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Chicago Express is not only asset ATA Holdings to jettison: More than $1.7 million for Boeing 727s won't land in ATA's pocket

March 28, 2005

As ATA Holdings Corp. prepares to ditch its Chicago Express commuter line after a tiresome series of low-ball bids, another batch of its aircraft about to be sold won't fetch much attention-or even a dime-for the Indianapolis carrier.

Up to seven of ATA's former Boeing 727s and as many as 20 engines for the tri-engine aircraft are to be sold by early April for at least $1.7 million, according to documents filed by ATA earlier this month in U.S. District Bankruptcy Court for the Southern District of Indiana.

The aircraft are part of a joint venture by ATA and Boeing Capital Corp., known as BATA Leasing. It was formed in 2001 to convert 23 former ATA airliners into air freighters that would be leased or sold to cargo companies.

At the time, ATA was trying to make room for a fleet of new Boeing 737-800 aircraft.

According to court records, the seven 727s could collectively fetch at least $200,000, while the 20 Pratt & Whitney engines should sell for no less than $1.5 million.

That's more than the minimum $1 million bid for Chicago Express that the bankruptcy court expected to receive by March 25. Bidders will be able to make counteroffers until March 31. If no bids of at least $1 million are received, Chicago Express is likely to be liquidated.

Bankrupt ATA had resisted offers from a Boston investor, Jack Robinson of Nat-Tel LLC, whose most recent offer for Chicago Express was a mere $100,000. Despite several improbable, low-ball offers, Robinson was anointed savior-status in a number of media reports that said he planned to keep alive intrastate air service to cities such as Evansville and South Bend. As it is, Chicago Express will cease operations April 1.

While ATA is likely to walk away with some money from Chicago Express, it won't be so lucky with the sale of its former 727s.

"ATA ... is currently indebted to BATA for certain membership contributions and other amounts and will not be eligible to receive any of the proceeds of the proposed sales," according to the airline's court filing.

The filing gave no details as to ATA's indebtedness to the joint venture. Boeing Capital took over majority control of BATA in 2003.

The filing said the sale of the aircraft is ultimately good for ATA because it reduces the expenses of maintaining and storing 727s, "increasing the likelihood that ATA and its estate may realize future value from its membership interest in BATA."

ATA listed the venture as a $13.2 million asset on its books at Sept. 30. However, BATA also appears to have been a millstone around ATA's neck.

ATA racked up asset impairment charges for the 727s totaling $85.7 million from 2001 to 2003, according to its financial statements.

To put that in perspective, rising jet fuel costs during the first nine months of last year cost ATA an additional $56 million. Soaring fuel prices accelerated the airline's plunge into Chapter 11 reorganization.

BATA in recent years unloaded nearly a dozen of ATA's 727s to Astar, a Miami cargo carrier that flies for German package delivery firm DHL, said Robert Dahl, project director at Seattle-based Air Cargo Management Group.

Dahl said demand for low-capacity freighters such as 727s was high in the late 1990s. But soaring jet fuel costs since then and the 727's status as a gas hog have shortened what ATA and Boeing probably thought was five or 10 years of remaining demand for the planes, said Michael Mooney, a senior vice president of Evergreen, Colo.-based aviation consulting firm Boyd Group. "They miscalculated."

Conversions of 727s have "effectively stopped," Dahl said.


This Boeing 727 is among 23 ATA Holdings aircraft given to a joint venture that's converting them to cargo freighters.
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