MIAMI, OCT. 8 -- Texas Air Corp. Chairman Frank Lorenzo said today that Eastern Airlines "has not yet made the transition" to deregulation, but said the financially strapped airline could grow with the proper "cost structure."
Texas Air, which bought Eastern last year, this week proposed major cuts in wages for 12,000 machinists and ground-service workers represented by the International Association of Machinists, the company's largest union.
"The acquisition of the company was a difficult one," Lorenzo told a luncheon audience at the National Hispanic Business Conference. "Regrettably, Eastern also brought some major problems. ... Basically, the company has not yet made the transition into a deregulated environment."
Lorenzo said he was pleased that Eastern's labor contracts are up for renegotiation soon because the company will get a chance to lower its costs. "I'm very confident that Eastern, with the proper cost structure, can and will grow," Lorenzo said.
The wage-cut proposal calls for reductions of as much as 50 percent over the next three years, a plan union leaders term "unacceptable." Eastern management and union representatives are expected to meet next week.
Lorenzo chose to highlight a more positive aspect of the proposal -- a $100 million retraining program offered by Eastern to unskilled workers, who would lose the most under the wage proposal.
"Eastern's management, as I think many of you know, has proposed a very humane program to save a lot of jobs at Eastern," Lorenzo said. "Now, of course, negotiations begin and we will all be watching.'