What made Eastern GO Under?

[Typhoon1244]

Re: FD109

FD109...are you actually reading anything in my posts?

We're all reading them. You're just not very well informed.

What I have said is that Lorenzo showed up after the airline had a fatal wound. No one else showed up at all. You can say it could have been saved but just who showed up to do that? No one.

What exactly do you imagine Eastern's "fatal wound" was? Eastern was, in terms of flight operations, the largest airline in the country when Lorenzo bought it. They weren't in teriffic financial shape, but neither was any other major. Publisher, read this very carefully: Eastern didn't need somebody to "save" it, it needed the guy who was killing it [Lorenzo] to go away!

If you think their costs and structure was like everyone else, give me some numbers.

Why? You don't seem to have any.

The people I referred to that crossed are not my hero's. Just people. People who I refuse to condem.

Look, a scab is a scab, just as a Nazi was a Nazi, and a terrorist is a terrorist. They may have had the best intentions, but that doesn't make what they did any less wrong.

I am not a scab because I have no interest in being a union member or any job that tells me that I have to be one.

So what you're saying is that you're a potential scab.

Frankly anyone who wants to label another individual like that is not going to be any friend of mine anyway.

Fine with me.

You're pretty holier-than-thou about labeling people, but you don't seem to have any trouble making sweeping negative generalizations about union members.

Lorenzo was an easy guy to dislike. Dislike him. He did not come to save the old Eastern, the president did not come to save the old Eastern, and neither did anyone else

You know, it's actually funny how totally out of touch you are with what happened to E.A.L. between '83 and '92. It's also a little tragic. What is it they say about people who refuse to learn from history...?

 

[MetroSheriff]

Re: FD109

FD109


No one else showed up at all. You can say it could have been saved but just who showed up to do that. No One.

Lorenzo was an easy guy to dislike. Dislike him. He did not come to save the old Eastern, the president did not come to save the old Eastern, and neither did anyone else

My details may be spotty, as I was only 24 and watching it on the news. My understanding of history is a little different.

Peter U (the old MLB commish) comes to mind, among others, of potential suitors for Eastern. The way I always understood it, if it wasn't for GHWB and that lackey NY bankruptcy judge, a deal could have been made. If Lorenzo had dealt square with them, not to mention a level playing field, Eastern could have been saved. Albeit probably a shadow of its' former self.

Further, his shenangins in those dealings (Ueberroth) helped lead to Lorenzo's being proven to his business peers, what a slimy crawfishin' b@stard he really was.

Sorry if that offends you publisher, I know you guys are tight.

Maybe MD109 can shed some light for us.

 

[kamikaize]

While we are on the whole scab and strike topic. while Comair was on strike last summer. I came across a few good articles. One was written by a pilot stating "what a pilots worth" He had a lot of valid points about why pilots should make the $$$ that we do. The other article was by an ex Eastern Pilot that had crossed the picket line and how he was treated by everyone and even his closest friends. If anybody has read these and knows where I can find a copy please let me know!!!!!

 

[FD109]

Re: FD109

FD109


What I have said is that Lorenzo showed up after the airline had a fatal wound.

No one else showed up at all. You can say it could have been saved but just who showed up to do that. No One.

If you think their costs and structure was like everyone else, give me some numbers. I think their maintenance cost was one of the highest ever according to ATW.

You can blame Lorenzo if you want, he stripped the assets but who was the alternative savior that was rejected.

The people I referred to that crossed are not my hero's. Just people. People who I refuse to condem.

==============================================
Everyone but Publisher: I appoligize for the length of this post and promise not to do it again. However, Publisher asked for supporting details, and because of the misinfomation and pure BS that he "publishes" I have to answer him. Thanks for your patience.


Publisher,

Exactly what is this preexisting "fatal wound" you keep talking about?

Eastern's costs were high: basically on a par with the other majors at the time. You have to remember, this was early in deregulation and none of the majors had yet adapted to the new environment.

Now, Publisher, some of the details you asked for:

In 1986 prior to the Lorenzo takeover:

(1) Eastern's pilot costs were slightly lower on a fully allocated flight hour basis than the "Big Three" and Pan Am. Slightly higher than Delta because of Delta's better utilization (management). Eastern's pilot costs were lower primarily because our pilot group had voted (through our nasty union) to take pay cuts and give other concessions. (Sources: Supporting data filed with the SEC for a preferred stock offering and an analysis performed by Solomon and Company in late 1985 re: a convertible debenture offering to be made in early 1986.)

