Thursday, June 12, 2008

ATA sues FedEx on military charters

Alleged deal breach cited for bankruptcy

Bloomberg News
June 12, 2008

ATA Airlines Inc. filed a $180 million breach-of-contract lawsuit against FedEx Corp., accusing the largest air-cargo shipper of forcing the carrier into bankruptcy by booting it from a U.S. military deal.

FedEx, which leads a team of airlines flying military charter flights, ousted ATA from the group in January in violation of a 2006 contract, ATA claimed in the suit filed Wednesday in federal court in Indianapolis, where it is based. ATA filed a Chapter 11 petition April 2 and halted operations a day later.

"FedEx's wrongful conduct in removing ATA from the FedEx team financially destroyed ATA and caused ATA to file bankruptcy and thereafter cease operations," the carrier said in its complaint.

ATA said FedEx agreed to split the military passenger service for 2007, 2008 and 2009 between the airline and another team member, Omni Air International Inc. It claimed FedEx kept secret a plan to end the relationship and give ATA's share of the flights to Northwest Airlines Corp., which is also part of the FedEx charter team.

U.S. military contracts generated about $400 million a year for ATA, according to the suit. Since 1983, ATA had been one of the largest civilian transporters of military personnel and their families to and from deployments in the Middle East, Europe and Asia, the carrier said.

ATA claims the deal cancellation was "all the more outrageous" because ATA in 2006 borrowed $50 million to buy seven aircraft and two airframes to meet its obligations as part of the FedEx team.

Sandra Munoz, spokeswoman for Memphis-based FedEx, didn't cite a reason for the decision but said ATA was told it wouldn't be part of the charter team when bidding started for 2009 flights.

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