More About The ATA Business Bankruptcy Story

June 9, 2008 3:37 pm Published by

A couple of months ago, I wrote about the ATA Airlines bankruptcy that completely shut down the company.  As a small business bankruptcy attorney in Indiana, I have an intense interest in stories about bankruptcy filings by Indiana companies.  As I counsel my small business bankruptcy clients, it’s important to draw lessons from other companies that can help my clients avoid mistakes as they rebuild their businesses. Then, too, any time a company closes its doors, my individual bankruptcy clients can be affected.  Some may be laid off because they worked for ATA or perhaps for a company that was a supplier or customer of ATA. The decrease in employment opportunities will have an effect on how quickly my clients can get back on their feet financially following a personal bankruptcy. 

Here’s the situation right now with ATA:  At the end of last month, a 341 meeting was held.  This is a special meeting, part of all bankruptcy cases, at which executives of the company are questioned about what caused the company to fail.  In my work as a bankruptcy attorney in Indiana, I am involved in the bankruptcy process.  I use that word “process” by design, because, despite the myths, bankruptcy is not a one-day “event”, but an orderly legal process with different stages.  I was personally involved in drafting changes to the Indiana bankruptcy statutes, and I know that the process, while certainly not perfect, is designed to have the courts arrive at as fair a settlement as possible.  That means trying to be fair to both the business owner(s) and the creditors who are owed money.  It also means, in many cases, trying to “save” a business and allow it to continue to operate to retain as many of its workers as possible, and to serve its customers.

The ATA story is an especially sad one, in a way, because the company was founded right here in Indianapolis thirty-five years ago.  Many attempts were made to keep the company going.  These strategies included selling ATA to Georgia-based Global Aero Logistics, and taking on government contracts to transport troops. Then, along with other airlines, ATA was hit with spiking fuel prices.  When it lost its government contracts, the airline simply could not keep going. 

I think one lesson small business owners can learn from ATA is to start working on strategies at the very first signs of trouble.  Sometimes a sale or merger can improve the situation dramatically.  With ATA, it just wasn’t enough.  When consumer travel began to fall off, ATA diversified into other areas of business, another good lesson for all small business owners.  Again, with ATA, it just wasn’t enough. Adverse market conditions just proved too strong for the company to keep flying.  And that’s exactly where the Indiana bankruptcy process comes in as a safety net.

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This post was written by Mark Zuckerberg

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