INDIANAPOLIS - ATA Airlines, the nation's 10th-largest carrier, filed for bankruptcy protection Tuesday and sold off airport slots and other assets to AirTran Airways Inc. for $87.6 million, to become the latest U.S. airline tripped up by rising fuel costs and fare wars.

Orlando, Fla.-based AirTran Holdings Inc. will assume ATA's flight operations, gate leases and routes at Chicago Midway Airport and arrival and departure slots at New York's LaGuardia Airport and Ronald Reagan (news - web sites) Washington National Airport.

The deal is subject to approvals by the bankruptcy court and other entities and is expected to take effect by early next year, ATA officials said. Chicago Department of Aviation spokeswoman Annette Martinez said ATA had not told the city of the deal, whereby Air Tran would take over ATA's 14 gates and flights at Midway.

"We will recreate ATA as a formidable, low-cost carrier," ATA founder and chief executive George Mikelsons said Tuesday.

ATA's announcement came amid speculation that Delta Air Lines Inc., the nation's third-largest airline, would win $1 billion in concessions from its pilots and avoid bankruptcy. The airline is expected to decide by Wednesday whether to seek Chapter 11 bankruptcy protection.

ATA joins three other large carriers in bankruptcy, United Airlines parent UAL Corp., US Airways Group Inc. and Hawaiian Holdings Inc., the parent of Hawaiian Airlines.

ATA on Monday named an executive to oversee the restructuring of the discount carrier's mounting debt.

The filing under Chapter 11 of the federal bankruptcy code came as the Indianapolis-based airline, whose parent company is ATA Holdings Corp., faces soaring fuel costs, an industry fare war and sharply lower demand for military charter flights.

ATA also is saddled with millions of dollars in debt from new aircraft purchases.

The value of the company plummeted 36 percent Tuesday, its stock closing at 93 cents a share, down 53 cents, on the Nasdaq Stock Exchange. The stock had hit a 52-week high of $13.31 on Feb. 2.

In Washington, the Air Transportation Stabilization Board said it planned to work with the airline through the bankruptcy process to make sure taxpayers' interests were protected.

The board, which was set up after the 2001 terrorist attacks to administer a $10 billion government loan guarantee program for the airlines, issued ATA a $148.5 million loan guarantee in September 2002.

"The proposed sale of assets will be closely scrutinized by the board to mitigate any additional risks the transaction may pose to taxpayers," the board said in a statement.

In its filing, ATA seeks bankruptcy protection for eight different corporate entities from more than 1,000 creditors. The filing listed total assets of about $745.1 million and total debts of $940.5 million.

In recent weeks ATA has announced plans to cut more than 300 jobs, including 150 flight attendants. So far this year, ATA pilots and flight attendants have accepted nearly $70 million in wage concessions.

In an SEC filing last week, ATA said its finances have worsened since Aug. 16, when it reported that it had lost $90.7 million during the first half of 2004.

Indianapolis-based ATA is the nation's 10th-largest U.S. carrier based on revenue passenger miles. In the first nine months of this year, ATA flew 7.8 million passengers, up 11 percent over the same period in 2003.

It is the largest North American operator of commercial and military charters. ATA operates hubs at Chicago's Midway Airport and Indianapolis International Airport.

Martinez said ATA is one of Midway's two largest carriers with 39 percent of the airport's passengers and its commuter carrier, Chicago Express, accounting for another 5 percent. Midway's other large carrier, Southwest Airlines Inc., has 19 gates and 42 percent of the airport's passengers.

Indianapolis will remain ATA's headquarters and primary hub, company officials said. The airline plans to honor tickets and maintain its full flight schedule.

Dennis Rosebrough, a spokesman for Indianapolis International Airport, said the bankruptcy filing likely would have minimal impact on passenger service at the airport.

ATA, which was founded in 1973 in Indianapolis as American Trans Air, currently has 7,900 employees, including 2,500 in Indianapolis.

On Monday, ATA's parent corporation, ATA Holdings Corp., announced that it had appointed Gilbert F. Viets, a retired Arthur Andersen accountant, the company's chief restructuring officer.

Viets took over as ATA's chief financial officer following the June resignation of David M. Wing. Wing has resumed his former position with the company, Mikelsons said Monday.

News Room

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, Oct. 26 /PRNewswire-FirstCall/ -- 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.
    (Logo:  http://www.newscom.com/cgi-bin/prnh/20030929/ATAHLOGO-b )
    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.
    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.

    About ATA Airlines
    Now in its 31st year of operation, ATA (Nasdaq: ATAH) 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.  For more information, visit
the web site http://www.ata.com .

    Certain of the information contained in this press release should be
considered "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 that reflect ATA's current views with
respect to certain current and future events and financial performance.  Such
forward-looking statements are and will be, as the case may be, subject to
many risks, uncertainties and factors relating to the operations and business
environments of ATA and its subsidiaries that may cause the actual results of
the companies to be materially different from any future results expressed or
implied in such forward-looking statements.  Factors that could cause actual
results to differ materially from these forward-looking statements include,
but are not limited to, the following: the ability of the companies to
continue as going concerns; the ability of the companies to operate pursuant
to the terms of the debtor-in-possession financing facility; the companies'
ability to obtain bankruptcy court approval with respect to motions in the
Chapter 11 proceeding prosecuted by it from time to time; the ability of the
companies to develop, prosecute, confirm and consummate one or more plans of
reorganization with respect to the Chapter 11 cases; risks associated with
third parties seeking and obtaining bankruptcy court approval to terminate or
shorten the exclusivity period for the companies to propose and confirm one or
more plans of reorganization, for the appointment of a Chapter 11 trustee or
to convert the cases to Chapter 7 cases; the ability of the companies to
obtain and maintain normal terms with vendors and service providers; the
companies' ability to maintain contracts that are critical to its operations;
the potential adverse impact of the Chapter 11 cases on the companies'
liquidity or results of operations; the ability of the companies to fund and
execute their business plan; the ability of the companies to attract, motivate
and/or retain key executives and associates; the ability of the companies to
attract and retain customers; demand for transportation in the markets in
which the companies operate; economic conditions; the effects of any
hostilities or act of war (in the Middle East or elsewhere) or any terrorist
attack, labor costs; financing costs; the costs and availability of aircraft
insurance; aviation fuel costs; security-related costs; competitive pressures
on pricing (particularly from lower-cost competitors); weather conditions;
government legislation and regulation; consumer perceptions of the companies'
products and services; and other risks and uncertainties set forth from time
to time in ATA's reports to the United States Securities and Exchange
Commission.

SOURCE  ATA Holdings Corp.

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