On empty:
ATA will restructure
and sell assets
at Chicago Midway.
Blaming a sluggish economy, 9/11, cutthroat
pricing and ballooning fuel costs, ATA Airlines and its corporate
parent, ATA Holdings Corp., filed for bankruptcy on Oct. 26.
Indianapolis-based ATA, the nation’s 10th largest carrier, joined
United and US Airways as major U.S. airlines now operating under
Chapter 11 protection.
ATA also announced its intention to sell to rival AirTran $87.6
million worth of flight operations, gates and routes at Chicago’s
Midway Airport, as well as arrival and departure slots at LaGuardia
in New York City and Ronald Reagan National in Washington, D.C.
Analysts said ATA’s bankruptcy will have little negative impact
on travel to these important meetings destinations. “One way or
another, it’s going to stay essentially competitive,” said John
Heimlich, chief economist with the Washington D.C.-based Air
Transport Association. “You have seen how much interest there is in
those gates, and you are going to see some competition for
them.”
“I think the ATA bankruptcy will improve air travel to these
three cities,” predicted Jay Ellenby, president and CEO of
Baltimore’s Safe Harbors Travel Group Inc. “Airlines doing as well
or better than ATA will be as successful with those same
routes.”
Indeed, in reaction to ATA’s cutbacks, Southwest Airlines
announced in November it would add 16 nonstop flights from Chicago
Midway.
But some experts warned more bankruptcies represent an ominous sign
for travelers. On Oct. 12, Kevin Mitchell, chairman of the Radnor,
Pa.-based Business Travel Coalition, told Congress “there is
increasing probability the U.S. airline industry, a critical
infrastructure for our country, will experience a catastrophic
failure in the next 12 months.”
Mitchell urged the government to ensure tickets would be
honored by other carriers in the event of a future airline
liquidation.
Soaring fuel costs have been seen as the number-one cause for
passenger carriers falling deeper into the red. “Our profits are
really being wiped out,” Heimlich noted. “Just a dollar increase in
the cost of a barrel adds $425 million to our industry’s [annual]
operating expense.”
Pressured by pricey jet fuel, many airlines now are on life
support. Atlanta-based Delta Air Lines narrowly missed bankruptcy
via a last-ditch financing deal plus concessions from its pilots’
union in late October. At press time, Independence Air, based in
Dulles, Va., was seen as a likely candidate for bankruptcy due to
high fuel costs and an $83 million jet lease payment due in
January.
Meanwhile, UAL, United’s corporate parent, and US Airways
posted steeper-than-expected losses for the third quarter. Low-cost
upstart JetBlue, based in Forest Hills, N.Y., saw its third-quarter
profits plunge by 71 percent.
“The ATA situation tells you there are underlying problems,”
said Heimlich. “There is even the chance of a fourth-quarter loss
for JetBlue. That means we’re facing some very serious
challenges.”