A federal bankruptcy judge attempted Wednesday to break an impasse that put Peter Ueberroth's $464 million deal to buy strikebound Eastern Airlines in danger of collapse.
Sources speaking on condition of anonymity said Judge Burton Lifland was meeting with attorneys for both sides to try to keep the deal from falling through.They said the stumbling block was a union demand that a trustee take control of Eastern from Texas Air chairman Frank Lorenzo while the airline changes hands. Lorenzo, according to sources, refused to go along.
"I don't think you can say that the deal is definitely off," said Eastern attorney David Boies. "All you can say is there is no deal right now and the parties are still talking." He declined further comment.
"Putting all the rhetoric and emotion aside, we're still cautiously optimistic that somehow a deal will be fashioned that will satisfy all the parties concerned," said Ron Cole, a spokesman in Washington for the Air Line Pilots Association.
Sources close to Ueber-roth, speaking on condition they not be identified, said each side apparently was trying to outbluff the other as part of a rough-and-tumble negotiating strategy.
Separately, U.S. District Judge Edward B. Davis in Miami Wednesday found no legal grounds to order Eastern's pilots back to work, dealing the airline another setback in its effort to end a crippling strike begun by the Machinists union March 4. Eastern said it will appeal.
The confusion over the ex-baseball commissioner's effort to buy the paralyzed airline came hours after a midnight deadline expired for reaching final agreement on details of the purchase.
Jack Bavis, head of the airline's pilots union, said the unions would not go back to work with Lorenzo in control. Eastern's unions have accused the Texas Air chief of gross mismanagement and robbing the airline of vital assets.
"They're not going to do it for the guy they hate the most," Bavis said. "They'll do it for Peter. If he's there, we're there."
Eastern pilot Jonathan Graf said in Salt Lake City Wednesday he remains confident that the details will be worked out.
Graf said he expected that he would be back to work this week, based on earlier optimistic reports. But when it was reported Wednesday that the deal had broken down, Graf remained where he has been for more than one month - by the phone, waiting. He got his last paycheck from the company Feb. 15.
Several lawyers involved said in Miami they expected that if a trustee were named, it would be former Defense Secretary Frank Carlucci, who was present for the negotiations on Monday. Carlucci declined to identify his role then and was not present Tuesday.
Ueberroth and Lorenzo walked out of the talks at U.S. Bankruptcy Court Tuesday evening. Eastern's three unions and its creditors also took part in the meeting; for the deal to work, all the parties had to be in agreement.
"I'm not optimistic," the former baseball commissioner said as he left. Lorenzo refused to comment.
Lifland, who is presiding over the bankruptcy case, had ordered the parties to return to his chambers Wednesday morning.
The strike - and participation by Eastern's pilots and flight attendants - virtually grounded Eastern and forced it to file for Chapter 11 bankruptcy protection.
Under five-year deals reached with Ueberroth on Monday, the unions would get a 30 percent stake in the airline in exchange for about $210 million in wage concessions.