CHAPTER 11
BAD DUDE RISING
Frank Lorenzo Grabs Continental
John F. Kennedy, renowned phrase-maker that he was, will probably be remembered
as much for some of his flippant utterances as for the stately cadences of his
more serious ones. His pithy observation that “life is not fair” bears heavily
on ALPA’s history in the Duffy era. That Hank Duffy, the product of Delta’s
peaceful world, should find himself presiding over ALPA during a time of savage
confrontations on Continental, United, and Eastern, is a surpassing historical
irony. But life isn’t fair and neither is history—Frank Lorenzo’s emergence
guaranteed it.
When last we left Francisco A. “Frank” Lorenzo, he had successfully gobbled up
little Texas International (TXI), stalemated J.J. O’Donnell, and converted
himself from an industry lightweight into somebody who clearly had designs on
heavyweight status. In the process, this upstart flea who would be an elephant
had made himself thoroughly obnoxious to ALPA (as we have seen in the New York
Air episode) and established links to Michael Milken, the junk bond king who
would finance Lorenzo’s ventures, which many observers saw as little more than
stock market “greenmail” at first. The pilots and other unionized workers at TXI
saw Lorenzo as the Devil Incarnate, but the rest of the airline community
regarded him as rather “cute” —a bit bug-eyed and overly ambitious, perhaps—but
cute.
“We were still Tree Top Airlines [a play on the pre-TXI name of Trans Texas
Airways],” recalls former TXI Master Chairman Dennis Higgins of Lorenzo’s heady,
early days. “Here is a guy who is doing things real fancy. We could hardly pick
up a newspaper without reading something about our company, and we wanted to pat
him on the back. But we were afraid he might bite our arm off.”
Everybody loves a success story, and Frank Lorenzo seemed to personify the
genre, almost defining the myth of rags-to-riches in his workaholic personal
habits and aggressive style. J.J. O’Donnell, as we have seen, was worried about
Lorenzo, whom he saw as an amoral and potentially dangerous adversary, even
under the pre-1978 system of governmental regulation of the airline industry.
With the coming of deregulation, O’Donnell, fully supported by the TXI pilots,
raised alarms about Lorenzo’s methods and the portents his negotiating tactics
raised for the future. But most rank-and-file ALPA members weren’t overly
concerned. To them, Frank Lorenzo was still just a small blip on the
early-warning radar. Although increasing numbers of informed ALPA members
fretted about him, far too many line pilots saw Lorenzo as slightly comical,
particularly in his abortive efforts to outbid Pan Am for control of National,
or barring that, muscle in on their markets with such things as “Peanut Fares.”
Many line pilots (including even a few who worked for him) actually saw Lorenzo
as admirable, a “comer” who miraculously induced large financial networks to
support his ventures and generally shook things up in the airline industry.
“Based on what we knew of him as a consultant, we looked forward to having him
come aboard,” Dennis Higgins recalls. “We wanted to be supportive because the
McKaughans (the family who owned TXI) had reached the top of their ability to
produce profits, and the carrier had teetered on the edge of bankruptcy a couple
of times.”
This favorable attitude evaporated rapidly, but some ALPA insiders thought that
focusing too heavily on Lorenzo, in a personal sense, was a mistake. They saw
this as giving him too much free publicity and distracting ALPA from other
problems that were more serious. To turn Frank Lorenzo into the bete noir
of the industry prematurely, they felt, would give him clout he didn’t deserve
and might hamper efforts to work with him in the future, a particularly
important consideration should Lorenzo actually succeed in establishing himself
and his holding companies (Jet Capital, and later Texas Air Corporation) as
major players in the industry.
“We did everything but take out full-page ads calling his wife a whore,” says
Tom Ashwood, who held the offices of secretary under O’Donnell and first
vice-president during the first Duffy administration. “Frank was just nastier
and tougher than most airline executives, but by personalizing the attack on
him, making him into Darth Vader, we reached the stage where doing business with
him was impossible.”
Ashwood’s view of Lorenzo was logical enough, given the climate of labor
relations during the long peace between management and pilots, which generally
characterized the era of direct government regulation. After all, ALPA had not
for a long time confronted a rapacious airline owner who sought domination
rather than accommodation—occasional unpleasantries notwithstanding.
All that was about to change. The generation of professional airline pilots who
matured in the 1970s had never dealt with an airline boss who manifested an
instinct for the jugular. Behavior like that was passé. The whole
experience of modern airline pilots was that their counterparts in management
were reasonable technocrats who knew the limits of their power and understood
that the airline business was, at base, a cooperative enterprise that required
informed consent and mutual respect, particularly when dealing with flight deck
crews. Even the fabled curmudgeons of the early years who survived into the
modern era, men like Bob Six of Continental Airlines, men who had once engaged
in the airline equivalent of tong wars with their pilots, had eventually
mellowed. A modern version of E.L. Cord was no longer possible. So most pilots
believed.
