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AA747123
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Why didn't EA/CO Merge?

Wed Apr 25, 2018 4:06 pm

Back in the latter part of the 80s both Eastern Airlines and Continental were under the holding corporation "Texas Air" both airlines were operated competitors. Why didn't Frank Lorenzo merge the two carriers. They both would have had great hubs in strategic locations. I think a merged airline would still be around today. It seems as though Frank Lorenzo intended for Eastern to fail, he charged huge "management consulting fees" as well as forcing Eastern to buy fuel from Texas Air as a premium price, as well as charging Eastern to use System1.

It seems as though a better business choice would have been to form one corporation and see it succeed.
 
topbanana
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 4:19 pm

If I recall correctly, the U.S. government would not allow it.
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F27500
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 4:23 pm

And yet the merge of Continental - PeoplExpress - New York Air all at the same time .. that went GREAT huh!?! ;) ;)
 
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LAXintl
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 4:25 pm

Continental would have been destroyed by Easterns cost, labor and PR issues.

It made much more sense for Texas Air to simply transfer some assets between them and have companies enter into behind the scenes agreements between each other for services such as IT, facilities, aircraft leases etc.
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flyingclrs727
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 4:27 pm

AA747123 wrote:
Back in the latter part of the 80s both Eastern Airlines and Continental were under the holding corporation "Texas Air" both airlines were operated competitors. Why didn't Frank Lorenzo merge the two carriers. They both would have had great hubs in strategic locations. I think a merged airline would still be around today. It seems as though Frank Lorenzo intended for Eastern to fail, he charged huge "management consulting fees" as well as forcing Eastern to buy fuel from Texas Air as a premium price, as well as charging Eastern to use System1.

It seems as though a better business choice would have been to form one corporation and see it succeed.


Probably the unions at EA. It was better for Frank Lorenzo if they were kept and operated as separate airlines.
 
vadodara
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 5:17 pm

EA - Union
CO - Non-union

EA's Unions went on strike precisely because Texas Air Group was transferring flying to non-union Continental.
 
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September11
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 5:27 pm

Texas Air intended to acquire Eastern for its assets, not employees. At the time of Eastern acquisition by Texas Air, Eastern's pay scale was the highest of all airlines. Lorenzo would then appoint Phil Bakes as CEO of Eastern. Bakes previously worked under Lorenzo's belt at Continental. Under Lorenzo's direction, Bakes managed to transfer Eastern assets to Continental. Bakes also managed to sell Eastern assets to other airlines. As a result, Eastern undergone massive schedule reductions and cuts. Finally, Bakes managed to lay off up to 50,000 Eastern employees. Bankruptcy court later ruled that Lorenzo and Texas Air was not fit to keep Eastern in the end. Needless to say, Phil Bakes died when Eastern made a comeback two years ago.
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RetiredNWA
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 5:41 pm

This has been discussed as naseum. On this forum, in the press, in debates about labor relations, examined by the best and brightest minds in labor relations, education, government, et cetera.

Here are some links. Read them or watch them. Learn something. Purchase the book “Grounded”. Read it. Google “Charlie Bryant”. Google “Eastern ALPA. Read how Lorenzo, Bryant and the unions killed an airline slowly - an airline that had been in a death spiral since BEFORE deregulation!

https://www.scribd.com/document/3207868 ... F-3d-226-3

https://commons.erau.edu/cgi/viewconten ... text=jaaer

https://mobile.nytimes.com/1987/03/12/n ... -woes.html

http://articles.latimes.com/1990-01-31/ ... nk-lorenzo
 
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RetiredNWA
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 5:53 pm

For your viewing pleasure:

“The Battle For Eastern” - PBS Frontline:

https://youtu.be/QpI3P_neD80

Eastern ALPA briefing:

https://youtu.be/IkWmXTSNaHw

A good video re: Eastern v. Texas Air:

https://youtu.be/2KWgVHLWSqU
 
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EA CO AS
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 6:25 pm

September11 wrote:
Bakes managed to lay off up to 50,000 Eastern employees.


Even at the height of their operations, EA never had that many total employees.

Why didn't EA/CO Merge?

As was stated earlier, once Lorenzo had control of EA, he had no interest in merging their unionized, high-cost workforce into CO's non-union, low-cost workforce. He wanted to slowly transfer assets, including aircraft, systems, and routes, over to the CO side and let EA collapse under its own weight.

