jettypeguy
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"ATA Is Here To Stay..But With Theses Fares You Don't Have To"
ATA called likely to trim at Midway
Analysts expect a smaller presence
By Geoff Dougherty
Tribune staff reporter
Published August 27, 2004
ATA Airlines, buffeted by skyrocketing fuel costs and faced with bills it may not be able to pay early next year, will need to trim its operations at Midway Airport to survive, industry analysts say.
As rumors swirled early this week that ATA would pull out of Midway, Chief Executive George Mikelsons issued a statement saying the airline would remain at the Southwest Side airport, where it handled more passengers last year than any other carrier.
Further, executives from the Indianapolis-based airline called city officials Tuesday to assure them that it will proceed with a $100 million pilot-training facility and hotel complex near the airport.
"We are comfortable with the idea that it's moving forward," said Peter Scales, spokesman for the city's Department of Planning and Development.
"We know for a fact that they are in serious talks with their other partners. Shortly after that, they will be ready to stick a shovel in the ground."
Still, ATA's daunting financial picture demands major changes.
In a filing with the Securities and Exchange Commission on Aug. 16, the airline posted a net loss of $90 million for the six months ended June 30, compared with a profit of $32.3 million for the first half of last year.
"Under current operating assumptions, and absent any changes to existing aircraft lease obligations, the company does not expect to have sufficient cash to meet its cash obligations in the first quarter of 2005," the report said.
Bankruptcy a possibility
ATA said it would rely on employee givebacks, route restructuring and its new business-class service to climb back to profitability.
But that may not be enough.
"Those are all first steps. It's crystal clear to me that they cannot continue with their current strategy," said Henry Harteveldt, an analyst at Forrester Research. "There are no guarantees that they can avoid Chapter 11 unless they are able to act lightning-fast. It will be down to the wire."
Under a Chapter 11 bankruptcy filing, a company reorganizes while it works out a plan to repay creditors.
ATA, which started as a charter carrier and then became a leading low-fare and leisure carrier, lost its way when it started competing as a full-service airline, Harteveldt said.
"They're not Wal-Mart, and they're not Neiman Marcus," he said. "The smartest thing is for them to refocus on leisure and charter."
In such a move, he said, the company would probably tighten its operation at Midway, not shut it down.
Michael Boyd, an airline consultant based in Colorado, agreed.
"I would suspect they are probably looking at ways of adjusting what they are doing at Midway," Boyd said. "The betting is that there are going to be some changes, but when the dust settles, they are going to be flying. I have no doubt about that."
ATA occupies 14 gates at Midway, and flights there account for two-thirds of ATA's total business.
"The company anticipates that its Chicago-Midway operation will continue to represent a substantial proportion of its scheduled service business in the future," ATA said in its SEC filing.
Loan changes sought
ATA also said it would try to renegotiate the terms of its loan backed by the Air Transportation Stabilization Board, along with other financial commitments. In November 2002 the carrier borrowed $168 million, of which $148.5 million is guaranteed by the agency.
"The ATSB may be willing to consider amendments to an existing loan," said Harteveldt. "The ATSB does not want the airline to default."
A spokeswoman, citing agency policy, would not comment on discussions with ATA.
Boeing watching "closely"
Boeing Capital Corp., which holds the leases on a dozen 757 aircraft, also would not discuss any contact it has had with ATA.
"Obviously, we are watching the situation very closely," said spokeswoman Donna Mikov. "We have renegotiated leases in the past, but it all depends on the carrier and situation."
Harteveldt said Boeing may show some flexibility because ATA has been a longtime customer and could continue to provide demand for the company's planes.
"But Boeing isn't your parent," said Harteveldt. "While your mom and dad may help you out in a bind, an aircraft manufacturer may not be quite as sympathetic."
Hoping for a positive outcome are passengers like Ed Cholewa, a medical-equipment repairman who returned Tuesday from a business trip to Orlando on ATA. He'd like to be able to fly ATA out of Midway again.
"The price was great," he said.
