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CHAPTER 13
THE ORIGINS OF THE CONTINENTAL STRIKE
Lorenzo Prepares His Blitzkrieg

Lorenzo in 1983 under unfavorable circumstances understates the problem. The Reagan Administration encouraged an antilabor climate, internal divisions marred the Continental pilots’ sense of community, and the national economy was still suffering from the steep economic slide of the early 1980s. An old axiom holds that when the economy catches cold, the airline industry gets pneumonia. Because of government regulation before 1978, airline employees had been less vulnerable to the consequences of hard times than workers in other industries, but Frank Lorenzo planned to change that. Until 1980, he had to proceed cautiously because Jimmy Carter, although not as friendly to organized labor as previous Democratic Presidents, might make trouble. Lorenzo also had to be wary of ALPA’s influence with Congress and the regulatory agencies before 1980.

ALPA’s 1980 campaign against Lorenzo’s “alter ego” airline, New York Air, justified his caution. Although the precise costs cannot be known for certain, ALPA’s resistance to New York Air (and to his 1981 takeover of Continental) forced Lorenzo to spend millions in legal fees. Thus Lorenzo, accustomed to easier victories in his fights against the smaller TXI pilot group, received unexpectedly rough handling from the Continental pilot group and bore them an obvious grudge because of it.

“We knew the seriousness of the problem, we knew the TXI pilots weren’t just crying wolf,” remembers Continental’s Dennis Duffy, who served as an ALPA executive vice-president (EVP) between 1982 and 1984. “But we also felt that they were beaten so badly that they had lost their will to fight. We were determined to fight, and we probably delayed his timetable by at least a year.”

Throughout 1981, Continental’s pilots mounted a strenuous lobbying campaign in both the California legislature and in Congress to block Lorenzo. They sought unsuccessfully to have Congress outlaw the leveraged-buyout (LBO) financial technique Lorenzo used (with the help of his money man, Michael Milken, the “junk bond king”) to launch New York Air and acquire Continental. During the 1980s, Lorenzo would circulate in the same rarefied financial atmosphere as Ivan Boesky, the Wall Street shark who would (like Milken) later go to prison for his crimes. Both Boesky and Lorenzo were special and honored guests at Michael Milken’s 1986 celebration in Los Angeles of their creative use of “junk bonds.”

New York Air owed its existence to this new form of financing expansion through debt. By injecting a nonunion airline into the geographic and professional heart of the America ’s most heavily unionized industry, Lorenzo whetted the appetites of Wall Street sharks who saw the newly deregulated industry as vulnerable. Put simply, if the assets of an airline were worth more, separately, than the cumulative value of its stock, this new breed of financial buccaneers would borrow to buy it (the LBO), then sell off its assets piecemeal, often to subcontractors who would not respect existing union contracts. These corporate raiders would then pay off their lenders and pocket the difference. The catastrophic effect of LBOs on employees bothered neither the Lorenzos of this era nor the pliant Reagan Administration. In the name of “maximizing shareholder value” (itself fraudulent), they would tolerate putting long-term employees on the street.

New York Air, with its “Apple” call sign and logo, was the first bitter fruit of deregulation and a harbinger of the LBO menace. It began flying on Dec. 19, 1980, barely a month after Ronald Reagan’s election. New York Air had a long gestation, partly because ALPA and its allies in organized labor fought it so hard from the moment of its filing with the Civil Aeronautics Board in August 1980, and partly because other airline managements joined the legal challenge although not for the same reasons.

Because of the extensive controversy over his “runaway shop” airline, Lorenzo postponed its debut until after his friend Ronald Reagan (for whom he had been an active fund raiser) had won election in November 1980. We must remember that an explicit element of the “Reagan Revolution” was a promise to bring “special interests” like “big labor” to heel. Lorenzo saw himself as the point man for this aspect of Reagan’s crusade.

New York Air was a straightforward attempt to skim the cream from Eastern’s East Coast shuttle operation. The only innovation Lorenzo brought to this project was low wages—to be accomplished through a nonunion workforce. Because he assembled New York Air largely from the internal resources of TXI (with “leased,” repainted TXI aircraft and borrowed training facilities for the non-ALPA pilots), Lorenzo knew he would encounter stringent opposition from the entire national apparatus of organized labor. But he also knew that an Achilles heel was present in all this—airline pilots themselves.

