ATA Holdings Corp., an airline which has been operating under bankruptcy protection for about a year, has reached an agreement to repay creditors using $130 million from investors including Southwest Airlines Co.

Southwest will receive 27.5 percent of the company's stock once it exits bankruptcy in return for a $30 million investment. Southwest purchased ATA's leases for gates at Chicago's Midway Airport and other rights for $117 million last year. The $30 million investment is part of the $117 million payment.

ATA, based in Indianapolis, will continue flying to Hawai'i from western cities and providing charter service to the U.S. military. Roughly two-thirds of the airline's creditors must vote in favor of the plan before it can be considered by the court. By filing the plan yesterday, ATA is in position to end the bankruptcy case late this year or in early 2006.

ATA "believes that the plan provides the best recoveries possible to claim holders," the company said in papers filed with the federal Bankruptcy Court in Indianapolis.

Under the terms of the accord, secured creditors will be fully repaid in cash or new notes. Unsecured creditors will receive a portion of the company's common stock. The airline hasn't disclosed how much unsecured creditors will be paid. All existing equity will be canceled and shareholders won't receive anything.

In addition to the Southwest investment, ATA is in negotiations to obtain an another $100 million cash investment, the airline said in court papers.

"We continue to be encouraged by these meetings," ATA spokeswoman Michelle Foley said. Foley declined to name the prospective investors.

ATA filed for bankruptcy in October 2004 after struggling with high fuel costs, a drop in U.S. fares and flight disruptions during four Florida hurricanes.