The ghost of old Dave Behncke must have stirred uneasily somewhere, for
historically, the airline bosses he dealt with wanted the heads of their
unionized pilots on a platter—not some namby-pamby “working relationship” with
them. In the brave new world of deregulation, no ALPA member should have been
surprised that Frank Lorenzo would cast himself as an atavistic throwback to an
earlier age—he had certainly given plenty of warning. When the crunch with
Lorenzo came, many pilots would see him as the Adolph Hitler of the airline
industry.
Historical analogies are tricky things. By comparing the story of ALPA’s wars
with Frank Lorenzo to the struggle against Adolph Hitler, we risk trivializing
one of the great tragedies of history. Nevertheless, the analogy has a certain
symmetry, wherein the pilots of Texas International become Czechoslovakiaon, the pilots of Continental
Airlines become Poland, and
(as we shall see in a later chapter) the pilots of Eastern become the Soviet Union—victorious, but at a terrible cost.1 Similarly,
many would say that comparing Frank Lorenzo to Hitler trivializes crimes of
unimaginable dimension. Frank Lorenzo may have disrupted peoples’ lives (and
even caused a few psychologically shaky individuals to commit suicide), but he
never sent anybody to the gas chamber. But then again, some professional
historians argue that Hitler was really no different from any other European
leader of his era—just “tougher and nastier” (to quote Tom Ashwood’s comparison
of Lorenzo to other airline bosses). And so the analogy comes full circle.
Continental Airlines, whose pilots would shortly take center stage in the
struggle against Lorenzo, worked in a corporate culture as distinctive as any in
the industry. Despite previous namesakes in the 1920s, the modern version of
their airline dates only to 1937, when Robert F. Six parlayed his holdings in
Varney Air Transport (a small feeder airline operating single-engine Lockheed
Vegas in the mountainous West) into a merger with Wyoming Air Service. Six gave
the combined airline its current name and, from the late 1930s through World War
II, learned his business while benefiting from the cautious expansion that
government regulators allowed. Bob Six inspired intense loyalty among his
employees, developed a cadre of talented managerial subordinates (such as
Harding L. Lawrence, who would later take Braniff to glory and grief), and
eventually transformed Continental from what was no more than a regional airline
into a “trunk” carrier (by the Civil Aeronautics Board’s definition).
As one of the smallest of the 11 major airlines, Continental grew in the
post-World War II period into a respectable operation, serving routes which
stretched from Texas to the West Coast and beyond. In the 1950s, Continental acquired Pioneer Air
Lines, won the right to serve Chicago, and began flying turbine equipment, the Vickers Viscount. During the 1960s,
Continental’s flight crews, through the airline’s Air Micronesia (popularly known as “Air Mike”) subsidiary, gained international experience and graduated to the same
equipment that the major carriers were flying, mainly B-707s on Military Airlift
Command contract operations in the Pacific.
During the long years of Bob Six’s reign, Continental’s pilot group developed a
“Delta-ish” reputation, in that they were steady and quiet about their unionism,
rather than militant. Continental pilots were more likely to be active in the
professional and technical aspects of ALPA work (the “nuts and bolts”
committees) than in the “political” side of ALPA, although there were
exceptions, like Dennis Duffy, who became executive vice-president (EVP) at the
same time Hank Duffy became president—to the endless confusion of ALPA’s
mailroom. Continental’s ALPA members could occasionally be hard-nosed when they
thought management was persecuting a pilot, but that was a rare occurrence. In
general, the Continental pilots’ relative quiescence spared them the kind of
rancor that scarred relations between other ALPA pilot groups and management.
The Continental pilots’ relatively peaceful life was purchased at a price,
however. Owing to the airline’s semi-feeder status in the early days,
Continental’s pilots always lagged behind the national average in pay and
benefits. They were so intensely proud of their airline that they were willing
to swallow these inequities, for many noneconomic compensations went with
wearing a Continental uniform. Their special relationship with management and
agreeable working conditions fostered a cohesive, close-knit sense of belonging,
and they tended to live in “airline ghettoes” at the various domiciles (Denver, Los Angeles, Houston, and Honolulu), where they
socialized together, both as individuals and families. Despite a brief strike in
the late 1950s during the struggle with the Flight Engineers International
Association over the qualifications of the third crewmember, peace and goodwill
reigned at Continental for many years. Being a Continental pilot and being a
“good company man” were almost synonymous.