Put simply, Lorenzo had learned the same lesson about pilots that Ulysses S. Grant had learned about Southerners during the Vicksburg campaign—that they would not scorch their earth. In 1941, the Russians left Hitler’s armies only desolation as they retreated while awaiting their traditional allies—General Cold, Field Marshal Snow, and Admiral Ice. But during the U.S. Civil War, ordinary Southerners’ loyalty to the Confederacy did not extend to burning their barns and slaughtering their livestock. Thus, for short periods, Grant learned he could cut loose from his train of supply and operate while living off the land, returning to his logistical base only to replenish ammunition. General William Tecumseh Sherman, Grant’s subordinate, would apply this tactic with devastating effect upon the Confederacy during his celebrated march from Atlanta to the sea in 1864.

In retrospect, many observers believe that the only chance the TXI pilots and ALPA had to stop New York Air (and Lorenzo) was a version of the scorched earth policy. If in the beginning TXI’s pilots had taken the dramatic and risky step of an immediate strike, with ALPA paying their full salaries, Lorenzo might have blinked. By going on strike, the pilots would have shut TXI down at a crucial stage and thus deprived Texas Air Corporation (TAC), the newly created parent of both TXI and New York Air, of the revenues that were the key to Lorenzo’s ability to borrow. By fully supporting such a strike financially, ALPA might have sufficiently unnerved Lorenzo’s financial backers to dry up the lending he needed to sustain New York Air’s early operations. ALPA would later, during the Continental strike, pay strike wages equivalent to the salaries Lorenzo was offering scabs. Such a tactic applied early against New York Air would have unmistakably demonstrated ALPA’s resolve.

The basis for the strike would have been that by peeling off DC-9 aircraft from the TXI fleet, repainting them with New York Air colors, and crewing them with non-ALPA pilots hired strictly for that purpose, Lorenzo was violating the TXI pilots’ “scope” clause. From the beginning of his tenure at TXI, Lorenzo had made a mockery of his pilots’ labor contract. He would routinely violate it, then challenge the pilots to file grievances. The grievance process is time-consuming and expensive. When applied vindictively to wear a small pilot group down, the cumulative effect can be devastating.

“We learned that this guy breaks the rules,” says former MEC Chairman Dennis Higgins of Lorenzo. “He pulls some cute trick and then says ‘sue me.’”

Because of such tactics, the TXI pilots were simply too battered to strike Lorenzo in 1980. Also, J.J. O’Donnell had come to the conclusion, following the Wien fiasco, that strikes were ineffective. He much preferred litigation to direct action, and TXI’s pilots, shell-shocked from their repeated confrontations with Lorenzo in the late 1970s, readily agreed. So the pilots would wage no scorched-earth strike over New York Air.

Lorenzo had won his early confrontations with the TXI pilot group hands down, and he knew that with the weak economy, the Continental pilots were also unlikely to resort to the desperate expedient of a strike. Lorenzo knew how to manipulate pilots, using techniques that would have been familiar to the Old Guys who had built ALPA a generation earlier. Pioneer airline bosses understood their pilots’ managerial mentality, and they knew that given the slightest evidence of good faith, pilots would quickly join forces to build an airline, sometimes quite literally working themselves to death in the process.

Lorenzo had little else in common with the pioneer airline founders, but he was an expert at faking “good faith,” and he understood that people who fly the line want to believe in management. Lorenzo was a smooth practitioner of the “Lucy Syndrome.” Lucy, the cartoon character in the comic strip “Peanuts,” would invariably swear that she would not move the football just as Charlie Brown tried to placekick it. She kept promising, he kept believing, and she kept jerking the football away. Lorenzo would violate agreements and then turn on his legendary “smooth talk” to charm pilots with new promises. Then, like Lucy, he would jerk the football away, depositing his pilots once again on their rumps.

