All-Frills Airline Told to Halt Ticket Sales Amid Probes
Mar. 13, 1986
LOS ANGELES (AP) _ Regent Air, the all-frills airline that has lost about $36 million in its three years in operation, is under investigation for alleged misleading advertising and possible securities violations, officials say.
The Los Angeles-based carrier also was ordered by a New York judge to halt all ticket sales and to rescind any reservations that already have been made for flights to Hawaii it had hoped to begin next month.
The judge issued the order Monday at the request of the New York Attorney General's office, which accused Regent of false advertising, said Robert Roth, a New York assistant attorney general.
Roth said the court order won't be lifted until Regent can prove it can continue operations.
He said the company had advertised flights to Hawaii on its newly acquired Boeing 747, but the plane had been grounded for modifications. Regent officials said a slightly smaller Lockheed L-1011 was leased this week to provide the service temporarily, but New York officials question whether the company has permission to fly the jet.
''The company's ability to provide transportation to Hawaii seems tenuous to us,'' Roth said. ''They sold round-trip tickets and we want to make sure these people get their money back.''
Meantime, deputy California Attorney General Christopher Ames in San Francisco said his agency is investigating whether Regent violated securities law by using passenger ticket sales to fund ongoing operations in place of adequate capital.
''The passengers appeared to be lending them money with the possibility of getting to fly,'' Ames said.
Regent's chairman, Preston Tsao, had no comment on the allegations, but said the company has no plans at this time to go out of business or file bankruptcy.
Tsao said the company is now being run by a handful of workers ''on a voluntary basis.''
Regent Air offers pampered traveling to those rich enough to afford it, with free limousine service to and from the airport, private staterooms in its luxuriously remodeled jetliners, secretaries and fine food and champagne.
Initially the carrier sought one-way fares of $1,600 on its sole route from Los Angeles to New York. It has subsequently slashed that to $785 each way but has still been unable to attract enough passengers to cover costs.
Tsao, an investment banker, is a principal in Regent Tours International Inc., a New York-based firm that acquired control of Regent Air last September for an undisclosed price from J. Roger Faherty.
Faherty had bought the airline a year and a half earlier from its founders, brothers Clifford and Stewart Perlman, who had been unable to get an airline operating license from the federal government because of allegations that they had ties to organized crime.
The Perlmans formed the airline in 1982 after selling their holdings in Caesar's World Resorts because similar allegations kept that company from getting a gaming license in Nevada.