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http://www.indystar.com/articles/7/193995-1587-223.html
ATA starts court fight for survival
Gate sale first issue; CEO would shrink fleet by a third
By Ted Evanoff
[email protected]
November 12, 2004
ATA Airlines Inc.'s lawyers this morning are expected to ask a bankruptcy judge in Indianapolis to set in motion a plan to sell off or scale back the company.
Executives of the airline, founded in Indianapolis in 1973 as American Trans Air, want to retrench the carrier by selling off a prized asset -- 17 airport gates at Chicago, New York and Washington.
U.S. Bankruptcy Judge Basil Lorch III is scheduled to consider a motion to open the way for selling the gates for $87.5 million to AirTran Airways, an Orlando-based carrier unrelated to ATA.
The bid process hearing would include establishing a deadline for other companies to make an offer on all or part of ATA. No other offers are expected to be filed by today.
Indianapolis-based ATA landed in Chapter 11 bankruptcy protection Oct. 26 after falling ticket prices and surging fuel prices scuttled an ambitious expansion centered on its Chicago Midway hub.
Now the nation's No. 10 carrier intends to scale down and eventually may fly about 50 aircraft, including a possible new fleet of regional jets, said Chairman J. George Mikelsons.
"We have to restructure. We have to make a go of it," Mikelsons said in an interview with The Star. "If I had to guess, I'd say by the end of 2005, we'd have two-thirds of the aircraft we have now. That's kind of a goal."
Mikelsons' remarks about reaching two-thirds of present size is the first time he has publicly disclosed the number.
ATA currently operates 82 aircraft, including 59 newer Boeing 737 and Boeing 757 airliners, long-distance jets leased when the expansion was started four years ago.
Facing more than $500 million in lease payments in 2005 and 2006 on those new jets, ATA is negotiating with lenders to cut the lease payments and spin off most of the big jets to other carriers.
"We've been hobbled for years" by the big jets, said Mikelsons. "The aircraft we have are too large. Nowadays, the smaller the airline, the better you are."
ATA, which lost $90 million in this year's first half, is expected to report a third- quarter loss next week.
While ATA renegotiates the jet leases, it also wants to sell the airport gates those big airliners have served -- 14 gates at Chicago Midway, two at New York LaGuardia, one at Reagan National in Washington.
Today, one of the first major legal procedures toward that goal is set to unfold in Downtown Indianapolis when Lorch convenes a hearing to set up a sale timetable.
The hearing also would set a deadline for other carriers to bid on ATA.
America West Airlines of Tempe, Ariz., is considering making a bid for all of ATA. Dallas-based Southwest Airlines said it might bid on Midway gates.
Today's hearing also would establish a breakup fee that in effect would have ATA pay AirTran about $2.6 million if another airline scuttles the proposed deal by buying the Indianapolis-based company.
AirTran's breakup fee amounts to 3 percent of the $87.5 million. The fee is considered normal in such deals.
"We did not object to the breakup fee," said Indianapolis lawyer John Carr, representing an ATA creditor, the airline machinists' union.
The machinists did file a minor objection, however, asking Lorch to make sure any bidder discloses whether it would keep or let go ATA employees.
ATA proposed the gate sale to AirTran as part of a reorganization plan it began drafting just before filing for bankruptcy.
Mikelsons favors the gate sale because it would allow ATA to continue as a smaller enterprise than the current 7,700-employee company.
In bankruptcy, any transaction must be approved by Lorch with recommendations from ATA's creditors.
Lorch is scheduled Monday to consider approving the $15.5 million government bailout loan from the Indiana Transportation Finance Authority and Indianapolis International Airport Authority.
Meanwhile, Mikelsons said ATA ticket reservations soared more than 30 percent this week compared with a year ago, primarily on Indianapolis flights.
Mikelsons attributed the sales surge to hometown support after the state bailout loan showed travelers the airline would stay in business.
"We certainly owe Indianapolis and Indiana a vote of gratitude," Mikelsons said.
