Former airline head Lorenzo talks on corp. restructuring

Former airline executive Frank Lorenzo found a receptive audience yesterday at College Hall, as he defended the controversial corporate restructuring he undertook for his airlines. Lorenzo has been widely accused of union-busting in his management of Eastern Airlines, Continental Airlines, and Texas Air, but audience members said that they came to hear about his business techniques and were not concerned about the accusations against Lorenzo. "I'm psyched they brought him here," said second-year Law student Chad Meyer. "He's right on target that the cost-structure of the [airline] industry needs to be changed and that labor is a major cost." While some in the audience disagreed with Lorenzo's tactics, they were still interested in his views. "I don't agree with what he's done, but it was interesting to hear another point of view," said Jose Montoya, a first-year MBA student. Asked about his face-off with Eastern's labor unions since 1989, which ended in the airline's closing this week, Lorenzo admitted he had regrets. Lorenzo maintained that one of Eastern's main refinancing goals was lowering labor costs. He called the machinists union's demands "totally unreasonable . . . he [the head of the machinists union] was giving us the finger." A capacity crowd of over 300, primarily Wharton graduate and Law students, came to hear Lorenzo. Once the head of the U.S.'s largest airline empire, Lorenzo left the airline industry last year after 18 years in the business. He attributed Continental Airlines' problems, including its recent filing for Chapter 11 bankruptcy, to the "triple whammy" of rising fuel prices, the national recession, and the drying up of financial markets. He denied charges of union-busting, saying he never intended to get rid of the unions. He said he was more anti-labor and anti-union than five years ago, though, after "having the crap beat out of me" by the unions. Lorenzo said that a severe recession would increase pressure on domestic airlines. He predicted that Pan American would fail in its current refinancing, while Northwest Airlines would succeed. Lorenzo also predicted the privatization of airports in the future, with only a few major domestic carriers remaining. Lorenzo also criticized the government's handling of airline deregulation. Saying he believed in the general philosophy of deregulation, he attacked the government's implementation of it, adding, "the traveling public's going to get screwed." Most students at the speech said they regarded Lorenzo as a business pioneer. "Whether or not people agree with him, Lorenzo does have some meaningful things to say," said Venkat Gangisetty, also a first-year MBA student. Asked what the world's best run airlines are, Lorenzo chose SwissAir, Singapore Airlines, and Lufthansa. "They wouldn't know a financial problem if it hit them in the head," he said. Wharton senior Kammy Moalemzadeh, a member of the Wharton Restructuring Club, which sponsored the speech, said the club invited Lorenzo to speak about his experience with corporate reorganization and said that "his tough management style really wasn't the focus."

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