Eastern Offers New Contract as Crippling Strike Looms

The scheduled strike against Eastern Airlines on Saturday could imperil the future of the 60-year-old airline and disrupt the nation’s economy.

Although an agreement still could be reached between Eastern and its 8,500 machinists before tonight’s midnight strike deadline, a settlement appeared elusive late Thursday.

Eastern management offered what it characterized as an improved contract Thursday, and federal mediators said there was “movement” in last-ditch talks aimed at averting the strike.

The AFL-CIO said that key unions would refuse to cross any picket lines put up by the machinists. Eastern’s pilots rejected a contract offer from the airline that was seen as a bid to keep them working through a strike. The pilots, along with Eastern’s flight attendants, said they would honor a boycott by machinists.

Meanwhile, President Bush was to meet with advisers this morning to consider a request to impose emergency measures that could postpone a walkout for another 60 days.

But if members of the International Assn. of Machinists and Aerospace Workers walk out and are successful in getting the support of their brethren at other airlines and railroads, the strike could have widespread repercussions.

Nationwide mail delivery could be disrupted, check clearing could be slowed, Wall Street stock brokers might not make it to work Monday morning and cruise ships may be leaving Florida this weekend with empty berths. (Nine out of 10 ship passengers are flown to Florida from other parts of the United States.)

The threat of a strike comes at the end of a 30-day cooling off period during which national mediators have tried to bring the two sides closer. After the midnight deadline passes, the airline is free to impose a new, lower wage scale for the machinists while the union is authorized to begin its strike.

The machinists hope to expand the strike through secondary boycotts. The union has said that member mechanics and baggage handlers could walk off the job at five other major airlines, United, Northwest, TWA, Piedmont and USAir, that have contracts with the union.

The union said that members also could boycott some of the nation’s railroads, including busy commuter lines that carry more than 250,000 people to and from jobs in New York City. The machinists’ union represents many railway workers on the East Coast, including those at Amtrak and Conrail.

In addition, the machinists are counting on members of other AFL-CIO unions to honor their picket lines at airports and rail depots. The participation of other unions would magnify the potential impact of the strike even further.

Although Eastern’s operations are concentrated in the Northeast, the resulting effects of the strike could be felt across the country.

It is not altogether clear if such secondary boycotts are legal. There is no question that railroad workers can legally honor picket lines set up by other unions. A Supreme Court decision held in favor of the unions on that matter in 1987.

Other airlines, however, maintain that such secondary activity would not be legal since it would violate “no-strike” clauses contained in contracts with their unions.

As a result, the machinists have asked a federal court in Washington for a judicial declaration that they are free to engage in secondary boycotts. They also are seeking an injunction to prevent other airlines from interfering with such activity.

The resolution of the secondary boycott issue could determine the extent of the strike’s impact. In the event of a widespread strike, the effect on the nation’s economy would be harsh.

According to the Air Transport Assn., an industry trade group, airlines contribute an estimated $237 billion annually to the economy, ranging from payroll and fuel purchases to landing fees and catering costs.

Every day, the nation’s airlines carry 1.2 million passengers. In many instances, there is no alternative form of travel. American carriers account for 92% of all city-to-city public transportation in the United States.

Eastern hopes to continue limited operations during a walkout. Whether it can succeed depends largely on the airline’s pilots. Late Thursday, Eastern’s pilots said they would not cross the machinists’ picket lines.

Observers maintain that the airline, which has been losing about $1.5 million a day, has enough cash in the till to sustain at least a temporary disruption of service, possibly a little more than 30 days.

“Even if the pilots report for work,” said Timothy Pettee, an airline analyst with Merrill Lynch & Co., “I expect Eastern to be forced to cancel 80% to 90% of its flights.”

Pettee said the airline is banking on what he called “the trickle effect,” in which pilots will cross the picket lines and a significant number of machinists will trickle across, too. If that happens, he said, “the airline hopes to maintain 50% to as much as 80% of its flight schedule.”

But Eastern can’t hold on forever in the event that a strike causes it to cease or radically curtail operations. Analysts predict that during a strike, the airline’s losses would jump to between $2 million and $2.5 million daily.

Eastern is owned by Texas Air Corp., which also owns Continental Airlines. Eastern has already been shrunk by its Texas Air chairman, Frank Lorenzo, characterized as labor’s arch enemy by many unions. They are still angered by his decision in 1983 to take Continental into bankruptcy proceedings, abrogating labor contracts in the process.

The unions have charged that Lorenzo is taking many of Eastern’s assets and either selling them or slowly shifting them to non-union Continental.

Indeed, Eastern has been slimmed in the last few years. In September, 1985, it had 262 planes, operated 1,492 flights serving 123 cities. Today, it has a fleet of 250 planes making 1,040 flights to 110 cities.

Making matters worse for management, the appointment of a special emergency panel by President Bush would postpone $150 million in annual concessions from the machinists for another 60 days, pushing the airline even closer to bankruptcy.

“If there is a protracted strike,” said Robert Decker, an airline analyst with the Chicago research firm of Duff & Phelps, “I am not sure Eastern could survive as a going concern.”

Observers see the union’s threats to picket other entities as a ploy to encourage the President to create the emergency panel.

“They want to use this as pressure on the President to create the Presidential Emergency Panel,” said Jerrold A. Glass, a vice president of the Airlines Industrial Relations Conference, which represents airline labor relations officials.

Would Not Be Binding

Such panels would require the parties to maintain the status quo for 60 days and could recommend a settlement, although its recommendations would not be binding on the parties.

In fact, President Lyndon B. Johnson created such a panel during the 1966 strike, and its recommendations were rejected.

There have only been five such panels created in the last three decades. The last one was established in 1978.

But observers predicted Thursday that President Bush would not create such a panel until after a walkout had begun. To do otherwise, they said, would undermine the collective bargaining process.

Late Thursday, an Eastern official said the new settlement offer reduces the size of the proposed wage cuts and also offers new security to union members and limits the subcontracting of work to outside companies.

Eastern said that it offered a flat rate of $16 an hour for mechanics, compared to $18.83 an hour at present. Previously, the company offered a sliding scale of $14 to $18, depending on the level of skill of the worker.

Eastern also offered a reduced reduction in pay for baggage handlers as well as new job security provisions.

The airline had asked the handlers, now making $15.60 an hour, to take a cut to $10. The new proposal increased the offer to $11.54.

National Mediation Board chief negotiator Harry Bickford said at a news conference that “an amended proposal was made from one party to another and it is being considered.”

He said that “some interesting developments have occurred” and that often breakthroughs came in the waning hours of negotiations. But he would not say which side offered the amended contract or give any details of the bid to end the 16-month dispute.