Hard Landing (48 page)

Once again cries of “BOHICA!” went up from the locker rooms and dispatch centers of the airline. Like his insensitive comparison of an earlier wage giveback to a few six-packs of beer, Borman’s characterization of years of concessions as mere “Band-Aids” outraged employees anew.

The three principal union groups—the machinists, pilots, and flight attendants—had never particularly gotten along, neither at the leadership nor at the membership level. That now changed. Combined rallies were staged at snowy locations in the north. Lawyers were jointly engaged—not some slouch Miami Beach outfit but Skadden, Arps, Slate, Meagher & Flom of Wall Street, the General Motors of the takeover bar. If Borman couldn’t run Eastern, the unions would look into running it themselves. They already owned 25 percent of the company, after all. Charlie Bryan pleaded with his members to buy stock, noting that if each of Eastern’s 40,000 employees bought
just $3,000 in shares, the workers would control Eastern Air Lines.

Watching the spectacle from a distance, Eastern’s bankers added more uncertainty still: unless Borman had the wage cuts in place by February 28, 1986, they told him, they would cut the company off for good. It would be curtains for Eastern, a certain bankruptcy filing.

In his career as a pilot and astronaut Borman had never flown a mission without three courses of action firmly planned. The first was to complete the mission, the second was to resort to an acceptable alternate mission, and the third was to bail out. Borman now reduced
his goal at Eastern to three options. He would try to win over the unions; failing that, he would find a buyer for Eastern; failing that, he would file for Chapter 11 protection. In his dealings with his fellow officers, his board members, and the unions, he expressed his new strategy over and over, as if it were his mantra: “
Fix it, sell it, or tank it.”

Borman knew his credibility was shot. If he had any hope of completing the first mission, he needed a stalking-horse, a real warmonger.

No sooner had this realization hit Borman than a call came from Frank Lorenzo. He wanted a meeting. “I’d like to
talk to you about System One,” Lorenzo said.

They got together at a small office that Eastern maintained in New York, and it was immediately obvious to Borman that
Lorenzo wanted System One very badly. They discussed the variety of ways a transaction could be structured, including a merger of System One and the in-house Continental reservations system. No deal was reached, but they agreed to revisit the matter soon.
Borman took immediately to Lorenzo, who was direct, just like Borman, and who hated small talk, also just like Borman. Borman decided to unveil his hidden agenda tentatively, almost
as if he were making a joke.

“I might get back to you [to sell] not just the reservation system but the whole airline,” Borman said.

“I wouldn’t be interested in doing anything unless it’s a friendly arrangement,” Lorenzo answered. “But if you want to talk further, just give me a call.”

Borman flew back to Miami so excited he could hardly contain himself. “I regarded Texas Air as an
ace in the hole,” he later explained.

Borman quickly contacted Richard Magurno, a soft-spoken former Peace Corps volunteer who had risen through the ranks of the Eastern legal department to become the general counsel of the company. Magurno had grown close over the years to a number of Eastern’s distinguished outside directors.
Borman excitedly described his conversation with Lorenzo. He wanted to go to the board immediately, then to the unions, brandishing Lorenzo as his new bogeyman. Borman wanted the world to know that if the unions didn’t deal, if
Charlie Bryan didn’t cave this time, they’d have Frank Lorenzo to deal with.

Although he did not consider it his place to say so directly, Magurno thought the Colonel needed a cold shower. Acting impulsively would throw Eastern Air Lines into play, particularly in the frenzied takeover environment of December 1985. So Magurno placed a discreet call to his best contact on the board: Roswell Gilpatric, a retired 79-year-old partner in the New York law firm of Cravath, Swaine & Moore, who had served as deputy defense secretary in the Kennedy White House. Gilpatric in turn called Borman and urged him to move with caution.

Within a few weeks, with the crisis at Eastern mounting, Borman was having his second meeting with Lorenzo, during an industry function at the sprawling Marriott resort center in Fort Lauderdale. This time Lorenzo seemed wary. “I want to know if you’re serious about selling Eastern, or are you
just using me as a bargaining chip?” he demanded. Borman explained his strategy—to fix it, sell it, or tank it—and promised that if he failed in the first goal, he would deal with Texas Air in good faith.

