St. Louis Post-Dispatch from St. Louis, Missouri • Page 7

7 SEP 2 7 1383 bnsinessthe economy 10A Sept. 27, 1 983 ST. LOUIS POST-DISPATCH Leonard Silk Eastern t's Cut Pay Or Else ay Economics: A View From Wonderland tiff II 1. 1 I in MIAMI (AP) Only two days after Continental Airlines filed for bankruptcy reorganization and shed its unions, Eastern Airlines Chairman Frank Borman said his company would be forced to close or reorganize if workers don't accept 15 percent wage cuts. In a videotaped message to 37,500 employees, Borman said Monday that the Miami-based carrier's dim financial picture required drastic and immediate action.

"He told them we have three choices," said Richard McGraw, Eastern's senior vice president for corporate communications. "One is to shut the airline down, one is to file a Chapter 11 bankruptcy petition and try to operate like Continental Airlines, and the only really viable option is to approve a 15 percent wage cut." Meanwhile, in Houston, Continental prepared to resume operations today with a schedule trimmed from 78 U.S. destinations to 25 and special one-way fares of $49 on all non-stop domestic flights through Friday. The airline has laid off 65 percent of its 12,000 workers and cut in half the sFaced with $650 million in debts, Continental filed for bankruptcy Saturday and suspended most flights and eliminated some. The move followed the carrier's unsuccessful 18-month attempt to gain work rule changes and pay reductions worth $150 "We could not continue to go the way we were going.

The company would have run out of money by the end of the year," said Continental Chairman Frank Lorenzo. Under the new plan, pay for veteran pilots was cut almost in half from $83,000 to $43,000 per year. Flight attendants had their salary cut from an average of $28,000 to $15,000 a year and ticket agents from $9 an hour to $7.50 an hour. Continental's filing was the second of a major U.S. carrier, with Texas-based Braniff International going to bankruptcy court last year.

Borman's latest statement to employees he has repeatedly called for wage concessions was greeted with doubt by the head of the flight attendants local. "Whether this is the time he means it or not, I don't know," said Patricia Fink, president of Local 553 of the Transport Workers Union, which AP Continental Airlines President Frank Lorenzo gesturing as he answers a question at a news conference Monday in Houston. represents Eastern's 5,800 flight'1 attendants. "Threats cannot and will not solve the problems we have. The only way is if management and the union work together to reach a solution," she said.

The flight attendants are currently negotiating with Eastern on a new contract and have set a strike deadline of midnight Oct. 12, at the end of a 30-day cooling-offperiod. The company's 3,980 pilots have presented the board of directors with a vote of no confidence in Borman and his management team, and Eastern's 12,500 machinists, who settled their contract earlier this year after protracted talks, also have rejected pressure for wage cuts. Eastern suffered a $106 million loss in the first seven months of this year. Although traffic was up 5 percent in July and 3 percent in August, it has remained inadequate, analysts say.

Eastern sustained a net loss of $74.9 million in 1982 on operating revenues of $3.77 billion. It blamed the recession and fare discounting. Company officials said he set a deadline of Oct. 12 the date the cooling-off period in the flight attendants' negotiations ends for acceptance of the new pay cuts by all employees. Continental Airlines President Frank Lorenzo said Monday in Houston that he is confident a reorganized airline will succeed.

"We are very optimistic and very enthusiastic about our future," he said. "Now that costs are firmly under control, we can compete and build a Continental Airlines that our founders and everyone associated with us can be proud of." The airline had filed for reorganization under Chapter 11 of the federal bankruptcy law after posting losses of $471.9 million since January 1979. Representatives of the carrier's flight attendants and pilots have denounced the filing as a ploy to void union agreements, but said Monday that they had no plans to strike or picket Continental when it resumes operations. Henry A. Duffy, president of the Air Line Pilots Association, said the unions will fight the airline in bankruptcy courts and added that he expected the public's doubts to hinder the airline's return.

"I want to counter the idea that everything is going to go smoothly tomorrow or that anybody is going to; be on those airplanes," Duffy said at news conference Monday. Although Continental cut its fares this week to $49, and then to $75 from Saturday through Oct. 15, it was not accepting telephone reservations for flights this week. All reservations made previously for this week were valid, the airline said, but no refunds will be issued during the startup period. Instead, a program will be announced shortly that will provide ticket holders with future travel credits, it said.

Diversified Industries Tells Court Of Losses British Caledonian, Ozark Team Up For Non-Stop Flights To London 1983, New York Times Newt Service In 1922 British economist D.H. Robertson published a little book called "Money," that made him famous because of his use of quotations from Lewis Carroll's "Alice" books as chapter headings. The connection between Alice in Wonderland and economics was no accident, no mere whimsy on Robertson's part. Carroll, who was a professor of mathematics and a most original logician, knew the slipperiness and arbitrariness of applying words and scientific models to the confusion of the social world. Carroll in fact appears to have been an amateur of economics.

