Randy Babbitt Interview by Jerry Barrett

JERRY BARRETT: This is Jerry Barrett talking. Today's date is April 29, 1986. I'm interviewing Captain Randy Babbitt in the ALPA headquarters, at the ALPA Building in Washington, D. C. Captain Babbitt, if you would, would you start by talking a little bit about your background with Eastern and with ALPA?

RANDY BABBITT: Surely. I started with Eastern in 1966. Based originally in Washington, I've been with them to date. Currently a DC-9 Captain based in Washington, I've flown a variety of airplanes with them over the years. My ALPA background goes back to approximately 1974 when I began to do committee work. I was a Local Council Representative in 1975. Went on to negotiating committee 00:01:00work in 1976. Chaired ALPA Eastern Pilots Negotiating Committee from 1978 through 1980. Also involved with national ALPA work, committee being Collective Bargaining Committee which I chaired from 1980 to 1984. In 1984, I was, I accepted the job with the Executive Administrator of ALPA working for Captain Duffy, the job I currently hold now. A sidepiece, just from a legacy point of view, my father went to work with Eastern in 1935 and I believe has held over the course of years just about every job you can have in ALPA at one time. Some of them all at once. For a period of time in the early sixties, when he was 00:02:00Local Council Chairman, Master Executive Council Chairman, Negotiating Committee Chairman and the Regional Vice President all at the same time. So, my background on ALPA does go back a ways.

BARRETT: Okay very good. Can you talk a little bit about the relationship between the pilots and Eastern — kind of a historic sweep from your perspective?

BABBITT: In my tenure, more particularly the tenure that would interact with the presence of Frank Borman, starting about 1975, Frank Borman was elected by the Board to be President, in the fall of 1975, if I recall. And Eastern was in difficult times and had some financial problems. And the pilots, at his urging, 00:03:00leapfrogged some raises, made some minor concessions here and there, and probably over the years that has been the story of the relationship between Frank Borman and the pilots. They were always fairly receptive to him with requests regarding the future. There was always an unspoken rapport between the two. Something gave him that one little extra bit of credibility -- the fact that he was a pilot. And I think, I don't think he ever missed any opportunities to play that to its maximum value. And I don't say that disparagingly. I think the circumstances, the events of Eastern, the inability to come to grips with some other costs, the people who were receptive were the pilots. Others were not as receptive and the fact that the Company would go back to the known help area, 00:04:00which was the pilots, I think, strained the relationship in time. They were constantly asked to do more than their counterparts in the industry in terms of concessions, and so forth. And while I am not being critical of other labor groups, the animosities that were probably more honestly felt between the groups were vented at the Company for not doing more. And a case in point was, I believe, the fall of '83 when the Machinists threatened to strike. I think Colonel Borman lost a great deal of credibility at that point. He indicated that he had had enough. We agreed that he should have had enough. It had been a good eight years of appeasement to them, concessions from others and appeasement to the IAM. And he stated vocally all around the system that this time they were 00:05:00going to have to get in line with the rest of the labor groups. And he took his cards right up to the last hand and then folded and lost a great deal of credibility. People were very upset with him. Rightfully or wrongfully, it set him back enormously with the pilots. From that point on, there was a certain unjustified lack of faith and even worse, probably open skepticism that if he would recommend it, then that in itself was reason not to do it. If he had said nothing, they would have probably come up with better ideas than the fact that he would suggest things. And I express these as the feeling that I gathered from the group, not necessarily personal opinions. The pilots put blinders on the facts for some of that time and lived on emotion rather than the factual condition of the Company and so forth. Going more broadly over all of the labor 00:06:00groups, my feeling was that Charlie Bryan probably didn't have much of a rapport with Colonel Borman and that lack of rapport wasn't just the standard labor-management relationship. It was, in my opinion, deeper than that. And it became pretty intense, personal competition between those two sponsored primarily, in my observation, from Charlie Bryan, although I have to admit I never sat down and heard his side of it. I certainly heard enough of the other side. I don't know that a lot of pilots would have felt sympathy with Charlie Bryan's position. There was a lot of antagonism. A lot of strings being pulled. It was more of a three-way battle than a two-way battle. It wasn't the 00:07:00traditional labor-management, it was more pilots against the machinists who were against the Company and the Pilots felt everybody was against them and I am sure each group in that tripart felt they were the odd one out. So, that gives you the kind of the overview leading up to the events of the sale, skepticism was certainly in place in there when at all times it didn't need to be or shouldn't have been.

BARRETT: Let me ask you a couple of specific questions then –

BABBITT: Sure.

BARRETT: What was ALPA's view of, particularly with respect to Eastern, of the deregulation? Was that - Were you surprised by the impact that it had? Did you anticipate that? What was it?

BABBITT: We tried to, as a national organization, anticipate going back, I can 00:08:00remember the high degree of skepticism that was felt by the pilots when the former President, J. J. O'Donnell, brought forward a plan in 1976. He sought to do more nationwide-type bargaining, put some national threads through all of our contracts. We had for forty-five years been completely single-unit bargaining. And O'Donnell sought to change that and the pilots then — it was not only not well received, it was rejected out of hand; that that was ridiculous; that we had done very well bargaining autonomously; and that would continue ad infinitum, which in fact it didn't. So there was some wisdom that was reemphasized in every collective, National Collective Bargaining Committee report that ALPA did establish, by the way, in 1980. They established a National Collective Bargaining Committee and I was either a member of, or the Chair of 00:09:00that Committee from 1980 to '84. Every report, every interim report ever written suggested that we had to find ways to break down these autonomous barriers. So, while there wasn't any surprise from the top, the implementation of those changes has been slow to come about. As probably the case with anything regarding a change of policy or legislation, you don't bring the change about until the pain is felt. Then it's usually too late. The medicine always follows the disease. So, in this case, the impact had to be felt. The downward cycles of bargaining and the period of late eighties through eighty-three were not good years for ALPA. There was full impact of deregulation. There was available 00:10:00financing for upstart airlines. The companies were feeling the effects of a national recession. All of these things just exacerbated the problem and they were tough years for bargaining — our contracts, I think we would have been happy to stay flat and, in fact, we lost ground in many, many areas. Overall, what we've tried to do to correct the effects is take away some of the autonomous nature. In the past we felt — this is an oversimplification — but if we could take each contract and improve upon it in each bargaining round, and even the piece negotiated at Pocono might have an effect, then you could then turn to negotiations with other carriers and say, well look, they even do this at Pocono. We would like to have it in our contract. Those days are, those days 00:11:00are gone because of no more regulation. And they've been replaced with corporate arguments that say, look, even this airline gave five percent, why can't you? So we are forced to go and we're always negotiating and defending ourselves from the lowest common denominator instead of to the highest. It's just a change in our structure has come over us. We've evolved. We have, like all evolutions. It's slow, but we have evolved —taken steps to strengthen ourselves, to make ourselves somewhat more responsive so we can react a little more quickly. We're a long ways from being home but the trend is here.

