Eastern Airlines Facing Bankruptcy

Eastern Airlines Facing Bankruptcy


      In  1986, Eastern Airlines was in  desparate  trouble.  The fourth

quarter  of  1985 had shown  a  $67.4  million  loss,  and financially  experts

had told Frank Borman,  president  and  chief executive  officer,  that the

airline had three choices:  1) a  20 percent  pay  cut for all union  and

noncontract  employees.   2) Filing for Chapter 11 (bankruptcy) or 3) Selling

the  airline.  On February 23,  1986, Eastern's board of directors met to decide

the fate of the company.


      Frank  Borman,  quickly  left his home in  Coral  Gables  to Building 16

at Miami International Airport that Sunday evening, to discuss plans on saving

the airlines.  The board of directors  had recessed for dinner following

afternoon session and was  scheduled to  convene at 7:30 p.m.   At the earlier

meeting,  Wayne  Yeoman, senior  vice  president for finance,  had spent most of

the  time outlining the details of Texas Air's offer to buy  Eastern.  Frank

Lorenzo   and  Frank  Borman  had  been  talking  since   December originally

about  consolidating  the  computerized   reservation systems,  then ,  as

Eastern's problems deepen,  about a  possible sale.


     As Frank entered his office,  he found his his loyal excutive assistant;

Wayne Yeoman;  and Dick Magurno, Eastern's senior vice president  for  legal

affairs.  For about 20  minutes  the  three discussed  the fourthcoming meeting

and the prospects  for  saving the airline.  Negotiations were going to come

around for ALPA  and TWU  but  no break from the IAM.  The IAM would  not  budge

since Charlie Byran, head of the machinist's union, stood firm against a 20

percent wage cut.


    At  7:30 the board meeting began with the  discussion  of  the Texas Air

offer,  concentrating on some of the conditions attached to  the  buying of the

company.  More talk and hours  dragged  on. Finally  word  got out that ALPA was

nearing  an  agreement.  The meeting recessed for an hour.


       During the recess Frank needed to get Charlie's surport  on the 20

percent pay cut,  otherwise the company was going to  sold. He told Charlie to

come up to his office.  Frank told  Charlie,  " we've been at this since 83' and

you have to recognize it can't go on.  I  have  every reason to believe that the

pilots  and  flight attendants  are going to give us what we need.  I know  it's

more difficult  for you because your contract is not open.  But I  know you

have a sense of history.  We have a very good opportunity  to cure this airline,

and if you just understand this,  in the  long run you'll come out a stronger,

more admirable person. Choose the harder right instead of the easier wrong,  and

let's go  forward." With  this Charlie replied,  "Frank you don't understand

that  you are just trying to run the company down and I can't go along  with

that.   With this, Frank gave up and told Charlie to wait outside. He  tryed

everything he could to get Charlie's  support  but  all attempts failed. This

was going to be the end of Eastern Airlines.


     The board meeting finally reconvened at 10:30,  an hour an  a half away

from the deadline. Word had reached that ALPA reached an agreement  and  TWU

negotiations were still up  in  the  air.  The directors heard analysis of the

Texas Air offer by representatives of Saloman Brothers and Merrill Lynch, at

this point Charlie Bryan finally spoke up.  He said, "I've had discussion with

the chairmen of the audit and finance committees,  and would like the board  to

be  informed what we talked about."  Two of the  directors,  Harry Hood  Bassett

and Peter Crisp,  told Charlie to reconsider in  the view  of  the  57 years of

the airline,  and  the  fact  that  his decision  woul
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