Eastern Unions Open to Latest Bid; Airline Resists
An 11th-hour bid for strikebound Eastern Airlines appeared to have the support of the carrier’s unions Sunday, but spokesmen for Eastern reaffirmed their determination not to sell the airline.
“It is a very aggressive offer,” said a high-ranking union official who spoke only on the guarantee that he not be identified. “It has plenty of flexibility. It will be by far the most acceptable offer to the court and to the creditors’ committee.”
Specifics of the offer by a group led by Chicago commodities trader Joseph Ritchie were not available, but it is believed that the deal promises Eastern’s unions a greater stake in the ailing carrier than was previously offered. A group headed by former Baseball Commissioner Peter V. Ueberroth had offered the unions a 30% stake in the carrier in exchange for about $210 million in concessions. That agreement subsequently fell through.
But Texas Air Corp., Eastern’s parent, has said repeatedly that it is not interested in selling the airline. Robin Matell, an Eastern spokesman, scoffed at the Ritchie offer Sunday, calling it “a house of cards.”
Instead, Texas Air has said it plans to downsize the airline by a third and continue to operate it, selling off assets of $1.8 billion to pay off its creditors. Numerous bids have already come in for planes, slots, gates, routes and for the lucrative Eastern shuttle, which flies in and out of New York between Boston and Washington.
The Ritchie group’s offer, to be financed by the Shearson Leahman Hutton investment banking firm, is the second formal offer for the airline as a whole. Investors headed by former Piedmont Airlines Chairman William R. Howard have also made a formal bid for Eastern in conjunction with Prudential-Bache Securities.
A lawyer on the Eastern side said Sunday that “there’s not that much difference in the two offers. ThE only difference is that there are different investment bankers.”
He said the Ritchie group had constructed an offer in which the investors are “providing very little up-front money. . . . It includes some ‘junk bonds,’ some paper and a small amount of cash.” The lawyer said all of the players on the Eastern side, including Eastern President Phil Bakes, were scheduled to meet for dinner Sunday night to map strategy.
Any agreement involving all or part of Eastern must be approved by U.S. Bankruptcy Court in New York. Bankruptcy Judge Burton R. Lifland has scheduled a hearing for Wednesday to consider the alternatives, including Eastern’s intentions to continue to operate as an independent carrier.
Another hearing is scheduled for this morning on the sale of Eastern’s shuttle. There are two offers on the table: a $365-million offer by New York billionaire Donald J. Trump, and a sweetened $415-million offer by Phoenix-based America West Airlines. The Trump deal has received all the necessary regulatory approvals and is awaiting bankruptcy court OK.
The lawyer for Eastern said sale of the shuttle would not be a stumbling block for the Ritchie or Howard groups. “They’ll buy whatever they can get,” he said.
Ritchie had been mentioned as a potential bidder for Eastern for some time, and his offer was not unexpected. However, when the airline sent him confidential financial information about the airline, the material went to a different person with the same name, according to Harvey R. Miller, an attorney representing Eastern. As a result of the error, Lifland gave the Ritchie group two additional days past a deadline last Wednesday to examine the material and to submit a bid.
It is also known that Ritchie had held several lengthy meetings recently with Charles Bryan, the fiery head of the Eastern local of the International Assn. of Machinists and Aerospace Workers.
Eastern filed for Chapter 11 bankruptcy protection March 9, five days after its machinists went on strike. The airline was virtually crippled when members of the Air Line Pilots Assn. honored the machinists’ picket lines.
As reported Sunday, Frank C. Carlucci, the former Secretary of Defense, would run the airline temporarily if the bid by the Ritchie group succeeded.
Also involved with the Ritchie group is Joseph W. Wright, a former director of the Office of Management and Budget. Carlucci and Wright are affiliated with the Caryle group, a Washington investment company.
