NEW YORK — Negotiators for the Air Line Pilots Assn. reached a tentative settlement with Eastern Airlines Sunday night, a little more than 24 hours after management had told three unions representing its employees that if they did not accept major reductions in wages and benefits, the financially troubled carrier will be sold to Texas Air owner Frank Lorenzo.
Joe Bilotta, a spokesman for the 4,300 pilots, who were set to walk out at midnight Tuesday, stressed the agreement's tentative nature and said it still must be approved by the union's master executive council. "It is just a proposal. It is what both sides feel is the best deal they can live with."
Even if approved, the settlement with the pilots appeared to leave Lorenzo's buy-out offer in place. Eastern still must reach an agreement with the Transport Workers Union, which represents 6,200 working Eastern flight attendants, who are set to strike at midnight Friday.
Moreover, an informed source within the International Assn. of Machinists said Sunday that his union would not accept cuts in its contract with Eastern. That agreement does not expire until next year, but the airline has been told by its creditors that it must obtain wage and benefit concessions from its unions or face default on its notes.
"As far as we can determine, the choices offered to all union groups presently are to reach a negotiated settlement or have the airline sold to outsiders," the pilots' union said in a statement earlier Sunday.
A merger between Eastern and Lorenzo's Houston-based Texas Air, which already owns New York Air and Continental Airlines, would create one of the nation's largest carriers. Eastern flew 33 million revenue passenger miles last year and that accounted for 10% of all U.S. carriers. It ranked third behind American Airlines and United Airlines. Continental ranked eighth with 5%.
'Cash Portion Substantial'
The pilots' union said in an earlier announcement Sunday that "the cash portion of the (purchase) offer is represented to be substantial." The union said its representatives had been informed of the offer on Saturday by Eastern Chairman Frank Borman."
The airline, which was founded in 1927 and which prospered during the quarter of a century that it was headed by renowned World War I ace Eddie Rickenbacker, has fallen on hard times in the last few years. In fact, it is in the midst of its most serious crisis in its history. It has only until the end of the coming week to avert default on its $2.5 billion in debts on which it pays $250 million in interest annually.
According to the machinists' source, the unions were called last Friday night and told to come to a Saturday afternoon meeting. All three unions were told that they had until midnight Sunday to make major concessions--including a permanent 20% pay cut--or the airline would be sold to Lorenzo. The attendants and pilots decided to negotiate. Earlier last week, in fact, Henry Duffy, president of the pilots' union, said that the pilots were willing to take a cut if it was temporary and losses could be recovered when Eastern regains financial health. The airline also is asking for substantial benefit and work-rule concessions.
The machinists, however, declined to accept the cuts. "We've told the company and the other unions we'll take our chances with Lorenzo," the source said. "At least he wants to make money, something that hasn't happened around here for a long time."
According to the machinists source, his union is unwilling to strike a bargain with Eastern because it has no confidence in management. "It would probably take them a year or two to fritter it away," he said, referring to the concessions that the union would have to give the airline.
"We won't get stampeded into a terrible deal that will destroy the union and destroy the members," the source said.
Lorenzo is thoroughly distrusted by most of organized labor. When pilots went on strike at Continental in 1983, Lorenzo filed for Chapter 11 of the federal bankruptcy code. He was thus able to impose new wage scales and work rules for Continental's work force. The unions subsequently thwarted Lorenzo's attempt to acquire Trans World Airlines, but the machinists source said his union was unwilling to play a similar role in Eastern's case. With its lower wage scales and higher productivity, Continental has emerged as one of the nation's most profitable carriers.
John Pinkavage, airline analyst with the New York brokerage firm of Paine, Webber, Jackson & Curtis, said that "it sounds to me as if (Borman) is setting (the unions) up for the lesser of two or three evils. Knowing how much the unions hate Lorenzo . . . that leaves the choice of Chapter 11 or giving in."