Eastern Air May Face Union-Led Proxy Fight
The three unions representing Eastern Airlines employees have warned of the possibility that they will conduct a proxy fight for control of the financially ailing carrier.
In filings with the Securities and Exchange Commission that became known Monday, the unions warned that, if their efforts to work amicably with the company’s board are not successful, they “would have to consider what other action, if any, would be appropriate. . . . Such actions could include a decision to seek additional board representation and/or to solicit proxies for the nomination and election of an independent slate of directors or to influence management through an extraordinary corporate transaction, a significant increase in stock ownership or otherwise.”
In the filing, which was made late Friday at SEC headquarters in Washington, the unions said they had made no decisions as to future actions, nor did they specify what they meant by “an extraordinary corporate transaction.”
Meanwhile, Eastern’s pilots union joined the company’s machinists union in urging its members to buy shares in the airline, presumably in order to make it possible for union members to vote out the current management, which is led by Chairman Frank Borman.
Deadline Is Today
The Eastern local of the Air Line Pilots Assn. released a statement saying that its “highest governing body” had approved steps to urge all Eastern pilots as well as pilots at other airlines to immediately acquire Eastern stock. The statement said members would have only until the end of Wall Street trading today to buy shares if they wish to vote at the airline’s annual meeting, set for April 11 in New York.
The stock ownership date of record to establish eligibility for voting at that meeting is Feb. 12, and stock must be purchased five business days before that.
Eastern’s lenders have given it a deadline of Feb. 28 to obtain agreement from its unions on wage cuts, threatening to call in their loans and place the airline in technical default. Eastern owes $2.5 billion.
The unions said in the SEC filing that they had “determined to pursue a joint program consisting of working together to deliver a high-quality product to the flying public, bring about necessary changes in the company’s management and increase employee ownership.”
Charles Bryan, head of the airline’s local of the International Assn. of Machinists and Aerospace Workers, called on his members to purchase Eastern stock several weeks ago. Eastern employees now own about 20% of the company’s common stock.
Not Given Much Chance
But Louis Marckesano, an airline analyst with Janney Montgomery Scott in Philadelphia, said there is little likelihood that pilots have sufficient time or money to purchase a meaningful amount of stock. He said Eastern has about 90 million voting shares outstanding. The stock closed Monday at $6.75.
There are 4,300 pilots at Eastern; the ALPA represents 37,000 pilots at 49 carriers.
The filing with the SEC made by the unions is called a Form 13-D. It is required by the agency when a single entity achieves ownership of 5% or more of the shares in a company.
However, the Eastern local of the Transport Workers Union, representing flight attendants, was listed as owning no shares of Eastern stock; the machinists union also owns none, and the pilots union was listed as owning one share. A lawyer representing all of the unions, who asked that his name not be used, said nothing prohibited them from filing the form even though they own virtually no stock. He said they did it to stem the speculation in the press about the unions’ intentions regarding Eastern.
Two union leaders, Bryan and Robert Callahan, president of the Transport Workers Union local at Eastern, are already members of the airline’s board of directors.