BARRETT: It would still be accurate to say though that individual airlines operate pretty much -

BABBITT: Yes.

BARRETT: What I mean is, the ALPA equivalent at each airline operates relatively independently, even yet?

BABBITT: That's absolutely correct. A good case in point and we have only policy. We have no binding — other than things that are set forth in our Constitution, all of our park policies, and so forth regarding bargaining are just that — policies. We have, as an example, a no-strike clause. Yet we have eight carriers that have accepted one. The one we are seeing now with some chagrin in the industry — and I say chagrin from other pilot groups — is TWA. Carl Icahn had been briefed on what the IAM had in their contract and found out it had a no-strike clause. So, when he bargained with the other units; namely, the Flight Attendants and the pilots, he thought that he should have one of those in each unit. And, in an effort to avoid a take-over by what they viewed as a hostile company — not in their best interest — to avoid that, they agreed to something that conflicts with our policy and signed a no-strike 00:13:00clause, or no secondary action, it's no supporting — so, there are variances and yes, we are, to be quite specific, we remain very autonomous. We have some implied policies that we do pretty well. Another good example would be B scales. We are allowing reductions through the fifth year but parity is a must. Six years and beyond that they would go back to the incumbent scales. And the theory being that in time these pop-up carriers will, too, have to mature and pay going wages. So to compete, we give the companies an early advantage with a little bit lower entry pay. But we're insisting on parity. There are airlines that don't have parity in the sixth year. Five variety of language changes in some of them. The United case has open arbitration should they not come to an agreement in 00:14:00future negotiations. So there are a lot of variances even from our policy.

BARRETT: Frank Borman has been quoted at various places referring to deregulation as being anti-union.

BABBITT: Um hmm.

BARRETT: Do you believe that to be the case?

BABBITT: I'm probably more responsible for that quote being around than I would care to admit. I happened to read in an aviation seminar, page 187 of some obscure document, and he was making a speech. And at the time I think they were looking for some concessions, or something, and I caught a piece of his comment. I think I can quote it almost directly, that the Deregulation Act of 1978 was the greatest single anti-labor legislation passed in this country. And so, in 00:15:00some newsletter or something, I saw that this was included just to give the boys a little bit of an idea of how the President felt about deregulation because obviously it was very unpopular with the pilots. You find out in time when you are in an elected office or an appointed office that getting people charged up to do something is one thing, uncharging them is very, very difficult. Sometimes I regret ever informing them of things like that because when times change — oh yea, we're all friends now. They don't forget that. Well, you're the guy that sent me the quote that said this or this. That quote has been widely used and I think it carried with it — I mean, taken somewhat out of context, it was a statement, and it was an acknowledgment. It was nothing subjective. I mean, whether he approved or disapproved wasn't in there. He just made the statement. I think the statement was probably not too far off the mark, but no I never thought for a second that Frank Borman was truly 00:16:00anti-labor in the sense of out to break labor. Quite the contrary, I think you could make a pretty good case that Frank Borman — one of his flat spots, and we all have them, one of his flaws of management was that, if anything, he was probably too paternalistic. The organized labor might, might — the rank and file might find exception to that but I think I could eighties, early eighties, '81 when the recession was in full force. Eastern should have furloughed. They should have cut back. They should have gotten rid of five hundred pilots. They should have gotten rid of five thousand employees and pulled in like everyone else did. But we kept this policy of full employment and instead turned to the 00:17:00employees for some concessions in order to do that. I think that was done for the betterment or the well-being of most of the employees. If you all take a dime off a dollar instead of taking ten percent of you and putting you out of work, what's the difference. And the employees felt that what they wanted was full employment and full pay checks -- something that was not there.

BARRETT: They voted for both, right?

BABBITT: Yes, they voted for both. They wanted the chocolates and the bonbons.

BARRETT: Okay. One other event that has made the airline industry a kind of a bumpy one in recent years was the — I've lost the year now — but I guess '81, when the PATCO work stoppage took place and the replacements, and so forth. Can you talk a little about that and its impact?

BABBITT: Yea. I think some of the airlines were particularly hurt, especially those poised for expansion. More than one airline executive has had the theory stuffed in his head that he can fly his way out of trouble. I think Frank Borman has been quoted many times as saying we will fly this airline out of trouble. The ex-president of Braniff — that was one of his theories, too. It's a great idea as long as there are people in the airplane when you are flying out of trouble. Lacking those people, you can get yourself in a lot of trouble as Braniff did. And I think what happened specifically at Eastern was they were poised for this expansion and they felt that they could at least keep their head above water by flying the fleet X amount of hours. But when PATCO came about, all of a sudden we were very severely restricted. You were restricted to the 00:19:00amount of flights you could operate at key airports. You, in effect, re-regulated the airline to a much, much lower revenue block hour production than was, you know, even dreamed of. So, as a result Eastern found itself with a fairly new fleet of airplanes that it had intended to fly the socks off of. They figured they could get the break-evens down low enough by flying the fleet and go into some innovative things. And suddenly they found that ability taken away from them. And again, Borman probably took the heat. Had there been no PATCO, things might have been very different. The Company might have not lost the monies that it lost in that period of time if they were able to fly the fleet. It was so, so uncertain that pilots — you may or may not be familiar with the way they typically bid — but marketing and the flight operations department 00:20:00blend together the schedules months in advance and pilots bid often two months ahead of the time they actually fly a flight. They know what they are going to be doing. Right now, for example, the guys already know what they are going to be doing a month from now. Their schedules are all laid out and they know what days they will be working. During PATCO, it was a day-to-day operation, literally. And you can imagine the nightmare of that. Every day, you would call in — all four thousand pilots would call in — and find out what trips are going to be flown and then literally bid on them on a day-to-day basis. Just chaos. Not just Eastern — this chaos was going on everywhere. So, the manpower that could have been thinking about other things was devoted to day-to-day operation of the airline, instead of long-range type planning. All these little 00:21:00pieces -- I can make the analogy and have that Eastern's rocky road from the eighties — from 1980 to 1986 -- is much like an aircraft accident, or a car accident. There's never any one thing. If my rear view window was broken and it was raining and I didn't have my normal shoes on and it was not my car, and when you put them all together you had an accident. If you take any one piece out, probably wouldn't have had an accident. And Eastern's much the same way. If there hadn't been a PATCO, the fuel was forty dollars a barrel, and jet fuel was selling for two dollars a gallon, that fleet of 757s would look pretty snappy right now. And people would be looking at how efficient the fuel burn was instead of how high the interest payments are, so.

