THE AIRLINE THAT PRIDE ALMOST BOUGHT: The Struggle to Take Over Continental Airlines by Michael E. Murphy

THE AIRLINE THAT PRIDE ALMOST BOUGHT: The Struggle to Take Over Continental Airlines

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An earnest but muddled account of Texas Air's 1981 raid on Continental, which focuses on the use of an ESOP (employee stock ownership plan) as a takeover defense--and more. A corporate attorney turned academic, Murphy makes no secret of his intent to chronicle ""an authentic employee movement"" at Continental. His own exhaustive reportage, however, effectively grounds this agenda. To begin with, the chief instigators and promoters of the ESOP were the airline's pilots; this elite group, the text makes clear, was at least as concerned with protecting six-figure salaries and generous perquisites as in creating a fellowship of workers ""in control of their own destinies."" There was a brief, widely publicized surge of enthusiasm at the grass-roots level for the stock plan, which would have given employees a 51% stake in Continental. The hirelings' interest was to be funded by bank loans, with repayment from savings realized on frozen wage rates. Members of the machinists' and flight-attendants' unions never gave the ESOP formal backing, and it passed muster with neither commercial lenders nor regulatory authorities. As a case study in occupational community, Continental's aborted ESOP is unsatisfactory to the extent that it was an ad hoc response to an unwelcome acquisition bid. More troublesome, though, is Murphy's failure to provide perspective on the seismic impact of deregulation, which put the de facto sponsor of the plan into a financial tailspin by opening the skies to Darwinian competition. Air transport's future probably belongs to realists like the villain of this piece, Texas Art's Francisco Lorenzo. His relentless slashing of labor and other costs has yielded, among other results, appreciably lower fares for the plane-riding public--whose interests Murphy largely ignores. In a lengthy epilogue that recounts how the parent company put its Continental subsidiary into bankruptcy, in large measure to abrogate labor contracts, Murphy grudgingly concedes Lorenzo a point or two on, for example, pay scales tied to productivity. (Yet another afterword may be in order now that Texas Air seems to have acquired Eastern.) At best, then, a less than relevant footnote to the airline industry's chaotic history.

Pub Date: May 1st, 1986
Publisher: Franklin Watts