Eastern Airlines Facing Bankruptcy :: essays research papers

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