ATA expands Southwest ties

By Julie Johnsson

ATA Airlines Inc. and Southwest Airlines plan to expand their code-share agreement to include international flights by winter, potentially intensifying competition on lucrative routes to the Caribbean and Mexico currently dominated by American Airlines and United Airlines.
The two airlines plan to allow passengers who book tickets on Southwest to connect on ATA flights to San Juan, Puerto Rico; Cancun, Mexico and other destinations by the fourth quarter 2005 or early 2006, ATA CEO John Denison told Crain’s.

ATA is also mulling expanding its international service from airports that serve as major Southwest hubs, including Baltimore-Washington International Airport and Chicago’s Midway Airport. “Those are all places where we could play in, be that piece of the model,” says Mr. Denison.
“As they expand their reach, of course it will have further impact (on pricing),” says Michael Allen, chief operating officer with Back Aviation Solutions, a Connecticut-based consulting firm.

The two airlines began code-sharing on some domestic routes in February, after Texas-based Southwest provided $117 million in financing to cash-strapped ATA, which is based in Indianapolis. As part of that bailout to ATA, which is operating under bankruptcy protection, Southwest purchased six gates at Midway for $34 million.

About 10% of ATA’s passengers now come via its Southwest code-share, and Mr. Dennison says that volume will rapidly increase. Expanding that arrangement to international flights will allow ATA to pick up even more Southwest passengers, while allowing the nation’s sixth-largest carrier to test overseas markets without taking on significant additional costs, says Mr. Allen.

“This gives them a chance to have a laboratory experiment,” he says.

Since joining ATA in January, Mr. Denison, a former Southwest executive, has slashed service from the low-cost carrier’s Indianapolis home market, while making Midway the focal point of its operations.

Flights originating from Midway account for nearly 40% of the 125 daily flights flown systemwide by ATA. By contrast, ATA has reduced its Indianapolis flights to four daily departures, down from 24 before it filed for bankruptcy protection last fall.

While ATA has laid off about 1,200 of its 3,200 Midway employees, it plans to step up hiring as it ramps up additional flights from Chicago’s Southwest side.

“We have limited resources,” says Mr. Denison. “And when you do, you have to make tough choices. We decided to stand and fight in Chicago.”

This is only the beginning. I think Southwest will eventually move to purchase ATA.

Beware. Pending showdown between ALPA and managment. Denison has already stated publicly at Co. roadshows that he would prefer to see the current concessionary agreement, set to expire May 31, extended as a long-term agreement. I don't think that will happen, but you never know.

Meanwhile, SWA has stated they are already making money from the codeshare, while ATA has not.

Denison has not accepted the permanent CEO position.

No reorganization plan has been submitted. No long-term plans announced/rumored.

Marketing is limited to non-existent, just like before.

ATA is doing little to nothing to grow or promote itself independently of SWA, military, and Hawaiian flying.

I will repeat what I've posted elsewhere. The potential to this codeshare is astounding, but SWA has not realized it, or is too afraid to execute the possibilities. (Fear of change.)

It would be interesting if SWA bought ATA. First, the staple of the seniority list would not go down well. Next, a new mixed fleet of 757 and 737 would lead to an interesting reduction bid. ATA pilots would not be happy losing their HNL turns.

And SWA pilots will find it hard to explain "track busts." A "gross error" check is waking up the ugly FA's room.

If SWA does buy ATA, it won't include the pilots/employees. They'll just want the ETOPS certificated 737's.