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Frank Lorenzo weighs in

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vc10

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Cue the music from Jaws...

DJ Frank Lorenzo:
Airline Execs Finally Face Labor Cost Cuts
Dow Jones News Service via Dow Jones



By Elizabeth Souder

Of DOW JONES NEWSWIRES



NEW YORK (Dow Jones)--Frank Lorenzo feels more optimistic than most
airline

veterans about the future of the industry, now that major carriers are

addressing their labor costs.

"There may be more sunshine through these dark clouds than people realize,"

said Lorenzo, former chief executive of Continental
Airlines Inc. (CAL), in an

interview with Dow Jones Newswires.

Lorenzo, whose efforts to cut Continental labor costs in the 1980s turned into

a battle with unions, said the stiff competition with low-cost carriers these

days is finally forcing executives with major
airlines to address their central

problem: labor-cost structures that are too expensive for the
airlines to

compete with low-cost carriers.

He said mergers like those he negotiated in the 1980s won't save
airlines

these days.

"Managements haven't wanted to face up to the fight," said Lorenzo, who is

currently chairman of Houston venture capital company Savoy Capital Inc.

"Employee attitude is not No. 1. The main event is the basic survivability of

the company."

Lorenzo didn't shrink from the fight when he ran Continental. In the late

1970s and 1980s, just after the industry was deregulated, he began buying

airlines, merging several low-cost carriers, as well as Eastern, with

Continental, creating a national network carrier. But as rival Texas start-up

Southwest
Airlines Co. (LUV) began to grow, Lorenzo decided that in order to

compete in the deregulated world, he would have to cut labor costs.

His cost-cutting drive turned into a battle with unions, prompting strikes.

Lorenzo filed for bankruptcy in 1983 - the first pre-emptive bankruptcy filing

in the industry, pilots say - and the judge allowed him to tear up union

contracts. After the filing, Lorenzo shut down Continental, then reopened as a

low-cost carrier, hiring fresh employees at half the salaries Continental

formerly paid.

Lorenzo said he had little choice because the union strikes could have

destroyed the
airline.

A spokesman with the Air Line Pilots Association said Lorenzo's then-novel

idea to file for bankruptcy pre-emptively, and call on the judge to abrogate

union contracts, was a cunning trick that employees still can't forgive.

After Lorenzo's bankruptcy move and lobbying by unions, the U.S. Congress

changed bankruptcy laws, making it more difficult to abrogate union contracts in

bankruptcy. Still, experts say the
airlines currently operating in bankruptcy

will likely be allowed to cut labor costs without union consent. On Friday, US

Airways Group Inc. (UAIRQ) asked the bankruptcy judge to reject its contracts

with flight attendants, customer service agents and mechanics.

Lorenzo pointed out that one element is missing in the fights unions are

currently having with US Airways, UAL Corp. (UALAQ) and others: strikes.

"They know that a strike would kill the company," Lorenzo said.

At US Airways, customer service agents have voted to authorize a strike, if

the bankruptcy judge abrogates its contract. But union leaders say they're still

working on a consensual contract.

Lorenzo said that back in the '80s, he was targeted by unions, in particular

pilots, because union members were worried his cost-cutting ideas would spread

to other carriers.

"One of the reasons they took me on is to make sure nobody talked about

cost-cutting," he said. "We were small. They saw that this was a disease and

they wanted to confine it to Texas. But it wasn't a disease. It was the

marketplace."

Still, he said, going through the painful cost-cutting 20 years before other

airlines have faced the problem was good for Continental's finances and balance

sheet.

"In many ways that was a blessing for us," he said.

Lorenzo resigned from Continental in 1990. A few years later, he attempted to

start up a new carrier, but the Department of Transportation rejected his

application, declaring him unfit to run an
airline. Lorenzo at the time

complained that union members had unfairly influenced the decision.

Gordon Bethune, Continental's current chief executive who took over a few

years after Lorenzo left, wrote in his memoirs that the executive offices at

Houston headquarters were full of security equipment when Bethune showed up.

"The paranoid security may have been a leftover from the days when the

conflicts between Frank Lorenzo and the unions made Lorenzo fear for his

personal safety," Bethune wrote. "There were little emergency alarm buttons,

panic buttons in case somebody came in to beat somebody up."