The TXI pilots eventually figured Lorenzo out, but at the time desperate action became necessary in the New York Air case, they simply lacked the stomach for it. Instead of striking, the TXI pilots waged a lengthy slowdown, called in sick well past the limit permissible under their contract, and challenged New York Air in court for violating the “scope” clause of their contract.

“We decided to stay put, sitting in our cockpits while fighting our fights with Lorenzo,” says Dennis Higgins, MEC chairman at the time.

Lorenzo sued over the “sick in,” won every round in court, and thrashed ALPA solidly. New York Air would survive every challenge until Lorenzo folded it into Continental after the strike—thus proving that the airline was, as ALPA had always maintained, merely antiunion corporate thimble-rigging.

When the crisis on Continental emerged in August 1983, the stresses of merging still affected the pilot group. Continental’s pilots were determined to preserve their contract from Lorenzo’s bullying, and their new TXI colleagues had every reason to support them.

Because Lorenzo had targeted his pilots, he became a close student of what made them tick. He had to know that the ancient factors that made pilots, when united, formidable would soon emerge to limit his freedom of action on Continental.

In fact, the process of melding and fence-mending among Continental’s pilots (after an admittedly rocky start) made good progress. Neither the “old” Continental pilots nor the TXI newcomers were fools—they knew that unity was a prerequisite for dealing with Lorenzo. They were also professionals who understood that mergers were an unavoidable consequence of the modern airline industry, which no amount of bellyaching would change. Like other professional airline pilots on other airlines in other times, the pilots of “old” Continental and TXI would, given enough time to work things out, put aside their differences and get on with the business of flying the line.

Frank Lorenzo’s challenge was to keep his pilots off balance while he maneuvered to destroy their contract. Continental’s MEC Chairman Larry Baxter, as even his detractors admitted, was tough, intelligent, and far from naive about Lorenzo. He moved rapidly to devise a strategy to counter Lorenzo and, in fact, fought an excellent delaying campaign that stymied Lorenzo for many months. Had it not been for the pressure and timing of events (“fate,” if you will), Baxter might have succeeded. How he failed must now concern us.

The story begins with the ill-fated “Prosperity Plan,” Lorenzo’s highly touted opening gambit. Continental’s pilots knew that the airline was in precarious financial condition even before the advent of Frank Lorenzo and the merger with TXI. This financial weakness was at least partially responsible for the failed Employee Stock Ownership Plan (ESOP).

Desperate to block Lorenzo’s takeover of their ailing carrier, Continental’s unionized employees, under the leadership of Paul Eckel, a Continental management pilot who was widely respected by the airline’s ALPA pilots, launched the first serious effort at an employee buyout in the airline industry’s history. Despite the full support of Al Feldman, Bob Six, and Continental’s top management, Eckel could not persuade lenders that an enterprise the size of Continental could (or should) be run by its employees.

“Under Paul Eckel as chief pilot, life was pleasant,” recalls former ALPA EVP Phil Nash. “He was a very fair, bright, vibrant guy.”

Eckel’s qualifications were so strong and the support he generated among Continental’s unionized employees was so widespread that many Continental pilots attribute the ESOP’s failure to a sinister antilabor conspiracy among bankers. Lorenzo, seriously worried about the possibility that the ESOP might succeed, fought it bitterly, undoubtedly using his influence to discourage potential ESOP lenders. His argument against the ESOP stands clearly revealed in an April 21, 1981, letter that Al Feldman (Bob Six’s chosen successor as CEO of Continental), wrote to Lorenzo.

“Your continued assertion that the ESOP is no more than an effort to maintain entrenched, inefficient management is ludicrous,” Feldman said. “From the outset, you have been urging me to operate the combined carrier. If we had really wanted to entrench ourselves, all we had to do was permit you the easy takeover of Continental you seek. Your assertion that the ESOP is being foisted by management on our employees is an insult to them. The ESOP is the result of their own dedication and enthusiasm to control their own destiny. Bob [Six] and I have concluded it is a great idea, a model for the industry, not simply an attack on your efforts to take control.”

With the collapse of Eckel’s ESOP effort on Continental in April 1981, Frank Lorenzo’s takeover became inevitable. When he finally seized the prize, on Aug. 9, 1981, a distraught Al Feldman put a pistol to his own head.

