Speaker 1: Ah, what's Miles, my.
Speaker 2: Miles? How are you doing? Miles? What's Miles? My Miles?
Speaker 1: Miles? What Miles my Gray? Maybe I just had a
Speaker 1: bunch of ice cream. Yeah, yeah, you're eating blue ice cream,
Speaker 1: which is gonna make it look like you were I
Speaker 1: don't know. I want to say like something grossly sexual
Speaker 1: about like the Brave Heart guy, because all the blue stuff.
Speaker 3: But yeah, yeah, yeah, well your alice. Yeah, I did
Speaker 3: figure out a good joke ahead of time. So yeah,
Speaker 3: I don't know what you'd say, but I get it.
Speaker 3: I get where you're going with it.
Speaker 1: Like you understand what the potential was.
Speaker 2: Oh yeah, totally. I see.
Speaker 3: I see the elements on the table for something great.
Speaker 3: I just didn't know how to put it together either.
Speaker 2: Yeah.
Speaker 3: But yeah, this ice cream is so blue that it's
Speaker 3: I'm a little alarmed how much I like it. And
Speaker 3: I feel like a fucking child when I order it
Speaker 3: at this place. But you know, what gives a fuck?
Speaker 3: Maybe I'm a child.
Speaker 1: What was your first thing that you ate as a
Speaker 1: kid and then you ate it again as an adult
Speaker 1: and you're like, this isn't food?
Speaker 2: What the fuck? People shouldn't have access to this? Oh
Speaker 2: my god?
Speaker 3: There's a few things, but I feel like maybe like
Speaker 3: shark bites or like gushers.
Speaker 2: No, gushers are wholesome. Love I mean, I love them too.
Speaker 3: I mean and I remember back at the old studio
Speaker 3: we had them there, remember, so yeah, order, yeah.
Speaker 2: And I remember.
Speaker 3: But here's the thing, not that I'm saying I disrespect them,
Speaker 3: but I remember eating them, Like, yo, this is fucking
Speaker 3: this is just sugar.
Speaker 1: But sugar mine was always and I still kind of
Speaker 1: love them. Is those like uh, what do you call it?
Speaker 1: It's like the stick and then like the pouches of
Speaker 1: colored sugar.
Speaker 2: Oh, fun just like.
Speaker 3: It's so funny, like something, yeah, just chemicals on a dipstick.
Speaker 2: They just licked over and like what was that stick
Speaker 2: even made of? It's pure sugar, miles all. The only
Speaker 2: thing is just raw sugar. It's just pure I guess.
Speaker 3: The only thing is that, yeah, just like the pouch
Speaker 3: that it was in was just the only thing that
Speaker 3: was not sugar.
Speaker 1: No. And it's like, you know, we're we're recording this
Speaker 1: the week that I don't know when this will air.
Speaker 1: But as we're recording this, everyone like there's just a
Speaker 1: big store where they're like, oh, aspartame causes it can
Speaker 1: cause you cancer, and like you look into it and
Speaker 1: it's like, well, if you have like between a dozen
Speaker 1: and three dozen cans a day, you might get cancer
Speaker 1: as opposed to like, I don't know, man, if everything
Speaker 1: like we're all shoveling so much crap and poison into
Speaker 1: ourselves at all times, I don't know that. I feel
Speaker 1: like diet coke's not going to be many people's primary
Speaker 1: risk factor.
Speaker 3: But whatever, it's And it's also it's pronounced as spark
Speaker 3: may Okay, we all know that that's but yeah, it's
Speaker 3: I think that also feels like the kind of thing
Speaker 3: that like the sugar lobby would come out with too.
Speaker 2: Funlike sugar which is a problem.
Speaker 1: Sugar, Yeah, fucking just just do whatever, gat like listen,
Speaker 1: like statistically, like a third of the people listening to
Speaker 1: this are doing so well. Blanketed in wildfire smoke and
Speaker 1: like burning the burning remnant sevassbestos and insulation, Like it's
Speaker 1: not going to be the aspertain that kills you guys.
Speaker 3: Take your aspertame, eat your blue ice cream, do it
Speaker 3: for the sword, you know.
Speaker 1: Yeah, whatever, it doesn't matter, Like every you're fine, and
Speaker 1: by fine, I mean doomed, but everything is so it's
Speaker 1: okay whatever. Anyway, you want to talk some more about
Speaker 1: Frank Lorenzo, No I do so today. You know, uh,
Speaker 1: United Airlines is kind of the descendant of Continental, and
Speaker 1: United Airlines is like an airline, right. I don't think
Speaker 1: anybody's like, ah, United. I have so many great United experiences.
Speaker 1: It's also not like the word of the airlines. They're
Speaker 1: just kind of like right in the middle, yeah, right
Speaker 1: right in the middle. You know, they're not as nice
Speaker 1: as like a smaller airline like Alaska, but I will
Speaker 1: take them over I don't know, fucking American Airlines or whatever,
Speaker 1: certainly over like Spirit. But I'm never like psyched to
Speaker 1: get on a fucking United flight either. But people were
Speaker 1: psyched to fly Continental back back in the day. Continental
Speaker 1: was like one of the airlines as shit. You know,
Speaker 1: the Reagan eras kicking off. You know, you've kind of
Speaker 1: got like the it's like the end of the late
Speaker 1: Carter era, early Reagan era is when sort of Continental
Speaker 1: is kind of starting to starting to look its age.
Speaker 1: You know, even after deregulation, they've kept their high fees
Speaker 1: and they've kept their passenger perks, so like, passengers consistently
Speaker 1: rate it as like one of the best airlines in
Speaker 1: the world, but it's not making a lot of money,
Speaker 1: whereas TI, the airline Lorenzo runs, is basically the opposite.
Speaker 1: It's a shitty budget airline that cannot make or that
Speaker 1: like makes a profit, but because it's it's shitty enough
Speaker 1: for people to afford. In nineteen seventy nine, Continental lost
Speaker 1: more than thirteen million dollars, and the bleeding accelerated. In
Speaker 1: nineteen eighty, the company gets a new CEO at this time,
Speaker 1: a guy named Alvin Feldman, and Alvin is generally remembered
Speaker 1: that should be a spoiler as a nice guy and
Speaker 1: a diligent businessman of the old style. And he's like
Speaker 1: he's trying to stop the bleeding, but he doesn't want
Speaker 1: it to like change its character. He tries to like
Speaker 1: emerges it with this other company. He's hoping that like
Speaker 1: he can keep it, you know, special and somehow make
Speaker 1: it profitable. But Continental, in addition to like dealing with
Speaker 1: changes in the market, is also feuding with their workers
Speaker 1: over new contracts. And because they're not as big as
Speaker 1: like American or TWA, you know, they've got a pretty
Speaker 1: small market cap, which means that you can actually purchase
Speaker 1: a controlling interest in their stock for surprisingly little money.
Speaker 1: And Lorenzo, to Lorenzo, this is like a shark smelling
Speaker 1: blood in the water, right, So it's total market values
Speaker 1: like one hundred and fifty million, and because again the
Speaker 1: stock market's nonsense, the company is worth way more than
Speaker 1: one hundred fifty million. If you just like add up
Speaker 1: all of their planes, they're worth a lot more than that.
Speaker 1: But because the business isn't doing as well as it
Speaker 1: used to be, like, their market cap is shit, and
Speaker 1: so he's able to Lorenzo's able to basically like buy
Speaker 1: up a bunch of big investors who have like interests
Speaker 1: in it and like work out a buy like he's
Speaker 1: he just basically starts eating up more and more and
Speaker 1: more of like getting closer to a controlling interest in Continental,
Speaker 1: because if he's able to get it, he'll wind up
Speaker 1: with way more value in like assets he can strip
Speaker 1: that he's actually spending on this thing. So this process
Speaker 1: starts for him in February of nineteen eighty one, and
Speaker 1: Feldman when he realizes, oh my god, this guy who
Speaker 1: is like the corporate raidar of the airline industry is
Speaker 1: buying up my beloved airline. He tries to go to
Speaker 1: war with him, right, but Lorenzo is a lot fast,
Speaker 1: he's a lot smarter, uh in dirty huh and fights
Speaker 1: dirty or uh he fights dirty. Feltman's like a nice guy.
