storminpilot
Well-known member
- Joined
- Jul 6, 2003
- Posts
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http://news.ft.com/cms/s/b74ddda6-f56a-11d8-85e9-00000e2511c8.html
ATA asset sell-off foreshadows consolidation of low-cost airlines
By Caroline Daniel in Chicago
Published: August 24 2004 05:00 | Last updated: August 24 2004 05:00
Consolidation of the overcrowded US low-cost airline sector could begin as ATA, the country's 10th largest carrier, prepares to sell assets to avert bankruptcy.
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Seabury Group, a boutique investment bank that specialises in transportation, has been appointed to find buyers for ATA's operations at Chicago's Midway airport, where it accounts for about 40 per cent of all departures.
ATA is seeking buyers for its airport gates and is considering transferring the leases on its Boeing 737-800 aircraft, according to several investment bankers.
Seabury declined to comment.
One banker said ATA was seeking to raise about $500m from the transactions but suggested a price tag of $200m-$300m was more realistic.
"They want to pay off their [$148.5m] loan to the Airline Transportation Stabilisation Board, and their unsecured bond holders," the banker said.
AirTran, the low-cost carrier, and Mesa, a regional carrier, are among those understood to be interested.
Although America West has been looking to expand its operations and has talked about the need for consolidation among low-cost carriers, it has been focusing on Airbus aircraft.
In afiling this month, ATA said it faced "substantial additional liquidity concerns" after plunging to a first-half loss of $90m, from income of $32m a year ago.
It blamed high fuel prices and intense fare competition from Southwest, which also operates at Midway.
ATA warned it would not meet cash obligations due in the first half of 2005.
ATA is pursuing other strategies to improve revenues, including the addition of business class and possible transatlantic flights.
However, if it proceeds with the asset sale or is forced into bankruptcy, it would make the first big retrenchment by a low-cost airline in this downturn.
"It is a question of survival but it is a Band Aid approach," said another banker. "It still does not address their strategic problem. There are active buyers who would also be interested in buying the whole company."
ATA, which is still about 70 per cent owned by George Mikelsons, its Latvian founder, was founded in 1973 in Indianapolis, offering military and leisure charter services.
Since 2000 it expanded aggressively into scheduled services, agreeing to pay big upfront leasing costs to buy a fleet of 25 Boeing 757 aircraft and 13 737-800s. It has seven more 737-800s on order.
Concerns about the future of ATA led Boeing Capital last month to take a $29m non-cash charge after concluding that its unsecured preferred stock investment, initially valued at $50m, was "other-than-temporarily impaired".
ATA asset sell-off foreshadows consolidation of low-cost airlines
By Caroline Daniel in Chicago
Published: August 24 2004 05:00 | Last updated: August 24 2004 05:00
Consolidation of the overcrowded US low-cost airline sector could begin as ATA, the country's 10th largest carrier, prepares to sell assets to avert bankruptcy.
//
Seabury Group, a boutique investment bank that specialises in transportation, has been appointed to find buyers for ATA's operations at Chicago's Midway airport, where it accounts for about 40 per cent of all departures.
ATA is seeking buyers for its airport gates and is considering transferring the leases on its Boeing 737-800 aircraft, according to several investment bankers.
Seabury declined to comment.
One banker said ATA was seeking to raise about $500m from the transactions but suggested a price tag of $200m-$300m was more realistic.
"They want to pay off their [$148.5m] loan to the Airline Transportation Stabilisation Board, and their unsecured bond holders," the banker said.
AirTran, the low-cost carrier, and Mesa, a regional carrier, are among those understood to be interested.
Although America West has been looking to expand its operations and has talked about the need for consolidation among low-cost carriers, it has been focusing on Airbus aircraft.
In afiling this month, ATA said it faced "substantial additional liquidity concerns" after plunging to a first-half loss of $90m, from income of $32m a year ago.
It blamed high fuel prices and intense fare competition from Southwest, which also operates at Midway.
ATA warned it would not meet cash obligations due in the first half of 2005.
ATA is pursuing other strategies to improve revenues, including the addition of business class and possible transatlantic flights.
However, if it proceeds with the asset sale or is forced into bankruptcy, it would make the first big retrenchment by a low-cost airline in this downturn.
"It is a question of survival but it is a Band Aid approach," said another banker. "It still does not address their strategic problem. There are active buyers who would also be interested in buying the whole company."
ATA, which is still about 70 per cent owned by George Mikelsons, its Latvian founder, was founded in 1973 in Indianapolis, offering military and leisure charter services.
Since 2000 it expanded aggressively into scheduled services, agreeing to pay big upfront leasing costs to buy a fleet of 25 Boeing 757 aircraft and 13 737-800s. It has seven more 737-800s on order.
Concerns about the future of ATA led Boeing Capital last month to take a $29m non-cash charge after concluding that its unsecured preferred stock investment, initially valued at $50m, was "other-than-temporarily impaired".
I always thought that ATA was my ticket to get back to my home town in Indy... I knew ATA was in very poor shape and it sucks that they have to do this because it affects so many families in Chicago and Indy (including my family).
