
“Frank Lorenzo has etched an indelible mark on the U.S. airline business,” wrote Aviation Week’s James Ott in 1990 following the announcement of Lorenzo’s departure from Continental Airlines. “Whether as a union buster, an opportunist, or a keen businessman depends on one’s perspective, but his mark has been deep and may be lasting.”
And a lasting mark it was. Thanks to Lorenzo’s work, United Airlines has hubs in Houston and Newark; American Airlines can boast to being the largest U.S. airline to South America; and Delta Air Lines rules to roost in Atlanta. But that mark was achieved through a series of deals, many hostile or made with airlines in distress, that sent waves through the airline industry in the 1980s, left Continental bankrupt, and — some argue — destroyed Eastern Air Lines.
This special dispatch looks at Lorenzo’s new memoir, Flying for Peanuts, published last month. A warning to my regular readers, this goes a bit into the weeds on one man who left his — very controversial — mark on U.S. airlines. (I received a complimentary copy of Flying for Peanuts from Lorenzo’s publicist.)

Everyone deserves to say their part. And Lorenzo certainly does, painting himself as something of a white-collar opportunist who did good for the airline industry by lowering costs after deregulation in 1978, and taking advantage of deals that any sensible person would pursue. Just good, old American capitalism. No harm in that right?
“Most other carriers were slow to learn from our cost-cutting example and the realities of the deregulated environment,” Lorenzo wrote of the time after Continental’s first bankruptcy filing in 1983 and after it had broken its unions. “As a result, they were losing money, which meant the industry remained full of companies ripe for turnaround.”
And by “turnaround,” he meant takeover by his Texas Air Corporation (and owner of Continental).
Here Lorenzo’s history gets a bit mushy. He lists Eastern, Frontier (the first one), TWA, United, USAir, and Western as among Texas Air’s targets in the mid-1980s. Though, reviewing annual reports from trade group Airlines for America (A4A), only Eastern, Frontier, TWA, and Western were significant money losers at that time.
And that is not the only time Lorenzo’s history gets mushy, or maybe lacked a thorough copyeditor, in Flying for Peanuts. At one point, he mentioned a “major order for the then new Boeing 737-800s” in the mid-1980s but the -800 was not launched until 1994. He likely meant the 737-300, which Texas Air ordered 51 of in 1984-85, according to Boeing data. And later in the book, discussing his work with the failed startup ATX Airlines in the early 1990s, he wrote that it planned a Baltimore base because the airport “had no major hub operation.” The former managers at USAir might have a word with that.
Inconsistencies aside, it’s deal, after deal for Lorenzo as he moved from one target to another. He succeeded at taking over Eastern and People Express, the latter included the assets of bankrupt Frontier, in 1986. And while he flew Eastern as a standalone company — a merger with Continental was planned if labor costs were cut, he wrote — People Express, Frontier, and New York Air (a wholly-owned subsidiary launched by Texas Air in 1980) were all folded into Continental in a “big bang” (and disastrous) merger on February 1, 1987.

Lorenzo’s labor relations were legendarily bad. In his 1995 book, Hard Landing, Thomas Petzinger, Jr., wrote that by the late 1980s the animosity between Lorenzo and the International Association of Machinists (IAM) at Eastern was already “immortalized as a textbook case of bad labor relations.”
Before the legendary IAM strike in 1989 that hobbled Eastern and contributed significantly to its demise, Lorenzo dealt with two major strikes at his airlines. One, at Texas International in 1975, that ended in a mutual agreement, and a second, at Continental in 1983, where he broke the unions through bankruptcy restructuring.
Lorenzo has nothing but sour words for organized labor. On multiple occasions he described union leadership as undertaking a “program of misinformation,” spreading “propaganda,” or that they were simply “unreasonable people.”
I cannot write whether or not labor costs were as big of an issue as Lorenzo paints them. But his calm presentation in the book of, in his view, the simple need for deep labor cost cuts with seemingly little concern for the people affected by those reductions comes off as cold.
And Lorenzo has few kind words for the regulations that manage airline labor relations in the U.S. either. He described the Railway Labor Act of 1926 as created to “protect the public against the threat of crippling national rail strikes.”
Then, on the same page, wrote that: “After 1978, as a deregulated industry, airlines should have been lifted from the jurisdiction of the NMB.”
Huh? Airlines are the railroads of today in the U.S. And if the government is to protect the public from modern-day “crippling national rail strikes,” then airlines are the place to do that.
Throughout the book, Lorenzo is very matter of fact on his management decisions. Take the decision to sell off Eastern’s assets in “chunks,” as an internal management memo he cited called it. The move was the simply the logical next step, “de-risking” the business as he put it, after the IAM responded to management’s proposed wage cuts with “absurd and totally out-of-touch numbers.”
Those sales, including gates, planes, Eastern’s computer reservations system, and the Eastern Shuttle to Donald Trump, did little to build faith in Texas Air and Lorenzo’s leadership among the Eastern rank and file.
“The extraction of cash from cash-short Eastern, one of Lorenzo’s top people explained, was simply a way of repaying Texas Air for having wiped out People Express as a competitor in Eastern’s markets,” wrote Petzinger in Hard Landing.
The end result, however, of the labor strife and asset sales were Eastern’s bankruptcy and eventual closure in January 1991.
And Lorenzo, for all his wheeling and dealing, did not leave his flagship, Continental, much better off. The airline filed for bankruptcy just three months after he sold his stake in the carrier to SAS Scandinavian Airlines in September 1990. Why the filing? Debt.
Continental’s long-term debt (debt not due within the next 12 months) increased 2.5-times from 1985-88 when it stood at $1.7 billion, Texas Air annual reports show. The number had ballooned to $2.2 billion, plus around $4 billion in off-balance sheet aircraft lease obligations, when Continental filed for bankruptcy in December 1990.
“Most of the liabilities relate to high-priced debt taken on in a mid-'80s acquisition binge,” wrote The Wall Street Journal at the time of the filing. The newspaper added that Continental was used by Texas Air as a “vehicle for an ambitious airline-buying spree.”
“Four months after Lorenzo had safely gotten his money out, Texas Air joined Continental and Eastern in the bankruptcy hall of fame. Lorenzo had a hat trick. Everything had failed.”
What does Lorenzo say today? He acknowledged that he and his chief financial officer were “aware of the substantial debt repayment schedule that Texas Air and Continental faced.” Yet, in the book he blamed the 1990 bankruptcy on the new Continental management team’s “unreasonable” assumptions on the price of fuel following the August 1990 U.S. invasion of Kuwait, and failure to consider changes in future airline capacity and fares.
At the start, I acknowledged Lorenzo’s mark on the U.S. airline industry but it came with clear costs. His tenure at Texas Air was marked by labor strife, botched mergers, and bankruptcies.
“Four months after Lorenzo had safely gotten his money out, Texas Air joined Continental and Eastern in the bankruptcy hall of fame,” wrote Petzinger. “Lorenzo had a hat trick. Everything had failed.”
As I read Lorenzo’s book, my mind kept wandering to an image I came across from the early days of the IAM strike at Eastern in 1989. A pilot’s wife wears a sign “Send Francisco Packing” — Lorenzo’s full first name — next to her husband in his uniform pushing a double stroller with their two young kids. What was the Lorenzo’s legacy on the four of them? I can only imagine.
Flying for Peanuts: Tough Deals, Steep Bargains, and Revolution in the Skies
By Frank Lorenzo
Skyhorse. 384 pp. $32.99