Which, eventually, it did, thanks to the IAM.
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GalaxyFlyer
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 6:30 pm

Eastern's pay scale was the highest of all airlines.


Patently, false. As part of the buy-out, the pilots took a 20% pay cut.

GF
 
727LOVER
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 6:32 pm

Of course the irony is that Lorenzo wouldn't have been in the pic if not for Bryan

Imagine...if Eastern bankruptcy judge had not taken it away from Lorenzo, UA would have a nice hub in ATL
"We must accept finite disappointment, but never lose infinite hope." - Martin Luther King, Jr.
 
superjeff
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 7:14 pm

LAXintl wrote:
Continental would have been destroyed by Easterns cost, labor and PR issues.

It made much more sense for Texas Air to simply transfer some assets between them and have companies enter into behind the scenes agreements between each other for services such as IT, facilities, aircraft leases etc.



You are absolutely correct. By the time Texas Air acquired Eastern, Lorenzo had already developed a reputation of a union buster, and Charlie Bryan of the IAM was in full sway at Eastern. There was no way to combine both airlines. Perhaps if they had been able to structure a deal in a way that resulted in Continental buying Eastern (including through a bankruptcy transaction) it could have worked, but the Machinists would have no part of anything with Lorenzo attached to it. So Lorenzo essentially stripped assets from Eastern and moved them to Continental or Texas Air (i.e., some airplanes, the MIA-LHR route, System One, etc.).
 
jfk777
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 10:23 pm

The primary reason was EA was union and Continental non-union.
 
MIflyer12
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 10:32 pm

vadodara wrote:
EA - Union
CO - Non-union

EA's Unions went on strike precisely because Texas Air Group was transferring flying to non-union Continental.


And yet CO's annual report for 2008 shows 44% of employees were union represented. Low for legacy carriers (other than present Delta) but still significant.
 
MIflyer12
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 10:36 pm

LAXintl wrote:
Continental would have been destroyed by Easterns cost, labor and PR issues.

It made much more sense for Texas Air to simply transfer some assets between them and have companies enter into behind the scenes agreements between each other for services such as IT, facilities, aircraft leases etc.


The word I was going to use was 'strip' but, yeh, that's a fair description.
 
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OzarkD9S
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 10:49 pm

Lorenzo did, in fact, intend to merge CO and EA but he wanted EA's labor costs in line (or close) to CO's. So for Lorenzo that was busting the unions, and for Charlie Bryan: Full Pay To The Last Day. Their conflict was a testosterone battle of "Who's Is Bigger" and the only people that lost were the employees of EA.
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atcsundevil
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 11:24 pm

Please just discuss the topic — there's no need for personal attacks or petty comments.

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afcjets
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Re: Why didn't EA/CO Merge?

Wed Apr 25, 2018 11:48 pm

GalaxyFlyer wrote:
Eastern's pay scale was the highest of all airlines.


Patently, false. As part of the buy-out, the pilots took a 20% pay cut.

GF


Was there ever a time when EA paid more than DL? I thought the pay gap between DL and other airlines was even higher back then.
 
Ionosphere
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Re: Why didn't EA/CO Merge?

Thu Apr 26, 2018 6:42 am

afcjets wrote:
GalaxyFlyer wrote:
Eastern's pay scale was the highest of all airlines.


Patently, false. As part of the buy-out, the pilots took a 20% pay cut.

GF


Was there ever a time when EA paid more than DL? I thought the pay gap between DL and other airlines was even higher back then.


Delta has always paid high to keep the unions out. My ex has been a DL FA 11 years, makes $65/hr. He started out at $17.45/hr at NW.
 
vadodara
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Re: Why didn't EA/CO Merge?

Thu Apr 26, 2018 2:46 pm

[list=][/list]
OzarkD9S wrote:
Lorenzo did, in fact, intend to merge CO and EA but he wanted EA's labor costs in line (or close) to CO's. So for Lorenzo that was busting the unions, and for Charlie Bryan: Full Pay To The Last Day. Their conflict was a testosterone battle of "Who's Is Bigger" and the only people that lost were the employees of EA.


Indeed, EA employees walked away with nothing. EA could have been a very strong JetBlue with its strong position at LGA & MIA besides BOS/DCA.

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