CHAPTER 18
LORENZO’S LAST GAMBLE
The Origins of the Eastern Strike

By 1987 the little copper box had lain beneath the steps of ALPA’s old Chicago headquarters at 55th and Cicero adjacent to Midway Airport for 36 years. When Dave Behncke placed it there during the building’s dedication in 1951, the artifacts in the “time capsule” already belonged to an era that was fading fast, as was Behncke himself.

“This is the very soul of ALPA,” Behncke had intoned as he consigned the copper box to wet cement (which would partially crush it and damage some of the items—a collection of photos, membership lists, and documents.) The “Old Man,” as everybody called Behncke, had been increasingly concerned with ALPA’s history of late, and he frequently complained that younger pilots didn’t appreciate the struggles he and the “Old Guys” had endured. Behncke, wan and ill, looked all of his 54 years. He would be dead by 1953, and ALPA, the entity he had brought to life, would teeter on the verge of collapse, partly because of the building in which he was burying his “time capsule.”

If we may indulge in a little dime-store psychology, Behncke was clearly having intimations of mortality. He didn’t much like modern aviation, already so alien to the world of wooden wings he had known, so he retreated into the past. He saw the squat, utilitarian building (complete with bunkrooms and shower facilities no airline pilot would ever use) as a monument to his leadership. Consequently, Behncke lavished time and money on his dream building, insisting that it be built to “aircraft specifications.” He spent endless hours sidewalk supervising its construction when he should have been taking care of ALPA’s business. It was not a happy time—either for ALPA or Behncke—as the sad fate of the building and the copper box buried under in steps would show.

Behncke would never conduct ALPA’s business from his dream building. In 1969, ALPA moved to Washington, D.C., where most of its real business had always taken place (the only reason for ALPA’s home office having been in Chicago was that it was Behncke’s home), and his cherished building was abandoned to an indifferent fate on the Chicago real estate market.

Midway Airport itself went into a long eclipse following the opening of O’Hare, and the ALPA building finally wound up in the possession of a trucking company. Everybody forgot about the little copper box beneath its steps, unmarked now even by the brass plaque emblazoned with ALPA’s motto, Schedule with Safety, which somebody had scavenged.

Ironically, Behncke’s time capsule saw the light of day again on Dec. 10, 1987, largely because of deregulation. The pilots of Midway Airlines, at the time a promising “new entrant” carrier and inspired by the stiff fight United’s pilots waged in 1985, had recently organized and won an ALPA contract. Under the leadership of former TWA pilot Jerry Mugerditchian, Midway’s pilots now needed office space for their new MEC. Mugerditchian asked his vice-chairman, Frank Anthony, to investigate renting office space in the old building across the street from Midway—which neither of them knew had once been ALPA’s national office.

“The first thing I discovered,” Anthony recalls, “was that the building was coming down as part of Midway’s renovation, so we couldn’t rent office space in it.”

But while checking out the building, Anthony noticed a brass mail drop with the letters “ALPA” on it. From this lucky break, everything else flowed. Tom Dalton, director of ALPA’s Office Administration Department, vaguely recalled the time capsule, thus setting in motion a recovery effort that would involve the pilots of many airlines. United MEC Communications Director Jim Damron, a second-generation airline pilot with a keen interest in ALPA’s history, and his assistant, Hank Krakowski, helped with the salvage effort.

“We were excited to learn of ALPA’s historical connection with the building,” recalls Mugerditchian, who would become ALPA’s secretary in 1990. “At first, we just wanted to save the brass mail drop and present it to Hank Duffy and ALPA for all the help we had received in organizing Midway. The existence of the time capsule came as a big surprise to us.”

The time capsule returned to a world in which airline pilots were confronting their history in the most painful way possible—by reliving it. Frank Lorenzo’s imitation of E.L. Cord had plunged ALPA into times Behncke and the Old Guys would have recognized instantly—a world of turmoil, bankruptcies, and ruined careers.

Despite these trials, ALPA’s future was far from hopeless as Hank Duffy began his second term. The rash of deregulation-inspired new-entrant airlines seemed, to some observers, to preface a tremendous new diversity of carriers in the industry, much like conditions at the time of ALPA’s founding. For every Braniff that failed, an optimist could see a Midway rising to take its place. If the future of the industry was to be one of diversity, ALPA could survive by conducting “outreach” efforts to educate the pilots of these new airlines. With proper preparation, these nonunion pilots would, when the time was right, be brought to see ALPA’s advantages.

