Borman Vows to Stay at Eastern; Airline Will Be Run Independently

Eastern Airlines Chairman Frank Borman vowed Tuesday to remain in his job after the company is sold, and both he and the head of the buyer, Texas Air, said Eastern would continue to be operated as an independent airline.

Charles Bryan, president of Eastern’s local of the International Assn. of Machinists, had said Monday that Borman would resign.

But Borman, who has been mentioned as a possible new head of the National Aeronautics and Space Administration, indicated that he had taken himself out of contention for that job. “I intend to stay at Eastern,” he told reporters at a crowded news conference at the airline’s headquarters here.

“I have made a commitment to (Texas Air Chairman) Frank Lorenzo. I have informed people of that intention.”

Also, although he conceded that Eastern would not have had to be sold if all three of its unions had agreed to accept wage and benefit cuts, Borman said the sale to Texas Air had made Eastern a “far stronger company.”

Fully Support Merger

Making his first public appearance with Lorenzo since the deal was announced early Monday, Borman said: “Eastern’s management and Eastern’s board of directors believe this is a far stronger company today than it was Saturday. We are fully supportive of the merger of Eastern into Texas Air.

“As a matter of fact, our investment bankers, Merrill Lynch, sought out Texas Air, and the negotiating that took place over the weekend was done with integrity and, we believe, for the best interest of the employees and shareholders of both companies. . . . We are very pleased with the results.”

During the half-hour news conference, Borman fielded most of the questions in a strong, loud and curt manner. Lorenzo, whose Houston-based holding company owns Continental Airlines and New York Air, answered in greater detail in a soft, low-pitched voice.

Lorenzo said he has no intention of making major layoffs at Eastern but added: “The only guarantee of that is a vibrant company and profitability. We aren’t Santa Claus.”

Lorenzo said Texas Air does not intend to use Eastern planes on Continental routes or to merge Eastern with Continental. “It will continue to operate independently and will keep its own great name, which it has built up over the past 60 to 70 years.”

Will Honor Contracts

He also said that Texas Air plans to honor all of Eastern’s labor contracts but added that he thinks that the pact with the machinists, which runs until next year, should be renegotiated, as Eastern has demanded. During the weekend, machinists local leader Bryan declined to accept 20% wage cuts for his members, and analysts say that was the final blow that forced Eastern into the arms of Texas Air.

Lorenzo was asked whether he thought the merger would face opposition from the antitrust division of the Justice Department, especially because New York Air and Eastern compete heavily in the New York-Boston-Washington corridor. “I don’t see any reason why this (deal) should not be done,” he said. “And we have no interest in selling New York Air.”

Lorenzo denied that he is anti-union, a reputation he acquired several years ago when he placed Continental Airlines into Chapter 11 bankruptcy proceedings when its pilots struck.

“We’re not union busters,” he said. “We’re airline builders. We’ve signed more than our share of union contracts. I carried a Teamster card in my pocket when I was working my way through school.”

The two executives said they believe that the lenders to which Eastern owes $2.5 billion will extend the Friday deadline that the airline still faces if it does not get large concessions from all of its unions. Without such an extension on at least $600 million of its debt, Eastern faces technical default and might have to seek protection under Chapter 11 of the U.S. Bankruptcy Code.

“Eastern management is working on the creditors,” Lorenzo said. “I would expect the creditors are going to be most willing to make adjustments in their agreements.”

‘Aggressive Airline’

Borman said: “If you are a creditor of Eastern Airlines . . . on Saturday you had a troubled airline facing a strike and a potential Chapter 11. Today, we are an aggressive airline. . . . We have a much greater opportunity to share the future in an industry that is very competitive, and I am quite confident they (the bankers) will fully endorse this operation.”

In a separate interview, a banker, who did not want to be identified, agreed it is unlikely that the consortium of 60 banks and insurance companies will push Eastern over the brink.

“One would conjecture that Eastern might ask the lenders for some more time and, under the circumstances, the lenders would consider such a request,” he said.

One observer said he believed that Lorenzo might guarantee the Eastern loans. But Borman, when asked if that might be done, answered with a quick “no.”

A combined Eastern-Continental operation will be a giant force in the industry. Had the two airlines been combined in 1985, they would have reported revenue of $6.5 billion, compared to American Airlines’ $6.1 billion and United Airlines’ $5.3 billion.

Times researcher Lorna Nones contributed to this story.