Md. officials close to deal with Lorenzo New no-frills airline may use BWI as hub

February 12, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer

Maryland officials are close to a final agreement with airline executive Frank Lorenzo to use Baltimore-Washington International Airport as the hub for a new no-frills airline, according to State Transportation Secretary O. James Lighthizer.

Reports emerged last week that Mr. Lorenzo, the controversial former chairman of Texas Air Corp. and now head of Savoy

Investment Co. of Houston, was planning to start a new airline that would fly from either BWI or Washington Dulles International Airport to Northeast cities.

Yesterday, Mr. Lighthizer said state officials have been negotiating for five months with Mr. Lorenzo and Stephen J. Kolski, a Lorenzo ally who recently resigned as president of Continental Express and is expected to head the new airline.

He said the state was offering them a package that includes sharing the cost of marketing and advertising the new airline.

"We're in the final stages of negotiating an agreement that will lead to the Savoy group bringing a new carrier to BWI," Mr. Lighthizer said.

He would not, however, comment about when the new carrier would start operating or how many flights it would initially offer. Bill Mosely, a spokesman for the U.S. Department of Transportation, said yesterday that neither that agency nor the Federal Aviation Administration had received an application to operate, as required by law.

Mr. Lorenzo, who could not be reached for comment yesterday, would only say last week that Savoy was considering an investment in several start-up airlines.

The new carrier would likely fly from Baltimore to New York and Boston, offering low fares and no frills, much like Southwest Airline, the only major domestic carrier which has made money in recent years.

It would apparently resemble Mr. Lorenzo's earliest ventures in the airline industry when he aggressively marketed cheap fares on Texas International Airlines, a small carrier which flew from Houston to BWI and other airports.

Mr. Lorenzo, who became widely known for his strong-arm tactics with labor, was ultimately pushed out of the business by unions and his creditors. Continental filed for bankruptcy in 1990 after Mr. Lorenzo sold his stake in the company.

Labor unions, who bitterly remember his management style at Eastern and Continental Air lines, vowed last week to oppose his re-entry into the airline business.

Mr. Lighthizer said a new carrier could increase the volume of passengers at BWI, which has seen its domestic passengers drop steadily in recent years as its predominant carrier, USAir, has cut flights.

"If they come here and they're successful and grow, you're literally talking about a couple thousand jobs for the area," he said.

Mr. Lighthizer said the Lorenzo group had been eyeing airports at Atlanta and Dulles but found BWI more attractive.

1% "BWI is an underutilized airport.

It's very, very user friendly and strategically located," he said. Among other things, the airport opened a new $30 million parking garage across from the terminal last year.

BWI was also seen by many as a more likely choice than Dulles because the new carrier would prefer to compete with USAir than United, which operates a hub at Dulles. In the past two years, USAir departures at BWI have dropped to 192 a day from 249, and the airline has replaced some jet service with smaller commuter flights.

"They [the Lorenzo group] thinks there's a vacuum at BWI and they can fill it," said Mr. Lighthizer, noting that several major airlines have added flights at BWI since USAir began cutting back.

"It's clear to me there is a substantial market for this kind of airline," he said.

Despite poor economic conditions, starting a new airline would be timely. There are plenty of excess planes and workers available as airlines, faced with record losses, have trimmed service and laid off employees. "It's a perfect time," said Mr. Lighthizer, "to get into the airline business."

Analysts said a new carrier would significantly undercut fares. That would be good news for BWI passengers, but bad news for USAir, which has lost nearly $1 billion in the past four years. Last year, fierce fare wars accounted for a significant portion of the $1.2 billion losses in the U.S. airline industry.

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