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ATA files for bankruptcy protection; reaches deal with AirTran

INDIANAPOLIS - ATA Airlines Inc., the nation's 10th-largest airline, filed for bankruptcy protection Tuesday and sold off airport slots and other assets to AirTran Airways Inc. for $87.6 million, to become the latest U.S. airline tripped up by rising fuel costs and fare wars.

Orlando, Fla.-based AirTran Holdings Inc. will assume ATA's flight operations, gate leases and routes at Chicago Midway Airport and arrival and departure slots at New York's LaGuardia Airport and Ronald Reagan Washington National Airport.

Chicago Department of Aviation spokeswoman Annette Martinez said ATA had not discussed with the city the deal whereby Air Tran would take over ATA's 14 gates and flights at Midway.

"In the end, this still needs city of Chicago approval. In order to reallocate those gates, the city must approve," she said.

The deal is subject to approvals by the bankruptcy court and other entities and is expected to take effect by early next year, ATA officials said.

"We will recreate ATA as a formidable, low-cost carrier," ATA founder and chief executive George Mikelsons said Tuesday.

ATA's announcement came amid speculation that Delta Air Lines Inc., the nation's third-largest airline, would win $1 billion in concessions from its pilots and avoid bankruptcy. The airline is expected to decide by Wednesday whether to seek Chapter 11 bankruptcy protection. ATA joins other airlines in bankruptcy, Elk Grove Village, Ill.-based United Airlines and US Airways.

ATA on Monday named an executive to oversee the restructuring of the discount carrier's mounting debt.

The filing under Chapter 11 of the federal bankruptcy code came as the Indianapolis-based airline, whose parent company is ATA Holdings Corp., faces soaring fuel costs, an industry fare war and sharply lower demand for military charter flights.

ATA also is saddled with millions of dollars in debt from new aircraft purchases.

The value of the company plummeted 36 percent Tuesday, its stock closing at 93 cents a share, down 53 cents, on the Nasdaq stock exchange. The stock had hit a 52-week high of $13.31 on Feb. 2.

In Washington, the Air Transportation Stabilization Board said it planned to work with the airline through the bankruptcy process to make sure taxpayers' interests were protected.

The board, which was set up after the 2001 terrorist attacks to administer a $10 billion government loan guarantee program for the airlines, issued ATA a $148.5 million loan guarantee in September 2002.

"The proposed sale of assets will be closely scrutinized by the board to mitigate any additional risks the transaction may pose to taxpayers," the board said in a statement.

In its filing, ATA seeks bankruptcy protection for eight different corporate entities from more than 1,000 creditors. The filing listed total assets of about $745.1 million and total debts of $940.5 million.

In recent weeks ATA has announced plans to cut more than 300 jobs, including 150 flight attendants. So far this year, ATA pilots and flight attendants have accepted nearly $70 million in wage concessions.

In a Securities and Exchange Commission filing last week, ATA said its finances have worsened since Aug. 16, when it reported that it had lost $90.7 million during the first half of 2004.

Indianapolis-based ATA is the nation's 10th-largest U.S. carrier based on revenue passenger miles. Over the first nine months of this year, ATA flew 7.8 million passengers, up 11 percent over the same period in 2003.

It is the largest North American operator of commercial and military charters. ATA operates hubs at Chicago's Midway Airport and Indianapolis International Airport.

Martinez said ATA is one of Midway's two largest carriers with 39 percent of the airport's passengers and its commuter carrier, Chicago Express, accounting for another 5 percent. Midway's other large carrier, Southwest Airlines, has 19 gates and 42 percent of the airport's passengers, Martinez said.

Indianapolis will remain ATA's headquarters and primary hub, company officials said. The airline plans to honor tickets and maintain its full flight schedule.

Dennis Rosebrough, a spokesman for Indianapolis International Airport, said the bankruptcy filing likely would have minimal impact on passenger service at the airport.

ATA, which was founded in 1973 in Indianapolis as American Trans Air, currently has 7,900 employees, including 2,500 in Indianapolis.

On Monday, ATA's parent corporation, ATA Holdings Corp., announced that it had appointed Gilbert F. Viets, a retired Arthur Andersen accountant, the company's chief restructuring officer.

Viets took over as ATA's chief financial officer following the June resignation of David M. Wing. Wing has resumed his former position with the company, ATA founder and Chief Executive George Mikelsons said Monday.

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