ATA picks Southwest as winner for Midway Airport gates

By Jeff Pines

Washington, Dec. 16 - ATA Holdings Corp. said it picked Southwest Airlines' $117 million package as the winning bidder for six Midway Airport gates and a hangar.

The decision is subject to the approval of the U.S. Bankruptcy Court for the Southern District of Indiana. Southwest and AirTran Airways Inc. were bidders in the auction.

Dallas-based Southwest will pay $40 million in cash, provide $47 million in financing and buy $30 million of convertible preferred shares once the airline exits bankruptcy. The shares are convertible into a 27.5% stake. Included in the package is a $7 million construction loan for the city of Chicago.

The two airlines will also enter a code sharing agreement. ATA said the airlines expect to start the code share agreement in early February on Chicago Midway flights and over the following six months at up to five other airports. Code sharing will allow each airline to transfer passengers to the other airline on a single ticket.

Southwest said it estimates the code sharing could add $25 million to $50 million per year to each airline's annual revenues.

With fewer flights going to Chicago, ATA said it plans to reduce its fleet by about 20%. However, with the terms of the code share agreement with Southwest Airlines and the retention by ATA of eight gates at Chicago Midway, ATA said it remains a larger airline than it would have been under the AirTran Airways Inc. competing bid.

ATA said it plans to expand its presence in the Indianapolis market, continue to serve the West Coast-to-Hawaii market, as well as operate military and commercial flights.

"I'm especially pleased that, thanks to Southwest Airlines, ATA will maintain a substantial operation in Midway, in addition to expanding ATA's operations in Indiana. I consider Southwest to be the premier low cost carrier in the world," said George Mikelsons, chairman, president and chief executive officer of ATA, in a news release.

A Dec. 21 hearing is scheduled.

Indianapolis-based ATA filed for bankruptcy on Oct. 26. Its Chapter 11 case number is 04-19866.

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