Speaker 1: He's going to try the high minded way of fighting
Speaker 1: back and it's not going to work for him. But
Speaker 1: like so he as Continental. He goes to court to
Speaker 1: try to get the CAAB to rule in favor of like,
Speaker 1: you know, basically saying that, like, hey, for Lorenzo to
Speaker 1: buy up Continental because he already owns these other airlines
Speaker 1: is anti competitive. But the CAAB rules in Lorenzo's favor
Speaker 1: because it's the Reagan era. Texas Monthly writes quote. While
Speaker 1: the fifty three year old Feldman remained at Continental's Los
Speaker 1: Angeles headquarters, Lorenzo was everywhere, flying around the country, lobbying legislatures,
Speaker 1: institutional investors, and even the media. Lorenzo made many promises.
Speaker 1: He wrote California officials that he had no plans to
Speaker 1: move Continental headquarters or any of its operations out of
Speaker 1: Los Angeles. He said he had no intention of firing employees.
Speaker 1: He said he wouldn't sell planes to raise money. Within
Speaker 1: two years he had done them.
Speaker 3: All. Yeah, what worry you, I'm not gonna do it.
Speaker 3: I'm not going to like sell the planes I see
Speaker 3: here for money.
Speaker 2: No, why would I do that? If I come on? Guys,
Speaker 2: come on, as.
Speaker 1: A rule, if you're like a regulator and like somebody
Speaker 1: starts making specific promises about what they won't do, if
Speaker 1: you let them do something they want to do, those
Speaker 1: are the things they plan on doing, right, Like they're
Speaker 1: telling how themselves. Yeah, So Continentals unions are kind of
Speaker 1: the most effective defense that Continental has against Lorenzo, and
Speaker 1: kind of working with Feldman, they come up with what
Speaker 1: seems like a pretty good idea on paper. It's it's
Speaker 1: what's called an employee stock ownership plan or ESOP, And
Speaker 1: basically the idea that these unions work out with Feldman
Speaker 1: is that workers are going to buy control of the company.
Speaker 1: This could work out for them because federal law gave
Speaker 1: ESOPs really nice tax breaks and they're able to kind
Speaker 1: of work with some banks to get like there's like
Speaker 1: one hundred and eighty five million they need to get
Speaker 1: in financing for this. So Feldman's on board the unions
Speaker 1: start like making a national campaign basically telling people, hey,
Speaker 1: you know you have all these nice fond memories of Continental,
Speaker 1: you know, where this like prestigious airline, and you know,
Speaker 1: we want to stop these ghoulish, soulless Reaganites from taking
Speaker 1: over our beautiful airline and it'll be worker owned. And
Speaker 1: it's like it shows you how different the world is that,
Speaker 1: like the Texas legislature passes a resolution like cheering on
Speaker 1: the effort, right, actually opposing a Texas based company trying
Speaker 1: to take over the airline.
Speaker 2: Yeah.
Speaker 1: Well because like if you think about it, like I'm
Speaker 1: not going to say necessarily that there's less culture war
Speaker 1: brain poisoning, but it's different. And conservatives in this era,
Speaker 1: you know, they voted for Reagan obviously, but there's still
Speaker 1: this attitude of like, well, these are working The idea
Speaker 1: of like working class people taking over their own airline
Speaker 1: is going to be more attractive to a lot of
Speaker 1: conservatives than like letting this ghoulish, bloodless Harvard grad take it.
Speaker 3: You know, right, Whereas now it's completely inverted and it's
Speaker 3: like the thought of like any worker powers it's like no, no, no, no,
Speaker 3: like than fire bomb them.
Speaker 1: Yeah, he would post Lorenzo would post a picture of
Speaker 1: himself in jeans and a shotgun, and people would be
Speaker 1: like assassinating pilots on the on the highway, you know.
Speaker 1: So there was a This is like a potentially you know,
Speaker 1: cool idea, but there's a problem. The plan needs majority
Speaker 1: approval at a shareholders meeting for like the employees to
Speaker 1: be able to do this thing, and Lorenzo had forty
Speaker 1: eight point five percent of the stock at this point,
Speaker 1: which is enough to block like anything from happening. Continental
Speaker 1: goes to the New York Stock Exchange and the California
Speaker 1: Corporation Commissioner's office to try and like force through the
Speaker 1: ESOP plan without a vote, but they get denied, and
Speaker 1: on August seventh, because it's not working out, the banks
Speaker 1: who'd offer to help finance it withdraw their financial commitments,
Speaker 1: and like you know, it falls apart. So this doesn't
Speaker 1: work tragically, like the the employees are not going to
Speaker 1: be able to buy their own airlines. And so two
Speaker 1: days after the banks pull their financing, while Lorenzo continues
Speaker 1: his full court press to take over Continental, the CEO
Speaker 1: Feldman issues a press release telling all of his workers
Speaker 1: that the esop plan is no longer possible, he tells
Speaker 1: them sadly. He's like, and this is like a pretty
Speaker 1: emotional letter for him. He's like, you know, we can't
Speaker 1: get financing. You know, this has kind of sunk our chances.
Speaker 1: I'm so sorry that this failed. And then after sending
Speaker 1: this out, he leaves his office at LAX in the
Speaker 1: middle of the day, goes on a little shopping trip,
Speaker 1: and he returns soon after with a package. Frank works
Speaker 1: the rest of the day winding down his control of Continental,
Speaker 1: preparing to hand it off to Lorenzo, and then at
Speaker 1: a little after seven pm Pacific standard time, he calls
Speaker 1: the security desk and he asks them to turn off
Speaker 1: the lights in his office. Then he gets on the
Speaker 1: couch and he shoots himself through the head.
Speaker 2: Oh my god, No, it's like it's pretty bleak.
Speaker 3: The fuck some Paul Thomas Anderson, Yeah, it kind of is,
Speaker 3: like it's it's this really like intense story.
Speaker 1: There's a lot about side kind of the changing of
Speaker 1: the guard, just sort of within the capitalist system from like,
Speaker 1: you know, Feldman, I'm not going to pretend al felt.
Speaker 1: I'm sure he wasn't like, uh, you know, a fucking
Speaker 1: flawless hero. But it comes from this era where like, yeah,
Speaker 1: like we're capitalists, but there's this understanding of like the
Speaker 1: prestige of the business some things are it's not purely
Speaker 1: about maximizing profit as opposed to Frank Lorenz was like, no,
Speaker 1: nothing matters but short term stockholder value. Yeah, because and
Speaker 1: it's like, yeah, Feldman is like from there of like
Speaker 1: you provide people a service and they give you money,
Speaker 1: and you want it to be fair and you give
Speaker 1: them some kind of value back, and this guy's like
Speaker 1: a fuck all that all that shit, let's sell your
Speaker 1: fucking planes, dude, get the fuck out of my face. Loser,
Speaker 1: like Feldman just can't exist in the era of Frank Lorenzo.
Speaker 2: So no very like no country for old men. It
Speaker 2: really is.
