And of course Eastern had System One, the jewel in its otherwise dull crown, a crucifix to wave in the path of the advancing Sabre and Apollo systems. Apart from its virtue as the third largest airline reservation network in the country, System One, as Lorenzo would explain, was the only computer reservation network in the United States the purchase of which was remotely plausible.
Bakes realized that Lorenzo, absorbed in a reverie, had already made up his mind, to which Bakes thought, “You tune me out, and I’m out of here.” And 90 minutes later Bakes was on an airplane, on his way to a great weekend, leaving Lorenzo to deal alone for Eastern.
Frank Borman had known the international president of the machinists’ union for years. He was William “Winpy” Winpisinger, rotund and irascible, full of bombast, with ideological leanings as far to the left as one could reach in mainstream politics. Winpisinger and Borman loved fast cars. The machinists sponsored an Indy-class race team, and the two men frequently sat together at the Indianapolis Speedway, the same racetrack once owned by the erstwhile Eastern chairman, Eddie Rickenbacker.
So Borman could confer with the union chief freely and confidentially when Winpisinger was in Miami for an AFL-CIO function on Friday, February 21, 1986. Although the pilots and flight attendants were also resisting Borman’s plea for 20 percent pay cuts, it was Charlie Bryan who most worried the Colonel. Was there anything Winpy could do?
Winpisinger was in a desperate fix. To the extent that he admired his friend Borman he mistrusted his own local president. Winpisinger thought Bryan had made himself into a king, so much so that people sometimes mistook Bryan for the international president of the machinists’ union.
“Charlie hears voices,” Winpisinger told Borman.
But at the same time, Winpisinger was painfully aware that the rank-and-file resentment against Borman was powerful and still building. Borman had gone to the well once too often. And in any event, Winpisinger was mostly powerless under the union’s constitution to control Bryan.
Winpisinger gave Borman a pep talk. Just keep bargaining, he said. Everything will work out. But in encouraging him to continue pressing, the international president left Borman with the indelible impression that he, the mighty William Winpisinger, would step in at the last minute and sit on Charlie Bryan if it was necessary for saving Eastern Air Lines.
Frank Borman left his meeting with Winpisinger heaving a sigh of relief. Maybe he could, after all, fix Eastern. Maybe, just maybe, he could checkmate Charlie Bryan.
That evening, word came back from Frank Lorenzo. He was willing to buy Eastern. He would pay only $600 million, however, peanuts for that great name, that great franchise, that jewel of a computer reservation system. In fact, under the proposal presented by Lorenzo, about $300 million of the purchase price would be paid to Eastern shareholders by extracting cash from Eastern itself; Eastern, in short, would be paying for half of its own acquisition. And regardless of the outcome, the offer was good only if Eastern agreed up front to pay $20 million to Lorenzo as a nonrefundable “inducement fee.”
Lorenzo, moreover, would not keep the offer on the table for long. His lawyers still had all the draft contracts in their word processors from the recent attempt to buy TWA; all they had to do was switch the names and the numbers. There was no reason for delay. The takeover offer, Lorenzo said, was good only until midnight Sunday.
If Borman was going to use Lorenzo as a bogeyman with the unions, he had to work fast. He had barely a day to fix it. For good measure, with jealousy and hatred running so high on all sides, he was back to wearing his bulletproof vest.
The pilots’ union and the flight attendants’ union had been coaxed to the bargaining table, where Borman’s aides were fervently trying to talk them into the 20 percent wage reduction. Charlie Bryan, however, was vomiting. After going years without a sniffle, he was now gripped by a debilitating flu. His fever shot up to 103 degrees. Shuddering with chills, he felt as if he were in a meat locker.
He had just returned from a Saturday afternoon board meeting with several of the directors, where he was put on notice that Eastern was ready to resort to plan B, selling it—and not to just anyone. Unless the machinists capitulated to the 20 percent cutback, Eastern would be sold to the most dreaded enemy of the airline unions, Frank Lorenzo. As the directors and investment bankers for Eastern importuned him to come to terms, he warned them off. “Watch out,” he said. “I’ve got the flu.”
