Posted on: Saturday, December 11, 2004
Southwest joins ATA fray
By David Koenig
Associated Press
DALLAS — The bidding war for bankrupt ATA Airlines' assets heated up yesterday when Southwest Airlines offered at least $100 million in cash and loans for gates at Chicago's Midway Airport and an alliance with ATA, its main rival there.
Michael Conroy • Associated Press Southwest is seeking to upset the bid of another low-cost carrier, AirTran Airways, a unit of Orlando, Fla.-based AirTran Holdings Inc., which offered about $90 million for many of ATA's assets.
Southwest wants six of ATA's 14 gates at Midway. AirTran is seeking all 14 to add to its current two gates, and it wants ATA landing slots at LaGuardia and Reagan airports to fly from Chicago to New York and Washington. ATA has 343 daily flights to more than 40 cities, including Honolulu and Kahului, Maui, and it employs about 6,000 people.
Southwest and ATA are the biggest carriers at Midway. If Southwest gets six of ATA's gates, it would control 25 of the airport's 43 gates and have an alliance with ATA, which would operate eight others.
AirTran charged that was too much control for one carrier.
"We believe this is a clever trick to eliminate competition at Midway Airport," said the AirTran spokesman, Tad Hutcheson. He hinted that the airline might complain to federal antitrust regulators.
A federal bankruptcy court judge in Indianapolis is scheduled to review the bids Monday and pick a winner Thursday. ATA filed for bankruptcy protection in October.
J.P. Morgan airline analyst Jamie Baker said Southwest was "seemingly offering more for less," but that AirTran's offer was better than it appeared because it proposed to lease some ATA aircraft and crews and maintain the planes. He predicted AirTran would likely prevail, but it may get less than it wants, perhaps eight Midway gates instead of 14.
Southwest shares slipped a penny to close at $15.71 yesterday on the New York Stock Exchange, near the high end of their 52-week trading range of $12.88 to $17.06.
AirTran shares lost 29 cents, or 2.6 percent, to close at $10.70 on the NYSE. The stock has traded in a 52-week range of $9.37 to $15.56.
Kelly said in an interview that Dallas-based Southwest would file a bid yesterday that included about $50 million for ATA assets and a loan of about $50 million to help keep ATA in business. Kelly said Southwest would be interested in converting the loan to stock if ATA is able to reorganize successfully.
"They're in bankruptcy and the risk is high we won't get repaid on the loans," Kelly said. But even if ATA were to default on the loans, the addition of the six gates would make the deal worthwhile to Southwest, he said.
Southwest and ATA would also form an alliance by adopting a so-called code-sharing agreement on flights between Chicago and nine other cities. Southwest would be able to sell seats on those ATA planes as if they were Southwest flights.
Southwest chief executive Gary Kelly said the bid represented the only way that his company could meet its top goal of expanding in Chicago. He said Southwest's proposal would let ATA Airlines Inc. still operate at Midway but with fewer gates.
The battle for the assets of ATA Airlines expanded yesterday when Southwest Airlines offered at least $100 million in cash and loans for six gates at Chicago's Midway Airport and an alliance with ATA.
