Relax TY, it's over.
By Ted Evanoff
[email protected]
December 16, 2004
ATA Airlines accepted Southwest Airlines' offer to buy six of its 14 gates at Chicago Midway, an attorney for rival bidder AirTran Airways said late Wednesday night.
ATA's decision must still be accepted by ATA creditors, the city of Chicago and U.S. Bankruptcy Judge Basil Lorch III.
If the deal is accepted, ATA would remain a national carrier at Midway rather than scaling back to a regional carrier, as proposed in the AirTran bid.
The decision appears to put the 7,700-employee Indianapolis airline on track to link tightly to the larger and more financially stable low-fare carrier from Texas.
Southwest would take a 27 percent stake in ATA and, with creditors, would have a say in naming its board and key executives, AirTran attorney Dick McGurno said.
ATA would remain headquartered in Indianapolis and operate as a publicly traded independent company.
ATA put its prized Midway gates up for sale in a bankruptcy auction as a way to raise cash so it could come out of bankruptcy and regroup as a smaller carrier.
Southwest would buy the six gates for more than $117 million, which includes a $30 million investment that represents 27 percent of ATA, McGurno said.
Southwest would also participate in a code-sharing deal that would enable passengers to buy one ticket and fly on either airline on certain flights from Midway.
While ATA would use the cash to regroup, it may scale back or defer the expansion at Indianapolis International Airport contemplated in the proposed deal with AirTran. Under that proposal, ATA would have sold off the Midway hub and focused its operations at Indianapolis.
Roxanne Butler, ATA investor relations specialist, said airline executives would probably make a public statement after Lorch's 9:30 a.m. hearing today in Indianapolis. She would not disclose the nature of the statement.
ATA executives could not be reached for comment Wednesday night. The company's lawyers declined to comment.
"It's all over," McGurno said about 10 p.m. Wednesday, after negotiations ended in the offices of Baker & Daniels, the Indianapolis law firm representing ATA. "We just congratulated Southwest and wished them the best of good fortune."
AirTran will receive a $3.5 million breakup fee from ATA for its efforts. The Orlando airline's offer as of the bid deadline Dec. 10 was $89.9 million for all 14 ATA Chicago gates plus slots at New York LaGuardia and Reagan National in Washington.
Southwest Chief Executive Gary Kelly on Tuesday described Southwest's bid as an effort to expand at Midway and also inject cash into ATA -- but not control the Indianapolis carrier. "We are not taking over ATA," Kelly said.
AirTran officials, however, drew a different conclusion.
"I don't believe it" when Southwest says it doesn't want control, AirTran marketing director Tad Hutchinson said. "From what was in that document, it looks to us like they want control."
Southwest's investment would amount to a 27 percent stake in ATA stock that Southwest could sell at a later date. AirTran's McGurno said this was scaled back from a 35 percent stake considered Tuesday.
Although such a stake would give Southwest one of the largest blocks of ATA stock and enable it to influence the board of directors, Kelly said ATA would remain independent and not be subject to Southwest's control.
"It's an effort to assist ATA and not take control of ATA," Kelly said.
Southwest's bid calls for ATA creditors to name a seven-member board in consultation with Southwest. The board would also appoint executives and, in the process, consult with Southwest on filling these positions: chairman, chief executive officer, chief operating officer, chief financial officer and chief restructuring officer or co-restructuring officers.
"Because we're putting money in, we're interested in the management team," Kelly said.
Kelly said he would prefer that ATA founder and Chairman J. George Mikelsons remain as chairman.
Southwest, which now operates 19 Midway gates, also would be interested in ATA's strategic direction in Chicago.
The Dallas airline's proposal would funnel passengers to ATA in Chicago under the code-sharing arrangement, which Kelly said could generate up to $25 million a year in new revenue for ATA.
It's a new direction for Southwest because ATA could also sell tickets to Southwest passengers in cities such as Boston and Dallas.
ATA flies to those two cities now from Midway, but Southwest does not.
Separately, Southwest rescinded a bid provision that called for a 15 percent to 20 percent reduction in labor costs at ATA.