Speaker 1: Yeah, it's what if like this, it's one of the
Speaker 1: more like yeah Cohen brother z e fucking stories in
Speaker 1: the history of like modern capitalism. And that's like this
Speaker 1: that's the day that the shit fell through basically that yeah, yeah,
Speaker 1: kind of well like a couple of days after right,
Speaker 1: like that was like but that was sort of like
Speaker 1: the last of yeah that that rule. Yeah, and it's
Speaker 1: one of those things it's interesting. I haven't seen a
Speaker 1: lot of like you know, we've got we do get
Speaker 1: to bring up the Coen Brothers. We've gotten a lot
Speaker 1: of like movies about like you know, those the corporate
Speaker 1: gul or the capitalist goruls of like the train industry, right,
Speaker 1: like stuff like that, right, and a lot of more
Speaker 1: modern stuff. I've never actually seen this period depicted. But
Speaker 1: it's pretty like we're going to go over some of this,
Speaker 1: like what's happening this like battle between like the unions
Speaker 1: and the airlines and like this old attitude that's less
Speaker 1: competitive of like how airlines should be in the new one. Obviously,
Speaker 1: like none of these people are. You know, when we
Speaker 1: talk about the old way of things, it is worth
Speaker 1: noting part of why it falls apart is that it
Speaker 1: can't make money because it was never that was never
Speaker 1: the primary purpose. So you know, it is it is complex.
Speaker 1: It's certainly more complicated than a lot of this stuff
Speaker 1: we talk about. But yeah, Frank Lorenzo is like reached
Speaker 1: to by the New York Times and he issues a
Speaker 1: statement being like, oh, you know, mister Feldman was a
Speaker 1: was a great guy. You know, I'm so sorry to
Speaker 1: his family, Like.
Speaker 2: Oh my God.
Speaker 1: Yeah, Like you don't need to say anything, man, we
Speaker 1: know you don't care, Like, of course, you know, nobody
Speaker 1: expects that from you. Yeah, your job is to not
Speaker 1: have a soul. Frank Lorenzo, it's fine.
Speaker 3: He's like, yeah, but I gotta say this stuff, you know,
Speaker 3: so I like, human, you.
Speaker 1: Got to say the thing. Union Resistance died with Feldman.
Speaker 1: Texas Air takes over Continental the next month, and in
Speaker 1: short order the two airlines are combined, which means Frank
Speaker 1: Lorenzo now controls effectively the seventh largest airline in the
Speaker 1: company or in the country. Now, there's a downside to
Speaker 1: acquiring a big, bleeding, giant giant like Continental. It is
Speaker 1: a money sink, right, There's a reason why it was
Speaker 1: on the table to buy. The airline industry is in
Speaker 1: a very new place, and it's kind of reeling from
Speaker 1: alt from deregulation, from all these sudden changes at the
Speaker 1: end of the Carter era and then at the start
Speaker 1: of the Reagan era in August of nineteen eighty one,
Speaker 1: you have the air traffic controllers strike, right, and this
Speaker 1: is basically air traffic controllers.
Speaker 2: It's like a hard gig.
Speaker 1: The hours are shit, they're not making enough money, so
Speaker 1: they decide to go on strike.
Speaker 2: Disaster if you fuck up, so many people die.
Speaker 1: But when they decide like most people again like if
Speaker 1: you've got I don't know, like people who work at
Speaker 1: Albertson's grocery stores go on strike, you know, that can matter.
Speaker 1: That matters in a community. It certainly matters to Albertson's,
Speaker 1: but like there's other grocery stores, you know, like the
Speaker 1: the overall impact to the country isn't massive. Whereas if
Speaker 1: all the air traffic controllers go on strike, like good,
Speaker 1: you can shut like yeah, and you know, obviously that's
Speaker 1: not something a guy like Ronald Reagan is going to
Speaker 1: think should be acceptable. He is fundamentally against the idea
Speaker 1: that any union should have as much power as the
Speaker 1: air traffic controllers do. So he calls their strike apparel
Speaker 1: to national security, and he orders them back to work
Speaker 1: at the risk of losing their jobs. And there's still
Speaker 1: elements of this in like air unions. I think we
Speaker 1: all remember when like the stewardesses union put an end
Speaker 1: to that, like the fucking budget, like the government shut
Speaker 1: down basically by being like, well, what if planes can't
Speaker 1: go in the air, how would you fuckers feel that
Speaker 1: you know, right, right right? And this is yeah, so
Speaker 1: uh there's a yeah. Basically, Reagan's like, yeah, if you
Speaker 1: guys don't go to work, I'm going to fire everybody.
Speaker 1: And the union calls Reagan's bluff, and Reagan does, in
Speaker 1: fact fire everyone, and he bans all of these air
Speaker 1: traffic controllers who had struck from federal service for life. Uh.
Speaker 1: This is very celebrated by conservatives, but it is a
Speaker 1: fucking disaster for a while because like suddenly all the
Speaker 1: guys who make air travel possible are gone, right, so
Speaker 1: they have to fill vacancies. They bring in the military,
Speaker 1: you know, flight controllers and shit from the military. There's
Speaker 1: controllers who like, for whatever reason, had worked outside the
Speaker 1: union and like different, like weird, little kind of niche
Speaker 1: parts of the industry they bring in, like like retirees
Speaker 1: and stuff. They bring in like people who had refused
Speaker 1: to go with the union on the strike. But it
Speaker 1: takes ten years before FAA controllers staffing returns to normal.
Speaker 1: The benefit of this for Republicans is that as much
Speaker 1: of a fuck up as it is for the industry
Speaker 1: and for flyers and for obviously these controllers, it does.
Speaker 1: It's almost like a death blow to organized labor, and
Speaker 1: a lot of ways you could argue that, like you
Speaker 1: kind of have the labor movement, you know, starting up
Speaker 1: late eighteen hundreds, early nineteen hundreds, fighting for that eight
Speaker 1: hour work day, all these other things that we get
Speaker 1: from organized labor, and labor has a significant degree of
Speaker 1: power kind of up until Reagan crushes this strike, and
Speaker 1: it's it's like a it's an epochal change in the
Speaker 1: way that we conceive of labor in this country.
Speaker 3: Yeah, I mean it's I feel like the last time
Speaker 3: we were talking about this was just with the rail
Speaker 3: workers at the end of the year, and like, oh,
Speaker 3: what's the government going to do? Because the last time
Speaker 3: it was the air traffic controllers and look where that
Speaker 3: got us. But yeah, it is, Yeah, it is true,
Speaker 3: Like you're there's so many huge fundamental shifts happening, whether
Speaker 3: it's just like the perspective of what even a business
Speaker 3: is and what it's meant to do, and like who
Speaker 3: it's supposed to provide value for to who the fuck
Speaker 3: even deserves to like, you know, demonstrate that they need
Speaker 3: better wages or working conditions. Yeah, in such a like
Speaker 3: cynical way.
Speaker 1: Yeah, now you know, we can talk more. There's a
Speaker 1: lot more to say about, you know, Reagan and the
Speaker 1: breaking of that strike, but that is not the story
Speaker 1: of today. And while you might expect Frank Lorenzo obviously
Speaker 1: to be in favor of Reagan breaking the strike, and
Speaker 1: obviously he like he's a fuck the unions guy, this
Speaker 1: also has a negative impact on his business because it
Speaker 1: like he is when he buys Continental, his plan is
Speaker 1: to basically cut a bunch of like the routes that
Speaker 1: aren't efficient and launch a bunch of new routes and
Speaker 1: kind of like uses existing business to make it more effective.
Speaker 1: But like he can't actually expand or really wildly change
Speaker 1: the way his airline works and the way that he
Speaker 1: needs to if there's this like cap on how much
Speaker 1: air travel can exist because we're out of fucking controllers, right,
Speaker 1: people Like this is a problem for him, and he's
Speaker 1: just burnt a shitload of capital to buy Continental, so
Speaker 1: he needs to be able to expand and show that
Speaker 1: like he can make a profit. In nineteen eighty one,
Speaker 1: then Continental reports losses of again when he had bought Continental,
Speaker 1: they were losing a thirteen million year and eighty one,
Speaker 1: they lose one hundred million dollars. So it's a little
Speaker 1: bit of like an Elon Musk type thing where it's like,
Speaker 1: I don't know, man, maybe this wasn't the best plan.
