ATA Airlines filed for Chapter 11 bankruptcy in Indianapolis yesterday and stopped all operations effective 4am this morning. ATA attributes its bankruptcy to losing a key military contract and rising jet fuel prices.

This comes just three days after Aloha Airlines shuttered its operations, citing unfair competition on its Web site. The company filed for bankruptcy for the second time in just over three years.

Bankruptcy may allow a business to be saved, as in the case of United Airlines, which emerged successfully two years ago. But it can also result in liquidating all assets in order to pay creditors who line up to be paid. And bankruptcy itself isn’t cheap – depending on the size of the company it can take years and huge legal bills to get everything settled.

ATA said it tried to find a buyer and more money to keep afloat but failed.

Both United and American cancelled flights out of Chicago recently to comply with U.S. Federal Aviation Administration concerns. United checked the fire suppression system in the cargo holds of its Boeing 777 planes. Delta and American checked wiring bundles on some of their planes last week.

The impact goes beyond the airline industry though. It’s likely business people, who booked flights to get to meetings around the world, can’t conduct their business. They lose money, their employees lose money and the cycle continues.

If you have tickets for ATA you may be able to get a refund through your credit card company. If you paid by cash or check you’ll have to file a claim in the bankruptcy case to get a refund.

And the beat goes on…

Published: Apr 3, 2008