Pilots Union Sues to Get Trustee to Run Eastern
The airline pilots union filed suit Tuesday asking that a trustee be appointed to run strike-bound Eastern Airlines while it is enmeshed in bankruptcy court proceedings, a move that would wrest management of the carrier from its chairman, Frank Lorenzo.
The Air Line Pilots Assn., most of whose 3,600 members at Eastern have joined the striking machinists union on the picket lines, charged that Lorenzo, who is also chairman of Eastern’s parent company, Texas Air, is conducting a “systematic attempt to strip Eastern Airlines of its assets and funnel the money to his other airline endeavors.” Texas Air, which bought Eastern in 1986, also owns non-union Continental Airlines.
Only about 100 of Eastern’s regular pilots have continued to fly since the strike by the machinists began March 4. They have been joined by another 100 pilots who are members of the airline’s management.
Since the strike began 10 days ago Eastern has been able to operate its most profitable routes, the Northeast shuttle between New York and Washington and New York and Boston, about 60 flights a day, but has had to drop most of the rest of its more-than-1,000 daily flights. On Tuesday, the airline got about 100 flights into the air.
Eastern filed last Thursday for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. Lorenzo and the airline’s president, Phil Bakes, charged that the pilots’ walkout, which all but idled the carrier, was creating such large losses that Eastern could not survive without the protection.
Would Take Control
Richard M. Seltzer, an attorney representing the pilots, said Tuesday that the ALPA local at Eastern is one of the airline’s creditors. Among other things, he said, the pilots are owed pension fund contributions, vacation pay, sick pay and back wages.
ALPA wants “Lorenzo to lose control of the airline,” Seltzer said, adding: “The trustee would have full authority to run the company, to hire, to fire to make decisions.” Such a trustee would be appointed by Burton R. Lifland, chief judge of the U.S. Bankruptcy Court in New York. There will be a hearing on the suit on April 7.
Farrell P. Kupersmith, a managing partner of Touche Ross, an accounting firm that works for the pilots union, said in a declaration filed in support of ALPA’s lawsuit that “since being acquired by Texas Air, Eastern management has executed transactions with its affiliates that have diminished the value of Eastern while enriching sister subsidiaries (e.g. Continental) and the parent company, Texas Air. . . . Either a sophisticated asset-stripping scheme is under way or management is incompetent.”
Eastern responded by saying the pilots’ action is cynical and unnecessary.
“No one should be surprised at ALPA’s request,” Eastern spokesman Jim Ashlock said. “No trustee appointment is necessary in this matter. Only yesterday, the company asked the court to appoint an examiner to review specific relationships between Eastern, Texas Air and related subsidiaries. ALPA’s filing today is just a cynical game of one-upmanship and there is no conceivable basis for the appointment of a trustee.”
On March 22, U.S. Trustee Harry Jones--a Justice Department official not to be confused with the separate trustee being sought by ALPA--will meet with Eastern’s creditors. At that time, they will choose a committee to represent them in the bankruptcy court proceedings. Seltzer, the ALPA attorney, said the union will seek to be represented on that committee.
Opposes Legislation
In another development, the national ALPA union said it would provide strike benefits of $2,400 monthly for pilots who honor the machinists’ picket lines. They will also get interest-free loans of up to $2,000 for captains, $1,500 for first officers and $1,200 for second officers.
In Washington, meanwhile, the Bush Administration mounted an aggressive campaign against congressional legislation that would force the President to impanel an emergency board to investigate and report on the strike. If the bill is enacted, the board would order the strikers to return to work for a 21-day cooling-off period.
Members of the the House, which is scheduled to vote on the legislation today, received letters from Transportation Secretary Samuel K. Skinner, asserting that President Bush sees “no compelling reason” for forming such a board, adding that advisers would recommend that the President veto the legislation.
“In short, no emergency exists,” Skinner wrote in his two-page letter, “and the President strongly believes that government should not be dictating the economic terms of labor contracts.”
Instead of forming a board, an approach Skinner dismissed as “stop-gap,” he suggested that the government concentrate on legislation “to disallow secondary boycotts across the board.”
The secondary boycott issue continued to fester as U.S. District Judge John H. Pratt in Washington allowed a temporary injunction against secondary picketing to expire at midnight Monday. This opens the way for machinist union members to picket other carriers.
