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Defunct ATA Airlines awarded $66M in FedEx lawsuit

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An Indianapolis jury has returned a $65.9 million verdict against Memphis-based FedEx in a breach-of-contract lawsuit brought in 2008 by now-defunct ATA Airlines.

The former Indianapolis carrier alleged FedEx broke a long-term contract with ATA to fly troops on behalf of the federal government. ATA ceased operations in April 2008, shortly after it was informed by FedEx that it would no longer be part of FedEx’s military contracting team.

Last week, the U.S. District Court jury said ATA is entitled to $21.9 million in lost profits for 2008 and $43.9 million in lost profits for 2009.

ATA originally had sought $94 million. Last April, however, FedEx won a partial summary judgment that tossed out some of ATA’s claims, leaving just the breach-of-contract charge.  In a recent regulatory filing prior to the Oct. 19 verdict, FedEx declared: “We still do not believe that any material loss is probable.”

“We respectfully disagree with the jury’s findings and are evaluating our options,” FedEx spokeswoman Sandra Munoz told IBJ on Monday.  It is widely expected that the company will appeal the verdict, which was reached after three hours of deliberations.

Any money ATA ultimately recovers will be distributed to creditors, including pilots, said Ken Broughton, an attorney for Texas-based Haynes and Boone LLP, which represented the airline.

In a statement, Broughton said that “unfortunately, any judgment ATA recovers from FedEx won’t revive" ATA.

According to bankruptcy records, ATA had 4,970 unsecured claims totaling $571.6 million as of June 30. The largest unsecured creditor listed is Wells Fargo Northwest, seeking $301 million.

ATA, founded in the 1970s by Latvian immigrant George Mikelsons, grew to be the nation’s 10th-largest scheduled passenger airline. An expensive fleet upgrade begun prior to the Sept. 11, 2001, terrorist attacks came back to haunt ATA as the industry slowed in the years to follow.

ATA filed its first Chapter 11 reorganization in October 2004. At first, Southwest Airlines bought a portion of ATA stock, along with New York vulture firm MatlinPatterson.  ATA’s headquarters were moved to suburban Atlanta, where the carrier became part of a larger organization based there—Global Aviation Holdings, operator of charter carriers World Airways and North American Airlines.

Dallas-based Southwest walked away with ATA’s valuable gate slots, including those in New York City.

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  • ATA & MatlinPatterson
    MatlinPatterson are INDEED a "VULTURE FIRM".

    They Screwed Varig in Brazil, they screwed ATA in the U.S., and they are currently pulling the purse-strings at Global Aviation Holdings (parent of World Airways & North American Airlines) in Peachtree City, Georgia.

    These people are nothing but VULTURES and don't give a damn about ANYTHING but profit.

    We all hope to God that the World Airways filing with the SEC to go public (again) takes-off, before World is stripped of its' assets and its' rich history.......

    SHAME ON YOU MatlinPatterson!!!!! You people are nothing but financial RAPISTS!
  • "Vulture" firms
    Let me learn you, Freudian Slip and Typo?Really? -- "vulture firm" is a real name on Wall Street for investment firms that buy assets of distressed companies, hoping to fixem' up and sell them later for a profit. Go back to reading the Star and have another fistful of Slim Jims.
  • Freudian Slip?
    That is the first time I have seen a Freudian slip in writing. How appropriate.
  • Typo? Really?
    "...New York vulture firm MatlinPatterson."

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