Speaker 2: I think I can do something. Oh fuck my life. Yeah,
Speaker 2: oh shit.
Speaker 1: You know, some of this is not directly his fault,
Speaker 1: but it's certainly the fault of like kind of the
Speaker 1: ideologies he's championed.
Speaker 2: This like war on the rights of labor.
Speaker 3: And did he do like a boxing match against another
Speaker 3: airline exect?
Speaker 1: Yeah, he does. He actually beats the shit out of
Speaker 1: Mark Zuckerberg. But at this point, Mark Zuckerberg is just
Speaker 1: like you've seen some of those old Catholic propaganda cartoons
Speaker 1: with like the babies that are in heaven before.
Speaker 2: They're wor yeah, exact, that's who he's fighting.
Speaker 1: Yeah, like the like the Catholic anti abortion propaganda angel,
Speaker 1: Mark Zuckerberg of Catholic propaganda. This podcast is sponsored by Catholicism. Catholicism.
Speaker 2: It's fine, now, yeah, what what mood are you in
Speaker 2: today's I don't know.
Speaker 1: I don't know, Sophie. I don't know where I'm coming
Speaker 1: or going here. We are back and Miles. This is exciting.
Speaker 1: I just found out from you once, once I started
Speaker 1: talking about Catholicism that you are actually engaged in recruiting
Speaker 1: for a new crusade to retake the Holy Land. But
Speaker 1: because we're nineties kids, the Holy Land is kind of
Speaker 1: the ephemeral concept of playing the N sixty four with
Speaker 1: your with your friends at a birthday party exactly. There's
Speaker 1: still a high death to expected, is that correct?
Speaker 2: Yeah?
Speaker 3: Yeah, because as much as we love Golden Eye, we
Speaker 3: are going to be using actual land mines and proximity
Speaker 3: minds excellent, excellent.
Speaker 1: Yeah, yeah, yeah, Well find find Miles on a gibsond
Speaker 1: Go and Treon. He's taking donations on both of those
Speaker 1: to reclaim our nineties video game past.
Speaker 3: And by that, I think you guys know what I
Speaker 3: really mean. But I'm but you know, before we get
Speaker 3: the money, it's about N sixty four, Okay.
Speaker 1: Yeah, uh so nineteen eighty one Continental loses one hundred
Speaker 1: million dollars and Texa Texas Air is plummeting too. Right,
Speaker 1: he's brought he had like it was looking like, wow,
Speaker 1: this guy's he's saved this company. He made it profitable.
Speaker 1: What a genius he loses fifty million dollars in nineteen
Speaker 1: eighty one. So this is a disaster. Barons calls it
Speaker 1: a stockholder's nightmare. And what's actually happening here is that
Speaker 1: a lot of Frank's success, the perception that he was
Speaker 1: this like master of rescuing damaged airlines, was not real success,
Speaker 1: but the result of a rational exuberance. Investors liked how
Speaker 1: we talked about unions, and the market was good for
Speaker 1: the kind of airline he ran, but he was making
Speaker 1: a ton of bad calls too. After the Continental acquisition,
Speaker 1: he launched a new major marketing rollout that had flopped disastrously,
Speaker 1: making Continental in this period the only airline that sees
Speaker 1: both revenue and passenger load drop for the quarter. So
Speaker 1: this is kind of revealed that he's not a great
Speaker 1: airline manager. He was just good at convincing stockholders that like,
Speaker 1: that's we're on the open.
Speaker 3: That's how like all these private equity things end up,
Speaker 3: is guys who only know how to make line go
Speaker 3: up end up taking over like healthcare companies, and they're like,
Speaker 3: I don't know, I just know how to make fucking
Speaker 3: numbers look different.
Speaker 1: Yeah, I can make the line go up. Now I
Speaker 1: will say in a little bit of like defensive Lorenzo,
Speaker 1: this is like a real bad time to be running
Speaker 1: most airlines. If you're not one of the top like
Speaker 1: two or three big ones, you're having a lot of trouble.
Speaker 1: Branef collapses at this time, so do a lot of
Speaker 1: the other old giants, and most of them are like
Speaker 1: getting bought up by kind of like the controllers at
Speaker 1: the very top. And Frank has like the seventh biggest airline,
Speaker 1: but there's a pretty big drop off between like the
Speaker 1: top three or four and numbers seven. And what we're
Speaker 1: seeing in this period is kind of the backswing of deregulation.
Speaker 1: Right Initially there's this huge drop in ticket prices, way
Speaker 1: more people take to the sky, But the end of
Speaker 1: the caab's anti competitive regime also leads to an inevitable
Speaker 1: tightening of the industry. And kind of where that's ended
Speaker 1: up today. You know, we talked about it. It's not
Speaker 1: entirely negative. There's a lot of things that are positive
Speaker 1: about the deregulation. But the other thing, the thing that
Speaker 1: it's like, the way it all winds up, is that
Speaker 1: today four carriers control eighty percent of the domestic airline market.
Speaker 1: As former American Airlines chairman Robert Crandall told ABC, the
Speaker 1: consequences of deregulation have been very adverse our airlines. Once
Speaker 1: world leaders, are now laggards in every category, including fleet age,
Speaker 1: service quality, and international reputation. Fewer and fewer flights are
Speaker 1: on time, Airport congestion has become a staple of late
Speaker 1: night comedy shows, and even higher percentage of bags are
Speaker 1: lost or misplaced. Last minute seats are harder and harder
Speaker 1: to find. Passenger complaints of skyrocketed airline service by any
Speaker 1: standard had become unacceptable. Now Crandall is a business school too,
Speaker 1: write and he's like he's kind of moaning the deregulation
Speaker 1: in part because like he's a guy who had succeeded
Speaker 1: at an earlier age of yeah, like pride and exactly. Yeah,
Speaker 1: but it's one of those things, so like, I don't know,
Speaker 1: there's a lot of downsides to deregulation. And at first
Speaker 1: the you know, it doesn't matter to Lorenzo, but like
Speaker 1: by the time kind of we're in the early eighties,
Speaker 1: the industry is starting to contract, and he's just kind
Speaker 1: of it looks initially he's not big enough to like
Speaker 1: make shit work. He's getting eaten alive by all sides.
Speaker 1: So the walls are kind of closing in on the
Speaker 1: guy at this point, and he defaults to what was
Speaker 1: basically his only real strategy, cutting perks for passengers and
Speaker 1: squeezing his employees as hard as possible. Frank didn't just
Speaker 1: see this as good business. There was a degree to
Speaker 1: which this is like a thing he enjoys. It's like
Speaker 1: a pleasure to him, fucking with his workforce. I found
Speaker 1: a book series called Flying the Line by George Hopkins.
Speaker 1: George is a former Navy pilot and an air travel
Speaker 1: industry historian, and these he writ He's got like this
Speaker 1: series of books called Flying the Lion, and if you like,
Speaker 1: if you want a frustrating amount of detail about how
Speaker 1: air travel used to work, George is your boy, right.
Speaker 1: He will tell you way more than you ever wanted
Speaker 1: to know about how fucking airlines worked in the seventies
Speaker 1: and eighties. He portrays Lorenzo, and again he's got an
Speaker 1: axe to grind against this guy. He portrays Lorenzo as
Speaker 1: almost ghoulishly excited to fuck over stewardesses. In particular, quote
Speaker 1: Phil Nash who went to work for Continental in nineteen
Speaker 1: sixty six after serving in the US Air Force and
Speaker 1: later became ALPA EVP in nineteen eighty to nineteen eighty two.
