How Llie Airlines Slipped

PI H M Eastern, TWA emerge from 1985 in trouble NEW YORK (AP) — While The carriers, which both rank most big U.S. airlines emerged about fourth in size after United from 1985 in fair health, Eastern Airlines, American Airlines and and TWA suffered heavy losses Delta Air Lines, are facing possi- and face uncertain futures in an ble strikes by demoralized em- industry shaped by lower labor ployees and have concentrated costs and intensifying competi- on building up emergency cash tion. because of that threat. i A Jrayejjypower-sharing pact "If the economy withers, then with inilitant unions, a $2.5 Eastern's in a lot of trouble, quite bilUoiTaeBTand impatient credi- frankly," said Timothy Pettee of ' tors have hurled Eastern Air- L.F. Rothschild, Unterberg, lines into a crisis that industry Towbin, a New York investment analysts are calling thq most se-_ firm. "The situation is indeed im- . xiouiLin the carrier's turbulent mediate." ' hlstoryT^ The problems at Eastern were " Transworld Airlines, target of underscored Tuesday by a a protracted takeover fight that fourth-quarter and year-end < ended in a bittersweet victory for earnings statement that said the ' financier Carl Icahn, lost an esti- Miami-based carrier lost $67.4 mated $140 million last year and million in the last three months reportedly is losing about $1 mil- of 1985 and posted only a $6.31 lion a day. million profit for the year. 1 v } 1CSS r ? >i M <1 3 u to 3S >q Braniff takes iS N lYi 44 hard lesson aa 'j; from Eastern IUI Airline's salary deduction I plan has a familiar ring By PHILIPP HARPER loss of $128.5 million bore eloquent witness to the carrier's cash flow Staff Writer problems. So, too, did the announce *1 Braniff International Corp. will be ment last week that Braniff was ask sporting a decidedly Eastern look if ing its private lenders to defer loan employes of the Dallas-based carrier payments until July 1. accept the profit-sharing plan being Eastern spokesman Jim Ashlock re pushed by management. In principle, called recently that Eastern also need the plan closely parallels one adopted ed lender concessions to stay afloat in 1977 by workers at Eastern Air shortly after Frank Borman took over lines Inc. as president of the airline in 1976. In fact, analysts say, because the And, he said, lenders were unwilling Braniff move follows a sharp reduc to make those concessions, which in tion in operations, it could prove more cluded deferred payments and fur effective than the Eastern program, ther credit, until Borman was able to which has prevented needed person convince them of the carrier's viabil nel cuts at the Miami-based carrier. ity. He did so, Ashlock said, by in Under the Braniff plan, 10 per cent volving the employes in the rejuvena of an employe's salary would be de tion process through the profit- ducted every month and put in a sharing plan, or variable earnings profit-sharing fund. How much program as it's called. would be returned to the employe in Without the program, Ashlock as a given year would hinge on Braniff's serted, "we might have been belly up ability to meet a profit goal. Paybacks by now." could range from zero to sums in ex Employe acceptance of the program cess of the amount contributed. mollified Eastern's lenders, Ashlock i While the Eastern plan also in said, and with the funds it was able to volves employes putting up part of secure, the carrier struck out on an their pay to cover corporate losses, the ambitious program to update its badly Miami-based carrier's 30,000 employes out of date aircraft fleet. In recent donate only 3.5 per cent of their pay years, Eastern has taken delivery of to the profit-sharing fund. Money 84 fuel-efficient aircraft and will take from the fund is not paid back to em delivery of 58 additional planes by 1984. ployes unless Eastern achieves a prof it of 2 cents on every revenue dollar. In today's environment of ever-ris Not only are the schemes similar in ing jet fuel costs, a modern fleet is the design, but Braniff's action has been key to survival for trunk carriers, prompted by a set of circumstances Ashlock said, adding that Borman's not unlike those in which Eastern idea is "that nothing's going to work found itself several years ago. unless we have the best airplanes As one industry source said last available to industry." week, "Braniff is in the same situa By helping stabilize Eastern's prof tion Eastern was in in 1975. They're itability and making the company staring over the lip of