================================================================= ATA AIRLINES BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2004 (ISSN XXXX-XXXX) October 27, 2004 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- ATA AIRLINES BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtors' cases. New issues are prepared by Carlo A. Fernandez, Christopher G. Patalinghug, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of ATA AIRLINES BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO ATA AIRLINES BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF ATA AIRLINES [00002] ATA HOLDINGS' CONSOLIDATED BALANCE SHEET AT JUNE 30, 2004 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] ATA AIRLINES' CHAPTER 11 DATABASE [00005] LIST OF THE DEBTORS' 30-LARGEST UNSECURED CREDITORS [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES [00007] ORLANDO AIRPORT'S MOTION TO COMPEL SEGREGATION OF PFC'S [00008] AIRTRAN INKS DEAL TO BUY ATA'S MIDWAY GATES FOR $87.5 MIL [00009] ATSB SAYS IT UNDERSTANDS THE ISSUES & WILL WORK WITH ATA [00010] PILOTS' UNION SAYS LABOR COSTS AREN'T ATA'S PROBLEM [00011] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL KEY DATE CALENDAR ----------------- 10/26/04 Voluntary Petition Date 11/10/04 Deadline for filing Schedules of Assets and Liabilities 11/10/04 Deadline for filing Statement of Financial Affairs 11/10/04 Deadline for filing Lists of Leases and Contracts 11/15/04 Deadline to provide Utilities with adequate assurance 12/26/04 Deadline to make decisions about lease dispositions 12/26/04 [PROPOSED] Bar Date for filing Proofs of Claim 01/24/05 Deadline to remove actions pursuant to F.R.B.P. 9027 02/23/05 Expiration of Debtors' Exclusive Plan Proposal Period 04/24/05 Expiration of Debtors' Exclusive Solicitation Period 10/26/06 Deadline for Debtors to Commence Avoidance Actions Organizational Meeting with UST to form Committees First Meeting of Creditors pursuant to 11 USC Sec. 341 ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO ATA AIRLINES BANKRUPTCY NEWS ----------------------------------------------------------------- ATA AIRLINES BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ATA AIRLINES BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. To continue receiving ATA AIRLINES BANKRUPTCY NEWS, please complete the form below and return it by fax or e-mail to: Bankruptcy Creditors' Service, Inc. 572 Fernwood Lane Fairless Hills, PA 19030 Telephone (215) 945-7000 Fax (215) 945-7001 E-mail: peter@bankrupt.com We have published similar newsletters tracking billion-dollar insolvency proceedings since 1990, starting with Federated Department Stores. 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ATA AIRLINES BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtors' cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of ATA AIRLINES BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF ATA AIRLINES ----------------------------------------------------------------- ATA Holdings Corp. 7337 West Washington Street Indianapolis, Indiana 46231 Telephone (317) 247-4000 http://www.ata.com/ Carrying 10 million passengers annually, ATA Airlines, owned by ATA Holdings Corp., is the nation's 10th largest passenger carrier (based on revenue passenger miles) and one of the nation's largest low-fare carriers. ATA has one of the youngest, most fuel-efficient fleets among the major carriers, featuring the new Boeing 737-800 and 757-300 aircraft. The airline operates significant scheduled service from Chicago-Midway, Hawaii, Indianapolis, New York and San Francisco to over 40 business and vacation destinations. Stock of parent company, ATA Holdings Corp., is traded on the Nasdaq Stock Exchange (subject to delisting on November 23, 2004, based on a letter from the Nasdaq dated August 25, 2004) under the ATAH symbol. Now in its 31st year of operation, ATA serves 40 major business centers and popular vacation destinations from gateways in Chicago-Midway, Indianapolis, St. Petersburg, FL, San Francisco and Los Angeles. Abbreviated History 1973 -- Year founded 1981 -- Air carrier status approved 1986 -- Scheduled passenger service begins 1992 -- Scheduled service hub opens at Chicago-Midway 1999 -- Surpassed $1 billion in annual revenue 2000 -- "Major Carrier" status achieved 2001 -- Begins re-fleeting process and scheduled service from Chicago-Midway to international destinations. 2002 -- ATA becomes the number one carrier from both Indianapolis International Airport and Chicago-Midway, and the third largest carrier overall in Chicago, based on the number of passengers flown. 2003 -- ATA announces a company name change from American Trans Air, Inc. to ATA Airlines, Inc. 2004 -- Files for chapter 11 protection Management * J. George Mikelsons, Chairman and CEO * James W. Hlavacek, Vice Chairman * Gilbert F. Viets, Executive Vice President and Chief Restructuring Officer * David M. Wing, Executive Vice President and CFO * William D. Beal, Senior Vice President of Flight Operations * John B. Happ, Senior Vice President Marketing and Sales ATA employs a staff of approximately 7,324 full- and part-time workers, of whom approximately 3,550 are employed under collective bargaining agreements. Aircraft ATA operates the youngest, most fuel-efficient fleet in the airline industry including Boeing 737-800s, 757-200s, 757-300s, Lockheed L-1011s and Saab 340s. Destinations Domestic Destinations: Boston, Charlotte, Dallas/Ft. Worth, Denver, Ft. Lauderdale, Ft. Myers, Honolulu, Kona, Las Vegas, Lihue, Los Angeles, Maui, Miami, Minneapolis/St. Paul, New York-LGA, Newark, Orlando, Philadelphia, Phoenix, Pittsburgh, St. Petersburg, San Francisco, San Juan, Sarasota, Seattle, and Washington, D.C.