Family Airlines Gets Ultimatum From the DOT: Michaels Must Go : Aviation: The fledgling carrier is warned it won’t get off the ground with its present owner.

A former Los Angeles businessman who has sought to create a coast-to-coast discount airline has been ordered by the Department of Transportation to give up control and ownership of the carrier.

Federal regulators issued the order late last week after reviewing numerous lawsuits and judgments against Barry Michaels, chairman of Las Vegas-based Family Airlines, and his wife, Holly, a company director. If the Michaelses fail to comply with the order by Friday, the DOT said, it will not allow Family Airlines to operate.

Michaels, who moved to Las Vegas late last year, was unavailable to comment. An airline spokesman said it was unclear how Michaels would respond to the order.

In a letter to Family’s lawyers, the DOT said: “In this case, because of the serious questions about the reliability and credibility of the company’s principals, as matters now stand we would be unable to recommend a favorable fitness determination for Family Airlines as long as the Michaelses continued to be involved with the company.”

Such a finding would be of considerable concern to about 100 pilots who invested up to $50,000 each to help start the airline. After several postponements, Family--which drew widespread attention with a plan to sell Los Angeles-New York round-trip fares for $249 without restrictions--has yet to begin flying.

Michaels, a former chiropractor in the San Fernando Valley with no previous airline management experience, has been sued several times over business practices and is the subject of outstanding judgments in Southern California, according to lawyers and legal documents. In a statement last year to the DOT, Michaels denied he had been charged with deceptive or unfair business practices or had outstanding judgments.

A separate Federal Aviation Administration review would be put at risk if the DOT found the Michaelses unfit.

“If the DOT finds that their president and officers are not worthy, then we are not going to issue them an operating certificate,” FAA spokesman Fred O’Donnell said.