bankruptcy." more attractive to lenders, the profit- While that, assessment may or may sharing plan has enabled Eastern to not be too apocalyptic, Braniff's 1980 See BRANIFF on Page 2 to it. Braniff salary plan familiar incidi Bapti BRANIFF — to secure participation in analyst. He said this would not has n ,From Page One the program. Converse Because Borman has be the situation at Bran pract ly, workers are under made good on his prom iff, since adoption of a name continue the moderni pressure to perform ise, the analyst said, profit-sharing plan zation of its fleet. more efficiently since some of Eastern's more would come when the The net employe con the plan, by its very na marginal operations airline is already down tribution to the program ture, rewards increased have not been pared to "its bare bones" in has varied widely over productivity. down. terms of operations. the three and one half Noting that the LAM R< years it has been in ef- contract approving the 'fect. In 1978, for exam plan is set to expire in ple, Eastern workers July, 1982, Bryan said, contributed $27 million "We don't know how Major Machine Shop to the fund and got back we'll approach it in fu Located in Arlington, Texas has open ma $36.8 million, or 135 per ture negotiations." repor cent of what they put in. Apparently Eastern's chine time available immediately for NC/ pilots will be more whea However, in 1980, a year CNC and conventional mills and lathes; and 1 of poor profit perfor tractable. grinding; honing; broaching and EDM ma tors t mance throughout the A senior Eastern pilot industry, none of the who works in the Miami chining. office of the Air Line Pi range $37.3 million anteed up Contact Howard Killingsworth range by the workers was re lots Association said, "We feel generally that bush( turned to them. Their Telephone 817/467-4927 contributions reduced these are pretty tough Hudson Aerospace, 3SOO S. Cooper tors i times and an airline conti] Eastern's loss from over $54 million to $17.4 needs some stability." useag •million. •He added that most 1981 pilots regard the plan as to pr During the six months being in their own best Gold/Silver supp] of 1977 the program was interests, since the sta Lowest Possible Rates On: and in effect, worker contri bility it promotes pro • 1, 5, 10 and 100 oz. Silver Bars (.999 pure) graii butions totaled $12.7 tects their jobs. $ 1.50 per oz. ouer spot (for lOO oz.bars) million, of which $6.7 whicl "If the airline were to • 1,10 and 100 oz. Englehard Silver Bars t million, or 52.8 per cent, lion r. suffer, Borman says, and e '/io. 'A, 'A and 1 oz. Gold Krugerrands f was returned. In 1979, we have reason to feel e Maple Leaf Gold Coins • Gold Pesos - workers were paid back he's credible, the airline e Silver Coins — U.S. 90% and 40% mesti * $10.1 million, or .30. 7 would have to retrench e Rare Coins for collectors & investors able I per cent, of the $32.9 and size down," the pilot Metroplex'Largest Volume Dealer recen million they contributed. said. "We Make The Market " in coi 1 -With the exeption of The fact that Borman 1 time. last year, the program gave employes assur • has enabled Eastern to ances that he would DALLAS # lent | | meet its profit goal. keep layoffs to a mini small • While Eastern man-. mum if they approved Gold & Silver The . ) agement appears unani- the plan has had a nega EXCHANGE Corp. ' Tnpus in its delight with tive impact, according to 228 Park Forest Ctr. ("A mile South of LBJ at Marsh & Forest Lns.j the profit-sharing plan, a New York airline 24 HOUR QUOTES 357-1706 Metro 263-3618 5 there are beginning to be some rumblings of discontent among workers, although it seems • doubtful that this senti G ment will prevent the program from being £ extended. ( * Charles Bryan, presi dent of district 100 of 1955 « the International Associ j low dc ation of Machinists and ; Many, Aerospace Workers in ' fields. Miami, "said now that T. Eastern is perceived to i draine j be in relatively good fi- I gradui nancial shape, the plan | ing th should be made j accord voluntary. logical Because the plan is presid mandatory, he said, Itr i there is no incentive for j more i the company "to run a I _We to good company" in order 2C The Miami Herald / Sunday, June 8,1986 Ebc Miami Herald 1 JOHN S. KNIGHT (1894-1981) JAMES L. KNIGHT, Chairman Emeritus RICHARD G. CAPEN, JR., Chairman and Publisher PHIL DEMONTMOLLIN JIM HAMPTON HEATH J MERIWETHER President and General Manager Editor Executive Editor JOANNA WRAGG, Associate Editor PETE WEITZEL.

Load more