Hard Landing (32 page)

Though he craved leadership roles, Borman was no joiner. He accepted an invitation to become a member of the secretive and exclusive Conquistadores del Cielo but came to hate the club. The idea of grown men gathering at an isolated ranch
struck him as weird, like a bunch of adult Boy Scouts hanging out in the woods. “If you quit this organization,” he was told by Paul Thayer, a legendary aerospace executive, “you’ll
never go anywhere in this industry.”
Borman quit anyway.

Aloof, analytical, characterizing his management challenge as a “mission,” Borman set about to restore discipline and profitability to Eastern. Within months of becoming president he
fired or demoted 24 vice presidents. He drew attention to costs by walking from office to office flipping off light switches. Fresh from his wife’s alcoholism recovery (and his own newborn life as a teetotaler) Borman banned drinking during company hours (including lunch), a not unreasonable policy for a company whose executive offices were located at the edge of the airport tarmac.

Executive perquisites came under severe attack. Eastern had a policy of allowing officers to lease company cars, including Mercedes Benzes, which the company depreciated practically overnight and then sold to the officers at the reduced value; Borman wiped out company cars. An executive jet, used by executives for personal as well as business travel, was jettisoned; Borman required Eastern executives to begin conducting their travel by commercial airline instead. He
curtly fired a longtime Eastern spokesman, golfer Jack Nicklaus, calculating that the company maintained the costly endorsement contract principally because the executives enjoyed the opportunity to golf with him occasionally. Borman, for his part, hated golf; it was too slow a game. “You’re not selling enough tickets,” he said. “Good-bye.”

Though Borman, like most airline chief executives, had a weakness for new planes, he did succeed in negotiating perhaps the
most lucrative airplane deal in history. He agreed to make Eastern the proving customer for the A-300, assembled in Toulouse, France, by the Airbus Industrie consortium from parts made throughout Europe.
Desperate to break the hold of Boeing and McDonnell Douglas in the United States, Airbus agreed to lease a number of planes to Eastern for six months free of charge. Borman told an employee meeting, “If you don’t
kiss the French flag every time you see it, at least salute it.”

Then Borman turned his attention to the most vital yet delicate matter of all: the livelihoods of his employees. They owed it to the future, Borman told them, to cut back their wages.

Like a politician on the stump, Borman launched a never-ending round-robin of trips through the Eastern system; even employees working in the middle of the night on the loneliest airport shifts got a dose of give-it-up religion. He began a letter-writing campaign to his employees, drumming them with the need for sacrifice. “
One of the great joys in life,” he told them, “is found in subordinating one’s personal desires and efforts to the success of a group.” He alternated from the velvet glove to the iron fist, between bended knee and thrusting chest, depending on the circumstances. There was always a crisis, it seemed—a mission, dangerously close to failure—for the sake of which Borman would convince employees to give up wages they were scheduled to receive. “We could be unable to
meet our payroll,” he warned at one point. Sen. Edward Kennedy’s deregulation proposals became the bogeyman, constituting “a
very serious threat to the continuation of Eastern Air Lines as we know it.” Finally, in November 1978, he wrote, “The President has signed the deregulation bill.…
It’s quite clear that we do not have the [necessary] resources—airplanes, cash.” And with each letter came another plea to forgo something that employees otherwise had coming. “God bless you all,” he added in the last paragraph of nearly every letter.

While some of these programs involved outright concessions by employees, the most creative and long-lasting was more complex and certainly more innovative: employees agreed to wager a percentage of their salaries on the company’s profitability. If earnings totaled less than a stipulated level, employees received less than full pay—96.5 percent of what they were otherwise entitled at that time, to be precise. If profits exceeded the agreed-upon benchmark, wages too would swell—to 103.5 percent of the baseline level. Borman called this the “variable earnings plan,” or VEP.

In so cyclical an industry as aviation, in which tiny changes in interest
rates and fuel prices and macroeconomic conditions have a huge effect on the bottom line, VEP gave Borman a stunning management advantage. It turned his employees, in essence, into Eastern’s bankers, enabling him to borrow tens of millions of dollars from them—unsecured, not so incidentally, and without interest—and to repay them only if the money happened to be available at a later time, which, as the years progressed, it increasingly was not.

