As filed with the Securities and Exchange Commission on August 11, 2000
Registration No. 333-
-------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
AMTRAN, INC. AMERICAN TRANS AIR, INC.
(Exact names of registrants as specified in their charters)
Indiana Indiana
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
4522 4522
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
35-1617970 35-1305077
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number)
7337 West Washington Street 7337 West Washington Street
Indianapolis, Indiana 46231 Indianapolis, Indiana 46231
(317) 247-4000 (317) 247-4000
(Address, including zip code, (Address, including zip code,
and telephone number,including and telephone number,including
area code,of registrant's principal area code, of registrant's
executive offices) principal executive offices)
---------------------------
Mr. Kenneth K. Wolff
Chief Financial Officer
American Trans Air, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
(317) 247-4000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------------
Copy to:
William P. Rogers, Jr, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
(212) 474-1000
---------------------------
Approximate date of commencement of proposed sale of the securities to
the public: As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box.[ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] . . . . . .
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]. . . . . .
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================
Proposed
Title of Each Amount to Be Maximum Offering Proposed Maximum
Class of Securities Registered (1) Price per Aggregate Offering Amount of
to Be Registered Certificate (2) Price (2) Registration Fee
<S> <C> <C> <C> <C>
Pass Through Certificates, Series 2000-1G... $201,901,000 100% $201,901,000 $53,302
Pass Through Certificates, Series 2000-1C... $36,740,000 100% $36,740,000 $9,699
Guarantee--of the Pass Through Certificates of (3) (3) (3) (3)
American Trans Air, Inc. by Amtran, Inc..
====================================================================================================================================
</TABLE>
(1) Equals the aggregate principal amount of the securities being registered.
(2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
(3) No separate consideration will be received for the Guarantee. Pursuant to
Rule 457(n), no separate fee is payable in respect of the Guarantee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
-------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
$238,641,000
American Trans Air, Inc.
---------------------------
2000-1 Pass Through Trusts
Pass Through Certificates, Series 2000-1
Applicable Underlying Payments Fully and Unconditionally Guaranteed by
Amtran, Inc.
OFFER TO EXCHANGE
$201,901,000 Class G Pass Through Certificates and
$36,740,000 Class C Pass Through Certificates
FOR
A Like Amount of Registered Class G
and Class C Pass Through Certificates
The exchange offer will expire at 5:00 p.m., New
York City time on , 2000, unless extended.
---------------------------
This is a registered offer to exchange each class of outstanding
certificates issued by two separate pass through trusts ("Outstanding
Certificates") for new certificates issued by the same pass through trusts
(the "Exchange Certificates") having terms substantially identical in all
material respects to the Outstanding Certificates they are replacing (except
that the Exchange Certificates will not contain terms with respect to transfer
restrictions or certain interest rate increases and the Exchange Certificates
will be available only in book-entry form).
---------------------------
Please see "Risk Factors" beginning on page 22 for a description of
certain factors that you should consider in connection with the exchange
offer.