In the first chapter of "Through the Looking Glass and What Alice Found There," he writes that Alice had never in all her life seen such a face as the White King made "when he found himself held in the air by an invisible hand" an ironic reference no doubt to Adam Smith's most famous metaphor. Kings, presidents and the rest of us are still astonished or even outraged when we discover what the invisible hand of the market can do us in working its miracles. Because Robertson is no longer alive, it must fall to other hands to demonstrate to rising generations the continued relevance of "Alice" to economics. Here are some notes on the meaning of "Alice's Adventures in Wonderland" today: It was high time to go, for the pool was getting quite crowded with the birds and animals that had fallen into it: There was a Duck and a Dodo, a Lory and an Eaglet, and several other curious crea tures. Alice led the way, and the whole party swam to the USEFUL FOR the meeting in Washington of the International Monetary Fund and the World Bank.

All the countries, debtor and creditor, are in the Pool of Tears together. Somebody, meaning the United States, must lead them out of it. But that is not to say that the others will listen to the leader. When the bedraggled creatures gathered ashore for a consultation on how to dry out, the Lory, a small parrot, turned sulky and would only say to Alice, "I am older than you, and must know better." "The cause of lightning, "Alice said very decidedly, for she was quite sure about this, "is the thunder no, no!" she hastily corrected herself, "I meant the other way." "It's too late to correct it," said the Red Queen: "When you've once said a thing, that fixes it, and you must take the consequences." ONCE THE financial markets are convinced that the growth of the money supply determines the growth of the economy, that fixes it, and there is no point in trying to regulate anything but the money supply. Similarly, once you say that deficits don't cause inflation, don't cause high interest rates, in short don't matter, you can't say deficits do matter, and start raising taxes.

It's too late; you must take the consequences. Well, then the books are something like our books, only the words go the wrong way. Everything is reversed now that we are on the other side of the looking glass. A strong recovery is bad for the stock market, a weak recovery is good for the stock market. For with a strong recovery, the Federal Reserve will have to tighten the money supply and interest rates will rise, but with a weak recovery, the Fed can ease up and interest rates will decline.

"Will you walk a little faster?" said a whiting to a snail. "There's a porpoise close behind us, and he's treading on my tail." UNLESS THE European economies grow faster, unemployment will increase, because productivity is rising and the labor force is growing faster than real output. This is a better quotation than the one about Alice's running to stay in the same place, for the level of unemployment, with different rates of real economic growth, may increase, decrease or remain the same. 'Twas brillig, and the slithy toves Did gyre andgimble in the wabe. EXPLAINING the poem "Jabberwocky," Humpty Dumpty said a word like slithy, meaning lithe and slimy, was a "portmanteau there are two meanings packed into one word." Hence, stagflation stagnation plus inflation.

The important thing is to see stagflation as one state, not two states, requiring a different treatment from stagnation or inflation alone. Robert Triffin, professor emeritus at Yale, prefers a different portmanteau: infession, a combination of inflation and recession, suggesting a different diagnosis, with inflation coming first. "When I use a word," Humpty Dumpty said, "it means just what I choose It to mean neither more nor less." 'Tis so," said the Duchess, "and the moral of, that is, 'Oh, 'tis love, 'tis love, that makes the world go "Somebody said, Alice whispered, "that it's done by everybody minding their own business!" "Ah, well! It means much the same thing' said the Duchess. MORE ECONOMIC philosophy by Adam Smith out of, as they say at the race track, Ronald Reagan. Champions of the poor, blacks, women and the jobless disagree.

This could be a major issue in the electoral campaign of 1984. recylcer of copper telephone wire for Nassau, a subsidiary of Western which is in turn a subsidiary of Diversified operated three plants, including one in Hazelwood that employed about 80 people, to "chop" wire in a mechanical process that separates the insulation from the metal. Diversified pioneered the development of the process. From 1974 to 1976, Harlan said, executives of Western and Nassau repeatedly "misled Diversfied into thinking that the business relationship would continue just as it had in the past." Instead, in 1976 Nassau began building its own wire-chopping plant. The defendants then used their influence to guarantee that the Bell Operating Companies sold their scrap to Nassau rather than Diversified, the suit alleges.

Diversified closed its plants, in 1977, idling about 200 workers. By Paul Wagman Of the Post-Dispatch Staff Diversified Industries Inc. lost about $80 million for the period 1977 to 1987 because the American Telephone and Telegraph Co. drove it out of the copper wire recyling business, an attorney for Diversified claimed Monday. Attorney David Harlan made the assertion in his opening argument in Diversified's antitrust suit against and two subsidiaries, Western Electric Co.

Inc. and Nassau Recycle Corp. The suit, filed five years ago, finally went to trial Monday in the court of U.S. District Judge H. Kenneth Wangelin.

A six-member jury was selected Monday morning. The suit seeks $100 million in damages for St. Louis-based Diversified. Because antitrust violations are alleged, the actual award would be trebled. Diversified once was a major programs designed to stimulate interest in the flights A "two-for-the-price-of-one" first class ticket deal.