BARRETT: Um hmm, okay. That makes the point very well — that it's a whole 00:22:00combination of things, one after the other, that coalesced. Can you talk a little bit about their equipment because when people begin talking about the amount of debts that they had to manage, which was like pushing a big boulder up the hill, a lot of that had to do with their effort at getting a more modern fleet. And I would imagine from a pilot's point of view, you would like that. You would rather fly new, big airplanes –

BABBITT: Absolutely, sure.

BARRETT: - than old, small ones.

BABBITT: Right. Yeah. Pilots, in general, new aircraft brings them two things. Everybody wants the latest. They want the one with all the bells and whistles — the state of the art technology. But the other thing increases in fleet size do for you is they bring about more pilots. Normally, if you buy more airplanes, you have to have more pilots. That means they hire. That makes your relative position improve on a seniority list.

BARRETT: Because the new hires come in at the bottom of the seniority list.

BABBITT: — come in at the bottom. So, while everybody was all enamored with buying all these new airplanes, again I'll go back to an analogy. It's like using a Visa card. You buy something and, oh, you just really enjoy it and then the bill comes in. And you kind of have forgotten the blush of, oh, wasn't this wonderful when I bought this new thing. And the pilots enjoyed all this expansion and everything but then, when the realities of the Company's debt problems were shown to them and they were asked to participate in solving it, I think I'd have to say that they might have overlooked the fact that they certainly had a very modern fleet now. They were sort of being asked to pay the piper and yet they didn't remember the piper anymore. I mean, these airplanes were here. They'd forgotten that someone was going to have to pay for them. And that may have been somewhat overlooked. Some very interesting studies were done 00:24:00later on. I saw one of our pilots, who was an MBA and pretty shrewd with a pencil, showed me one time pretty graphically that Eastern was spending something like $16,000 a day in capital costs to save $800 a day in fuel on a 757. Certainly, going back to his multi-faceted, multi-pieced problem, were not safe-harbor leasing legislation laws changed, it might have been a different ball game, too. They took away the safe-harbor leasing and left Eastern without the ability to sell off some of the tax advantages.

BARRETT: Can you say a little more about what that is — that safe-harbor leasing?

BABBITT: I'm not a tax expert but my understanding it allowed the Company to 00:25:00take — Eastern was losing money so there was no tax advantage, no income tax to offset for Eastern Airlines. So they were allowed to sell — and I'm not quite sure how this structure — whether they moved title to the aircraft in a capitalized lease arrangement. But I know it was very advantageous. You, in effect, could sell the tax losses to someone else who was profitable and could use them, and in return get something back, which was money. It certainly lessened the impact. It made it more attractive to a company who was only marginally profitable and could see the need for some capital expansion. The detriment to that in our current tax structure is taking depreciation and things like that aren't going to do you any good unless you are making profits. So they would then say, well then, why should we have a capital expansion? Why should we 00:26:00go out and buy a new fleet? Safe-harbor leasing was an incentive to do that. And apparently it was too good of an incentive or they felt it was too big a loophole because it only lasted two years. And again, Eastern committed to a fair amount of expansion based on those laws that were taken away. So, another piece of the rug gets pulled out from under us.

BARRETT: Some of the purchases that were made of aircraft were, at the moment of the purchase, were pretty attractive the way they've been described — the airbus for instance. There was a desire on the part of that company to break into the U.S. market and so they were not only — they not only needed new aircraft but there was a strong inducement to do it in addition to what you've just referred to as the tax break. At the time that some of that was done 00:27:00though, were the pilots saying this is too much, or were they mostly saying, great, more aircraft, better good?

BABBITT: More aircraft, better. This is great. They were tickled. I know the airbus was particularly attractive in its training advantage. And I was on the airbus pretty much at the start. I was a senior co-pilot and did my training in Toulouse. They literally gave Eastern four airbuses for six months, trained the crews and said, try 'em out. Free airplanes to fly up and down the East Coast for you know half a year. Very attractive. If my recollection is correct, the first fifty or so crews were trained free. All expenses were taken care of. It was a marvelous arrangement. But, as you have indicated, there was no clamor — 00:28:00oh, this is too much. You're going to come back. We can see this interest is going to hurt later on. It will rupture the Company. If you went back and looked in the period of time between 1970 and 1975 in the airline industry, there are some interesting parallels. The actual pieces that changed were different but the effects were the same. In 1970, both Eastern and American Airlines went into rather extensive fleet modernization programs. American buying DC-10s and Eastern buying L-1011s. And right in the midst of that came the fuel crisis. And suddenly you had these brand new monsters that went on the planning boards when kerosene was twenty-two cents a gallon and now they were finding it was fifty to seventy cents a gallon and that was just the beginning. This was a period of 00:29:00time when fleets were parked in Arizona — 707s lined up as far as you could see because it was, no one could afford to fly them. They lost all the planned revenues from those and it took a great period of bootstrapping to get back on course and some good years in the mid-seventies and some good profits to return. Unfortunately for Eastern, the same thing happened again. They went into the reequipping phase a little ahead of some other airlines. And I'm not being critical. Somebody had to make the decision. Somebody had to make the projections where fuel was going to be. Those projections were made and somebody ultimately had to make the command decision — yes, this is what we do. The decision was made and it turned out to be a little off. I don't flaw anybody for having made the decision. It's just, perhaps the facts weren't all there. 00:30:00Something was overlooked. But no criticism on the actual decision. It had to be made. The decision was made that fuel efficiency was the way to go. It just came about with all these other pieces -- the PATCO and some of the other things, and soaring interest rates and you know, bankers wanting to write loans with both hands. Here, take them, you can pay for them. Nobody putting that scrutiny on, perhaps an overzealous expansion.

