A federal bankruptcy judge Thursday granted a request by Eastern Airlines to appoint an independent examiner to oversee the company’s affairs, but he broadened the examiner’s powers beyond those requested by the airline.
U.S. Bankruptcy Judge Burton R. Lifland said after a hearing that he was taking the action quickly “because this is a public interest case. I do not intend to let this case string out.”
Eastern has been crippled by a machinists’ strike since March 4. On March 9, it filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code while it reorganizes.
Neal S. Mann, assistant U.S. bankruptcy trustee, said later in an interview that the examiner will be appointed either today or Monday. Interested parties--creditors, unions and Eastern--have until the end of business today to make recommendations.
Mann said the examiner--who is likely to be a lawyer, an investment banker or a financial analyst--will “investigate the assets and help negotiations by the parties in the bankruptcy and . . . facilitate a constructive reorganization plan.” The examiner must canvass all parties involved in the bankruptcy, determine the issues and identify problems that could impede a resolution.
While Lifland gave the examiner greater scope than Eastern had wanted, he did not go as far as the airline’s labor groups wanted. They had asked for appointment of a bankruptcy trustee who would have been given effective control of the airline during the bankruptcy proceedings, displacing Eastern’s current management.
Mann said the unions’ request, on which a hearing is scheduled April 7, has become “moot, given the scope of powers of the examiner.” The request was made by the striking International Assn. of Machinists and Aerospace Workers and by the Air Line Pilots Assn., virtually all of whose members have refused to cross the machinists’ picket lines.
Richard Lieb, an attorney for AT&T; Communications, one of Eastern’s creditors and a member of a 15-member creditors committee appointed Wednesday, said the quick decision by Lifland was “surprising.” He said he had thought that the decision would be deferred until the committee had had time to consult with its lawyers and to determine its position regarding such an appointment.
A spokesman for Eastern said, “We are extremely pleased at today’s action . . . and we could not be more pleased with the fact that the judge has broadened the scope and authority of the examiner’s duties.”
He rejected the interpretation of some observers that the decision was a victory for the unions, saying, “This company is still being operated by its board of directors, and not by a trustee, as the unions had requested.”