Aviation News

October 24, 2010

Ghost of ATA Avenges FedEx Contract Breach Which Put Airline Out of Business

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By: Matt Molnar
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ATA 737-300 N401TZ Chicago Midway
ATA's 737-300 N401TZ taxis to the active after pushback from Chicago-Midway. (Photo by Phil Derner)
The remnants of ATA Airlines won a $66 million verdict against FedEx in a federal suit over the breach of contract that forced the company into bankruptcy.

The suit stemmed from a contract ATA held to operate military personnel transport flights as a subcontractor of FedEx. FedEx, which was one of three civilian contractors managing the Pentagon’s war transport movements, abruptly booted ATA from the program in April 2008. Because these charter flights formed the backbone of ATA’s operating revenue—worth up to $400 million a year—the airline was forced to halt operations and file for bankruptcy shortly thereafter.

ATA’s complaint stated that FedEx had breached its contract when it discontinued its relationship with ATA. Jurors agreed, and awarded the amount based on estimated lost profits.

FedEx is expected to appeal the decision, but should ATA prevail, the funds will be distributed to the airline’s lengthy list of creditors.

ATA halted operations during one of the most brutal weeks in aviation business history, in which three other carriers—Aloha Airlines, Champion Air and Skybus Airlines—also folded.

Southwest Airlines purchased ATA’s operating certificate and non-aircraft assets in November 2008, mostly for access to the 14 slots ATA held at LaGuardia Airport in New York.

  • Anonymous

    ATA is not the only operator to foolishly throw all its eggs in the FedEx basket., see Reliant Airlines which operated ad hoc for the FX World Hub.