Northwest Airlines is actively discussing the purchase of Eastern Air Lines and will meet later this week with one of Eastern's key unions to see if the struggling carrier's labor problems can be overcome, sources said yesterday.
Representatives of the International Association of Machinists met yesterday to discuss the problems of integrating the Eastern employees into the Northwest operation as a prelude to a scheduled meeting later this week between Northwest Chairman Alfred A. Checchi and IAM Vice President John Peterpaul, sources said.
Northwest spokesman Doug Miller said yesterday the airline was examining all the options for growth and expansion. "We are not in a position to discuss the options we are reviewing nor should anyone conclude that such an examination will lead to a transaction," he said.
Sources said Northwest initially approached Eastern trustee Martin Shugrue about buying some of the carrier's airport gates in Atlanta as well as some of its maintenance facilities. But Shugrue, who was appointed by the bankruptcy court last April to replace the management team headed by Frank Lorenzo, "made it very clear that parts of the airline are not for sale. It is the whole airline," according to a source.
Another source familiar with the talks between Eastern and Northwest said yesterday "it's going to be the whole system."
Eastern's major creditors appear to have concluded that the airline is not apt to survive on its own and a sale is their only real hope of getting at least some of their money back. "I think the creditor's group hopes it can be sold," said a source closely involved in the bankruptcy process.
Eastern continues to lose more than $1 million a day despite the change in management. But creditors appear willing to fund those losses as long as there is the possibility that the entire airline can be sold.
In an internal memo to employees two weeks ago, Eastern said "it is no secret that some airlines, including Northwest and Pan Am, have approached us, on a preliminary basis, concerning the possibility of future business relationships." Eastern said yesterday nothing has changed since that memo was sent.
So far there have been no discussions of price. If Northwest can be persuaded that the unions won't block the transaction, the talks are expected to proceed.
One source familiar with the discussions pointed out that by purchasing Eastern's physical assets such as its planes, gates and routes -- rather than merging the two airlines -- Northwest would not be bound by Eastern's labor agreements. It would then be free to negotiate a new deal with the unions that would exclude all strikebreakers hired by Eastern. "They'd be free to hire anybody they wanted," said a source.
The labor situation at Eastern, in the meantime, continues to deteriorate. When Shugrue took over the airline last April, he said that one of his top priorities was restoring labor peace -- so far that goal has eluded him.
Negotiations between the company and the Air Line Pilots Association
(ALPA) broke down Friday when the union rejected an offer to take back 650 union pilots and restore their seniority over the next three years. The more hard-line pilots rejected that offer in favor of a more complete restoration of their seniority over strikebreakers.
A federal bankruptcy judge in New York has scheduled a hearing next week on a proposal by Eastern to abrogate its labor contract with ALPA. An Eastern victory would give new impetus to a group attempting to represent the pilots hired to replace those who went out on strike. Called the Eastern Pilots Association, the group is challenging ALPA's right to represent the pilots, although any resolution of that fight is apt to be months away. The new union challenge is currently tied up in the National Mediation Board, which must certify any new union election.
Eastern was forced to seek protection from its creditors in bankruptcy court in March 1989, just days after it was struck by the IAM in a dispute over a new contract. The airline was virtually grounded when the pilots honored the machinists' picket lines.