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Polot
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What Exactly Did Frank Lorenzo Do?

Sat Sep 24, 2011 11:52 pm

Considering how vilified Frank Lorenzo is in the industry, I have always wondered what specifically he did to garner so much hate (as his actions generally took place before my time). I have tried to do some research on my own, but it can be difficult as descriptions are usually either very general, stating how he was feared by labor due to his practices, or extreme, basically stopping short of claiming that he required his workers to sacrifice their first born child.

From what I gather his notoriety seemed to have started with forcing CO into bankruptcy to lower labor costs, and the formation of the non-union New York Air. While I understand how the union would be upset over the second issue, how was CO's bankruptcy different from the ones the other legacy carriers went through in the past decade? Or is it just that it was really the first of its kind in a different era and mindset amongst the labor group? Is it the case that his actions were really that extreme, or is it just that he did so many unpopular things in succession (New York Air, bankruptcy, his attempted takeover of basically every airline for sale, helping to break up EA etc) that he just became infamous?

Just to note, I am not supporting or defending him and his actions, and I would prefer that this not turn into a management vs union flamefest, I'm just curious on how he ended up being "one of the most hated men in America" and banned from the industry?

[Edited 2011-09-24 16:56:01]
 
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OzarkD9S
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 12:02 am

Next up: STL-OAK-RNO-LAS-ICT-STL
 
Delta787
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 2:56 am

He is a person who I have mixed views about overall. I firmly believe that if he hadnt taken over Continental in the 1980s, the airline would have ceased to exist a long time ago. However, his leadership at Eastern was a contributing factor to their eventual demise. I still think it would be naive to say that he was the sole reason that Eastern Air Lines eventually went out of business.

[Edited 2011-09-24 20:14:03]
Fly Delta!
 
mhkansan
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 3:36 am

Found it on Amazon for $3.50 used and just bought it! Thanks!
 
747400sp
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 4:01 am

Ask an ex-Eastern pilot that quesion.
 
trnswrld
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 2:49 pm

Kind of reminds me of another infamous name.... Carl Icahn
 
sccutler
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 3:12 pm

Francisco will always be a controversial soul.

Sum it up like this:

He saved two airlines, then reached too far.

Texas International would never have survived had Lorenzo and his crew not taken over, and applied serious financial discipline and new-idea marketing. The leveraging to Texas International's renewed strength into buying very-nearly-dead Continental was remarkable.

Rewritten history is an interesting thing, though - the (first) bankruptcy of CO was not a strategically-planned event intended to do away with union contracts; it was compelled by the refusal of one (and only one) union to participate in the agreed and effective renewal of the airline's untenable financial condition. Can you guess which union?

As things went later, my contention is that, had Frank been more focused on discussing, and less on dictating, he might have salvaged the whole EAL situation (although the IAM had already made that an exceedingly unlikely occurrence under any management), but that was simply not his style.

So maybe Frank Lorenzo is not who you want to work for - but he was the right man at the right time for Continental in 1983; no Frank then, No CO/UA today. He is no saint, but he's scarcely the devil many cast him to be, either.
...three miles from BRONS, clear for the ILS one five approach...
 
lax777lr
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 3:24 pm

Here's your bible for the NA airline business. Enjoy  http://www.amazon.com/Hard-Landing-C...est-Profits-Airlines/dp/0812928350
 
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Polot
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 3:33 pm

Thanks everyone for all the book recommendations. I've ordered them and excited to check them out.
 
LoneStarMike
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 4:22 pm

While you're waiting for your books to arrive, you might want to check out Texas Monthly's cover story for March 1987 about Frank Lorenzo.

Top Gun - March 1987

Please note: per books.google.com's TOS, I'm only able to provide a link to the search results page. So you have to click on the above link, then when the results page comes up, just click on the link that ends in "Page 98" and it should take you right to the page the article begins on. At the end of page 103, it skips to page 185.

Also, there are 6 icons near the top. Zoom in, zoom out, show one page at a time, show two pages at a time, show thumbnails of all pages, and show full screen. If you click on the icon for full screen, it gets rid of the sidebar on the left hand side.


