Bk Judge Approves Swa/ata Deal
- Thread starter SWAFA30
- Start date
Here's the Indy Star article. Wonder who the 'ex-SWA exec' is??
Judge finalizes deal between Southwest, ATA
The $117 million pact is expected to help the Indianapolis-based carrier maintain a national presence.
By Ted Evanoff, [email protected], December 22, 2004
When a Texas lawyer doodled a dream on a cocktail napkin in the late 1960s for a no-frills airline, he conjured up low-cost Southwest Airlines.
Over three decades, Southwest's focused strategy has made it the nation's most profitable airline and the largest in terms of its 70 million passengers a year.
Now some of Southwest's magic could sprinkle on Indianapolis-based ATA Airlines, the nation's only low-fare carrier in bankruptcy.
On Tuesday, U.S. Bankruptcy Court Judge Basil Lorch III approved the Dallas-based airline's far-reaching $117 million offer for part of ATA.
Southwest will get six ATA gates at Chicago's Midway Airport in the first quarter and take a 27.5 percent stake in ATA next year. The deal also will allow ATA to sell Southwest tickets to travelers who use both airlines on one trip, a process called code-sharing. It could pour 500,000 passengers each year onto ATA planes.
Moreover, an unnamed former Southwest executive will step in within weeks to help oversee the restructuring of the 7,700-employee Indianapolis airline.
Separately, ATA's creditors will appoint a new board and key executives next summer, with a search for a chief executive expected to conclude by June 30, creditors' attorney Lisa Beckerman told The Indianapolis Star after Tuesday's hearing.
Without flair or drama, the transaction was concluded in Lorch's courtroom free of public comment regarding the economic issues at stake.
ATA is widely viewed in Indianapolis as an important asset for its nonstop, low-fare flights and 2,300 employees.
Southwest stepped in after it appeared the nation's No. 10 airline might scale back into a regional carrier with as few as 1,000 local employees. The deal with the Dallas-based airline will enable ATA to maintain a national presence with eight Midway gates, well as its Indianapolis hub.
"I'm just glad we got to this point," said Southwest Chief Executive Gary Kelly, who outbid AirTran Airways of Orlando.
ATA chairman and founder J. George Mikelsons said recently he'd like to draw on Southwest's expertise in customer service and flying low-fare flights profitably. But officials have not yet provided details on the collaboration and are working out details. What they have said so far: They will not collaborate on setting fares, planning flight routes or their fleet of jets or employee costs.
With ATA desperate for cash, the Southwest deal provides a temporary cushion. But there's plenty of potential for hard knocks.
ATA could lose its eight remaining Midway gates to Southwest if it runs into deeper financial problems and can't repay its loans.
The gates are the security for a federal bailout loan, as well as Southwest's short-term loan of $40 million.
Another looming issue: Negotiations are beginning for wage concessions among ATA's nearly 3,000 pilots and flight attendants. And ATA and Southwest must work out procedures to seamlessly shift code-share passengers from one airline to another in the first quarter.
In addition, ATA must drop undisclosed flights as it slims down to eight Midway gates and drops to 50 jets from 61.
Just as important, it must craft a strategy to keep flying even if travel slumps and fuel prices surge again.
ATA unions welcome the Southwest deal. It preserves more jobs than were promised in the AirTran bid. And some employees hope Southwest adds a steadying hand.
"ATA is still in Chapter 11, and it will be for the foreseeable future," said Matt Ellis, an ATA Boeing 737 pilot based in Chicago. "The Southwest culture is one thing that we hope rubs off on ATA."
That culture is built around the simple-to-run airline dreamed up by former San Antonio general business lawyer and litigator Herb Kelleher, today Southwest's chairman.
Mikelsons, 67, and Kelleher, 71, are both old-school entrepreneurs with a love for airplanes. But the gregarious Kelleher managed to maintain Southwest's simple, focused approach, while ATA evolved into a more complicated business.
ATA added regular flights even as it retained its roots as a global military and holiday charter service, including its original Ambassadair travel club.
ATA's airliners reflect its complexity -- giant troop-carrying Lockheed TriStars, ocean-crossing Boeing 757s, cross-country Boeing 737s, Saab props flown by air shuttle subsidiary Chicago Express.
Southwest flies only Boeing 737s. Maintaining one kind of jet is more cost-efficient than training mechanics for multiple jets. And it never shuttles passengers to hubs to change over to larger aircraft. Southwest flies only point to point, one city to another.
Southwest is the most profitable carrier in the U.S. airline industry, which is on track to lose $5 billion this year.
In the quarter that ended Sept. 30, the airline earned $119 million, up 12.3 percent from a year earlier.
"Southwest is probably the best airline in the world," said analyst Morton Beyer of Reston, Va., an airline executive and consultant for 50 years. "They have consistently been profitable and stuck to their plan. I've long said Southwest is the only airline that knows why they are in business. They are selling transportation."
Southwest debuted in 1971, flying the Dallas-Houston-San Antonio circuit.
Flight attendants wore orange hot pants, poured free liquor for the duration of the short flights, usually 50 minutes. Day fares were low, and night and weekend flights were even less. Southwest money-changing machines in the Dallas terminal offered $1.05 for each $1, a way for the airline to thank its customers.
When entrenched carriers such as Dallas-based American Airlines moved to the huge new Dallas-Fort Worth airport in the 1970s, Southwest stayed at old Love Field in Dallas, preferring Love's lower operating fees. Southwest's stock ticker symbol, LUV, reflects the continuing allegiance to the old airport.
Now, other carriers are scrambling to match its no-frills approach.
"I think the future lies in low fares," said Southwest's Kelly, who last week predicted ATA would be profitable and on firmer footing in a year.