During Lorenzo’s hostile leveraged buyout of Continental, his duplicity fooled no one, although he tried to reassure people. In a letter to Al Feldman dated March 13, 1981, Lorenzo wrote: “We would expect that the [merger] agreement would protect the most valuable resources of our two companies—our ­employees.”

Aside from his gushing praise of Bob Six (“we have long admired Bob Six’s creative leadership”), Lorenzo’s merger letters are chiefly interesting because he habitually referred to himself as “we.” Mark Twain once said that one should beware of any man who uses the “royal we” when referring to himself—unless of course, he has a tapeworm.

In any case, Lorenzo didn’t fool old Bob Six, ailing with heart trouble though he was. On April 24, 1981, in his capacity as chairman of Continental’s Board, Six showed great prescience when he denounced Lorenzo’s “junk bond” method of acquiring Continental.

“Frank, I find your [merger] proposal would create a company so overburdened with debt that it would, in my judgment, be unfair to the employees,” Six wrote. “The bottom line is you are asking our employees to help pay for your purchase of Continental. That is clearly unfair.”

But old Bob Six came from another generation and another era, a time when some degree of fair play seemed to matter in corporate boardrooms. To Frank Lorenzo, a representative of the new corporate ethic of the “greed decade” of the 1980s, Six’s values were anachronistic.

So Frank Lorenzo outmaneuvered everybody and acquired control of one of the proudest names in airline history. He wasted no time in proving Bob Six a prophet—Lorenzo would make his employees pay for their own airline.

Lorenzo’s initial target would be the International Association of Machinists (IAM). But before he took them on, Lorenzo needed to temporarily neutralize ALPA—hence the “Prosperity Plan.” Easily slipping into his “Frankie Smooth Talk” persona, Lorenzo wooed Continental’s pilots with promises of a golden future if they would only make sacrifices. By August 1982, he succeeded in wringing additional concessions out of a pilot group that had already made substantial givebacks during the pre-Lorenzo period.

Then, the “Lucy Syndrome” kicked in. In January 1983, with the Prosperity Plan only recently in place, Lorenzo demanded additional concessions. Continental’s pilots, like Charlie Brown with Lucy, believed they had a deal with Frank Lorenzo. But their $100 million giveback over a two-year period wasn’t enough, Lorenzo said, even though it gave him work rules concessions that resulted in some 400 furloughs and reductions in funding of the pilots’ pension plan.

MEC Chairman Larry Baxter, who had played a crucial role in selling the Prosperity Plan to a reluctant rank and file, felt betrayed. During 1982–83, two Negotiating Committees, composed of a rotating cast made up of Scott Henderson, John Huber, Dennis Duffy, Kirby Schnell, Guy Casey, and Lou Colombo, wrestled with Lorenzo’s demands as they tried to find a way to save their airline without sacrificing their contract.

After agreeing to the Prosperity Plan, Continental’s pilots had swallowed hard, rolled up their sleeves, and prepared to live with it. Then they discovered, just as the TXI pilots had warned them, that signed contracts meant nothing to Lorenzo. The effect on Larry Baxter was particularly devastating.

“Larry was a highly intelligent individual who could be quite persuasive,” says Guy Casey, who would later become strike coordinator. “But he misjudged Lorenzo, in that he felt Lorenzo did have some moral character.”

Phil Nash, who was an ALPA EVP at the time and never a fan of Baxter’s, called the Prosperity Plan “an accommodation with the devil,” a view shared by most rank-and-file pilots. “We were going to have to live with it, and we would have. Then Frank came back to us for the second money in January, and then the third money in June. I smelled a rat.”

The rat Phil Nash smelled (although nobody knew it at the time) was Lorenzo’s underlying purpose in negotiating the Prosperity Plan. Put simply, Lorenzo wanted to keep his pilots off balance while he destroyed the IAM, exactly the pattern he had used earlier at TXI. He offered the mechanics a raise if they would permit “outsourcing,” a fancy name for subcontracting their work out to nonunion shops. Naturally the IAM resisted, for Lorenzo’s plan would eventually lead to the layoff of about half their members. While he dragged out the IAM negotiations, Lorenzo feverishly trained scab mechanics.