-DCA International Destinations: Aruba, Cancun, Cozumel, Mexico, Grand Cayman, Guadalajara, Puerto Vallarta, Punta Cana, Dominican Republic, and Ixtapa/Zihuatanejo ATA Connection: Dayton, Des Moines, Flint, Ft. Wayne, Grand Rapids, Madison, Milwaukee, Moline, IL/Quad Cities, South Bend, Springfield, and Toledo Charter Service ATA is the largest North American operator of commercial and military charters. ATA provides worldwide capacity to more than 400 destinations for a variety of customers, including leading tour operators, the U.S. military, government agencies, incentive customers and corporate clients. ATA's Capital Structure ATA is a publicly held company with approximately 280 registered shareholders. ATA has not paid dividends to its common shareholders since becoming publicly held. In late 2000, ATA issued and sold 500 shares of Series A redeemable preferred stock, without par value, at a price and liquidation amount of $100,000 per share. The Series A Preferred is optionally redeemable by ATA under certain conditions, but ATA must redeem the Series A Preferred in equal semiannual payments beginning December 28, 2010, and ending December 28, 2015. Optional redemption by ATA may occur at a redemption premium of 50.0% of the dividend rate, beginning December 28, 2003, decreasing 10.0% per year to 20.0% of the dividend rate commencing December 28, 2006, and to 0.0% after the seventh year from issuance. Also in late 2000, ATA issued and sold 300 shares of Series B convertible redeemable preferred stock, without par value, at a price and liquidation amount of $100,000 per share. The Series B Preferred is convertible into shares of ATA's common stock at a conversion rate of 6,381.62 shares of common stock per share of Series B Preferred at a conversion price of $15.67 per share of common stock, subject to antidilution adjustments. The Series B Preferred is optionally redeemable by ATA under certain conditions, but ATA must redeem the Series B Preferred no later than September 20, 2015. Optional redemption by ATA may occur at 103.6% of the liquidation amount beginning September 20, 2003, decreasing 0.3% of the liquidation amount per year to 100.0% of the liquidation amount at the mandatory redemption date of September 20, 2015. ATA's Current Financial Crisis The geopolitical impact of the conflict in the Middle East and generally weak economic conditions of the past several years have adversely affected the airline industry as a whole, and have caused many airlines, including ATA Airlines and Chicago Express, to suffer significant financial losses since 2001. This trend continues in 2004, as the industry and the Company experience a very weak revenue environment and substantially increased fuel costs. These conditions have caused several air carriers, including United Airlines, American Airlines, Delta Airlines, Hawaiian Airlines, and US Airways, to either seek bankruptcy protection or threaten bankruptcy. ATA, in particular, faces a competitive pricing environment that includes extraordinary fare discounting by several airlines in many of the scheduled service markets that ATA Airlines serves at the same time that jet aviation fuel prices have escalated far beyond any price per gallon previously experienced on a sustained basis by the air carrier industry and far beyond the increases expected by the Company. These conditions and events significantly and adversely contributed to the Company's liquidity deterioration. In addition, the major and highly destructive hurricanes and tropical storms which hit Florida or the southern coasts of the United States in the third quarter of 2004 had a very severe and continuing impact on revenues, as a significant portion of the scheduled service routes of ATA Airlines serve these hard-hit areas of the United States. ATA's Boeing aircraft are all leased and have higher fixed- ownership costs than the older fleets that they replaced, another significant contributing factor to ATA's cash shortage. The terms of many of these aircraft operating leases were determined before September 11, 2001, and were structured to require significant cash payments in the first few years of each lease in order to reduce the total rental costs over the related lease terms. Consequently, ATA Airlines made large cash lease payments on many of its aircraft in 2003 and 2004, which resulted in a substantial use of ATA's cash. In January, 2004, ATA completed the amendment of certain aircraft operating leases with its three major lessors, Boeing Capital Services Corporation, General Electric Capital Aviation Services and International Lease Finance Corporation. The effect of the lease amendments was to delay the payment of portions of the rents due under those operating leases, primarily between June 30, 2003 and March 31, 2005, and to extend the leases generally for two years. Most of the payments delayed during this time period are to be paid at various subsequent times throughout the remaining life of the leases. ATA received a refund of $29.8 million on January 30, 2004 related to payments made in 2003 under the original terms of certain retroactively amended leases. In January, 2004, in a continued effort to address the liquidity problems created by the economic conditions the Debtors have faced since 2001, ATA successfully completed exchange offers and issued Senior Notes due 2009 and cash consideration for certain of its $175 million 10-1/2% Senior Notes due in August 2004 and issued Senior Notes due 2010 and cash consideration for certain of its $125 million 9-5/8% Senior Notes due in December 2005. In completing the exchange offers, ATA accepted $260.3 million of Existing Notes tendered for exchange, issuing $163.1 million in aggregate principal amo unt of 2009 Notes and delivering $7.8 million in cash in exchange for $155.3 million in aggregate principal amount of 2004 Notes tendered, and issuing $110.2 million in aggregate principal amount of 2010 Notes and delivering $5.2 million in cash in exchange for $105.0 million in aggregate principal amount of 2005 Notes. In addition to the New Notes issued, $19.7 million in aggregate principal amount of the 2004 Notes and $20.0 