Without warning, budget airline ATA declares bankruptcy and shuts down. Why it happened and what to do if you're holding a ticket.
Yesterday, on April 2, 2008, ATA Airlines filed for Chapter 11 in U.S. Bankruptcy Court in their home base of Indianapolis, Indiana.
Less than 24 hours later, the airline issued an early morning press release that they were ceasing all operations effective immediately, leaving thousands of passengers stranded. Not even the employees had any warning.
Why Did ATA Go Bankrupt?
According to the press release issued by the airline, problems occurred following the loss of a key military charter contract. A later article by the website The Consumerist relayed further information from an “ATA insider” who elaborated that the “airline lost an important contract [with Federal Express] that involved the AMC [Air Mobility Command] and became financially insolvent.”
Essentially, what that means is that ATA is claiming that because they lost a contract to transport military personnel, they were not making enough money from regular airline passengers to keep operating…even though they also state in the press release they were servicing 10,000 passengers a day.
Early Warnings the Airline Was In Trouble
This is the second time ATA has filed for bankruptcy in recent years, and the first time, they were assisted by a $20 million investment by competitor Southwest Airlines. In exchange, Southwest had received some of the ATA gates at Chicago’s Midway Airport, enabling them to open up routes to the city. They had also been planning to begin flights to Mexico, Canada and the Caribbean next year under a marketing codeshare agreement with ATA.
The first inklings of new troubles came last month (March 2008), when the airline started scaling back operations by shutting down routes to Cancun and Guadalajara, Mexico, and then said it was planning to cease operations at Midway Airport entirely.
This week’s shut down, however, took just about everybody by surprise, including over 2,000 employees, many of whom found out by watching the morning news that they were suddenly out of a job. The Chicago Tribune went live to Midway and shot video of passenger and employee first reactions to the shut down.
What to Do If You Have a Ticket
Southwest Airlines said it will honor any tickets issued through its system on ATA codeshare flights via its own scheduled flights, or give refunds. Those with questions regarding the codeshare flights via Southwest should contact the airline at 800-308-5037.
Northwest Airlines said it will honor ATA tickets until May 3 for a $100 fee per leg for flights to/from Hawaii and Cancun.
Otherwise, if you paid by credit card, immediately contact your card company for a refund. It will be up to them as to whether you’ll get your money back.
If you paid by cash or check, you can file a claim for a full or partial refund by submitting a claim against ATA’s Chapter 11 court proceedings online, but chances are you’ll only get a small percentage of what you paid for the ticket, if anything at all, once the airline is liquidated.
The ATA website has a list of other informative links for consumers, ironically on a page with a banner proclaiming the airline had proudly operated for 35 years.
