The new owner of Chicago Express hopes to be back in the air by the end of the month.

However, Okun Enterprises needs to overcome a number of challenges before its Saab 340Bs fly again. The top priorities include gaining federal regulatory approval to use Chicago Express' operating certificate and finding a new code-share partner.

Chicago Express was grounded on March 28 when the bankrupt ATA Holdings [ATAH] closed down the regional airline that was once based at Chicago Midway Airport. A court supervised sale was held on April 1 to find a new owner of the carrier.

Edward Okun, a 54-year-old Indianapolis real estate developer and Indy Racing League sponsor, won the five-way bidding contest. Okun agreed to pay between $3 million and $4 million for the Chicago Express assets, including its operating certificate. He is paying an additional $2.4 million for the two Saabs that were owned by ATAH. The bankruptcy court approved the sale on April 4. The final sale price is contingent on working out settlements with undisclosed third parties. The sale agreement has been filed under seal with the court.

A court-appointed examiner had set $1 million as the minimum bid for carrier. ATAH purchased Chicago Express in 1999 for $1.9 million. It had since upgraded the carrier's fleet to the Saabs. The carrier at its peak had 17 planes, with all but two leased.

When Okun bid on the carrier, he did not have a firm business plan in hand. Instead, Okun met last week with an undisclosed airline consultant in Washington to finalize the plan, said Joseph Kavan, a partner with Kutak Rock, an Omaha law firm that handles Okun's real estate deals. Elements of the plan include possible code-share partners and routes.

An economically viable plan is just one of the elements that the Federal Aviation Administration (FAA) and the U.S. Department of Transportation (DOT) will be reviewing. The sale is contingent upon getting these federal approvals. Getting the airline back in the air by the end of April or early May is critical to keep the certificate active.

"We want to retain the key executives," Kavan told Regional Aviation News. Okun's company has begun negotiating with individuals it wants to retain, he added. It is important to hold on to individuals such as the chief pilot, director of operations and the director of maintenance to meet FAA continuity requirements.

With the exception of 16 senior employees, 450 employees of Chicago Express were furloughed on April 3. The court permitted ATAH to pay $213,000 to these 16 during a transition period to help assure the smooth transfer of the operating certificate. When ATAH made the decision in January to shut down the carrier on March 28, the airline had 600 employees.

The new carrier will place a heavy emphasis on customer service, Kavan said. Okun's team is now interviewing former employees and looking closely at their history of customer service. "Having the right people in the right places will help ensure the new airline serves the customer's needs today, and will aid in identifying their regional transportation needs in the future." Kavan would not say how many of the 450 furloughed employees it would bring back.

The key to the still undeveloped business plan is to find a new code-share partner.

"We are exploring code-share opportunities with three airlines and we hope to add more to the mix. It does not mean we will pick three or five carriers. I would see some type of code-share agreement," Kavan told Regional Aviation News.

ATAH closed the door on Chicago Express because it no longer needed the regional feed into Chicago for its low-fare carrier, ATA. Instead, ATAH struck a $117 million dollar deal last December with Southwest Airlines [LUV], which expanded its Midway operation and put the Southwest code onto flights to Hawaii, Boston and New York. At the time of the sale last week, ATAH did not rule out a future code-share arrangement with Chicago Express.

"We are not precluded from having a code-share with ATA," Kavan told Regional Aviation News, "but it is not one of the three we are currently considering."

"An independent operation would be sub-optimal, unless they have a sugar daddy somewhere," said Doug Abbey, a regional aviation consultant in Washington with The Velocity Group. Okun is not a client. The "sugar daddy" could be a major corporation or community that is underwriting some of the flights to ensure regular service.

Abbey identified three network carriers that could potentially use additional turboprop feed in the Great Lakes region: Northwest Airlines [NWAC], US Airways [UAIRQ] and Continental Airlines [CAL]. In addition, American Airlines [AMR] might also be a potential partner. In any case, Chicago Express would most likely be paid on a pro-rated basis instead of on a fee-for-departure basis, he added.

Abbey's analysis of the situation includes:

• Northwest: The Minneapolis-based carrier is already building a mini-hub in Indianapolis. A second Northwest AirLink operation could be based at Milwaukee, he said.
• Continental: Continental could perhaps use a larger turboprop to feed its Cleveland hub. Currently Commute Air feeds Cleveland, but with 19-seaters.
• US Airways: The bankrupt carrier could use additional turboprop feed all over its system, Abbey said.
• American: Express could pick up the turboprop routes out of St. Louis that Trans States Airlines now flies for American Connection. Furthermore, American owns six Saabs that Chicago Express had been flying.

It is Okun's intent "to build [Chicago Express] back up to the same level as before - the same number of planes and flights," Kavan said. However, it has not been determined where the carrier will be based and what routes it will serve.

Chicago Express served both Midway and Indianapolis International Airport. However, if the carrier again wants to serve Midway, it needs to start from scratch and apply to the airport for gates.

The Great Lakes region represents an under-served area, Kavan said. This untapped potential is what drew Okun into the bidding fray for Chicago Express.

Even at $6.4 million for the total package, Kavan said "there is good value there. We believe it is an under-valued asset that will provide a good foundation to build a quality product."

>>Contacts: Joseph Kavan, Kutak Rock, (402) 346-6000; Doug Abbey, Velocity Group, (202) 338-1727.<<