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Author(s)

Joseph G. Ferrante

Volume

9

Issue

3

Publisher

Embry-Riddle Aeronautical University

Abstract

In 1986, when Frank Lorenzo took over Eastern Airlines, the country's third largest carrier was in decline: its route structure was inherently weak, its costs were sky high, and its stiff-necked labor unions fought with each other almost as much as they fought management. To man in corporate America, Lorenzo seemed just the man to whip Eastern back into shape. Lorenzo, with the help of Michael Milken and Drexel Burnham Lambert 's junk bond machine, built his tiny Texas Air Corporation into an empire. Indeed, with the addition of Eastern to Continental, Frontier, and People Express airlines, Lorenzo controlled the largest airline in the country, flying more than a fifth of the nation's air passengers on his planes. Lorenzo has been characterized as a ruthless empire builder, who uses a seemingly simple formula of slashing costs and offering lower fares. The problem, however, is that he had failed to parlay his formula into profitability. New York Air failed; Continental was consistently losing money; and Eastern was on the brink of extinction (Gessell, 167).

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