Which did not mean that pessimists had surrendered the field. They predicted that the unfettered free market would eventually result in a semi-monopolistic “Big Three” airlines dominating a swarm of small, nonunion carriers whose pilots worked for peanuts. In their dark vision of the future, it would be either feast or famine professionally for airline pilots, depending upon where they worked, and the ancient ALPA principle of unity across company lines could hardly survive in a world of princes and paupers. The cofferdam United’s pilots had erected against the antipilot tide in 1985 was merely temporary, pessimists feared. While the failure of Dick Ferris to break ALPA seemed to discourage other airline executives from trying it themselves, Frank Lorenzo still lurked out there, undefeated; and he had just acquired control of Eastern Airlines, one of aviation’s most prestigious namesakes. Critics warned of Lorenzo’s spreading empire, which would eventually include upstart People Express and revived Frontier. They cautioned that deregulation would lead to more airline failures. But, at that time, few pessimists foresaw the fates of Eastern and Pan American.

History needs a little distance, both in time and emotional involvement, before making firm judgments. Otherwise history might be wrong, and it would become indistinguishable from journalism—history’s “first rough draft.” Not that journalism is unimportant. No historian will ever be able to write about the Eastern strike of 1989 without it. Most of the important contemporary books dealing with Eastern and its fate were written by “beat” journalists covering it almost daily as it unfolded. No historian will ever be able to write about this subject without consulting Aaron Bernstein’s Grounded: Frank Lorenzo and the Destruction of Eastern Airlines (1990). Bernstein, a reporter for Business Week, covered Eastern from 1985, which was before Lorenzo took over, until Bankruptcy Court Judge Burton Lifland finally removed him from control in April 1990. But when Bernstein finished his book in 1990, Eastern was still alive, albeit barely.1

But history must cover “the rest of the story,” so what conclusions might we venture about ALPA’s history during the late Duffy era?

The most obvious generalization might be that the nature of Duffy’s power was comparably weaker than that of any previous ALPA president. We can get an inkling of this by comparing him to J.J. O’Donnell, who until 1978 worked in a regulated environment. Before 1978, O’Donnell unhesitatingly took the leaders of errant MECs to task, often pressing them brutally. As we have seen, in the mid-1970s, O’Donnell repeatedly lambasted the Continental pilots—quite a major group at the time. But after deregulation, pressing a major pilot group like that was unthinkable—witness O’Donnell’s reticence in the case of United’s “Blue Skies” contract in 1981.

From the moment Duffy took office in January 1983, his presidency had essentially been reactive, with strategic long-range planning necessarily taking a back seat to the kind of tactical, short-range thinking the burgeoning crises demanded. At the beginning of his second term, with the storm seeming to abate somewhat and the internal division symbolized by Tom Ashwood’s challenge resolved, Duffy hoped he could devote his full attention to ensuring ALPA’s effectiveness in the deregulated airline industry of the future. If ALPA was to survive as the profession’s voice into the 1990s and beyond, Duffy knew, he would have to move it beyond the fingernail-scratching fight for survival that had so far characterized the 1980s.

But nothing came easily for Hank Duffy. He would have no let-up from the agony of deregulation-induced mergers, with all the internal discord that implied. Nor was Frank Lorenzo finished. After acquiring control of Eastern in early 1986, Lorenzo made promises of peace and cooperation with ALPA and remained quiescent throughout the remainder of Duffy’s first term. But that was only the lull before the storm. Duffy’s trials would continue to the bitter end of his eight-year tenure, culminating in an ALPA presidential election of unparalleled historical divisiveness.

“The major test of my administration has been holding ALPA together,” Duffy declared flatly, during an interview in the summer of 1990, shortly after announcing that he would not seek a third term. “What with the pilot groups who have threatened to get out of ALPA because they didn’t want me to enforce merger policy or because they didn’t think I had enforced it, didn’t do this or didn’t do that, it’s been tough. Keeping this outfit together has taken a real diplomatic effort and a lot of compromises that weren’t always too pleasant.”

