Air Transport World

Eastern employe stock plan helps airline stay afloat. (Eastern Airlines)

Paternalism has marked the airline industry from its inception. Such a notion of management was the natural result in a business filled with individual entrepreneurs who felt their employes were part of a big family headed by the patriarchical founder.

The protection of regulation made such an environment easy to sustain. With a few exceptions, and despite the industry's maturation, modern airline managements maintained the founders' methods.

That is changing. The father-child, "I make the plans, you do the work" style of management is giving way in many industries, including the airline business. A combination of factors--primarily the need to cut costs and the need to motivate employes--has caused wholesale re-evaluation of how managers and employes deal with each other.

Various schemes are in effect, including profit-sharing, stock bonuses and encouragement of voluntary purchase of company stock. Such plans are not new, but their rate of usage has increased rapidly in recent years, both within and outside the airline business. These schemes are discussed in the story on p. 20.

None of them is so controversial within the airline community as the employe stock ownership plan (ESOP) under which employes obtain equity in their company.

The ESOP Association says there are 5,000 such plans in the U.S. The first was established in 1956. Most of them involve profitable companies which get a federal tax deduction for establishing an ESOP. That money may represent varying degrees of employe ownership and normally is used as a retirement fund. Most of the plans do not involve employe representation on the companies' boards of directors.

It was not until 1980, when Texas Air Corp. started its takeover of Continental Airlines, that the notion took root in the airline industry. At that time Continental tried to construct an ESOP in an unsuccessful attempt to stave off TAC's bid. Concept spreading

As we were preparing this issue of ATW the concept was spreading. Pan Am, Western and Aspen Airways had already estalbished ESOPs. Republic had reached agreement for such a plan with some of its employes; Continental was developing a voluntary, ESOP; and Eastern was working with four different employe groups to determine how they will handle the four stock trusts agreed to last winter. Eastern's size, combined with the percentage of employe ownership, the enormity of its debt and the vituperation surrounding last year's labor negotiations all make it a significant case study. …

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