Ueberroth May Replace Top Eastern Managers
Former baseball commissioner Peter V. Ueberroth said Saturday that members of his group of investors, including current officials at other airlines, may replace some of Eastern Airlines’ top management if the planned $464-million purchase of the troubled carrier goes through.
Ueberroth, speaking to reporters in Beverly Hills, said specific plans for management changes had not been drawn up yet. But Phil Bakes, Eastern’s current president and chief executive, may be among those replaced if a new management team is brought in. Ueberroth said “I don’t know” when asked if Bakes is likely to remain at the airline.
Ueberroth declined to identify any of the members of his investment group who would be brought in to Eastern’s management. But he said it was “just a small group” of individuals, including several who now work for other airlines.
Chapter 11 Protection
Eastern’s unions favor replacement of current management of the airline, which filed for protection from creditors under Chapter 11 of the federal bankruptcy code five days after workers went out on strike.
The would-be airline chairman was in town briefly Saturday to appear before institutional investors at Drexel Burnham Lambert’s annual junk bond conference at the Beverly Hilton. Drexel has committed itself to providing $300 million in financing for the transaction.
Ueberroth told reporters that he may continue to receive advice on the transaction from Michael Milken, the former head of Drexel’s junk bond department. Milken on Friday pleaded not guilty to racketeering and securities fraud charges, and has taken a leave of absence from Drexel.
Suggestions From Milken
Earlier in the week, Ueberroth had disclosed that he received suggestions from Milken in a telephone conversation on how to structure the deal. Ueberroth described Milken as a friend.
Ueberroth on Saturday said: “He may call me. I may call him.” But he said any contacts would be limited to receiving advice from Milken. He said Milken would not participate in any transactions.
Negotiations With 3 Unions
Speculation on management changes at Eastern may be moot if Ueberroth’s group fails to come to terms with Eastern’s unions. The investors reportedly are seeking $210 million a year in wage and work rule concessions from the three unions representing Eastern’s machinists, pilots and flight attendants. In exchange, both union and non-union employees would get a 30% ownership share in the company. The Ueberroth group would own 30%, while other investors would get 40%.
Negotiations with the unions were continuing through the weekend, with a deadline of midnight Tuesday. U.S. Bankruptcy Judge Burton R. Lifland has been pressing for a quick resolution. Ueberroth said Saturday that he expects the deal to collapse if an agreement is not reached by then.
Fails to Appear
Speculation that Bakes might be replaced has grown since Thursday, when he failed to appear at the press conference in which the agreement to sell Eastern was announced. Frank Lorenzo, the chairman of Texas Air Corp., Eastern’s parent firm, was present.
In contrast, Bakes had played a prominent role March 9 in publicly announcing Eastern’s decision to file bankruptcy proceedings. An Eastern spokesman said Saturday that Bakes would not have any comment on Ueberroth’s statement.