Bethune has spent much of his time as chief executive improving relations with

unions, culminating in an agreement signed by both sides in September to a

partnership relationship, assuring each party a "fair share" of financial

rewards.

Still, Bethune, who retires in December, has warned employees that wage cuts

and concessions may be necessary, particularly if rival major
airlines strip out

labor costs in bankruptcy.

- By Elizabeth Souder, Dow Jones Newswires; 201-938-4148;

[email protected]



(END) Dow Jones Newswires



 
I was wondering what nice cushy ex-CEO job Lorenzo had slimed into. Those types are always taken care of. Leave it to Dow Jones news to write from what that slimball said and not any counter, from say ALPA or ex Continental or Eastern or (insert Lorenzo victim here).
 
Who on earth would actually take advice from this guy? He was a failure in every sense of the word.
 
coolyoke,


First, these folks ALWAYS land on their feet...just the way it is...not worth one molecule of your adreneline.

Second, what could he say you'd want to listen to ? " I feel a lot of pressure under my sternum, short of breath, pain...radiating down my left arm, I'm sweating and feeling nauseated...".

Juuuuust kidding....juuuuust kidding....
 
Bafanguy that was good for a morning laugh. I guess I would've been happy with finding out his unemployment ran out and was waiting to get recalled to corporate America, meanwhile keeping his hand in aviation by cleaning the used blue stuff out of aircraft.
 
It is amazing that he is still alive...


Met the guy in an elevator in a hotel in Bombay once.
The guy I was with, an ex Eastern pilot, turned white and could not talk for a minute or two after the ride up the floors.

I did not recognize 'ol Frank from pictures, the Eastern guy did however, he also explained that there was a secret fund set up in the Bahamas to collect money and put a contract on Lorenzo.

It failed, (obviously) but I can see why the scum-bag was / is paranoid about security.
Would love to clamp my hands around his throat and keep squezzing all the way to hell and back...
 
Isn't Frank a devoted runner?

I don't know his family genetics, but I have a feeling that he'll be taking his potshots for a little while yet.

And laughing his pathetic skinny millionaire ass off in the process.

Too bad he'll never realize his real dream of being an airline guru...a revered captain of industry.

I hate that for you, Frankie!
 
"... but the Department of Transportation rejected his
application, declaring him unfit to run an airline".

That says it all!

Farking Douchebag!
 
Lorenzo at the time complained that union members had unfairly influenced the decision.

No. That says it all. Go ahead and try it again, you slimy weasel.
 
i hope i get a layover in Houston...I wanna go TP that asses house! anybody interested?
 
Yeah.... and dates a certain ex-politician who lives in the area.....
 
Really...Last I heard he was in Houston...Anyway I get EWR layovers all the time. Anybody up for TP'ng?
 
Of course now most of you have come to know that Frank Lorenzo is really "Chuckie".

He is no doubt responsible for all that ever ailed the airline industry and personally bankrupted at least 20 airlines without so much as a tear. As with most evil ones, his reputation far exceeds his real impact.

He gained a rep as a scavenger and that is really all that he or Carl Ichan were. When he took over, he acted swift and decidedly to gain cost control and was never real diplomatic about it.

Then again, the slow bleed process that we suffer through today before one of these capital intensive business dies is certainly just as painful and results in no better management or labor leadership.
 
his reputation far exceeds his real impact.
Ya got that wrong.

His impact far exeeds his reputation.

That guy (arse-hole) ruined more airlines, families, futures and individuals than any raider in the history of US airlines.

Just read the history books, including the ones written after the de-regulation:

The guy was a greedy rat, never did anything good in his life, just kept screwing things over to increase profits and his own bank accounts...Screw the employees and everybody else...His ego and profits was far more important.

Quite a few airlines and their CEOs bought into his BS as well:

SAS got in bed with him and pumped $100 mill into the Continental "partnership"
When Chapter 11 hit, they had to write it off big time

MarkAir took the swine on as a consultant, he advised 'em to get another $100 mill in financing..They did and went out of business.

Again, why the swine is still alive is a big mystery to all in the airline business.

Give me his address however and the mystery can be solved..The Italian way.
 

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