But change was in the offing. The temper of these changes between the “old”
Continental pilot group and the younger pilots hired during the 1960s emerged
clearly in the 22-day strike of 1976 (October 24 to November 15). It began when
the younger pilots’ patience with Bob Six’s promises of pie-in-the-sky finally
ran out and ended in a three-way welter of bad feelings among ALPA’s national
officers, the Continental MEC, and the Continental pilots themselves. The strike
also marked a watershed of sorts for the Continental pilots in their relations
with management.
Although a majority of Continental’s pilots still regarded themselves as “Bob
Six’s boys” and saw their airline as “family,” an increasing number of junior
pilots (the so-called “Young Turks”) grew skeptical of both the company’s
intentions and the senior pilots’ pro-company bias. This problem came to a head
over Continental’s history of seasonal furloughs, which had historically been
short. Senior pilots regarded these furloughs as a normal part of paying
professional dues—the “You ain’t a real airline pilot, kid, ‘till you’ve
been furloughed” syndrome. But to junior pilots, the furloughs were
intolerable—a prime example of managerial incompetence. As the company’s
financial position became shakier in the waning years of Bob Six’s tenure, two
relatively long furloughs, in 1970 and again in 1974, affected a substantial
number of junior Continental pilots.
Thus the younger pilots were the catalyst in the 1976 strike, which was strictly
economic in origin. Put simply, the Young Turks were tired of living under the
threat of furloughs and flying for 80 percent of the pay their professional
colleagues at other airlines received. Two key players in this strike were Bob
Strauss (a handsome and magnetic leader who bore a striking physical resemblance
to the movie star Tom Selleck) and Larry Baxter, both of whom were members of
the Negotiating Committee. As leaders of the Young Turks, Strauss and Baxter all
but took the play away from Gary Thomas, the MEC chairman. With the assistance
of Jim Rinella, the LEC chairman at Los Angeles, Continental’s
largest domicile, the Young Turks seized effective control. Thomas was closely
tied to a group of senior pilots, men like Don Ballard, Wes Coss, and Jack
Daniels, who had dominated ALPA affairs on Continental through the 1960s. Larry
Baxter, highly intelligent but abrasive, was generally regarded as the most
militant of the Young Turks.
One startling aspect of the 1976 strike
was a series of angry confrontations between J.J. O’Donnell and the Continental
pilot leadership. For example, during an Aug. 17, 1976, meeting in Washington, D.C.,
the Continental Negotiating Committee (composed of Strauss, Baxter, and Dick
Nelson) became so angry with O’Donnell’s criticisms of their tactics, timing,
and expenditures that they walked out en masse on him!
“I told Baxter he wasn’t competent to conduct negotiations. I really laid into
him,” O’Donnell recalled in his 1991 interview of that stormy meeting in
Washington. “I said, ‘Larry, you’re going to take the Continental pilots right
off the cliff, and they’re going to die, and you’ll be responsible.’ He stood
up, said something to little Jim Rinella, who pretty much did what Baxter said
at that time, and out the door they go.”
O’Donnell, previously burned by an unsuccessful strike on Northwest, was
increasingly skeptical of the effectiveness of strikes. He made no secret of his
belief that Continental’s pilot leaders were behaving unwisely, and he feared a
strike would poison the well of “good-faith bargaining” that had previously
existed at Continental. Even more alarming to O’Donnell was what he regarded as
the Young Turks’ unyielding negotiating stance, which he feared would force a
strike that might drive the carrier into bankruptcy. O’Donnell was acutely aware
that bankruptcy could lead to the abrogation of union contracts.
“I was absolutely skeptical of the strike as an effective weapon as early as
1972,” O’Donnell said in 1991. “Every time we tried it, we lost. I told the
Continental pilots in 1976 that they had other alternatives—take a look at sick
days, stay within the Railway Labor Act, operate by the book, as long as you
start that program a year before, show it’s your normal delays, never use the
term ‘slowdown.’”
O’Donnell had good reason to fear that bankruptcy might lead to the abrogation
of union contracts. In an eerie foreshadowing of Frank Lorenzo’s later use of
the bankruptcy laws in 1983 to terminate the Continental contract, Universal
Airlines (which had previously been known as Zantop Air Transport), a cargo
operation based in Michigan, had broken its ALPA contract in 1971 through the
auspices of a bankruptcy judge. ALPA contested this contract abrogation, but
before it could be resolved in the courts, Universal ceased operations in May
1972, putting 400 ALPA pilots on the street. O’Donnell had been forced to deal
with the fallout from this obscure case during his first term as ALPA’s
president. Ed Nash, who got out of the U.S. Air Force in 1959, just in time to
confront a very tight job market for pilots, went to work for Zantop before it
merged into Universal. He flew Zantop’s DC-3s and DC-6s for a flat 3 cents per
mile, an experience that motivated him and his fellow Zantop pilots to explore
union affiliation.
