CHICAGO, Oct 26 (AFP) - Discount carrier ATA Airlines filed for bankruptcy Tuesday and announced plans to sell off certain assets to another budget carrier.
Confirming days of speculation, the nation's 10th-largest passenger carrier said it was seeking protection under Chapter 11 of the US bankruptcy code so that it could restructure without pressure from its creditors.
George Mikelsons, president of the carrier's parent company, ATA Holdings, blamed "excess capacity, extremely high fuel prices, which continue to escalate, and declining fares," in a statement.
Mikelsons said ATA, which has its headquarters in Indianapolis, Indiana, will operate a full schedule, and honor its customer commitments, tickets and frequent flyer reward programs while in bankruptcy.
The move provides the carrier with a breathing space in which to cut costs and secure funds needed to pay down its debt while still remaining operational, he said.
The airline is talking to lenders about securing asset-backed loans to underwrite its eventual exit from bankruptcy. In the interim, it hopes to fund operations from its cash collateral and ticket revenues, it said.
The carrier also announced plans to transfer some of its assets to AirTran Inc. for 87.6 million dollars.
AirTran would assume ATA's flight operations, gates lease and routes in Chicago Midway Airport, as well as arrival and departure slots at New York's LaGuardia Airport and Ronald Reagan Washington National Airport outside the nation's capital under the plan.
The deal is subject to approval by the City of Chicago and the Bankruptcy Court and would take effect later this year or early next year, ATA said in a statement.
10/26/2004 23:32 GMT - AFP