In the profit and loss column, Borman’s first five years running Eastern were pages from an executive storybook. Borman turned the losses of the Hall regime into the greatest profits Eastern had ever (or would ever) report. There were problems, grave problems, but they only increased the challenge—and the heroism of his triumphs. “His associates,”
The Miami Herald
crowed, “say that
he alone resuscitated a dying airline.” Added
Time
magazine: “Borman has accomplished a
remarkable turnaround.” Borman celebrated Eastern’s profitability by placing some of the largest airplane orders in history, and this time the airplanes were not free. Already a ward of its bankers, Eastern went even more deeply into hock.

Then Charlie Bryan became president of Eastern’s largest union.

Bryan did not initially consider himself an enemy of Frank Borman. On the contrary, as Bryan was coming into prominence in District 100 of the International Association of Machinists, he sat with Borman at a company dinner party and thrilled to hear Borman describe the mission of Apollo 8. Bryan could feel the goose bumps on his arms as Borman spoke. “I’m sitting here with the
Magellan of our time,” he told himself.

Political reality soon brought Bryan down to earth. By the early 1980s, with interest rates swelling and fare wars spreading, Borman’s variable earnings plan was varying in the company’s direction much more frequently than in the employees’. Borman’s hero status with employees began to wear thin: in one anti-VEP protest employees carried signs saying, “
Earth to Frank: No More VEP.” But Borman cried that Eastern needed VEP more than ever. New York Air had recently invaded the Eastern shuttle’s market, and People Express was running cut-rate flights in Eastern’s mainstay market to Florida.

Bryan won the IAM presidency on a promise to eliminate VEP, which he dubbed the “veritable extortion plan.” Bryan, who had
worked so many odd jobs in his life, who cared so deeply about the kind of car he drove and the number of bathrooms in his house, knew how much a few dollars a week meant to a union worker.

Bryan indeed was the living embodiment of the principles of the machinists’ union, an organization devoted like few others to the dollar value of a paycheck.
When Lyndon Johnson laid down a 3.5 percent limit on wage increases throughout the United States, the IAM struck five airlines for 39 days and walked away with a 5.5 percent wage increase. The IAM made a mockery of President Nixon’s wage and price freeze. When Jimmy Carter’s wage “guidelines” became law, an IAM settlement at Eureka Vacuum Company was declared illegal by the Council on Wage and Price Stability.

Charlie Bryan’s zeal for that tradition was evident the instant he assumed office. The outgoing district president, in a gracious newsletter offering congratulations to Bryan, added a sincere if awkwardly written farewell: “Mr. Frank Borman, whom I have the
utmost respect for, was the company official, in my opinion, that did the most for Eastern Air Lines in the 31 years I have had an employee-employer relationship.” Twelve days later Bryan, now in control, distributed a newsletter of his own, which, if nothing else, was grammatically written. “The
Gestapo tactics of Martin Ludwig Borman and his Nazi scorched earth policy,” Bryan wrote, “will not work with this union leadership.”

A few months later Bryan showed up at Eastern’s 1980 annual meeting of shareholders with a
briefcase full of proxies, about 100,000 shares’ worth, and nominated himself to serve on the Eastern board. He knew of course that he had no chance to win, but that was beside the point. As he later explained, “I did it
just to get attention.” At the annual meeting the following year, Bryan showed up with even more proxies, this time on the order of a half-million. It was still only a fraction of what the election of a director required, but he managed to use the meeting as a public platform for dressing down the Colonel. “
You made history with Apollo 8,” Bryan said. “Why do you
ignore
the history lesson the British learned regarding ‘taxation without representation’ by continuing to ask our employees to give, contribute, and sacrifice, but [telling them] ‘don’t get involved at the top’?”

Bryan’s penchant for grandstanding was equaled by his talent
with the media. He equipped District 100 with fax technology, then in its infancy, and began distributing his bulletins to the press as well as to his membership. He understood, as few union people ever have, that he could use publicity to help fulfill his purposes only by delivering a compelling story. When the company began forcing machinists to take their coffee breaks at the same time of day, the long lines at the canteen caused some workers to return to their posts a few minutes late. Wages were docked. Bryan called Borman and barked, “
Quit fucking with people just because I got elected!” Bryan then planted the suggestion that a strike, or at least a work slowdown, could erupt over the issue. Before long a big headline asked, “Will Coffee Ground Eastern?” In the glare of the publicity Eastern backed down.

