ATA Airlines bankrupt, stops service

Another airline serving Hawaii has filed for bankruptcy and shut down.

Indianapolis-based ATA Airlines Inc. discontinued all service on Thursday after filling for bankruptcy late Wednesday.

ATA said it filed for Chapter 11 protection after it lost a key military charter contract amid skyrocketing fuel prices. Nearly all of the airline's 2,230 employees have been laid off, including approximately 58 in Hawaii.

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"We deeply regret the disruption and hardship caused by the sudden shutdown of ATA, an outcome we and our employees had worked very hard and made many sacrifices to avoid," Doug Yakola, chief operating officer of ATA, said in a statement. "Unfortunately, the cancellation of a critical agreement for our military charter business undermined ATA's plan to address the current conditions facing all scheduled service airlines, including the tremendous spike in the price of jet fuel in recent months. As a result, it became impossible for ATA to continue operating."

The airline had approximately 50 flights per day, including Hawaii flights from Honolulu, Maui and the Big Island to California. The bulk of the Mainland flights were between Oakland, Los Angeles, Phoenix and Las Vegas.

The shutdown also affects Southwest Airlines customers who bought ATA tickets through a code-sharing agreement the airlines have had since 2005.

"ATA Airlines has been an outstanding partner for Southwest, and we are disappointed to hear this unfortunate news," said Southwest Chief Executive Gary Kelly in a statement. "We are sad to end our code-share relationship with ATA but understand it's extremely difficult for an airline to flourish in today's arduous financial environment that has been plagued by soaring fuel prices."

Dallas-based Southwest (NYSE: LUV) said it would rebook passengers who were scheduled to travel on ATA or offer full refunds for any unused portion of a ticket.