Discounter ATA Files For Bankruptcy

October 27, 2004

Discounter ATA Files For Bankruptcy
October 27, 2004 – On Tuesday low-cost Indianapolis-based air carrier ATA filed for bankruptcy reorganization, after reportedly losing $90 million in the first half of 2004.

ATA cited rising fuel costs and intense fare competition for its court-protected reorganization.

In an official statement issued by the airline, president, chairman and CEO, George Mikelsons wrote, "Excess capacity, extremely high fuel prices and declining fares have meant that all airlines, low-fare and legacy carriers alike, have to re-examine their business."

United and US Airways have also filed for bankruptcy protection this year.

ATA claims that business will continue as usual and that it will stand by its customer commitments, honor all tickets, uphold its full flight schedule, in-flight services and frequent flyer reward programs. The airline says it can continue operating on cash from ticket sales and government-backed loans, while it continues to seek an outside financier to back it during reorganization.

USA Today reports that 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 Tuesday to scrutinize proposed ATA asset sales for their potential impact on taxpayers.

USA Today also reports that in conjunction with the filing, ATA has reached an agreement with AirTran Airways, Inc. in which AirTran will assume ATA’s flight operations, gates lease, and routes in Chicago Midway Airport as well as arrival and departure slots at LaGuardia Airport and Ronald Reagan Washington National Airport. The agreement, which is subject to approval by the city of Chicago, will take effect in the coming months.

Bankruptcy law requires ATA to consider rival bids, and other airlines have expressed interest. America West Airlines confirmed it had been in discussions with ATA, and remains interested.

"A combined America West and ATA may ultimately offer more value to employees, customers and creditors," said spokeswoman Elise Eberwein.

AirTran says it will look "very seriously" at hiring some of ATA’s 3,200 workforce in Chicago. ATA’s pilots union chief, Erik Engdahl, called the filing "a sad day" adding, "with some of the lowest costs in the industry, labor expenses can’t be blamed for this airline’s breakdown."