Swa Ceo: "we're Not Acquiring Ata"


May 13, 2003
Southwest says it's not acquiring ATA

Carrier would get gates and be close adviser if bid prevails, CEO says

10:59 PM CST on Tuesday, December 14, 2004

By ERIC TORBENSON / The Dallas Morning News

Southwest Airlines Co. would get more than six gates at Chicago's Midway Airport if it's the winning bidder for assets of bankrupt ATA Airlines Inc.

According to excerpts from the original bid documents, Southwest could own 35 percent of ATA's common stock and be a close adviser to the Indianapolis-based carrier while it restructures.

But in an interview Tuesday, Southwest chief executive Gary Kelly reiterated that his carrier has "absolutely no interest in acquiring or controlling ATA."

The documents from Southwest's $117 million bid show the Dallas-based discounter would be consulted on a range of issues at ATA, including which executives would manage the carrier and when they would be named.

Southwest officials emphasized that the discussions are ongoing.

A bankruptcy judge is to decide this week between Southwest and AirTran Airways Inc., which bid about $100 million for 14 ATA gates at Midway and other flying rights.

Published reports Tuesday said Southwest's bid amounted to a takeover of ATA. Mr. Kelly called them "completely inaccurate."

Southwest would not have the ability to name a new executive team, said Mr. Kelly, who praised current ATA chairman and chief executive George Mickelsons.

Southwest wants Mr. Mickelsons to remain involved, Mr. Kelly said.

"The ATA management team has been a joy to work with throughout this," he said.

ATA can't comment on the ongoing process, said spokeswoman Erica Keane.

If ATA survives bankruptcy, Southwest would provide $30 million of financing that it would convert into a preferred stake in the airline, Mr. Kelly said.

The stake would not have any voting rights, he said. Southwest would not have a seat on ATA's board of directors, and it wouldn't be able to name board members.

Southwest's conditions were "a bit unusual" for a bankruptcy bid for assets, said Toby Gerber, a lawyer with Fulbright & Jaworski in Dallas.

But because the bid is mostly a loan to ATA, Southwest "is vitally interested in how they will operate in the future," Mr. Gerber said.

Southwest's original bid language also called for ATA to renegotiate labor contracts. ATA would have to lower employee costs by as much as 20 percent.

Mr. Kelly said that's no longer part of Southwest's proposal.

"There is no requirement by Southwest for ATA to do anything with labor," he said, though he added that a restructured ATA "needs to make a profit" under Southwest's terms.

Southwest would take a role in ATA, but Mr. Kelly said it would be to consult in major affairs, not decide.

In hock

"They are a company that is in hock up to their eyeballs – they need cash," he said. "We have an interest in trying to recover our loan, and like any commercial lender, we are going to have covenants and requirements."

One of those requirements won't be to pledge ATA's remaining eight gates as collateral for Southwest's financing, Mr. Kelly said.

Under earlier terms of Southwest's bid, those remaining gates could have ended up with Southwest if ATA failed. Southwest has 19 of Midway's 43 gates and wants six more.

Expansion priority

Midway is Southwest's top expansion priority, and the carrier has already increased its daily flight schedule next year to 170 flights from 145 this year.

More gates at Midway could make Chicago Southwest's largest national operation, surpassing current No. 1 Las Vegas.

As part of its bid, Southwest would sell seats on ATA flights at Midway, potentially even on ATA's flights from Dallas/Fort Worth International Airport.

No decisions have been made on which ATA routes will be chosen.

Southwest's pilots support any growth plans for the airline, said spokeswoman Karen Absalom of the Southwest Airlines Pilots' Association.

Both Southwest and AirTran, based in Orlando, Fla., say their bids offer more cash to ATA.

Mr. Kelly said the strength of the nation's largest domestic passenger airline and its helping hand to ATA give his company's offer the edge.

AirTran's bid includes $90 million in installments for all of ATA's Midway gates and payments to ATA for use of some of its landing rights.

AirTran officials had no comment Tuesday other than to reiterate comments last week that their bid was superior to Southwest's in all respects, a spokesman said.

Shares of Southwest rose 9 cents Tuesday to $16.01. Shares of AirTran Holdings rose 32 cents to $11.01.

E-mail etorbenson@dallasnews.com


Nov 22, 2003
Of course they won't. They'll keep the gates, 737s and anything else they want and sell the rest. And MAKE money doing it.