Officials of the Air Line Pilots Association, which represents ATA's 1,100 pilots, have given tentative support to the Southwest bid
By Ted Evanoff
[email protected]
December 16, 2004
ATA Airlines accepted Southwest Airlines' offer to buy six of its 14 gates at Chicago Midway, an attorney for rival bidder AirTran Airways said late Wednesday night.
ATA's decision must still be accepted by ATA creditors, the city of Chicago and U.S. Bankruptcy Judge Basil Lorch III.
If the deal is accepted, ATA would remain a national carrier at Midway rather than scaling back to a regional carrier, as proposed in the AirTran bid.
The decision appears to put the 7,700-employee Indianapolis airline on track to link tightly to the larger and more financially stable low-fare carrier from Texas.
Southwest would take a 27 percent stake in ATA and, with creditors, would have a say in naming its board and key executives, AirTran attorney Dick McGurno said.
ATA would remain headquartered in Indianapolis and operate as a publicly traded independent company.
ATA put its prized Midway gates up for sale in a bankruptcy auction as a way to raise cash so it could come out of bankruptcy and regroup as a smaller carrier.
Southwest would buy the six gates for more than $117 million, which includes a $30 million investment that represents 27 percent of ATA, McGurno said.
Southwest would also participate in a code-sharing deal that would enable passengers to buy one ticket and fly on either airline on certain flights from Midway.
While ATA would use the cash to regroup, it may scale back or defer the expansion at Indianapolis International Airport contemplated in the proposed deal with AirTran. Under that proposal, ATA would have sold off the Midway hub and focused its operations at Indianapolis.
Roxanne Butler, ATA investor relations specialist, said airline executives would probably make a public statement after Lorch's 9:30 a.m. hearing today in Indianapolis. She would not disclose the nature of the statement.
ATA executives could not be reached for comment Wednesday night. The company's lawyers declined to comment.
"It's all over," McGurno said about 10 p.m. Wednesday, after negotiations ended in the offices of Baker & Daniels, the Indianapolis law firm representing ATA. "We just congratulated Southwest and wished them the best of good fortune."
AirTran will receive a $3.5 million breakup fee from ATA for its efforts. The Orlando airline's offer as of the bid deadline Dec. 10 was $89.9 million for all 14 ATA Chicago gates plus slots at New York LaGuardia and Reagan National in Washington.
Southwest Chief Executive Gary Kelly on Tuesday described Southwest's bid as an effort to expand at Midway and also inject cash into ATA -- but not control the Indianapolis carrier. "We are not taking over ATA," Kelly said.
AirTran officials, however, drew a different conclusion.
"I don't believe it" when Southwest says it doesn't want control, AirTran marketing director Tad Hutchinson said. "From what was in that document, it looks to us like they want control."
Southwest's investment would amount to a 27 percent stake in ATA stock that Southwest could sell at a later date. AirTran's McGurno said this was scaled back from a 35 percent stake considered Tuesday.
Although such a stake would give Southwest one of the largest blocks of ATA stock and enable it to influence the board of directors, Kelly said ATA would remain independent and not be subject to Southwest's control.
"It's an effort to assist ATA and not take control of ATA," Kelly said.
Southwest's bid calls for ATA creditors to name a seven-member board in consultation with Southwest. The board would also appoint executives and, in the process, consult with Southwest on filling these positions: chairman, chief executive officer, chief operating officer, chief financial officer and chief restructuring officer or co-restructuring officers.
"Because we're putting money in, we're interested in the management team," Kelly said.
Kelly said he would prefer that ATA founder and Chairman J. George Mikelsons remain as chairman.
Southwest, which now operates 19 Midway gates, also would be interested in ATA's strategic direction in Chicago.
The Dallas airline's proposal would funnel passengers to ATA in Chicago under the code-sharing arrangement, which Kelly said could generate up to $25 million a year in new revenue for ATA.
It's a new direction for Southwest because ATA could also sell tickets to Southwest passengers in cities such as Boston and Dallas.
ATA flies to those two cities now from Midway, but Southwest does not.
Separately, Southwest rescinded a bid provision that called for a 15 percent to 20 percent reduction in labor costs at ATA.
Officials of the Air Line Pilots Association, which represents ATA's 1,100 pilots, have given tentative support to the Southwest bid