million in aggregate principal amount of the 2005 Notes remained outstanding after the completion of the exchange offers. In connection with the exchange offers, ATA also obtained the consent of the holders of the Existing Notes to amend or eliminate certain of the restrictive operating covenants and certain default provisions of the indentures governing the Existing Notes. The remaining 2004 Notes matured in early August 2004, and were paid. ATA also has attempted to reduce costs through, among other measures, a reduction in labor costs, with a requested reduction in flight attendants' salaries being approved by the AFA in October 2004. ATA also sought and obtained an agreement by the Air Line Pilots Association and the employee-members to amend the collective bargaining agreement for the two-year period of July 2004 through June 2006. The amendments include the elimination of July 2004 pay increases; the total projected savings over the two-year period are estimated to aggregate approximately $43,000,000. The Company also has implemented pay reductions for certain of its non-union employees, and has undertaken a substantial and painful reduction in corporate employees, with approximately 275 corporate jobs being terminated or departing. Other measures taken by ATA include an exhaustive search for acquirors for certain of ATA's significant assets, such as the Chicago Midway operations of ATA Airlines and Chicago Express, as well as for the Company as a whole. Despite its cost-cutting efforts, ATA will realize an overwhelming net loss for the full year of 2004. Based on current operating assumptions and market conditions, absent the initiation of these Chapter 11 cases, the Company projects that it would not be able to meet its cash obligations within the next 60 days, and perhaps sooner. ATA's sustained losses have negatively impacted its financial covenants. Specifically, the percentage of its holdback with its Visa and MasterCard processing bank has been increased to 100%, from 75% as of June 30, 2004, and American Express, Diner's Club International and Discover charge card companies also have instituted holdbacks. As of October 15, 2004, these increases in holdbacks have decreased ATA's unrestricted cash since September 30, 2004 by approximately $7.0 million. Additionally, as of September 30, 2004, ATA was required to meet an earnings before interest, taxes, depreciation, amortization and aircraft rent to fixed charges ratio covenant under its secured term loan, which is partly guaranteed by the Air Transportation Stabilization Board, and its mortgage note payable agreements. ATA did not satisfy that financial covenant as of September 30, 2004. Certain of ATA's other loan agreements have cross-default provisions that have been triggered by ATA's failure to comply with this financial covenant. ATA's failure to satisfy this financial covenant constitutes a default under these loan agreements, and the lenders have the right to accelerate the maturity date of their loans and exercise their remedies against ATA Airlines and each of its affiliates that guarantee payment of those loans. ----------------------------------------------------------------- [00002] ATA HOLDINGS' CONSOLIDATED BALANCE SHEET AT JUNE 30, 2004 ----------------------------------------------------------------- ATA HOLDINGS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS At June 30, 2004 (Unaudited) ASSETS Current assets: Cash and cash equivalents $150,046,000 Receivables, net of allowance for doubtful accounts ($1,077,000) 114,303,000 Inventories, net 46,803,000 Prepaid expenses and other current assets 30,568,000 ------------- Total current assets 341,720,000 Property and equipment: Flight equipment 330,993,000 Facilities and ground equipment 147,250,000 ------------- 478,243,000 Accumulated depreciation (236,329,000) ------------- 241,914,000 Restricted cash 31,682,000 Goodwill 14,887,000 Prepaid aircraft rent 146,175,000 Investment in BATA 13,679,000 Deposits and other assets 51,549,000 ------------- Total assets $841,606,000 ============= LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Current maturities of long-term debt $59,597,000 Accounts payable 31,687,000 Air traffic liabilities 125,677,000 Accrued expenses 171,398,000 ------------- Total current liabilities 388,359,000 Long-term debt, less current maturities 433,531,000 Deferred gains from sale and leaseback of aircraft 53,484,000 Other deferred items . 80,695,000 Mandatorily redeemable preferred stock; authorized and issued 500 shares 50,000,000 ------------- Total liabilities 1,006,069,000 Commitments and contingencies Convertible redeemable preferred stock; authorized and issued 300 shares 30,000,000 Shareholders' deficit: Preferred stock; authorized 9,999,200 shares; none issued - Common stock, without par value; authorized 30,000,000 shares; issued 13,535,304 66,236,000 Treasury stock; 1,711,440 shares (24,778,000) Additional paid-in capital 17,938,000 Accumulated deficit (253,859,000) ------------- Total shareholders' deficit (194,463,000) ------------- Total liabilities and shareholders' deficit $841,606,000 ============= *** ATA Holdings, Inc., reports $745,159,000 in total assets and *** $940,521,000 in total liabilities, as of August 31, 2004, in *** papers filed with the U.S. Bankruptcy Court. ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- ATA Holdings Corp. Files for Chapter 11 Reorganization * Maintains flight schedule, operations, customer service and travel rewards programs * Enters agreement with AirTran Airways, Inc. to operate and acquire routes at Chicago Midway, Ronald Reagan Washington National and LaGuardia Airports * Indianapolis to remain ATA's headquarters and primary hub * ATSB allows use of cash collateral in advance of securing debtor-in-possession (DIP) financing INDIANAPOLIS, Indiana -- October 26, 2004 -- ATA Holdings Corp., (Nasdaq: ATAH), the nation's 10th largest passenger carrier, today announced that it and certain subsidiaries, including ATA Airlines, Inc., have filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana. ATA emphasized that it continues business as usual. The airline stands by its customer commitments, honoring tickets, upholding its full flight schedule, in-flight services and frequent flyer reward programs. With this move, ATA will develop a plan of reorganization to address its debt levels and other obligations, and to lower its cost structure even further, while operating in the normal course of business. The reorganization will allow the airline to restore and strengthen its competitiveness as a leading low cost carrier in the challenging industry environment, and to advance existing initiatives to improve its services, such as retrofitting planes for business class service. "Excess capacity, extremely high fuel prices, which continue to escalate, and declining fares have necessitated that all airlines, including ATA, re-examine their business," said ATA Holdings' Chairman, President and Chief Executive Officer George Mikelsons. "As we transform, we maintain our focus on serving customers, while flying one of the youngest, most fuel-efficient fleets among the major carriers. ATA will continue to provide value-based everyday, low fares and service that makes the travel experience easier and more affordable for all our business and leisure travelers." Agreement with AirTran Airways, Inc. ATA reported that, in conjunction with the filing, the airline has reached an agreement with AirTran Airways, Inc. (NYSE: AAI) in which AirTran will pay ATA $87.6 million to assume ATA's flight operations, gates lease, and routes in Chicago Midway Airport, as well as arrival and departure slots at LaGuardia Airport and Ronald Reagan Washington National Airport. The agreement, which is subject to approval by the City of Chicago and the Bankruptcy Court, will take effect later this year or early next year, and is to be finalized over the next several days. *** A copy of AirTran's eight-page Commitment Letter, dated *** Oct. 24, 2004, is available at no charge at *** http://bankrupt.com/misc/AirTranCommitmentLetter.pdf ATA is in continuing discussions with potential third-party lenders to procure Debtor-In-Possession (DIP) financing. Meanwhile, the Air Transportation Stabilization Board (ATSB) has agreed to allow ATA's continued use of its cash collateral, which, combined with the Company's projected cash flow from operations, should be sufficient to fund the needs of ATA and its operating subsidiaries until the Company reaches an agreement for DIP financing. "Our arrangement with AirTran will grow the travel options we offer customers, and is a key component of our transformation into a refocused, streamlined and profitable airline," continued Mikelsons. "We remain committed to serving Midway customers during this transition, while also having the significant support of one of the strongest low cost carriers." AirTran and ATA intend to establish co-marketing programs and code share agreements for flights operating into and out of Chicago Midway. There is a transition plan in place for AirTran to outsource to ATA servicing of Chicago flights over a specified period. The transition arrangements with AirTran will allow ATA a gradual, measured exit from Chicago, as well as provide ATA time and flexibility to develop and execute its reorganization plan. ATA passengers holding existing reservations for flights to and from Chicago Midway will be serviced seamlessly under their originally issued tickets, without the need for rebooking. Participants in ATA and AirTran frequent flyer programs will accrue and redeem miles on both airlines' networks. Reorganizing to Emerge a Stronger Airline Mikelsons also broadly outlined the key points of ATA's reorganization plan, which entails optimizing its fleet and plane sizes and focusing on the most profitable cornerstones of its business: commercial flights routed through its Indianapolis hub, flights to Hawaii, as well as military and some commercial charter service. ATA will continue to operate its Chicago express connection service through Chicago Midway, as well as its Ambassadair Travel Club. ATA also stressed its continued commitment to Indianapolis, which will remain the Company's headquarters and primary hub. Mikelsons continued, "Indianapolis has been a key source of our growth, and we will remain in the city we have called home since 1973." To further ensure ATA's smooth operation, the Company has filed various first-day motions with the Bankruptcy Court that would allow it to, among other operations, continue timely payments to fuel vendors, employees and other service providers, as well as to assume clearinghouse and interline contracts. Mikelsons added, "We have begun taking the difficult steps to transform ATA into an airline that is positioned to meet the needs of our customers today and for the future. Our agreements with AirTran, combined with ATSB's flexibility, will facilitate ATA's transformation into a formidable low-fare competitor, capable of winning in today's airline industry environment for our customers, employees, creditors, and other stakeholders." ATA has faced significant financial and operational challenges stemming from the slowdown of the economy, the tragic events of September 11, 2001, pricing pressure, major increases in fuel costs, which have not yet abated, and losses of revenue and bookings in its important Florida market due to four hurricanes this summer. Changes in consumer behavior, particularly the reduction in business travel and the changes in business travel patterns, have led to a significant drop in revenues due, in part, to ATA's large aircraft. ATA determined that the Chapter 11 process offered the Company the most viable way to restructure its operations and finances to remain competitive. ----------------------------------------------------------------- [00004] ATA