BARRETT: Certainly at any point along the way it would have been hard to predict that fuel costs would come down. It just --

BABBITT: Right.

BARRETT: What once we all suffered, I mean as individual consumers, as airlines —

BABBITT: Well, Eastern found itself very quickly. After committing to buying a 00:31:00fleet of 757s, up springs an airline like People Express. That instead of flying a $35 million airplane with 185 seats in it, Eastern finds competition from an airline that buys an old 727 and can be tourist-configured to 177 seats for 3.5 million. One-tenth the capital cost, goes the same speed, goes to the same airports, burns a little more fuel per seat, but when fuel prices are coming down it was not an effect at all. And, in fact, the capital cost and the interest rates, and so forth really hammered them. Put that along with the fact that Eastern would have in the left seat a pilot with twenty-five years of experience and had to be compensated accordingly, and in the right seat, 00:32:00probably one with ten or fifteen years, again compensated accordingly. And so here they are flying an airplane that's ten times more expensive and every employee that's touching that airplane is probably receiving at least double what the competition is across the street — save the mechanics. It was really an uphill battle — real uphill battle.

BARRETT: Yes. Almost overwhelming, isn't it?

BABBITT: Almost.

BARRETT: Almost overwhelming. Can you talk specifically about individual sets of negotiations? In somewhat of a general way because you won't remember the specifics of each proposal. But, say beginning with the early concessions that were made by the pilots at Eastern. Because, as I understand it, it wasn't more broadly across other industries. We didn't hear about the concessions until '80 00:33:00or '81 — something like that. Whereas Eastern and the pilots were discussing those matters in '76. As early as that.

BABBITT: Earlier.

BARRETT: Earlier than that? OK.

BABBITT: Earlier. My first meeting that I went to as a representative -- I remember it very clearly because I was impressionable and I had gone from being just a regular old co-pilot and been on a small committee and suddenly I find myself being summoned to a meeting at 10 Rockefeller Center. I'd never set foot in that building and I was going to the top floor and I was going to meet the President of the airline. I believe Floyd Hall was still the President then. And Frank Borman was there and Bill Howard, and I was just, you know. A very clear impression of that meeting still exists in my mind. And the problem, Charlie 00:34:00Simons was still at Eastern at the time. The problem that we had in '74 — I think the Company had seen some rough times ahead, financial times, coming out of the fuel crisis, and so forth. They had asked for some concessions and the pilots thought about them a while but as it turned out, the Company had made a great deal of money. Their estimate was way off. They had predicted a $35 million loss, I think. The Company made over $100 million that year. So, the pilots weren't, well let's say they were fairly skeptical. ''Your numbers are so bad. You showed us your last year projection and you missed it by $135 million. And that's quite a swing." So, at that meeting the Company had requested, which was referred to as the, I think it was the Salary Adjustment Program. It was commented that it was rather a poor choice of words because it made a terrible acronym. SAP was the acronym that came from the Salary Adjustment Plan. 00:35:00But anyway, that was turned down and very few things were turned down. Most of the time they were agreed to and from that meeting the Company had turned out was fairly correct. The next time I really recall concession requests coming back around was, oh, six or eight months later. Frank Borman had become the President and the Company had gotten itself into technical default on about a $75 million note. The pilots leapfrogged a couple raises we were due — I don't remember the exact dates — but something around April we were due a percentage increase in salary. And they delayed that until the following November. Kept track of the difference and took warrants or profit sharing in the future for that amount of money that was deferred. They took another raise and moved it — seems they leapfrogged two. That was in '76. In '77 I was a member of the 00:36:00Negotiating Committee and we listened very clearly and closely to the Company's concerns about deregulation should it come about, and they wanted some flexibility and we gave them a lot of things. We went rather moderate in wage increases. They were minimal. A couple of, oh a two year contract, and they might have had a grand total of seven percent. This was in a period of pretty healthy inflation. We also gave the Company the flexibility to expand their flying by agreeing to fly overtime several times a year. The Company had the option of calling most of them. We kept the option on one of them. Three or four times a year the Company could raise our cap by five percent — the cap being the amount, the maximum amount of hours we could fly. They could increase it. The whole idea was that if they saw a market opportunity with this deregulation, 00:37:00they could jump on it. The types of things that got Eastern in trouble — and this should be pointed out — I personally took a lot of flak for ever agreeing to that with the Company. And I had to spend a lot of time on road shows explaining to the pilots it was in their best interest because the Company was, [a] only going to expand the airline with this and, [b] take opportunities and that would be better for us in the long run. The first time they used it, the first time they increased the cap, they used it to do training and all my arguments went right in the sewer. All I heard from that point on was see, whatever you give them, they just take and throw away. They'll tell you anything to get it and then once they've got it, they'll abuse it. Those types of things, if the Company had announced they were going to fly one new route to Okeechobee, Florida and therefore were going to increase the cap, we would of you know. That's just communication. How things are perceived. The fact that 00:38:00they did the training perhaps to take advantage of some increase in the future was ignored. Some of their packaging was in error there. I think they could have put some frills around what they were trying to do and made us all look a little better, or at least let me know or some of the people, you know, hey, this is what we are going to do. And we could have told them, don't do it that way for God's sake. This will blow up in our face. So. Going on in '79, we had by the way agreed in '77 to the Variable Earnings Plan which I personally thought was a marvelous idea. I'd love to be able to take the full credit for dreaming it up but I think that more rightfully belongs to Chuck Dyer, C. G. Dyer, who is one of our pilots up in Washington. A very bright lad. He's a Harvard MBA. He came up with this scheme we would agree on a negotiated rate of pay, but then we would only take home in our paychecks ninety-six and one-half percent of it. We 00:39:00would leave the other three and one-half percent as — we call it the security net under Eastern. If the Company's numbers proved profitable -- if the Company were profitable, then we would return.

[Interruption – beeping]

BABBITT: Not me.

BARRETT: Its mine, I do not know why it's doing that.

