Southwest Airlines Co.'s chief executive said yesterday that his carrier has "absolutely no interest in acquiring or controlling" ailing ATA Airlines Inc., despite documents showing that Southwest's bid for ATA gates in Chicago would give it 35 percent of ATA's stock and input on major strategic decisions.
Gary C. Kelly called "completely inaccurate" published reports that Southwest's $117 million bid for certain ATA assets amounted to a takeover offer.
The judge handling ATA's bankruptcy reorganization is to decide this week between bids from Southwest and AirTran Airways Inc., which offered about $100 million for 14 ATA's gates at Chicago's Midway Airport and other flying rights.
Southwest is the dominant carrier at Baltimore-Washington International Airport, accounting for about half the airport's traffic, and AirTran is its principal competitor there.
If ATA survives bankruptcy, Southwest would provide $30 million in financing that it would give it a substantial stake in the airline but no voting rights, Kelly said.
Southwest would not have a seat on ATA's board, nor would it would be able to name board members.
Nor would Southwest have the ability to name a new executive team at ATA, said Kelly, who praised J. George Mickelsons, chairman and chief executive of ATA Holdings Corp., the airline's parent.
Southwest's conditions were "a bit unusual" for a bankruptcy bid for assets, said Toby L. Gerber, a lawyer with Fulbright & Jaworski LLP in Dallas.
But because the bid is mostly a loan to ATA, Southwest "is vitally interested in how they will operate in the future," Gerber said.
Southwest's original bid language also called for ATA to renegotiate labor contracts. ATA would have to lower employee costs by as much as 20 percent.
Kelly said that is no longer part of Southwest's proposal.
"There is no requirement by Southwest for ATA to do anything with labor," he said, though he added that a restructured ATA "needs to make a profit" under Southwest's terms.
Southwest would take a role in ATA, but Kelly said it would be to consult in major affairs, not decide them.
'They need cash'
"They are a company that is in hock up to their eyeballs - they need cash," he said. "We have an interest in trying to recover our loan, and like any commercial lender, we are going to have covenants and requirements."
One of those requirements won't be to pledge ATA's remaining eight gates at Midway as collateral for Southwest's financing, Kelly said.
Under earlier terms of Southwest's bid, those remaining gates could have ended up with Southwest if ATA failed. Southwest has 19 of Midway's 43 gates and wants six more.
Midway is Southwest's top expansion priority, and the carrier has already increased its daily flight schedule next year to 170 flights from 145 this year.
More gates at Midway could make Chicago Southwest's largest national operation, surpassing current No. 1 Las Vegas.