Office Tragedy

The death of a chairman

Continental Airlines Chairman Alvin Lindbergh Feldman, 53, worked for several hours with an aide Sunday, Aug. 9, in his office at the Los Angeles International Airport. The two men were preparing a press release to be published the next day announcing that nine banks had pulled out of a plan aimed at stopping a Texas International Airlines takeover of the company. The banks had changed their minds about making a $185 million loan to a group of about 11,000 employees who wanted to buy controlling interest in their ailing company. Without the loans, the takeover seemed inevitable. After finishing work, Feldman sat alone and wrote four letters: two to his attorneys, one to his three grown children, in which he mentioned the death of their mother last year, and one to his secretary telling her what to do with the other three letters. Then Alvin Feldman shot himself.

The Continental chairman had built up a reputation as one of the top executives in the airline industry. Only two months ago, Pan American Chairman William Seawell offered Feldman the Pan Am presidency, but Feldman declined. During nine years as chairman of Denver-based Frontier Airlines in the 1970s, Feldman transformed that carrier from a major loser to a consistent moneymaker by paring unprofitable routes, streamlining management and restructuring its flight operations.

When Feldman took over Continental in early 1980, it was a troubled airline. Although it had a good network of domestic and international flights, Continental had never fully recovered from a long strike in 1976. The company lost $13 million in 1979, more than $20 million in 1980 and $34.7 million for the first half of this year. Like many other carriers, Continental was also suffering from the tough competition set off by the deregulation of the airline industry and the high cost of jet fuel.

A merger looked like a good move, and Feldman started talking to Western Airlines, a regional carrier that flies in 15 states west of the Mississippi, Canada and Mexico. The two companies tried to merge in 1979, but the Civil Aeronautics Board at the time stopped them, arguing that such a deal would reduce air competition on the West Coast. But in March the CAB changed its decision and gave Continental and Western the go-ahead.

Then, just as the merger was about to take place, Texas International, led by its aggressive chairman Francisco Lorenzo, moved against Continental. Texas International had previously made unfriendly takeover bids on National Airlines and TWA.

Lorenzo quickly acquired 48.5% of Continental's stock. In one hectic day of trading, he bought 830,000 shares of Continental just 30 min. before the market closed. The Continental-Western merger was dead, and a bitter takeover battle between Continental and Texas International was under way. In April two veteran Continental pilots proposed that company workers buy a majority of the firm's stock through an employee stock-ownership plan. Though skeptical of the plan at first, Feldman soon threw his support behind it in a last-ditch effort to stop Texas International. Lorenzo immediately challenged the legality of the plan. But the courts rejected his case. Continental employees still had hopes for the plan they called "the answer to a prayer."

But all that was changed when the banks, led by the Security Pacific National Bank in California and the First National Bank of Chicago, backed out of their agreement to provide the money. The $185 million loan now looked too risky because of Continental's weak performance in the first half of the year, the poor health of the airline industry in general and the air-traffic controllers' strike.

A somber Continental board of directors last week named George A. Warde, 59, the former president, to succeed Feldman as chief executive officer. Meanwhile, Texas International is awaiting final White House approval of its takeover bid, which appears likely. Lorenzo intends to keep Continental a separate airline and a subsidiary of the parent organization, Texas Air Corporation. Continental employees last week were still trying to search for ways to block Texas International, but their chances looked very slim.

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