LoneStarMike
 
srbmod
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 5:38 pm

Quoting TrnsWrld (Reply 6):
Kind of reminds me of another infamous name.... Carl Icahn

TWA picked what they thought the lesser of the two evils since Texas Air was also making a play for the airline. I think that the result would have been the same either way.

Quoting sccutler (Reply 7):

As things went later, my contention is that, had Frank been more focused on discussing, and less on dictating, he might have salvaged the whole EAL situation (although the IAM had already made that an exceedingly unlikely occurrence under any management), but that was simply not his style.

Eastern had been troubled for many years before Borman sold out to Texas Air. Borman wanted out because of the ongoing labor issues at the airline that were affecting efforts to ease some of Eastern's financial situations (which they never seemed to be able to get straightened out,). Borman gave the three major unions at the airline an ultimatum to either grant them the concessions they wanted or the airline would be sold to Texas Air. The unions opted to let the airline be sold to Texas Air. Considering how some of the more hardline IAM folks at Eastern viewed the folding of the airline in 1991 as a "victory", it's likely they probably did this to try to get back at Texas Air for what happened at CO. What seems to make this a likely reason is the fact that there were several potential buyers of the airline prior to the 1989 strikes and the deals fell through because of the unions refusal to make any concessions and this also led to the failure of several potential deals that emerged during the strike and towards the end of the airline.

The hatred that some have for Lorenzo is perhaps misplaced since it really could be argued that the IAM never intended to negotiate in good faith in order to end the strike and that the labor action was more or less an act of revenge against Texas Air and Frank Lorenzo. My grandfather worked at Eastern for about 38 years before retiring and was on both sides of the fence when it came to the unions, as he was a member of the union and once he was promoted into management, he had to leave the union. He often said that the unions were going to kill the airline and he was saying this years before it happened. The IAM uses Frank Lorenzo's name as a scare tactic in union elections, as I worked at AirTran back in late 1999 when the IAM was attempting to unionize the ramp, customer service, and reservations agents. They used the fact that FL CEO (at the time) Joe Leonard was an Eastern executive during the Lorenzo years and implied that if they (they IAM) wasn't voted in that Lorenzo was going to be involved with the airline (A complete falsehood since while he was never "banned" from the airline industry, he was strongly discouraged from being involved in the airline industry, and there was no way any airline would take that sort of a gamble.).

Frank Lorenzo did get a bad reputation for some of the things that he did, but not everything can be pinned on him. What happened at Eastern was the results of the actions of a number of people, from the airline, to the unions to the White House (President Bush did not intervene in this strike and chose to ignore the recommendations of the NMB to put together a presidential emergency board in order to try to get the sides to reach an agreement, a move that would have delayed a strike. He later vetoed a bill that would have created a congressional committee to investigate the ongoing labor dispute in an attempt to end the dispute.). Some say that Bush lost Georgia in 1992 because of his refusal to intervene in the strike, as a lot of former Eastern employees lived in the Atlanta area.
 
NWAESC
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 6:19 pm

Quoting OzarkD9S (Reply 1):
All the info you ever need is right here:

http://www.amazon.com/Grounded-Loren...r=1-1
Quoting lax777lr (Reply 7):
Here's your bible for the NA airline business. Enjoy  http://www.amazon.com/Hard-Landing-C...est-Profits-Airlines/dp/0812928350

+1

Quoting mhkansan (Reply 3):
Found it on Amazon for $3.50 used and just bought it! Thanks!
Quoting lax777lr (Reply 7):
Thanks everyone for all the book recommendations. I've ordered them and excited to check them out.

Enjoy! Don't be surprised if you both find yourselves staying up all night to finish them!
"Nothing ever happens here, " I said. "I just wait."
 
727LOVER
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 7:40 pm

Quoting srbmod (Reply 10):
The unions opted to let the airline be sold to Texas Air

I thought that the pilots and FAs had agrred to concessions, but good ol Charlie Bryan refused. We always hear Charlie's name, but who was the the ALPA leader in 1989 that joined in a sympathy srtike.