Although Duffy’s mind was clearly on his place in ALPA’s history, his concern for the future was obvious. By the beginning of his second term, deregulation had brought about a set of circumstances within the airline industry that no other ALPA president had faced. If the critics of deregulation were right and the industry degenerated into a semi-monopoly, what was ALPA’s future? The evolution of the industry into a few mammoth airlines with their associated “elephant” pilot groups could take ALPA into unexplored regions. Could an ALPA president withstand a determined assault by one of these new postderegulation “megacarriers?” More to the point, could ALPA survive a concerted effort by the pilots of one of these new super-airlines to secede outright, as the pilots of American Airlines had done in 1963?

“Keeping ALPA together is the real challenge, and it’s going to be tough,” Duffy warned darkly in his 1990 interview. “With four major carriers, any one of which could afford to leave and operate on its own, that’s going to be the test of leadership. If you get the wrong people in charge, who for selfish motivation would lead their pilot group away from ALPA, this profession’s going to be in trouble.”

With the airline industry increasingly dominated by giant carriers, each supreme in its own sphere of “hubs and spokes,” many thoughtful observers believed it would only be a matter of time before Duffy’s fears materialized and the pilots of one of them threw out the baby with the bath water. As we shall see, at the end of Duffy’s administration, following the bitter and controversial election of Randy Babbitt, that hour seemed to have struck. The pilots of United, against all odds, seemed perched upon the precipice of disunion, so bitter was their reaction to the defeat of Roger Hall.

“The real challenge for whoever comes after me is to make sure ALPA doesn’t break up into a loose federation of independent unions,” Duffy fretted in 1990. “It’s been suggested that we might lure American back into ALPA with promises of autonomy. But I’ll tell you, that wouldn’t be worth the price. The biggest advantage ALPA has is its ability to speak with one voice. The chairman of the House Aviation Subcommittee doesn’t get the United pilot position whispered in one ear and the USAir position whispered in the other. He hears one position from airline pilots! ALPA is effective in Washington [D.C.] because of that, and the American pilots are simply nonplayers. If we ever split our voice, our enemies will have us for lunch. Actually, what I’d really like to know is what ALPA’s going to be like when they open that time capsule a century from now.”

Duffy was determined that ALPA would survive, speaking with one voice, into the 21st century. At times he could be very tough, but like O’Donnell after deregulation, his power was stronger when dealing with “ant” airlines than with “elephants.” Duffy would impose a trusteeship during the Air Wisconsin–Mississippi Valley merger dispute, much as O’Donnell had done to the Frontier pilots in 1978. But if the pilots of a megacarrier insisted upon doing things their own way, even in contravention of ALPA policy, Duffy had, like O’Donnell after 1978, recourse only to the weapons of conciliation and persuasion, rather than arbitrary force.

“We have had to meet trouble by heading it off before it happens,” Duffy admitted at the end of his presidency. “You have to stay on top of things, know what they’re doing, so you can come to a consensus before you ever get into trouble.”

As we have seen, after a rocky start that saw Piedmont’s pilots (among others), sign away major contract provisions through “side letters,” Duffy engineered a new collective bargaining system that subjected negotiations on each airline to the direct supervision of ALPA’s national officers. The savage impact of mergers, notably Northwest-Republic, caused Duffy serious trouble. Northwest had no B-scale before the merger, while Republic did. The pilots of Northwest were determined to grant their management a B-scale, and if Duffy had resisted they might well have seceded from ALPA. The newly merged Northwest (by now one of the “Big Four”) was certainly capable of standing alone.

“Some things are so egregious that you’d have to risk a pilot group’s leaving ALPA,” Duffy believes. “But in the Northwest thing, I lobbied them, trying to get them to hold ground against signing any kind of a B-scale, but it wasn’t the kind of thing we could draw the line on, because it was better than anybody else’s B-scale. If it was something predatory that was going to give a pilot group some intrusion into another pilot group’s work, I’d have to say ‘no’ and suffer the results. But I can’t think of an example where this couldn’t be headed off.”

Duffy makes a plausible argument. Even presidents of the United States, with all the raw power of military might at their command, are prone to note in their memoirs that the power to persuade, the fact that opponents have to listen (the “Bully Pulpit,” if you will), gives them their real power. Duffy believes that the kind of conciliatory, consensus-building approach he had no choice but to embrace might have worked as well for ALPA in the past as it must work in the future.

“In today’s environment, with proper coordination among the pilot groups, we might even have held off the whole B-scale “ Duffy said in 1990. “I think the American pilots would be very reluctant today about undercutting another pilot group.”

