If Chicago Express is sold before its scheduled March 28 closure, it will most likely be an 11th hour deal. A tight sales schedule was set last week when a U.S. Bankruptcy Court judge in Indianapolis set March 1 as a deadline for any interested party to submit bids for the Chicago- based Saab operator. The...
For immediate service; more information; and multi-user access (site license), non-profit organization, educational institute pricing, contact Karen Garner kgarner@accessintel.com at (301) 354-1612.
This story is only available to paid subscribers. Please login below with your username and password if you are a subscriber.
Subscribe Trial
If Chicago Express is sold before its scheduled March 28 closure, it will most likely be an 11th hour deal.
A tight sales schedule was set last week when a U.S. Bankruptcy Court judge in Indianapolis set March 1 as a deadline for any interested party to submit bids for the Chicago- based Saab operator. The judge appointed New York-based Compass Advisers to solicit and screen offers.
In addition to appointing Compass, the judge agreed to appoint an examiner who will attempt to untangle the financial relationship between Chicago Express and its parent, Indianapolis-based ATA Holdings [ATAH]. The appointment will be made at a March 7 hearing.
NatTel, of Stamford, Conn. - the one confirmed suitor - sought the examiner contending that ATAH owes Chicago Express $16.7 million in ticket revenue and it has saddled the regional unit with more than $500 million in debts related to the acquisition of new Boeing [BA] 737 aircraft for ATA, the low-fare airline unit of ATAH.
Without a complete financial picture of Chicago Express, any potential suitor will be handicapped in preparing a bid by the March 1 deadline. "Frankly, nothing is going to happen in this case until the March 7 hearing," said Jack Robinson, NatTel's owner.
"I would not be surprised if this thing did not come down to the 11th hour," Robinson said, noting, "that is what generally happens in bankruptcy."
"We are still slated to end service on March 28," said Roxanne Butler, an ATAH investor relations representative. "That is not a moving target. It is a sure thing."
While ATAH remains firm about the date, Robinson said some "off the cuff" remarks indicate there may be some wiggle room. If a suitor requires that ATAH keep Chicago Express in the air until a deal is closed, Robinson said, they may do so if someone else foots the bill. A number of the Saabs have lease payments that are due at the end of March.
Chicago Express leases 14 of the 16 Saab 340s its flies.
Once the carrier suspends service its operating certificate is worthless. Furthermore, anyone wanting to take over Chicago Express needs to buy the entire airline - assets and liabilities.
In addition to NatTel, a second possible suitor has emerged. Robert Riddell, president of AvJets Aviation Services Group, which is the fixed-base operator of the Covington, Ga., airport, told Regional Aviation News that he may bid. Riddell is still waiting on an information package from Compass.
"There have been numerous parties calling us about the sale," said ATAH's Butler. Based on advice from Compass, ATAH will not comment on sales process or prospects. In the end, Butler said Compass and ATAH will recommend to the court the suitor that makes the best offer for Chicago Express.
"We have an interest in the airline," Riddell said. "It sounds intriguing, but we don't know enough right now to say. The trick will be putting together the deal and to make it self-supporting. We are at a strong disadvantage with the time remaining and we are pleading for information as soon as possible."
Admitting that he is operating in an information vacuum, Riddell said that he would attempt to operate Chicago Express with minimal amount of changes. "The puzzle would be complete if we had a code-share partner who is interested in a commuter feed. The main piece of the puzzle, ATA, is missing. We obviously need some type of assurances with ATA or another carrier to have any chance to make this work."
Chicago Express is now on the market because the bankrupt ATA does not need a feeder carrier in its new scaled down operations. ATA is retreating from its newly established Indianapolis-hub, but it will continue to fly from eight Chicago Midway Airport gates. ATA sold six Midway gates to Southwest Airlines [LUV] in a $117 million deal that includes a new code-share relationship.
Riddell has suggested that Chicago Express could provide feeder service to AirTran, which is expanding in both Indianapolis and at Midway. Chicago Express could also feed from Southeast locations into AirTran's Atlanta hub, he said.
Last year, AirTran ended an 20-month experiment with Air Wisconsin. AirTran used 70-seat RJs flown by Air Wisconsin to provide both feeder flights to Atlanta and some point-to-point flying. AirTran decided it was more economical to service these routes with its own B717s (CRAN, March 15, 2004).
Noting that there is support in Indiana for the newly established intra-Indiana service, Riddell also hopes to fly Chicago Express back into Midway and serve the Midwest cities that were recently cut. The Indiana support includes $2 million in local and federal tax dollars to underwrite an intra-state service (CRAN. Sept. 13, 2004).
Riddell wants to meet with local airport directors to determine the load potentials. Since ATAH's compensation of Chicago Express did not rely on the load factors, Riddell said it is not clear how many flights are needed in each market.
A retired Delta Air Lines [DAL] pilot, Riddell has operated Dixie Jet Service since 2001 at the Covington airport. His operations also includes a flight school and a corporate jet charter service. Sandwiched between his Delta years and his Covington investment, Riddell has held key operation positions at TransMeridian Airlines, America West Airlines [AWAC] and the former ProAir.
Until he knows the scope for the deal, Riddell said he has not approached any investment partners to join him in a bid for Chicago Express.
Robinson has indicated he will invest at least $3.5 million to return Chicago Express to profitability. His original plan assumed that the Saabs would not be available so he has lined up 30 Saabs, both 340s and the 50-seat 2000 model to form the backbone of his revitalized Chicago Express. NatTel is willing to take on the $500 million in disputed liabilities to close the deal.
NatTel, once a wireless telecommunications company, made an unsolicited bid of $37,700 in December. The court rejected the offer at the time because ATAH had plans to expand Chicago Express instead of closing the carrier. ATAH refused to talk to NatTel until Jan. 31, according to Robinson. "Those conversations then never developed into anything. We will go straight to the court to get the deal done," he told Regional Aviation News. In the last two weeks, NatTel has revised its bid downward. "It is now $25,000 and heading south from there. It could be $1 by March 1," Robinson said.
NatTel's business plans for Chicago Express envision flights from 10 to 12 nearby Midwest states into Midway. The fares will be in the current $100-a-seat range for one-way travel (RAN, Feb. 7). Robinson said there is enough Chicago-bound traffic to support the carrier without relying on a code-share partner.
>>Contacts: Jack Robinson, NatTel, (203) 425-4500; Roxanne Butler, ATAH, (317) 282-2659; Robert Riddell, AvJets, (770) 304-2121.<<
Print This Page
Email This Page
Archives
Copyright Permissions