Speaker 1: We'll never forget his first encounter with Frank Lorenzo. Above
Speaker 1: all others, Lorenzo typified this new managerial breed. At a
Speaker 1: special meeting in Denver, Nash asked Lorenzo, who was in
Speaker 1: the process of taking over Continental left the time, why
Speaker 1: he was so intent on reducing the pay of flight attendants.
Speaker 1: Didn't he know phil Nash asked that many of them
Speaker 1: were single parents who couldn't afford to own homes, that
Speaker 1: the pay rate Z was proposing. Lorenzo looked at Nash
Speaker 1: as if he were crazy. Quite frankly, I don't believe
Speaker 1: flight attendants ought to make enough money so they can
Speaker 1: own houses, Lorenzo told a flabbergasted Nash. Maybe they should
Speaker 1: find another job that pays better.
Speaker 2: Oh fuck wow.
Speaker 3: He's always wearing his like sociopath badge on his sleeve,
Speaker 3: like at every opportunity. He can't even He's like, yeah, yeah,
Speaker 3: they don't, I mean, they don't deserve air.
Speaker 2: Yeah, I don't even think they're really people. Yeah, fuck him.
Speaker 2: Why don't we just shoot them? Yeah we did.
Speaker 3: I mean, if it's up to me, we'd throw him
Speaker 3: out the fucking plane before we land and get a
Speaker 3: new crop before the next flight takes off.
Speaker 1: And like, yeah, it's it's wild because like Nash is
Speaker 1: obviously Nash is a capitalist. Nash is a guy who
Speaker 1: believes in free enterprise. But also he does he comes
Speaker 1: from this old era where he's like, well, but they
Speaker 1: wouldn't be able to buy houses, and that's like the
Speaker 1: whole point, right.
Speaker 2: Like everyone to be able to buy a house. That's
Speaker 2: why you toil. No, some people take these jobs and
Speaker 2: fuck them if they take them.
Speaker 1: Yeah, like they work, and then ideally they drop dead
Speaker 1: at age forty nine when they stop being as profitable.
Speaker 1: So Frank's prime target next is going to be pilots. Now,
Speaker 1: for very obvious reasons. Pilots tend to make pretty good money, right,
Speaker 1: and their costs are one of the more significant baked
Speaker 1: in costs for airline management. And this is normally when
Speaker 1: we talk about like the struggle of like unions against management,
Speaker 1: we're talking about like, yeah, you got like a bunch
Speaker 1: of coal miners, right, and maybe the industry changes around them,
Speaker 1: or like the executives make a bad decision, but the
Speaker 1: coal miners are like doing their job, they're getting the
Speaker 1: coal out of the world, and they're just getting like
Speaker 1: fucked over by the people who run the company. It's
Speaker 1: a bit different with pilots unions because, for one thing,
Speaker 1: up until recently, pilots had kind of run a lot
Speaker 1: of the airlines. Right, So even if you know you're
Speaker 1: just a flyer, you're not in management technically, you're the
Speaker 1: guy who runs your company is probably a pilot, and
Speaker 1: so are a lot of executives, and maybe you worked
Speaker 1: with some of these guys. So like when other airline
Speaker 1: unions get fucked over, the pilots are usually safe, you know,
Speaker 1: because they're close with management right right, right right. And
Speaker 1: it's like, you know, today we're dealing with this thing
Speaker 1: where like there's a shortage of pilots in part because
Speaker 1: there's this very unreasonably long period of time in the
Speaker 1: US where you have to like be trained and have
Speaker 1: experience to be able to be a commercial pilot that's
Speaker 1: like much longer than like what the requirements are in Europe.
Speaker 1: And it's a thing that like the pilot's unions have
Speaker 1: fought for because they make more money that way. Not
Speaker 1: blaming everything on the pilots, but it's not exactly the
Speaker 1: same as like the stewardess's union, right, because they are
Speaker 1: closer to running, closer to power, right, So pilots have
Speaker 1: more baked in benefits. And they also, like a lot
Speaker 1: of them, are like friends with the guys who are
Speaker 1: running their companies. So one consequence of this is that
Speaker 1: when management and the airlines had made cuts, the pilots
Speaker 1: had generally been spared. Dennis Higgins, who worked for Texas International, explained, quote,
Speaker 1: some people in senior management were extremely close to the
Speaker 1: pilots and smooth that mess over. They spent time in
Speaker 1: pilot's homes, went to kids graduations. It was very much
Speaker 1: a family atmosphere. So Lorenzo obviously does not care about
Speaker 1: the pilots. He wants to fuck them over, but he
Speaker 1: understands there's an opportunity here, right because the pilot's unions
Speaker 1: are already kind of acclimated to the idea that like, well,
Speaker 1: maybe we can fuck over some of like our coworkers
Speaker 1: and other unions as and will still be okay. And Lorenzo,
Speaker 1: he's kind of like the British Empire. Right, He's like,
Speaker 1: I feel like this is an opportunity I can play
Speaker 1: these unions off against each other in order to benefit myself.
Speaker 1: Hopkins writes. Quote Lorenzo, for all his faults, made no
Speaker 1: secret of his plans, but he deviously led various employee
Speaker 1: groups to believe that he was after concessions only from
Speaker 1: other unions. At the time of his takeover, Lorenzo hosted
Speaker 1: a cocktail reception for txi's pilots the Houston Intercontinental Hotel.
Speaker 1: Lorenzo flatly declared that except for pilots, he intended to
Speaker 1: take the airline back to the employment levels of nineteen
Speaker 1: sixty seven. There are profits to be made here. Dennis
Speaker 1: Higgins recalls the Lorenzo saying, We're going to continue operating
Speaker 1: the same number of trips, but we are going to
Speaker 1: get rid of some ground for folks. So because txis ground,
Speaker 1: folks are unionized, this strategy means that the airline is
Speaker 1: going to like, there's going to be some labor fighting
Speaker 1: over this, right, and Lorenzo is eager to fuck with
Speaker 1: the union. So he his proposition is like, I'm going
Speaker 1: to turn all of our baggage handlers and ticket agents
Speaker 1: into temporary employees, right, I'm just going to replace the
Speaker 1: unionized guys with temps, which is like a standard tactic
Speaker 1: today and that's starting to be more common in this
Speaker 1: period of time. He also argues that, like, well, we've
Speaker 1: got all these flights to cities that are like outlying,
Speaker 1: and so we've they're only on like one or two
Speaker 1: flights coming in a day there, so they don't need
Speaker 1: any full time employees. So like for these smaller routes,
Speaker 1: we'll just hire like college students who need like like
Speaker 1: shitty part time gigs to be ground employees just when
Speaker 1: like the flight is departing and arriving. And it's one
Speaker 1: of those things. Part of how he's able to get
Speaker 1: by with this initially is he tells the pilot's union, Hey, guys,
Speaker 1: I want you to keep making money, but like, we
Speaker 1: can't keep paying you all this money if these worthless
Speaker 1: ground employees are siphoning all your money away.
Speaker 2: So what do you say? Yeah, so what do you say? Now?
Speaker 1: All of the pilots don't buy this. There are some
Speaker 1: pilots at this big intercontinental hotel meeting that are like, well,
Speaker 1: what if we try to offer better flights and try
Speaker 1: to make more money that way. And Lorenzo, he has
Speaker 1: a violent reaction to this idea. He Dennis Higgins recalls quote,
Speaker 1: Lorenzo was openly against the better product concept. He said,
Speaker 1: the traveling public looks for the dollar sign. What they're
Speaker 1: interested in is a cheap seat. The ones who don't
Speaker 1: like our service can go pay higher prices on another carrier.