But the biggest problem Duffy faced was Frank Lorenzo. Regardless of the bodycheck United’s pilots had dealt copycats like Dick Ferris, or the fact that other airline executives seemed less eager to follow his example, nothing ALPA or Hank Duffy could have done would likely have dissuaded Lorenzo from the course of action upon which he had embarked. His modus operandi, as we have seen, was established in the mid-1970s at Texas International (TXI), and it never really changed. Lorenzo was a “one-trick pony” pursuing the main chance, carrying a load of junk bond debt that typified everything that was wrong with deregulation, Reaganomics, and amoral “Yuppie” greed.

The biggest historical question, which will always haunt the Eastern strike, is why any government would allow a man with Lorenzo’s reputation to acquire such a respected and venerable airline in the first place. After all, Lorenzo was operating Continental under protection of the bankruptcy laws, thus in a de facto sense, competing unfairly with other airlines that were paying their bills. In the old deregulated system, the Civil Aeronautics Board, which underwent “sunset” in 1984, would surely never have allowed a man of Lorenzo’s cancerous reputation to metastasize to another airline. Even under deregulation, Lorenzo’s acquisition of Eastern was so fraught with antitrust and conflict-of-interest problems that any Department of Justice except Reagan’s thoroughly ideological outfit almost certainly would have disallowed it. But ideological conservatism not withstanding, Lorenzo’s careful cultivation of the Reagan Administration insulated him from such scrutiny.

These larger issues aside, the specific question that will always haunt Eastern’s pilots is, Why did Lorenzo do what he did? The answer lies in his history, and perhaps in the ancient adage that a leopard never changes spots.

At TXI and Continental, Lorenzo first attacked the mechanics, provoked strikes, and then tried to manipulate his pilots into breaking them for him. His plan hadn’t worked, but because he had won the subsequent strikes anyway, he was sure to try it again at Eastern. Before the strikes on each airline, the pilots, in saving their jobs, would have done almost anything to accommodate Lorenzo. In a classic example of the “Lucy Syndrome,” in 1978, during Lorenzo’s attempt to acquire National Airlines from Lewis B. “Bud” Maytag, Newsweek quoted “a veteran pilot” as saying: “Almost anybody would be better than Maytag.” Incredibly, the International Association of Machinists’ local newsletter encouraged Lorenzo with the following headline: “TAKE US, WE’RE YOURS!” That willingness to give Lorenzo the benefit of the doubt never really changed—even Eastern’s unions were cooperative at first.

Lorenzo acquired Eastern through a fluke. It happened in February 1986, when a gamble by Frank Borman to coerce Eastern’s unions into concessions (including a B-scale for new-hire pilots) went badly awry. In late 1985, Borman had tried to bluff the pilots by threatening to sell the airline to Lorenzo if they didn’t grant concessions. Eastern’s pilot group responded by taking a strike vote, which passed by a 96 percent margin. But more troubling than that, Borman’s bluff stirred up the “outside” members of Eastern’s Board of Directors. These directors, whose fiduciary responsibility required them to consider any reasonable offer for the troubled airline, insisted that Lorenzo be allowed to bid. Lorenzo himself, surprised that he was being taken seriously (he was running a bankrupt airline under Chapter 11 rules at the time), seized the main chance and put together a financial package consisting mostly of junk bonds. Then he waited for the mouse to fall into his trap.

With ALPA’s strike deadline exerting pressure, Borman, who had no intention of selling Eastern, responded by pushing his bluff to a higher level. Probably at his urging, Eastern’s creditors announced a February 28 deadline for the unions to make concessions or they would foreclose on $2.5 billion in loans, thus forcing the airline into bankruptcy, with potentially catastrophic consequences for existing union contracts and the possibility of Lorenzo grabbing control anyway. Lorenzo had led a charmed life under the bankruptcy laws, and he had excellent financial connections to Michael Milken, the Drexel, Burnham, Lambert junk bond king and future felon. (Although not part of this story, deregulation of the savings and loan industry paved the way for looters like Milken to channel S&L money to fast buck operators like Lorenzo, with taxpayers taking all the risks. The savings of ordinary people, invested by corrupt or incompetent S&L managers in Milken’s junk bonds, provided the capital that allowed the likes of Lorenzo to flourish.)