Borman talked to other
potential buyers. Northwest Airlines, financially strong, wasn’t interested. He met in Washington with Don Burr of People Express to discuss a possible merger but dismissed Burr as a real-life Elmer Gantry. “He was
loony tunes,” Borman would later recall. Borman even sounded out some oil companies, which at the time were the biggest takeover players in the game. There too he drilled a dry hole. That left only Frank Lorenzo.

To that point Borman’s dealings with Lorenzo had been strictly sub-rosa and totally informal. In the takeover culture that had developed in the mid-1980s, merger deals, regardless of the contact between willing principals, were not set into motion until the investment bankers from Wall Street had become involved, like ministers at a baptism. Borman contacted Eastern’s investment bankers at Merrill Lynch. He was ready to play his ace in the hole.

“
What do you think?”

It was the afternoon of Friday, February 21, 1986. The Presidents’ Day weekend was about to begin, and Phil Bakes had plane tickets from Houston to Washington. Frank Lorenzo had just invited himself
into Bakes’s office, announcing that Frank Borman’s investment bankers had telephoned. Eastern Air Lines, they had told Lorenzo, was officially available.

“What should we tell them?” Lorenzo asked Bakes.

Bakes could hear nothing but alarm bells. After dodging the airline unions with New York Air and destroying trade unionism at Continental, Texas Air was not exactly the ideal candidate for defusing the most volatile labor situation anywhere in the United States. As Bakes would later put it, “We were the wrong savior for this flock.”

Bakes tried to be direct with Lorenzo: “I think it’s a swamp from which we will never return.”

But Lorenzo began to rhapsodize. Eastern, a company he had once worked for … Eastern, one of the original Big Four … One could never build anything like that today, he thought. “That franchise,” Lorenzo said in Bakes’s office. “That name …”

Of course, Lorenzo recognized, it was a damaged name; the labor wars were so unfortunate. And its routes—they were uniquely vulnerable to competitive attack, stuck in the world’s single most competitive airline market, the East Coast. Eastern did not have a cozy position in some hub, Lorenzo thought, where it could hide a lot of high costs. But he had seen worse, had even been involved with worse—Continental, for instance. When he bought it, Continental had a lousier market position than Eastern at this point, Lorenzo thought.

And of course Eastern had System One, the jewel in its otherwise dull crown, a crucifix to wave in the path of the advancing Sabre and Apollo systems. Apart from its virtue as the third largest airline reservation network in the country, System One, as Lorenzo would explain, was the only computer reservation network in the United States the purchase of which was
remotely plausible.

Bakes realized that Lorenzo, absorbed in a reverie, had already made up his mind, to which Bakes thought, “You tune me out, and I’m out of here.” And 90 minutes later Bakes was on an airplane, on his way to a great weekend, leaving Lorenzo to deal alone for Eastern.

Frank
Borman had known the international president of the machinists’ union for years. He was William “Winpy” Winpisinger, rotund
and irascible, full of bombast, with ideological leanings as far to the left as one could reach in mainstream politics. Winpisinger and Borman loved fast cars. The machinists sponsored an Indy-class race team, and the two men frequently sat together at the Indianapolis Speedway, the same racetrack once owned by the erstwhile Eastern chairman, Eddie Rickenbacker.

So Borman could confer with the union chief freely and confidentially when Winpisinger was in Miami for an AFL-CIO function on Friday, February 21, 1986. Although the pilots and flight attendants were also resisting Borman’s plea for 20 percent pay cuts, it was Charlie Bryan who most worried the Colonel. Was there anything Winpy could do?

Winpisinger was in a desperate fix. To the extent that he admired his friend Borman he mistrusted his own local president. Winpisinger thought Bryan had made himself into a king, so much so that people sometimes mistook Bryan for the international president of the machinists’ union.

“
Charlie hears voices,” Winpisinger told Borman.

But at the same time, Winpisinger was painfully aware that the rank-and-file resentment against Borman was powerful and still building. Borman had gone to the well once too often. And in any event, Winpisinger was mostly powerless under the union’s constitution to control Bryan.

Winpisinger gave Borman a pep talk. Just keep bargaining, he said. Everything will work out. But in encouraging him to continue pressing, the international president left Borman with the indelible impression that he, the mighty William Winpisinger, would step in at the last minute and sit on Charlie Bryan if it was necessary for saving Eastern Air Lines.