Matters came to a head in a confusing welter of events in August and September 1983. In the midst of his carefully laid plans to break the IAM while flying through a strike with his pilots’ support, Lorenzo abruptly changed course. This change originated in Lorenzo’s desperate need to service the enormous debt he had undertaken in the purchase of Continental—the debt Bob Six had warned about. Although Lorenzo claimed Continental was broke, its parent corporation, TAC, boasted $288 million in cash, securities, and accounts receivable (with virtually no debt), according to his own filing with the bankruptcy court! It was a preview of the “upstreaming” technique Lorenzo would later use to strip Eastern’s assets before the strike of 1989. Lorenzo’s corporate shell game permitted him to shield assets in TAC, while arguing that high labor costs were breaking the very companies that generated the cash he “upstreamed” to his holding company. But Lorenzo told the New York Times that debt wasn’t his problem. “Our sole problem is high labor costs,” Lorenzo said.

The IAM struck Lorenzo on Aug. 13, 1983. Continental’s pilots honored their contract and continued flying, largely because Lorenzo threatened to take the airline into bankruptcy otherwise. Immediately upon seeing that the pilots and flight attendants would cross the IAM’s picket lines, Lorenzo pushed his psychological advantage by demanding further concessions.

While not refusing Lorenzo’s demands outright, Continental’s pilots wanted him to at least prove his financial need. For months they had asked him to “open the books” and to agree to joint meetings with the airline’s lenders. Lorenzo finally did open his books after a fashion, but he steadfastly refused to permit joint meetings between the holders of his debt and his unions.

Lorenzo’s resort to bankruptcy followed a precedent set by Universal Airlines (Zantop) to break its ALPA contract in 1971. As tensions with the IAM mounted, Lorenzo hired the New York law firm Weil, Gotshal, and Manges, which specialized in bankruptcies, to take Continental into Chapter 11. This action would permit Lorenzo not only to suspend payments on his debts (one of the first of a wave of junk bond failures that would help bring down the U.S. savings and loan industry at the end of the 1980s) but break his unions as well.

So to recap, during the prolonged maneuvering of 1983, Continental’s pilots found out that the TXI pilots weren’t exaggerating about Lorenzo. He reneged on “Prosperity Plan I” almost before the ink was dry and demanded “Prosperity Plan II,” which involved further concessions. MEC Chairman Larry Baxter stalled off Lorenzo’s demands from January to August 1983. Meanwhile, Lorenzo attacked the flight attendants and mechanics, finally provoking the IAM’s August strike. A critical decision now faced the Continental pilot group—should they cross the IAM’s pickets, or should they be good labor unionists?

“When the IAM went out on Continental, I did roadshows urging them to honor the lines,” recalls Hank Duffy, who was still relatively new to the job of ALPA president. “They rejected what I said.”

One reason the Continental pilots decided to honor their contract and cross the IAM’s picket lines had to do with that union’s sorry history of internal unity in strike situations. Historically, the IAM has not been able to control its own membership. Many Continental pilots felt that the strike on their airline would see large numbers of crossovers among the mechanics, and that the IAM was a very weak reed to lean on in a critical situation, a point with which Hank Duffy could only agree.

“When I made the roadshows, I knew that the IAM had not delivered when they went out,” Duffy says in explanation of the Continental pilots snubbing his advice. “On Alaska, their own units crossed them; the main mechanic unit stayed out, but the crew scheduling unit went across. They couldn’t even hold their own people.”

Duffy, mindful of this IAM trait (one that would figure prominently in the Eastern strike of 1989), certainly was not as forceful in his roadshow advice as he could have been. The Continental pilot group had a history of crossing other unions’ picket lines, but this time it was a very close decision, made with grave misgivings and at the price of much internal distress.

