Bangkok--Sep 30--eTurbo news
INDIANAPOLIS/LOS ANGELES (eTurboNews) -- As part of ATA Holdings Corp.'s filing for protection under Chapter 11 of the US Bankruptcy Code in the US Bankruptcy Court for the Southern District of Indiana on Tuesday, the nation's tenth largest airline, ATA, became the latest airline to enter a short list of airlines under bankruptcy protection.
ATA will develop a plan of reorganization to address its debt levels and other obligations, and to lower its cost structure even further, while operating in the normal course of business. The reorganization will allow the airline to restore and strengthen its competitiveness as a leading low cost carrier in the challenging industry environment, and to advance existing initiatives to improve its services, such as retrofitting planes for business class service.
"Excess capacity, extremely high fuel prices, which continue to escalate, and declining fares have necessitated that all airlines, including ATA, re- examine their business," said ATA Holdings' Chairman, President and Chief Executive Officer George Mikelsons.
ATA said business continues as usual, standing by its customer commitments, honoring tickets, upholding its full flight schedule, in-flight services and frequent flyer reward programs.
The airline reported that, in conjunction with the filing, the airline has reached an agreement with AirTran Airways, Inc. in which AirTran will pay ATA $87.6 million to assume ATA's flight operations, gates lease, and routes in Chicago Midway Airport, as well as arrival and departure slots at LaGuardia Airport and Ronald Reagan Washington National Airport. The agreement, which is subject to approval by the City of Chicago and the Bankruptcy Court, will take effect later this year or early next year, and is to be finalized over the next several days.
ATA is in continuing discussions with potential third-party lenders to procure Debtor-In-Possession (DIP) financing. Meanwhile, the Air Transportation Stabilization Board (ATSB) has agreed to allow ATA's continued use of its cash collateral, which, combined with the Company's projected cash flow from operations, should be sufficient to fund the needs of ATA and its operating subsidiaries until the Company reaches an agreement for DIP financing.
"Our arrangement with AirTran will grow the travel options we offer customers, and is a key component of our transformation into a refocused, streamlined and profitable airline," continued Mikelsons. "We remain committed to serving Midway customers during this transition, while also having the significant support of one of the strongest low cost carriers."
AirTran and ATA intend to establish co-marketing programs and code share agreements for flights operating into and out of Chicago Midway. There is a transition plan in place for AirTran to outsource to ATA servicing of Chicago flights over a specified period. The transition arrangements with AirTran will allow ATA a gradual, measured exit from Chicago, as well as provide ATA time and flexibility to develop and execute its reorganization plan.
ATA passengers holding existing reservations for flights to and from Chicago Midway will be serviced seamlessly under their originally issued tickets, without the need for rebooking. Participants in ATA and AirTran frequent flyer programs will accrue and redeem miles on both airlines' networks.
Meanwhile, the ATA Unit of the Air Line Pilots Association, while noting that "labor expenses can't be blamed for this airline's breakdown," said it is rallying behind the airline.
"We will also respond expeditiously in order to protect our members who may end up remaining at ATA, and work cooperatively with management to keep the transformed airline and its cockpit crewmembers successful and competitive," Capt. Erik Engdahl, chairman of the ATA Unit of the Air Line Pilots Association, said Tuesday following ATA's filing for bankruptcy.
"We love our airline and are strongly committed to seeing it succeed. ATA has always set the standard for safety, comfort and convenience among low-cost carriers, and we are committed to maintaining a quality product in spite of our changed circumstances. During this period of transition we will strive to ensure that our passengers can't tell the difference between the pre- and post-bankruptcy airline."
The Air Line Pilots Association is the bargaining agent for the 1,100 pilots and flight engineers at ATA. ALPA is the world's oldest and largest pilot union, representing 64,000 pilots at 43 airlines in the US and Canada.
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