That evening Bryan was back at the local union offices with his consultant Randy Barber. They pondered the variables, ran economic scenarios, pondered every what-if they could imagine. From all they could tell, Eastern had passed the financial fail-safe point. There was no hope for the company, certainly not with the current management and possibly not with any management. The 20 percent concession might prolong the company’s life a few months, they reasoned, but it would only postpone failure. Moreover, Barber was convinced that the rank and file would never stand for more BOHICA. Only 10 months earlier they had handed Charlie Bryan his head by voting down a concessionary contract that he himself had urged them to accept in the name of peace.
The Eastern board was scheduled to meet again the following day, Sunday, February 23, 1986, a few hours before Lorenzo’s deadline. Bryan went to bed with his fever and nausea and no idea what the following day would bring.
On Sunday afternoon, the directors’ limousines began pulling up to Building 16 alongside the mammoth expanse of Rickenbacker Fountain, where the image of the founding chairman was cast in bronze relief on a stone monument. The fountain itself, however, was dry, the water drained and the power cut off years earlier in a cost-saving move.
The front doors led to an expansive lobby with a great circular reception desk in the middle. The marble floor, like the fountain out front, bespoke the pretensions that Eastern had once harbored. To the left, as one entered the lobby, a great route map hung on the wall, with little lightbulbs dimly burning behind each of the cities served by Eastern, all the way to LEE-mah and Bway-nos-I-rays. The lobby also bore the telltale markings of previous efforts to redecorate on a tight budget—a section of wood paneling here, some wallpaper striped in green and orange there.
The directors strode through the lobby to a door next to the twinkling route map and entered a small auditorium outfitted with ionosphere blue carpeting. In the auditorium several rows of seats were arrayed theater-style before a small, elevated stage, where a large table sat. It was on that stage, with their advisors seated in the audience and the curious hanging around the lobby outside, that the directors sat down to decide the future of Eastern.
The directors assembled only briefly in the afternoon, long enough to hear that the documents for Lorenzo’s purchase were nearing completion and that the pilots and flight attendants were negotiating in earnest over Borman’s 20 percent demand. For the machinists, however, Bryan was still refusing to entertain the cutbacks. The offer from Lorenzo, due to expire at midnight, would be presented for a vote after dinner.
The directors adjourned and were driven the few blocks to the Airport Hilton, where they ate salads and sandwiches and desperately wondered what would happen next. Where, someone asked, was Bill Winpisinger? The machinists’ international president had promised to bring Charlie Bryan under control if the threat of a sale to Lorenzo had been insufficient; it was now time to call on Winpisinger to do so. Jack Fallon, the old Kennedy family pal on the Eastern board, tried to track down someone on Ted Kennedy’s Senate staff in Washington for help in locating Winpisinger. On Presidents’ Day weekend it was an almost impossible endeavor.
Back to Building 16 trooped the directors, back into the auditorium, slamming shut the doors behind them at 7:30 P.M. and leaving an even larger crowd of bystanders and onlookers assembled in the main lobby of Building 16. Soon word arrived that the flight attendants had settled, consenting to the demand for a 20 percent cutback to save Eastern. During a recess Borman encountered Randy Barber, the machinists’ advisor. “We
ll,” the Colonel asked, “is Charlie going to change his mind?”
“You’ll have to ask him yourself,” Barber answered.
“I did,” Borman answered. “He said no. It’s too bad, but I’m through begging.”
As adamantly as Bryan was continuing to stonewall, those who listened carefully were noticing a slight wavering on one point. There would be no more concessions from the machinists, he was saying, for this management. Was Bryan leaving the door open to concessions if Borman were out?
