Eastern restructuring grounded, for now
Frank Lorenzo's grand plan to remake Eastern into a lower-cost carrier is in the soup again - at least temporarily. A federal judge Wednesday blocked a move by Mr. Lorenzo's managers to scale down Eastern by cutting service to 14 cities and eliminating its money-losing hub in Kansas City, Mo. Part of Lorenzo's strategy, according to analysts, was to put pressure on unions to make concessions.
``If he keeps losing in the courts, it's going to bring him back to the table face to face with the unions,'' says Barry Gordon, an analyst with the National Aviation & Technology Corporation, a mutual fund company in New York.
Mr. Gordon believes the immediate effect of the judge's ruling, if it is not quickly reversed, will be to keep Eastern management's attention occupied with routes it had planned to be out of long ago.
Passenger traffic could also suffer if passengers don't know where Eastern is flying. Airline customers often make reservations weeks in advance, and schedules at travel agencies and printed airline guides already reflect the planned cutbacks in service.
Though Mr. Lorenzo is viewed by many analysts as the consummate chessmaster of the airline industry, there is concern among analysts that the latest in a series of courtroom reversals may indicate longer-term problems.
Gordon says financing could become more difficult. Lorenzo is currently seeking $100 million in private junk bond financing.
``It's a real setback for the company,'' says Candace Browning, an airline analyst at Wertheim Shroeder & Co., a brokerage firm in New York. ``It slows the process of making this company into a moneymaker.''