AIRLINES' CHAPTER 11 DATABASE ----------------------------------------------------------------- Lead Debtor: ATA Holdings Corporation 7337 West Washington Street Indianapolis, Indiana 46231-1328 Chapter 11 Petition Date: October 26, 2004 Lead Bankruptcy Case No.: 04-19866 Debtor affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- ATA Airlines, Inc. 04-19868 Ambassadair Travel Club, Inc. 04-19869 ATA Leisure Corporation 04-19870 Amber Travel, Inc. 04-19871 American Trans Air Execujet, Inc. 04-19872 ATA Cargo, Inc. 04-19873 Chicago Express Airlines, Inc. 04-19874 Bankruptcy Court: United States Bankruptcy Court Southern District of Indiana 116 U.S. Courthouse 46 E. Ohio St. P.O. Box 44978 Indianapolis, IN 46244 Telephone (317) 229-3800 Fax (317) 229-3801 http://www.insb.uscourts.gov/ Bankruptcy Judge: The Honorable Basil H. Lorch, III, Chief Judge Circuit: Seventh Debtors' Lead Bankruptcy Counsel: James M. Carr, Esq. Terry E. Hall, Esq. Stephen A. Claffey, Esq. Melissa M. Hinds, Esq. Baker & Daniels 300 North Meridian Street, Suite 2700 Indianapolis, IN 46204 Telephone (317) 237-0300 Fax (317) 237-1000 http://www.bakerdaniels.com/ Debtors' Bankruptcy Co-Counsel: Wendy W. Ponader, Esq. Ponader & Associates, LLP 5241 North Meridian Street Indianapolis, IN 46208 Telephone (317) 496-3072 Fax (317) 257-5776 Debtors' Conflict Counsel: Jerald I. Ancel, Esq. Marlene Reich, Esq. Sommer Barnard Attorneys, PC One Indiana Square, Suite 3500 Indianapolis, IN 46204 Telephone (317) 844-4744 Fax (317) 844-4780 http://www.sommerbarnard.com/ Debtors' Special Labor Counsel: John J. Gallagher, Esq. Jon A. Geier, Esq. Scott M. Flicker, Esq. Kenneth M. Willner, Esq. Margaret H. Spurlin, Esq. Brendan M. Branon, Esq. Hannah Breshin, Esq. Paul, Hastings, Janofsky & Walker LLP 1299 Pennsylvania Avenue, N.W., 10th Floor Washington, DC 20004 Telephone (202) 508-9500 Fax (202) 508-9700 http://www.paulhastings.com/ - and - Robert S. Span, Esq. Katherine A. Traxler, Esq. Paul, Hastings, Janofsky & Walker LLP 515 South Flower Street, 25th Floor Los Angeles, CA 90071 Telephone (213) 683-6000 Fax (213) 627-0705 http://www.paulhastings.com/ Debtors' Financial Advisor: Thomas J. Allison Managing Director Huron Consulting Group LLC 550 W. Van Buren St. Chicago, IL 60607 Telephone (312) 583-8700 Fax (312) 583-8701 http://www.huronconsultinggroup.com Debtors' Claims Agent: Tinamarie Feil John Myrtle The BMC Group 1330 E. Franklin Ave. El Segundo, CA 90245 http://www.bmccorp.net U.S. Trustee: Nancy J. Gargula United States Trustee for Region 10 Kevin P. Dempsey, Assistant U.S. Trustee 101 West Ohio Street, Suite 1000 Indianapolis, IN 46204 Telephone (317) 226-6101 Fax (317) 226-6356 Counsel to the Air Transportation Stabilization Board: Jeffrey Hunter, Esq. Assistant United States Attorney Civil Division U.S. Department of Justice - and - Andrea Horowitz Handel, Esq. Brendan Collins, Esq. Commercial Litigation Branch Civil Division U.S. Department of Justice P. O. Box 875 Ben Franklin Station Washington, D. C. 20044 Telephone (202) 307-0358 - and - Steven J. Reisman, Esq. Daniel R. Lenihan, Esq. CURTIS, MALLET-PREVOST, COLT & MOSLE LLP 101 Park Avenue New York, New York 10178-0061 Telephone (212) 696-6000 - and - Counsel to the ATSB Lenders: Wilbur F. Foster, Jr., Esq. Jeffrey K. Milton, Esq. MILBANK, TWEED, HADLEY & MCCLOY LLP 1 Chase Manhattan Plaza New York, New York 10005-1413 Telephone (212) 530-5000 - and - James A. Knauer, Esq. KROGER, GARDIS & REGAS 111 Monument Circle, Suite 900 Indianapolis, IN 46204-5125 Telephone (317) 692-9000 - and - Karen M. McCarthy, Esq. PATTERSON, BELKNAP, WEBB & TYLER LLP 1133 Avenue of the Americas New York, NY 10036-6710 Telephone (212) 336-2000 Fax (212) 336-2222 - and - Jon Yard Arnason, Esq. VEDDER, PRICE, KAUFMAN & KAMMHOLZ, P.C. 805 Third Avenue New York, New York 10022 Telephone (212) 407-7700 Fax (212) 407-7799 - and - Richard Krasnow, Esq. Elizabeth Evans, Esq. WEIL, GOTSHAL & MANGES LLP 767 Fifth Avenue New York, New York 10153 Telephone (212) 310-8000 Fax (212) 310-8007 Financial Advisor to the ATSB Lenders: David S. Kurtz LAZARD FRERES & CO., LLC 200 West Madison Street, Suite 2200 Chicago, IL 60606 Telephone (312) 407-6615 Fax (312) 407-6620 http://www.lazard.com/ - and - J. Blake O'Dowd LAZARD FRERES & CO., LLC 30 Rockefeller Plaza New York, NY 10020 Telephone (212) 632-6000 Fax (212) 332-6060 http://www.lazard.com/ ----------------------------------------------------------------- [00005] LIST OF THE DEBTORS' 30-LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Creditor Nature of Claim Claim Amount -------- --------------- ------------ Wells Fargo Bank Northwest N.A. 13% Senior Note $163,064,000 Corporate Trust Services 299 South Main St., 12th Floor MAC: U1228-120 Salt Lake City, IT 84111 Attn: Scott Nielsen Tel: (801) 246-5555 Fax: (801) 246-5053 scott.Nielsen@wellsfargo.com Wilmington Trust Company 12.125% Senior $110,233,000 Rodney Square North Note Due June 15, 1100 North Market Street 2010 Wilmington, DE 19890-0001 Attn: Jeanne Oller Tel: (302) 636-6188 Fax: (302) 636-4140 joller@wilmingtontrust.com Citibank, N.A., As Agent for Unsecured Portion $63,271,000 Lender Group of ATSB Guaranteed ATSB Guaranteed Loan Loan 2 Penns Way, Suite 200 New Castle, DE 19720 Estimated Collateral Attn: Kathy Racer Value as of 10/15/04: Tel: (302) 894-6002 $76,629,000 Fax: (212) 994-0849 kathleen.c.racer@citigroup.com Wells Fargo Bank Northwest NA 9.625% Senior Note $20,005,000 Corporate Trust Services Due December 15, 299 South Main Street 2005 12th Floor, Mac: U1228-120 Salt Lake City, UT 84111 Attn: Scott Nielsen Tel: (801) 246-5555 Fax: (801) 246-5053 scott.nielsen@wellsfargo.com US Bank Advance Under $20,000,000 755 Bridle Ridge Road Co-Branded Credit Saint Paul, MN 55123 Card Agreement Attn: Michael Kennedy Vice President National Accounts Tel: (651)330-9847 michael.kennedy@usbank.com Union Planters Bank, N.A. Undersecured