Now-Leaner ATA Sets Sights On Its Future

Mar. 10 -- While bankrupt Delta, Northwest and United grapple with how to turn their proud and profitless carriers into moneymakers again, ATA Airlines has quietly gone bankrupt, retrenched and gone on.

Once a leading Indianapolis employer, ATA last week emerged from a 16-month bankruptcy reorganization recast as a leaner company reliant on Pentagon charters.

If its stable financial condition improves, the Indianapolis-based company might sell stock to the public within two years, ATA chief John Denison said in his first interview outlining the new course since leaving bankruptcy Feb. 28.

Raising cash on the open stock market -- "going public," in other words -- would represent a remarkable turnaround for a company staggered by $1.5 billion in losses since 2000.

But in bankruptcy ATA has been busy. It shed jobs, planes, its unprofitable Chicago Midway hub and formed a business alliance allowing it to carry passengers for Southwest Airlines.

"I do think this is a viable plan for ATA," said aviation analyst Bill Swelbar, president of Eclat Consulting of Reston, Va., which analyzed ATA finances for the airline's flight attendants just before the bankruptcy. "They have access to places and equipment to fly to places Southwest can't get to."

Scaled today at half its pre-bankruptcy size, privately owned ATA is prepared to earn the profits necessary to support a public stock sale, Denison said.

"We fully expect to be that in the months and years ahead," said Denison, the airline's chief executive officer, about going public.

First, though, ATA must earn a profit. Last week, the carrier reported a $455.5 million loss for 2005, including $370 million in reorganization costs.

Denison concedes tough cost controls must remain in place. He has shown he doesn't flinch from deep cuts. While bigger bankrupt carriers grasped for strategies, Denison quickly scaled ATA down to 3,300 employees.

ATA pared its jet fleet to 30 airliners from 64, won employee contract concessions and cut nearly 4,800 jobs, almost 1,000 of them in Indianapolis, where ATA today employs 1,300.

The chastened carrier shaved $100 million off its annual fuel bill, $94 million off aircraft rentals, $87 million off payroll, $23 million off advertising, and $10 million off crew travel. In all, ATA trimmed its annual operating expenses by $460 million, to $1.17 billion last year. Operating revenue totaled $1.08 billion, a deficit of $90,000.

Matlin Patterson Global Opportunities Partners, the Manhattan investor now in control of ATA, saw the savings and last fall stepped in. ATA left bankruptcy last week cushioned by Matlin's new $95 million capital infusion.

Now, ATA's leaders are contemplating selling shares to the public in 12 to 24 months. That could compensate Matlin, which buys and sells distressed firms. The Matlin group usually holds an investment three to five years, Denison said.

Selling shares to the public also would arm ATA with an undetermined amount of new capital. That could finance still sketchy plans to bring in 20 new jetliners if business increases on regular passenger routes.

Today, ATA's jets are spread in two groups. Only 18 fly scheduled routes, chiefly focused on leisure travel between Western cities and Hawaii in the alliance with Southwest. A dozen are allocated to what is becoming the lead income source, Pentagon charters.

Ferrying U.S. troops around the globe is an ATA tradition, but a long way from founder J. George Mikelsons' audacious plan. He and John Tague, ATA's president in the late 1990s, launched the Indiana business into the ranks of major national airlines.

ATA's rapid 2001 expansion brought in a new fleet of Boeing 737s and ballooning airliner lease payments. Then when fare wars and rising fuel prices ate profits, ATA filed for protection from creditors on Oct. 26, 2004.

Mikelsons, who founded ATA in the city in 1973, retired last year after creditors, chiefly bondholders owed more than $1.5 billion, ushered in a new management team led by Denison. The retired Southwest Airlines executive quickly eliminated most ATA flights where it competed with major carriers, including all routes to Indianapolis.

While there are no plans to resume flights to Indianapolis, where ATA in 2004 led all airlines in passenger boardings, Denison said ATA appears stable now that it has shed unprofitable routes.

No longer traded on a stock exchange, ATA's stock value was wiped out in bankruptcy, including much of the paper fortune Mikelsons amassed.

When ATA left bankruptcy, it turned itself into new legal entity still called ATA. The new ATA privately allocated stock not traded on any public market to important stakeholders.

Once all stock options and warrants for those new shares are exercised, Matlin would control 61 percent of the stock. Major creditors including the Royal Bank of Canada would own 30 percent.

A handful of ATA executives and managers would have 5 percent as payment for taking the airline through the bankruptcy. The 900 ATA pilots represented by the Air Line Pilots Association would have the remaining 4 percent in return for salary concessions made last year.

Once ATA issues a new round of stock to the public, all the private shares owned by management, ALPA, bondholders and Matlin presumably would become more valuable.

ATA'S TURBULENT RIDE:

2004:

--Oct. 26: ATA files for bankruptcy and considers unloading Midway flights, gates and routes and LaGuardia and Reagan airport slots to AirTran for $87.6 million.

--Dec. 21: A U.S. bankruptcy judge approves Southwest's offer for six ATA gates for $30 million, plus a $47 million loan.

2005:

--Jan. 26: ATA says it will cancel 50 flights planned on 19 Indianapolis routes, shrinking by April 10 to four daily flights.

--Feb. 22: ATA says 260- plus workers will lose jobs.

--July: ATA announces it will cut 450 jobs.

--Nov. 1: ATA says it will end commercial service in Indianapolis on Jan. 10.

--Nov. 10: ATA says it has reached a deal to secure $100 million in new capital it needs to emerge from bankruptcy.

--Dec. 6: ATA says it will end flights from Chicago's Midway Airport to Orlando and Fort Myers, Fla., and San Francisco in late April.

2006:

--Jan. 9: ATA flies its last four Indianapolis flights.

--Jan. 30: A federal judge approves ATA's plans to exit bankruptcy after more than 14 months of financial protection.

--Feb. 28: ATA emerges from bankruptcy, hoping to lure back passengers by focusing on vacation travel. Its shares no longer will be publicly traded; the airline and parent company will be operated as a privately held entity.

BY THE NUMBERS: A look at ATA before and after bankruptcy:

Before:

--Jet fleet: 64

--Jobs: 8,100

--Annual operating expenses: $1.63M

--Indianapolis market share: 18 percent

After:

--Jet fleet: 30

--Jobs: 3,300

--Annual operating expenses: $1.17M

--Indianapolis market share: 0 percent

Sources: ATA, Star archives and news reports

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