Printer Friendly

Eastern Airlines update.

Eastern Airlines update

The travails of Eastern Airlines continue, but there was some hope for improvement in the financial condition of the carrier when the U.S. Department of Justice dropped its objections to Texas Air Corp.'s acquisition of Eastern (approval is still required from the Department of Transportation). In another unsettled matter, Eastern was continuing a court case to force the Machinists union to reopen its contract and negotiate wage and benefit reductions and changes in work rules similar to those negotiated by the Air Line Pilots and Transport Workers unions.

The latest series of crises at Eastern began in late 1985, when company chairman Frank Borman and president Joseph Leonard notified employees that, "the temporary [wage concession] programs that we have participated in since 1983 simply will not permit us to prosper in the new economic environment of our industry. . . . We must design and implement a restructuring of our employment costs that will allow us to resume the success of early 1985." During the first half of 1985, Eastern--which had not showed an annual profit since 1979--earned $46.4 million, but prospects for a full-year profit were dimmed by intensifying fare wars. (In fact, Eastern did show a profit of $6.3 million for the year.)

Following this announcement, Eastern informed the unions that its survival required a permanent pay cut of 22 percent; two-tier pay systems; changes in work rules, including more monthly flying time by plane crews; and some reduction in benefits. The proposed 22-percent pay cut would be only a few percentage points more than the temporary cuts the unions had negotiated in 1983. The temporary cuts--to apply only during 1984--were 20 percent for the 4,000 pilots represented by the Air Line Pilots Association; and 18 percent for the 6,800 flight attendants represented by the Transport Workers and for the 13,000 mechanics and related ground service employees represented by the Machinists union. In 1985, the Air Line Pilots and the Machinists had negotiated agreements with the carrier to restore the temporary cuts in January 1986. The Machinists contract, extending through 1987, also provided for pay increases in 1986 and 1987. The Transport Workers did not settle at the same time as the other unions, contending that Eastern refused to offer the same terms as those accepted by the other unions, and that Eastern's extension of the pay reduction into 1985 violated the 1983 agreement.

At yearend, the pressure on Eastern and the unions increased when the company's lenders set a March 31 deadline for negotiation and ratification of cost-reducing labor contracts. If the parties were unable to agree, the lenders could have seized Eastern's assets because the company would have been in default on it $2.5 billion in debts.

In mid-January, Eastern announced it was cutting 1,010 flight attendants from the payrool and was reducing the pay of the remaining attendants by 20 percent and increasing their flight hours to about 63 per month (from 52). Finally, the company said that it would institute a two-tier pay system. Eastern's action came after the expiration of a 30-day "cooling off" period declared by the National Mediation Board under the Railway Labor Act. The end of the 30-day period freed the union to strike and the company to impose contract changes or to lock out employees.

In late February, Frank Lorenzo, Chairman of Texas Air Corp., offered to buy Eastern. This impelled the unions to intensify efforts to settle on cost reductions and thus end the carrier's need for assistance from Lorenzo, who is viewed with disfavor by the unions because of his 1983 acquisition of Continental Airlines and subsequent dismissal of the union-represented employees, followed by resumption of operation at reduced pay levels. The Air Line Pilots settled as Eastern's board of directors was meeting to consider Lorenzo's offer. The Transport Workers claimed that it also settled at that time, but Eastern said that the document was never properly completed. Eastern rejected the Machinists' offer of a 15-percent pay cut because the union made it contingent on the resignation of company chairman Frank Borman. (Later, the airline initiated a lawsuit against the Machinists in an effort to force the union to negotiate on cost reduction measures, contending that the offer to cut pay in exchange for the resignation of Borman was a valid reopening of the contract.)

The 28-month Air Line Pilots accord calls for a 20-percent permanent pay cut that could be offset by a possible 1988 distribution to employees from an allocation equal to 5 percent of any 1987 profits. Other terms included increased flying hours; a two-tier pay system under which new employees receive 20 percent lower pay during their first 5 years on the job; a cut in vacation time; and a requirement that workers begin paying part of their medical insurance premiums.

The Transport Workers also negotiated a 33-month contract containing similar terms. It also provides for binding arbitration of several issues which arose during the workers balloting and threatened the entire accord.

In conjunction with the Transport Workers settlement, Eastern also agreed to recall the laid-off flight attendants and to pay employees part of the money they lost because the company extended the pay cut through 1985. The payment was calculated at 6 percent of earnings from February 1, 1985, through January 20, 1986.

Flight attendants at TWA end strike At TWA, the Independent Federation of Flight Attendants ended its 2-1/2-month strike but rejected the carrier's last offer. Return-to-work prospects were uncertain for the 6,000 employees. Apparently, the union decided to end the stoppage because TWA was hiring replacements--and some strikers had returned to work--permitting the airline to attain nearly full operation. Just before the employees voted to accept the offer, TWA announced th at all but 600 of their jobs had been filled.

In May 1985, Financier Carl Icahn began a drive to gain control of the financially stricken TWA. In August, the Air Line Pilots and the Machinists agreed to cuts in compensation and changes in work rules to aid Icahn in gaining control. To some extent, the unions were impelled to cooperate because they feared that Frank Lorenzo of Texas Air Corp. might outbid Icahn for control of the airlines.

