Southwest swoops in to benefit from ATA Airlines' bankruptcy

December 1, 2008
Southwest Airlines first swooped in as the apparent savior of ATA Airlines four years ago, giving the bankrupt Indianapolis carrier a much-needed $117 million in return for its valuable gates at Chicago Midway Airport.

The Dallas-based carrier paid ATA tens of millions of dollars more in the years to follow when ATA flew its passengers places Southwest didn't, such as New York's LaGuardia Airport.

But in the end, Southwest appears to be playing the vulture, striking a deal to acquire those valuable landing slots at LaGuardia and most of ATA's remaining assets for $7.5 million.

A hearing to approve the sale is set for Dec. 2 in U.S. District Bankruptcy Court in Indianapolis, where ATA landed in bankruptcy for the second and final time in April of this year. Southwest is likely to prevail barring a last-minute offer from another carrier or legal complications.

"Southwest is getting a terrific deal. Those [14] slots are probably worth $1 million apiece," said Don Wurster, a former ATA first officer who represents the interests of former ATA pilots as a member of the Air Line Pilots Association.

The deal struck by Southwest is effectively the last nail in the coffin for ATA, which was the nation's 10th-largest passenger carrier until it began shedding routes to stay alive in 2005.

ALPA said much of the route reduction was to placate Southwest, which entered into a code-sharing arrangement with ATA.

"They came in as our partner, and our friend, and immediately we went into a reduction mode, a regressive state where we vacated routes," Wurster said.

Over the last several months, suspicions some pilots had of Southwest's playing the vulture role from the start have been steeled.

"This Texas airline acted in bad faith for the past several years to steal ATA Airlines from the employees who proudly built the company brick by brick," one former ATA pilot wrote in a recent e-mail.

What stoked those suspicions was Southwest's recent announcement that it had named former ATA chief executive and chairman John Denison to its board.

Denison had been retired from Southwest as its chief financial officer when he took control of ATA during the first bankruptcy filing. At the time, Denison publicly shrugged off the appointment as something to keep him busy after retirement.

ALPA is dubious.

"I was struck by the coincidental nature of Denison joining the Southwest board the day after they filed for the ATA slots," said Rusty Ayers, an ALPA spokesman in Chicago.

Wurster compared Denison to a "Trojan horse" for Southwest, allowing the Dallas carrier to gain valuable insight into ATA's cost structure and learn from its experience in markets where Southwest didn't operate.

In November, The Wall Street Journal noted that Southwest, which for years focused on airports where it could make quick turnarounds between takeoffs and landings, learned about delay patterns at LaGuardia through its ATA partnership.

Some former ATA pilots see Southwest as behind ATA's sudden decision to shutter the company and file for bankruptcy.

ATA's parent, Global Aero Logistics, said it decided to cease service after learning FedEx would not keep ATA on board its military cargo contract team after September. ALPA members said management wouldn't listen to a proposal to change labor work rules for ATA's charter business to help the carrier survive.

Meanwhile, back at what's left of ATA, attorneys are trying to liquidate other assets, including two pages of Web domain names owned by the airline. Besides ATA.com, the carrier had acquired less-than-flattering domain names over the years, including "ATAcrashes.com," to keep them out of the public eye.

ATA has asked the court for permission to auction the 80 domain names on the GoDaddy online auction site, saying several "have significant potential resale value."

Attorneys for ATA also of late have been trying to establish bidding procedures to unload three former Lockheed L1011 aircraft that date to the early days of the carrier founded by Latvian immigrant George Mikelsons in the 1970s.

ATA once employed more than 7,000 people, including 2,300 in Indianapolis.

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