"ATA Is Here To Stay..But With Theses Fares You Don't Have To"
ATA called likely to trim at Midway
Analysts expect a smaller presence
By Geoff Dougherty
Tribune staff reporter
Published August 27, 2004
ATA Airlines, buffeted by skyrocketing fuel costs and faced with bills it may not be able to pay early next year, will need to trim its operations at Midway Airport to survive, industry analysts say.
As rumors swirled early this week that ATA would pull out of Midway, Chief Executive George Mikelsons issued a statement saying the airline would remain at the Southwest Side airport, where it handled more passengers last year than any other carrier.
Further, executives from the Indianapolis-based airline called city officials Tuesday to assure them that it will proceed with a $100 million pilot-training facility and hotel complex near the airport.
"We are comfortable with the idea that it's moving forward," said Peter Scales, spokesman for the city's Department of Planning and Development.
"We know for a fact that they are in serious talks with their other partners. Shortly after that, they will be ready to stick a shovel in the ground."
Still, ATA's daunting financial picture demands major changes.
In a filing with the Securities and Exchange Commission on Aug. 16, the airline posted a net loss of $90 million for the six months ended June 30, compared with a profit of $32.3 million for the first half of last year.
"Under current operating assumptions, and absent any changes to existing aircraft lease obligations, the company does not expect to have sufficient cash to meet its cash obligations in the first quarter of 2005," the report said.
Bankruptcy a possibility
ATA said it would rely on employee givebacks, route restructuring and its new business-class service to climb back to profitability.
But that may not be enough.
"Those are all first steps. It's crystal clear to me that they cannot continue with their current strategy," said Henry Harteveldt, an analyst at Forrester Research. "There are no guarantees that they can avoid Chapter 11 unless they are able to act lightning-fast. It will be down to the wire."
Under a Chapter 11 bankruptcy filing, a company reorganizes while it works out a plan to repay creditors.
ATA, which started as a charter carrier and then became a leading low-fare and leisure carrier, lost its way when it started competing as a full-service airline, Harteveldt said.
"They're not Wal-Mart, and they're not Neiman Marcus," he said. "The smartest thing is for them to refocus on leisure and charter."
In such a move, he said, the company would probably tighten its operation at Midway, not shut it down.
Michael Boyd, an airline consultant based in Colorado, agreed.
"I would suspect they are probably looking at ways of adjusting what they are doing at Midway," Boyd said. "The betting is that there are going to be some changes, but when the dust settles, they are going to be flying. I have no doubt about that."
ATA occupies 14 gates at Midway, and flights there account for two-thirds of ATA's total business.
"The company anticipates that its Chicago-Midway operation will continue to represent a substantial proportion of its scheduled service business in the future," ATA said in its SEC filing.
Loan changes sought
ATA also said it would try to renegotiate the terms of its loan backed by the Air Transportation Stabilization Board, along with other financial commitments. In November 2002 the carrier borrowed $168 million, of which $148.5 million is guaranteed by the agency.
"The ATSB may be willing to consider amendments to an existing loan," said Harteveldt. "The ATSB does not want the airline to default."
A spokeswoman, citing agency policy, would not comment on discussions with ATA.
Boeing watching "closely"
Boeing Capital Corp., which holds the leases on a dozen 757 aircraft, also would not discuss any contact it has had with ATA.
"Obviously, we are watching the situation very closely," said spokeswoman Donna Mikov. "We have renegotiated leases in the past, but it all depends on the carrier and situation."
Harteveldt said Boeing may show some flexibility because ATA has been a longtime customer and could continue to provide demand for the company's planes.
"But Boeing isn't your parent," said Harteveldt. "While your mom and dad may help you out in a bind, an aircraft manufacturer may not be quite as sympathetic."
Hoping for a positive outcome are passengers like Ed Cholewa, a medical-equipment repairman who returned Tuesday from a business trip to Orlando on ATA. He'd like to be able to fly ATA out of Midway again.
"The price was great," he said.