“ALPA wasn’t particularly interested in us, so we approached Allied [the
American Airlines pilots’ union],” Nash recalls. “They didn’t want anything
to do with us, so we looked at the Teamsters. That got kind of ugly—forklifts
through cars and so on. I was pushing for ALPA from day one.”
By the time Nash left Zantop in 1967 for a job with Continental, Zantop had 400
pilots, and ALPA was definitely interested, largely owing to Ed Nash’s skills as
an organizer. In 1968, Universal (the renamed Zantop) signed an ALPA contract,
but the victory was short-lived. After the “non-sked” airline declared
bankruptcy in 1971, its pilots worked without a union contract until it shut
down. O’Donnell, aware that bankruptcy could jeopardize an ALPA contract,
worried that Continental’s pilots were courting a similar disaster in 1976.
“Zantop pulled a maneuver similar to Frank’s later one when it declared
bankruptcy right after ALPA organized them,” Ed Nash recalls. “I am convinced
that Frank Lorenzo was aware of it.”
Indeed he was. A very young Frank Lorenzo, fresh out of school with his MBA
degree, was working for Universal (Zantop) as a financial analyst at the time!
At the time of Continental’s 1976 strike, O’Donnell was privately furious with
Gary Thomas, the Continental MEC chairman in 1976, for letting things get so out
of hand that a reprise of the Universal–Zantop bankruptcy might be possible.
“He made the mistake of letting that third, you know, that militant third, guys
like Larry Baxter, get out of hand,” O’Donnell declared later.
But an ALPA president interferes directly in the internal affairs of an
MEC at his peril. O’Donnell could only watch with rising alarm and disapproval
as the Continental Negotiating Committee, in the absence of firm control from a
generationally divided MEC, allowed itself to be maneuvered into a strike the
majority of Continental pilots did not want.
Ed Nash, who had gone to work for Continental in 1966 after leading the
organizational effort among his fellow Zantop pilots for ALPA in the early
1960s, involved himself in ALPA service as a “water carrier” all through the
1970s. Nash, who was not an admirer of the Young Turks, saw Larry Baxter as the
cause of the strike: “Larry was the kind of guy who, once given authority, would
not take advice or direction. The 1976 strike was a bitter experience for us.
Basically, it destroyed our good relationship with management.”
So the 1976 strike occurred under circumstances that left everybody angry.
During a brutally frank closed session shortly after the strike began, O’Donnell
flayed the MEC for failing to control its bargainers, ripped Los Angeles LEC
Chairman Jim Rinella for filing an unauthorized lawsuit, and denounced the
Continental pilot leaders for tacitly condoning an illegal slowdown. Continental
had promptly sued ALPA over these tactics.
“I was shocked at the violation of ALPA policy and the Constitution and
By-Laws,” a furious O’Donnell told a closed MEC meeting in Los Angeles shortly
after the strike began. “You as an MEC and we as ALPA representatives are in one
hell of a mess. You were repeatedly cautioned against any type of a slowdown,
and under the law, you are charged to make certain you prevent it. There’s not
much we can do about the lawsuit now. We are trapped. The company now has all
the ingredients to deny you an equitable agreement and tie up our key people and
all of our legal resources in court.”
Eventually, under this kind of pressure, the Continental MEC forced the
Negotiating Committee to resign and installed a new one, chaired by Bill
Kennedy, which agreed to a settlement the Young Turks did not like. Phil Nash
(no relation to Ed Nash), who left the U.S. Air Force in 1965 for a job with
Continental, described the mental state of the younger pilots during 1976
perfectly when he declared: “We made mistakes because we wanted to get well
again real damn fast.”
Too fast, as it turned out. The 1976 strike caused the Continental pilot group
to enter the crucial late 1970s (the first years of deregulation) badly divided.
The stresses of free market economics soon soured many more rank-and-file
Continental pilots on the company’s policies, enabling the Young Turks to repair
relations with them and win control of the MEC. Larry Baxter dropped out of ALPA
work temporarily, but Bob Strauss became MEC chairman, replacing Gary Thomas.
