Lorenzo’s Ouster a Start for Strikers
There just might be some justice soon for the thousands of Eastern Airlines workers fighting a long, discouraging battle against the company’s recently ousted chairman, the combative Frank Lorenzo.
Talks are under way to negotiate new union contracts and restructure Eastern, either through a merger with another airline or a buyout by private investors, with participation by the employees.
The workers’ struggle against Lorenzo’s efforts to break their unions and force them to make even more financial sacrifices has achieved only two goals, neither of which materially helped them:
- Their strike was a critical factor in a federal judge’s decision to remove Lorenzo as Eastern’s chairman, although the direct cause was pressure that was finally applied by the company’s creditors and shareholders.
His departure should help workers in the rest of the industry because it means that no longer will other airlines point to Lorenzo’s devastating cuts in the wages and benefits of his employees as an excuse for trimming their own labor costs.
- The court’s action also brought some emotional satisfaction to the strikers and their allies since the court finally agreed with them that, as Bankruptcy Court Judge Burton R. Lifland put it: “Eastern’s owner/manager as personified by (Lorenzo) is not competent to reorganize this estate.”
There was a nice bit of irony when Lorenzo, who hired thousands of new employees to replace strikers, was finally himself replaced as Eastern’s chairman on April 19 by Lifland.
Until then, Lifland’s rulings in Eastern’s bankruptcy case had consistently helped Lorenzo hang on as chairman despite whopping losses of $1.2 billion suffered just since the carrier filed for bankruptcy protection a year ago.
Equally surprising was Lifland’s choice of Martin Shugrue as trustee to run Eastern. Only last year, Shugrue, who believes in a cooperative approach to labor relations, was unceremoniously dumped by Lorenzo as president of Continental Airlines, which, like Eastern, is owned by Lorenzo’s Texas Air.
Now, intriguing private talks have started that might give the strikers and their allies more than a Pyrrhic victory. There is an outside chance that the behind-the-scenes maneuvers will restore many of their jobs even though Lorenzo “permanently replaced” them with strikebreakers.
One possibility being explored is to keep Eastern flying as an independent airline through a buyout made by a combination of employees and one or more outside investors who have indicated renewed interest in the idea since the court action.
A key ingredient in that approach involves new union contracts that Shugrue says he wants to negotiate. Contract negotiations between the unions and Shugrue are beginning this week, and everyone involved in those talks insists that they want agreements based on compromises Lorenzo refused to make.
An alternative once again being actively explored is an Eastern merger with another carrier, perhaps Northwest Airlines, which would hire many of Eastern’s displaced union employees--not the strikebreakers--to operate Eastern’s part of the merged company.
Lorenzo’s ouster at Eastern could be the least of his troubles. At risk is his entire airline empire because his Texas Air, the parent company, may be forced to assume financial responsibility for losses suffered by Eastern under his leadership.
For starters, Eastern’s creditors, its unions and Shugrue himself may take court action to try to make Texas Air pay up to $400 million that the bankruptcy examiner said Lorenzo may have illegally siphoned from Eastern.
Shortly before the court’s ax fell on Lorenzo, David Shapiro, the examiner, concluded that the airline executive might justifiably be charged with looting Eastern of both money and assets.
Such a loss could be a major blow to Lorenzo because it could force his already ailing Texas Air into bankruptcy if it had to repay Eastern for losses suffered by the alleged looting.
And then there is the giant problem of Eastern’s pension plan that has more than $1 billion in unfunded liabilities that are guaranteed by Texas Air. If Eastern goes under, the federal Pension Benefit Guarantee Corp. says it will go after Texas Air to make the costly guarantee good.
For Lorenzo, the troubles stemming from the battle he started with Eastern’s workers are far from over. But neither will the workers have an easy time regaining what they have lost.
For one thing, to negotiate new contracts with Shugrue, they must find a way to deal with Lorenzo’s strikebreakers.
For instance, worried that Shugrue might negotiate a new contract with the Air Line Pilots Assn., a group of strikebreaking pilots have formed the Eastern Pilots Assn. as an instrument to eliminate ALPA, which has represented the company’s pilots for more than 45 years.
That battle between pilots could last for months, and even if the pilots who went on strike win, the fight won’t help restore much needed public confidence in Eastern’s reliability.
The International Assn. of Machinists, the only union still officially on strike, will also have problems with strikebreakers, but its leaders believe that they can get a contract agreement with Shugrue.
The courts have held that workers, although free to strike, can be permanently replaced--as though the difference between being fired or being permanently replaced has any meaning to workers who are put out of their jobs because they exercised their right to strike.
If Eastern’s corporate structure problems can be resolved, and ways found to undo the mischief done when Lorenzo hired those “permanent replacements,” Eastern’s workers may win their battle with Lorenzo, who epitomizes the destructive confrontational approach to labor-management relations.