Rival carriers will bid for ATA's Midway hub
By Ted Evanoff
[email protected]
November 18, 2004
AirTran Airways got the official word today that rival carriers will try to outbid it for bankrupt ATA Airlines' Chicago Midway hub.
Lawyers for America West Airlines and Southwest Airlines told a bankruptcy judge in Indianapolis today the companies intend to make separate bids for part or all of ATA.
ATA probably won't see a bidding war for the prime real estate it leases at Midway International Airport, one airline executive said.
However, creditors would welcome any deal that eked out more cash than AirTran's $89.9-million proposal.
Hit by fare wars and record fuel prices, Indianapolis-based ATA filed for Chapter 11 bankruptcy Oct. 26. On the same day it revealed a deal taking shape with AirTran for the sale of the rights to the 14 Midway gates and three gates at New York LaGuardia and Reagan Washington.
ATA, which employs 7,700, including 2,300 in Indianapolis, wants to use cash from the sale to regroup as a smaller airline. It would focus on Indianapolis regional service and regular long-haul flights to Hawaii, Los Angeles, San Francisco, Mexico and the Caribbean.
Because a company in bankruptcy generally must open the door to all potential acquirers, ATA can't complete a deal with Flordia-based AirTran without first putting itself up for sale under the court's auspices.
In today's hearing, U.S. Bankruptcy Judge Basil Lorch III set Dec. 10 as the deadline for interested buyers to submit bids. Bids will be opened and reviewed Dec. 13 at the Indianapolis office of Baker and Daniels, ATA's attorney. Lorch will pick a winning bid Dec. 16.
ATA is on a tight schedule to reach a deal before its cash drain resumes after Dec. 23. That's when ATA must again make jet airliner lease payments postponed by the bankruptcy filing.
As it started to run short of cash in June, ATA executives contacted 10 other airlines to ask about a merger or sale of the prized Midway gates. Only AirTran, an Orlando carrier unrelated to ATA, responded with an offer, Gilbert Viets, ATA's chief restructuring officer, said in an interview.
That led to an agreement reached Tuesday with AirTran for an $89.9 million deal to be submitted to the bankruptcy court as part of the ATA auction process.
Today, lawyers for creditors and ATA spent most of the nearly three-hour session wrangling about the pay AirTran should receive for its time in case its bid is rejected Dec. 16.
AirTran asked for a $3.75 million so-called break-up fee if its offer is rejected. ATA would pay the fee. Such fees are considered common in bankruptcy auctions.
Lorch finally cut the debate short, recommending a $3 million fee, which AirTran accepted.
During the debate, America West and Southwest declared they were interested in bidding on ATA.
It happened after an ATA attorney said the $3.75 million was fair because only AirTran had made an effort to negotiate with ATA.
"I don't want to lose this buyer," ATA attorney James Carr said.
Lawyers separately representing Southwest and America West immediately responded, pointing out their airlines were considering making bids.
Elise Eberwein, an America West vice president, in a telephone interview doubted a bidding war would erupt and ratchet the Midway hub's price beyond its market value at a time when most airlines are short on cash.
"This business is ego-driven. You hear a lot of trash talk," Eberwein said. "But at the end of the day no airline is stupid. No one is going to pursue something just to pursue it. It has to make economic sense."
By Ted Evanoff
[email protected]
November 18, 2004
AirTran Airways got the official word today that rival carriers will try to outbid it for bankrupt ATA Airlines' Chicago Midway hub.
Lawyers for America West Airlines and Southwest Airlines told a bankruptcy judge in Indianapolis today the companies intend to make separate bids for part or all of ATA.
ATA probably won't see a bidding war for the prime real estate it leases at Midway International Airport, one airline executive said.
However, creditors would welcome any deal that eked out more cash than AirTran's $89.9-million proposal.
Hit by fare wars and record fuel prices, Indianapolis-based ATA filed for Chapter 11 bankruptcy Oct. 26. On the same day it revealed a deal taking shape with AirTran for the sale of the rights to the 14 Midway gates and three gates at New York LaGuardia and Reagan Washington.
ATA, which employs 7,700, including 2,300 in Indianapolis, wants to use cash from the sale to regroup as a smaller airline. It would focus on Indianapolis regional service and regular long-haul flights to Hawaii, Los Angeles, San Francisco, Mexico and the Caribbean.
Because a company in bankruptcy generally must open the door to all potential acquirers, ATA can't complete a deal with Flordia-based AirTran without first putting itself up for sale under the court's auspices.
In today's hearing, U.S. Bankruptcy Judge Basil Lorch III set Dec. 10 as the deadline for interested buyers to submit bids. Bids will be opened and reviewed Dec. 13 at the Indianapolis office of Baker and Daniels, ATA's attorney. Lorch will pick a winning bid Dec. 16.
ATA is on a tight schedule to reach a deal before its cash drain resumes after Dec. 23. That's when ATA must again make jet airliner lease payments postponed by the bankruptcy filing.
As it started to run short of cash in June, ATA executives contacted 10 other airlines to ask about a merger or sale of the prized Midway gates. Only AirTran, an Orlando carrier unrelated to ATA, responded with an offer, Gilbert Viets, ATA's chief restructuring officer, said in an interview.
That led to an agreement reached Tuesday with AirTran for an $89.9 million deal to be submitted to the bankruptcy court as part of the ATA auction process.
Today, lawyers for creditors and ATA spent most of the nearly three-hour session wrangling about the pay AirTran should receive for its time in case its bid is rejected Dec. 16.
AirTran asked for a $3.75 million so-called break-up fee if its offer is rejected. ATA would pay the fee. Such fees are considered common in bankruptcy auctions.
Lorch finally cut the debate short, recommending a $3 million fee, which AirTran accepted.
During the debate, America West and Southwest declared they were interested in bidding on ATA.
It happened after an ATA attorney said the $3.75 million was fair because only AirTran had made an effort to negotiate with ATA.
"I don't want to lose this buyer," ATA attorney James Carr said.
Lawyers separately representing Southwest and America West immediately responded, pointing out their airlines were considering making bids.
Elise Eberwein, an America West vice president, in a telephone interview doubted a bidding war would erupt and ratchet the Midway hub's price beyond its market value at a time when most airlines are short on cash.
"This business is ego-driven. You hear a lot of trash talk," Eberwein said. "But at the end of the day no airline is stupid. No one is going to pursue something just to pursue it. It has to make economic sense."
