ATA Airlines Files for Bankruptcy

The shutdown idles about 2,230 employees.
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ATA Airlines shut down and filed for bankruptcy protection on Thursday, becoming the third carrier to say this week that it will close in the face of rapidly rising fuel costs.

The sudden shutdown idled about 2,230 employees, including nearly 600 workers at ATA's Indianapolis headquarters, and left some passengers stranded. ATA carried about 10,000 passengers a day on four routes from Chicago Midway and from four western cities to Hawaii.

In addition to high fuel costs, "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," said COO Doug Yakola, in a prepared statement. "As a result, it became impossible for ATA to continue operating."

The company said it recently "received abrupt and unexpected notification" from

FedEx

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that it would no longer be part of a FedEx team that received airlift contracts under a Defense Department program that facilitates overseas travel for military personnel and their families.

The arrangement accounted for most of ATA's charter business. FedEx informed ATA that it would lose its place in the program in October, after nearly two decades of participation, ATA said. FedEx spokesman Jim McCluskey noted that notification of the October cutoff was provided to ATA in January. He declined to specify the reason.

ATA announced March 6 that it would discontinue domestic flights from Midway on April 14 and international flights on June 7. But the company said Thursday that it had "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," and that the failure of those efforts forced an immediate shutdown.

Founded in 1973, ATA was a subsidiary of Global Aero Logistics Inc., which also owns two charter carriers. In closing, it follows Hawaii's Aloha Airlines, which shut down Monday and charter-carrier Champion Air, which said it will close in May.

Since 2005, ATA has had a code-share agreement with

Southwest

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, allowing the carriers to exchange passengers in four cities. Southwest also marketed and sold ATA flights.

"We are sad to end our code-share relationship with ATA but understand it's extremely difficult for an airline to flourish in today's arduous financial environment that has been plagued by soaring fuel prices," said Southwest CEO Gary Kelly, in a prepared statement. Southwest said it would rebook all passengers who purchased ATA tickets through Southwest.