Eastern Airlines Earns $24 Million : Quarterly Profit Is 3rd in Row but Labor Talks Hit Snag

Eastern Airlines Chairman and Chief Executive Frank Borman on Tuesday announced the company’s third successive profitable quarter, which he said shows that Eastern has successfully completed a difficult adjustment to an unregulated airline market.

Speaking even as the company was jarred by a new snag in labor negotiations, Borman said the Miami-based carrier earned $24.3 million on operating revenue of $1.22 billion for the quarter ended March 31, compared to a loss of $28.1 million on operating revenue of $1.07 billion in the comparable quarter of 1984.

Borman attributed the strong earnings to the now-ended Pam Am strike, strong first-quarter air traffic as well as the company’s cost-control steps. Passenger volume in March set a record for the company, which has lost $380 million in the past five years.

Borman said quarterly operating income of $78.5 million set a company record. Under its proposed new contract with its unions, Eastern subtracted from its quarterly operating income a reserve of $28.9 million for employee profit sharing.

In another apparent effort to sell the contract to its unions, Borman noted that the quarterly reserve amounted to nearly $1,000 for each of Eastern’s 38,000 employees. The figure would be reduced, however, if Eastern were to lose money later in the year.

Borman said the quarterly report and the profit-sharing funds set aside marked a “very happy occasion for us” and insisted that new signs of labor’s unhappiness with the three-year contracts will not prove to be an obstacle.

Borman said Eastern was not in any way prepared to sweeten its offer to the unions.

In a narrow vote Monday, Eastern’s machinists union narrowly turned down the proposed contract despite the recommendation of its leadership. The agreement called for an 18% pay increase over three years for 12,000 mechanics, baggage handlers and other ground workers but lower pay for newly hired workers.

And last Friday, the company’s flight attendants voted to reject a proposed pact by a 5-1 margin.

Under a deal with its creditors, Eastern must reach agreements with the unions by May 15 or technically fall in default on $2.5 billion in loans and lease agreements.

One analyst, Alfred Norling of Kidder, Peabody in New York, said the default deadline poses “a problem for them really only technically.” But he added that the rejection of the pact by two unions could explode into serious difficulties because the airline probably could not make concessions to some unions without new demands from others.