Posted on: Wednesday, October 27, 2004
ATA files for bankruptcy but vows budget airline to keep flying
By Chirs Woodyard and Dan Reed
USA Today
Low-cost carrier ATA filed for bankruptcy reorganization yesterday as part of a self-preservation bid that also calls for the No. 10 airline to hand off major operations in Chicago to discounter AirTran Airways.
Michael Conroy • Associated Press ATA — which joins No. 2 United and No. 7 US Airways in bankruptcy court — vowed to keep flying. It said it will honor all tickets. ATA will be retooled "into a refocused, streamlined and profitable airline," said CEO George Mikelsons, who founded ATA as an air travel club in 1972 and owns 69 percent of its stock.
ATA says it can continue operating on cash from ticket sales and government-backed loans. It continues to seek an outside financier to back it during reorganization.
ATA is obligated for $148 million in debt backed by federal loan guarantees authorized under a post-9/11 industry bailout. The U.S. Air Transportation Stabilization Board promised yesterday to scrutinize proposed ATA asset sales for their potential impact on taxpayers.
ATA has 343 daily flights to more than 40 cities, including Honolulu and Kahului, and it employs about 6,000 people. Key to the filing was the side deal with AirTran. It would pay $87.5 million for ATA's 14 gates at Chicago Midway, two gates at New York LaGuardia and one at Reagan Washington National.
Adding a Midway hub could relieve some of the competitive pressure on AirTran, which competes fiercely with Delta Air Lines in Atlanta. "This will give AirTran Airways a true national presence," said AirTran President Robert Fornaro. AirTran and ATA would coordinate flights in a code-sharing arrangement.
ATA would move its hub operations from Midway to Indianapolis, despite a challenge from Northwest Airlines, which plans to more than double its flight schedule there.
Bankruptcy law requires ATA to consider rival bids. America West Airlines confirmed that it has been in discussions with ATA and remains interested.
Despite wage concessions and some of the lowest costs in the industry, Indianapolis-based ATA lost $90 million in the first half of 2004. It cited rising fuel costs and intense fare competition for its court-protected reorganization. ATA has also been pinned down by $700 million in debt on 49 recently acquired aircraft, Boeing 757s and 737s.
ATA has 343 daily flights to more than 40 cities. Key to its bankruptcy filing is a deal with AirTran, which would pay $87.5 million for 14 ATA gates at Chicago Midway, two in New York and one in Washington.