Call Star reporter Ted Evanoff at (317) 444-6019.
ATA starts court fight for survival
Gate sale first issue; CEO would shrink fleet by a third
By Ted Evanoff
[email protected]
November 12, 2004
ATA Airlines Inc.'s lawyers this morning are expected to ask a bankruptcy judge in Indianapolis to set in motion a plan to sell off or scale back the company.
Executives of the airline, founded in Indianapolis in 1973 as American Trans Air, want to retrench the carrier by selling off a prized asset -- 17 airport gates at Chicago, New York and Washington.
U.S. Bankruptcy Judge Basil Lorch III is scheduled to consider a motion to open the way for selling the gates for $87.5 million to AirTran Airways, an Orlando-based carrier unrelated to ATA.
The bid process hearing would include establishing a deadline for other companies to make an offer on all or part of ATA. No other offers are expected to be filed by today.
Indianapolis-based ATA landed in Chapter 11 bankruptcy protection Oct. 26 after falling ticket prices and surging fuel prices scuttled an ambitious expansion centered on its Chicago Midway hub.
Now the nation's No. 10 carrier intends to scale down and eventually may fly about 50 aircraft, including a possible new fleet of regional jets, said Chairman J. George Mikelsons.
"We have to restructure. We have to make a go of it," Mikelsons said in an interview with The Star. "If I had to guess, I'd say by the end of 2005, we'd have two-thirds of the aircraft we have now. That's kind of a goal."
Mikelsons' remarks about reaching two-thirds of present size is the first time he has publicly disclosed the number.
ATA currently operates 82 aircraft, including 59 newer Boeing 737 and Boeing 757 airliners, long-distance jets leased when the expansion was started four years ago.
Facing more than $500 million in lease payments in 2005 and 2006 on those new jets, ATA is negotiating with lenders to cut the lease payments and spin off most of the big jets to other carriers.
"We've been hobbled for years" by the big jets, said Mikelsons. "The aircraft we have are too large. Nowadays, the smaller the airline, the better you are."
ATA, which lost $90 million in this year's first half, is expected to report a third- quarter loss next week.
While ATA renegotiates the jet leases, it also wants to sell the airport gates those big airliners have served -- 14 gates at Chicago Midway, two at New York LaGuardia, one at Reagan National in Washington.
Today, one of the first major legal procedures toward that goal is set to unfold in Downtown Indianapolis when Lorch convenes a hearing to set up a sale timetable.
The hearing also would set a deadline for other carriers to bid on ATA.
America West Airlines of Tempe, Ariz., is considering making a bid for all of ATA. Dallas-based Southwest Airlines said it might bid on Midway gates.
Today's hearing also would establish a breakup fee that in effect would have ATA pay AirTran about $2.6 million if another airline scuttles the proposed deal by buying the Indianapolis-based company.
AirTran's breakup fee amounts to 3 percent of the $87.5 million. The fee is considered normal in such deals.
"We did not object to the breakup fee," said Indianapolis lawyer John Carr, representing an ATA creditor, the airline machinists' union.
The machinists did file a minor objection, however, asking Lorch to make sure any bidder discloses whether it would keep or let go ATA employees.
ATA proposed the gate sale to AirTran as part of a reorganization plan it began drafting just before filing for bankruptcy.
Mikelsons favors the gate sale because it would allow ATA to continue as a smaller enterprise than the current 7,700-employee company.
In bankruptcy, any transaction must be approved by Lorch with recommendations from ATA's creditors.
Lorch is scheduled Monday to consider approving the $15.5 million government bailout loan from the Indiana Transportation Finance Authority and Indianapolis International Airport Authority.
Meanwhile, Mikelsons said ATA ticket reservations soared more than 30 percent this week compared with a year ago, primarily on Indianapolis flights.
Mikelsons attributed the sales surge to hometown support after the state bailout loan showed travelers the airline would stay in business.
"We certainly owe Indianapolis and Indiana a vote of gratitude," Mikelsons said.
Call Star reporter Ted Evanoff at (317) 444-6019.
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