Also, before the EA BK judge took control from Lorenzo, was it Lorenzo's plan to merge EA and CO? At that point EA was really just ATL and some NE-Florida routes, would have fit perfectly with CO. DL would not be the mass in ATL it is now if that had happened.


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srbmod
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 8:28 pm

Quoting 727LOVER (Reply 12):
I thought that the pilots and FAs had agrred to concessions, but good ol Charlie Bryan refused. We always hear Charlie's name, but who was the the ALPA leader in 1989 that joined in a sympathy srtike.

Also, before the EA BK judge took control from Lorenzo, was it Lorenzo's plan to merge EA and CO? At that point EA was really just ATL and some NE-Florida routes, would have fit perfectly with CO. DL would not be the mass in ATL it is now if that had happened.

The IAM was the lead dog in the dispute, but as evidenced by the fact that the pilots (ALPA) and F/As (TWU) joined the strike, there was solidarity for a time amongst the unions. They eventually saw the futility of the strike and returned to work (a number of their ranks had already crossed the picket line) while the IAM folks opted for go for the Pyrrhic Victory.

If he would have merged them, the strike and the CH. 11 filing soon there after probably would have been when such a merger would have been undertaken. That move could have forced the unions to work out a deal. Lorenzo was more interested in the assets of Eastern than the airline itself. For him, the prize in the deal was Eastern's SystemOne computer reservations system as well as some of the newer a/c in the fleet, the A300s. If he thought Eastern was a viable company, then he wouldn't have transferred assets from Eastern to Texas Air and Continental and perhaps would have sold off SystemOne to an outside company and used the money from that sale to help the airline instead of "selling" it to a Texas Air subsidiary formed as a holding company at a heavily discounted price (SystemOne was reportedly worth between $200-400 million at the time and was "sold" for $100 million and Eastern had to pay that company to lease the system.).

[Edited 2011-09-25 13:59:34]
 
LongbowPilot
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 8:48 pm

Quoting TrnsWrld (Reply 5):
Kind of reminds me of another infamous name.... Carl Icahn

   Sometimes I think he should be referred to as "He-Who-Must-Not-Be-Named."
 
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OzarkD9S
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 8:51 pm

Quoting sccutler (Reply 6):


Texas International would never have survived had Lorenzo and his crew not taken over, and applied serious financial discipline and new-idea marketing.

As it was still the deregulated era, TI would have been "Gentleman's Routed" into a financially stronger carrier. I cant imagine what trunk would have wanted them, maybe CO or BN. Locals that bumped up against TI's markets were Frontier, Ozark and Southern. Hughes Airwest as well, if TI was flying to LAX when Lorenzo got there.

Quoting srbmod (Reply 10):


TWA picked what they thought the lesser of the two evils since Texas Air was also making a play for the airline. I think that the result would have been the same either way.

Probably, only now it would UA merging with TWA instead of CO.  
Next up: STL-OAK-RNO-LAS-ICT-STL
 
srbmod
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 9:06 pm

Quoting OzarkD9S (Reply 15):
Probably, only now it would UA merging with TWA instead of CO.

One thing to note is that in the late 80s, Carl Icahn almost bought Eastern from Texas Air. He was among several suitors for the airline during the last few years of the airline, including Peter Ueberroth (Businessman best known for leading the 1984 Olympics in LA and MLB commissioner.), Jay Pritzker (Hyatt Hotels and Braniff II) and Kirk Kerkorian (MGM). These deals fell through for various reasons, including the unions (in particular the IAM) not willing to work a deal in order to allow the deal to happen and Lorenzo's own actions scuttled the deals.
 
727LOVER
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 9:22 pm

Didnt Frankie try to start a FRIENDSHIP Airlines???
I feel woozy....what did you put in that Pudding Pop?
 
swatpamike
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 9:30 pm

Quoting OzarkD9S (Reply 1):

Great book

Cheers

Mike
 
dhr
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 9:44 pm

Frank Lorenzo was a legend of his time in the aviation industry in the USA, regardless of what anyone else says. If he didn't have a firm hand against the unions I doubt any of the current legacy airlines would be around today such as CO or UA. In an era where US airlines were struggling to be competitive because of extremely high labour costs, some airlines turned to tier pay levels where you had existing employees on high salaries while new employees on lower salaries but still this wasn't enough to tackle the problems. Someone had to take the fight to the unions and it just happened to be Frank Lorenzo who had the balls to do it.