Final Expected
Interest Distribution
Pass Through Certificates Principal Amount Rate Date
------------------------- ---------------- ------- -------------
2000-1G................ $201,901,000 8.0 January 15, 2016
2000-1C................ $ 36,740,000 9.6 January 15, 2006
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
Page
Where You Can Find More Information....................................... 3
Incorporation of Certain Documents by Reference........................... 3
Forward-Looking Statements................................................ 4
Summary................................................................... 6
Summary of Terms of the Exchange Offer.................................... 7
Summary Description of the Exchange Certificates.......................... 8
Use of Proceeds........................................................... 19
Summary Consolidated Financial and Operating Data......................... 19
Risk Factors.............................................................. 22
Description of the Policy Provider........................................ 34
The Exchange Offer........................................................ 35
Capitalization............................................................ 45
Selected Consolidated Financial Data...................................... 46
Management's Discussion and Analysis of Financial Condition
and Results of Operation................................................... 48
Business.................................................................. 82
Description of Principal Indebtedness..................................... 91
Description of the Certificates........................................... 94
Description of the Deposit Agreements..................................... 111
Description of the Escrow Agreements...................................... 113
Description of the Liquidity Facilities................................... 114
Description of the Policy and the Policy Provider Agreement............... 118
Description of the Intercreditor Agreement................................ 121
Description of the Aircraft and the Appraisals............................ 126
Description of the Secured Promissory Notes............................... 127
Exchange Offer; Registration Rights....................................... 147
Book-Entry; Delivery and Form............................................. 125
U.S. Federal Income Tax Consequences...................................... 150
Delaware Taxes............................................................ 155
ERISA Considerations...................................................... 155
Plan of Distribution...................................................... 158
Legal Matters............................................................. 158
Experts................................................................... 159
Index to Consolidated Financial Statements................................ F-1
2
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
American Trans Air, Inc. ("ATA") is a wholly owned subsidiary of Amtran,
Inc. ("Amtran"). Amtran is subject to the informational requirements of the
Securities Exchange Act of 1934 and, therefore, must file periodic reports,
proxy statements and other information with the Commission. In addition,
Amtran has agreed to file with the Commission the annual reports and the
information, documents and other reports otherwise required by Section 13 of
the Exchange Act. All such information is available to the public over the
Internet at the SEC's web site at http://www.sec.gov and may be inspected and
copied at the public reference facilities:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Judiciary Plaza Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
Copies of these documents can also be obtained at prescribed rates by writing
to the Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
This prospectus constitutes a part of a registration statement on Form
S-4 filed by ATA with the Commission under the Securities Act. As permitted by
the rules and regulations of the Commission, this prospectus does not contain
all of the information contained in the registration statement and the
exhibits and schedules thereto. Reference is hereby made to the registration
statement and its exhibits and schedules for further information with respect
to ATA and the securities offered through this exchange offer. Statements
contained in this prospectus concerning the provisions of any documents filed
as an exhibit to the registration statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is
made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them into this prospectus, which means that:
o incorporated documents are considered part of this prospectus;
o we can disclose important business and financial information about
us, that is not included in or delivered with this prospectus, to you
by referring you to those other documents; and
o later information filed with the SEC will update and supersede this
information.
Amtran, Inc. Documents
We incorporate by reference into this prospectus the documents listed
below, as amended and supplemented, and all documents filed by us with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
after the date of this prospectus and prior to the date on which the exchange
offer made hereby is consummated:
o The Amtran, Inc. Annual Report on Form 10-K for the fiscal year
ended December 31, 1999;
o The Amtran, Inc. Definitive Proxy Statement, dated April 5, 2000; and
o The Amtran, Inc. Quarterly Report on Form 10-Q for the period ended
March 31, 2000.
3
<PAGE>
Ambac Assurance Corporation Documents
Ambac Assurance Corporation ("Ambac" or the "Policy Provider") has
issued a certificate guarantee insurance policy to support the payment of
interest on the class G certificates. See "Description of the Policy
Provider." We incorporate by reference into this prospectus the
consolidated financial statements of Ambac Assurance Corporation and its
subsidiaries as of December 31, 1999 and December 31, 1998 and for each of
the years in the three year period ended December 31, 1999 included in the
Annual Report on Form 10-K of Ambac Financial Group, Inc. (which was filed
with the SEC on March 30, 2000; SEC File Number 1-10777), and the unaudited
consolidated financial statements of Ambac and its subsidiaries as of June
30, 2000 and June 30, 1999, included in the Quarterly Report on Form 10-Q
of Ambac Financial Group Inc. for the period ended June 30, 2000 (which was
filed with the SEC on August 11, 2000). Any statement contained in a
document incorporated herein by reference shall be modified or superceded
for the purposes of the prospectus to the extent that a statement contained
herein by reference herein also modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
All financial statements of Ambac and its subsidiaries included in
documents filed by Ambac Financial Group, Inc. with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, subsequent to the date of this prospectus and prior to the date
on which the exchange offer made hereby is consummated shall be deemed to
be incorporated by reference into this prospectus and to be a part hereof
from the respective dates of filing such financial statements. Copies of
the Ambac Financial Group, Inc. Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 are available, without charge, from Ambac. The
address of Ambac's administrative offices and its telephone number are One
State Street Plaza, New York, New York 10004 and (212) 668-0340.