Exasperated with Borman, to whom they had made hefty concessions in 1983, only to watch him turn around and give the IAM a raise, Eastern’s pilots were worried and suspicious. Under August H. “Augie” Gorse, the MEC chairman who had been instrumental in swinging a large bloc of votes away from J.J. O’Donnell to Hank Duffy in 1982, Eastern’s pilots had granted Borman $100 million in deferred pay raises, increased flying time, and reduced vacations. By 1986, the MEC was bitterly divided between two strong polar opposites, Chairman Larry Schulte, a moderate who wanted to help Borman despite his previous missteps, and Charles “Skip” Copeland, a veteran New York-based ALPA activist, who was militantly opposed. Arguing that concessions were the only way to ensure that Lorenzo would not take over their airline, Schulte got the MEC to agree (by the barest of margins) to a new contract. Randy Babbitt, in his capacity as ALPA’s executive administrator, had a ringside seat as the fiasco played itself out.

“It was the wildest MEC meeting I ever witnessed,” Babbitt recalls of the complex negotiations between unions, management, and Eastern’s creditors preceding the bankers’ February 28 deadline. “It went around the clock Saturday. The only group to reach a deal was the pilots, but ultimately the airline was sold Sunday evening. There was terrible miscommunication between the unions, and a lot of mistrust directed at ALPA national, too.”

The selling of Eastern during the early morning hours of Feb. 24, 1986, was a cathartic moment. Betrayed by IAM leader Charlie Bryan, undercut by some of Borman’s own subordinates (who apparently fancied their chances in a reorganized airline), and outmaneuvered by Lorenzo, Borman was an emotional wreck. He was 57, had invested nearly 12 years in Eastern, and had little likelihood of future employment in the industry. Borman had fought desperately to cap his career by saving Eastern, thereby linking his name with such legendary giants as Rickenbacker.

Eastern’s pilots had also invested a lot, both in emotions and givebacks, in Borman, and his failure was also theirs. Larry Schulte at one point had to be restrained from a fistfight with an Eastern executive gloating over Borman’s fall. The next day, Hank Duffy talked Borman into formally signing the new contract that Schulte had hammered out, which granted a B-scale plus $150 million in concessions. Schulte and Borman ratified the agreement before the MEC, then embraced, crying. The MEC gave them a standing ovation.

“That was a tough time,” Randy Babbitt observes. “I remember talking to Borman about 30 minutes after the airline was sold, and he had tears running down his face. He was a devastated man.”

The famed astronaut proved he was still a pilot at heart. He would give Eastern’s pilots what protection he could against Lorenzo by signing the new contract. A mere contract, however, was a slender reed upon which to lean when dealing with Lorenzo.

Lorenzo, delighted that this prize had fallen into his lap for such a pittance, promptly announced that he would accept the pilots’ contract Borman had signed. He denied any unionbusting intentions and agreed to a 7 a.m. breakfast meeting with Hank Duffy at the Miami Marriott the next morning. The meeting went well. Lorenzo vowed to let bygones be bygones. Duffy promised that ALPA stood ready, as always, to help anybody—even Frank Lorenzo—make an airline work.

In the interim, the employees, while they allowed Lorenzo a chance, saw no reason not to try to find an employer who was more suitable—a “white knight.” To this end, over the next two years, Eastern’s unions, operating through the Eastern Employees Acquisition Corporation, approached a wide variety of “movers and shakers” about supplanting Lorenzo. They talked to former Baseball Commissioner Peter Ueberroth, Dallas billionaire Ross Perot, Denver mogul Marvin Davis, and corporate raider T. Boone Pickens, among others. Also, because Eastern’s unions had substantial stock holdings from the 1984 “Cooperation Plan,” they were simultaneously exploring an Employee Stock Ownership Plan (ESOP), by which they could become their own bosses.

All these efforts failed for one of two reasons. The first was that Lorenzo could not be forced to sell Eastern. He had picked up the airline for a song, and its net asset value, should it be liquidated, was nearly $3 billion. Lorenzo was thus in a position to ask an enormous price. Second, to meet this enormous price would require not only hundreds of millions in givebacks from the unions, but an enormous amount from their pension funds as well. ALPA and the flight attendants were willing to invest substantial amounts from their pension funds, but the machinists were not. So all efforts to displace Lorenzo through a white knight or an ESOP came to nothing.

As we have seen, Lorenzo was really not interested in aviation. He was essentially a corporate raider and financial manipulator, more like his friend Michael Milken or his rival Carl Icahn, than Bob Six or Eddie Rickenbacker. The daily details of actually running an airline held no charm for Lorenzo. Rather, the heady rush of the deal—the maneuvers, the ploys, the sharp advantage to be gained over an opponent by shrewd “one up-manship”—was what attracted him.

