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Transportation Department Judge Deals Blow To Lorenzo’s Airline Plans

December 23, 1993

WASHINGTON (AP) _ Former Texas Air Corp. Chairman Frank Lorenzo’s plans for a new low fare airline were dealt a major blow Wednesday when a Transportation Department judge said Lorenzo’s airline is unable to show it has the skill or technology to do the job.

Associates of the airline entrepreneur said Lorenzo is the victim of a smear campaign by unions and of an unfair review process.

An administrative law judge, Richard L. Barton Jr., recommended for a second time that Lorenzo’s ATX Inc. be denied a license. Department officials, who have three and one-half months to act, are expected to make the recommendation final.

Richard Danforth, a spokesman for Lorenzo, said the process lacked impartiality.

Danforth said the brother of a key department employee involved in the process is a former pilot for Eastern Airlines, once headed by Lorenzo.

″We feel there is no conflict of interest,″ replied Bill Mosley, a department spokesman.

ATX President Steve Kolski said Lorenzo has been maligned unfairly. Airline unions are trying to ″pressure Washington decision makers into stopping the man most responsible for bringing the benefits of deregulation to the American people,″ Kolski said.

Barton said ATX failed to show it has the skill, technology and will to comply with federal laws and regulations. Barton said Lorenzo and his associates have enough money to run the airline.

Barton on Sept. 8 said that ATX should be denied a license because the airline defied judicial orders and filed ″frivolous and vexatious″ motions in its application for federal approval.

But Transportation Department officials ordered the judge to take a second look at the case because the record was incomplete.

A lawyer appointed by the Transportation Department to represent the public interest said Dec. 3 that ATX lacks managerial capability and a willingness to obey rules that the public interest requires of an airline executive.

A member of the lawyer’s staff, William Wagner, is a brother of a former Eastern pilot.

Lorenzo proposed in March to launch Friendship Airlines - later renamed ATX - along the East Coast. He controls 77 percent of the new carrier. ATX would fly between the Baltimore-Washington area, Boston and Atlanta.

In the 1980s, Lorenzo ran Eastern and Continental airlines under the umbrella of Texas Air Corp., once the nation’s biggest airline operator.

Barton presided at hearings in June but adjourned them before completion, warning he would throw out Lorenzo’s bid unless there was more cooperation from ATX.

Unions led the effort to deny Lorenzo’s bid to start up the new carrier. They portrayed Lorenzo as a greedy destroyer of airlines. Years before Lorenzo acquired Eastern, he took Continental Airlines into bankruptcy court where he was able to void union contracts.

But Lorenzo has said the charges are unfair and that he cut labor costs in an effort to save the airlines he headed.

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