Ueberroth, Eastern Unions Confer on Concession Issue

With the clock running, representatives of former baseball commissioner Peter V. Ueberroth began serious negotiations in Washington on Friday with officials of Eastern Airlines’ three labor unions.

The unions’ willingness to grant millions of dollars in wage and work-rule concessions by midnight Tuesday is considered the key to Ueberroth putting together the deal to buy strikebound Eastern for $464 million.

Representatives of the pilots union said earlier that they would make concessions in hopes of bringing Eastern out of bankruptcy and putting all of its planes back into the skies.

The machinists are considered likely to be somewhat more skeptical, having expressed hopes at one time that Carl C. Icahn, chairman of TWA, would buy Eastern because they believed that the financially ailing carrier would be more competitive if aligned with another major airline. Eastern’s flight attendants, headed by Mary Jane Barry of the Transport Workers Union, are also participating in the negotiations.

For months Icahn has made it known that he was interested in buying Eastern, but Frank Lorenzo, chairman of the airline and its parent company, Texas Air, would not give him permission to talk to Eastern’s unions, a critical prerequisite to a purchase. In an apparent attempt to ensure that Icahn is unable to buy Eastern out of bankruptcy court, a tactic he is rumored to have been contemplating, Texas Air filed suit against him in federal district court in Ft. Bend County, Tex.

The suit alleges that Icahn and TWA are “tortiously interfering” with the contract it signed with Ueberroth on Thursday. The suit asserts that Icahn and TWA have illegally communicated and negotiated with union groups representing Eastern employees, offering inducements to those groups to deal with Icahn and TWA rather than the Ueberroth group.

“Mr. Icahn and TWA are competitors of Eastern and they have every motive to try to scuttle these important discussions,” Texas Air spokesman Art Kent said, referring to the negotiations in Washington. “The delay, confusion and economic damage that Eastern would suffer could obviously provide the opportunity for Mr. Icahn to buy assets at bargain basement prices.”

Icahn Unavailable

Union sources have said for some time that Lorenzo did not want Icahn to buy Eastern because TWA, bolstered by Eastern, would represent a considerably greater competitive threat to Continental Airlines, a non-union carrier also owned by Texas Air.

Mark Buckstein, general counsel of TWA, called the suit “preposterous,” but declined to coment further until he could review it.

Ueberroth reportedly is seeking $210 million a year in wage and work rule concessions from the unions for the next five years. In return, Eastern’s employees, unionized and non-unionized, will receive a 30% share of the company. The Ueberroth investment group also would own 30% and other investors would get 40% if the deal is consummated.

The letter of intent that Ueberroth signed with Lorenzo provides that Ueberroth must be able to reach accord with the unions by Tuesday night or the deal is voided. Parties familiar with the situation have said they think it is unrealistic to think that all details of a new labor contract could be concluded that soon but that an agreement in principle, including a back-to-work agreement, could be finished by the deadline.

Union officials are believed to be concerned about how quickly and extensively the Ueberroth group would shake up Eastern’s management. They have expressed little confidence in the company’s existing management.

Ueberroth won’t be participating in the talks in Washington today. Instead, he will be the final speaker at the annual “Predators’ Ball” held in Beverly Hills by the investment firm of Drexel, Burnham Lambert Inc. This is the first time in the event’s history that Michael Milken, former head of Drexel’s “junk bond” department who is now under federal criminal indictment, hasn’t chaired the conference. In announcing his purchase of Eastern on Thursday, Ueberroth said he had received some unsolicited but helpful advice on the deal from Milken.

Meanwhile, in New York Federal Bankruptcy Judge Burton R. Lifland on Friday held a closed door meeting with representatives of all the major players in the Eastern situation in an attempt to speed up negotiations. Since Lifland was assigned the case after Eastern filed for protection from its creditors on March 9, he has made it clear that he wants Eastern planes flying again as soon as possible.

In this case, as in several other major bankruptcies that he has handled, Lifland has not been bashful about wielding a heavy club. “He knocked all the heads together,” said Robert J. Rosenberg, one of the attorneys representing Ueberroth. But he declined to discuss any other details of the meeting.

Creditors Quiet

Lifland is likely to be keep pushing hard on all the parties because, as he said Thursday, Ueberroth’s deal “has not assured the immediate scheduling of flights, even on an interim basis.”

Representatives of the unions and the creditors were unusually quiet Friday.

However, one creditor’s lawyer called the proposed Ueberroth purchase “encouraging.” But he expressed concerns about how long it might take for the deal to be completed and what impact that might have on Eastern.

Losing $1 Million A Day

“If they try to fly again in the meantime (while Eastern is in bankruptcy court and before the Ueberroth deal is concluded) will there be losses, and if there are losses, who will pay for them?” the lawyer asked. “And there still has to be a resolution of the pension payments,” he said, referring to reports that Eastern has pension liabilities in the range of $300 million to $750 million.

At the hearing Friday, Lifland granted a motion by Eastern to require other air carriers to honor Eastern’s tickets. A lawyer for the company had said such an order was needed to enable Eastern to keep 10% of its operations running, as it has since the strike began.

Eastern currently has cash reserves of about $206 million and hopes to have more than $500 million on hand by the end of May, if a sale of its Northeastern shuttle to real estate tycoon Donald J. Trump for $365 million is completed. Company officials have said that Eastern is currently losing about $1 million a day. The carrier lost more than $500 million in the last two years.

Henry Weinstein reported from Los Angeles. Robert E. Dallos reported from New York.