You can obtain any of our filings incorporated by reference into this
document through us or from the SEC through the SEC's web site or at the
addresses listed above. Documents incorporated by reference into this
prospectus, except for any exhibits to those documents that are not expressly
incorporated by reference into those documents, are available from us without
charge by requesting them in writing or by telephone at the following address
and telephone number:
American Trans Air, Inc.
7337 West Washington Street
Indianapolis, Indiana 46231
Attention: Kenneth K. Wolff, Chief Financial Officer
Telephone: (317) 247-4000
If you request any incorporated documents from us, we will mail them
to you by first- class mail, or by another equally prompt means, within one
business day after we receive your request. However, in order to obtain
timely delivery of these documents, you must make your request no later
than five business days before the expiration date of the exchange offer.
Unless the context requires otherwise, all references in this document
to "this Prospectus" include all documents incorporated by reference into
this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus includes and incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements relate to analyses and other information which are
based on forecasts of future results and estimates of amounts not yet
determinable. These statements also relate to our future prospects,
developments and business strategies.
4
<PAGE>
These forward-looking statements are identifiable by their use of
terms and phrases such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "plan," "predict," "project," "will" and similar
terms and phrases, including references to assumptions. These statements
are contained in sections entitled "Summary," "Risk Factors" and other
sections of this prospectus and in the documents incorporated by reference
in this prospectus.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be
materially different. Such factors include, but are not limited to, the
following:
o economic conditions;
o labor costs;
o aviation fuel costs;
o competitive pressures on pricing;
o weather conditions;
o governmental legislation;
o consumer perceptions of our products;
o demand for air transportation in the markets in which we operate;
o other operational matters discussed in this prospectus; and
o other risks and uncertainties listed from time to time in reports we
periodically file with the SEC.
We do not undertake to update our forward-looking statements to
reflect future events or circumstances.
---------------------------
Amtran and ATA are Indiana corporations. Their executive offices are
located at 7337 West Washington Street, Indianapolis, Indiana 46231, and
the telephone number is (317) 247-4000. Amtran's common stock is traded
through the facilities of the Nasdaq Stock Market under the symbol "AMTR."
5
<PAGE>
SUMMARY
This summary highlights selected information from this prospectus, but
does not contain all the information that may be important to you. We
encourage you to read this entire prospectus, including the "Risk Factors"
section, and the documents we incorporate by reference, in their entirety
before making an investment decision.
"Amtran" refers to Amtran, Inc.; "ATA" refers to American Trans Air,
Inc. and "we" or "the Company" refers to Amtran, Inc. and its subsidiaries,
including ATA.
The Company
Amtran owns ATA, the eleventh largest passenger airline in the United
States (based on 1999 revenues) and a leading provider of airline services
in selected market segments. We are also the largest commercial passenger
charter airline in the United States and the largest charter provider of
passenger airline services to the U.S. military, in each case based on
revenues. For the year ended December 31, 1999, our revenues consisted of
55.7% scheduled service, 23.5% commercial charter service and 11.2%
military charter service, with the balance derived from related travel
services.
We actively consider and enter into discussions regarding possible
business combinaions with air carriers and others, and plan to continue to
do so. See "Risk Factors."
Scheduled Service
We provide scheduled service through ATA to selected destinations
primarily from its gateways at Chicago-Midway and Indianapolis and also
provides transpacific services between the western United States and
Hawaii. In 1999, we added scheduled service between Chicago- Midway and
Philadelphia. We focus on routes where we believe we can be a leading
provider of nonstop service and targets leisure and value-oriented business
travelers.
Commercial Charter Service
We are the largest commercial passenger charter airline in the United
States and provide services throughout the world, primarily to U.S. and
European tour operators. We seek to maximize the profitability of these
operations by leveraging our leading market position, diverse aircraft
fleet and worldwide operating capability. We believe our commercial charter
services are a predictable source of revenues and operating profits in part
because our commercial charter contracts require tour operators to assume
capacity, yield and fuel price risk, and also because of our ability to
re-deploy assets into favorable markets. Our commercial charter services
are marketed through a network of domestic sales offices along with a
London office.
