FedEx ordered to pay $66M to defunct airline ATA

AP News
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Posted: Oct 25, 2010 3:55 PM
FedEx ordered to pay $66M to defunct airline ATA

A federal jury said FedEx must pay $66 million to now-defunct ATA Airlines, saying the package delivery company broke a contract that ultimately pushed ATA into bankruptcy.

The jury for the U.S. District Court in Indianapolis awarded ATA $22 million for lost profit in 2008 and $44 million for lost profit in 2009.

ATA filed for bankruptcy April 2, 2008 and abruptly ceased operations the next day. It sued FedEx Corp. in June of that year over its decision to end a military charter business, a move the airline says forced it to seek bankruptcy protection and left it financially devastated.

The lawsuit said that the charter flights of military personnel and their families generated more than $400 million in annual revenue and were expected to remain a "cornerstone" of the airline's future business.

The military contracts with commercial airlines for charter flights organized through two teams of companies.

ATA had flown military charter flights as a member of the FedEx team for more than 20 years. In late 2006, it spent more than $50 million to buy seven DC-10 planes from Northwest Airlines.

Kenneth Broughton, a Houston-based attorney representing ATA, said that at the time the airline bought planes and spent additional money on hiring and training to meet the military's demands for wide-body aircraft. He said ATA did that after receiving a written commitment from FedEx that it would continue to receive military charter business through the fiscal year ending in 2009.

ATA had retrenched in 2006 after emerging from bankruptcy and was focused on increasing its military charter business. It was also operating about 50 commercial flights a day, mostly between the West Coast and Hawaii, when it shut down. It was once the nation's 10th-largest airline.