Portion $8,570,291 PO Box 438 of Claim Vincennes, IN 47591-0438 Attn: William Perry Estimated Collateral Tel: (812) 885-6528 Value as of 10/26/04: Fax: 812-885-6406 $5,000,000 william.perry@upbna.com Bank of America Unsecured Portion $8,091,667 M/S RI DE 03708C of Claim One Financial Plaza Providence, RI 02903 Estimated Collateral Attn: Robert Merill Value as of 10/26/04: Tel: (401) 278-8144 $600,000 Fax: (401) 278-8200 robert_e_merrill@fleetcl.com Department of Aviation Loan for Funding $7,019,103 O'Hare International Airport Chicago Midway Terminal 2 Mezzanine Expansion Gates P.O. Box 66142 Chicago, IL 60666 Attn: Commissioner John Roberson Tel: (773) 686-8060 Fax: (773) 686-3424 jroberson@ohare.com Aon Risk Services Trade Payable $3,608,510 201 North Illinois Street (Insurance) Suite 1400 Indianapolis, IN 46204-4231 Attn: Mike Mccray Tel: (312) 381-4166 Fax: (312) 381-6363 mike_mccray@ars.aon.com Boeing Commercial Airplane Trade Payable $685,402 Group (Parts) Attn: Cashier M/S 6x-Cf PO Box 3707 Seattle, WA 98124-2207 DFAS-CO/ FPS / F Trade Payable $625,936 3990 East Broad Street (Fuel) Building 21 Columbus, OH 43213-1152 SAAB Aircraft of America, LLC Trade Payable $357,996 21300 Ridgetop Circle Sterling, VA 20166 Michael Lewis Company Trade Payable $350,374 PO Box 97510 (Catering) Chicago, IL 60678-7510 KGD Systems Trade Payable $299,026 20251 Southwest Acacia Street (Revenue Accounting) Suite 210 Newport Beach, CA 92660 Driesen Aircraft Trade Payable $281,343 Interior Systems 10781 Forbes Avenue Garden Grove, CA 92843 Flying Food Group Trade Payable $264,937 810 Malcolm Road (Catering) Burlingame, CA 94010 Rockwell Collins Inc. Trade Payable $264,276 10925 Reed Hartman Highway #205 Cincinnati, OH 45242 Hexaware Trade Payable $248,207 WGN AM Radio Trade Payable $242,256 Chicago Department of Revenue Tax $234,231 Hamilton Sundstrand Trade Payable $225,759 Aircraft Service Utility Payable $218,036 International Aeropuerto De Cancun, SA Utility Payable $213,176 (Foreign) San Jose Advertising Group Trade Payable $208,854 Advertising, Marketing & Pr (Advertising) Honeywell Aerospace Services Trade Payable $207,851 Aer Rianta Shannon Trade Payable $201,990 c/o Dublin Airport Authority (Rent) Moore Wallace North Trade Payable $196,998 America Inc. Kelly Scott and Madison Inc. Trade Payable $161,559 c/o Lasalle National Bank Gate Gourmet Trade Payable $160,506 Greater Orlando Aviation Trade Payable $153,945 Authority ----------------------------------------------------------------- [00006] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CASES ----------------------------------------------------------------- By this motion, the Debtors seek a court order directing the joint administration of their Chapter 11 cases, for procedural purposes only, pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure and Rule B-1015-1 of the Local Rules of the United States Bankruptcy Court for the Southern District of Indiana. To reflect the joint administration of their cases, the Debtors propose that any pleading or paper filed be captioned: IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA ----------------------------------- In re: ) Chapter 11 ) ATA Holdings Corp., et al., ) Case No. 04-19866 ) (Jointly Administered) Debtors. ) ) ----------------------------------- Terry E. Hall, Esq., at Baker & Daniels, in Indianapolis, Indiana, asserts that the joint administration of the Debtors' Chapter 11 Cases is necessary because: -- the Debtors will be able to administer optimally and economically their multiple pending Chapter 11 cases given that: (a) many of the motions, hearings and orders that will arise in these Chapter 11 cases will jointly affect each and every Debtor; (b) the Debtors will be able to reduce fees and costs resulting from the administration of these Chapter 11 cases; and (c) the Debtors will be eased from the onerous administrative burden of having to file multiple documents; -- the creditors will benefit from the reduced costs and not be adversely affected by the joint administration since it only involves administrative, not substantive, consolidation of the estates; -- the Court will also be relieved of the burden of entering duplicative orders and maintaining duplicative files; and -- the Office of the United States Trustee will simplify its supervision of the administrative aspects of these Chapter 11 cases. ----------------------------------------------------------------- [00007] ORLANDO AIRPORT'S MOTION TO COMPEL SEGREGATION OF PFC'S ----------------------------------------------------------------- The Greater Orlando Aviation Authority wants the $3.00 per- passenger fee added to each ticket ATA sells to travelers who land at and take off from the airport in Orlando, Florida, segregated from all of the carrier's other funds without delay. The GOAA, which owns and operates the Orlando International Airport, relies on those passenger fees for its future development. The GOAA argues that those Passenger Facility Charges are funds held by ATA in trust for the Airport, are not property of ATA's estate, and may not be used to either fund ATA's operating losses or pay ATA's debts. The GOAA says that 49 U.S.C. Section 40117(m) is the controlling statute and the Bankruptcy Code can't sidestep or eviscerate that law. On a monthly basis, the GOAA explains, ATA accrues PFC's due and payable to the GOAA. In the past, ATA has complied with the accounting and remittance requirement of the PFC regulations found at 14 C.F.R. Section 158. ATA hasn't remitted PFC's to the GOAA for the month of September 2004 and thereafter. The GOAA asks the Bankruptcy Court for an Order that specifically exempts the PFC's collected by the Debtor so that there is no danger that the collections could somehow transform into cash collateral for any lender or third-party postpetition lender. Specifically, the GOAA wants the Debtors to: (1) open a bank account, separate and apart