Military/Government Charter Service
We have provided passenger airline services to the U.S. military since
1983 and are currently the largest commercial airline provider of these
services. We believe that because these operations are generally less seasonal
than leisure travel, they have tended to have a stabilizing impact on our
operating margins. The U.S. government awards one-year contracts for its
military charter business and pre-negotiates contract prices for each type of
aircraft that a carrier makes available. We believe that our fleet of aircraft
is well suited to the needs of the military.
Recent Developments
In May 2000, we entered into preliminary agreements to obtain 37
Boeing 737-800 aircraft and 10 Boeing 757-300 aircraft, along with the
engines to power these aircraft. In June 2000, we formalized an agreement
to acquire the 10 Boeing 757-300s and 20 of the Boeing 737-800s. We expect
to finalize the agreements with respect to the remaining aircraft and
engines in the third quarter 2000.
Also in the second quarter of 2000, we added scheduled service between
Chicago-Midway and Ronald Reagan Washington National Airport, Boston and
Seattle. We added scheduled service to Minneapolis/St. Paul early in the
third quarter of 2000.
6
<PAGE>
Summary of Terms of the Exchange Offer
In the exchange offer we will accept for exchange up to $201,901,000
class G Outstanding Certificates and up to $36,740,000 class C Outstanding
Certificates for an equal aggregate principal amount of Exchange Certificates.
The form and terms of the Exchange Certificates are substantially the same as
the form of the Outstanding Certificates except that the Exchange Certificates
have been registered under the Securities Act.
Background....................................On February 15, 2000, we
completed an offering of
two classes of pass through
certificates issued by
two separate pass through
trusts. In connection
with that offering, we entered
into a registration rights
agreement in which we agreed,
among other things, to deliver
this prospectus to you and to
complete an exchange offer.
Securities Offered........................... Up to $201,901,000 class G
certificates and up to
$36,740,000 class C
certificates, which have been
registered under the Securities
Act. The terms of the Exchange
Certificates are substantially
the same as the terms of the
Outstanding Certificates except
for certain transfer
restrictions and registration
rights relating to the
Outstanding Certificates. See
"Description of the Certificates
--Exchange Offer; Registration
Rights."
The Exchange Offer.......................... We are offering to accept for
exchange your unregistered
Outstanding Certificates for our
new Exchange Certificates that
have been registered under the
Securities Act of 1933. As of
the date hereof, $238,641,000
in aggregate principal amount of
Outstanding Certificates are
outstanding. On or promptly
after the expiration date we
will issue the Exchange
Certificates to those of you
who hold Outstanding
Certificates and wish to tender
them. The issuance of the
Exchange Certificates is
intended to satisfy our
obligation contained in the
registration rights agreement.
For procedures on tendering,
see "The Exchange Offer" and
"Description of the Certificates
--Exchange Offer; Registration
Rights."
Expiration of the Exchange Offer........... 5:00 p.m., New York City time, on
, 2000, unless we extend it. See
"The Exchange Offer--Terms of the
Exchange Offer, Period for
Tendering Outstanding
Certificates."
Tenders; Withdrawal...................... You may withdraw your tender of
Outstanding Certificates at any
time before the offer expires. If
for any reason any Outstanding
Certificates are not accepted for
exchange, they will be returned as
soon as practicable after the
expiration or termination of the
exchange offer.
Conditions to the Exchange Offer.......... The exchange offer is subject to
the condition that it does not
violate applicable law or any
applicable
7
<PAGE>
interpretation of the staff
of the Commission. There is
no guarantee that any such
condition will not occur.
You will have certain
rights against us under the
registration rights
agreement if we fail to
consummate the exchange
offer.
Federal Income Tax Considerations........... Pursuant to the exchange offer, the
exchange of an Outstanding
Certificate for an Exchange
Certificate will not constitute a
taxable exchange. See "U.S.
Federal Income Tax Consequences."
Exchange Agent...............................Wilmington Trust Company is serving
as the Exchange Agent in
connection with the exchange
offer.
