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ATA Airlines Cuts Back Service From Chicago

Posted on: Tuesday, 1 November 2005, 21:00 CST

By Mark Skertic, Chicago Tribune

Nov. 2--Struggling ATA Airlines is ending service to three cities, including its hometown Indianapolis, in an effort to stem losses.

The airline is also dropping flights to and from Denver and San Juan, Puerto Rico. Intense competition and record fuel prices prompted the decision, the carrier said Tuesday.

Coupled with other service cutbacks announced last month, ATA will shrink from 122 daily departures to 64. At Midway, its largest airport, the airline will have 24 daily departures.

ATA has been trying to find a profitable business model during a period when nearly all airlines are losing millions. The carrier's goal is to "get to the smallest cash loss--maybe a cash positive position--by early 2006," said Subodh Karnik, senior vice president and chief commercial officer. ATA management has targeted early 2006 for its exit from bankruptcy.

The airline said it has not yet determined how many jobs will be lost with the latest round of reductions. It employs about 4,200, including 400 in Chicago.

ATA's parent, ATA Holding Corp., sought bankruptcy protection in October 2004. At the time, it was a dominant airline at Midway and a major presence in Indianapolis, where the company is headquartered.

After the reductions it will remain the second largest airline at Midway, but will be dwarfed by Southwest Airlines, which has about 200 daily departures from Chicago.

Southwest gained partial ownership of ATA last year when it provided the airline financing necessary to get through bankruptcy. In exchange, Southwest gained rights to six of ATA's 14 gates at Midway.

The two also agreed to a passenger-sharing arrangement known as a code share. Customers can book a flight on one of the airlines and transfer to the other. The agreement has enabled Southwest customers, for example, to use their frequent flier miles to visit Honolulu, a city served by ATA.

Southwest said in a recent federal filing that the code-share agreement generated $19 million in revenues in the third quarter. But that amount will decrease in coming months as ATA shrinks.

In addition to Denver, ATA is dropping service to Minneapolis and recently ended flights to Newark, N.J. and Boston. Passenger traffic from those four cities accounted for about 50 percent of the code share revenue, a Southwest spokeswoman said.

Ironically, it was Southwest's recent decision to enter the Denver market that hastened ATA's exit. United Airlines, the dominant carrier in Denver, lowered its ticket prices to match Southwest. ATA could no longer afford to compete.

With the latest reductions, nearly half of ATA's revenues will come from its charter operation. Through September, scheduled commercial service had provided $506 million in revenue, while charter work accounted for $324 million. Revenue from scheduled service will decrease as fewer flights are flown. Much of the charter business comes from a contract to fly military charters, accounting for nearly a third of ATA's business.

ATA will continue to focus on select vacation destinations, such as Hawaii and Cancun, which other low-cost carriers don't service, Karnik said. It will also emphasize select business destinations, with several daily departures to airports such as New York's LaGuardia and Reagan National in Washington, D.C., he said.

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ATAHQ, UALAQ, LUV,

Source: Chicago Tribune

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