The fact was, in Bryan’s view, that giving concessions to Frank Borman was like giving drugs to an addict, like passing a wine cork under the nose of a drunk. All it did was intensify his craving for more concessions. Implicit in Bryan’s reasoning was the possibility that the machinists would cave to the demand for concessions if the management of Eastern were somehow changed to Bryan’s liking. The union had made no secret of its wish to see Borman sacked. “Frank Borman—Resign Now!” the skywriters had written.
Of course the Eastern board could never sack Frank Borman on the motion of Charles Bryan; the directors of no major company would ever allow a union leader to dictate who occupied the office of chairman. But perhaps Bryan had shown them an opening. Perhaps there was a middle ground.
A recess was called. Borman pulled Bryan into an elevator in the lobby. They rose to the top of the building, to the executive offices, with the screaming-70s orange vinyl wallpaper and arched doorways. There Borman turned Bryan over to two of the board’s most distinguished members: H. Hood Bassett, one of South Florida’s leading bankers, and Peter Crisp, the Rockefeller representative. What if Eastern got a vice chairman to serve alongside Borman? the directors asked Bryan. Perhaps even someone of Bryan’s choosing? Would he then consent to the 20 percent cutbacks?
No way, Bryan said.
The directors had made an extraordinary offer and had been refused. Now they were really mad.
Bryan offered a proposal of his own: instead of consenting to the 20 percent cutback, the union would commit to saving an equivalent sum through productivity improvements and other measures that didn’t invade anyone’s paycheck. Bryan would promise right then and there that if the union failed to save the company that sum of money, the 20 percent cutbacks would occur automatically in six months’ time.
No way, the directors said.
Borman appeared from his office, announcing that he had reached Winpisinger in Washington—Winpisinger, who had promised to “handle” Charlie. Borman turned the receiver over to Bryan and left him alone with Randy Barber at his side.
“What’s going on?” Winpy asked his local president.
“Well, we’re going at it hot and heavy,” Bryan answered. “They’re threatening to sell the company to Lorenzo.”
“What’s your judgment?”
“The way they’re trying to destroy this company, there’s no way that I’m going to subsidize that,” Bryan said.
Winpisinger anguished over his predicament. He wished he could take over the bargaining himself, but there were no grounds to fire Charlie Bryan. Yet something had to be done fast to prevent the sale to Lorenzo. One way or another, the machinists simply had to come to terms. And between the two unionists—the international president, on the phone in Washington, and the local president, sitting in Frank Borman’s office on the ninth floor of Building 16—there was no disagreement about the price the rank and file would require for another BOHICA deal. That price was Frank Borman’s head.
“Goddam it,” Winpisinger said. “Get it done!” Bryan handed the telephone receiver back to Frank Borman and left the office.
Winpisinger then told his close friend that however much Borman might have been counting on him, he was powerless to rein in Bryan.
“You know this means the end of Eastern,” Borman answered, his voice growing raspy.
Maybe, maybe not. But all Winpisinger could say was, “So be it.”
It was 11:40 P.M. when the directors reassembled in the blue auditorium. Frank Lorenzo’s deadline was rapidly approaching. Borman finally lost his composure. He was trembling. Pointing his finger at Bryan, he began to shout. “I’m going to tell the world that you destroyed this airline!”
“And I’m going to tell them you did!” Bryan answered. “So where does that leave us?”
In the lobby, a telephone rang on the circular reception desk. An Eastern public relations executive lifted the receiver. “Continental Airlines,” he cheerfully answered.
The directors were both furious and frightened. Serving as an outside director in an earlier age accorded a bit of distinction and a little bit of money besides. It was so easy. A director showed up and got a check for a few thousand bucks. In the case of an airline board, a director and his wife also enjoyed free travel privileges, usually in first class. But the Eastern directors were now at risk for something they had never bargained for: the likelihood that they would be sued personally if they mishandled this delicate situation in any way.
