Updated from Oct. 26
Shares in ATA Airlines parent
rose Wednesday after the company filed for Chapter 11 bankruptcy protection Tuesday, the latest casualty of a crippling environment for airline companies.
Shares were up 28 cents, or 30%, to $1.21, having lost more than a third of their value yesterday amid growing speculation about the move.
In a conference call Tuesday evening, George Mikelsons, chairman and chief executive of the company, said the company filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Indiana.
Mikelsons said the airline expected to survive after restructuring its debt and lowering costs, although in a leaner form as a result of an agreement with
in which AirTran will assume ATA's gate leases at Chicago's Midway Airport and takeoff and landing slots at New York's LaGuardia and Washington, D.C.'s Ronald Reagan National airports in exchange for $87.5 million.
The AirTran deal is contingent upon approval from various parties, including the bankruptcy court and the city of Chicago.
ATA and AirTran will honor existing tickets to and from Midway while the gate transition is under way, said James Hlavacek, ATA's vice chairman.
The company also stressed it would continue "business as usual" while it restructures, by honoring tickets, upholding its flight schedule, in-flight services and frequent-flyer program.
During the call, executives declined to offer a timeline for when they hoped to emerge from bankruptcy protection.
They cited industry overcapacity and record high fuel prices as among the factors hurting all airlines that had forced ATA to seek bankruptcy protection. Mikelsons said ATA specifically suffered from the high cost of new airplane leases negotiated in 2000, which are about $100 million above current market rates.
Aside from the routes that ATA will hand over in the new deal, the airline said it would continue to focus on existing businesses: commercial flights through its Indianapolis hub, flights to Hawaii, military and commercial charters and its Chicago Express connection service through Midway. Its headquarters will remain in Indianapolis.
Earlier Tuesday, the company had fueled bankruptcy speculation by naming its CFO to the newly created post of chief restructuring officer. The nation's 10th-largest airline appointed Gilbert Viets, who has served as CFO since June, to the new post, the company said in a filing with the
Securities and Exchange Commission
David Wing, 53, the company's CFO from March 2003 to June 2004, will return to the job, with a $157,500 sign-up bonus and $315,000 annual salary, the filing said. From 1994 to 2003, Wing was the company's controller.
Both appointments took effect Oct. 19.
ATA said in August that it could run out of cash early next year and might be forced to sell assets. Rumors have swirled for months that other airlines are talking to ATA about purchasing its assets.
In Tuesday's conference call, Hlavacek said the airline had talked to a lot of parties about possible transactions, but added that ATA was "committed" to the AirTran agreement.