Bankruptcy Examiner Bemoans Lack of ‘Real’ Eastern Bids

Eastern Airlines’ court-appointed bankruptcy examiner complained Tuesday that there had been no “real live” bids for strikebound Eastern and demanded that bidders “put $100 million (in cash) on the table.”

David I. Shapiro made his statement during an all-day hearing in federal bankruptcy court here on whether Eastern should be allowed to sell its highly profitable Northeastern shuttle operation separately. At the close of the session, Judge Burton R. Lifland gave verbal approval to that plan.

The shuttle ruling was a blow to Eastern’s unions, which have sought to keep the airline in one piece. The unions had hoped that one of the offers for the entire airline would be approved and had promised significant wage concessions to the bidders. By doing so, they hoped to help wrest control of the airline from Frank Lorenzo, chairman of Eastern and of its parent, Texas Air.

2 Formal Bids

But Texas Air says it does not want the airline to be sold and that it wants to continue the operation but to downsize the carrier by one-third, selling off $1.8 billion in assets, including the shuttle. If that plan eventually wins out, many of the striking workers would lose their jobs.

The International Assn. of Machinists has been on strike against Eastern since March 4. Most of the airline’s pilots and flight attendants have refused to cross the picket lines, keeping the airline from operating about 90% of its pre-strike flights. The carrier filed for Chapter 11 bankruptcy March 9.

There have been two so-called formal bids for all of Eastern. One is from a group headed by former Piedmont Airlines Chairman William R. Howard and Prudential-Bache Securities. The other is from Chicago options trader Joseph Ritchie, with the backing of the Shearson Lehman Hutton investment firm. Both offers would require the airline to take on $1 billion in new debt.

But the angry Shapiro was not happy with the offers. “Either put up or shut up,” he said in addressing the two groups of bidders. “Eastern cannot be purchased with mirrors. We need real cash on the table. We have come to the end of the line. The public is being ignored and is suffering” from the strike.

In an interview after the hearing, Shapiro said he meant by his statement that a serious bidder “must put up equity capital. Must be at risk. It is called venture capital.” This, he said, has not occurred yet.

America West Offer

In his ruling regarding the Eastern shuttle, which operates hourly between New York and Washington and between New York and Boston, Judge Lifland said he will chose the winner of the bidding war during another hearing next Monday.

Eastern has already agreed to sell the shuttle to billionaire hotel man Donald J. Trump for $365 million. All necessary government approvals have been secured for that deal.

Phoenix-based America West Airlines has offered $415 million for the shuttle, but that deal would take longer to consummate because it does not have the regulatory approvals. Another complicating factor is that Trump’s pending deal with Eastern requires that if it is not consummated by May 27 for any reason, Eastern is required to pay him a “drop dead” fee of $8 million.

Lewis Kaden, an attorney for the Howard group, said Howard and his fellow investors are preparing a separate offer for the shuttle alone and that it would be priced “between the Trump and America West offers.” The group’s offer for the entire airline would also stand, he said.

Harvey Miller, Eastern’s lead bankruptcy attorney, said the shuttle must be sold quickly because its value has been declining because of the strike. Eastern’s market share in its competition with Pan American World Airways on the shuttle routes has slipped to 23% from the 52% it held just before the strike and 72% in October, 1986, Miller said.

Arguing against the sale of the shuttle, Richard Seltzer, an attorney for the Air Line Pilots Assn., described it as Eastern’s “crown jewel.”

But Lifland said, “I cannot find that the debtor (Eastern) is inappropriately exercising his business judgement (in seeking to sell the shuttle.)”