The new leaders’ resentment toward J.J. O’Donnell, whom they regarded as
insufficiently militant, festered, but was kept under control owing to the fact
that Strauss and O’Donnell began to form a personal friendship in the late
1970s. In fact, the friendship became so intense that it was widely assumed that
O’Donnell was grooming Strauss as his replacement. But O’Donnell could barely
tolerate most of the Young Turks, and he disliked Larry Baxter in particular.
The Continental pilots would later support Hank Duffy against O’Donnell at the
1982 BOD meeting, with the wounds of the 1976 strike and its aftermath still
fresh in their minds. Larry Baxter, whom O’Donnell thought a dangerous radical,
would emerge as the Continental MEC chairman following the death of Bob Strauss
(from cancer) in March 1982. Although terminally ill, Strauss had clung to power
until he was removed by the MEC—involuntarily. Baxter, partly because of his
poisonously bad relationship with O’Donnell and partly because of his intense
nature, inspired both considerable opposition and fervent admiration among the
15-member MEC. These internal stresses afflicting the Continental pilot group
reached boiling point just at the time of Frank Lorenzo’s advent.
So the unpleasantness of the 1976 strike, the substantial expansion of the pilot
roster in the mid-1960s, and the first adverse effects of deregulation had left
old Bob Six’s peaceful kingdom in a shambles by the early 1980s. The building
resentment of the pilots eventually included even Six himself, who cleverly used
the Mutual Aid Pact to turn a $15 million profit during the 1976 strike, while
his airline foundered operationally and his disillusioned employees fumed on the
picket line.
Six’s successor, Al Feldman, did his best to patch up morale and eventually
became something of a hero to the Continental pilots through his resistance to
Lorenzo. But nothing could replace the lost tradition of mutual trust, although
Bob Strauss eventually became quite close to Feldman. Pride in the airline and
the pilots’ sense of personal identification with it did not entirely die, but
the Continental pilots were deeply suspicious of management by the early 1980s.
Ironically, relations between the company and its pilots actually improved
temporarily, because the conflict between Baxter and O’Donnell deflected some
rank-and-file resentments from management to ALPA National, thus providing
another good example of Frank Mayne’s Axiom—“When things go wrong, ALPA gets the
blame.” The strike did give the Continental pilots a certain sense of pride and
a psychological uplift through the solidarity they achieved, but this temporary
internal harmony among the Continental pilots cost a considerable amount in
intra-ALPA collegiality.
Instead of being angry at ALPA, the Continental pilots should have focused on
other factors, among them the effect of the Nixon–Ford era economic policy, such
as the “Presidential Pay Board” (the anti-inflationary device of the early
1970s), which exacerbated existing pay inequities between themselves and other
pilot groups. Ironically, Richard Nixon would be the last U.S. President to
resort to the old expedient (used extensively during World War II) of wage and
price controls. The Nixon-era wage restraints penalized unionized workers
excessively, but rank-and-file ALPA members in the 1970s, predominantly
Republican and conservative, were not yet ready to deal with national politics.
Because of national political trends and the shape of the American economy,
Continental’s pilots would never achieve the dream of a “Delta-type” contract.
But many Continental pilots viewed their 1976 “job action” as a victory, because
they did win some gains that brought them closer to parity with other pilot
groups, the stresses generated notwithstanding.
The Continental MEC behaved with
increasing independence from ALPA National as their airline’s situation
deteriorated during the final years of the O’Donnell era. Deregulation had
something to do with this, for as we shall see, it served to weaken the power of
unions and, consequently, the power of union leaders to control their
rank-and-file. Proof of this assertion lies in the Continental pilots’
willingness to ignore O’Donnell’s advice and cross the picket lines of other
unions, notably those of the Association of Flight Attendants in 1980. When the
Continental pilots believed the strikes of other unions jeopardized their
carrier’s future, they were capable of some very bad manners.
Although the MEC wanted to support the AFA in 1980, the rank-and-file angrily
rejected any “sympathy action.” This was particularly unfortunate for Bob
Strauss, the MEC chairman. Strauss, handsome and divorced, fluttered more than a
few hearts among Continental “stews.” As he was crossing the girls’ picket line
one day, one of them shouted, “Did you hear that loud noise, Bob?” Strauss
asked, “What loud noise?” She replied, “The sound of 2,000 [bleeps] snapping
shut. Better get used to it—you’ll hear it a lot from now on.”
Then suddenly in February 1981, reality landed on Continental’s pilots with a
thud—after 38 years, the Bob Six era was over. The legendary old pioneer, tired
and discouraged by the new deregulated system he didn’t understand, announced
his retirement. Six’s hand-picked successor, Al Feldman, would have to deal with
the effects of deregulation.