Speaker 1: He was very cynical about the public. And this is
Speaker 1: like you can see, this is how all of air
Speaker 1: travel works now, right, is like, fuck them. All they
Speaker 1: want is to see a cheap price, and you know what,
Speaker 1: we can make him pay more in the long run.
Speaker 1: If we're Spirit Air, you know, we'll sneak in a
Speaker 1: couple one hundred dollars charges that they're not seeing. But
Speaker 1: all these idiots care about is that they see, you know,
Speaker 1: what looks like a good price.
Speaker 2: Initially.
Speaker 1: We can get him to do all sorts of dumb
Speaker 1: shit if we trick him. That's Lorenzo's attitude. He's kind
Speaker 1: of like one of the first guys in air travel
Speaker 1: who sees where things are going to go here, and
Speaker 1: he is right, like people mostly care about it being cheap.
Speaker 1: It turns out, We're willing to suffer with a lot
Speaker 1: on planes as long as we don't have to pay
Speaker 1: too much. Yeah seriously, Yeah, which, you know whatever, that's life.
Speaker 1: So while he's doing all this getting each union to
Speaker 1: agree to a few cuts under the promise that they'll
Speaker 1: be spared and someone else will get fired, he starts
Speaker 1: selling Continental aircraft as fast as he can. This puts
Speaker 1: like twenty one million dollars in the bank right away,
Speaker 1: and he gets another big, like thirty million dollar loan
Speaker 1: from Chase Manhattan. He does this public stock offering to
Speaker 1: raise more money, and over the course of eighty three
Speaker 1: he builds up this big war chest, right so suddenly
Speaker 1: Continental has like a weird amount of cash on hand,
Speaker 1: even though they lose like eighty something million dollars that year.
Speaker 1: And everyone assumes he's doing this he's saving up money
Speaker 1: because he's gonna buy another fucking airline, because that's what
Speaker 1: Frank always does. But he actually has a different, cunning,
Speaker 1: more fucked up plan. He's going to break the unions
Speaker 1: once and for all, and he's going to do it
Speaker 1: by declaring bankruptcy. Yeah, yeah, he is.
Speaker 3: Every hes like I love that, every like all of
Speaker 3: his goals are just in line with making things just
Speaker 3: as fucked up for other.
Speaker 2: People as possible, just enriching himself.
Speaker 1: Yeah, I mean, of course, like that's the way it all,
Speaker 1: that's the way it all works.
Speaker 2: But he's doing it.
Speaker 1: This is like, this is one of the first times
Speaker 1: that he's really he's he's creating something. No one had
Speaker 1: ever done this before. So basically his plan is, Hey,
Speaker 1: if you go into bankruptcy, I think you might be
Speaker 1: able to throw out all your union contracts, right because and.
Speaker 2: The part of and shit, yeah.
Speaker 1: And no one, no one knew if it would work
Speaker 1: this way, right, Like this had not been done before.
Speaker 1: But basically his plan is like, I'll take this shit
Speaker 1: to the Supreme Court if.
Speaker 2: I have to.
Speaker 1: I think eventually they'll rule with me, because you know,
Speaker 1: Reagan's in the fucking White House, right, I can see
Speaker 1: where the fucking winds are blowing.
Speaker 2: Yeah.
Speaker 3: It's like though, like, right, brothers of fucking the unions
Speaker 3: over like, I don't know if you can.
Speaker 2: He's like, I don't drive, We're gonna dry man, We're
Speaker 2: kind of figure it out. Yeah, and if we do,
Speaker 2: and if it works, welcome to a new age. Yeah.
Speaker 1: That is exactly what he's saying, and so he would
Speaker 1: claim like he dis disappearance at Harvard the next year
Speaker 1: and he's like, well, you know, I really failed and
Speaker 1: we had to do chapter eleven because like I just
Speaker 1: couldn't make shit work.
Speaker 2: You know, this is on me.
Speaker 1: But we have like notes that he was sending around
Speaker 1: the company at the time where he's like, you know,
Speaker 1: this is what's gonna work, Like the creditors are ready
Speaker 1: for it, Like we're gonna fucking kill the unions with
Speaker 1: this shit, Like that's the reason that we're doing this.
Speaker 1: And at the same time, he starts to execute this
Speaker 1: very slick media strategy where he's he's really playing up
Speaker 1: the company these financial problems and he's blaming it all
Speaker 1: on workers' salaries, right, like I failed. What I failed
Speaker 1: in doing is I just couldn't get salaries low enough.
Speaker 1: You know, we're paying too much on workers and that's
Speaker 1: why it's impossible to make a profit with this airline,
Speaker 1: he claimed in his speech at Harvard. Quote, what we
Speaker 1: tried to do was shift the story from it being
Speaker 1: a bankruptcy to a labor problem as fast as possible.
Speaker 1: And this works really well, right, so's he's Basically, as
Speaker 1: this is going on, as he's prepping to go into
Speaker 1: chapter eleven, he's renegotiating his contracts with these unions, and
Speaker 1: instead of working anything out with him, he just keeps
Speaker 1: at the last moment when they'll think they're about ready
Speaker 1: to sign a contract, they'd be like, ah, nope, you
Speaker 1: know what, I actually I can't do this or I
Speaker 1: can't do that. We have to go back to the
Speaker 1: drawing board. So the unions eventually decide to go on strike,
Speaker 1: and as soon as they go on strike, he furloughs
Speaker 1: all of the non striking employees or the striking employees,
Speaker 1: he brings in scabs and he declares chapter eleven right,
Speaker 1: So he goes into bankruptcy, and he says, well, now
Speaker 1: that I'm doing bankruptcy, I want the government to let
Speaker 1: me revoke all of my union contracts. So yeah, that's
Speaker 1: that's the plot. That's what he's trying to do here.
Speaker 1: And this right up from Texas Monthly describes what happens next.
Speaker 1: The airline immediately shut down operations and laid off all
Speaker 1: but four thousand of its twelve thousand employees. Continental executives
Speaker 1: said the line would resume flights three days later to
Speaker 1: selected cities at the low price of forty nine dollars
Speaker 1: one way. Returning workers would face pay cuts, increased productivity requirements,
Speaker 1: and the elimination of all pensions. The salary of flight
Speaker 1: attendants would drop from twenty nine thousand to fifteen thousand.
Speaker 1: Pilots making eighty nine thousand would be paid forty three thousand,
Speaker 1: the same salary Lorenzo said he would take in place
Speaker 1: of his normal two hundred and fifty seven thousand dollars.
Speaker 1: At press conferences, he glossed over Continental's fifty million dollars
Speaker 1: in cash reserves. The airline faced running out of money
Speaker 1: in a few days, he insisted. Meanwhile, union leaders and
Speaker 1: even some business executives denounced him. Wall Street analysts questioned
Speaker 1: the company's future, and competitors rejoice. So Frank's plan here,
Speaker 1: there's like an element of desperation to this, because no
Speaker 1: one's ever done this before. He's just pretty sure it's
Speaker 1: going to work. On September twenty seventh, when he reopens
Speaker 1: the airline and starts offering these cut rate flares, basically
Speaker 1: the whole Continental fleet remains on the ground. There were
Speaker 1: only a handful of flights he was able to actually
Speaker 1: pull out, but since the airline had technically resumed operations,
Speaker 1: he was able to ask the bankruptcy court to rescind
Speaker 1: the union contracts. Gradually, Continental starts opening up more and
Speaker 1: more flights, bringing in scabs to do all the work,
Speaker 1: but the real financial health of the company is unclear.
Speaker 1: He declares at a press conference that like, we're doing great.
Speaker 1: The same day he asks the government to release ten
Speaker 1: million in their funds to keep the airline from collapsing.