To fully understand Lorenzo’s obsessive character and his visceral attack on unions (particularly ALPA) requires a detour into abnormal psychology, which is beyond the scope of this history. As Aaron Bernstein wrote in Grounded: “Eastern had problems, but labor was not foremost among them. The pilots and flight attendants had just cut Eastern’s labor costs to reasonable levels. For equity’s sake, the machinists should have kicked in, too, but their cuts were not sufficient to make or break the company. Lorenzo was so obsessed with beating labor that he never faced Eastern’s real dilemmas. His employees had shown a willingness to do almost anything to keep their jobs and the company going. Lorenzo never saw that. Instead, he stripped Eastern and made off with millions in assets.”

Lorenzo’s looting of Eastern began slowly. Throughout the remainder of 1986, things remained relatively quiet as ALPA gave Lorenzo every chance to save the airline. But ALPA’s good faith was in vain, for Lorenzo was merely biding his time, following his familiar strategy of dividing labor by targeting the IAM first. The truce would end when the machinists’ contract came up for renewal in February 1987.

The IAM refused Lorenzo’s demands for wage cuts and instead asked for a raise. Lorenzo launched a publicity war, denouncing “$45,000-per-year baggage handlers.”

This time ALPA wouldn’t be taken in. A memo to all ALPA members contained the following statement: “How do you think an employee will feel if you’re 51 years old, you’re a baggage handler, you’ve worked your way up to $30,000 a year, and they come in and say, ‘I’m going to cut your salary to $18,000. If you don’t like it, you’re fired!’”

Amazingly, the preceding statement wasn’t from some IAM official. Rather, it was a direct quote from Robert Crandall, CEO of American Airlines, in a June 1987 Airline Executive interview.

For the next two years, the acrimony between Lorenzo and the IAM continued, as the contract talks underwent mediation. Although the pilots’ contract was not open, Lorenzo nevertheless sought $114 million in additional concessions simultaneously with his demands for givebacks from the IAM. When the pilots refused, Lorenzo followed yet another of his familiar strategies, suing to invalidate the contract Borman had signed during the takeover—the very contract Lorenzo had sworn to accept!

February 1987 marked the beginning of sustained conflict between Eastern’s pilots and Lorenzo. Unlike the Texas and Continental pilots, Eastern’s pilots vowed to be ready for Lorenzo this time. While they had extended their wholehearted cooperation during the 1986 truce, the pilots had also simultaneously prepared for a fight, should it come to that.

Building upon the experience ALPA had gained in the United strike, Eastern’s pilots instituted a “family awareness” program to build internal solidarity. Under the leadership of former Executive Administrator Jack Bavis (who became MEC chairman after Larry Schulte won election as ALPA’s secretary in November 1986), Eastern’s pilots prepared to launch preemptive strikes at Lorenzo to keep him off balance.

Chief among these stratagems was one aimed at organizing their Texas Air Corporation (TAC) siblings to bring them all together under ALPA’s umbrella. Reasoning that a formal program sponsored by ALPA national would meet resistance, Eastern’s MEC pilot group began a “pilot-to-pilot” program they called “TAC Unity,” which encouraged Eastern pilots to individually seek out pilots they knew personally at Continental. This bridge-building program didn’t work, less because of the lingering animosity of the 1983–85 strike than because of internal divisions on Continental itself.

“On Continental, it was like the old Kingston Trio song, everybody hated everybody,” recalls Randy Babbitt, who had specialized in difficult organizational efforts since becoming Hank Duffy’s executive administrator. “The Frontier pilots were angry at the People Express pilots, who were angry at the New York Air pilots, who were angry at the original TXI guys, who were still angry at the Continental guys. Plus you had different degrees of scabs, ranging from the ‘walk-backs’ to the ‘crawl-backs.’ Organizing them was impossible.”

And, of course, nearly all Continental’s pilots were angry at ALPA for something, even many of the striking loyalists, who still resented the “Surrender Agreement.” Confidential internal assessments supplied by ALPA field organizers detailed the problems.

“The best reading I can get from talking to line pilots, scabs, strikers, and new-hires alike,” wrote Jim Abney to Seth Rosen, “is that a reasonably viable union could probably organize the Continental property. ALPA, however, continues to suffer from a largely unfair understanding of earlier situations, such as the Braniff and Frontier bankruptcies.”