Pete Lappin, who learned flying in the USAF and went to work for Continental in
1969, served as MEC vice-chairman during 1983. He echoes the sentiments of many
Continental pilots when he speaks of Al Feldman, who would later end his life
with a single pistol shot on the eve of Frank Lorenzo’s takeover of Continental.
“Under the old system of regulation,” Lappin observes, “Al Feldman would have
been superb. I think he realized that the future belonged to Frank Lorenzo, who
would come in like Attila the Hun, and that the rank-and-file pilot, because of
the legacy of Bob Six, was unprepared for him. I talked to Al Feldman on the
morning he killed himself. He said that we were in a lot more serious shape than
any of us allowed ourselves to believe. With hindsight, I see that he was very
relaxed because he’d already made the decision to commit suicide, I think
because he couldn’t live with failure.”
Against this dramatic backdrop and the failure of the Continental employees to
buy their airline through an ESOP (which we will discuss later), the Frank
Lorenzo era at Continental began. It was complicated by the necessity of merging
the TXI and Continental pilot rosters, the crushing debt with which Lorenzo had
saddled Continental to acquire it, and from ALPA’s perspective, the fact that
the transition between Hank Duffy and J.J. O’Donnell was a difficult one. Duffy
and his new team were still learning the ropes and knew next to nothing about
Lorenzo and his techniques when they took over.
Early in Duffy’s administration, he had inaugurated a series of meetings with
airline CEOs, both to get to know them and to let them understand his position.
Because of Duffy’s Delta background, most airline CEOs were curious about him
and eager to meet him.
“People I had worked with in management at Delta went out of their way to tell
everybody that I could be dealt with, that I was tough but fair,” Duffy recalls.
“I tried to get to know them all, the larger ones especially, but I did not meet
Frank Lorenzo during the whole Continental strike.”
Duffy was extremely busy during the first half of 1983, and Lorenzo’s lack of a
response to Duffy’s request for a meeting went virtually unnoticed. But shortly
before the explosion on Continental in August 1983, after Lorenzo had apparently
already laid his plans to declare bankruptcy to break his unions, Don Breeding,
Lorenzo’s chief operations officer at TXI (a position he would shortly assume at
Continental), contacted Duffy about a face-to-face meeting with Lorenzo.
Breeding, whom the TXI pilots intensely disliked and who would shortly earn
similar enmity from the Continental pilots, suggested Duffy and Lorenzo have
breakfast together. He offered the opinion that Duffy and Lorenzo, because they
were both serious long-distance runners, might find that they had enough in
common to establish a working relationship of some sort. This offer of a meeting
appealed to Duffy, who saw it as a way to establish an “eyeball-to-eyeball” feel
for Continental’s new boss.
“I was going to fly to Houston,” Duffy remembers, “when an emergency came up on
Eastern, and I had to go down there instead. This was just before the
bankruptcy. I have often wondered if it would have diverted anything or not.”
Probably not. By the time Continental’s hierarchy approached Hank Duffy for a
meeting, things had already deteriorated badly between the airline and its
pilots, and what little goodwill remained from the days of Bob Six had
evaporated. Additionally, an ALPA president, by the very nature of his position,
must always be wary of management efforts to use him to undercut an MEC. Because
of the history of difficult relations between the Continental MEC and ALPA
National during the O’Donnell era, and Lorenzo’s reputation for guile, Hank
Duffy thought an arm’s-length approach prudent. In retrospect, Duffy believes it
might have been wiser if he had met Lorenzo personally.
“When Lorenzo bought Eastern,” Duffy said in a 1989 interview, “I told Borman I
needed to meet Frank Lorenzo, I couldn’t go through another whole cycle without
at least sitting down and having that talk with him. Borman arranged breakfast,
where we chatted. He was surprisingly informal and gracious. I have a strong
belief that you always need to keep that communication going, despite the
rhetoric, hype, and passion.”
But a far more serious obstacle to resolving problems between Frank Lorenzo and
the Continental pilot group existed—the pilot group itself. Because the TXI
pilots (commonly referred to as the “Texas” pilots) and the Continental group were
in the process of merging, a variety of internal factors badly divided them and
hampered their effort to craft a united front against Lorenzo.