(2) Eastern's maintenance costs were high, but, again, on a fully allocated basis approximately the same as the "Big Three" and slightly lower than Pan Am. Because of EAL's massive infrastructure, the company had the capability of doing more maintenance "in house" than many of its competitors and for some maintenance items this makes it difficult to compare costs. The costs of maintaining and operating that infrastructure could be used to make it look like EAL's costs were much higher than actual if you didn't factor in the income produced by doing maintenance for other carriers and operators. The ATW comparison you referred to probably did just that. In EAL's (Lorenzo's) bankruptcy filing the company produced data showing that Eastern's operational maintenance costs were "acceptable" and could be made even better with restructuring. (Sources: Same as item 1 above and EAL's Ch 11 filing)

(3) Eastern's non-contract ground personnel costs were lower than any of the majors and basically the same as Delta's. (Source: Same as 1 above; Eastern's bankruptcy filing)

(4) Eastern's interest and financing expense were among the highest in the industry, and if Eastern had a fatal wound this would have been it. Note, however, that for some reason Eastern made no serious attempt to fix this problem. There were many members of EAL's board who had either direct or indirect connections with various EAL lenders/creditors who directly benefited from the high interest expense. This problem could have been fixed almost instantly by a competent Chapter 11 reorganization and debt restructuring (like US Airways this year). That competent filing would, of course, attempt to preserve EAL's assets. Lorenzo's Ch. 11 continued to strip assets out of the company until even the bankruptcy court couldn't hide it any longer and finally took the company away from Frank L. referring to him as "unfit." (Source: EAL annual reports 1989 and 1990, and bankruptcy court proceedins spring 1990.)

Now, Publisher, lets look at Eastern overall:

(1) Eastern's liquidation value BEFORE Lorenzo was between one and two billion dollars. (Source: Filing persuant to a civil action brought against the TAC board by a group of EAL preferred stockholders and an external audit performed by Tooch-Ross in 1985)

(2) Eastern had one of the largest aircraft fleets in the world with ground assets and operating "slots" in every major market in the US along with a large Caribbean, Central American and South American franchise and a small European franchise. (Source: DOT Annual Statistical Analysis 1985 and EAL Annual Report 1985)

(3) Eastern had (System One) the third largest computer reservation and computer operations system in the industry. According to Aviation Week this asset alone funneled 8 to 10 million a month more into EAL than would have been possible contracting reservations and computer services with someone else.

(By the way. Lorenzo sold System One to himself for 100 million, used TAC junk bonds due in 2007 to pay for it and then charged EAL around 10 million a month to use the system. The bankruptcy court said System one was worth 600 million)

(4) Perhaps most important, EAL had a large, loyal employee group that was eager and begging for a competent management group that would attempt to operate EAL for the benefit of the airline and not for the benefit of investment bankers and others who used EAL as a cash cow.

Publisher, you say' "No one else showed up at all. You can say it could have been saved but just who showed up to do that. No One. "

Again, publisher, you are showing your ignorance. There were, in fact, serveral:

(1) A group headed by Peter Uberroth actually did agree to purchase and Lorenzo agreed to sell the company. Unfortunately, though, Lorenzo backed out of the deal at the last minute. Lorenzo balked when the bankruptcy court would not approve the sale unless a trustee was appointed immediately to take operational control from Lorenzo while the transfer of control to the Uberroth group was completed.

With new management, those nasty unions had agreed to do whatever was necessary to save the company (changes in pay, benefits, work rules, etc.) if the Uberroth group took over. If this deal had been allowed to go through, the company probably would still be here today.

(2) A group associated with the Hyatt Corporation was in serious negotiations to purchase EAL for over six months, but few details are available on the negotiations.

(3) There were other less serious groups as well.

Publisher, anyone who looks at the situation rationally and (unlike you) has some knowledge of what really happened, can easily see that EAL could have (and should have) been saved. The problem was that during that critical period in 1989 and 1990 the company was being controlled by someone who had other motives and didn't want to save it.

And lets not forget, Publisher, that Lorenzo probably wouldn't have had control during that critical period if it hadn't been for George Bush and the SCABS who helped him keep the company going so he could bleed it to death.

 

[Tim47SIP]

????

OK, I give up. What EXACTLY did then Pres Bush do to help in Easterns demise? The DOJ (I believe) forbid FL from ever touching another airline (and I believe any coorporation in the transportation industry). Would a PEB of helped, or would he have been blamed for taking away the unions bargaining power?

 

[FD109]

Re: ????

OK, I give up. What EXACTLY did then Pres Bush do to help in Easterns demise? The DOJ (I believe) forbid FL from ever touching another airline (and I believe any coorporation in the transportation industry). Would a PEB of helped, or would he have been blamed for taking away the unions bargaining power?

I guess you didn't see some of the earlier posts:

All of the union and non-union groups at Eastern begged (telegrams, letters, phone calls, etc.) Bush to appoint a PEB.

