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.