U.S. rejects Lorenzo bid to start discount airline

April 06, 1994|By Suzanne Wooton | Suzanne Wooton,Sun Staff Writer

The U.S. Department of Transportation yesterday rejected an application by Frank Lorenzo to launch a new discount airline, ending a bitterly contested yearlong effort by the former airline magnate to return to the industry.

In its final decision, the department said Mr. Lorenzo's record fails to demonstrate a serious commitment to safety or a willingness to comply with federal regulations.

Mr. Lorenzo was the former chairman of Texas Air Corp., which owned both Eastern and Continental Airlines.

rTC While both airlines were controlled by Mr. Lorenzo, they "experienced operational, maintenance and labor-related problems that were among the most serious in the history of U.S. aviation," the department said.

"These problems resulted in an extraordinary level of federal oversight to ensure the public's protection," the agency wrote.

It said the Federal Aviation Administration had found repeated violations of maintenance regulations at Eastern and found that the carrier's pilots were pressured to fly aircraft that needed maintenance.

The Houston-based ATX called yesterday's decision a "political payoff" to organized labor, particularly airline pilots, who had bitterly opposed the application.

The company said it will appeal today to the U.S. Court of Appeals in Washington.

The Air Line Pilots Association applauded the government's ruling yesterday but said Mr. Lorenzo should not blame unions for his failure.

"Although organized labor has been embroiled in numerous battles with Lorenzo, it was not the actions of the unions that brought about his downfall," said association President Randolph Babbitt. "It was Lorenzo's own history that finally caught up with him."

Mr. Lorenzo applied more than a year ago to start ATX Airlines. He initially had planned to operate the carrier from Baltimore-Washington International Airport to Boston and Orlando, Fla., offering discount fares that he said were sorely needed along the East Coast.

In trying to make a comeback, Mr. Lorenzo had become a lightning rod to many who argued that he symbolized the greed and mismanagement that weakened airlines in the 1980s.

At one point, Mr. Lorenzo's empire encompassed 20 percent of the domestic airline industry, including Continental, Eastern, New York Air, People Express Airlines and Frontier Airlines.

Only Continental, now in its second bankruptcy reorganization, remains, and Mr. Lorenzo no longer has any involvement with that airline.

In an effort to diffuse the criticism about his control of ATX, Mr. Lorenzo reduced his 77 percent stake to a minority interest. But the Transportation Department said yesterday that he had founded the company, provided the initial financing and had hired key personnel.

Amid intense political and labor opposition, the Transportation Department ordered a highly unusual administrative hearing last spring to evaluate ATX's application. Yesterday's decision had been expected ever since an administrative law judge recommended against Mr. Lorenzo last fall.

The Transportation Department last week offered to conduct a second round of hearings after ATX complained that a brother of one of the government's lawyers is a member of the Air Line Pilots Association.

But ATX rejected that offer, saying it already has spent at least $1 million fighting to get a certificate to operate and that agreeing to a second hearing would amount to "legitimizing a flawed process" in which the Clinton administration was allowing labor unions to call the shots.

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