America West, AirTran in consolidation race
By Caroline Daniel in London
Published: October 22 2004 03:00 | Last updated: October 22 2004 03:00
Efforts to be first to consolidate the US low-cost airline sector intensified on Thursday as America West and AirTran continued last-minute talks with ATA, as it prepared for an imminent bankruptcy filing.
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According to people involved with the discussions, ATA, the 10th-largest US airline, is trying to put together a pre-arranged bankruptcy filing, with one of the two airlines acting as its strategic partner in a new reorganisation plan.
Boeing Capital, which has significant exposure to ATA because of the number of aircraft it leases to the airline, has also been involved in the talks. It has already written off some of its equity stake in the carrier.
ATA is expected to file for bankruptcy in the next few days, although the timing is dependent on the talks. The two potential bidders have different interests in ATA's assets, and would proceed only after a bankruptcy filing. ATA, which is being advised by Citigroup, is also seeking about $75m in debtor-in-possession financing to fund a bankruptcy.
America West is understood to be considering a merger with ATA, taking over its operations at Midway airport in Chicago, assuming most of the leases for ATA's Boeing 737 and 757 aircraft, and scaling back ATA's operations at Indianapolis. It could also take over ATA's employees.
AirTran, which has headquarters in Orlando, is understood to be seeking to acquire just ATA's Midway gates, and the 737 assets rather than the 757 aircraft.
One person said that AirTran was the frontrunner, but that America West could still file an alternative transformation plan once ATA was in bankruptcy.
Considerable risks remain for both America West and AirTran. Both would be increasing their exposure to Southwest, which has a dominant position at Midway. In the first half, ATA lost $91m, on revenues of $778m.
There are also concerns that all three airlines are losing money, which is further weakening balance sheets. America West has more than $300m in debt to the Airline Transportation Stabilisation Board, which oversees loan guarantees. Under conditions of the loan, it would need to seek ATSB permission to pursue a deal and would also need to show that a merger would not lead to a credit downgrade.
On Wednesday, ATA warned that its cash problems had worsened since its filing on August 16. The 10 per cent wage concession approved by ATA's flight attendants would not be enough in cost-savings to satisfy these liquidity concerns, it said.
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By Caroline Daniel in London
Published: October 22 2004 03:00 | Last updated: October 22 2004 03:00
Efforts to be first to consolidate the US low-cost airline sector intensified on Thursday as America West and AirTran continued last-minute talks with ATA, as it prepared for an imminent bankruptcy filing.
ADVERTISEMENT
According to people involved with the discussions, ATA, the 10th-largest US airline, is trying to put together a pre-arranged bankruptcy filing, with one of the two airlines acting as its strategic partner in a new reorganisation plan.
Boeing Capital, which has significant exposure to ATA because of the number of aircraft it leases to the airline, has also been involved in the talks. It has already written off some of its equity stake in the carrier.
ATA is expected to file for bankruptcy in the next few days, although the timing is dependent on the talks. The two potential bidders have different interests in ATA's assets, and would proceed only after a bankruptcy filing. ATA, which is being advised by Citigroup, is also seeking about $75m in debtor-in-possession financing to fund a bankruptcy.
America West is understood to be considering a merger with ATA, taking over its operations at Midway airport in Chicago, assuming most of the leases for ATA's Boeing 737 and 757 aircraft, and scaling back ATA's operations at Indianapolis. It could also take over ATA's employees.
AirTran, which has headquarters in Orlando, is understood to be seeking to acquire just ATA's Midway gates, and the 737 assets rather than the 757 aircraft.
One person said that AirTran was the frontrunner, but that America West could still file an alternative transformation plan once ATA was in bankruptcy.
Considerable risks remain for both America West and AirTran. Both would be increasing their exposure to Southwest, which has a dominant position at Midway. In the first half, ATA lost $91m, on revenues of $778m.
There are also concerns that all three airlines are losing money, which is further weakening balance sheets. America West has more than $300m in debt to the Airline Transportation Stabilisation Board, which oversees loan guarantees. Under conditions of the loan, it would need to seek ATSB permission to pursue a deal and would also need to show that a merger would not lead to a credit downgrade.
On Wednesday, ATA warned that its cash problems had worsened since its filing on August 16. The 10 per cent wage concession approved by ATA's flight attendants would not be enough in cost-savings to satisfy these liquidity concerns, it said.
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