Consequences If You Do Not Exchange
Your Outstanding Certificates................Outstanding Certificates that are
not tendered in the exchange
offer or are not accepted for
exchange will continue to accrue
interest, but will not retain
any rights under the registration
rights agreement and will bear
legends restricting their
transfer. You will not be able to
offer or sell the Outstanding
Certificates unless:
o pursuant to an exemption from
the requirements of
the Securities Act of 1933;
o the Outstanding Certificates
are registered under the
Securities Act of 1933; or
o the transaction requires
neither such an exemption
nor registration.
We do not currently anticipate
that we will register
Outstanding Certificates under
the Securities Act. See "Risk
Factors--Consequences of Failure
to Exchange and Requirements
for Transfer of Exchange
Certificates."
Summary Description of the Exchange Certificates
Certificates Offered ............... o Up to $201,901,000 class G Exchange
Certificates which have been
registered under the Securities Act.
o Up to $36,746,000 class C Exchange
Certificates that have been
registered under the Securities Act.
Amtran Guarantee.................... The payments by ATA under each lease and
owned aircraft indenture will be
unconditionally guaranteed by Amtran.
See "Description of the Secured
Promissory Notes-- The Amtran
Guarantee."
Use of Proceeds..................... There will be no proceeds from the
Exchange Certificates. The proceeds
from the sale of the original
certificates will ultimately be used
to purchase secured promissory notes
issued to finance seven Boeing
aircraft to be operated by ATA.
8
<PAGE>
Subordination Agent, Pass
Through Trustee, Paying
Agent and Loan Trustee........... Wilmington Trust Company.
Escrow Agent........................ First Security Bank, National
Association.
Depositary.......................... Citibank, N.A.
Initial Liquidity Provider.......... Citibank, N.A.
Policy Provider..................... Ambac Assurance Corporation.
Trust Property...................... The property of each pass through trust
will include:
o secured promissory notes;
o rights of the pass through trust
to acquire secured promissory
notes under a note purchase
agreement;
o rights of the pass through trust
under the related escrow
and paying agent agreement;
o rights of the pass through trust
under the intercreditor agreement
described below under "--
Intercreditor Agreement",
o all rights under the liquidity
facility for that pass through
trust;
o funds from time to time deposited
with the pass through trustee in
accounts relating to that pass
through trust; and
o in the case of the pass through
trust for the class G
certificates, all rights under
the insurance policy.
Certificates; Denominations......... The Exchange Certificates of each trust
will be issued in a minimum
denomination of $1,000 and in
integral multiples of $1,000 in
excess thereof, except that one
Exchange Certificate of each trust
may be issued in a denomination of
less than $1,000.
Regular Distribution Dates.......... January 15, April 15, July 15 and
October 15, commencing on April 15,
2000.
Record Dates........................ The fifteenth day preceding the related
distribution date.
Distributions by Pass
Through Trustees................. Each pass through trustee will
distribute all payments of principal,
premium, if any, and interest
received on the secured promissory
notes held in that pass through trust
to the holders of Exchange
Certificates issued by that pass
through trust.
Each pass through trustee will
distribute all scheduled payments of
principal and interest made on the
secured promissory notes on regular
distribution dates.
9
<PAGE>
Each pass through trustee will
distribute all payments of
principal, premium, if any, and
interest made on the secured
promissory notes resulting from any
early redemption or purchase of
those secured promissory notes on a
special distribution date. Each pass
through trustee will also distribute
any premium that we pay in
connection with the return of any
unused deposit. Such distribution of
premium will be on a special
distribution date. Each pass through
trustee will provide Exchange
Certificateholders with at least 20
days' notice prior to any special
distribution.
Distributions by a pass through trustee
to Exchange Certificateholders
generally are subject to the
intercreditor and subordination
provisions described below.
Distribution by the Paying
Agent............................ The paying agent will distribute all
payments of interest on the deposits,
and any unused deposits relating to
each pass through trust, to the
holders of Exchange Certificates
issued by that pass through trust.
Possible Issuance of Class D
Certificates..................... Subject to certain conditions, ATA may
elect to issue series D secured
promissory notes in connection with
the financing of owned aircraft, but
series D secured promissory notes will
not be purchased by the class G or
class C pass through trusts and will
be funded from sources other than the
initial offering. ATA may elect to
fund the sale of the series D secured
promissory notes through the sale of
pass through certificates issued by a
class D American Trans Air, Inc.