On June 29, 1983, TXI MEC Chairman Ron Waters wrote to Duffy complaining about a
proposed joint meeting between the two MECs and Lorenzo, scheduled for June 9,
which Baxter had sabotaged. Warning that Baxter was falling victim to a Lorenzo
stratagem to divide the two pilot groups, Waters declared: “I don’t have to tell
you what a vicious labor antagonist Frank Lorenzo is. One can only imagine how a
split in a group our size will help his game plan. Last week, I initiated an
attempt to arrange a meeting between the MEC officers, TXI and Continental, to
go as one solid group in the event we are faced with a strike. Larry [Baxter]
emphatically indicated he didn’t think there was any purpose in such a meeting.”
At the separate June 9 meetings, Lorenzo and Stephen Wolf, the president of
Continental, told the two MECs that they wanted concessions, that they intended
to “take on” the International Association of Machinists, and that they expected
the pilots to cross the IAM’s picket lines.
“They informed us that they expected the IAM to strike around September 1,”
Waters told Duffy. “Sources within the company are now saying that the TXI
pilots will cross the line but not the Continental pilots. I deem this a serious
attempt by Lorenzo to split the two pilot groups.”
As we have seen, the TXI pilots emerged from their baptism of fire during Frank
Lorenzo’s initial foray into the airline business badly burned. The Continental
pilots regarded the TXI pilots as “defeatist” because of their horror stories
about Lorenzo, while the TXI pilots saw the Continental pilots as insufficiently
worried about the new Continental boss’s rapacity.
The TXI pilots’ irritation, aggravated by the normal stresses of integrating two
pilot seniority lists, became more acute over what they saw as the Continental
pilots’ condescending attitude toward them. In a nutshell, the TXI pilots
thought the Continental pilots viewed them as “bushleaguers” who had been unable
to cope with Lorenzo. The TXI pilots also smarted from the Continental pilots’
cocky insinuations (real or imagined) that the “big leaguers” would now bring
skinny little Frank to heel.
The TXI pilot group, concurrently, tended to see their earlier battles with
Frank Lorenzo, particularly over New York Air, as unappreciated. Many of these
difficulties were probably unavoidable, owing to the normal stresses of merging
the two seniority lists, but there is general agreement that Larry Baxter’s
leadership style made things worse.
“Larry Baxter was an intelligent, tough, hard-working guy,”
recalls Phil Nash, a member of the MEC during 1983 who counted himself among the
Continental chairman’s admirers. “But he could also be overzealous and caustic.
For example, he got into the habit of calling Red Stuebens, one of the
Operations VPs, ‘Beet Face,’ because of his complexion, and he did this to his
face.”
Pete Lappin, Baxter’s MEC vice-chairman and a close personal friend, agrees:
“Larry’s approach was confrontational, and because of their styles,
he and Lorenzo clashed. It was a very uncomfortable atmosphere.”
By general agreement, Baxter was Lorenzo’s equal when it came to rhetorical
sparring and, on more than one occasion, made Lorenzo look bad in front of his
executives. While most pilots approved of Baxter’s ability to trade insults with
Lorenzo, the problem was that Baxter had trouble turning off his abrasive style
when it came to dealing with internal ALPA matters.
The election of the first combined Continental–TXI MEC provides a case in point.
From the time of Lorenzo’s merger of Continental and TXI in October 1982 to the
eve of the strike in 1983, the TXI and Continental pilots were joined in name
only. Although the airplanes had all been repainted with Continental’s colors by
early 1983, keeping the two pilot groups divided and suspicious of each other
was to Lorenzo’s advantage. Things would have been bad enough without Lorenzo’s
meddling (as anybody who has ever been through a merger understands), but Baxter
made things worse by failing to control the tribal instincts of the Continental
pilot group. The result was that, in the first election for officers of the
merged airline, the TXI pilots were completely shut out.
“We had only two local councils in common, Denver
and Houston,”
recalls Dennis Higgins, de facto leader of the TXI pilots. “We barely
knew the Continental guys, and we were vastly outnumbered, but I told Baxter
that the Texas pilots must not be disenfranchised. I told him to pick a position
on the MEC, and we’ll supply the candidate, and it was up to him to guarantee
that our guy got elected. They elected all their own guys, no Texas faces
anywhere.”
Hank Duffy, watching the situation warily, also tried to intervene to ensure
that the combined MEC, which would not begin functioning until September
1983—barely a month before the strike—contained at least some symbolic tokens of
unity. The legacy of antagonism that existed from the days of J.J. O’Donnell’s
presidency had diminished, but Duffy was powerless to force the Continental
rank-and-file to elect any TXI pilots at their local council meetings.
“We are, as a national organization, tied to the character of an MEC,” Hank
Duffy later recalled ruefully. “If you’ve got good, strong leadership, it’s one
thing; if you’ve got the other, it controls the situation. At Continental, we
had a split MEC, this tug of war going on inside, at the same time we were
trying to fight a really tough adversary.”
