The NY Times is reporting that the Air Tran/ATA deal is far from done. It seems AWA still wants to bid on ATA and the court may be more inclined to go with AWA as it preserves jobs and protects the creditors.
By MICHELINE MAYNARD
Published: October 27, 20
ATA Airlines yesterday became the first major low-fare airline to seek Chapter 11 bankruptcy protection, a move that immediately set off a bidding war for the company and its assets.
The airline, a subsidiary of the ATA Holdings Corporation, said it would continue to operate normally, that all tickets would be honored, and that it would maintain a complete schedule of flights.
ATA, the 10th-largest carrier, said it agreed to sell gates and slots at Midway in Chicago, LaGuardia in New York and Reagan National Airport in Washington to AirTran, a low-fare rival, for $87.6 million. AirTran is the nation's 12th-largest airline.
Last night, America West, another low-fare company, said it was interested in bidding for all of ATA. The two airlines had discussed a possible merger in the weeks before ATA's bankruptcy filing yesterday.
A spokeswoman for America West said the airline was not ready to say what it would offer for ATA, which sought bankruptcy protection in federal court in Indianapolis, where it is based.
Meanwhile, industry experts said they expected other airlines, particularly Southwest Airlines, to jump in with their own offers for all or part of ATA.
Southwest expressed interest in the 14 gates controlled by ATA at Midway Airport, one of Southwest's hubs; ATA is the largest airline there. Any deal involving those gates would require approval by the city of Chicago.
The action by ATA could be followed by a similar filing as soon as today at Delta Air Lines, which has warned it could seek Chapter 11 protection, if pilots do not grant its bid for $1 billion in wage and benefit cuts. Talks between Delta and the Air Line Pilots Association recessed early last night, but are expected to resume today. Both the pilots' union and Delta did not comment on the status of the talks.
Any bidding war that breaks out for ATA could work to the advantage of taxpayers. The airline owes $140 million on a package of loan guarantees awarded by the federal Air Transportation Stabilization Board, which was created by Congress after the September 2001 attacks to oversee $10 billion in loan guarantees to the struggling industry.
By seeking bankruptcy protection, ATA technically defaulted on its federally backed loans, becoming the second airline to do so in six weeks. The other is US Airways, which filed for its second bankruptcy in two years on Sept. 12; it has a $717 million outstanding balance on its loan package.
Like US Airways, ATA did not obtain conventional debtor-in-possession financing, a standard feature of most bankruptcies.
Instead, ATA said it would operate from its available cash under an agreement with the loan board and its lenders, as the board and US Airways' lenders are allowing US Air to do.
ATA officials did not say how much cash the airline had on hand when it sought bankruptcy protection or how much the loan board and lenders were allowing it to use.
In a statement, the loan board said it "understands the issues confronting ATA and will work with the airline through the bankruptcy process to ensure that the taxpayers' interests are protected." It said the sale of any assets would be "closely scrutinized" to mitigate any additional risks to taxpayers.
The proposed deal with AirTran would begin to take effect later this year or early next year. Tad Hutchinson, a spokesman for AirTran, said he was not surprised to hear that other airlines were interested.
"These are valuable assets," Mr. Hutchinson said. "There may be other bidders that come after, but we think this is a good deal for AirTran, for ATA and for the city of Chicago."
ATA was not trying to put itself in play by announcing the agreement with AirTran, said its chief executive, George Mikelsons, who founded the airline as a travel club in 1972.
"We certainly have talked to a lot of carriers, but it's obvious from the direction that we took that of the offers on the table, AirTran's was the best," Mr. Mikelsons said in an interview last night.
But he said ATA had "a fiduciary duty to look at other competing offers" and would review any that the airline received. A final decision would require the approval of the bankruptcy court.
The loan board would be likely to play a role as well, especially if America West made the highest bid. It, too, has an outstanding package of federally backed loans worth $343 million, and the government also holds warrants that can be exchanged for America West stock.
In the meantime, ATA said it would continue to operate normally, including the flights it makes for the Pentagon. Last year, it was the biggest commercial airline transporting American troops and equipment to bases around the world.
Best known as a charter airline, ATA stepped up its commercial service throughout the 1990's. Its operations swelled four years ago, when it ordered 39 Boeing 737 jets, used for shorter flights, and 10 Boeing 757, used for medium-range flights.
The orders came shortly before the September 2001 attacks, which forced ATA to cut its operations by 20 percent. Nonetheless, the airline went on an expansion drive, adding international flights to vacation destinations like Cancún and Aruba, and adding business-class service on some flights.
Earlier this year, ATA said it was planning to start service to Europe sometime in 2005, which would have made it the first low-fare airline to fly across the Atlantic since Laker Air in the early 1980's.
But ATA's expansion was thwarted by skyrocketing jet fuel prices, and it suffered another blow in the summer, when service to Florida was disrupted by four hurricanes in six weeks.
Last night, Gil Viets, the airline's executive in charge of restructuring, said the bankruptcy filing was inevitable, given the combination of those circumstances, which he said have affected the majority of airlines.
