Unions Turn Up the Heat at Texas Air : Will Demand Pacts or Sale of Eastern
A multi-union coalition Thursday announced the start of a campaign designed to pressure Frank Lorenzo, chairman of the Texas Air holding company, into either settling with his unions “on an equitable basis” or selling Eastern Air Lines.
Eastern employees, who have given the company about $1 billion worth of concessions involving wages, work rules and benefits during the past decade, “have been subjected to a reign of terror aimed at forcing them to agree to further massive wage cuts of nearly a half-billion dollars a year,” according to a resolution adopted Thursday by the AFL-CIO executive council meeting here. Besides Eastern, Texas Air controls Continental Airlines.
Representatives of Eastern’s mechanics, pilots and flight attendants said their campaign against Lorenzo would include demonstrations, public hearings by a special “citizens commission of inquiry” and activities to put pressure on Texas Air’s financial backers.
However, they specifically said they are not calling for a boycott of Eastern or Continental at this time. “A boycott would just play into Lorenzo’s hands” by further injuring Eastern, said Howard Samuel, president of the AFL-CIO’s industrial union department, which is helping the Eastern employees.
Spurned by the unions in recent demands for more concessions, Lorenzo has been downsizing Eastern. In the last two years, he has spun off the company’s reservations system, decreased its work force, sold planes and transferred routes to Continental. Perhaps most significantly, he recently arranged to have a newly formed Texas Air subsidiary buy Eastern’s lucrative shuttle operation in the northeast United States air corridor.
Gone to Court
The unions fear that Lorenzo is attempting to strip Eastern of all of its significant assets, transferring them to non-union Continental or other entities he would form, in order to get rid of its unionized work force.
The unions have gone to federal court in Washington in an attempt to block the sale of Eastern’s shuttle operation, asserting that Lorenzo has merely created an “alter ego corporation” in violation of the Railway Labor Act. Several unionists said they are concerned that if Lorenzo succeeds in this move, it would set a dangerous precedent, comparable to the one he set when he took Continental into Chapter 11 bankruptcy in order to abrogate its labor contracts in 1983.
The sale of the shuttle seems to have been the final straw for the Eastern unions, which have been wrangling with Lorenzo ever since he acquired the airline in 1986. He has been heading for a showdown with his mechanics, represented by the International Assn. of Machinists, since their contract came up for revision at the end of December.
The mechanics have resisted his demands for wage cuts of up to 50%, according to Charles Bryan, president of the machinists local at Eastern here. He said Lorenzo is attempting to force the machinists to strike in early April.
Eastern officials have denied that they are trying to force a strike but they have acknowledged that they have contracted with Orion Air, an air cargo company based in Louisville, Ky., to fly Eastern’s most profitable routes in the event of a strike.
At a hearing in Washington on Tuesday, Rep. Gerald D. Kleczka (D-Wis.), a member of the Government Operations Committee’s subcommittee on transportation, blasted this move as an “attempt to break a strike” that could compromise passenger safety. However, Federal Aviation Administration officials indicated that they would approve of Orion’s temporarily flying the planes under a lease arrangement with Eastern.
The first anti-Lorenzo rally is scheduled to be held in Philadelphia on March 9. Bryan said, however, that the unions hope for a favorable court ruling on the shuttle sale by the end of this month.
Big Loss in ’87
Eastern spokesmen, asked for comment on the unions’ call for Lorenzo either to deal with them equitably or sell the airline, said: “The labor unions are launching a public relations campaign announced today. It is designed to hurt the company, its employees and its passengers as well as the 130 cities we serve. The intent is to cause further deterioration in Eastern’s already serious financial condition.”
Company officials have taken the position that they need massive wage concessions to keep the ailing carrier going. Eastern lost $181.1 million in 1987.
However, at a news conference here, Larry Schulte, president of the Eastern pilots council, said the company has made an operating profit in 49 of the last 52 quarters. But he said the money has not “made it to the bottom line” because those profits were wiped out by debt payments and other additional costs resulting from financial mismanagement of the company.