Another round, however, went to Eastern.
Borman had been smarting ever since another airline executive had teased him about one of the featherbedding work rules that the machinists maintained at Eastern. The rule required Eastern to keep three union members on hand when a plane pushed back from the gate—one to drive the tractor and two to walk along the wings. Borman established new procedures when in 1981 Eastern was preparing to open a new terminal at Atlanta’s Hartsfield Airport, a terminal for which Borman had borrowed heavily to help Eastern block the inroads that Atlanta-based Delta was continuing to make on Eastern territory. Eastern calculated that the machinists’ push-back rule would force it to employ 44 machinists that the company otherwise would not require at the expanded operation. No, Borman ordered, from that point forward Eastern would use the
reverse thrust capability of its engines, not a push-car operator with his union wing walkers.

Bryan would cotton to none of this. He raced to Atlanta and stood behind the wheels of the first plane to push back with reverse thrust. The showdown was at hand. In one corner, weighing in at about 160 pounds, from West Virginia, the frowning and square-shouldered Charlie Bryan. In the other corner, tipping the scales at 100,000 pounds, from Seattle, Washington, a Boeing 727. The plane lurched. All eyes were cast to Charlie. And with those big tires slowly revolving in his direction, Charlie Bryan flinched. He dove out of the way to avoid getting rolled over by the aluminum beast (later saying he had been knocked away by the blast of an engine).

Borman and Bryan shared a notable face-off in Caesars Palace, where the IAM was holding a national convention. Borman, friendly with the union’s international leadership, had been invited to address the group. Bryan had just published a newsletter suggesting that Eastern was deliberately understating its profits in order to pressure employees into more sacrifice.

Bryan was at a
slot machine when he heard himself being paged. The hell with it, he said, continuing to play. Suddenly Borman was stalking purposefully toward him. “Bryan,” he barked. “Why didn’t you answer my page?”

“I’ve got a cup full of coins!” Bryan cried.

Ignoring the protest, Borman grabbed Bryan by the arm and pulled him into the coffee shop. The men sat down.

“What the hell are you trying to do?” Borman demanded. “Make us look like a bunch of crooks?”

Bryan peered back quizzically. He had no idea what Borman meant.

“Look at this!” Borman commanded, shoving Bryan’s accusatory newsletter in front of him.

Bryan peered down. “I can’t read this,” he said. “I don’t have my glasses.”

“Here. Take mine.”

And for the next several minutes the renowned astronaut and the little-known unionist swapped the same pair of glasses over a coffee shop table, locked in combat over a union newsletter.

On the bottom line, Borman’s fairy-tale success at Eastern lasted from 1975 to the early 1980s, when a variety of forces converged to plunge the company headlong into reality.

With its price-sensitive “frost-to-flowers” markets, Eastern was more vulnerable to attack from the upstarts than any other established airline. People Express was already cutting in; others would follow. On Eastern’s business routes, New York Air was still taking a huge bite.

Worse still, Eastern was losing passengers just as it was being inundated with new airplanes. Borman had ordered the planes amid the fuel shortages of the 1970s, moving aggressively to replace his old gas-guzzlers with modern, fuel-efficient aircraft. But the price of jet
fuel by 1983 at last was plunging. While People Express and New York Air were happily flying against Eastern with old gas-guzzlers that had been purchased used for a song, Eastern was flying new, fuel-efficient aircraft—just when fuel efficiency mattered much less. At the same time interest rates remained at stubbornly high levels. Borman was on the wrong side of both markets. Further compounding the disadvantage, Borman’s new planes were big 757s; the upstarts, by contrast, were flying much smaller planes, enabling them to offer greater frequencies against Eastern than they otherwise might.

Borman courageously tried to break the mold by which Eastern had operated since the Rickenbacker days. At a retreat with his top managers
in the Florida Keys, Borman approved a plan to thrust Eastern into the transcontinental markets, from New York to California—the routes endowed upon American, United, and TWA but denied to Eastern from the time of the postmaster general’s spoils conference in 1930. The incumbent airlines reacted as if Borman were trying to kidnap their firstborns. “You’ll have to
take me out of that market feet first!” Dick Ferris of United publicly declared. “We’ll protect it to our dying breath.” Eventually Eastern washed out of the transcontinental market.