On top of this, nearly every airline he bought was totally rejigged and brought back to life with a lower cost base and competitive against the other legacy carriers. Obviously sometimes it didn't work out with some airlines but in the majority it worked.

Quoting OzarkD9S (Reply 1):
All the info you ever need is right here:

http://www.amazon.com/Grounded-Loren...r=1-1

A fantastic book which is a good reference of what the airline industry was like in the 80's, I definately recommend this book and then come to your own conclusions. A definate legend of the US aviation industry.
 
kfitz
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 10:10 pm

When Frank Lorenzo comes up, those with a predisposed ideological bias against union representation will attempt to paint him in the "not to bad", "savior" type of light.

The reality of the situation is that Lorenzo brought a new level of contention and toxicity that up until then, had never been realized in this industry. He nearly destroyed Continental, and drove it into the mess that Mr. Bethune had to come in and clean up. He was a short sided, and extremely petty man driven by his, what some people would call, extreme borderline-hate for his unionized workers below him. His legacy will always be tarnished and cast in negative light, and for good reason. The FAA even denied him a certificate to start a new airline in the 90s (a scab outfit naturally).

And lest we forget Alvin L. Feldman, chairman of Continental in 1981, who committed suicide in his LA office after the plan to hold back Lorenzo's hostile Texas Air disaster fell apart. Frank Lorenzo leaves a legacy of blood, hate, and massive distrust and he will always be remembered for the coward he was and still is. He's a shameful and shameless man.
 
ltbewr
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 10:52 pm

One of the key problems of Lorenzo and Ichan was their insatiable greed for money. This is probably shown best in the late 1980's fictional movie "Wall Street" which has an Eastern like airline takeover as part of it's storyline.

In the era of 1982-1987, as the movie "Wall Street" had as it's theme, many with lots of money and greedy investors competing with each other would take over companies paying outrageous amounts for their stock. Often the top executives of the target companies would get huge buyouts or payoffs from the stock deals, rather than real shareholders. Then these investors would strip out all there cash (especially in what were over-funded pension funds, forgetting the future needs or the cash needed to pay for new aircraft, etc), force labor costs cuts, then sell out to the highest bidder, keeping their profits. Those that made the deals (the big brokerage houses, investment banks, law firms, accountants) often got huge fees causing distorted support for these deals for the fees, forgetting the potential disasters too many would become later. The advancements in personal computers and the early versions of spreadsheet programs like MS's Excel, helped crunch the numbers so much faster than in the past and taken advantage of by the big players of their time.

All too often there were illegal and highly unethical practices in these deals. The stock market crashed in October 1987 due to the investment bubble busting from in large part from too many of these excessive deals. Many of these massive deals went bust from then on, many companies went Bankruptcy with some disappearing or bought out by others. Some of the big players like the Drexel Burnham firm who provided much of the cash for these deals with high risk, high interest paying 'junk bonds' went out of business due to their excesses. Some of the principals involved went to jail for illegal practices (insider trading, etc.). Others like Ichan were banned from any further investments in airlines and other business due to the damage done.

It is too bad we didn't learn from these lessons of history to prevent the 2002-2008 real property and investment bubble that hurts us today.

[Edited 2011-09-25 15:58:15]
 
Viscount724
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 11:06 pm

Lorenzo interview from 1984, a few months after CO's first bankruptcy filing.
http://www.youtube.com/watch?v=hlBlEGB9JbM

Another related news report from February 1984.
http://www.youtube.com/watch?v=_oDBb0PKufs&NR=1
 
mrskyguy
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RE: What Exactly Did Frank Lorenzo Do?

