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Case Study On Personality

Frank Lorenzo had a lifelong dream of owning an airline. He started an airline consulting firm and took control of a small regional airline, which he successfully ran. He then took over Continental Airlines in 1981. As the aggressive and determined leader, Lorenzo aimed to cut costs, especially high labor costs. He asked unions to negotiate lower wages, but they refused. In 1983, he declared bankruptcy to break contracts and hire non-union workers at lower costs. However, when he later acquired Eastern Airlines, strong unions there opposed his tactics and the airline ultimately shut down.

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Anand Choubey
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2K views3 pages

Case Study On Personality

Frank Lorenzo had a lifelong dream of owning an airline. He started an airline consulting firm and took control of a small regional airline, which he successfully ran. He then took over Continental Airlines in 1981. As the aggressive and determined leader, Lorenzo aimed to cut costs, especially high labor costs. He asked unions to negotiate lower wages, but they refused. In 1983, he declared bankruptcy to break contracts and hire non-union workers at lower costs. However, when he later acquired Eastern Airlines, strong unions there opposed his tactics and the airline ultimately shut down.

Uploaded by

Anand Choubey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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CASE STUDY ON PERSONALITY

Frank Lorenzo had a dream from the very childhood to own an


airline. He grew up in New York city in the shadow of LaGuardia
Airport, became fascinated with the airline industry and vowed
one day to be an owner of a major airline.
He and a friend invested $25000 each in 1969 to start an airline
consulting firm called Jet Capital. In 1971, they took control of a
small, regional airline known as Texas International. He was
successful in running this airline and was able to take over a
major carrier, Continental Airlines in 1981.
Being an aggressive and determined decision-maker, Frank
Lorenzo decided to streamline the operation of Continental
Airlines. He authorized a detailed and an-alytical study of its cost
structure and concluded that the overhead costs were 0too high,
specially the labor costs. His study indicated that the labor cost
for US Airlines were about 20% higher than the comparable labor
cost of International Carriers. He decided to take steps to lower
the labor costs.
Frank Lorenzo asked the labor union to negotiate lower wage
rates in order to make Continental Airlines more competitive. The
unions refused. Lorenzo was adamant and stuck to his position
that labor costs had to be reduced and he refused to consider
other options. In a bold move, in 1983, Lorenzo declared
bankruptcy for Continental Airlines to break the existing labor
contracts and employ non union workers at a much lower cost.
Even though the labor became enemies, he was able to hire new
employees and with lower labor costs, Continental was able to
reduce fares and increase its market share rapidly.
In 1986, Lorenzo made a series of bold moves and acquired
peoples Express Airlines, Frontier Airlines and Eastern Airlines,
that was one of the largest airlines in America. Eastern Airlines, at

this time, was having its own trouble with its labor unions & these
unions were very strong and enjoyed tremendous power in
negotiating settlements with the management. Lorenzos
acquisition of Eastern Airlines made the unions even more
determined to get what they wanted.
During negotiations, virtually every concession he requested from
labor was denied. The unions went on strike in 1989. Lorenzo,
once again, took Eastern Airlines Bankruptcy, hoping to repeat
the success of Continental experience. It did not work. The unions
were too strong. Eventually, his control of Eastern Airlines was
taken away from him by the courts. In 1990, he also relinquished
Texas Air & in Jan 19 91, Eastern Airlines was shut down once and
for all.
In a bold attempt to come back into the airline industry, Frank
Lorenzo applied to start another airlines named ATX to serve east
coast point from Washington area. His bid has been opposed by
the unions who consider him as a destroyer of airlines. His bid
may or may not be approved but he has become the most
controversial and perhaps most disliked person in the airline
industry because of his management tactics in managing an
airlines.

Questions:
1. Discuss the personality traits of Frank Lorenzo and establish
whether he is a Type A or Type B personality.
2. How did the attitudes of both Lorenzo & the Unions affect the
operations of Eastern Airlines?
3. If you were hired as a consultant and an arbitrator to handle
the dispute at Eater Airlines, what recommendations would
you provide to solve the problem amicably?

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