2000-1 Pass Through Trust.
Intercreditor Agreement............. The pass through trustees, the
subordination agent, the liquidity
provider and the policy provider will
enter into an intercreditor agreement
that states how payments made on the
secured promissory notes and payments
made under the liquidity facilities
and under the insurance policy will
be shared and distributed among pass
through trustees, the liquidity
provider and the policy provider. The
intercreditor agreement also sets
forth agreements among the pass
through trustees, the liquidity
provider and the policy provider
relating to who will control the
exercise of remedies under the secured
promissory notes and the indentures.
There are no cross-default provisions
in the indentures or in the leases
unless otherwise agreed to between
an owner participant and ATA. This
means that if the secured promissory
notes relating to an aircraft are in
default, and the secured promissory
notes issued with respect to the
remaining aircraft are not in
default, no remedies will be
exercisable with respect to the
remaining aircraft.
Subordination....................... By virtue of the intercreditor
agreement, the secured promissory
notes are cross-subordinated. This
means that payments received on a
junior class of secured promissory
10
<PAGE>
notes relating to one aircraft may
be applied according to the priority
of payment provisions in the
intercreditor agreement to make
payments relating to a more senior
class of certificates. Under the
intercreditor agreement,
distributions on the Exchange
Certificates will be made in the
following order:
o first, to the holders of the class
G Exchange Certificates;
o second, to the holders of the
class C Exchange Certificates; and
o third, if class D certificates
have been issued, to the holders
of the class D certificates.
Certain payments to the liquidity
provider and to the policy provider
will be made prior to payments on
all or some of the Exchange
Certificates, as discussed under
"Description of the Intercreditor
Agreement--Priority of
Distributions."
The subordination provisions may permit
distributions to junior Exchange
Certificateholders after a default
on the secured promissory notes even
if more senior Exchange
Certificateholders have not been
repaid in full. The subordination
provisions do not apply to payments
relating to the deposits, proceeds
of advances under the liquidity
facilities or proceeds of drawings
under the insurance policy for the
class G Exchange Certificates.
Control of Loan Trustee............. The controlling party with respect to an
indenture will, subject to certain
limited exceptions discussed below,
be entitled to direct the loan
trustee in taking remedial action
under that indenture, which may
include accelerating the secured
promissory notes under that indenture
or foreclosing the lien on the
aircraft securing those secured
promissory notes. In exercising
remedies during the nine months after
the earlier of (a) the acceleration
of the secured promissory notes
issued under any indenture and (b)
our bankruptcy, the controlling party
may not sell the secured promissory
notes or the aircraft subject to the
lien of that indenture for less than
certain specified minimums or modify
lease rental payments for that
aircraft below a specified threshold.
The controlling party will be:
o the policy provider, until final
distributions of the outstanding
balance of the class G Exchange
Certificates, together with
accrued and unpaid interest, are
made to the holders of the class
G Exchange Certificates and
thereafter, if, and while, no
obligations owing to the policy
provider remain outstanding or,
if a policy provider default has
occurred and is continuing, the
class G pass through trustee,
until payment of final
distributions together with
accrued interest to the
11
<PAGE>
holders of the class G Exchange
Certificates; then the class C
pass through trustee; and
o if any class D certificates have
been issued, upon final
distribution of the aggregate
outstanding balance of the class
C Exchange Certificates, together
with accrued and unpaid interest,
to the holders of class C
Exchange Certificates, the class
D pass through trustee.
Under certain circumstances, the
liquidity provider with the greater
amount owed to it may elect to act
as the controlling party, unless the
policy provider amends its insurance
policy to cover all outstanding
drawings and accrued interest on
such drawings under the liquidity
facility and certain other
conditions are met or the policy
provider pays to the liquidity
provider all outstanding drawings
and accrued interest on such
drawings under the liquidity
facility, in which case, the policy
provider will be the controlling
party (so long as no policy provider
default has occurred and is
continuing). See "Description of the
Intercreditor
Agreement--Intercreditor Rights" and
"Description of the Intercreditor
Agreement--Voting of Secured
Promissory Notes."