Sun Sep 25, 2011 11:23 pm

Personally I'm surprised the "world" isn't angrier with Charlie Bryan over the Eastern debacle. Ultimately I think Lorenzo did keep the COA brand alive through the eventual cannibalization of his airline portfolio, but Eastern did have a fighting chance. Everything I've read seemed to indicate that Frank was willing to play ball, but Charlie Bryan wouldn't budge 1 inch.
"The strength of the turbulence is directly proportional to the temperature of your coffee." -- Gunter's 2nd Law of Air
 
Squid
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RE: What Exactly Did Frank Lorenzo Do?

Mon Sep 26, 2011 1:34 am

There will always be people that criticize Frank Lorenzo, and people that praise him, but the truth is, his actual performance was somewhere in the middle.

Similar to the airline mavericks running the major carriers prior to deregulation, Frank Lorenzo loved aviation, however unlike the airline leaders prior to deregulation, Frank Lorenzo was a shrewd businessman. What he realized very early was that the airline unions, up to deregulation, were able to command high wages because the Civil Aeronautics Board would simply raise ticket fares to cover it. The industry was floundering during the 70's due to the prolonged recession and rising fuel prices. Therefore it was decided to deregulate the industry to allow the airlines to compete in a free market. The thinking was that the strong and innovative carriers would survive, and ticket prices would fall leading to higher consumer demand. Frank Lorenzo realized that Texas International had to get big very fast in order to compete; therefore he moved first to acquire National, which resulted in a bidding war with Pan Am. Pan Am won the bid but paid way too much for it. This allowed Frank Lorenzo to build up enough cash and liquidity to acquire Continental, and airline much bigger than even National. Of course he made many promises that he didn't keep, including moving the Continental HQ from the LA area to Houston. He received a lot of criticism for that decision, but as we have seen over the years, airlines make all sorts of promises they have no intention of actually following through with in order to get what they want. Also, Frank Lorenzo, realizing that the country was still in a recession with many people out of work, could find people willing to be pilots, mechanics, flight attendants, and ticket agents for much less than the unionized employees at Continental were being paid. Although Frank Lorenzo took a more draconian approach through bankruptcy and union busting, over the next few years, almost all the major airlines employee's had to take severe wage and benefit cuts. They just instead had to endure it little by little with a 3% cut for 12 months with the promise of a snap-up afterward only to be told they need to take even more wage cuts instead. American Airlines was actually one of the few carriers that avoided having to impose wage cuts. Like many major airlines prior to deregulation, AA was rather poorly positioned, lacking a solid logical route network and an old fleet that included many 707’s. Their president, Bob Crandall, saw many of the same things that Frank Lorenzo did. However unlike Frank, he was able to grow American from within, without the need for wage cuts, by getting AA’s unions to agree to the B-Scale (a new wage and benefits package for all new AA employee's with the intention of those employee's never reaching pay parity with their more senior counter parts). Because of the B-Scale, AA was able to buy 100's of new planes and greatly expand their network while greatly mitigating employee backlash and outward distain which was so evident at Continental.
I guess the things that you can't really fault Lorenzo for are the lowered wages and decreased benefits for his employee's, or for his pursuit to increase Continental’s critical mass. However he is not blameless, he can be faulted for many other things. He tried to mash 4 airlines together on a single day without much pre-planning leading to major service disruptions that took months to sort out. Also he didn't see much use in the power of marketing and yield management, something that AA and United did early on. Lorenzo basically saw his marketing department as his advertising department, and pushed them to really focus on low fares and hooky promotions, rather than build up a frequent flyer base that would pay higher fares for better service. He didn't really understand yield management until years after AA and United had turned it into a science. Furthermore, by the time he did realize the full potential of a strong marketing department, Continental/Texas-International didn't have a super computer capable of doing the kind of ticket price, seat inventory, and fleet allocation calculations needed to maximize their revenue which was one of his reasons he acquired Eastern which had System One and a large frequent flier base. Lorenzo, I believe, thought that deregulation meant that consumers would ALWAYS look for the cheapest fares, and therefore he felt it necessary to have the lowest costs and the biggest network, which we know today to not necessarily be true; there are many people that are willing to pay more for a premium product and will give their loyalty to that airline if they continue to provide that product.

