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Lorenzo-founded Airline Rejects Rehearing Offer

March 31, 1994

NEW YORK (AP) _ An as-yet flightless airline started by Frank Lorenzo rejected a government offer of new hearings on its application Thursday and claimed the Clinton administration has improperly stonewalled the effort.

If the Department of Transportation turns down ATX Inc.’s year-old request for an operating certificate, the company plans to appeal the decision to federal courts, said Steve Kolski, president of the company.

An administrative law judge has already recommended the government nix the proposal.

The Houston-based company, which wants to fly up and down the East Coast offering cheaper fares than most existing carriers, has already spent nearly $1.5 million trying to get approval, Kolski said.

The department offered the new hearings after concluding there could be an appearance of bias in the process. A brother of one of the government’s lawyers is a member of the Air Line Pilots Association, a chief Lorenzo opponent.

Kolski said he hopes the administration will approve the application in light of a stack of documents that ATX says proves the decision to hold the unusual new hearings was politically motivated. ATX plans to distribute the documents among members of Congress with hopes of srirring up some political support of its own, Kolski said.

Agreeing to a second hearing would amount to ″legitimizing a flawed process,″ the company said. Kolski also said a lack of any forseeable end to the administrative process prompted the company to pass on the government offer.

Central to ATX’s argument is the assertion that Transportation Secretary Federico Pena made the decision to hold the hearings, a step the company says violated department rules intended to insulate the process from political concerns.

The Department of Transportation responded Thursday afternoon with a statement saying Pena and the department ″have acted completely within the letter and the spirit of all applicable laws and regulations.″

″The suggestion that evidentiary hearings were undertaken for any reason other than fairness and protection of the public interest is without foundation as well,″ the statement said. It added that the department’s inspector general had found ″no evidence of actual bias or lack of impartiality in the conduct of the ATX hearing.″

Opposition to the company, which plans to adopt a catchier name if it gets approval to fly, has stemmed from Lorenzo’s contentious history with labor unions.

That history dates to 1983 when he took Continental Airlines into bankruptcy court, allowing the company to void its labor contracts. Most notoriously, Lorenzo was running Eastern Airlines when Machinists union members struck the carrier. Eastern later died in bankruptcy court.

Lorenzo recently announced he was bringing in new investors to ATX and would reduce the stake he and his family hold from 77 percent to about 30 percent, the largest single interest. Lorenzo would remain as a board member of the company.

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