1. A PEB would have either forced binding arbitration (that the IAM had already agreed to) or have maintained the status quo while negotiations continued.

I will assume for the monent that all of you airline tyes understand how the Railway Labor Act controls airline labor negotiations and can be used by airline management to "force" a strike that a union does not want. The NMB recognized that Lorenzo was doing just that, and asked for the PEB to prevent the strike. Bush was the first President to ever refuse a PEB after one was requested by the NMB. That insured that a strike would occur. A PEB might have forced the actions necessary to save the company.

2. In the Fall of 1989, Bush vetoed legislation that would have stopped the strike, imposed binding arbitration, and started a cogressional investgation into TAC and Frank Lorenzo. Again this might have saved the company, but Bush vetoed it and we were not able to override the veto.

3. The DOT barred Lorenzo from the industry, but that was too late to save EAL from his actions.

By the way, those of us who were at EAL during this period refer to Bush's veto as the night we were Bushwhacked.

 

[enigma]

FD109,
Thanks for the info. I'm basically a pro free enterprise conservative, but unlike the publisher, I can accept that sometimes labor is not the bad guy. This is definately one such case. Lorenzo entered the airline business because he recognized that the airline business environment was such that they held a tremendous amount of unused assets and idle cash. He figured to buy into an airline, strip it of cash and then hope to keep it operation on the backs of the employees and with cash flow. I originally supported Lorenzo out a basic belief that one who owns has the right to control. Then I found out how the S.O.B. raided the pension funds in order to guarantee his junk bond buy out. I don't believe that any thinking person could defend his actions in the airline industry.

regards,
8N

 

[FD109]

FD109,
Thanks for the info. I'm basically a pro free enterprise conservative, but unlike the publisher, I can accept that sometimes labor is not the bad guy. This is definately one such case. Lorenzo entered the airline business because he recognized that the airline business environment was such that they held a tremendous amount of unused assets and idle cash. He figured to buy into an airline, strip it of cash and then hope to keep it operation on the backs of the employees and with cash flow. I originally supported Lorenzo out a basic belief that one who owns has the right to control. Then I found out how the S.O.B. raided the pension funds in order to guarantee his junk bond buy out. I don't believe that any thinking person could defend his actions in the airline industry.

regards,
8N

What a refreshing point of view. Thanks!

 

[Tim47SIP]

Thanks FD

What is your (or any other ex Eastern guy) opinion on why the PEB request was denied and why the Pres vetoed the legislation? Was the part that pertained to Eastern a part of another bill, or a bill that specifically addressed Easterns needs. The reason why I ask is that Line Item Veto power didn't come untill the Mid 90's so any bill that was vetoed was done so in it's entirety. Additionally, I believe you are refering to the mechanics strike that the PEB would have been enacted. Didn't the pilots strike prior to this one? Why wasn't there any request for a PEB in that case (or was there?). What would have happened if Bush PEB'd the pilots strike? Thanks.

 

[FD109]

Re: Thanks FD

What is your (or any other ex Eastern guy) opinion on why the PEB request was denied and why the Pres vetoed the legislation? Was the part that pertained to Eastern a part of another bill, or a bill that specifically addressed Easterns needs. The reason why I ask is that Line Item Veto power didn't come untill the Mid 90's so any bill that was vetoed was done so in it's entirety. Additionally, I believe you are refering to the mechanics strike that the PEB would have been enacted. Didn't the pilots strike prior to this one? Why wasn't there any request for a PEB in that case (or was there?). What would have happened if Bush PEB'd the pilots strike? Thanks.

=============================================

You need to check your history; Eastern's pilots WERE NOT ON STRIKE. Where did you get that information? The IAM was the only striking group at EAL, and even they were reluctantly forced into a strike.

The pilots and flight attendants reluctantly honored the IAM picket line in an attempt to force action to get the company away from Lorenzo before it was too late. Unfortunately, for the reasons previously stated (Bush and the SCABS) it took a year too long for the bankruptcy court to take action.

I can't remember its "name" or its sponsors (how soon we forget), but the bill Bush vetoed was a single issue.

We (Eastern's employees) were able to get enough members of both houses of Congress from both parties to recognize the emergency situation at Eastern to get it passed and very quickly at that. We couldn't get enough votes after the veto, though, to override it.

Bush probably had several reasons for denying the PEB and for the veto: (1) Lorenzo and TAC were among his largest campaign contributors and he was paying them back. (2) Lorenzo asked Bush to veto it. (3) Bush was probably scared to death of the congrressional investigation of TAC that the bill called for, because it would have revealed his financial and political connections with TAC and Lorenzo. (4) And of course, he was philosophically opposed to any labor group and the IAM in particular.

The point is that Eastern's last chance was the actions specified in that bill and Bush made sure that those actions were not taken.