ATA Airlines yesterday filed for bankruptcy, beset by a familiar litany of problems -- high fuel prices, intense competition and costly lease payments on its aircraft.
The Indianapolis-based carrier also said it has agreed to sell its hub at Chicago's Midway Airport to AirTran, one of its major competitors, for $87.5 million. That would give Orlando-based AirTran a second hub and strengthen its position against Southwest Airlines.
Like other airlines operating in bankruptcy, AirTran said it will maintain its full flight schedule and honor its frequent-flier commitments. The tenth-largest U.S. airline by traffic, ATA joins United, US Airways and Hawaiian Airlines in bankruptcy. Delta Air Lines is trying to avoid a bankruptcy filing.
ATA is the first major low-cost airline to seek bankruptcy protection. It has long been hobbled by its costly leases, estimated to be about $100 million per year over prevailing market rates. That's one of the things the carrier hopes to fix during its stay in bankruptcy court.
Besides its Midway assets, ATA will turn over its slots at New York's LaGuardia and Washington's Reagan National Airport to AirTran and will fly 15 of its aircraft on AirTran's behalf for six months. ATA and AirTran also say they intend to create a marketing and code-share alliance.
ATA has not arranged financing during bankruptcy but chairman J. George Mikelsons said the AirTran deal would provide an immediate cash infusion while he lines up financing elsewhere.
Taxpayers will be footing some of the bill. Like US Airways, ATA was one of the airlines to receive loan backing from the Air Transportation Stabilization Board after the 9/11 attacks. The board guaranteed a $168 million loan ATA took out in 2002 and will allow ATA to use some of that cash while it works on new financing.
ATA lost $90 million in the first half of this year on revenue of $778 million.