Call Star reporter Ted Evanoff at (317) 444-6019.
Judge finalizes deal between Southwest, ATA
The $117 million pact is expected to help the Indianapolis-based carrier maintain a national presence.
By Ted Evanoff, [email protected], December 22, 2004
When a Texas lawyer doodled a dream on a cocktail napkin in the late 1960s for a no-frills airline, he conjured up low-cost Southwest Airlines.
Over three decades, Southwest's focused strategy has made it the nation's most profitable airline and the largest in terms of its 70 million passengers a year.
Now some of Southwest's magic could sprinkle on Indianapolis-based ATA Airlines, the nation's only low-fare carrier in bankruptcy.
On Tuesday, U.S. Bankruptcy Court Judge Basil Lorch III approved the Dallas-based airline's far-reaching $117 million offer for part of ATA.
Southwest will get six ATA gates at Chicago's Midway Airport in the first quarter and take a 27.5 percent stake in ATA next year. The deal also will allow ATA to sell Southwest tickets to travelers who use both airlines on one trip, a process called code-sharing. It could pour 500,000 passengers each year onto ATA planes.
Moreover, an unnamed former Southwest executive will step in within weeks to help oversee the restructuring of the 7,700-employee Indianapolis airline.
Separately, ATA's creditors will appoint a new board and key executives next summer, with a search for a chief executive expected to conclude by June 30, creditors' attorney Lisa Beckerman told The Indianapolis Star after Tuesday's hearing.
Without flair or drama, the transaction was concluded in Lorch's courtroom free of public comment regarding the economic issues at stake.
ATA is widely viewed in Indianapolis as an important asset for its nonstop, low-fare flights and 2,300 employees.
Southwest stepped in after it appeared the nation's No. 10 airline might scale back into a regional carrier with as few as 1,000 local employees. The deal with the Dallas-based airline will enable ATA to maintain a national presence with eight Midway gates, well as its Indianapolis hub.
"I'm just glad we got to this point," said Southwest Chief Executive Gary Kelly, who outbid AirTran Airways of Orlando.
ATA chairman and founder J. George Mikelsons said recently he'd like to draw on Southwest's expertise in customer service and flying low-fare flights profitably. But officials have not yet provided details on the collaboration and are working out details. What they have said so far: They will not collaborate on setting fares, planning flight routes or their fleet of jets or employee costs.
With ATA desperate for cash, the Southwest deal provides a temporary cushion. But there's plenty of potential for hard knocks.
ATA could lose its eight remaining Midway gates to Southwest if it runs into deeper financial problems and can't repay its loans.
The gates are the security for a federal bailout loan, as well as Southwest's short-term loan of $40 million.
Another looming issue: Negotiations are beginning for wage concessions among ATA's nearly 3,000 pilots and flight attendants. And ATA and Southwest must work out procedures to seamlessly shift code-share passengers from one airline to another in the first quarter.
In addition, ATA must drop undisclosed flights as it slims down to eight Midway gates and drops to 50 jets from 61.
Just as important, it must craft a strategy to keep flying even if travel slumps and fuel prices surge again.
ATA unions welcome the Southwest deal. It preserves more jobs than were promised in the AirTran bid. And some employees hope Southwest adds a steadying hand.
"ATA is still in Chapter 11, and it will be for the foreseeable future," said Matt Ellis, an ATA Boeing 737 pilot based in Chicago. "The Southwest culture is one thing that we hope rubs off on ATA."
That culture is built around the simple-to-run airline dreamed up by former San Antonio general business lawyer and litigator Herb Kelleher, today Southwest's chairman.
Mikelsons, 67, and Kelleher, 71, are both old-school entrepreneurs with a love for airplanes. But the gregarious Kelleher managed to maintain Southwest's simple, focused approach, while ATA evolved into a more complicated business.
ATA added regular flights even as it retained its roots as a global military and holiday charter service, including its original Ambassadair travel club.
ATA's airliners reflect its complexity -- giant troop-carrying Lockheed TriStars, ocean-crossing Boeing 757s, cross-country Boeing 737s, Saab props flown by air shuttle subsidiary Chicago Express.
Southwest flies only Boeing 737s. Maintaining one kind of jet is more cost-efficient than training mechanics for multiple jets. And it never shuttles passengers to hubs to change over to larger aircraft. Southwest flies only point to point, one city to another.
Southwest is the most profitable carrier in the U.S. airline industry, which is on track to lose $5 billion this year.
In the quarter that ended Sept. 30, the airline earned $119 million, up 12.3 percent from a year earlier.
"Southwest is probably the best airline in the world," said analyst Morton Beyer of Reston, Va., an airline executive and consultant for 50 years. "They have consistently been profitable and stuck to their plan. I've long said Southwest is the only airline that knows why they are in business. They are selling transportation."
Southwest debuted in 1971, flying the Dallas-Houston-San Antonio circuit.
Flight attendants wore orange hot pants, poured free liquor for the duration of the short flights, usually 50 minutes. Day fares were low, and night and weekend flights were even less. Southwest money-changing machines in the Dallas terminal offered $1.05 for each $1, a way for the airline to thank its customers.
When entrenched carriers such as Dallas-based American Airlines moved to the huge new Dallas-Fort Worth airport in the 1970s, Southwest stayed at old Love Field in Dallas, preferring Love's lower operating fees. Southwest's stock ticker symbol, LUV, reflects the continuing allegiance to the old airport.
Now, other carriers are scrambling to match its no-frills approach.
"I think the future lies in low fares," said Southwest's Kelly, who last week predicted ATA would be profitable and on firmer footing in a year.
Call Star reporter Ted Evanoff at (317) 444-6019.