At yearend, Icahn was encountering difficulties in gaining the financial backing necessary to complete the acquisition, leading the unions to agree to modifications of the original accords. Reportedly, the combined cut in compensation resulting from the settlements amounted to 23 percent for employees represented by the Air Line Pilots and 17 percent for those represented by the Machinists.

The Flight Attendants did not settle with TWA in 1985. Instead, it continued bargaining into 1986. Talks became increasingly, difficult, with the union contending that TWA was seeking larger cuts in compensation than those accepted by the other unions. Finally, the union struck in March, but as time passed, the stoppage became less and less effective, leading to the union members' decision to end the strike.

Illinois State workers; firefighters accords

About 40,000 employees of the State of Illinois were covered by a 3-year contract negotiated by the State, County and Municipal Employees. The agreement, effective July 1, provides for general wage increases of 4 percent on October 1, 1986, 4.5 percent on July 1, 1987, and 5 percent on July 1, 1988. Employees at the top of their rate range--about half of those in the unit--received an additional 2-percent increase on July 1, 1986. The State also agreed to provide $4 million for special pay increases to employees the parties agree are underpaid.

The accord, which covered workers in a variety of State agencies, also provides for negotiations on the impact on employees of the closing of any facilities; a new State-financed dental plan; and reduced deductibles and copayments for workers who use preferred provider medical care organizations.

Also in Illinois, 4,500 Chicago firefighters were covered by a 3-year arbitration award. Martin O. Holland, President of Local 2 of the International Association of Fire Fighters, said the award "was worth the wait," while Carl S. Tomnberg, the city's counsel for the negotiations, said the award gives back "operational control of the fire department to the city." The parties' contract expired on December 31, 1983, and the arbitration period was concluded in March 1986, when arbitrator Irwin M. Lieberman issued his findings.

The union won its demand for five person staffing of fire companies, but the city won the right to 15 staffing variances per day, meaning that 15 companies can be comprised of four firefighters.

Other terms included, a reduction in the workweek to an average of 44.8 hours, from 46.7; 12 paid furlough days (formerly 10); 13 paid holidays (formerly 12); $15,000 city-financed life insurance (formerly $5,000); and elimination of the annual clothing allowance, with the city now required to open a commissary to provide uniforms and work clothes and to give each employee $50 a year for maintenance.

The settlement was financed by a $45.4 million a year increase in property taxes voted by the city council, which also appropriated $500,000 to aid employees who retired or became disabled during the arbitration period or to aid the survivors of firefighters who died.

Oscar Mayer plant shutdown averted

A shutdown of Oscar Mayer Food Corp.'s hog slaughtering plant in Perry, IA, was averted when employees approved a new 3-year contract. Included was a company guarantee that it will not shut down the facility for 18 months and will give a 90-day notice of any intention to shut down. The workers had turned down an earlier offer because it did not include these provisions.

The accord also raised the base pay rate to $9 an hour, from $8.69, effective immediately, and to $9.10 in April 1987. According to a company official, the new rates will be among the highest in the slaughtering industry.

UAW ends strike at Champion Spark Plugs

In the automobile parts industry, Champion Spark Plug Co. and the Auto Workers settled, ending a 10-week strike. The settlement covered 2,400 active and 600 laid-off workers at two plants in Ohio and one each in Michigan, Iowa, and Ontario, Canada.

The workers will receive $500 lump-sum payments in the first and second years and a 2.25-percent wage increase in the final year. The cost-of-living clause was continued, but 3 cents an hour will be diverted from each resulting quarterly pay adjustment.

The contract, running to February 1, 1989, also provided for benefit changes: adoption of health care cost containment requirements such as precertification for hospital admissions and second opinions on surgery; increased life insurance for retirees; a pension rate of $22.50 a month (was $18.95) for each year of credited service, a $1,205 a month pension (was $935) for employees retiring under the 30-year-and-out provision, and two payments of up to $200 each for current retirees.

UAW settle at former Bendix plants

The Auto Workers and Allied Corp. settled for 4,800 workers at former Bendix Corp. plants that were acquired by Allied in 1983. The plants, located in Michigan, Indiana, New Jersey, New York, and California, produce parts for the automobile, truck, aerospace, and shipbuilding industries.

The 3-year contract, scheduled to expire on May 3, 1989, does nto provide for specified wage increases but the employees will receive $700 lump-sum payments in May of each year. The cost-of-living provision was continued, subjet to a 2-cent-an-hour diversion from each of the first eight possible quarterly adjustments. There will be no diversion from the last three possible adjustments, which will be accrued and paid in lump sums at the end of the 3-month periods, rather than being paid immediately in regular weekly pay checks.

In other changes, the pension rate was increased to $20.50 a month for each year of credited service (from $18.45), and the 30-and-out pension was increased to $1,100 a month (from $935).
COPYRIGHT 1986 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1986 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:finance and labor relations
Publication:Monthly Labor Review
Date:Jul 1, 1986
Previous Article:High court backs laid-off white teachers.
Next Article:The economics of unemployment: a comparative analysis of Britain and the United States.

Related Articles
Airline union concessions in the wake of deregulation.
Airline deregulation and labor relations.
Paradise tossed; how a chance to save American capitalism was sabotaged at Eastern.
Nonstriking employees given job preference.
Eastern Air Lines.
Airline update.
United Airline accord.
Dunlop Commission reports.
Company Watch - Northwest Airlines.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters