THE INTERVIEW: AVIATION ASSET MANAGEMENT CEO GLEN LANGDON! (PART 1 OF 3)

Mohave Airport, California

____________

What follows is one of the most unique Guests to be featured here on "THE INTERVIEW" and as I went to sleep last night, I kept thinking about how I would make this introduction. While I have requests out to Hollywood Actors and Musicians from the world of Rock and Country alike, GLEN LANGDON would be the first person to tell you that he was quite surprised, if not amused that I not only located him, but that I found him to be an interesting subject for "THE INTERVIEW".

_____

Originally, I contacted Glen in back in the Winter of 2002 when I was still broadcasting on CBS Radio in the Southwest. The November 2006 issue of AIRWAYS MAGAZINE (that I shamelessly promoted here on my Blogsite) contains my article, "The Estate of Eastern Airlines". As I shared with you last December, when my article on Rock Legend Rick Nelson's tragic aircraft fire and subsequent emergency landing appeared in AIRWAYS, the majority of my work at the magazine involves many hours of research, note taking, fact-checking and eventually of course, the write-up itself. It is a labor of love.

___

In the case of the Eastern Airlines story there were two components. FIRST, the history of events that led Frank Lorenzo to dismantle one-third of Eastern Airlines, one of the four original American "trunk carriers" (founded in 1928) during the most visible and widely felt labor battle in U.S. history. SECONDLY: I created what we journalists refer to as a "sidebar" interview with Glen Langdon. As you can only imagine, after four years and literally hundreds of "updates", my Editor-In-Chief John Wegg had the thankless task of receiving my "edited" copy: 5,000 words in length! His task was formidable--to say the least! There was simply no way to include Glen's interview about a curious entity the public hardly knew about called the ESLT (the Eastern Secured Liquidation Trust).

_____

This story was really quite dramatic! A nationwide sympathy strike by Railroad workers who sided with Eastern employees would have virtually ground all United States commerce to a halt. President Bush Sr. had an Emergency Order drafted to stop a potential nationwide work stoppage. And the reason for this was that Washington officials viewed this as a vicious war between Frank Lorenzo's Texas Air Corporation (now renamed Continental Airlines Holdings) and organized labor at Eastern that required more mediation. Lorenzo, who purchased Eastern in 1986 was as intransigent as the IAM (the mechanics union at Eastern). Even nemesis Carl Icahn called Frank and union representative Charles Bryan "two scorpions in a bottle". Lorenzo resigned in disgrace from Texas Air in 1991, after he was ruled "incompetent to reorganize Eastern's estate" by presiding bankruptcy Judge Burton Lifland. Meanwhile over at Continental Airlines, Gordon Bethune was eventually recruited after two previous short-term CEO's were unable to save Continental (at that time in its second bankruptcy). Today Continental is considered the finest among the U.S. "Legacy Carriers". Bethune, a fascinating man himself, became the last pre 9/11 CEO to retire two years ago after saving the carrier by rallying the teamwork of its employees (chronicled in his book "From Worst to First").

_____

Eastern Airlines was a familiar fixture to Americans in virtually every East Coast city and town, the Caribbean, Mexico, Latin America (from routes purchased in 1981 from bankrupt Braniff International) and briefly a route that was operated from Miami to London with DC-10's acquired from Alitalia.

_____

When Eastern was forced to suspend all operation on December 18, 1991 the services of Langdon Aviation Asset Management in San Francisco, California was engaged as the “Individual Trustee” to monetize and manage certain assets of Eastern’s secured bondholders. Considered insolvent with $1.2 billion in debt when it ceased operations, under the late Marty Shugrue's leadership Eastern's estate had raised and paid out a total of $3.6 billion to 26,000 former Eastern employees, 70,000 ticket holders, vendors and other creditors including secured creditors who were eventually paid in full. To this day, Shugrue's stewardship is widely hailed in business schools as a textbook example of reorganizing what became the most complicated bankruptcy case American business history. Flash Forward to the Winter season of 2002.

_____

My first telephone contact with Glen Langdon was short. A true "gentleman of the old school", Glen was almost incredulous that apart from some humorous stories of pilots he came into contact with, he just didn't see himself as interview material! But the more we communicated, I uncovered a story that was hardly a dry piece of business one would expect to read in TIME or NEWSWEEK magazines. Glen revealed a dangerous story that could have been turned into a script for a Bruce Willis "Die Hard" movie sequel! What follows is an unusual and I hope--an interesting chat with a man in a position that hardly ever attracts the public's attention. Until now. Glen's assignment as "Individual Trustee" was separate from John Sicilian, whom Marty Shugrue had hired from the Washington, D.C.-based firm of Verner Lipfert as Eastern's Chief Legal Officer in 1990. With the estate reorganized in 1995, Shugrue left his 5-year post to rekindle his long-held dream of restarting Pan American World Airways (1996-1998). In 1996, Trustee John Sicilian was succeeded by Ron Bevans who completed the sale of Eastern's name and logo--the "last pieces of the puzzle" this past July. As far as seeing a new Eastern? Bevans told me it was a done deal. "Yes, it's definitely going to happen. Unless you have the kind of capital JetBlue (New York City) had to get started, I think it makes more sense to find an airline---not over a certain size---currently operating and work out a transaction to re-brand it, and come up with a better business plan to get it flying in a new direction". And now "THE INTERVIEW".

_____

MM: Glen, my Bloggers are familiar with the concept of a Trustee who is appointed to airline companies operating under Chapter 11, such as Eastern and of late Hawaiian Airlines. What was your role as the “Individual Trustee” in the Eastern Secured Liquidating Trust?

___

Langdon: The role of a Bankruptcy Court-appointed Trustee at an airline operating under Chapter 11 bankruptcy protection (such as Marty Shugrue) is typically that of an informed but disinterested third party charged with responsibility to mediate between the various constituencies of creditors, management, and other stakeholders to develop a plan of reorganization for the airline which will permit it to exit bankruptcy with a credible prospect of survival. The judge in a bankruptcy case has the sole authority to appoint a Trustee to this kind of role and the Trustee is answerable only to the Court.

_____

MM: Okay, but help us understand how your role was different from Marty, John and later Ron?

_____

Langdon: By contrast, the type of Trustee role that I fulfilled at Eastern and at Kitty Hawk ( a cargo carrier that survived Chapter 11 last year) has roots established well before the event of airline bankruptcy concurrent with the placement of large issues of secured public debt in the form of secured bonds.

_____

MM: Now what are these bonds all about?

_____

Langdon: Most large airlines operating in the U.S. today, raise hundreds of million of dollars in public debt markets by issuing publicly traded bonds secured by first priority security interests in aircraft operating within their fleets. Usually about 50% of an airline's fleet is owned by the airline itself and in most cases is security to publicly traded debt - the other 50% is typically leased from third-party operating lessors.

_____

MM: Clearly, we're talking about billions of dollars for commercial aircraft. How are these bonds repaid?

_____

Langdon: Well, repayment of the bonds and the holding of the aircraft collateral is usually handled through a business trust structure under the supervision of an Indenture Trustee. The Indenture Trustee performs various administrative tasks associated with receiving payments from the debtor airline, allocating a portion of each payment received to each bond unit, distributing the payments to the bondholders, maintaining records of bondholders, maintaining and filing security interests, etc.

_____

MM: That's interesting and very meticulous. You know, I've seen tourists pull their cars over to the side of the road to try and photograph hundreds of parked commercial jets at Mohave Airport in California. And you know as well as I do that it's sort of an eerie sight to see jets in the liveries of popular airlines that they fly regularly with the engines plugged, the windows and doors covered with a preservative to air seal the planes from deteriorating in the dry desert. And it's a silent site that reminds many of the movie, "The Day the Earth Stood Still". Glen, some of my readers might wonder why so many jets are parked in storage like this?

_____

Langdon: When an airline files for bankruptcy protection under Chapter 11, the airline must determine if it has excess aircraft capacity. They have 60 days to either abandon certain aircraft which it owns or reject certain leased aircraft. Abandoned aircraft which are security to publicly owned bonds we just mentioned become the property of the Indenture Trustee. Rejected leased aircraft are returned to the various lessor/owners.

_____

MM: Right. So, the Chapter 11 filing really buys the airline some time to shed debt and that includes airliners they no longer need and need to dump to save money?

_____

Langdon: Exactly. In most cases, an Indenture Trustee is not equipped with the expertise to secure and manage the abandoned aircraft by selling or leasing the collateral aircraft to recover the maximum value for the secured bond holders. That's where I come in. I usually work with the Indenture Trustee as an advisor providing industry expertise during the early bankruptcy period. After the airline has made its determination to abandon or reject certain of its aircraft, the creditors usually want a well-defined plan under which the collateral aircraft, and any other claims against the bankruptcy estate, are monetized within a reasonable period of time. And, while title to the aircraft may remain with the Indenture Trustee (provided that the Indenture Trustee is a US person as defined by the FAA), a second Trustee is then appointed to monetize the assets of the Trust. That is what happened in the context of the Eastern estate. The Eastern Secured Liquidating Trust was created; title to aircraft and various other claims was contributed to the ESLT; Wilmington Trust was appointed as Corporate Trustee to hold title and to receive and disburse cash; I was appointed as Individual Trustee to manage and monetize aircraft, spare engines, and claims against Eastern Airlines, the original Pan Am, Midway, and Braniff Airways.

_____

MM: Alright. I'm with you. On February 6, 1995 you were retained to sell and lease aircraft engines, spare parts, equipment and machinery held by the Corporate Trustee. I've written marketing plans when I was in broadcast management. (Laughing) But I'm sure your job was a lot different in writing a marketing plan for selling off equipment that once belonged to an operating airline. How did you go about this?

_____

Langdon: I relied on over 25 years of experience in the aviation industry and specifically on the most recent 8 years which I spent at Concord Asset Management (a unit of HSBC Holdings) developing a portfolio of 154 commercial aircraft worth $1.8 billion that I leased to 36 airlines in 22 countries. HSBC wanted to exit its' aviation portfolio in 1993 in the wake of the Persian Gulf War, when the market was at the bottom.

_____

MM: I remember that. What a horrible time in the economy. Saddam Hussein had invaded Kuwait and the Persian Gulf War just decimated the finances of the airline industry.

_____

Langdon: That's true. And I was retained to manage the selling of the aircraft in the Concord/HSBC portfolio which I had built and so I had hands-on experience in monetizing aircraft assets under difficult economic circumstances. There are clear differences between what can be achieved under "normal" conditions where there is a reasonable balance of supply and demand in a stable market environment versus "abnormal" conditions which may have a limited marketing time period. Plus, there's the perception of the seller being under duress to sell which reduces the bargaining leverage of the seller and gives the buyer an advantage. I understood these issues.

_____

(Tomorrow Glen talks about the personal side of his job and kidnapping!)