BABBITT: if the Company were profitable, then we would return. The goal was two percent. If the Company's gross revenues gave them a two percent profit, then they would return every bit of that. We would treat that monies, by the way, as if it was an expense. It was not an add on later. Their books carried our salaries, etc. at a hundred percent, but we only received ninety-six and one-half percent. So, if the Company had achieved its goal of the two percent profit -- revenues over expenses -- then everybody got all their money back. If 00:40:00it was less than two percent, they dipped into that fund. You remember, Eastern was at that time approaching a billion dollar a year annual payroll. So, you're talking about a $35 million kitty that was sitting there. The first year we received a partial return. Year number two, it was also negotiated if the Company received a three percent or went over the goal, you not only got you one hundred percent back -- the three and one-half they had capped -- but there was a formula to give you a bonus. And I believe it was '78 we received more than a hundred percent pay for that year. The years thereafter it bounced. But I think we got a partial one year and in the last two years we received nothing back. But I still thought it was a tremendous idea in that it provided a great 00:41:00incentive. You were tied to the Company, you as an employee, directly. The more profitable the Company was, the more likely you were to get more than they had agreed to pay you. I think, though, this was beginning to -- in retrospect now, and I emphasize that — we probably should have agreed on one type of plan and stayed with it. One of the things that confused and disheartened the employees at Eastern was the constant changing of plans. One year it was the Salary Adjustment Plan. Another year it was the Variable Earnings Plan. Then we had the Wage Investment Plan, and the stock program. You had the bond program. I told Colonel Borman one time that — he inquired why the employees were so skeptical of it sometimes. This was when he was fairly new. I said, I've only been here, at the time, fourteen years and you're the fifth management I've seen. And I've 00:42:00been paid in green stamps, silver dollars. I've seen Operation Can Do, Bootstrap. You name it, I've seen it. I've seen the Floyd Hall movies. I've seen them all and they've all been scams. Every one of them. These guys go through here like carpetbaggers. They take this place for everything its worth, put on their platinum parachute and take it out the window. They live in luxury hereafter and we're still, you know, sludging around dreaming up a new plan. Let's give them green stamps next year. I've got warrants. I've got stock. I've got bonds. So, all of these things led to some degeneration of credibility. There was a famous Bill Howard memo that was circulated. Have you ever heard of this?

BARRETT: No, I have not. No.

BABBITT: I think it led to his termination. Bill Howard, the current President of Piedmont.

BARRETT: Piedmont, yes.

BABBITT: He was a V.P. at Eastern — personnel. And a confidential memo he 00:43:00wrote to Colonel Borman spelled out in detail what the Company needed to do was orchestrate a poor financial scenario and then take that scenario out on road shows, in front of the employees, and that would — and he may have even used the term 'softened them up' so that you will be able to extract wage concessions from them and what we need to do is make a horrible scenario and extract it from them for a long period of time. A long program. No Band-Aids. No year or two. You need to make this bad and lay it out. I have the memo if you care to see it sometime. When that went public, when that got out, that really again damaged credibility.

BARRETT: Oh, certainly. It certainly would.

BABBITT: But following the contract for the pilots in '79, which was an excellent agreement, the Company had, in my eyes, lived up to their word and had 00:44:00negotiated the pilots back to a real place of dignity in the industry. It was a key point for me as Negotiating Committee Chairman — a certain pride among staying up with the industry, and so forth. And the goal was Delta. It always is the goal. If you can negotiate a contract that gets near Delta, you win. And for the first time in ten years we actually passed the Delta hourly rate in monthly in-rate by forty dollars for one month. And they went right on by us again. But that was all right. It gave a great feeling back to the pilots. We were back in the mainstream. Even though we still gave away three and one-half percent, you knew you could get it back if the Company was profitable. So, we went forward. When the recession started in 1980, the markets were getting hammered by new entrants, yields started to deteriorate and the Company again looked for 00:45:00concessions. They looked for profitability. Pilots are notoriously resistant to change. They would never make it as cockroaches because they can't evolve. They don't want anything to change. I clearly remember one of our old guys retiring and telling the guys he enjoyed watching the thirty-four years of progress he had seen at Eastern Airlines but he wanted them to know he had fought every goddamn minute of it.

BARRETT: That's a very honest statement, isn't it?

BABBITT: Absolutely. That sentiment sits deeper in them than a lot of us want to acknowledge — with all of us, not just pilots. The pilots began to resist. And in another piece, I think the companies didn't do the greatest job in the world. I think we both were a little negligent. The companies didn't do the greatest job of acknowledging that these changing times were going to require some of these things. They used the stick approach to move them forward and the pilots 00:46:00felt they were giving quite a bit a lot. They were losing a lot of their traditional contractual frills, if you would. I think we all could have done a little better job of educating them. We could have sat down and perhaps come up with more innovative ways. And unions, quite honestly, often lose sight of the fact that while we have nothing to do 365 days a year but to plot against how to get things out of the Company, they do have this minor diversion on the Company side of running the airline. They do have other things to do than meet with us constantly. I think the Company was way too patient sometimes with the pilots, quite honestly. Way too tolerant of long — well, you know, we'll cross this out and we'll take this delay, and so forth. But that's all, just retrospective 00:47:00review. Concessions in 1983 was the first attempt at coalitions. The Company really got into some trouble. It was the first time I had heard the word Chapter 11. And it was felt now the skepticism between things like the old Howard memo and watching things be eroded. The skepticism began to bubble up that they're capitalizing on Continental. If you recall, Continental went bankrupt in September of '83 and Eastern was beginning by that fall to talk about it. [Interruption]

BARRETT: Okay we are back up.

BABBITT: I'll back up. Referring to the pay cuts that were taken in '83 — they are not crystal clear in my mind but the scenario that I recall was that all three unions took a similar amount. We recorded that. I believe that was the 00:48:00Wage Investment Program. And what we did was record the amount of money that represented the difference as we had two types of pay. You had salary of record and compensation of record —salary being a paper amount which all benefits were computed on. The actual compensation was reduced from that and that difference was recorded on paychecks. So you, there was another thing. You were constantly being reminded. It was like having a running total of everything you'd ever spent with your Visa card. You'd tear the damn thing up if you could see — oh my God, I've charged four thousand dollars last year. It's not too bad at, you know, three hundred or four hundred a month but when you add them all up and see it, oh. And that, every month you were reminded. In some cases it was a sizeable amount of money. For a mediocre seniority pilot in the middle of the list, his concession was probably in excess of ten to twelve thousand 00:49:00dollars. Captains are often over twenty thousand in that particular year.

BARRETT: In each month you'd be reminded of that by the stub you're getting.

