Texas International Airlines last week asked a federal court for a preliminary injunction barring Continental Airlines from going ahead with creation of an employe stock purchase plan that would thwart TI's takeover bid.
In lenghty documents filed in the U.S. District Court in Los Angeles today, Texas International made new charges that Continental devised the idea of the employe stock ownership plan as a way of warding off the takeove and then carefully orchestrated and financed the employe's "campaign" to get Continental to create such a plan.
During a federal court hearing in Los Angeles last week, a judge set June 15 as the date for a new hearing on Texas International's motion for a temporary injunction against the plan. Continental also agreed during the course of last week's hearing to postpone until June 18 implementation of the plan.
According to Texas International's new charges, in order to dilute TI's 48 1/2 percent holding in the Los Angeles-based Continental, the plan calls for Continental to issue 15.4 million new shares of stock -- more than double the amount currently outstanding -- to its employes who had gained control of the airline. The money necessary to buy the stock -- estimated at about $185 million -- would be financed from bank loans arranged and guaranteed by Continental. The loans would be repaid over the next seven years out of funds contributed by Continental from money saved in wages because of employe pledges to give up a portion of their future paychecks.
At the annual shareholders' meeting here of Texas Air Corp., the parent company of Texas International, TAC President Frank Lorenzo, who also serves as chairman of the executive committee of Texas International, called the Continental plan "perhaps the most desperate antitakeover-prevention [sic] scheme concoted in modern American business.
"Although it makes for food newspaper reading, it makes absolutely no financial or legal sense and we are confident of the soundness of our legal case," Lorenzo told a crowd of more than 1,000 shareholders and employes.
A Continental spokesman said last week in Los Angeles that the company didn't have any comment on the specifics of Texas International's pleadings, because Continental had not see them yet. But he confirmed that a special committee of Continental's directors will be leaving Monday and a full director's meeting is scheduled for Tuesday to consider final approval of the employe stock plan.
The Texas Air meeting was notable for the study is contrasting employe sentiments at Texas International, a company buffeted by labor unrest stemming largley from Texas Air's creation of New York Air as a separate subsidiary with a separate labor force. Texas International also has three major contracts with its employe group and is the subject of a boycott by the Air Line Pilots Association for what it alledges are the company's antiunion activities.
On the one hand, there wer hundreds of employes here who came on chartered buses, many of them wearing bright blue Texas International T-shirts, and sporting buttons and stickers that proclaimed "Proud and Profitable," "We bank on Frank," and "TI and Proud of It." Several of them spoke in praise of the company and presented Lorenzo with petitions of support from employes.
In contrast there were dozens of obviously unhappy employes sporting buttons that proclaimed such things as "Texas International -- the Company The Destroys Pride." Lorenzo's comments during the meeting frequently were punctuated by angry and insulting remarks from some of the employes who accused him of not caring about the employes and undermining their confidence in the company, jeopardizing their jobs, and "empire building," as pilot Keith Hansburger called it.
''Our management moved from betraying its responsibility to bargain in good faith to threatening out futures through the creation of New York Air with TI planes, and with TI money guarantees and TI training, but not with TI personnel,'' pilot Stan Poynor said in a speech to nominate five suspended pilots as directors.
Lorenzo had been quite vocal about hsi view that Texas International, though profitable over the last few years, has to cut costs and gain productivity in order to meet the challenge of a new competition as a result of deregulation of the airline industry, and he repeated this view numerous times.
"The facts of life in a deregulated business are that the low-cost producer can have the lowest prices and the highest profits," Lorenzo said, citing the example of Southwest Airlines, one of its major competitors.
"We must make a very major change in out labor costs," he said, adding that Southwest pilots fly 75 hours a month while TI's pilots fly between 52 and 54 hours per month because of "work rules and restrictions," he said amid boos from the audience. "It is these stark realities, among others which are being addressed in the protracted negotiations with our pilots."