By John Schmeltzer
Tribune Staff Writer
May 4, 2000

For the past decade American Trans Air has been struggling with its identity.

On the one hand it was the nation's largest charter carrier and the single largest supplier of air transportation to the U.S. Army. On the other, it was operating an increasingly successful scheduled airline.

Its advertising promoted its leisure travel focus: "When you are on ATA, You're on Vacation." And unlike most airlines it didn't offer a frequent flier program, a premium first class or business class of service.

"Historically, this is an airline that didn't know if it was a fish or a bird, a charter operator or an airline," said Julius Maldutis, airline analyst for CIBC World Markets in New York.

Now, John Tague, ATA's president and chief executive, says the 27-year-old, Indianapolis-based carrier knows where it's going.

The airline is poised to double the number of flights it offers out of Chicago and will launch international service to as many as 15 destinations in Mexico and the Caribbean next year. On Friday, ATA will begin seeking government approval to double to six the number of daily flights it offers between Midway and Washington's Reagan National Airport. On Sunday it will launch daily service to Boston and Seattle from Midway.

Already, ATA is snatching big chunks of the market from competitors, such as United Airlines and American Airlines, which use O'Hare International Airport. Records of the U.S. Department of Transportation show that ATA is capturing 31 percent of the market flying between Chicago and Los Angeles, 40 percent of the Chicago-to-Dallas market and 45 percent of the Chicago-to-Orlando market.

Despite hourly service by United from O'Hare to Los Angeles, ATA's flights generate $70,000 daily in revenue. In the Dallas market, where ATA competes against hourly service by American from O'Hare and several daily flights from Midway, ATA's flights generate $28,000 daily. (Such revenue estimates aren't generally available from domestic airlines.)

But the airline's aggressive expansion plans would stall without the $800 million reconstruction of the Southwest Side airport that is now approaching the halfway point. The airport will operate 41 gates, up from the current 29. ATA will use 13 gates, up from the 6 it presently uses.

"This airline is focused on Midway," said Bill McKnight, executive vice president of ATA.

Maldutis says the decision to establish ATA's only hub at the Southwest Side airport has turned out to be a "brilliant stroke" despite the construction-related inconvenience passengers currently encounter when using Midway.

Temporary structures from roads to walkways are everywhere. Steel girders rise of out of what was once the main parking lot in front of the old terminal. Midway's operations, which last year saw 13.5 million people board 297,000 flights, are currently constrained because of the shortage of gates.

By February, however, that will begin changing. The new terminal building is scheduled to open on the east side of Cicero Avenue. The first gates in three new concourses will open in September 2001.

That's when ATA plans to launch its Midway-based international service to Cancun, Puerto Vallerta, Barbados and Montego Bay using a U.S. Customs Service facility that is being built for ATA's use. Later, Tague says, the airline would like to fly to Havana (if the flight embargo is ever lifted), St. Maarten and perhaps a dozen other destinations.

But ATA's ability to operate as the lowest-cost carrier in the airline industry would have been compromised if costs of building the new terminal had ballooned.

"The city promised us it would not exceed $8 per passenger boarding and we're forecasting it will end up in the $4.80 to $5.50 [range]," said Tague.

Tague says ATA remains adamantly opposed to a new airport being constructed in Peotone, located about 40 miles south of Chicago's Loop. Competition from another point-to-point airport in the region could cripple operations at Midway, the airlines say.

Like Southwest Airlines, Tague says ATA insisted on a clause in its contract with the city that allows it to pull its operations out of Midway if a new airport is constructed at Peotone, as Gov. George Ryan hopes.

But ATA's efforts to join the ranks of the nation's major airlines also hinge on the successful conclusion of negotiations with Boeing Co. for the purchase of dozens of new jets.

"Keep in mind they have one of the oldest fleets in the world," said Maldutis.

Currently, the airline operates 57 aircraft. More than half are old Boeing 727 and Lockheed L-1011 jets. Those models have not been manufactured in years. Tague said announcement of an aircraft order could come as early as Thursday.

He insisted that the airline will not have trouble filling its new planes even with a federal rule change that is allowing significant expansion of both domestic and international flights.

"The average customer wants what we are offering--fares that are one-third less on average than the majors," Tague said.

And ATA still won't be offering first class or frequent flier programs, he said.