BABBITT: Yes. Right on your stub it showed the Wage Investment Plan amount. You know, I guess it had to be recorded but it always seemed to me to be a constant rubbing of the wound. However, at the end of '83, you received bonds. If you had given up five thousand dollars, then you got a five thousand dollar bond, which paid and you know nominal amount of interest. Sometime in the year 2006, 2010 or something, those bonds come due. And that was the year the — I mentioned earlier that the machinists, after joining the coalition, making the concession, when it came time to negotiate their basic agreement, keep in mind the 00:50:00concession was a percentage reduction from salary of record, so someone could certainly -- it didn't preclude you from negotiating upwards your salary of record, which is exactly what the machinists did. They went in and, in effect, negotiated away their concession by agreeing, or demanding, that they receive increases that exceeded the concession. So in effect, they would be back at ground zero if they had given up thirteen, eighteen percent — somewhere in there. Whatever it was, they wanted that added on so they would zero out their concession. And they won. They challenged Borman. He -- this, I'd be very vague because I can operate only on rumors. But it was obvious the Company was gearing up to take them on in a strike posture. Seemingly, millions, tens of millions of dollars, were spent in preparation. Rumor had it that supervisors were flown to 00:51:00out stations and the strike deadline got closer and closer. And I can only speculate. Hearing road shows and hearing Colonel Borman speak, the inference was that the banks had abandoned him, and meaning that they had retracted their commitment to provide him financing through the strike period. With that he had no choice but to concede and give the machinists their demands. Eighty-four brought the real threat of bankruptcy for the first time to the pilots. The Company began to openly talk about Chapter 11. And I guess what concerned a lot of us was watching Braniff and watching a few of the other ones, those things. Those type of comments have a way of becoming self-fulfilling prophesies. You 00:52:00tell enough people long enough that you are going to go bankrupt, it really starts cutting into the ticket purchase. Especially when you heard about people holding the bag for fifteen hundred dollar tickets on Continental to the Philippines, it was suddenly they weren't worth the paper they were written on. The pilots again responded and the whole airline responded this time in coalition fashion. We all took a uniform eighteen percent pay cut, plus we all threw in productivity increases. Just a point in passing here, it was interesting to note that those productivity increases were agreed upon prospectively. They were not quantified, but in fact were agreed upon as percentages. We all agreed to come up with, I think the number was five percent increase in productivity. We didn't say what the five percent was going to be. 00:53:00They were shallow. Quite honestly, they were damn shallow. The pilots said, well one of the things we're going to do is save you fuel money. We'll fly more efficiently and save our five percent. The machinists, I don't know what they did, keeping the ramp cleaner or something like that. They were farcists. They were not real, quantifiable, hard-dollar values that you could put into a contract, as far as I could see. Again, I was not on the MEC nor was I on the negotiating committee. I was just, I was a casual observer of that process. But I don't think the Company got quite out of that deal what they thought they were going to get. Eighty-five, a repeat scenario. Now the employees are beginning to get downright frustrated. Now the letters that come from the union say, well, we're back with the crisis and Christmas again. It's our annual Christmas review and we're going to beach this thing again. The whale heads for the shore and 00:54:00we're going to have to fend it off. It was becoming almost commonplace. Now the Chapter 11 talk was, yeah, we heard that last year and the year before. It's going to be rough and we'll get through it. The classic crying of wolf. And I think what hurt -- this all leading up to '86 and the crisis in the winter or early spring of '86 — was the fact that they had heard it so many times and now it was almost like the employees were immune. And the Company did themselves, in my opinion, a great disservice by going out and getting an outside opinion from a firm known as Avmark which I could creditably call nothing beyond the trader plane of the large aircraft industry — at least in 00:55:00this organization. They are not a terribly creditable — I mean they do a good service and if you want to know a fleet value, fine. I would go to Avmark. But if I wanted to know how to run Eastern Airlines, I sure as hell wouldn't go to Avmark. I would give myself a high quality -not that there's no quality there, it simply wasn't, that's not what they do for a living. You wouldn't take your Porsche down to the grocery store to get it fixed. Why would you go to Avmark for management input about Eastern Airlines? They reentered the word "draconian" into the everyday vocabulary by referring to all these measures that Eastern was going to have to take. The whole thing just stunk of no credibility. It all just really reeked of an orchestrated scenario going back to the Howard-type memos. This was a setup. They had this outside "consultant" that is going to forecast 00:56:00all these gloom and doom things. The Company is now not talking so much Chapter 11 but Chapter 7, openly talking Chapter 7. But all the labor people, the attorneys that labor had hired, laughed at Chapter 7. They said there is no way that anybody would ever take a corporation this size. The last one that tried it was W. T. Grant and the stockholder liability against the board, I mean the board liability. No one would ever try anything this crazy again. What they might try was a Chapter 11. A liquidating Chapter 11. Put the airline in 11, off the creditors, fly it and sell off the equipment as you fly. But I don't care how well you are covered as an investor of Eastern with bonds, or whatever, to put that whole fleet on the market all at once. There was no way they were going to get twenty cents on a dollar out of these airplanes. Braniff still has airplanes for sale, for heaven's sake. So, Eastern's marvelous fleet of 00:57:00L-1011s that they haven't been able to sell for ten years certainly wasn't going to stir up any new market. All of these things put together put a haze of a lack of credibility, for anything else to say, over this whole process.

BARRETT: Are you talking in the fall of '85, spring?

BABBITT: Fall of '85, winter — you know the crossover between '85 and '86 -- that January. When the Company — now with all of this talk, we began to watch their revenue. And the Company began to seriously lose money. This was becoming that classic self-fulfilling prophesy. All the talk, the advance bookings began to deteriorate. Just piece by piece you could see it happening. The employees were so totally frustrated. I think everybody in their heart wants to work for a successful company, whether it's a three-man company, or a three million man 00:58:00company. At Eastern's case, it's a forty thousand employee company. They wanted to work for a winner. They'd been losers for a long time and yet the reason was always it's labor costs, its labor this, you're unproductive, you're this, you're that. I think they got sick of hearing it. Whether it was how much credibility you could put to it, one of the things that I could see for the pilots at Eastern was — the easiest thing to compare would be a paycheck. We have reams of pay comparisons, contractual comparisons available through ALPA. And the pilot pay at Eastern was not the top, not anymore. But what they didn't want to compare was the benefits, the separate retirement plans. Individually funded, the B plan that the pilots have is one of the best in the country. Their work rules are excellent and somewhat prohibitive. And yet, the Company was 00:59:00never able to show, and again, this is communications, where their true costs and where their problems were. They would just come in with — well, just give us twenty percent and you keep all the other stuff. Well now this guy has to go home and go play golf with a Delta pilot that lives next door and hear that he's getting two thousand dollars a month less for doing what he sees is the same job. He could have very easily changed some of his work rules to be compatible with the Delta pilot and kept most of that two thousand.

