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Airline Announces January Loss, Accepts Negotiator’s Proposals

February 6, 1985

MIAMI (AP) _ Eastern Airlines said Wednesday it expects a net loss of more than $30 million for January and blamed most of it on workers’ demands that they be paid $23 million, which had been cut from their wages a year ago.

The airline, in technical default of $2.5 billion in debts, also continued meeting with representatives of its three unions and announced it would accept a labor consultant’s recommendations for settling the contract disputes.

The recommendations, released by Eastern on Wednesday, were made by William J. Usery, a former U.S. secretary of labor hired by the airline, and call for graduated pay increases for union and non-union employees.

The increases, ranging from 11 percent to 131/2 percent, would begin with a 5 percent pay hike over Dec. 31, 1984, salary levels and be retroactive to last Friday.

Usery also suggested programs for increasing productivity and asked the airline and the unions, which represent about 22,000 of the company’s 38,000 workers, to agree on new contracts by midnight Thursday.

Explaining the anticipated January loss, Eastern’s senior vice president for finance, Wayne Yeoman, said, ″We have continually told our employees that we could not afford to reinstate these wages without it having a negative effect on the airline’s bottom line.″

The airline said January’s loss would almost equal Eastern’s entire 1984 loss of $37.9 million, and attributed most of it to the nearly $23 million paid to employees when it restored pay that had been cut in a 1984 concession and stock-investment program.

A year ago, union and non-union workers agreed to sacrifice at least 18 percent of their pay, and promised increased productivity in exchange for 25 percent of the company’s stock and four seats on the board of directors. The concessions ended at midnight Dec. 31.

Eastern’s lenders had agreed to a business plan for 1985 that included a continuation of the concessions. But that was contingent on worker approval - which lenders gave the carrier until midnight Jan. 31 to secure. When talks failed to produce the agreement, Eastern went into technical default on $2.5 billion in loan and leasing agreements.

The airline has asked lenders for a two-month deadline extension while it negotiates with the International Association of Machinists, the Transport Workers Union, the Air Line Pilots Association.

Usery’s proposal also called for cutting benefits, such as health, life insurance and retirement, by $50 million a year for all employees.

For its part, Eastern agreed, subject to stockholder approval, to a 1985 profit-sharing plan in which ″all profits above $90 million will be given to employees″ until they are returned to the pre-1984 wage levels.

Eastern also agreed to reduce management positions by 5 percent and rebid contracts to cut expenses.

Airline and union representatives returned to the bargaining table Wednesday to discuss the recommendations. The proposals were presented to the unions Tuesday and to employees Wednesday morning, airline spokesman Mark Wegel said.

Negotiators for the pilots and flight attendants were in talks and were not available for comment, their secretaries said. A secretary for Charles Bryan, IAM local president, said ″he said to tell you right now they’re in open negotiations″ and can’t comment further.

On Tuesday, Bryan had said the proposal was a basis for ″good-faith bargaining,″ and Eastern’s senior vice president for communications, Richard McGraw, said it ″could very well get us off dead center.″

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