They don't call Frank Borman "moonman" at Eastern Airlines anymore.
Dubbed "moonman" by employes who viewed the former astronout's ascendancy at Eastern with amusement at first, Borman now seems to have general respect, almost awe, from employes and close observers of the once-derided carrier for the extra-terrestial efforts he has made on its behalf and the apparent successes he has had in altering the company's course away from what many believed to be certain bankruptcy.
After a dismal 20-year performance - in which the airline took in $17.1 billion in revenues and lost $19.2 million - the company has experienced a turnaround since Borman took the controls in December 1975. Eastern reported record profits in the two last years - $45.2 million in 1976 and $34.7 million in 1977.
What progress he has performed has been due to his relentlessness in trying to improve the airline's service to its customers; its employe, fuel and aircraft productivity; its route system and its balance sheet. To trim the fat, he has taken a no-nonsense approach to cutting expenses he perceives as unnecessary, starting at the top:
The 60 top officials Borman inherited have been shaved to 38. Now ten of them report directly to Borman. There are today 760 fewer in the management ranks than there were a few years ago. There were so many layers of management at Eastern that officials used to joke that there was a vice president in charge of the vice presidents. Now, many of the Vice presidents, and the layers, are gone: Instead of a pyramid structure, Borman has ten top vice presidents report directly to him. The building directory on the main floor of the now-very-plain corporate headquaters here, once filled with the names of executives, contains more spaces than names.
Borman closed the New York branch of the corporate headquaters, bringing everyone down to Miami - everyone who was coming down - ending what many in the company call the "two-headed monster style" of management that had characterized the company before, when a vice president in New York would order something and a vice president in Miami would order the opposite.
Gone are all the limousines Eastern's top officials used to enjoy. Eastern officials joke about the time some of Eastern's lenders came down from New York to discuss the company's precarious financial situation after Borman took over and were chauffered to the meeting site by Eastern's top brass using their own cars: a '67 Firebird, a later model Gremlin, and Borman's '69 Camaro, with 100,000 miles on it.
"We had to tell them, "This isn't an act," one said. "This is how it is here now'."
Gone also is the corporate jet. "Frank said, 'We have 235 jets of our own; why do we need a corporate jet?'" one explained.
To pull th airline out of the financial pit it was in, Borman has also shown a willingness to be bold and consider innovative ideas:
Borman convinced Eastern's employes to accept a wage program he candidly calls a "life saver" for the airline. Under the program, wages were held at 1975 levels until Jan. 1, 1977. In return, employes had the choice of getting into a five-year profit sharing plan, or getting warrants convertible into stock for every $10 of salary foregone in 1976. The wage freeze contributed directly to th company's 1976 earnings and was instrumental in persuading Eastern's lenders to defer debt repayment due in that year. (The employes who chose profit-sharing have already gotten back 65 percent of their wage contributions.)
Borman then convinced the employes to accept a five-year "variable earnings program" under which their salaries were related to the profitability of the company. Borman calls the VEP "insurance" for the company. Workers get a bonus of up to 3.5 percent of their wages if Eastern's profit for the year exceeds a target of 2 percent of operating revenue. If net income drops below the target, workers contribute up to 3.5 percent to Eastern. Borman puts 7 percent of his salary into the program, and made the other top executives put in 5 percent.
Taking advantage of the European Airbus Industrie's desire to crack the American market, Borman worked out a six-month free trial period for Eastern to use four of its fuel-efficient, cost-saving A300s. Finding the plane's operating capabilities exceeded even the promises made for it, Borman has signed a contract to acquire 23 A300s. Seventy percent of the total price will involve external financing so that he didn't have to ask his lenders to put in more, though they must approve the plan.
Despite the undisputed bold moves, and a constantly repeated perception inside the industry and out that Borman is doing a "great" job, there is often a "but".
"But" he's "got a long way to go" and "but" Eastern is still a "terrible" airline.
"We're still fighting that," Borman says, but he insists Eastern is no longer the airline many travelers had come to despise - for its reputed discourteous employes, abominable food, and poor service performance - and ignore when possible when making flight reservations.
"I don't apologize anymore," the 50-year-old chairman of the board, president, and chief executive officer said in a recent interview in a very modest office for a person who holds the top three titles in a multi-billion-dollar corporation. "We have made significant progress, and we're running a damn good airline."
Pulling out a sheaf of papers he receives daily detailing the operations of the airline the previous day, Borman crows about the statistics: 1,541 flights flown, more than 110,000 people carried, 84 percent of the flights system wide arriving within 15 minutes of schedule, just 2 percent of the passengers delayed an hour or more, and only one flight cancelled, affecting 0.1 percnet of the day's passengers, because of some operational difficulties.
"Now you just can't run a system that involves people and machines any better than that," he says. (The next day's report would make him less happy: Charlotte, N.C., was fogged in the middle of the morning, affecting five flights which the airline's "system control" center - officials said Borman calls it "mission control" - had to worry about and deal with. The day after that, an Eastern jet bound from Miami to New York hit a pocket of air turbulence in clear skies at 33,600 feet, jostling the plane and its passengers and injuring 11.)
To support his claim that Eastern's operations have "improved immensely" from a passenger's point of view, Borman cities a significant drop in consumer complaints, a substantially improved on-time performance record, improved passenger traffic, and the reports of people hired to go out and candidly compare Eastern's performance with its competitors.
Despite the strides made, Borman is quick to admit "we've got a long way to go." In a letter sent to Eastern's 34,000 employees earlier this month, he applauded their past help and exhorted them to greater efforts in the future. "Two robins don't make a spring," he warned. After outlining in detail the airline's sad past and improved present financial position so they could see "the magnitude of the turnaround," he told them the numbers also clearly showed that "we are still quite vulnerable to adverse economic factors or to any service-related problems that would cause our customers to go elsewhere."
The challenge is formidable, a truth Borman doesn't forget and doesn't want the employes to forget. Although Eastern has paid off $286 million of its debt in the last four years, it still has a whopping $934 million to carry.
Despite the trims Borman has made in expenses, Eastern, with a lot of short routes and inefficient airplanes, is still considered a "high-cost" carrier with narrow margins. "Every day at Eastern, we take in about $6.2 million, every day we spend about $6.1 million," Borman says, so just one additional passenger per flight during the year could yield the company $35 million in profits, he notes, but one less . . .
Part of Borman's overall plan to improve the company's performance involves looking at the airline's route system and a willingness to make changes. In that connection, Eastern recently took actions to drop service altogether from Memphis, Macon, Chattanooga, Roanoke and Akron/Canton "so we can concentrate on areas where we can make money," Borman says. He hopes to increase Eastern's penetration east to west, through St. Louis, as well as to increase north-to-south penetration by making Miami a hub for flights down into Central America.
So far, 1978 looks good for Eastern. The airline said Tuesday that it earned $19.5 million (92 cents ba share) in the first quarter compared with $16.8 million (85 cents) a year bago on a 12.1 percent increase in revenues to $584.4 million.
The increase in the number of passengers is contributing substantially. "We've had an absolutely unprecedented, unexpected and unforeseen surge in our traffic," Borman says. And it's not explained by low fares, Borman insists, though they have helped. The largest increases in traffic have been on routes with no significant discount fares he says.
In his quest to maintain momentum, Borman doesn't shy away from comparing Eastern to Delta Airlines, something Eastern officials didn't like to do in the past. Delta last year reported its 30th consecutive fiscal year of profitability.