Nevertheless, TAC Unity worried Lorenzo. Operating with a grant of $2.5 million from the Major Contingency Fund (MCF), Eastern’s pilots seemed to be making inroads among Lorenzo’s disgruntled pilots, who chafed under substandard wages and poor working conditions. Lorenzo wasn’t at all sure his Continental pilots wouldn’t sign enough “Authorization to Act” cards to force a representational election under National Mediation Board (NMB) auspices, so he countered by announcing a retirement plan (the bankruptcy court had invalidated the original one) and wage increases (which he had to do because Continental was losing pilots to other airlines). Lorenzo also struck back with a panicky letter to all Continental pilots in September 1987.

“If ALPA wins, they plan to merge the Continental and Eastern seniority lists,” Lorenzo warned. “Many of you would go right to the bottom [italics Lorenzo’s], and many more would lose their positions—just as ALPA has always wanted. So when ALPA approaches you, remember that they were willing to sacrifice you and your family.”

Proof that Lorenzo was seriously worried came in a series of personal meetings with his pilots at Continental domiciles—something he hadn’t done since the strike. He promised that they would be only the first of regular quarterly meetings to build the “Continental family.” Lorenzo invariably began these meetings with pilots by telling a favorite horror story about ALPA.

“You might recall the story of the eight-year Western Airlines veteran after ALPA merged their pilots with Delta’s,” Lorenzo declaimed. “He was placed on the seniority list below a Delta pilot who wasn’t even out of training” (emphasis Lorenzo’s).

Lorenzo’s horror story deserves explanation. As we have seen in earlier discussions of ALPA merger policy, if date-of-hire was to be the only method of integrating pilot seniority lists, it could lead to grave injustices. In the Western–Delta merger of 1986, negotiators accepted a “stove-pipe standalone” seniority list integration. Under this system, pilots were integrated according to the equipment they flew at a ten-to-one ratio (the size of the two pilot groups), structured so that no pilot on either airline would lose his domicile or be forced to change his seat. The main deviation from date-of-hire arose because of a category of aircraft, the B-767, which only Delta flew, so there was some distortion in favor of Delta pilots.

Lorenzo’s attack on ALPA merger policy for deviating from date-of-hire contains a supreme irony, for if Continental and Eastern ever were to be integrated as a “single carrier,” the method used in the Western–Delta merger would protect the junior pilot group—namely Lorenzo’s own scabs. So the celebrated horror story with which Lorenzo warmed up his apprehensive Continental pilot audiences was a distortion Joseph Goebbles would have admired.

“Boy, would I like to have had equal time for a reply on that one,” says former Executive Vice-President Frank Mayne of Delta, an ex-Western pilot. “The case Lorenzo always cited involved a guy who had been on medical leave for five years before the merger. The company wanted relief on training costs, so anybody already in training was guaranteed a number. So one Western guy on medical leave gave Lorenzo the basis for his horror story.”

In fact, Jack Bavis did formally request “equal time” to refute Lorenzo’s misrepresentation of ALPA merger policy. In September 1987, he received the following reply from John Adams, Continental’s human resources vice-president: “If you have so much time available, I suggest you visit the two ALPA pilots still serving 13-year prison sentences for carrying explosive devices.”

ALPA upped the ante by filing with the NMB a “single carrier” petition that would have declared Eastern and Continental to be one airline. This petition, if the NMB supported it, would result in a representational election for the combined airlines. Continental’s pilot leaders (known derisively as the “Student Council” to ALPA loyalists) hued to Lorenzo’s line by trying to derail the single-carrier petition by launching a campaign to revive “racketeering” charges against ALPA. Lorenzo had once filed a $510 million lawsuit alleging a racketeering conspiracy by ALPA, but had dropped it as part of the strike settlement in 1985.

“ALPA has never changed,” screamed “Student Council” memos to all Continental pilots. “It is the same group led by unprincipled, power-mad individuals.”

By late 1988, Eastern’s pilots faced a more serious challenge—Lorenzo’s “cherry-picking” of Eastern assets. This technique, also called “upstreaming,” saw Lorenzo loot Eastern by selling off such valuable properties as the shuttle service to Donald Trump, the New York real estate speculator.

