Frank Borman, the controversial chairman of beleaguered Eastern Air Lines, yesterday said he is stepping down June 30, shortly before the airline is expected to be merged with Texas Air Corp.
The former astronaut-turned-airline-executive said that he plans to relinquish the controls of the airline that for the past 10 years he has piloted from one storm cloud to another, trying to overcome the growing pressures of a deregulated airline industry.
His new job will be that of grandparent, Borman, 58, told a press conference yesterday, in explaining why he and his wife Susan plan to move to Las Cruces, N.M. "Principally, my son and his wife need babysitters," he said.
Fred Borman, 34, recently moved to New Mexico from Miami after selling a south Florida car dealership. Although the younger Borman plans to set up a new dealership in New Mexico, his father -- who joined Eastern in 1970 -- denied earlier reports that he would join his son in the car dealership business.
Borman no longer will be Eastern's chairman, but he said he will maintain some oversight role when he becomes vice chairman and a director of Texas Air on July 1.
"I'm very much still in love with this airline," said Borman, a retired Air Force colonel. He noted that he plans to write a book about his experiences.
Pending expected final government approval this summer, Texas Air is slated to acquire Eastern -- an airline that hasn't made a profit since 1979 -- in a $674 million deal. The merger would create one of the nation's largest airlines, tying Texas Air, New York Air and Continental Airlines under the helm of one company headed by Frank Lorenzo -- an entrepreneur who has taken advantage of airline deregulation to make his low-cost, non-union airlines formidable rivals to the more established carriers.
Given the pending acquisition, Borman's resignation was no surprise to Eastern employes, Texas Air officials or financial analysts.
"Col. Borman's contributions to Eastern over the past 16 years have been tremendous, and he will be missed," Texas Air said in a statement. "Col. Borman's decision, which is his own, is not surprising. But we appreciate that he has continued to lead the company during this important and difficult transition period, and we are honored that he has agreed to join Texas Air as vice chairman and member of the board of directors."
It was unclear yesterday how his departure would affect the airline's relationship with its unions -- a relationship that had grown increasingly contentious and bitter under Borman's leadership.
Borman -- or "moonman" as he was initially called when he joined Eastern from the space program -- earned considerable respect from employes in the late 1970s for pulling the airline from the brink of bankruptcy, although he did so by extracting wage concessions, a first for the industry.
However, that respect dwindled quickly in the 1980s as the airline hit one financial crisis after another. In each crisis, Col. Borman, as he became known, asked the unions to make further concessions in their contracts.
The most recent crisis came to a head in February after a key labor official -- Charles Bryan of Eastern's machinists -- refused to agree to further wage concessions unless Borman resigned.
Eastern management rejected this proposal -- a move that meant that the airline would be unable to satisfy its creditors' demands for labor-cost concessions by all three of its major unions -- pilots, flight attendants and machinists. Absent those, the lenders were prepared to say Eastern was in technical default of its $2.5 billion in loans -- pushing the airline into a bankruptcy reorganization.
To avoid this predicament, Eastern agreed to accept Lorenzo's offer to buy the airline.
When the merger was announced, Borman said he would stay at least until the acquisition was completed. Close associates began predicting he would leave, and rumors surfaced that Borman would move back to his main Arizona residence to run for the Senate seat being vacated by Republican Barry Goldwater. Borman, however, denied these rumors yesterday, saying he is not a politician. But he did not rule out accepting an appointment to a government post.
"His stepping down will not make much difference" with the unions, predicted financial analyst Robert Joedicke of Shearson Lehman Bros. Inc. "But Mr. Lorenzo's arrival will," he added, noting that Lorenzo had taken a tough cost-cutting stance with the unions at Continental Airlines, demanding substantial concessions after he acquired the company.
His departure "means Lorenzo will be running the show completely," added Anthony Hatch, an analyst with Argus Research Corp.
Joseph B. Leonard, Eastern's president, will remain in charge of the day-to-day operations, a Texas Air official said. There has been no decision on who, if anyone, will replace Borman. Lorenzo is chairman at his other airlines.
However, Joedicke noted that, because Borman was named to the new position of vice chairman of Texas Air, his "experience and understanding of Eastern's idiosyncracies and problems will still be at the disposal of Mr. Lorenzo."
With his departure, Borman ends his hands-on flight activities. As an Apollo astronaut, he commanded the first spacecraft to fly around the moon in 1968 -- his second flight in space.
Borman left the space program in 1970, saying, "I didn't want to ride for the rest of my life on the publicity I had received from NASA and become a dancing bear. I knew Eastern had some problems, and I thought I could contribute."
"I find it kind of sad," said Argus' Hatch. "He was an American hero. It would have been great to have him a sucessful business leader, too.