BARRETT: Oh okay.

BABBITT: That was as much mutual communication problems, if anything. It all built up to a terrible, terrible lack of confidence and credibility from the union side to the Company, and it showed itself in a lot of frustrating ways. I think a lot of the pilot reps who had been interested in the past were taking such a rap from their pilots, they chose not to run. You know I don't want to be 01:00:00a rep. Why should I run and take all that abuse. They're blaming us for it. So, people wouldn't take office and it left the people who did eventually go into the elective positions with a tough task. They were new. They weren't the seasoned reps of the past. You know, as an example, they changed negotiating committees as if that would make the problem go away. I think they changed three times in the thirty-day period. That's unheard of. The Company never knew who was going to be at the next meeting. There was no continuity, and rightfully no credibility that goes with people like that. You don't know who you're bargaining with, and they don't either. They're new to the game. So, we were going through some tumultuous internal times. It's almost the chicken and egg problem. Were they that way because the Company had been doing poorly, or was the Company doing poorly because of the other way around? I think it was a 01:01:00combination. You could see the stage was well set for a real tough time in February.

BARRETT: What would be the role of ALPA nationally with respect to those negotiations, or in that three or four month period at the end of '85?

BABBITT: Okay, we provide, ALPA National provides contract administrators who are basically professional negotiators and, in many cases, lawyers as well. And they are versed with -- they're usually not practicing attorneys in the sense that — bar and all of that. They tend to be labor lawyers, mostly limited to Railway Labor Act type law and negotiations, and grievance-type work within a contract. We would certainly counsel. We brought in -- the negotiating committee 01:02:00of Eastern, for example, was brought up here where they would meet. We do this typically, and have been. It's one of the ways we are trying to break down some of our autonomy that I talked about earlier. We take the airlines, three or four of them that are heading into negotiations, and invite them up here to a conference and sit them down at a round-table discussion with the latest three or four who have completed negotiations. Let's compare notes. Let's talk through this a little bit. Let's see where the companies are going -- where we're going, where we're trying to be. Was there a lot of heat for B scale? Was there this, was there that, and so on? How did you combat it? What were the arguments you used? While we might know the answers to a lot of this here, it's good to hear it first hand from a contemporary. So the Eastern committee was brought up into that loop. They had a pretty good feel where the industry was going. As time went on, I had particular rapport because of being an Eastern pilot and I was 01:03:00involved, at least on the peripheral, for some of the negotiations. I did have some background. I understand the agreement pretty well. And these agreements, they're very mature, very sophisticated agreements. They are not — the Eastern agreement is hundreds of pages long. And it's involved. And every little issue that comes up gets a side letter and it gets incorporated in the agreement later and they are very complex agreements. And it's not anything you'd just pick up and get yourself real familiar with in a week or two. So, plus there are certain unstated things that you are aware of. So, ALPA National would be involved more from an advisory role. Sometimes the Company would want to do something and be at odds who to contact and we would play the conduit role. Call up here and I 01:04:00would maybe put together a meeting if I could, between somebody at the local level and somebody at the Company side. In the actual, as negotiations got closer and closer, the weekend the airline was sold, I went down and pretty much stayed with the Master Chairman throughout the process as best I could. I also, having some rapport with at least the Flight Attendant Union more so and the fact the Machinists Union wasn't in negotiations, there wasn't much to do for, running back and forth, but I did try and communicate some of what we were doing, what our concerns were, what our goals were in a protective sense. I shared with the Flight Attendant Union, for example, labor protective 01:05:00provisions, you know, what are we taking away, pay cuts. They felt that they were being hung out to dry.

BARRETT: The flight attendants did?

BABBITT: The flight attendants, right. That we would negotiate and tell them we were here when, in fact, we had done nothing like that. They would agree to it and then when they saw the light of day, we had, in fact, left them out on the pier somewhere. Well, it was my job to be the liaison and to keep that basically from happening, although it came to cause me some grief later because the mystical night when the airline was sold, the flight attendants called us at one-thirty in the morning and I spoke with the Chair of the Flight Attendant Negotiating Committee. Excuse me, not the Chair, Kathy Bailey, I don't believe was the Chair. And she told me point blank that they had come to an agreement 01:06:00and I advised the pilots of that in a session with the MEC. And that was clearly a point to help them make a decision — that the other union had made a decision. In fact, they hadn't. Well, I should clarify that. What had happened was they had gone into a caucus — the flight attendants had — and the Company was in another room. And when I called, it just happened to be the moment that they had decided to accept the proposal the Company had given them. As far as they were concerned, they had an agreement.

BARRETT: They had made an agreement.

BABBITT: What they didn't know was that at something like one o'clock in the morning the Company left, they were no longer sitting in another caucus room. So when the flight attendants came out, there was no one to say, hey, we've got a deal. They were gone. And as far as the Company was concerned, if they didn't take that offer, they went back to their table position. So, they didn't have a 01:07:00deal. That came to haunt a lot of people later.

BARRETT: Oh, I can see that it would, yeah. Apparently the timing of that must have been that the — from corporate headquarters their negotiators must have been called back from the hotel.

BABBITT: That's my understanding.

BARRETT: Because the sale had happened or was about to happen, or something. Oh yes, oh yes.

BABBITT: Well, there was an implied deadline at midnight by Texas Air Corps. So --

BARRETT: That really put the pilots in an odd position. Then, did you hear shortly after that that the sale had taken place?

