Borman said. Wall Street was predicting a $90-million year; now, it appears that if Eastern comes out in the black, it won't be by much.

Bryan noted that there has been some kind of employee wage-deferral program at Eastern since 1975; however, as Borman says, Eastern's employees on average have received annual wage increases of 7.05% since 1979, the last year, incidentally, in which Eastern showed a profit.

Pilots are now averaging $112,535 annually, mechanics $41,879 and flight attendants $30,464. Those are considerably higher than the averages at People Express.

Moreover, they are higher than the averages for new employees at such establishments as United and American, which have negotiated or obtained considerably lower wage rates for new employees in the past two years. United took a 29-day strike by its pilots this year to do it.

$400-Million Cash Reserve

Eastern's status as one of the last major airlines since deregulation in 1978 to retool its wage agreements could be "stupid management," Borman said. However, Eastern has not had the advantages of huge cash reserves and general corporate might that United and American had when they wrested major wage concessions from their unions.

This time, Eastern has a cash reserve in excess of $400 million; in 1983, when Borman publicy threatened bankruptcy and Bryan called for his resignation, the airline had little cash.

Eastern's contract with the IAM runs through 1987. It is now in negotiations with both the Air Line Pilots Assn. and the Transport Workers Union, which represents its flight attendants.

On Jan. 20, the flight attendants can strike (which they have said they will not do) or Eastern can impose new work rules and pay schedules, which it has hinted it might do.

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