Former Texas Air Corp. Chairman Frank Lorenzo's plans for a new low fare airline were dealt a major blow recently 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 decisionmakers 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.

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