Barry Michaels’ first attempt to start a bargain airline ended with him being sued by investors, sanctioned by the SEC and ultimately receiving 21 months in federal prison on securities fraud and tax charges.
That was in the 1990s. Last week, Michaels once brought his idea to the Department of Transportation, seeking approval to fly giant 747s on domestic routes and offering bottom-dollar fares propped up by onboard advertising. He calls the company Avatar Airlines and is hoping to raise $300 million from investors to get it off the ground.
Michaels, a Las Vegas businessman, referred questions about the venture to Avatar’s chief legal officer, Michael E. Zapin. Zapin said he understands that people might have concerns about Michaels’ background but said that the idea for the airline is sound and that Michaels should be given a chance.
“What point is someone given a chance to make right? I don’t know? Is it a lifelong sentence?” Zapin said. “Should he be just shut down for the rest of his life?”
Avatar submitted a 450-page application to the Department of Transportation, outlining a business plan and the names of key executives who would run the company. Avatar pitches itself as an antidote to the downsizing and upcharging that has become common across the industry, proposing to fly 747s with space to carry almost 600 passengers in comfort and making almost every single surface inside and outside the planes available to advertisers. Fares would be as low as $19.
“Nothing will be sacred,” Avatar’s application reads. “Management even envisions patrons using the restroom and being ‘greeted’ by a named brand bathroom tissue company when they look inside the lid of the lavatory bowl.”
The Transportation Department has yet to respond to the application, but it turned Avatar down in 2017, after almost a decade of trying to get information from the company about its proposed operations, questioning its financial fitness and the experience of its proposed management team. Throughout the process, which began in 2008, officials expressed concern about Michaels’ past legal problems.
“The fact that you were convicted of securities fraud in connection with that prior application is especially troubling to us,” a Transportation Department official wrote to Michaels in 2009.
Henry Harteveldt, a travel industry analyst who has tracked Micheals’ efforts, said there is industry interest in starting new airlines – founders of JetBlue and Allegiant both have their own plans – but that he doubted Avatar would be a success.
“It’s a bad idea with bad management and doesn’t deserve to be funded,” said Harteveldt, president of Atmosphere Research.
(Michaels briefly attracted attention earlier this year when a case he filed seeking to have his gun rights restored was used to challenge President Donald Trump’s appointment of Matthew G. Whitaker as acting attorney general.)
Michaels first made an attempt to launch what was then called Family Airlines back in the early 1990s. At that point, he already had convictions for mail fraud and check fraud on his record.
As with Avatar, he pitched using 747s to offer low-cost trips and raised $3 million from pilots who paid in for a chance to fly with the company, the Los Angeles Times reported.
But investors sued, saying Michaels misused their money and he agreed to relinquish control of the company in 1993. Then, following an investigation by the Securities and Exchange Commission, a federal judge sanctioned Michaels in 1996, finding that “he had participated in the fraudulent offering of $5 million of unregistered stock.”
Michaels and his wife had used the investors’ money to make a $50,000 payment on their home, pay for membership at an exclusive country club, make lease payments on a pair of Mercedes and pay off debts, according to the SEC.
Ultimately, in 1997, Michaels was charged criminally and ultimately sentenced to 21 months in prison after pleading guilty to securities fraud and a tax charge.
Questioned in the 2008 application, Family Airlines wrote that Michaels’ record since getting out of prison, which included attending college and abiding by a family court order, was “ample evidence of Mr. Michael’s [sic] rehabilitation.”
Zapin acknowledged that “some people are going to look at it and say this guy isn’t entitled to another chance.”
But he said he hopes others will be interested, drawn in by the chance to try something new and the company’s vision for a different kind of air travel. The company currently has no aircraft but Zapin said its financial plans would work and challenged naysayers to take a close look at its numbers.
“It’s such a compelling concept,” Zapin said.
(c) 2019, The Washington Post · Ian Duncan
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