LAX Commission Postpones Vote on Van Concessions

With a standing-room-only crowd of angry shuttle van operators looking on, the Los Angeles Airport Commission on Tuesday postponed voting on a plan to award exclusive shuttle concessions to LAX’s two largest operators amid concerns that one may be operating without proper state licensing.

Commission President Daniel Garcia tabled the vote based on an April 2 letter from the California Public Utilities Commission, which regulates all ground transportation at the state’s airports.

He said the letter raises “serious legal and regulatory questions” about the licensing status of Prime Time Shuttle, a passenger van company that an influential airport staff committee has recommended win one of the contracts. Coincidentally, the PUC is conducting hearings all this week in Los Angeles to sort out which entities, if any, in Prime Time’s complicated ownership web need to obtain regulatory approval to operate.

Prime Time has defended its business practices.

The vote postponement is a small victory for the mom-and-pop operators of shuttle vans at LAX, who had expected the commission to rubber-stamp the staff committee’s recommendation to award the concessions to Prime Time and Phoenix-based SuperShuttle Inc. Most small operators oppose the airport’s new permit plans, saying they would be forced out of business and that consumers will have to pay higher prices.

It also raises questions about why airport officials are pushing to award a contract to Prime Time, a company that has been battling with state regulators for several years and that has experienced financial and operating difficulties as well.

“Why does the airport favor Prime Time when more qualified companies are being turned down? That’s what we want to know,” said Roger Moradi, general manager of Xpress Shuttle of Los Angeles. “We’re putting a lot of pressure on them to find out.”

The latest salvo in Los Angeles International Airport’s long-running shuttle wars stems from a move by airport officials to thin the crowd of shared-ride van companies operating at LAX.

Citing concerns about air quality, traffic snarls, lousy service and overzealous competition for passengers, LAX last year announced plans to boost its standards while reducing the number of van companies to a maximum of four full-service firms, down from the 38 currently vying for customers at the nation’s third-busiest airport.

LAX put the concession out for bid, with the requirements that operators own at least 50 vans, guarantee the airport a minimum of $1 million annually and meet a raft of other standards involving training and service quality. Shuttle companies not selected would still be free to drop off travelers at LAX, but they could only pick up passengers who have made previous reservations with their firms, a requirement that would have the effect of shutting them out of the walk-up business that is many small operators’ bread and butter.

Faced with losing that critical “free call” business, small companies scrambled to team up in consortia to have a shot at winning one of the contracts. Thus there was outrage last week when the airport staff committee disclosed that it was recommending only SuperShuttle and Prime Time, which already operate more than half of the 600 vans licensed to do business at LAX.

Dozens of operators and their families packed the hearing at LAX on Tuesday, eager to protest the staff committee’s decision before the full commission. They didn’t get their chance because the board postponed its vote, so they vented their frustration outside in the lobby instead.

There, with television cameras rolling, they peppered a hapless Prime Time driver with questions about whether the company has a valid license from the PUC, loudly heckling him to “tell the public the truth.”

Meanwhile, in a hearing at the State Office Building on Broadway in downtown Los Angeles, Administrative Law Judge Patricia Bennett was listening to arguments about whether Prime Time’s supervising corporate entity--Valencia-based Freehold Inc.--needs a state permit to operate, in addition to the PUC licenses required for the company’s three known franchisees.

Freehold, launched by Prime Time founder John E. Kindt Jr., is at the center of intensive state regulatory scrutiny, partly because another of Kindt’s corporations, Prime Time Shuttle International Inc., had its state operating license revoked in August after a protracted battle with the PUC over labor practices, accounting procedures and auditing.

Prime Time has sued the PUC, alleging malicious prosecution. The suit is pending.

Kindt declined to comment, but attorney John DeBrauwere, who represents an independent shuttle driver whose attempt to buy a Prime Time franchise is at the heart of the case, said Freehold needs no licensing because it is simply a franchiser, not an operator.

But Moira Simmerson, an enforcement supervisor with the PUC, argues otherwise. She and PUC attorney Cleveland Lee have alleged that Freehold has enough control over its franchisees to warrant licensing.

Among the issues Simmerson and Lee brought before Bennett on Tuesday were Freehold’s insistence that all franchisees use a common phone number and that the corporation insisted on being able to transfer money from franchisee bank accounts.

“The question before the PUC is: ‘Who is conducting the operation?’ ” Simmerson said in an interview before the proceeding. “If this is really something being controlled, managed, operated and directed by John Kindt using Freehold Inc. . . , then that entity needs a state license. Without it, it’s violating state laws.”

DeBrauwere put franchise consultant Jerome Cole on the witness stand to testify that such actions are not unusual in franchising.

Prime Time International in 1996 overcame PUC challenges to its practice of hiring independent owner/operators instead of employees. However, last summer, the PUC, citing allegations of accounting irregularities and the company’s refusal to submit to an audit, revoked Prime Time International’s permit.

Citing what it called Prime Time’s “utter indifference to its responsibilities,” the commission said last summer that it would be leery of granting future permits to Prime Time, its successors or any other “entity controlled by the people that have controlled or operated Prime Time.”

Because a PUC license is required to operate a shuttle service at LAX, Prime Time’s application for the airport concession could be in jeopardy if the judge finds that Freehold has substantial control over its franchises. Testimony in the hearing is expected to run through Friday; Bennett could not say when to expect a decision.

Its battles with state regulators notwithstanding, Prime Time has a history of financial difficulties. Bankruptcy Court documents indicate Prime Time International emerged from Chapter 11 bankruptcy protection last April. What’s more, the company has been the target of more than $560,000 in federal, state and county tax liens since 1994. The most recent was a state tax lien filed Jan. 9 for $1,619.

Industry watchers say Prime Time has experienced operating difficulties as well.

Michael Field, former general manager of Shared Ride Management, the entity that coordinates shuttle service at LAX, said a number of Prime Time customers were left stranded at the airport curb last summer, victims of a disagreement between Freehold and its franchisees.

Field said drivers for the franchises told him they refused to pick up Prime Time passengers who had prepaid their reservations, because those funds were going directly to “corporate,” which was not properly reimbursing the drivers, many of whom are independent contractors. Field said he and his staff were left to deal with the angry customers and find alternative transportation for them.

“Prime Time for many years was a fine operator, but I witnessed a disintegration of their service in 1997,” Field said. “I don’t see how [airport officials] couldn’t be” aware of the problems.

Airport officials contend the staff committee selected Prime Time for its “very good” proposal.

“We were aware that they did some restructuring,” said LAX spokeswoman Cora Jackson-Fossett. “The bottom line is that they met the terms of the proposal and submitted information that determined they have the ability to meet all the criteria listed in the concession agreement.”

The Airport Commission will take up the issue again soon.