I do believe that Frank Lorenzo had good intentions for the acquisition of Eastern, but soon realized after the purchase how dire their situation was. From Eastern he did get Continental access to System One, and their frequent flier base, but he realized that Eastern’s unions, specifically the IAM, would not agree to wage cuts, and took Eastern in CH.11 believing he would get the same results he got when he took Continental into CH11. However his plan didn't quite work out, and Eastern really struggled to operate through the strike. Unlike the early 80’s, where there was high unemployment and skilled people desperate for work, the late 80’s had low unemployment and the general public had begun to grow weary of corporate management after many high profile leveraged buyouts of many large American corporations had only made a few people richer and left the majority of the working class watching. Because of this, Eastern’s already shoddy product and poor employee morale worsened. That's when I believe that Lorenzo in a nut shell said "screw it," and began to harvest the valuable assets out of Eastern and transfer them to Continental. Continental would buy assets from Eastern, way under market value, and then lease it back to Eastern for far more than the going lease rates. He took aircraft such as the A300's and newer 727's and handed them over to Continental; and ultimately, Continental took over the operation of System One too. Then when all the valuable stuff from Eastern was gone, he let Eastern go under.

Continental was always Lorenzo's baby, and he hung onto it for as long as he could. Many things prevented Continental from becoming Lorenzo's dream, the first Gulf War, the recession of the early 90's, his lack of understating of what a good marketing department can do for you, his alienation from his VP's leading to poor inter-office communication, and the unions. But overall, Lorenzo is misguidedly vilified by many people.
 
Flyingsottsman
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RE: What Exactly Did Frank Lorenzo Do?

Mon Sep 26, 2011 10:39 am

I have heard a lot about Frank Lorenzo. Did he realy know much about the airline business and running an airline or was he like an Gordon Gecko in the movie Wall Street, some one that just brought and sold businesses like they were swap cards?
 
bjorn14
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RE: What Exactly Did Frank Lorenzo Do?

Mon Sep 26, 2011 11:15 am

Quoting Flyingsottsman (Reply 25):
Did he realy know much about the airline business and running an airline

Lorenzo's first professional jobs were at Eastern Airlines and Trans World Airlines, working in financial analysis, from 1963—1966. He then formed Lorenzo & Carney, Inc., a financial advisory firm specializing in airlines and related businesses, in 1966 with Robert Carney.
"I want to know the voice of God the rest is just details" --A. Einstein
 
apodino
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RE: What Exactly Did Frank Lorenzo Do?

Mon Sep 26, 2011 5:02 pm

I am not a Frank Lorenzo fan by any stretch, but I think what Carl Icahn did to TWA was far more criminal than what Lorenzo did to Eastern. Carl Icahn was a guy who bought TWA, then sold all the parts of TWA that made money for the airline and pocketed the profits himself. What he did with TWA was in the best interests of Carl Icahn, not TWA. It was so bad that he was eventually ousted in the early 90's. However, on his way out the door, he set up the Karabu Deal, which made it impossible for TWA to control pricing on its own flights, and then the revenue ended up in Icahn's pocket anyways. This is what pushed TWA out of business and eventually being scooped up by AA. I personally feel that TWA could have survived if anyone other than Icahn, who actually cared about running TWA, ended up running the airline. What makes me sick to my stomach is to this very day, Carl Icahn is still pulling these stunts with publicly traded companies every day, which is making it hard for BODs and CEOs of companies he buys stock in to actually function. Yahoo is a great example.

Frank Lorenzo, by contrast, I think is a guy who wanted his airlines to succeed, but I think went about it the wrong way. Part of the problem with the Unions is that he came on to the scene very soon after Deregulation that I don't think the Union's realized what the impact of Deregulation would be. That being said, from what I have read about Lorenzo, he didn't try to negotiate, he just created the other airlines and used Chapter 11 to get what he felt was necessary. I don't think this is the way Chapter 11 should be used, but that's the way he used it. I think if instead of this, he had sat down with the unions, showed them the books, and said this is whats going on and this is where we need to be, how do we get there, it might have been a much different picture.

