Critics try to keep Lorenzo grounded Defending his management, he seeks license for ATX Airlines

June 29, 1993|By Suzanne Wooton | Suzanne Wooton,Staff Writer

WASHINGTON -- Frank Lorenzo, the former airline magnate who has been vilified by labor unions and politicians alike as "the bad boy of the airline industry," came here yesterday to confront opponents who are fighting to keep him from re-entering the industry.

A trim, tanned Mr. Lorenzo testified for nearly five hours as attorneys for airline labor unions painstakingly depicted his tenure in the industry as a decade of mismanagement -- highlighted, they said, by bankruptcies, layoffs, bitter strikes and broken promises.

"The American people should not be subjected to the flimflam that continuously went on in breaking commitment to employees, to consumers and to creditors time and time and time again," said James Linsey, an attorney for the 44,000-member Airline Pilots Association.

Mr. Linsey's comments came during a break in the hearing before an administrative law judge on whether ATX Airlines, which is three-fourths owned by Mr. Lorenzo, should be granted a certificate to operate.

In trying to make a comeback, Mr. Lorenzo, who heads the Houston-based Savoy Capital Inc. investment firm, has become a lightning rod to many who say he symbolizes the greed and mismanagement that weakened airlines in the 1980s.

His critics argued yesterday that thousands of employees of Mr. Lorenzo's airlines lost their jobs and that others were left holding worthless stock.

But the 53-year-old Mr. Lorenzo described himself as a "hard-working man with a family who has tried to run good airlines."

In the audience yesterday were one of Mr. Lorenzo's teen-age daughters and his wife, Sharon, who teaches at the University of St. Thomas in Houston. The couple has three other children.

"I haven't had a perfect batting average," said Mr. Lorenzo, whose Texas Air Corp. included Continental Airlines and now-defunct companies like Eastern Airlines Inc., New York Air, People Express Airlines and Frontier Airlines.

"But there have been some successes -- witness Continental today," said Mr. Lorenzo, who no longer controls any airlines.

Established in the early 1970s, Texas Air was one of the first discount carriers, and it offered what was known as "peanut fares." Today, Mr. Lorenzo said, the public "is begging for an alternative discount airline service that doesn't require 14-day advance bookings and Saturday night stay-overs."

Mr. Lorenzo had hoped to begin operating daily service on ATX this summer, most likely out of Baltimore-Washington International Airport, to Boston and Orlando, Fla.

But intense opposition from labor unions and political leaders derailed those plans and prompted federal regulators to order the highly unusual hearing, which began yesterday and is expected to continue much of this week.

Saying the process was politically tainted, attorneys for Mr. Lorenzo last week asked a federal appeals court here to end the hearing and turn over the decision on the application by ATX, previously known as Friendship Airlines, to an independent party.

During the 1980s, Mr. Lorenzo emerged as a leading player in airline consolidation battles spawned by deregulation, leveraged buyouts and cost-cutting strategies. At one point, Mr. Lorenzo's holding company, Texas Air, controlled 20 percent of domestic airline service.

Today, only Continental remains, and it has just emerged from a second bankruptcy. In 1990, Mr. Lorenzo was removed as head of Eastern Airlines by a bankruptcy judge.

For months, Mr. Lorenzo has been uncharacteristically subdued, saying little about the planned new airline or the labor opposition.

But yesterday, while patiently answering pointed questions about his management style and tactics, he took numerous swipes at airline unions.

In 1981, Mr. Lorenzo's Texas Air Corp. acquired Continental in a hostile takeover, only to file bankruptcy a year and a half later.

"We went to Continental employees and explained the company had to change, that we were running out of cash," Mr. Lorenzo recalled, noting that the situation was not unlike Northwest Airlines' current predicament.

"At that time, no other major airline had filed bankruptcy," he said. "There was great risk, and we wanted to avoid it at all costs. But the unions wouldn't budge."

During a break in the hearing, Mr. Lorenzo said, referring to the pilots' union, "ALPA has made a symbol of Frank Lorenzo over the past decade."

The hearing will resume today with cross-examination expected from a lawyer for the federal Transportation Department.

Among other things, the lawyer is expected to focus on the high rate of consumer complaints against Continental and Eastern during the time they were controlled by Texas Air.

Tomorrow, Alfred E. Kahn, head of the Civil Aeronautics Board when the airline industry was deregulated in 1978, is expected to testify in favor of Mr. Lorenzo's application.

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