BABBITT: The pilots debated somewhat more and there is my version of those events. I recalled that we were informed by the Master Chairman at about two-fifty or two fifty five in the morning that the airline had been sold. Throughout the evening though, the points had been made to both the flight 01:08:00Attendants and the pilots at MEC by legal counsel and national officers of ALPA, including President Duffy, that there were three possible scenarios in front of them. They would all come to an agreement in a concession and life would go on or they wouldn't come to an agreement and it would force one of two alternatives — either sell the airline or bankrupt the airline. The order of priority would be that if no agreements, they would then take a snapshot of fairness opinions, compile those and if the fairness opinions was worth more in bankruptcy than someone was willing to offer for the airline, they would take the best offer. It was in someone's opinion that it was worth more bankrupt and so be it. That's what they were going to do. I think the Board of Directors was 01:09:00under considerable heat to make that move to do something. I think they felt very exposed. Their fiduciary responsibilities, or whatever, were really beginning to haunt them and justifiably so. Pretty crucial time right there.

BARRETT: Yeah, that was a -- some high drama that evening. That evening ended with the pilots actually having an agreement, did it not?

BABBITT: Um hmm. It did.

BARRETT: At the end, was there a lot of, sort of gnashing the teeth among the pilots over this? I imagine it was a hard —

BABBITT: Tremendous, tremendous. Clearly divided. The, there was a lot of tension, not only on the negotiating committee, as with any organization you have two sides. There were some that were very concerned to keep the company 01:10:00viable, to keep it alive. Taking a twenty percent pay cut would be better than risking the Company going broke. And you may recall that the big point that the pilots were upset about and the reason they had geared up so ferociously to prepare to strike was the Company had talked of just a horrible document. I mean a major, major -- they ceased to talk about a minor twenty percent pay cut. They began to talk in the forty percent area, you know. Truly, in the words of Avmark, draconian measures. Cut in pension plans to just sharpen up. And things that had absolutely no financial value. One of the things that incensed the pilots, just absolutely lit their fuse, was the removal in a proposal, a 01:11:00recommendation to remove the scope clause which governs everything they do. We have a scope clause that says all flying done by Eastern Airlines would be done by the pilots of Eastern Airlines, in an over simplistic fashion. The Company said let's do away with that. The question was, what the hell will that save you? You're going bankrupt and you want to farm out the flying to somebody. You show us the wisdom of where the dollar bills are in that. In so many of the things — changing procedures and changing how you can call a pilot in to investigate him. What the hell does that have to do with your financial problems? Show me how that's going to make you a buck. Quantify it. And they refused to do so. They continued to lay the same proposal on the table. They really angered the pilots. With all of that leading up to that evening, though, the negotiating committee was split. There had been — for example, I had some 01:12:00input and I have to admit that the hawks of that committee pretty much eliminated me from being a participant. I had recommended and had some language roughed out for them. It's like the old negotiator, he never dies, you know. The Dalmatian, even the old one, wants to go jump on the fire wagon when he hears the bells you know. I just couldn't resist. There were things that concerned me and I had some friends on the committee and I had drawn up a couple of areas. One of the things I was very concerned with was that they would do a lot of preparations to avoid one thing and get themselves into trouble with another. So, in their efforts, things like one of the proposals I had suggested to them was these pay cuts should be contingent on some things on the airline not being sold. The labor protective provision should be effective if the airline is sold, 01:13:00this goes into effect, and so forth. While I guess I'd just take them quietly away with me and throw them away, I really wanted those things put in. Now they are a great subject of heartburn. But why in the hell didn't we have those things. And in due consideration of that committee, they were really being twisted by the group that governs in the pilot MEC. I have been to a lot of meetings in my day and I have never seen anything as emotional as that meeting in my entire life. I just, I can't even describe in words the high level of emotion that was in that room, careers were on the line — and not just a few careers — we're talking four thousand careers and we're talking careers that spanned thirty years. That's one hundred twenty thousand career years you're dealing with. And a great deal of money, hundreds of millions of dollars and all 01:14:00being left to rapid decision making by twenty-seven people who were going to have to really take some heat. Decisions to take away things like membership ratification had to be done quickly so they couldn't have that membership ratified. Later that got thrust back in their face that the flight attendants did membership ratify, and the pilots were "why didn't we" ask more. At the very, very end, though, the people that were in favor of accepting lower wage scale, and so forth prevailed and there was a tremendous amount of animosity later in backlash that the airline wouldn't have been sold had they come to an agreement more quickly. The feeling was that — and I can understand the other side, too. I don't know Charlie Bryan all that well but I have to suspect that in his mind was this feeling that we're being set up for a massive trap. There's 01:15:00a term for a chess move. You're in an unextractable position. No matter how you move, you're dead. It's a real pincer play and the choices were cancer, leukemia or polio. Pick one. Do you want to take a twenty percent wage cut? Do you want your airline sold to Frank Lorenzo? Or would you like to go bankrupt? You know, here's our menu. Pick one. None of those were very palatable choices. And I guess in Mr. Bryan's case he just felt that this was a bluff that they weren't anymore going to sell this airline than send Frank back to the moon. So, if I just sit here, it will all go away. The other groups will give enough to keep this thing floating and I can just sit here and watch it. And he was wrong. And I am not faulting, he had a decision to make. I wasn't in his shoes. I don't know what his membership was saying. I don't agree with this decision but I 01:16:00can't fault him for having to make it, and he did. I credit him for making the decision. It's better than some people who just sit you know —

BARRETT: Don't make anything.

BABBITT: Yea. Just sit there in anguish for days, and he made this decision. It was unfortunate at the outcome that there was -- as far as the pilots were concerned, in answer to your direct question, there was just a tremendous amount of hostility, even physical hostility, between some of them at the conclusion. And there is still, it lingers. The aftermath has been rough. One of the representatives from one of the larger bases was recalled for his actions. Just an incredible rate for recall ratio. Another one quit in a large base. A second officer just quit. He was so upset that the others couldn't see his position — both of these gentlemen were in the minority. A third has advised me 01:17:00confidentially, of the seven people that were opposed to this, the third one has advised me that he intends to resign as soon as things cool down. He's frustrated with the whole process. A tremendous toll taken on these people. It's been difficult.

BARRETT: You have an appointment so I won't keep you any longer. Can we talk more at some point? OK.

BABBITT: Sure. If you'd like to go back — if you want to focus more on those events that transpired, what I probably should do is have my tape. Get a transcript made here at ALPA. Just a rough one. I'll look through it. I know when I made it there were some things that I had thought about later that maybe I had misstated. I'd like to see the transcript myself.

BARRETT: So after you have that done, then do we talk further?

BABBITT: Yea. We'll talk again.

BARRETT: OK. Thank you very much. Appreciate your time.

BABBITT: You're surely welcome.