Lorenzo had warmed up by selling Eastern’s SODA computerized reservations system to TAC (effectively himself) for a fraction of its actual value in 1987. The total of these transactions amounted to nearly $1 billion and would later be ruled illegal by David Shapiro, the examiner assigned to the case by bankruptcy judge Burton Lifland. Shapiro ruled that in 12 of 15 asset transfers, TAC (Lorenzo) paid “unfairly low prices” to Eastern.

In the case of the SODA sale, Lorenzo had paid Eastern only $100 million, and then charged Eastern $130 million to use it! Even worse, he later sold half the SODA system for $250 million. Subsequent to Examiner Shapiro’s finding, Lorenzo belatedly paid Eastern $280 million extra for SODA, although typically only $133 million was in cash—the rest was junk bonds.

By the fall of 1987, it was clear that Lorenzo had no intention of working cooperatively with ALPA. Working conditions deteriorated, with ALPA pilots insisting that supervisors were pressuring them to violate federal aviation regulations and fly unsafe aircraft. ALPA responded with the “Max Safety Campaign” to call attention to Lorenzo’s shortcuts. By holding Lorenzo accountable, Eastern’s pilots were intervening on the behalf of an unsuspecting public, thus fulfilling the most ancient and primary responsibility of the airline piloting profession. Unfortunately the FAA, exhibiting a Reagan-Bush–inspired lethargy, dismissed ALPA’s safety complaints as “just a labor dispute.”

Later, after Lorenzo had effectively destroyed the airline, the FAA would reverse itself and fine Eastern and several individual supervisors for falsifying maintenance records—just as the pilots had charged. In July 1990, Eastern and nine high-level managers were formally indicted for “conspiring to falsify safety and maintenance records to avoid costly flight delays and cancellations.” These criminal indictments, unprecedented in the history of commercial aviation, charged that mechanics had been ordered to falsify log books.

Working at Eastern, an airline with no future, became so stressful and unsatisfactory that junior pilots began leaving for other jobs, which they could do at the time because the industry was prospering and pilot hiring was high. Lorenzo worsened “pilot flight” by announcing stringent new requirements for sick leave, and he instituted a new system, in apparent contravention of FAA regulations, for countermanding a captain’s ancient authority to determine airworthiness. More than 600 senior pilots retired early in the two years after Lorenzo took over, leaving Eastern so short of flight deck crews that Lorenzo had to begin emergency hiring. He also accelerated his plan to shift Eastern’s routes to nonunion Continental, along with the aircraft to fly them, including several of the fuel-efficient Airbus Industrie A300s for which Frank Borman had mortgaged Eastern’s future.

To many pilots, this transfer of routes and equipment was the last straw. A kind of fatalism set in, as Eastern’s pilots concluded they must either get rid of Lorenzo or lose their careers. Increasingly, the pilots came to favor drastic, even radical, action. The powder keg was open. All it needed now was a spark. That came in March 1989, when the long-stalled IAM contract talks, which had been in “super mediation,” finally broke down and the NMB “released” the parties to “engage in an economic contest,” or strike.

Frank Lorenzo’s plan was right on schedule, unfolding at Eastern precisely as it had at TXI in 1975 and at Continental in 1983. The only issue now at stake was the pilots. Would they cross the IAM’s picket lines? There was so much bad blood between ALPA and Charley Bryan, leader of the Eastern machinists’ union, that Lorenzo could reasonably hope they would. If Eastern’s boss had been anybody but Frank Lorenzo, they probably would have. But Lorenzo had made Eastern’s pilots desperate. Their goodwill had been met with cynical maneuvers, best illustrated in the following anecdote from Aaron Bernstein’s Grounded. Shortly after Borman formally resigned, Joe Leonard, an executive sent over from TAC, called in Bob Shipner, a veteran Eastern pilot (and 1978 ALPA presidential candidate) who was at that time the airline’s vice-president for flight. Leonard summarily fired Shipner and sent him back to the line. When Shipner asked why, Leonard said: “You don’t have the stomach to do what we’re going to do to the pilots.”

Little did Lorenzo know, this time ALPA would be ready for him.

NOTE
1 Hard Landing: The Epic Contest for Power and Profits that Plunged the Airlines into Chaos (1995) by Thomas Petzinger, Jr., and Rapid Descent: Deregulation and Shakeout in the Airlines (1994), by Barbara Peterson and James Glab, are also essential “journalistic” books.

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