ATA Airlines May Sell Off Passenger Business

By Ted Evanoff, The Indianapolis Star

Jan. 30–The dismantling of ATA Airlines in Indianapolis could continue if the carrier sells off its regular passenger business as part of a broad plan to raise cash for the New York hedge fund that bought the carrier.

Global Aero Logistics, owner of 2,300-employee ATA, raised the possibility of a sale in a recent statement filed with the Securities and Exchange Commission.

Separately, ATA will lay off 30 of its 650 Indianapolis employees this week in part because of service cutbacks at New York LaGuardia and Washington Reagan airports, said Steve Forsyth, Global Aero spokesman.

ATA was regarded as one of Indiana’s most glamorous companies in the last decade. A discount airline that became the No. 10 U.S. passenger carrier, it employed 2,300 workers in the city as recently as 2004, when its rapid expansion imploded in bankruptcy.

In February 2006, New York hedge fund Matlin Patterson bought ATA out of bankruptcy. Matlin then formed Atlanta-based Global Aero to oversee ATA and two other airlines Matlin bought later, North American and World.

Many pilots, flight attendants and airplane mechanics once based in Indianapolis have been laid off or relocated as ATA, streamlined to 28 aircraft from a pre-bankruptcy fleet of 66, turned its focus to the West Coast and its military business.

Pilots suggest Southwest Airlines or Aloha Airlines might buy ATA for its lucrative West Coast-to-Hawaii routes, although Forsyth said he could not disclose whether any sale talks are under way.

The statement, filed Jan. 9 with the SEC, “is meant to be an all inclusive document that can describe any eventuality,” Forsyth said. “To achieve substantial growth we are currently evaluating selective and strategic possibilities.”

Even if the regular routes are sold, ATA would continue to fly U.S. troops between bases throughout the world. It is the nation’s largest private troop hauler. ATA also would continue to expand its cargo business.

Together, the troop and cargo businesses brought in $1.2 billion last year, compared with the $400 million raised by ATA and North American on regular passenger routes. World is a cargo hauler. North American flies passengers on scheduled service between Africa, New York and Baltimore.

Global’s statement concerns ATA pilots, who worry another bout of instability could shake ATA.

“The situation with ATA is so fluid, and the intentions of the owners, which is a hedge fund, is so elusive, we can’t draw any conclusions as to what in fact is happening other than to say they may sell off a large portion of the company,” said ATA pilot Seth Cooperman, an officer in the Air Line Pilots Association, on Tuesday.

The statement Global filed with the SEC is a prospectus that outlines plans to sell $50 million worth of new stock in the company to investors in an initial public offering. As part of the concessions the pilots delivered to keep bankrupt ATA flying, pilots would receive shares of new stock.

“The defense business promises to be quite good for Global for the next few years,” Cooperman said. “But unless fuel prices drop significantly, we’re going to see a further reduction in capacity” of ATA scheduled service routes.

It was soaring jet fuel costs earlier this decade that sidetracked ATA. Founded by charter pilot J. George Mikelsons in 1973, ATA became the leading passenger carrier in Indianapolis by 2004, operating 66 airliners.

But as fuel costs eroded profits, ATA sought bankruptcy protection, unable to make the payments on a fleet of big new jet airliners purchased for its rapid expansion.

The Indianapolis passenger business was canceled entirely, Florida routes were dismantled, and the cash cow — the gates at Chicago Midway — were sold to Southwest.

Dallas-based Southwest also formed a loose alliance to funnel its passengers to ATA airliners flying the leisure routes to Hawaii and the Caribbean.

Currently, 12 of ATA’s 28 planes carry passengers on regular routes and 16 haul troops and cargo.

Part of the cargo business, Forsyth said, is picked up from other carriers that outsource freight to ATA. This includes a lucrative freight service running regularly between Germany and Dubai in the Persian Gulf. In its SEC statement, Global said it plans to expand the cargo service in Asia.

ATA AIRLINES:

–What: A subsidiary of Global Aero Logistics that serves major business centers and popular vacation destinations in more than 60 markets. It is also a leading passenger charter airline serving the U.S. military and other government customers. It has a fleet of 29 aircraft.

–Founded: 1973 in Indianapolis by George Mikelsons.

–Headquarters: 7337 W. Washington St., Indianapolis.

–Chief executive: Subodh Karnik.

–Employees: 2,300. ATA Airlines

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