As for the IAM deal, I am reminded of the NW AMFA strike a few years ago, when Doug Steenland simply hired replacement workers to replace the AMFA ones and as a result, AMFA got broken. If IAM was that unwilling to help out Eastern, why didn't Lorenzo do this back in the day? It might have actually saved the airline. I also think that if Lorenzo had sold the airline to Uberroth, Uberroth would have been great for the company.

Also, much of what got Eastern into trouble was not Lorenzo's making. Lorenzo was not the guy who placed either the A300 or 757 order in anticipation of high fuel prices when in fact oil actually tanked. I was reading that Eastern paid 400,000 USD per day in interest before they even sold a ticket. What is ironic is that AA right now is in about the same shape that Eastern was in when Lorenzo took over. Let us see now if Arpey and crew can get AA out of this mess, which Lorenzo failed to do with Eastern.
 
WesternA318
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RE: What Exactly Did Frank Lorenzo Do?

Mon Sep 26, 2011 6:52 pm

Quoting ltbewr (Reply 21):
It is too bad we didn't learn from these lessons of history to prevent the 2002-2008 real property and investment bubble that hurts us today.

As Gordon Gekko put it in the Wall Street sequel.."I'm small time compared to these crooks today".

I cant say too much against Frank Lorenzo as his company (Savoy Capital) helped fund mine, and having met the man and had a few somewhat in-depth conversations with him, I tend to think like several others here, he wasn't out to be the most hated man in America, he honestly thought he was doing what he thought was need to the various Jet Capital/Texas Air subsidiaries.

After doing quite a bit of research on Eastern and what happened, it wasnt all Texas Air's fault, either. You had the IAM do more damage to the airline with their militants in such a short time that NO management team on Earth could save the failing carrier. Texas Air came in and Phil Bakes did what he could, but to no avail. First the unions sold out just to rid themselves of Frank Borman, then they sacrificed themselves for what? Nothing. Texas Air did their part by selling off or trading parts of Eastern that could be salvaged and brought them into Continental, alienating the rest of the airline. This is one of the few times I could think of where I have actually said to myself that an airline had to die (the original UA/CO, Pan Am and Frontier II are the others).

Having worked at TWA myself, I have seen the destruction Icahn caused. From the time I got hired on in '96 to the end, we knew we were runnign out tof time, and the airline tried hard to get better, to make the operations go into the black...then the inept BOD and Sr. Management stopped the clock and sold out to AMR. At least the good folks at TWA tried to save the airline the right way, not by striking, not by sabotaging any effort, like their counterparts at EAL.

Thats my   , worth, take it for what it is.
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milesrich
Posts: 1508
Joined: Sun Jul 06, 2003 2:46 am

RE: What Exactly Did Frank Lorenzo Do?

Tue Sep 27, 2011 5:58 pm

Lorenzo had little to do with the demise of Eastern and Continental, and today's high unemployment is caused by Obama's stimulus package, and his bailout of the GM, Chrysler and the banks. If you believe any of that, you must be a regular Fox News watcher. While no one is all bad, when you add up the pluses and minuses of Frank Lorenzo, the minus side wins big time. Lorenzo put Continental into Chapter 11 twice, and destroyed Eastern. During the same period, Continental, absorbed NY Air, Texas International, and the remains of the original Frontier and Peoples Express. When Lorenzo left, Continental was a mess, an on the verge of a third bankruptcy and liquidation. Gordon Bethune rebuilt the airline. Did Lorenzo cut labor costs? Yes. I guess you people think all of those Continental employees and those of its predecessors were over paid. If you believe that, perhaps your employers should cut your paychecks too so they can increase their profits or spend the money buying up other firms. If you are self employed, perhaps your customers should cut the amount they are paying you, because they are paying you TOO MUCH. That argument is just ridiculous. Perhaps I have not illustrated it well in a few sentences, but I am sure some of you will get the idea. That is the problem in the US today. Wages have stagnated and are lower today in real dollars than they were 20-30 years ago. Yet people wonder why consumer spending is down. I will tell you why, people can no longer borrow money from their home equity to support consumer spending. If wage earners all work for peanuts, they have no money to spend. Believe it or not, the wealthy can only buy so much.
 
northstardc4m
Posts: 2724
Joined: Fri Apr 28, 2000 11:23 am

RE: What Exactly Did Frank Lorenzo Do?

