Ueberroth Ends Effort to Buy Eastern Airlines

Peter V. Ueberroth formally abandoned his bid to acquire Eastern Airlines on Wednesday after he and Eastern’s owners pronounced themselves hopelessly deadlocked over who should manage the company while the strikebound carrier is in bankruptcy.

Although there were signs that a federal bankruptcy judge still hoped to salvage the deal, the failure apparently marked the end of an alliance between the former baseball commissioner and the unions that have virtually grounded Eastern.

Ueberroth had proposed last week to buy Eastern for $464 million in a partnership with the unions. But the bitter dispute between organized labor and Frank Lorenzo, head of Eastern’s parent firm, Texas Air Corp., ultimately derailed the plan.

Both Sides Voice Chagrin

At a news conference here, both sides voiced chagrin that the sale had fallen through. Lorenzo did not participate in the meeting.

“We’re deeply disappointed,” Ueberroth said. The president of Eastern, Phil Bakes, described the proposed sale as “a unique and once-in-a-moment opportunity.”

Bakes vowed to reorganize Eastern as a smaller airline, which the company had been trying to do anyway.

In a related development, a federal judge in Miami upheld the right of Eastern’s pilots to honor picket lines of the striking machinists’ union.

The ruling by U.S. District Judge Edward Davis seriously hurt the company’s effort to get the airline flying again. The company said it would ask a federal appeals court to overturn the ruling.

The ongoing strike worsens Eastern’s financial situation each day, and, in New York, federal Bankruptcy Judge Burton R. Lifland acted late Wednesday to increase the pressure on the airline’s owners. He has repeatedly voiced his determination to get Eastern back in the air.

In responding to a petition filed by an unhappy Eastern customer, the judge ordered Eastern to show at a hearing Monday why it should not be auctioned off but barred from consummating the sale of its profitable Northeastern shuttle service to real estate tycoon Donald Trump for $365 million.

Attorneys for Ueberroth also were ordered to be at the Monday hearing.

The order indicated that the judge might unravel several major transactions among Eastern, Texas Air and Continental Airlines, also owned by Texas Air. These include the controversial sale in 1987 of Eastern’s reservations system to Continental for a reputed bargain price of $100 million. Eastern might also regain planes it sold to Continental and return cash it received for those planes.

Other Suitors in Wings

Several other potential suitors for the airline remain in the wings, including TWA Chairman Carl C. Icahn, who issued a statement Wednesday saying that he remained interested in Eastern. In the past, Texas Air has also received an offer from Jay Pritzker, head of the Hyatt Hotel chain.

A Manhattan diamond dealer Willy Censor, 62, said Wednesday he has formed a partnership with an unidentified foreign airline that he said could raise more than $250 million by the end of the week to buy Eastern. Eastern attorney David Boies said he had met with Censor but it was unclear whether the offer was considered legitimate.

The Ueberroth purchase plan fell apart over a demand by him and the airline’s machinists’, pilots’ and flight attendants’ unions that Judge Lifland name a trustee to run Eastern, which would have wrested control of the carrier from Lorenzo.

“We absolutely will not return to work for Lorenzo,” machinists’ union Vice President John Peterpaul declared.

But Eastern strenuously opposed the appointment of a trustee. Bakes said at the press conference that it would have created “all kinds of uncertainties for the company.”

Although Ueberroth said his deal was “over” and “done,” a partner, J. Thomas Talbot of Newport Beach, Calif., said: “Nobody can predict the future.”

“The deal isn’t dead if Lorenzo comes back to him,” said another source close to Ueberroth. “But he isn’t making any initiatives.”

Bakes said that, since the strike began, Texas Air has had three options. It could sell Eastern, liquidate the carrier--which he characterized as the most profitable of the three choices--or rebuild a smaller Eastern, “which would require the sale of some assets.”

He said that the vastly scaled-back new Eastern would serve only 60 to 80 cities and would reduce its fleet from its current level of about 250 planes to between 130 and 150 planes. And he said the company would reduce its work force to between 50% and 60% of its prestrike level, which was 31,000.

Since the strike began, Eastern has been able to operate only about 10% of its normally scheduled 1,040 flights, and many of those have taken off with very few passengers.

‘We Will Never Go Back’

Virtually all of Eastern’s unionized machinists are still on strike. And there is no indication that the company’s pilots and flight attendants, who have overwhelmingly supported the strike, will back off. Jack Bavis, head of Eastern’s pilots’ union, has vowed on numerous occasions in recent days that “we will never go back to work for Lorenzo.”

The federal court decision in Miami amounted to a major victory for the pilots, their union said.

“The federal court . . . has shut the door on management’s last hope of forcing Eastern pilots back to work,” the pilots’ union statement said Wednesday night.

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