ATA Airlines files for bankruptcy and shuts down

By Mark McSherry

NEW YORK (Reuters) - ATA Airlines Inc said on Thursday it filed for Chapter 11 bankruptcy protection and shut down all operations after cancellation of a key military charter agreement.

The Indianapolis-based low-cost airline and its rivals have recently been hamstrung by big increases in jet fuel prices. ATA is the second airline to file in the past few weeks.

The fuel price spike, coupled with a steadily weakening U.S. economy, has stalled the airline industry's modest recovery from the 2001-2006 downturn.

On Sunday, less than two weeks after filing for bankruptcy protection, Hawaii-based Aloha Airlines said it would shut down its passenger operations.

Big airlines are beginning to shrink to cope with toughening operating conditions. On March 18, Delta Air Lines Inc unveiled plans to cut 2,000 jobs and scale back flights.

Carriers have also moved to pass along fuel costs to travelers via higher fares and surcharges. Some airlines have opened new revenue streams by charging for products and services that previously had been included in the ticket price.

Oil prices, which are directly related to jet fuel costs, remain above $100 a barrel.

"ATA's scheduled service business had been severely impacted by the dramatic and unprecedented increase in the price of jet fuel in recent months," said ATA in a statement.

ATA said "virtually all" of its 2,230 employees have been told their jobs have been eliminated.

ATA operated 29 aircraft, serving destinations that included Hawaii, Guadalajara and Cancun, Mexico; Oakland, California; Chicago; Las Vegas; and Dallas and also had a code-share agreement with Southwest Airlines Co.

ATA said it is no longer able to honor any reservations or tickets, and customers who bought tickets from Southwest for flights operated by ATA through its code-share agreement should contact Southwest.

Southwest said it would rebook such travelers on new itineraries or offer refunds for any unused portions of their tickets.

Northwest Airlines Corp, US Airways Group and Delta Air Lines all offered to assist ATA passengers.

HARDSHIP

ATA said it spoke to numerous parties in unsuccessful efforts to obtain capital or sell the business as a going concern.