“I came on the MEC in late June, just as it got called into session to handle the issue of the IAM strike,” recalls Phil Nash, who served as ALPA EVP from 1980 to 1982. “My pilots didn’t have a stern resolve to stop Lorenzo then. It was the ‘Frank’s a bad dude, we’d-better-do-anything-he-wants’ syndrome. So we crossed the picket line, and so did everybody else, including a large percentage of the IAM guys. It smelled real bad, and I felt bad—I couldn’t even look those guys in the face. Some of my pilots didn’t want to come to work; they called in sick. Some of the pilots who had been mechanics said we were lily-livered, and others called me an idiot for voting to go on strike. I took guff from both ends.”

From the beginning of the IAM strike on August 13, Continental’s MEC was in almost continuous session, dealing with a series of emergency demands from management.

Then on Sept. 11, 1983, under the signature of Stephen Wolf, Lorenzo’s titular president of Continental, an apocalyptic telegram went out to all Continental pilots over the head of the MEC, with hand deliveries to ALPA’s national officers. Wolf demanded an additional $60 million in pilot givebacks, “all or nothing,” over the previously negotiated $100 million.

“We have to get our costs down,” Wolf said. “Today’s marketplace prices are being set by Southwest Airlines, which is trying to drive us out of market after market.”

“That was funny,” recalls Dennis Duffy. “He told us Southwest was beating us to death. So we took a Southwest contract, ripped the cover off, and put a Continental cover on it. We said we’d sign it just like it is. They sent it back to us, wouldn’t touch it.”

At this point, Continental’s pilot leaders, fearing for the future of their airline, were in same the kind of whip-sawed state that Lorenzo had previously induced among TXI’s pilots. Rank-and-file pilots divided all over the lot, with some urging surrender while others wanted war. Larry Baxter wanted nothing further to do with Lorenzo. He became moody and uncommunicative, leaving the Negotiating Committee adrift.

“Baxter’s attitude was we gave Frank enough,” recalls Phil Nash. “He embarrassed Frank by telling him, ‘In less than ten months, you’ve gone through a hundred million? You said you could run an airline with that, now go run an airline!’”

Meanwhile Lorenzo kept pressing. He set a deadline of 4 p.m. on Saturday, Sept. 24, 1983, for the pilots to capitulate. Either they would abandon their contact, or he would file for bankruptcy.

The astounding thing about the 1983 Continental strike is that the pilots did capitulate! During frantic negotiations that began with the IAM strike, and intensified meetings in September (brought on by Lorenzo’s threat to file for bankruptcy), the Negotiating Committee publicly committed Continental’s pilots to “do whatever it takes” to save their airline. Lou Columbo, who chaired the Committee, made that explicitly clear as early as September 19, when he told company negotiators formally: “We are not limited. We are committed to do whatever it takes (emphasis added) to return this airline to profitability.”

The white flag was up, but Lorenzo, already secretly committed to his bankruptcy strategy, would take no prisoners. Instead, he used the trumped-up excuse of MEC Chairman Larry Baxter’s lack of formal communication with him to reject Columbo’s offer. Although Baxter, moody and withdrawn, argued that the pilots had a valid contact and needn’t negotiate further, Continental’s Negotiating Committee thought otherwise. Baxter, sulking in his tent, was not involved in the late September round of negotiations. During a meeting at the Greenspoint Marriott Hotel in Houston on September 23, Continental’s negotiating team accused the pilots of a “refusal to participate,” citing Baxter’s absence.

“Unless you give us a firm proposal,” said John Adams, Continental’s negotiator, “we must conclude that you won’t give us anything. We have an immediate and permanent requirement to lower costs.”

For Lou Columbo and his fellow negotiators, the only real question was how to implement the concessions Lorenzo wanted and what technical steps had to be taken to insert them into their existing contract. The historical record is clear and unequivocal on these points: Lorenzo had no intention of agreeing to anything; he had already decided to take his airline into bankruptcy; he wanted a “blank check” from his pilots instead of a contract; and he expected them to “fly to the FARs.”

In short, evidence shows that Larry Baxter was absolutely right—no amount of good-faith bargaining would have deterred Lorenzo. During one frantic session preceding the strike, Stephen M. Wolf, the Lorenzo lieutenant who would later become United’s boss, did something remarkable.

