Family Airlines Still on Ground

Family Airlines gained widespread attention last year when it announced plans to offer Los Angeles-New York round trips for $249 without any restrictions.

But several months and delays later, the Las Vegas-based airline has failed to get off the ground, and now the Federal Aviation Administration has stopped processing Family’s application to begin service.

In addition, Barry Michaels, the Los Angeles businessman who founded Family and serves as its chairman, has been plagued with numerous lawsuits, bankruptcy proceedings and troubled business affairs.

Michaels’ previous financial and legal problems--and his lack of airline experience--raise questions about his ability to get the airline up and running. Family has already passed a federal examination of its financial backing, but officials have now asked for more information about Michaels’ legal troubles. Michaels could not be reached for comment.

Despite the current delays, Family--which had initially planned to begin flying in December--now anticipates service to begin May 1, pending government approval. Spokesman Alan Loflin said the airline will soon start flight tests of a leased 747 jet and expects to take delivery of a second jumbo jet within a few weeks.

Family’s advertising agency, Los Angeles-based Fotouhi Alonso Advertising & Marketing, said it is also proceeding with developing a $5-million campaign for the firm.

“We have had no problems,” said Steve Elson, executive vice president at Fotouhi. “They are a very good client.”

FAA spokesman Fred O’Donnell said the agency stopped processing Family’s application after the carrier failed numerous times to provide information on maintenance procedures and manuals. “We have been waiting for it for some time,” O’Donnell said.

Family Airlines executives met with FAA officials in Las Vegas to clear up the matter, which company spokesman Loflin described as a “communications glitch.” The company will now provide the FAA with the necessary documents, he said.

Family is also providing the Department of Transportation with additional details about any legal actions Michaels has been involved in during the last 10 years. In a copy of a DOT questionnaire supplied to The Times, Michaels in July denied having been charged with deceptive and unfair business practices or being subject to outstanding judgments.

But Michaels, a former chiropractor, and his companies have been named in lawsuits that go back several years. A few days before Michaels signed the questionnaire, an Encino hair and skin care firm--Ele Katel--operated by Michaels was sued for failing to pay rent on its Ventura Boulevard offices.

Also last July, a Los Angeles couple sued Michaels and Ele Katel to reclaim the $70,000 they had paid to become distributors and an additional $15,000 in expenses. The couple--Marcus and Linda Harrel--received only a small amount of the products they were supposed to receive, said their attorney, Howard M. Zelener. Michaels has agreed to pay back the $85,000.

“They gave him plenty of time to perform,” said Zelener. But he said Michaels maintained at the time that his company was “insolvent and not able to perform.”

Michaels also filed for Chapter 7 bankruptcy protection in 1982, claiming more than $800,000 in debts and $272,000 in property. Another of Michaels’ companies--Carress Products International, a Huntington Beach cosmetics firm--filed for Chapter 11 bankruptcy protection a few years later, but a deal was worked out with creditors and the filing withdrawn, said lawyer Samuel Cubete.

“He had an awful lot of obligations and not much income or assets,” said Cubete, who has not spoken to Michaels for several years. “He was very disappointed when it did not work out. He seemed to have a good sense for these products, but, obviously from these lawsuits, it wasn’t a good sense for business.”