Midnight had arrived. The directors had a bona fide offer from Frank Lorenzo on the table. Lorenzo, thank goodness, had just extended his deadline, although only to 4 A.M. Option number one—fix it—appeared to have failed. If the directors failed to act on option number two—sell it—that left only the final alternative, tank it. In that case the shareholders of the company would wind up with nothing. As creditors standing last in a long line of claimants, individual investors would find that their shares were worthless. If the directors passed up the opportunity to get something for the shareholders by selling to Frank Lorenzo, they would be giving depositions and answering interrogatories for years, to say nothing of the risk to their personal assets, which in some cases were considerable.
The board’s lawyers, from the firm of Davis, Polk & Wardwell, tried to give their clients some comfort. Nothing was forcing the directors to act immediately. Salomon Brothers, the investment banking firm advising the directors, had still not rendered an opinion of the fairness of Lorenzo’s terms to Eastern shareholders. In the absence of a fairness opinion, the board still had the cover necessary to take more time.
But what if Lorenzo went away? The board would have no choice then but to tank it.
Texas Air sent word into the boardroom that it would indemnify the directors up to $35 million if they were ever sued—if that is, they agreed to sell the company to Texas Air. The whole rotten affair had gone on too long. The paperwork had just been completed. It was time to vote.
The senior director, Jack Fallon, was presiding. The sale to Texas Air was moved and seconded …
“Hold it!”
The meeting came to a halt as Charlie Bryan excused himself to the lobby outside. Soon, two other directors, Hood Basset and Peter Crisp, were called from the meeting room. With a gaggle of advisors in tow the directors and Bryan made their way to a small, private office on the other side of the lobby.
As the remaining directors waited, Borman left for a breath of fresh air. Under a nearly full moon he stood in front of Building 16. He rolled his tense shoulders and stared at the bronze image of Capt. Eddie Rickenbacker. He knew he had lost control of the situation. Eastern, he was sure, was going to be sold.
Returning to the lobby, Borman encountered the caucusing directors as they sped back to the boardroom.
“Well?” Borman asked Peter Crisp, the Rockefeller man. “What is it?”
“You’ll hear in a minute,” Crisp answered. With his proposal at issue, Charlie Bryan remained in the lobby.
When everyone else had been seated again at the directors’ table, Hood Bassett, the senior director, announced that the machinists were prepared to assent to concessions—but only of 15 percent. Bryan, the director explained, felt the machinists had already contributed the equivalent of 5 percent through increased productivity.
Some of the people in the room were incredulous that Bryan would chisel at such a moment, but there was more.
“Mr. Bryan’s offer,” Bassett continued, the muscles of hi
s face tightening, “is contingent upon the appointment of a board committee to search for a new chief executive officer.”
Well, at least it’s out in the open, Borman told himself.
Borman rose, struggling against another loss of composure. “Any allegation that the IAM has already given 5 percent is nonsense.” Besides which, he said, the company had to have the full 20 percent in any case.
He turned to Wayne Yoeman, Eastern’s chief financial officer, a retired brigadier general with a Harvard Ph.D. “Don’t you agree we can’t do this with 15 percent?” Borman asked from the stage.
“It would collapse the company!” Yoeman answered.
Borman continued. “If the IAM will give 20 percent like the other employees, I’ll submit my resignation this evening.”
Dick Magurno, the company’s general counsel, watched the scene unfold with dismay. The 5 percent was meaningless. Of course the company could survive without it. The company could even make money without it. But the directors had boxed themselves in. Emotions had overwhelmed everyone, on all sides. Charlie Bryan couldn’t give the board 20 percent, and the board couldn’t give him 5 percent.
Borman once again had to depart the meeting room, since his job was now at issue. In the lobby he approached Bryan. “Just so you know, I’m volunteering to leave. No one can run a company under these circumstances.”
Then one of Bryan’s lawyers emerged from the auditorium. The directors would accept the 15 percent solution. They would allow Bryan to help pick a vice chairman, as previously offered—but they would not throw out Frank Borman.
“Their promises are no good!” Bryan snapped. “Only drastic action will do!”
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