from all other accounts, to deposit all GOAA PFC Trust Funds as and when collected as required by 49 U.S.C. Section 40117(m); (2) remit the Trust Funds monthly to GOAA as required by 14 C.F.R. Section 158; and (3) to the extent not inconsistent with any other order entered by the Bankruptcy Court, comply with all other accounting and remittance requirements provided by 14 C.F.R. Section 158. The GOAA directs the Court's attention to In re Vanguard Airlines, Inc., (Case No. 02-50802-JWV, W.D. Mo., Kansas City Division) where that carrier segregated, but commingled, PFC collections with September 11 charges for the Transportation Security Agency. At the end of that case, there were insufficient PFC collections which had to be shared whether an actual shortfall existed or not, at any particular airport. The GOAA doesn't want to see that situation again. To avoid this result, the GOAA recommends that the Debtor segregate and account for the PFC's on an airport-by-airport basis and create an individual account for GOAA. The GOAA is represented in this matter by Roy S. Kobert, Esq., at Broad and Cassel in Orlando, Florida, and Randy Eyster, Esq., at Feiwell & Hannoy, P.C., in Indianapolis. ----------------------------------------------------------------- [00008] AIRTRAN INKS DEAL TO BUY ATA'S MIDWAY GATES FOR $87.5 MIL ----------------------------------------------------------------- AirTran Airways Agrees to Assume Chicago Midway Gates and Acquire Certain Other Assets of ATA Airlines ORLANDO, Florida -- October 26, 2004 -- AirTran Airways, a subsidiary of AirTran Holdings, Inc. (NYSE: AAI), announced today that the airline has agreed, subject to certain conditions, to assume the Chicago Midway Airport gate leases and acquire certain other related assets including takeoff and landing slots at New York's LaGuardia and Washington's Ronald Reagan National airports of ATA Airlines, a unit of ATA Holdings Corp. (Nasdaq: ATAH), for approximately $87.5 million. ATA Holdings Corp., and certain of its subsidiaries, have filed for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Indiana. Under the agreement with ATA Airlines, AirTran Airways would assume ATA's leases on up to 14 gates at Chicago's Midway Airport, 19 time-controlled take-off and landing slots at New York's LaGuardia Airport and 8 such slots at Washington's Reagan National Airport. The deal must receive various approvals, including approval of the Bankruptcy Court in ATA's Chapter 11 proceeding. In the interim, ATA Airlines is to continue operating flights and business as usual at Chicago's Midway Airport. AirTran Airways plans to introduce its fuel efficient, all new Boeing fleet on the routes from Chicago Midway, and intends to enter into a marketing agreement with ATA Airlines, which is currently contemplated to include a code-share, frequent traveler program and other programs to benefit both carriers' customers. In conjunction with the code-share arrangement, the carriers also intend to enter into an agreement to outsource certain flying during the transition of service from ATA Airlines to AirTran Airways at Chicago's Midway Airport. "This proposal offers a great opportunity for both AirTran Airways and the City of Chicago as well as significantly aiding ATA in its reorganization," said Joe Leonard, chairman and chief executive officer of AirTran Airways. "Adding a hub in Chicago is an important strategic expansion for AirTran Airways' growing network," stated Robert L. Fornaro, president and chief operating officer. "A Midwest hub complements AirTran Airways' strong East Coast network and will capitalize on a number of synergies in the cities we serve across the country. This addition will give AirTran Airways a true national presence. We look forward to increasing our service for the Chicago business and leisure travelers." AirTran Airways is one of America's largest low-fare airlines -- with 6,000 friendly, professional Crew Members and operating over 500 flights a day to more than 40 destinations. The airline's hub is at Hartsfield-Jackson Atlanta International Airport, the world's busiest airport by passenger volume, where it is the second largest carrier. AirTran Airways, a subsidiary of AirTran Holdings (NYSE: AAI), is the world's largest operator of the Boeing 717 and has America's youngest all-Boeing fleet. The airline recently added the Boeing 737-700 aircraft, one of the most fuel efficient and environmentally friendly aircraft flying today, to its fleet and looks to begin outfitting its planes with XM Satellite Radio this fall. For reservations or more information, visit http://www.airtran.com/ (America Online Keyword: AirTran). A copy of AirTran's eight-page Commitment Letter, dated Oct. 24, 2004, is available at no charge at: http://bankrupt.com/misc/AirTranCommitmentLetter.pdf ----------------------------------------------------------------- [00009] ATSB SAYS IT UNDERSTANDS THE ISSUES & WILL WORK WITH ATA ----------------------------------------------------------------- WASHINGTON, D.C. -- October 26, 2004 -- The Air Transportation Stabilization Board (ATSB) has been in contact with ATA Airlines over the past several weeks as the carrier prepared for today's filing. The ATSB understands the issues confronting ATA and will work with the airline through the bankruptcy process to ensure that the taxpayers' interests are protected. The proposed sale of assets will be closely scrutinized by the Board to mitigate any additional risks the transaction may pose to taxpayers. ----------------------------------------------------------------- [00010] PILOTS' UNION SAYS LABOR COSTS AREN'T ATA'S PROBLEM ----------------------------------------------------------------- WASHINGTON, D.C. -- October 26, 2004 -- Capt. Erik Engdahl, chairman of the ATA Unit of the Air Line Pilots Association, made this statement today following ATA's filing for bankruptcy with the U.S. District Court in