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Airline Announces January Loss, Accepts Negotiator’s Proposals

February 6, 1985

MIAMI (AP) _ Eastern Airlines said Wednesday that 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 that had been cut from their wages a year ago.

Meanwhile, the air carrier continued meeting with representatives of its three unions and announced that 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 the members of all three unions and non-contract employees.

The increases, ranging from 11 percent to 131/2 percent, would begin with a 5 percent pay hike on Feb. 1, 1985, and based on Dec. 31, 1984, salary levels. In addition, Usery suggested programs for increasing productivity.

He called on the airline and its unions, which represent about 22,000 of the company’s 38,000 workers, to agree on new contracts by midnight Thursday.

Union spokesmen could not be reached by telephone for their comment on the recommendations.

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. It should be obvious that we cannot so significantly increase our expense base and be profitable.″

The airline said January’s loss would almost equal the company’s entire 1984 loss of $37.9 million. It said most of last month’s loss could be attributed 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 wage and productivity concessions. But that was contingent on worker approval - which lenders gave the carrier until midnight Jan. 31 to secure. When contract talks failed to produce agreement, Eastern went into technical default on $2.5 billion in loan and leasing agreements.

Negotiators for the International Association of Machinists, the Transport Workers Union, the Air Line Pilots Association and the airline have been negotiating since, and Eastern has asked lenders for another deadline extension - this one for two months.

Usery’s four-page proposal also called for cutting benefit programs, such as health, life insurance and retirement, by $50 million a year for all airline employees.

The airline, for its part, agreed to put in place, subject to stockholder approval, 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. The new labor agreements, if reached, would extend at least through Dec. 31, 1986.

Airline management and union representatives returned to the bargaining table Wednesday to discuss the recommendations after a weekend of inactivity. 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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