SWA to buy ATA MDW gates???

[storminpilot]

There is a rumor going around at Southwest that SWA bought ATA's MDW gates? Is this true?

 

[TriStar_drvr]

Would you take the planes and pilots too? Please...

 

[N905TW]

Need a small, very efficient, MDW based commuter carrier while you are at it??

 

[tz800ca]

MDW Gates

There is a rumor going around at Southwest that SWA bought ATA's MDW gates? Is this true?

Q: "And while you are at it, how about your thoughts on the reports that GM is considering the sale of MDW gates and perhaps a substantial portion of the MDW operation."

A: Your MEC asked this directly to GM yesterday over a phone conference. The gates at MDW CANNOT be sold to another airline. They are returned to the City of Chicago. As to the MDW operation there currently is no plan to downsize MDW operation. However let me make it perfectly clear that if the decision to downsize is made, logically MDW would be hit first due to the competitive market. There is no protection that any particular market is protected from downsizing when and if the time comes.

-Erik Enghdal ATA MEC Chairman 8/20/04

 

[storminpilot]

Q: "And while you are at it, how about your thoughts on the reports that GM is considering the sale of MDW gates and perhaps a substantial portion of the MDW operation."

A: Your MEC asked this directly to GM yesterday over a phone conference. The gates at MDW CANNOT be sold to another airline. They are returned to the City of Chicago. As to the MDW operation there currently is no plan to downsize MDW operation. However let me make it perfectly clear that if the decision to downsize is made, logically MDW would be hit first due to the competitive market. There is no protection that any particular market is protected from downsizing when and if the time comes.

-Erik Enghdal ATA MEC Chairman 8/20/04

OK, I get all of that response but couldn't the gates then be subleased to SWA for a price? The last sentence in the "A" is kind of....YIKES.

Anyway, good luck to you guys. Seems odd to downsize in a big market like Chicago.

 

[LUVChild]

Whoops...wrong thread. Disregard.

 

[chase]

The rumor came from a comment made to an upgrade class by a senior SWA official that ATA's financial situation is rather dire & they are considering selling gate access in MDW & some aircraft to improve their financial situation. Whether this is comes to fruition is difficult to say but the comment was "allegedly" made to an upgrade class. No actual confirmation, just info from the SWAPA forum.

The logic is there since ATA appears to be bleeding worse than what had origionally been predicted, or at least recent press reports state this & their last quarterly analysis specifically mentions they are in a cash strapped situation as '05 comes around, failing to meet some of the covenants required of their loan guarantees.

Where does a company generate money? They appear to be getting some concessions from their pilot unions. Will this be enough? Maybe & it may preclude having to do the drastic deed of selling hard assets, i.e. airplanes. All of this could be info to impress the pilot union that failure to make cuts will reduce the work force of pilots, a viable way to generate concessions to keep jobs.

There is no doubt that there are going to be gates, airports, hardware available on the market within the next 12-18 months with the reduction in legacy & some LCC carriers. These assets will be of interest to SWA & with a strong cash position rapid expansion could occur. A "perfect storm" is brewing in which both ATA & USAir could implode opening up huge gains at two of the more lucrative bases we fly out of, PHL & MDW. Would CLT be a surprise for the first new city of '05? Certainly not with the high cost of tickets being sold there & that by a carrier that is indeed struggling. Just my $.02.

 

[lowecur]

Interesting thoughts Chase.

Actually the rumor has pretty strong conviction that Boeing/GECAS tried to broker the deal for TZ on MDW. It did fall apart, and I would assume one of two things happened:

1. WN or FL wasn't offering enough money
2. Chicago Airport Authority stepped in to say no way

WN has deep pockets, but I have my doubts that the Chicago Airport Authority would want to place all their eggs in one basket. My guess is they built in a clause that stated that in the event that TZ's financials fell below a certain rating, then they could not sublease the gates. In this way, CAA could then again have control of who occupies those gates. The lease is probably the same one that WN negotiated.

I'm still a fan of UAIR making it. I see them in BK again shortly, but I see them emerging by the first of the year. TZ has more of a problem. Unless employee give-backs will negate the covenant default, the ATSB will probably call the loans by Sept 30th.

 

[320AV8R]

From PlaneBusiness.com:

In other news, last week I talked about the deteriorating financial situation at ATA. Again.

This week, I can confirm that the airline is, indeed, actively trying to shed some of its assets.

It appears that the airline's overall plan to survive centers around shedding most of its domestic operation, including its large presence at Midway.

The airline's goal is to retain its profitable charter operations. In addition, the airline intends to use whatever money it gains from the sale of assets to keep itself afloat, and hopefully put together some kind of low-fare trans-Atlantic service, a concept the airline has touted for several years.

However, all is not moving smoothly with the plan, from what I understand. In fact, the most recent negotiations blew apart last week, according to those close to the negotiations.

It doesn't take much to figure out who one of the major players is in this situation. As one industry observer said to me on Monday, "This one is easy. Follow the money."

Boeing is the major player here, as the company not only has aircraft placed with the airline, but it has aircraft at the airline financed through its Boeing Capital division as well. General Electric Capital Aviation Services is another major lessor.

Boeing also has a piece of equity in the airline, part of the aircraft financing deal the airline entered into with Boeing a number of years ago.

Our sources tell us that the airline is seeking to sell not only aircraft, but the bulk of its gate allocation at Midway Airport in Chicago as well.

Remember that if the airline substantially curtails its domestic operation, it would not require the number of gates it currently has at Midway, and the airline's headquarters is based in Indianapolis, not Chicago.

Now, let's follow the money again.

If you look at the likely buyers in this scenario I think you'll come up with two logical suspects: AirTran and Southwest.

And, interestingly enough, Boeing is closely tied to both of these airlines.

Anyone taking bets?

Meanwhile, ATA announced second quarter earnings Monday.

Or, rather, the airline filed its second quarter earnings as part of an SEC filing.

The airline issued no press release.

I found this rather odd, especially since the airline recently signed up the high-powered Boston-based WPP Group's Hill & Knowlton firm to handle their PR.

So... where's the press release?

Did the dog eat it?

If he did, I'm sure he now has indigestion, as the numbers were pretty unsettling.

But here's a lesson in PR 101. The fact that the airline did not issue an earnings release received much more attention than had the airline simply issued one -- no matter how bad the news was. This certainly proved to be the case with subscribers, as a number of you were quick to drop me a note -- commenting on the airline's rather glaring omission.

For the second quarter, the airline reported that it lost $26 million, with first half losses totaling $90.7 million.

Last year for the second quarter, the airline reported a profit of $40.8 million.

At the end of the second quarter, the airline reported that it had $150 million in cash on hand. However, the airline reported in its SEC filing that the bank handling its credit card charges has begun to retain the entire ticket amount, until the flight occurs -- rather than sending a portion of the ticket price directly to the airline when the tickets are purchased.

This will, going forward, result in a loss of approximately $20 million in cash to the airline.

Finally, the airline said in the filing, "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."

One last reminder about the corporate set-up of ATA. Remember that ATA Airlines is part of a holding company -- ATA Holdings. When you purchase stock in ATAH, you are purchasing stock in that holding company. There are six other companies, besides the main airline unit, in the holding company.

As a result, if ATA Airlines declares bankruptcy, it would not mean that the parent company ATAH will necessarily declare bankruptcy.

An interesting twist -- and one that will, I am sure, become more important in the next few weeks.