A reduction of $540 on the round-trip "Super Executive" business class fare. A new midweek fare offering a savings of $200. An auction of 50 economy seats on the first four non-stop flights to the highest bidder. Those seats normally are available for no less than $579. The announcement culminated the work of city officials who visited London last month in an attempt to prevent British Caledonian from pulling out of St.

Louis. At the time, the airline was considering the move because of lack of interest here. For a while, British Caledonian had non-stop flights to London, but those ended last year. St. Louisans using British Caledonian now have to go through Atlanta on the way to London.

"With extensive experience of working alongside other major U.S. airlines, it is not unreasonable to expect a substantial increase in traffic as a result of our new agreement with Ozark Airlines," Thomson said. "Although St. Louis will continue to provide the greater proportion of traffic on the route, the development and growth of feeder traffic from points in the Midwest is vital to the long-term future of St. Louis as a connecting point to Europe." Schoemehl, who helped put together the agreement, called it a positive step for the city.

"This will be marketed as not just non-stop to London, but also as one-stop to Europe," Schoemehl said. "This will enable British Caledonian to really serve the Midwest." The two airlines will conduct an $850,000 advertising campaign in the St. Louis area and key points in the Midwest. Thomson announced several By Gregory B. Freeman Of the Post-Dispatch Staff British Caledonian Airways and Ozark Airlines have announced an agreement joining the networks of both airlines in St.

Louis. As a result, British Caledonian will resume non-stop flights from St. Louis to London Oct. 23. The announcement was made by Mayor Vincent C.

Schoemehl British Caledonian Chairman Sir Adam Thomson and Ozark President Edward J. Crane. The agreement links Ozark's 61-city network with British Caledonian's St. Louis-London route and destinations in Europe, Africa and the Middle East. St.

Louis will be the hub for many of those flights. "We think this agreement makes St. Louis immediately competitive with Chicago and New York, without the hassle of Chicago and New York," Thomson said. The Biggest Name in Little Computers! Falcon Misses Mark On Profit Prediction 1 I I I Hi SERVICE i TRAINING SALES i LEASING AiaeK RS-8(T "STARTER" C0MPIT Cassette-Based 16K Model 4 tflfieffi Iff -1 didn't explain the reference to lower sales, despite the improvement from last year. Falcon lost $3.1 million in its last fiscal year and $177,000 in the first quarter of this year.

In an interview in February, Franklin A. Jacobs, chairman and chief executive, said that the company had shown a profit in January and that he expected it to continue to make money the rest of the year. Falcon later reported a loss for the second quarter, ended April 30, of $394,381, or 25 cents a share. Falcon said that because of its third-quarter losses, it has taken "significant steps to tighten its operations and further reduce overhead, including a restructuring of. its plant management in St.

Louis and Greeneville, Tenn." Falcon also said it has refinanced its long-term bank debt under an arrangement that results in increased availability of borrowed funds and the removal of certain restrictions on its operations. Falcon is a manufacturer of equipment and furnishings for the contract furniture, food-service, health care and industrial material handling markets. By Paul Wagman Of the Post-Dispatch Staff For the second consecutive quarter Falcon Products Inc. has registered a loss after it had predicted a profit. The company said it it lost $1,595,991, or $1 a share in the third quarter ended July 31.

In the same period last year, the company lost $1,692,865, or $1.06 a share. Sales in the three months ended July 31 were $7,719,569, a 14.4 percent increase from the year-ago level of $6,749,523. In a statement accompanying Falcon's second-quarter earnings report in June, President Robert M. Clark said the improvement in the general economy "should result in profitable operations for the company during the third and fourth quarters of fiscal 1983." But in a statement accompanying the third-quarter report, the company said a combination of factors had caused it to experience red ink results. The statement cited "a combination of the effect of lower sales levels, a loss experienced on the sale of the company's Philadelphia plant and expenses incurred; in restructuring Falcon's bank debt." The statement SSQW ill ftrt rft 7SS AS LOW AS J45PER I MONTH Self-Contained Monitor and Deluxe Keyboard Are Built-in.

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In Milan, the dollar opened at 1,606.75 lire compared to 1,601.45 at Monday's close. The pound was down in London, opening trading at $1,502 against Monday's $1,504. LONDON (UPI) The U.S. dollar, driven by higher Interest rates, opened higher on European markets today, but gold prices declined. Gold opened at $414.50 an ounce in Zurich, compared to Monday's close of $416.50.

In London, bullion opened down to $414,125 from $415,625. In Zurich, the dollar jumped from 2.14175 Swiss francs at Monday's close up to 2.147 francs on opening. The Check Your Phone Book for the Radio hack Store or Dealer Nearest You PRICES APPLY AT PARTICIPATING STORES AND DEALERS A DIVISION OF TANDY CORPORATION.