"This isn't just happening to one carrier; it's happening to an industry," Mr. Viets said. "From that perspective, it would have been very very hard for us to avoid this situation."
By MICHELINE MAYNARD
Published: October 27, 20
ATA Airlines yesterday became the first major low-fare airline to seek Chapter 11 bankruptcy protection, a move that immediately set off a bidding war for the company and its assets.
The airline, a subsidiary of the ATA Holdings Corporation, said it would continue to operate normally, that all tickets would be honored, and that it would maintain a complete schedule of flights.
ATA, the 10th-largest carrier, said it agreed to sell gates and slots at Midway in Chicago, LaGuardia in New York and Reagan National Airport in Washington to AirTran, a low-fare rival, for $87.6 million. AirTran is the nation's 12th-largest airline.
Last night, America West, another low-fare company, said it was interested in bidding for all of ATA. The two airlines had discussed a possible merger in the weeks before ATA's bankruptcy filing yesterday.
A spokeswoman for America West said the airline was not ready to say what it would offer for ATA, which sought bankruptcy protection in federal court in Indianapolis, where it is based.
Meanwhile, industry experts said they expected other airlines, particularly Southwest Airlines, to jump in with their own offers for all or part of ATA.
Southwest expressed interest in the 14 gates controlled by ATA at Midway Airport, one of Southwest's hubs; ATA is the largest airline there. Any deal involving those gates would require approval by the city of Chicago.
The action by ATA could be followed by a similar filing as soon as today at Delta Air Lines, which has warned it could seek Chapter 11 protection, if pilots do not grant its bid for $1 billion in wage and benefit cuts. Talks between Delta and the Air Line Pilots Association recessed early last night, but are expected to resume today. Both the pilots' union and Delta did not comment on the status of the talks.
Any bidding war that breaks out for ATA could work to the advantage of taxpayers. The airline owes $140 million on a package of loan guarantees awarded by the federal Air Transportation Stabilization Board, which was created by Congress after the September 2001 attacks to oversee $10 billion in loan guarantees to the struggling industry.
By seeking bankruptcy protection, ATA technically defaulted on its federally backed loans, becoming the second airline to do so in six weeks. The other is US Airways, which filed for its second bankruptcy in two years on Sept. 12; it has a $717 million outstanding balance on its loan package.
Like US Airways, ATA did not obtain conventional debtor-in-possession financing, a standard feature of most bankruptcies.
Instead, ATA said it would operate from its available cash under an agreement with the loan board and its lenders, as the board and US Airways' lenders are allowing US Air to do.
ATA officials did not say how much cash the airline had on hand when it sought bankruptcy protection or how much the loan board and lenders were allowing it to use.
In a statement, the loan board said it "understands the issues confronting ATA and will work with the airline through the bankruptcy process to ensure that the taxpayers' interests are protected." It said the sale of any assets would be "closely scrutinized" to mitigate any additional risks to taxpayers.
The proposed deal with AirTran would begin to take effect later this year or early next year. Tad Hutchinson, a spokesman for AirTran, said he was not surprised to hear that other airlines were interested.
"These are valuable assets," Mr. Hutchinson said. "There may be other bidders that come after, but we think this is a good deal for AirTran, for ATA and for the city of Chicago."
ATA was not trying to put itself in play by announcing the agreement with AirTran, said its chief executive, George Mikelsons, who founded the airline as a travel club in 1972.
"We certainly have talked to a lot of carriers, but it's obvious from the direction that we took that of the offers on the table, AirTran's was the best," Mr. Mikelsons said in an interview last night.
But he said ATA had "a fiduciary duty to look at other competing offers" and would review any that the airline received. A final decision would require the approval of the bankruptcy court.
The loan board would be likely to play a role as well, especially if America West made the highest bid. It, too, has an outstanding package of federally backed loans worth $343 million, and the government also holds warrants that can be exchanged for America West stock.
In the meantime, ATA said it would continue to operate normally, including the flights it makes for the Pentagon. Last year, it was the biggest commercial airline transporting American troops and equipment to bases around the world.
Best known as a charter airline, ATA stepped up its commercial service throughout the 1990's. Its operations swelled four years ago, when it ordered 39 Boeing 737 jets, used for shorter flights, and 10 Boeing 757, used for medium-range flights.
The orders came shortly before the September 2001 attacks, which forced ATA to cut its operations by 20 percent. Nonetheless, the airline went on an expansion drive, adding international flights to vacation destinations like Cancún and Aruba, and adding business-class service on some flights.
Earlier this year, ATA said it was planning to start service to Europe sometime in 2005, which would have made it the first low-fare airline to fly across the Atlantic since Laker Air in the early 1980's.
But ATA's expansion was thwarted by skyrocketing jet fuel prices, and it suffered another blow in the summer, when service to Florida was disrupted by four hurricanes in six weeks.
Last night, Gil Viets, the airline's executive in charge of restructuring, said the bankruptcy filing was inevitable, given the combination of those circumstances, which he said have affected the majority of airlines.
"This isn't just happening to one carrier; it's happening to an industry," Mr. Viets said. "From that perspective, it would have been very very hard for us to avoid this situation."