“We were in the room negotiating when Wolf walked in and asked us—Lou Columbo, Kirby Schnell, and myself—to take a 10-minute recess,” recalls Dennis Duffy. “‘Gentlemen,’ he says, ‘I have just resigned from Continental. I won’t be part of this,’ and he walked away. The girls [flight attendants] told Wolf they were with us on the ‘do whatever it takes’ thing. Wolf thought that was enough, but Lorenzo wouldn’t accept it.”

“Lorenzo pulled Wolf from his team at a very strategic point,” agrees Seth Rosen, the ALPA staff lawyer assigned to Continental, who believes it was a case of Wolf jumping ship before Lorenzo pushed him. “It was a real blow because we had confidence in Wolf. Once Wolf was out of the picture, Lorenzo wasn’t doing anything except trying to figure out a way to break the contract.”

The Continental pilot negotiators, flabbergasted at this turn of events, nevertheless continued good-faith bargaining. It all came to a head in one final bizarre episode. Lorenzo demanded that Larry Baxter personally respond to his specific demands by phone, no later than 4 p.m. on Friday, September 23. Under severe stress, and at the urging of his Negotiating Committee, Baxter finally did make the call, only to be told that it was too late—he had missed Lorenzo’s deadline by a few minutes!

“You mean to say that even with a big chunk from the pilots and from the girls [the Union of Flight Attendants], he would shut it down?” asked an incredulous Lou Columbo of Tom Matthews, Lorenzo’s representative.

“He will do it,” said Matthews.

“We’re working with two crazies,” Columbo screamed. “For one phone call, you sacrifice 12,000 jobs!”

Seth Rosen, the ALPA staff attorney, who met frequently with Lorenzo during 1981–83, believes the pilots never had any chance of averting bankruptcy.

“Lorenzo kept upping the ante that summer,” Rosen says. “Every time we saw him, Lorenzo became less precise, more general. We ended up with double talk. Where he wanted relief, it was much greater than the dollars attributed to it. He was really setting us up for bankruptcy. When he got to court, he would have this track record of having made all these requests, that he was acting in a good-faith manner, when he was really engaging in a lot of superficial nonsense.”

At 6:30 p.m. on Sept. 24, 1983, in the dry, technical language of law, Continental filed for “reorganization” under Chapter 11 of the U.S. Bankruptcy Code in Houston, Texas. Throughout the United States and overseas, Continental’s video terminals went blank, and flights were canceled, stranding stunned passengers and crews alike. Coming hard on the heels of Braniff’s 1982 bankruptcy, Continental’s action seemed to foreshadow the doom of an industry.

Continental’s pilots, now massing in unaccustomed numbers on the ground, were shocked, full of disbelief and anger. Everybody wanted answers; nobody had any. Confusion reigned.

Lorenzo, simultaneously with his bankruptcy petition, promulgated Continental’s new “Emergency Work Rules,” which would replace ALPA’s contract. The new rules called for drastic 50 percent pay cuts, increases in duty time, and out-of-seniority flying. Through the weekend, Continental’s pilots held mass meetings, anxiously awaiting “the word” from their MEC and ALPA’s national officers. On Monday, September 26, following consultations with ALPA’s attorneys, Continental’s leaders declared that their existing contract remained in effect. What should line pilots do then, with respect to the company’s limited, out-of-seniority callback?

In what everybody later agreed was a mistake, Continental’s MEC, operating in conditions approximating the “fog of war,” told pilots to return to their cockpits “under duress.” During the 72-hour shutdown, Lorenzo had restructured his airline to cover only about 40 per cent of the pre-bankruptcy operation. He offered outrageously low $49 fares (to all destinations) to entice customers back to Continental and recalled pilots to suit his needs, not the contract’s. The few pilots who were recalled following this 72-hour shutdown were “in the castle,” so to speak, psychologically scabs already, with ALPA’s consent. Many would not come out.

