In Business This Week: HEADLINER: DAVID HINSON
FORCED LANDING FOR THE FAA'S BOSS?
The nation's chief airline cop may not survive the May 11 ValuJet crash. Federal Aviation Administrator David Hinson is under fire from consumer advocates, Congress, and from within the FAA for not taking a tougher stance to ensure safe skies.
Hinson is an ex-CEO of the now-defunct Midway Airlines and a former McDonnell Douglas vice-president. He is also an advocate of the FAA's dual mission to promote air travel and monitor aviation safety--a mission now being questioned. He says he doesn't plan to stay long: "I only promised to stay one [Presidential] term." But growing concerns about aviation safety could force him out sooner. Says Gordon Johnson, president of the union that represents FAA inspectors, "He has to choose between two masters: The public wants safety. Airlines want profits."
Confidence in Hinson fell further when he did not share with Congress a May 2 FAA report showing the accident rate of low-cost airlines--except Southwest--is four times that of the major carriers. Now his reticence may come back to haunt him.EDITED BY KELLEY HOLLAND By Christina Del ValleReturn to top
BANKING ON A BANKER'S BANK
JUST WHEN YOU THOUGHT IT might be history, Bankers Trust is back. On May 22, the bank announced that it has agreed to pay an undisclosed amount for Wolfensohn, the boutique investment bank headed by Paul Volcker. Bankers Trust has been trying to rebuild its business and its reputation after settling several lawsuits brought by disgruntled customers of its derivatives business. Teaming with former Federal Reserve Chairman Volcker should help. "I do not think Paul Volcker at this point in his career would join the board of a company that is in any way a question mark," says David King, Putnam Investments' senior portfolio manager. Putnam is Bankers' largest shareholder.EDITED BY KELLEY HOLLANDReturn to top
DARK DAYS FOR EUROTUNNEL
THERE'S STILL NO LIGHT AT the end of Eurotunnel. Finance Director Graham Corbett will retire in June, leaving the operation with two vacancies on the board. That news came just days after 800 shareholders held a protest opposing a plan to convert some of the $12 billion in Eurotunnel debt into shares. Eurotunnel lost $1.4 billion last year and has suspended interest payments on its debt. Under the plan, banks would end up controlling 49% of the operation, a formula Eurotunnel rejects. Next problem: Co-Chairman Alastair Morton retires this fall.EDITED BY KELLEY HOLLANDReturn to top
PUNISHING PUNITIVE DAMAGES
CONGRESS AND THE WHITE House have punted on tort reform, but the U.S. Supreme Court on May 20 handed business a victory in its long-lived campaign for smaller court awards. The justices ruled that a $2 million punitive damage award by an Alabama court to compensate a doctor who unwittingly bought a new BMW 535i sedan with retouched paint was "grossly excessive." Business didn't get everything it wanted from the ruling, however: Lower courts will still have to hash out specific criteria for calculating punitive damages.EDITED BY KELLEY HOLLANDReturn to top
THIS TAX CUT MAY RUN OUT OF GAS
DON'T COUNT ON THE 4.3 cents-A-gallon gas tax cut to last much past the election. The bill that was passed by the House on May 21 rolled back the gas tax only through December. And while congressional Republicans insist that their goal is to keep the tax cut intact for the next six years, they have no room in their budget proposal for such an initiative, which would cost a total of $28 billion. Congressional Republican officials concede that the 4.3 cents tax will almost certainly be restored at yearend. Total value of the temporary relief to the average American: $16.EDITED BY KELLEY HOLLANDReturn to top