INDIANAPOLIS--(BUSINESS WIRE)--ATA Airlines, Inc. today announced that it has filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code. The petition was filed on April 2 in the U.S. Bankruptcy Court for the Southern District of Indiana, in the Indianapolis division. Subsequent to the Chapter 11 filing, ATA discontinued all operations, effective as of 4 am ET on April 3. A primary factor leading to these actions was the unexpected cancellation of a key contract for ATA’s military charter business, which made it impossible for ATA to obtain additional capital to sustain its operations or restructure the business.
With the shutdown of all operations and cancellation of all ATA flights, ATA is no longer able to honor any reservations or tickets. ATA customers should seek alternative arrangements for current and future travel. To that end, ATA has contacted the airlines that serve ATA destinations and asked them to provide assistance to ATA customers. A list of other airlines that serve ATA destinations and additional information for ATA customers is available at www.ata.com. Customer information has also been posted at all ATA ticket counters and is available at (800) 435-9282. Customers should visit ata.com for updates as additional information becomes available.
Customers who purchased tickets from ATA using a credit card should contact their credit card provider directly for more information about how to obtain a refund for unused tickets. Customers who purchased tickets from Southwest Airlines for flights operated by ATA through its codeshare agreement should contact Southwest at (800) 308-5037 for more information. ATA’s frequent flier program and all accumulated frequent flier points will be canceled. ATA has advised its commercial and military charter customers that they should make alternative arrangements for future travel needs.
Doug Yakola, chief operating officer of ATA, said: “We deeply regret the disruption and hardship caused by the sudden shutdown of ATA, an outcome we and our employees had worked very hard and made many sacrifices to avoid. Unfortunately, the cancellation of a critical agreement for our military charter business undermined ATA’s plan to address the current conditions facing all scheduled service airlines, including the tremendous spike in the price of jet fuel in recent months. As a result, it became impossible for ATA to continue operating.”
Despite its financial challenges, ATA continued to seek solutions for its scheduled service business and create value from its longstanding presence in the Hawaii market and its planned international expansion. But these efforts suffered a major blow recently when ATA received abrupt and unexpected notification from FedEx Corporation that ATA would no longer be a member of the FedEx Teaming Arrangement. This arrangement gave ATA a significant share of the airlift contracts under the International Program of the Department of Defense Air Mobility Command, which facilitates transportation for military personnel and their families to and from overseas destinations. This arrangement accounted for most of ATA’s charter business.
Even though ATA had been a member of the FedEx team for nearly two decades, FedEx informed ATA that it would be denied membership on the FedEx Team for the government’s 2009 fiscal year – a period that begins in October 2008 and runs through September 2009. This termination is a full year earlier than the term specified in a letter of agreement between FedEx and ATA.
ATA has engaged in extensive discussions with numerous parties in an effort to obtain capital, identify other opportunities that would allow it to continue operating, or sell the business as a going concern. However, despite its best efforts, ATA could not continue operations or consummate a sale. Accordingly, an immediate shutdown was necessary.
ATA’s scheduled service business had been severely impacted by the dramatic and unprecedented increase in the price of jet fuel in recent months. On March 6, in an effort to reduce costs, ATA announced that it would discontinue its low-fare domestic scheduled service at Chicago’s Midway Airport, effective April 14, 2008. International service from Midway was expected to end on June 7, 2008. All such service has been discontinued immediately, in addition to all of ATA’s other scheduled flights, which operated between the West Coast and Hawaii.
Steven S. Turoff has been named Chief Restructuring Officer of ATA, with responsibility for overseeing the company’s Chapter 11 case. Mr. Turoff is president of The Renaissance Consulting Group, Inc., a turnaround management firm based in Dallas, Texas. ATA’s lead bankruptcy counsel in its Chapter 11 proceedings is Haynes and Boone, LLP.
Founded in 1973 and based in Indianapolis, ATA Airlines, Inc. is a subsidiary of Global Aero Logistics Inc. Global Aero and its other subsidiaries are not part of ATA’s Chapter 11 proceedings and are conducting business as usual.
At the time of the shutdown, ATA had approximately 2,230 employees, virtually all of whom are being notified today that their positions have been eliminated. ATA has filed motions with the Bankruptcy Court seeking authorization to provide COBRA medical insurance coverage to these employees. ATA was serving approximately 10,000 passengers per day at the time of its shutdown. The company operated 29 aircraft, many of which are leased.
Additional information about ATA’s shutdown and Chapter 11 proceedings is available on the internet at www.ata.com. Court filings and claims information will be available at www.bmcgroup.com/ataairlines.