ATA Airlines files for bankruptcy

April 3, 2008 6:49:02 PM PDT
The abrupt shutdowns of ATA Airlines and Aloha Airlines won't keep travelers off Hawaii's shores altogether, but they could make an already expensive vacation destination even pricier and potentially put the leis and luaus out of reach for many. Flights to and from Hawaii had been a key part of ATA's business ever since the Indianapolis-based carrier scaled back its route network following a previous trip through bankruptcy in 2006.

On Thursday, the airline suddenly quit flying, leaving passengers on the islands and elsewhere stranded as it again headed for bankruptcy court. Virtually all the carrier's more than 2,200 employees were laid off. Aloha Airlines stopped passenger service just days earlier after also filing for bankruptcy.

Passengers approaching the closed ATA counters at Honolulu International Airport Thursday morning were met by state transportation agents, who distributed information about ATA's shutdown. Many travelers were looking for other ways to fly out of Hawaii.

Transportation Department spokesman Scott Ishikawa said the number of passengers at the airline's counters has been low because state officials alerted hotels about its closure.

"We want ATA passengers to make sure they have a confirmed reservation before they come to the airport to cut down on any more confusion," Ishikawa said.

ATA and Aloha's one-two punch, coming at a time when the airline industry is already straining under rapidly rising fuel prices, will likely prompt remaining carriers to push their fares even higher, industry observers said.

"When you pull out a major carrier, it's going to create a lot of demand on the remaining carriers," said Robert Mann, an independent airline analyst in Port Washington, N.Y.

Hawaiian Airlines, the state's biggest airline, could emerge as the biggest winner following its rivals' collapse. The carrier flies to nine cities on the mainland - more than any other airline - including all four markets where ATA operated. It also controls a hefty share of inter-island traffic.

A number of other domestic carriers also fly to the islands, and each will likely see additional traffic flowing their way now that two rivals are out of the picture.

Delta Air Lines and Continental Airlines competed against ATA on direct flights from Los Angeles, for example, while US Airways challenged the carrier in Phoenix. Northwest Airlines, United Airlines, American Airlines and Alaska Airlines all also fly from multiple mainland destinations.

"It helps all the carriers who fly from the U.S. mainland to Hawaii," Avondale Partners airline analyst Bob McAdoo said. "There'll be less seats offered at really deep discounts."

Flights between the islands could also grow more expensive.

Hawaiian and Mesa Air Group, the parent company of interisland carrier go!, have each recently announced plans to add spare planes and flights on routes within Hawaii to help make up for the loss of Aloha service.

Even so, experts doubt fares that have fallen as low as $49 or less one-way are sustainable over the long term.

Frank Sunder was feeling the pinch of ATA's closure Thursday.

The New York City-area resident was scheduled to fly from the Big Island city of Hilo to Oakland on a morning ATA flight. Instead, he paid $183 for a flight on Hawaiian Airlines from Hilo to Honolulu, where he was booked on a red-eye aboard United Airlines to Oakland for an additional $322.

"There's nothing one can do," Sunder, 51, said when asked whether he was angry about the airline's sudden closure.

ATA last year carried more than 632,000 passengers to Hawaii from the mainland, more than all but three other domestic airlines, according to the Bureau of Transportation Statistics.

ATA's surprise announcement came just two weeks after Aloha filed for bankruptcy protection following years of losses. Aloha, which served the state for more than 60 years and was the islands' second-largest carrier, ended passenger service Monday and is hoping to offload its cargo business this month. It flew interisland routes and flights to the mainland.

Hawaii's Department of Labor and Industrial Relations has invited ATA's laid-off employees to join former Aloha workers at informational meetings throughout the state Thursday.

The state was providing job training and counseling among other services to the displaced workers.

--- AP Business Writer Adam Schreck in New York contributed to this report.