Speaker 1: The unions fight back, They go on strike. They refuse
Speaker 1: to go back to work for reduced pay, but they
Speaker 1: can't stop the scabs from a flooding in, and Frank
Speaker 1: is able to bring in enough workers to keep this
Speaker 1: minimal schedule operational. Now, the union with the most clout
Speaker 1: and thus the most power or are the pilots. And
Speaker 1: because pilots made bank they had enough money that they
Speaker 1: were able to like draw funding from other pilots unions
Speaker 1: to fund their part of the strike. So they start
Speaker 1: using some of this money to carry out a media
Speaker 1: campaign where they're basically trying to be like, all this
Speaker 1: non union labor has made flying more dangerous. You might
Speaker 1: die in the air because of what, you know, what
Speaker 1: Lorenzo's doing. This may have been true because Continental gets
Speaker 1: fined like four hundred grand because the FAA sees that
Speaker 1: they're not like they're breaking a bunch of rules basically.
Speaker 1: But no planes crash from Continental in this period, so
Speaker 1: it's kind of hard to like, you know, yeah, really
Speaker 1: point the finger would have helped them if some people
Speaker 1: had died, is what I'd say.
Speaker 3: Yeah.
Speaker 1: Now, one of the things that's really interesting is like
Speaker 1: how ugly this strike gets. So on November twenty second,
Speaker 1: two Continental pilots get arrested trying to evade a police
Speaker 1: license checkpoint. Both of these guys are I think this
Speaker 1: is like a DUI checkpoint basically, but both of these
Speaker 1: pilots had been they'd been driving to the homes of
Speaker 1: Continental scat pilots who were gabbing and throwing pipe bombs
Speaker 1: at their houses. Oh shit, they get caught fucking pipe
Speaker 1: bombs and scaps.
Speaker 3: Oh no.
Speaker 1: And it's like there's this like little war that goes
Speaker 1: on because the year after these guys get convicted, a
Speaker 1: Houston police attendant lieutenant gets charged and convicted of selling
Speaker 1: confidential information about striking Continental employees to a private detective
Speaker 1: hired by the airline, So like, yeah, the fucking nasty strike.
Speaker 1: Yeah yeah. Soon after all this goes down, a court
Speaker 1: case is ignited by Frank's Chapter eleven move and it
Speaker 1: gets a ruling from the Supreme Court. They declare that
Speaker 1: companies in chapter eleven have the right to cancel burdensome
Speaker 1: union contracts. Now, Congress like seals this up. They passed
Speaker 1: legislation so that like CEOs can't do what Frank did.
Speaker 1: But he wins, right, he gets to actually like do
Speaker 1: this shit.
Speaker 2: Oh he got up.
Speaker 3: So he's like, is he the only one they got
Speaker 3: it over the line?
Speaker 2: Basically that got.
Speaker 1: It over the line in this way, right, Like there's
Speaker 1: still kind of more openings to do this, but Congress
Speaker 1: kind of makes it harder. But it works out for Frank.
Speaker 1: His company is still in pretty desperate financial straits though,
Speaker 1: and because he's the guy who had like led it there,
Speaker 1: you might have expected him to have suffered financially. And
Speaker 1: he's like making a big claim to like, well, I've
Speaker 1: cut my salary, I'm making like way less money. You know,
Speaker 1: we're all hurting here. This is a lie. Yeah, So
Speaker 1: basically he's like I'm going to drop my salary from
Speaker 1: like two hundred and sixty thousand to forty three grand.
Speaker 1: But he he's that's not like the whole story, because
Speaker 1: like he's getting bonuses. Obviously, he's like making hundreds of
Speaker 1: thousands of dollars in bonuses, but he's also he's set
Speaker 1: shit up so that like there's this weird he's basically
Speaker 1: putting his money into this weird stock transaction that he's
Speaker 1: like running through an automated subsidiary, which is like doing
Speaker 1: the he's basically like doing like an automated stock trick
Speaker 1: where he's like buying shares and then like reselling them
Speaker 1: once they get Anyway, the way this all works out
Speaker 1: is that he's able to buy two hundred thousand shares
Speaker 1: of his company stock at fifty cents a share for
Speaker 1: one hundred thousand dollars, but he only has to pay
Speaker 1: five thousand dollars because he has Texas Air loan him
Speaker 1: the rest of the money, and then he resells it
Speaker 1: two years later when it's worth more money and effectively
Speaker 1: makes like an extra one and a half million dollars
Speaker 1: for paying five grand, where he basically like has the
Speaker 1: company subsidize his investments. So yeah, it's he's making He's
Speaker 1: doing just fine, right.
Speaker 2: Yes, so, but I mean he's only making forty grand
Speaker 2: a year now.
Speaker 1: Are yeah only making for He's like one of the
Speaker 1: first CEOs to be like, oh if I just tell
Speaker 1: people my salaries cut Like these idiots don't understand all
Speaker 1: the ways we can fuck with stock prices.
Speaker 2: I don't know.
Speaker 3: That's like a minuscule. That's not let's I don't even
Speaker 3: need a salary. It's all the fucking bonuses and the stocks.
Speaker 1: That's not where the fucking money is. But you know
Speaker 1: where the money really is. Miles tell me podcast ads.
Speaker 1: Oh yeah, yeah, like these podcast ads.
Speaker 2: Ugh, we're back.
Speaker 1: So yeah, it's really interesting. There's like during this kind
Speaker 1: of period of time, Frank is also really willing to
Speaker 1: fuck over his other like the corporate ghouls who like
Speaker 1: make these moves possible. One of the guys who basically
Speaker 1: funds his Chapter eleven scheme is the chairman of a
Speaker 1: company called American General Harold Hook, and he floats Frank
Speaker 1: the money to keep Continental going while he's like fighting
Speaker 1: with the unions, and the understanding is that like they
Speaker 1: will be partners in the airline business. Once it gets
Speaker 1: back on the black, but Lorenzo doesn't sign anything with Hook,
Speaker 1: like it's a handshake deal. And so as soon as
Speaker 1: the airline's making money again, Hook is like, well, yeah,
Speaker 1: now we're running this together. And Lorenzo's like, what do
Speaker 1: you mean what do you mean you thought you know, you.
Speaker 2: Thought a handshake deal meant anything?
Speaker 3: Nah? Bro, No, that wasn't even that wasn't even to
Speaker 3: like seal the deal. I was like, I see you
Speaker 3: later put her there and then yeah, laugh had nothing
Speaker 3: to do. No, dude, it's not even legal.
Speaker 1: And it's because Hook has a lot of money. They
Speaker 1: go to court over this, and like a lot of
Speaker 1: the case winds up being around how he had used
Speaker 1: the word partner in these conversations, and his argument is like,
Speaker 1: when I said partner, that was like a colloquial term.
Speaker 1: It's like, buddy, yeah, yeah, exactly, how do you partner?
Speaker 2: We're a Texas partner, you know.
Speaker 3: Yeah. I feel like this we can go into business partner. Yeah,
Speaker 3: that's kind of what he does. He could be my
Speaker 3: business partner. Wait, so I could be your business or
Speaker 3: your business partner.
Speaker 1: So after he breaks the pilots union and he wins
Speaker 1: this fight, scandals start to erupt. That makes it clear
Speaker 1: how he had like done a lot of the business.
Speaker 1: So one of the things that he does in order
Speaker 1: to get investments is he like makes these deals overseas
Speaker 1: while the problems are happening with like in like Australia
Speaker 1: to like run a bunch of you know, get get
Speaker 1: a bunch of roots for Continental. And it comes out
Speaker 1: after the fact that like he had basically bribed the governor,
Speaker 1: the ceremonial governor of which is a thing that exists
Speaker 1: with free flights, in order to help him negotiate to
Speaker 1: get these roots. And then it came out with the
Speaker 1: judge the US the federal judge who'd ruled on their
Speaker 1: Chapter eleven case before it hit the Supreme Court. Right after,
Speaker 1: like the case goes Lorenzo's way, he quits being a
Speaker 1: judge and gets a job at the law firm that
Speaker 1: represented Lorenzo's companies. So like, yeah, this is all fine.