On September 29, an emergency meeting of ALPA’s Executive Board convened in Houston at the Sheraton Crown Hotel. United’s Chuck Pierce, ALPA’s secretary, announced that the meeting was closed to the news media. Hank Duffy took the rostrum to preside over one of the tensest meetings in ALPA’s history. Significantly, his first action was to recognize the presence of Capt. Bob Malone of American, who was formally representing the Allied Pilots Association. The industry’s crisis, building since deregulation, had brought the APA home, if only temporarily.

“The crisis in our industry, as evidenced in Denver [a reference to Frontier’s threat to create “Frontier Horizon,” an alter-ego airline similar to New York Air], as evidenced in Miami [a reference to Eastern’s on-going crisis], and especially as evidenced here in Houston,” Duffy warned solemnly, “is starting to engulf all of us. For five years, we have been complaining about deregulation. In April, we told Congress that this industry is unraveling. In the month of September, our testimony has become prophesy. My assessment is that we have been too understanding, too trusting, and most of all, too patient. The airline pilots of this country are going to have to stand up and act like a labor union if we are going to save this industry.”

Hank Duffy’s charge to the Executive Board struck a responsive chord. Following presentations from the MEC chairmen of each of the three most threatened airlines, Larry Baxter of Continental, Wes Davis of Frontier, and George Smith of Eastern, the assembled Executive Board delegates unanimously and virtually without discussion approved drastic measures. For Continental’s pilots, ALPA would modify its strike benefit policy to pay each pilot striker an amount comparable to the salary Lorenzo was paying under his “Emergency Work Rules.” Lorenzo proposed to halve the compensation called for in the Continental contract, paying captains $3,585 per month and the new “pilot officers” (he dispensed with distinctions between first officers and second officers), $2,335 per month. Subsequent to approval by a mail ballot of the membership (with immediate “loans” that would be wiped out once the vote was official), striking Continental captains would receive $3,800 per month, while first and second officers would receive $2,500—to be paid for by special strike assessments the membership would vote to impose upon itself.

With extraordinary strike benefits approved, the balance of the Executive Board’s work was devoted to a discussion of a possible suspension of service (SOS), “ALPA’s nuke.” Under the direction of TWA’s Harry Hoglander, the Executive Board approved an SOS, but only with a membership ballot and only “after suitable education” of the membership. Nobody wanted to call another SOS and then have it fizzle.

The delegates agreed with Hank Duffy when he said: “I am occasionally soft-spoken, but that doesn’t reflect the anger I feel at the management of Continental and Frontier and at a government that has not been responsive to us. I will not hesitate use the full force of everything you have given me, including the SOS.” But, Duffy continued, “those of you who have been through an SOS before know that it is a long way from here to getting the line pilot to do it. If we could have had the collective membership here to listen to Moffitt Tinsley today, I have no doubt that we would march 34,000 strong in the same direction.”

Duffy’s reference to Moffitt Tinsley deserves explanation. Tinsley, a Continental pilot since 1968 and a first officer representative on the MEC, moved the Executive Board delegates in a way they will always remember, not with bombast, but with sober, honest confession and a call for renewal that was almost religious in its intensity.

“I had no intention of speaking,” Tinsley remembers. “I had attended several meetings, and I’d never stepped up to a microphone to make any utterance. J.J. O’Donnell once asked me, jokingly, if I was every going to have anything to say. Before the debate on strike benefits, Larry Baxter said, ‘Moffitt, I want you to make a speech.’ I had all of five minutes to think about what I was going to say.”

With unforced eloquence and passion, Tinsley summed up what being an airline pilot meant to him. He said that he had never wanted to be anything else, that he prized being part of the brotherhood of the air above all else. Then, with great contrition, Tinsley noted that he had betrayed the brotherhood during the Braniff bankruptcy, that his first reaction was, “Gee, I wonder if Continental’s going to pick up the South American routes and will this make me a captain?” Tinsley’s frankness touched deep wellsprings of feeling, and his call to redeem the profession handed to them by the Old Guys who had sacrificed so much provided a unifying theme.

Airline pilots in general and the Continental pilots in particular would need stirring words like Tinsley’s in the ordeal to come. On September 29, the same day the Executive Board met, Continental’s MEC voted to “withdraw from service” as of Oct. 1, 1983.

The strike was on.

To Chapter 14

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