Tue Sep 27, 2011 6:08 pm

Truth is Lorenzo should never of gotten into EA.
He knew it to but got wrapped up in "coming home" (his 1st airline job was with Eastern in NYC).

Borman didn't sell out to him, the board sold EA out from under Borman, Borman was trying to rig a better deal with banks at the time.

Though once he was in, Lorenzo made no friends in the labor force. He and Bryant deserved each other, but it's just a pity the "Silver Fleet" died in the crossfire.

But even before that, if we want to point finger, Pan Am handed Eastern to Lorenzo by buying National (where Lorenzo had already bought up alot of shares) for far more than it was worth. Is PanAm had let TI buy National, then he wouldn't of had the funds to buy Eastern (or make a run for TWA either...). And possibly PanAm might of found a better merger partner and survived.
Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.
 
planespotting
Posts: 3026
Joined: Sat Apr 17, 2004 4:54 am

RE: What Exactly Did Frank Lorenzo Do?

Tue Sep 27, 2011 10:12 pm

Quoting lax777lr (Reply 7):
Here's your bible for the NA airline business.

Bingo. It is the bible.

Quoting mrskyguy (Reply 23):
Personally I'm surprised the "world" isn't angrier with Charlie Bryan over the Eastern debacle.

I agree. I'm more-or-less pro union, especially when it comes to the airlines, but Charlie Bryan and the IAM weren't going to give up a milimeter at a time when their airline desperately needed a kilometer (including the clauses specifying that a union member had to be present to walk each wingtip anytime an Eastern aircraft pushed back, if I remember correctly).

Those kind of dramatic but unnecessary details are almost always not in the best interest of a working man today and only result in less goodwill for unions.
Do you like movies about gladiators?
 
RogerThat
Posts: 505
Joined: Wed Dec 17, 2003 12:13 pm

RE: What Exactly Did Frank Lorenzo Do?

Tue Sep 27, 2011 11:54 pm

Quoting ltbewr (Reply 21):
In the era of 1982-1987

..

Quoting ltbewr (Reply 21):
spreadsheet programs like MS's Excel, helped crunch the numbers so much faster than in the past and taken advantage of by the big players of their time

"Number Crunching" during this time was done using Lotus 1-2-3. Excel didn't takeoff until Microsoft bundled it with Windows towards the end of the 1980s.
 
PI767
Posts: 192
Joined: Mon Nov 29, 2010 2:50 am

RE: What Exactly Did Frank Lorenzo Do?

Wed Sep 28, 2011 12:08 am

One thing I will never forget was an interview Frank Lorenzo gave to Barbara Walters on 20/20 shortly after the Eastern strike started.

I forget his answer, but I will never forget Barbara Walters's question to him. It was something like: "How does it feel to be the most hated man in America?"
"Piedmont. The Model of What a Good Airline Should Be."
 
loggat
Posts: 426
Joined: Sat Feb 12, 2000 11:34 am

RE: What Exactly Did Frank Lorenzo Do?

Wed Sep 28, 2011 2:01 pm

Charlie Bryan would not give the 20% concessions that were asked for all three unions at Eastern. The pilots gave, the flight attendants gave, but CB's (IAM) final offer was 15%. The book Hard Landing claims that the 5% was not the difference between doing it alone and being sold to TI. CB's offer was 15% and the removal of Frank Borman as CEO. Frank agreed to leave, but the deal still went to TI. I don't think the BoD perhaps knew what the fate of EAL would be at that moment, but there was certainly egocentric activity going on. Everyone at EAL lost once the company was sold to Texas International and Frank Lorenzo.
There are 3 types of people in this world, those that can count, and those that can't.