Indianapolis. Capt. Engdahl, a resident of Brown County, IN, is a Boeing 757 pilot based on the west coast. "Today is a sad day for all of us as ATA flight crew members, but one that's recurring with alarming frequency in our industry. There are many reasons why ATA was forced to declare bankruptcy, but with some of the lowest costs in the industry, labor expenses can't be blamed for this airline's breakdown. "Our crews are unique among low-cost carriers for their expertise in operating new-generation, ETOPS-certified aircraft both at home and overseas. They will be a valuable asset to any airline, and we will aggressively work to ensure that their jobs and seniority are protected. While the uniforms may change, their professionalism will stay the same. "We will also respond expeditiously in order to protect our members who may end up remaining at ATA, and work cooperatively with management to keep the transformed airline and its cockpit crewmembers successful and competitive. "We love our airline and are strongly committed to seeing it succeed. ATA has always set the standard for safety, comfort and convenience among low-cost carriers, and we are committed to maintaining a quality product in spite of our changed circumstances. During this period of transition we will strive to ensure that our passengers can't tell the difference between the pre- and post-bankruptcy airline." The Air Line Pilots Association is the bargaining agent for the 1,100 pilots and flight engineers at ATA. ALPA is the world's oldest and largest pilot union, representing 64,000 pilots at 43 airlines in the U.S. and Canada. Visit the ALPA Web site at http://www.alpa.org/ ----------------------------------------------------------------- [00011] DEBTORS' MOTION FOR AUTHORITY TO USE CASH COLLATERAL ----------------------------------------------------------------- ATA's businesses require cash. Without cash, the Debtors would not be able to operate for even a single day. When ATA filed for chapter 11 protection, it had approximately $21,776,594 of Available Cash. 95% of that cash is pledged to secure repayment of a $168,000,000 loan from Govco Incorporated, Citibank, N.A., AFS Investments XII, Inc., and International Lease Finance Corporation, for which the Air Transportation and Stabilization Board provides a $148,500,000 guarantee. The ATSB Loan balance is approximately $139,900,000 plus accrued but unpaid interest today. The Debtors ask the Bankruptcy Court for permission to use the 95% portion of their Available Cash -- $20,687,765 -- that constitutes Cash Collateral securing repayment of the ATSB Loan to fund their on-going operations while in chapter 11. The Debtors need access to the Cash Collateral to meet their payroll and other necessary, ordinary course business expenditures, acquire goods and services, and administer and preserve the value of their estates, maintain adequate access to cash in amounts customary and necessary for companies of their size in their airline industry to maintain customer and vendor confidence, and emerge from Chapter 11. If ATA can't obtain access to sufficient working capital, the result will be immediate and irreparable harm the Debtors, their estates, and their creditors. The Debtors tell the Bankruptcy Court that the Lenders have agreed to permit ATA to use the Cash Collateral: (a) to pay the ordinary and reasonable expenses of operating their businesses, including, without limitation, payroll and benefit expenses (including, the funding of a Court approved Key Employee Retention Plan); provided, however, that no KERP may be funded by, or on behalf of, the Debtors or their directors, officers or employees, until the effective date and funding of a Permitted DIP Financing Arrangement has occurred; provided, further, that no funding shall be made for the KERP if it will result in an event of default under this Interim Cash Collateral Pact, aircraft and engine debt and lease payments, purchase of fuel and supplies, government security and inspection fees, advertising, utility services, payroll taxes, insurance, supplies and equipment, vendor and supplier services, and other expenditures as are necessary for operating their businesses or consummating a Restructuring Transaction; (b) but not to purchase or otherwise acquire aircraft without their prior written consent; and (c) to make payments authorized under other orders entered by the Bankruptcy Court, including payment of professionals and other administrative expenses (except any fees payable for efforts to contest, but not just investigate, the secured position of the ATSB Lender Parties). As adequate protection for the use of the Cash Collateral, the Debtors and the ATSB Lender Parties agreed to this arrangement: (x) The Debtors shall pay, for the benefit of the ATSB Lender $250,000 (plus reasonable expenses) for the costs to be incurred by the ATSB Lender Parties for the fee charged by Lazard Freres & Co. LLC, the financial advisor to the ATSB Lender Parties, for one month; and (y) the ATSB Lenders receive valid, perfected and enforceable Replacement Liens and security interests. "I believe it is imperative that the Debtors have immediate access to and the ability to use the Cash Collateral in order to continue their operations," James W. Hlavacek ATA's Vice Chairman of the Board tells the Bankruptcy Court. Judge Lorch put his stamp of approval on this arrangement through the conclusion of an Interim Cash Collateral Hearing this coming Friday, Oct. 29. The need for continued access to working capital on an emergency basis is clear. Interim Approval of the arrangement at the Oct. 29 is expected to carry the Debtors through Nov. 23, 2004, before which time the Court anticipates it will convene a Final Cash Collateral Hearing to resolve any objections by individual creditors or other parties-in-interest, including any Official Committees the U.S. Trustee may appoint in the coming weeks. *** End of Issue No. 1 ***