Speaker 3: Oh yeah, I mean yeah, I mean he's he's got
Speaker 3: all the right moves.
Speaker 1: Yeah, yeah, he's he's it's going well for a while,
Speaker 1: but more acquisitions followed, Like Frank kind of goes a
Speaker 1: little nuts after he wins this continental case, and like,
Speaker 1: you know, as as profits start to return, he starts
Speaker 1: getting more investments. There's a lot of you know, people
Speaker 1: are have a lot of confidence in him because he's
Speaker 1: this like union buster. So he's able to like basically
Speaker 1: work his way into taking over Eastern Airlines next, which
Speaker 1: is the number three airline in the country. So he
Speaker 1: is like, I send them like twenty percent or whatever,
Speaker 1: like one, yeah, one fifth of all air traffic in
Speaker 1: the United States is under Frank's personal control at this point.
Speaker 1: But also Eastern is like bleeding money, and all of
Speaker 1: his companies kind of are because after he's able to
Speaker 1: get these kind of like short term investments and shit,
Speaker 1: it becomes clear that like, well, he's just made his
Speaker 1: airlines a lot shittier like and nobody actually likes flying
Speaker 1: on them. So this again, it's the same thing that
Speaker 1: had happened like a couple of years earlier. Like he
Speaker 1: starts hemorrhaging money. And I'm going to quote from a
Speaker 1: write up on avgeehery dot com, Lorenzo was so heavy
Speaker 1: handed with subordinates at Eastern that in the end, the
Speaker 1: airlines employees basically put their own jobs on the line.
Speaker 1: To get rid of him when he first arrived. He
Speaker 1: tried to turn the company around by incessantly hammering the
Speaker 1: unions to make concessions. He enlisted the help of Eastern
Speaker 1: Airlines as managers who were company men, and enforced what
Speaker 1: some called abusive policies against employees. Workers were required to
Speaker 1: adhere to very strict rules, and we're up for lying
Speaker 1: about non existent medical conditions if they called in sick
Speaker 1: to work. So many machinists were accused of theft and
Speaker 1: or drug use that in one year alone, two hundred
Speaker 1: and sixty two unionized machinists lost their jobs. Psychological warfare
Speaker 1: was even waged on flight attendants who were forced to
Speaker 1: collect garbage on flights, a violation of their contract. What
Speaker 1: if a flight attendant refused to act as a garbage collector,
Speaker 1: they were fired on the spot for insubordination. So Eastern
Speaker 1: gets combined with Continental Frontier and People Express, and you know,
Speaker 1: it's one of those things where like his constant cost cutting,
Speaker 1: like he's looking great on paper for a while, but
Speaker 1: everything starts to fall out, fall apart after this, and Frank,
Speaker 1: you know, is squeezing these people too so much that
Speaker 1: like Eventually, the Eastern Airlines Machinist Union goes on strike.
Speaker 1: And up to this point, like nineteen eighty nine, every
Speaker 1: time the union employees had gone on strike against him,
Speaker 1: Frank had wound up just like beating the piss out
Speaker 1: of them. So he's pretty confident. George H. W. Bush's
Speaker 1: in the White House now, He's like, I got this stuff. Yeah, yeah,
Speaker 1: hold my beer. But Bush doesn't hold his beer. He
Speaker 1: refuse to. He refuses to create a mediation board. He
Speaker 1: basically says, no, the federal government's not getting in on this, Like,
Speaker 1: you're going to handle this alone. And this is when
Speaker 1: Frank thinks back to Andrew Carnegie. So he hires mercenaries
Speaker 1: in order to like escort his employees off the airfields
Speaker 1: when they try to lock down the airfields at gunpoint.
Speaker 1: Like he kind of goes like hard on this shit,
Speaker 1: but again without the government backing him, his heavy handed
Speaker 1: tactics fail. The pilots and the flight attendancy unions are
Speaker 1: so like horrified by what he is doing that they
Speaker 1: go on a sympathy strike. He hadn't thought this was possible.
Speaker 1: He thought he'd broken them enough that this wouldn't happen,
Speaker 1: but they ground his entire Like Eastern Airlines, the third
Speaker 1: largest airline in the US, is grounded right after he
Speaker 1: buys it, and this just causes a cascading like series
Speaker 1: of losses that sends him like bankrupts his companies right right. Obviously,
Speaker 1: Lorenz gets away rich, but he is his empire gets
Speaker 1: broken up and sold off, and like he gets forced
Speaker 1: out of aviation forever. Part of why is that, Like
Speaker 1: the Scandinavians buy Continental airlines, but they only do so,
Speaker 1: Like if the US government will agree to ban Frank
Speaker 1: from working in the airline industry for a decade, they're like,
Speaker 1: we'll pull your fat out of the fire, but you
Speaker 1: can't let this guy near an airline again.
Speaker 2: Shit.
Speaker 1: He tries two years later to create an airline called
Speaker 1: Friendship Airlines, but the Department of Transportation is like an
Speaker 1: absolutely not, like you nearly collapse the entire industry. We
Speaker 1: are never letting you anywhere near a fucking plane again.
Speaker 1: And so he just spends the rest of his life
Speaker 1: as a rich guy. He's got like a Capital VC firm.
Speaker 1: He still makes he's still alive, he still makes a
Speaker 1: lot of money, but he's not allowed in nearplanes anymore.
Speaker 2: Anyway. Oh yeah, now he's doing and look just he's
Speaker 2: doing venture capital.
Speaker 3: Yeah, he get private equity in private equity, as it
Speaker 3: always is.
Speaker 2: Because I guess it always is same.
Speaker 3: The thing I learned was always like, whenever you think
Speaker 3: of business is like shitty, it's and like you're like,
Speaker 3: but this business was like so big.
Speaker 2: What happened?
Speaker 3: It's usually because private equity just bought it. Yeah, and
Speaker 3: it's like slowly being all the good shit is being
Speaker 3: pulled out. There's no people working. So if you like
Speaker 3: when you go into like Toys r Us and looks
Speaker 3: like a fucking spooky ghost.
Speaker 2: Town, wasn't because like they were fucking up.
Speaker 3: I mean like I mean because they were profitable up
Speaker 3: until private equity bought them.
Speaker 2: Yeah, private equity starts following it out. Yeah, so it's good.
Speaker 3: Yeah, it is good. I wonder now I just want
Speaker 3: to know what fucking Frank Lorenzo was up to? Is
Speaker 3: have like Savoy Capital or whatever is fucking private equity
Speaker 3: firms up to.
Speaker 1: Yeah yeah, maybe that will be a story for another day.
Speaker 1: But today was the tale of why airlines.
Speaker 2: Be that way? Yeah? Why do they? Yeah?
Speaker 1: Anyway, you at anything to plug miles.
Speaker 3: Uh, just go at my of Gray wherever you see
Speaker 3: at based Yeah.
Speaker 1: Yeah, yeah, go to at miles of Gray. Listen to
Speaker 1: the daily Zeitgeist. Yeah, and uh, I don't know, Uh
Speaker 1: I probably I was going to make a joke about
Speaker 1: the pilots and the pipe bombs, but that's probably going
Speaker 1: to get.
Speaker 2: Us some trouble. Probably, Yeah, I would you still want
Speaker 2: to fly? Yeah?
Speaker 1: Yeah anyway, ad free. Cooler Zone Media whatever We're done later.
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