US airline files for bankruptcy

ATA Airlines Inc. said on Thursday it filed for Chapter 11 bankruptcy and shut down all operations after cancellation of a key military charter agreement.

The Indianapolis-based low-cost airline and its rivals have recently been hamstrung by big increases in jet fuel prices. ATA is the second airline to file for bankruptcy in the past few weeks.

The fuel price spike, coupled with a steadily weakening US economy, has stalled the airline industry's modest recovery from the 2001-2006 downturn.

On Sunday, Hawaii-based Aloha Airlines said it would shut down its passenger operations less than two weeks after it filed for bankruptcy protection.

Big airlines are beginning to shrink to cope with much tougher operating conditions. On March 18, Delta Air Lines Inc. unveiled plans to cut 2,000 jobs and scale back flights.

Carriers have also moved to pass on fuel costs to travellers through higher fares and surcharges. Some airlines have opened new revenue streams by charging for products and services that previously had been included in the price of a ticket.

Oil prices, which are directly related to jet fuel costs, remain above $100 a barrel.

"ATA's scheduled service business had been severely impacted by the dramatic and unprecedented increase in the price of jet fuel in recent months," said ATA in a statement.

ATA said "virtually all" of its 2,230 employees have been told their jobs have been eliminated.

ATA operated 29 aircraft and served destinations that included Hawaii, Guadalajara and Cancun, Mexico; Oakland, California; Chicago; Las Vegas and Dallas and also had a code-share agreement with Southwest Airlines Co.

ATA said it is no longer able to honour any reservations or tickets, and customers who bought tickets from Southwest for flights operated by ATA through its code-share agreement should contact Southwest.

Southwest said it would rebook such customers on new itineraries or offer refunds for any unused portions of tickets.