ATA, in bankruptcy protection, sues FedEx over abrupt end to military charter deal
INDIANAPOLIS - ATA Airlines is suing FedEx Corp. over its decision to end a military charter business, a move the airline says forced it to seek bankruptcy protection and left it financially destroyed.
INDIANAPOLIS – ATA Airlines is suing FedEx Corp. over its decision to end a military charter business, a move the airline says forced it to seek bankruptcy protection and left it financially destroyed.
ATA accused FedEx of breaking a written agreement when it told the airline in January it would no longer receive military passenger service for the government fiscal year ending in 2009, according to a lawsuit filed Wednesday in U.S. District Court in Indianapolis.
FedEx notified ATA of the cancellation in a letter that came “out of the blue,” said Kenneth Broughton, a Houston-based attorney representing ATA.
He said ATA counted was counting on the military charters to be a “significant profit center.”
The charter flights of military personnel and their families generated more than $400 million in annual revenue and were expected to remain a “cornerstone” of the airline’s future business, the lawsuit states.
ATA filed for bankruptcy April 2 and abruptly ceased operations the next day.
FedEx spokeswoman Sandra Munoz said her company had no contractual obligation to ATA beyond the current fiscal year, which ends in September.
The military contracts commercial airlines for charter flights organized through two teams of companies.
ATA had flown military charter flights as a member of the FedEx team for more than 20 years. In late 2006, it spent more than $50 million to buy seven DC-10 planes from Northwest Airlines.
Broughton said the airline bought the planes and then spent additional money on hiring and training, because the military prefers wide-body aircraft. He said ATA did this after receiving a written commitment from FedEx that it would continue to receive military charter business through the fiscal year ending in 2009.
“There’s absolutely no reason at all to buy a DC-10 except for these military flights,” he said. “That’s the only reason ATA bought them.”
The airline had retrenched in 2006 after emerging from bankruptcy and was focused on increasing its military charter business. It also operated about 50 commercial flights a day mostly between the West Coast and Hawaii when it shut down. It was once the nation’s 10th-largest airline.
Broughton said the airline would have remained in business if FedEx had not canceled the contract.
The lawsuit asks for no specific damage amounts. Broughton said they were still tallying them but the total will be within the range of “tens of millions” of dollars.