In addition to the Continental–TXI split, there was also an intra-Continental
split. Gary Thomas, who had been displaced from the MEC chairmanship by Baxter’s
ally (the deceased Bob Strauss) following the 1976 strike, led a significant
anti-Baxter faction. Thomas (who would also die of cancer later, in 1989) was
openly critical of what he called Baxter’s “lack of people skills.” Careful
observers of the “all-Continental MEC fiasco” cite the episode as an example of
Baxter’s flawed leadership.
“Hank Duffy was there during the election of the new MEC chairman,” Dennis
Higgins remembers. “He backed me up when I warned that Frank would try to drive
a wedge between us, and then he’d drive a truck through both of our houses. The
Continental pilots thought I was being overly dramatic. They were basically
confident that they could handle Frank Lorenzo.”
Almost without exception, people who knew Larry Baxter, both friend and foe,
testify that he felt equal to the challenge of dealing with Lorenzo, that he
perhaps relished the confrontation. But he wasn’t foolhardy. Baxter recognized
that shutting out the TXI group on the new combined Continental MEC was
impolitic, so he asked Dennis Higgins to join him as a sort of “Minister Without
Portfolio” to foster unity. Higgins agreed and became quite visible on the MEC,
despite not being officially a member.
Almost immediately, Continental’s unionized workers found themselves at the
point of Lorenzo’s assault. They were the logical first target because Lorenzo
was, in fact, a “one-trick pony” in a strictly business sense. He had no
interest in the technical aspects of the airline business, nor was he an
innovator or a motivator. He was as unlike Bob Six and the previous generation
of airline industry pioneers as it was possible to be.
Phil Nash, who served as EVP under J.J. O’Donnell, recalls a conversation with a
former Continental executive who (like so many others) had fallen afoul of
Lorenzo and lost his job in the revolving door managerial system Lorenzo
favored: “I bumped into Roy Rawls, comptroller under Al Feldman. We were
standing in the King Super grocery store in Houston, and I’ll always remember
him telling me, ‘Those young men around Lorenzo are not interested in running an
airline at all—they’re interested in making deals.’”
Lorenzo cared virtually nothing about the airline business as such—his metier
was, like Donald Trump’s, the deal. He would have been as happy
manipulating the affairs of a widget maker as an airline. But fiercely
ambitious, possessed of a towering ego and a raging temper, Lorenzo also wanted
to be big—whether in widgets or airlines, he wanted to run the biggest
operation around.
By definition, in a heavily unionized labor-intensive industry, if Lorenzo were
to zoom to the top, the most attractive avenue of attack, given the weak state
of the economy owing to the 1982 recession and the initial dislocations of
“Reaganomics,” was to go after Continental’s unions. Lorenzo would later argue
that his financial predicament, brought on by the debt-leveraged process that
bought him control of Continental, meant that he had to extract a lot of cash
from somewhere in the company, fast, or he would be unable to service his
debt. But at the time he declared bankruptcy, Continental had plenty of cash on
hand and was not broke. Nobody should have been surprised at Lorenzo’s disregard
for the truth—he had earlier promised California legislators, in writing,
that he would not move Continental’s corporate headquarters to Houston. He took
less than a month to break that promise.
In addition to his alleged financial predicament, Lorenzo also had another
weapon with which to bludgeon his pilots—the fact that the non-ALPA pilots of
American Airlines, through their union, the Allied Pilots Association, the clone
with which they had replaced ALPA following their 1963 defection, had agreed to
the industry’s first non nonexpiring “two-tier,” or “B-scale,” contract in 1982.
Given the actively antilabor political climate of the early 1980s, American’s
competitors quickly moved toward B-scales themselves. We will deal more fully
with the B-scale issue in another chapter; but generally, carriers represented
by ALPA responded at first by asking their pilots for across-the-board
concessions, typified by United’s notorious “Blue Skies” contract of 1981.2 Because
this approach tended to create a united front between senior and junior pilots,
how much management could extract from their pilots with it was limited. The
B-scale concept played to shortsightedness and human greed (the “I’m all right
Jack” syndrome), because it pitted pilots currently working against those who
weren’t even hired yet. So it was fiendishly clever.
Oddly, Frank Lorenzo didn’t ask the merged pilots of Continental and TXI for a
B-scale. He had in mind something far more sinister—a B-scale for all of them—right
now!
1 See
“Lorenzo’s Last Gamble” and “The Eastern Strike and the Fall of Lorenzo,” Chs.
18 & 19.
2 See
“Blue skies and MEC Wars,” Ch. 15.