Frank Borman left his meeting with Winpisinger heaving a sigh of relief. Maybe he could, after all, fix Eastern. Maybe, just maybe, he could checkmate Charlie Bryan.

That evening, word came back from Frank Lorenzo. He was willing to buy Eastern. He would pay only $600 million, however, peanuts for that great name, that great franchise, that jewel of a computer reservation system. In fact, under the proposal presented by Lorenzo, about $300 million of the purchase price would be paid to Eastern shareholders by extracting cash from Eastern itself; Eastern,
in short, would be paying for half of its own acquisition. And regardless of the outcome, the offer was good only if Eastern agreed up front to pay $20 million to Lorenzo as a nonrefundable “inducement fee.”

Lorenzo, moreover, would not keep the offer on the table for long. His lawyers still had all the draft contracts in their word processors from the recent attempt to buy TWA; all they had to do was switch the names and the numbers. There was no reason for delay. The takeover offer, Lorenzo said, was good only until midnight Sunday.

If Borman was going to use Lorenzo as a bogeyman with the unions, he had to work fast. He had barely a day to fix it. For good measure, with jealousy and hatred running so high on all sides, he was back to wearing his
bulletproof vest.

The pilots’ union and the flight attendants’ union had been coaxed to the bargaining table, where Borman’s aides were fervently trying to talk them into the 20 percent wage reduction. Charlie
Bryan, however, was vomiting. After going years without a sniffle, he was now gripped by a debilitating flu. His fever shot up to 103 degrees. Shuddering with chills, he felt as if he were in a meat locker.

He had just returned from a Saturday afternoon board meeting with several of the directors, where he was put on notice that Eastern was ready to resort to plan B, selling it—and not to just anyone. Unless the machinists capitulated to the 20 percent cutback, Eastern would be sold to the most dreaded enemy of the airline unions, Frank Lorenzo. As the directors and investment bankers for Eastern importuned him to come to terms, he warned them off. “Watch out,” he said. “I’ve got the flu.”

That evening Bryan was back at the local union offices with his consultant Randy Barber. They
pondered the variables, ran economic scenarios, pondered every what-if they could imagine. From all they could tell, Eastern had passed the financial fail-safe point. There was no hope for the company, certainly not with the current management and possibly not with any management. The 20 percent concession might prolong the company’s life a few months, they reasoned, but it would only postpone failure. Moreover, Barber was convinced that the rank and file would never stand for more BOHICA. Only 10 months earlier they had handed Charlie Bryan his
head by voting down a concessionary contract that he himself had urged them to accept in the name of peace.

The Eastern board was scheduled to meet again the following day, Sunday, February 23, 1986, a few hours before Lorenzo’s deadline. Bryan went to bed with his fever and nausea and no idea what the following day would bring.

On Sunday afternoon, the directors’ limousines began pulling up to Building 16 alongside the mammoth expanse of Rickenbacker Fountain, where the image of the founding chairman was cast in bronze relief on a stone monument. The fountain itself, however, was dry, the water drained and the power cut off years earlier in a cost-saving move.

The front doors led to an expansive lobby with a great circular reception desk in the middle. The marble floor, like the fountain out front, bespoke the pretensions that Eastern had once harbored. To the left, as one entered the lobby, a great route map hung on the wall, with little lightbulbs dimly burning behind each of the cities served by Eastern, all the way to LEE-mah and Bway-nos-I-rays. The lobby also bore the telltale markings of previous efforts to redecorate on a tight budget—a section of wood paneling here, some wallpaper striped in green and orange there.

The directors strode through the lobby to a door next to the twinkling route map and entered a small auditorium outfitted with ionosphere blue carpeting. In the auditorium several rows of seats were arrayed theater-style before a small, elevated stage, where a large table sat. It was on that stage, with their advisors seated in the audience and the curious hanging around the lobby outside, that the directors sat down to decide the future of Eastern.

The directors assembled only briefly in the afternoon, long enough to hear that the documents for Lorenzo’s purchase were nearing completion and that the pilots and flight attendants were negotiating in earnest over Borman’s 20 percent demand. For the machinists, however, Bryan was still refusing to entertain the cutbacks. The offer from Lorenzo, due to expire at midnight, would be presented for a vote after dinner.