Right to Buy Other Classes
of Certificates..................... If ATA is in bankruptcy or another
triggering event has occurred, the
Exchange Certificateholders may have
the right to buy the more senior
classes of Exchange Certificates. See
"Description of the Exchange
Certificates--Purchase Rights of
Exchange Certificateholders." This
right to buy is based on the
following:
o the class C Exchange
Certificateholders will have the
right to purchase all the class G
Exchange Certificates;
o if any class D certificates are
issued, the class D
certificateholders will have the
right to purchase all the class G
and class C Exchange
Certificates;
o whether or not such rights are
exercised by the class C (or
class D) Exchange
Certificateholders, the policy
provider will have the right to
purchase all, but not less than
all, of the class G Exchange
Certificates.
The purchase price will be the
outstanding balance of the
applicable classes of Exchange
Certificates plus accrued and unpaid
interest, plus any other amounts
then due to the Exchange
Certificateholders of those classes.
Liquidity Facilities................ Under the liquidity facility for each
pass through trust (other than the
class D trust, if any), the liquidity
provider will, if necessary, make
advances in an aggregate amount
sufficient to pay interest on up to
six successive quarterly regular
distribution dates at the applicable
interest rate for the Exchange
Certificates of that pass through
trust. The liquidity facilities may
not be used to pay any other amount
relating to the Exchange Certificates
and will not
12
<PAGE>
cover interest on deposits held with
the depositary. The holders of the
Exchange Certificates to be issued by
each pass through trust will be
entitled to receive and keep the
proceeds of advances under the
liquidity facility for that pass
through trust. This is because the
subordination provisions will not
apply to the proceeds of advances
under the liquidity facilities.
Upon receipt of each advance under any
liquidity facility, the
subordination agent will, to the
extent of available funds, reimburse
the liquidity provider for the
amount of that advance. That
reimbursement obligation and all
interest, fees and other amounts
owing to the liquidity provider will
rank senior to all classes of
Exchange Certificates in right of
payment.
Insurance Policy Coverage........... Under the insurance policy,the policy
provider agrees to honor drawings
to cover:
o any shortfall on any regular
distribution date (other than the
final maturity date--see below)
in interest on the class G
Exchange Certificates at the
stated interest rate for the
class G Exchange Certificates;
o any shortfall on any special
distribution date between the
disposition proceeds with respect
to any series G secured
promissory note to be distributed
on that special distribution
date, if any, and the outstanding
principal amount of such secured
promissory note plus accrued
interest on that outstanding
principal amount at the stated
interest rate for the class G
Exchange Certificates from the
prior regular distribution date
to such special distribution
date;
o if no disposition proceeds with
respect to a series G secured
promissory note are received
within 24 months from the last
date on which any scheduled or
special payment was made on such
series G secured promissory note
as to which there has
subsequently been a failure to
pay principal or that has
subsequently been accelerated, an
amount equal to the then
outstanding principal amount of
such note plus accrued interest
on that amount at the stated
interest rate for the class G
Exchange Certificates from the
prior regular distribution date
to the special distribution date
established to make such payment;
and
o any shortfall on the final
maturity date in the final
distribution (other than any
unpaid premium) on the class G
Exchange Certificates.
The policy provider has the right at
the end of the 24- month period
referred to above, so long as no
policy provider default has occurred
and is continuing, to elect instead:
o to pay on the special
distribution date an amount equal
to any shortfall in the scheduled
principal (without
13
<PAGE>
regard to the acceleration of the
secured promissory note) and
interest at the stated interest
rate that came due on that secured
promissory note during the 24-
month period (after giving effect
to the application of funds
received from the class G
liquidity facility and the class
G cash collateral account and any
separate policy drawings
attributable to that interest);
o after the 24-month period, on
each regular distribution date to
permit drawings under the
insurance policy for an amount
equal to the scheduled principal
(without regard to any
acceleration of the secured
promissory note) and interest at
the stated interest rate that
were to become due on that
secured promissory note on the
related payment date until paid
in full, and
o on any business day that is a
special distribution date elected
by the policy provider upon 20
days' notice, to request, or
following either the occurrence
and continuation of a policy
provider default or the sale or
other disposition of that secured
promissory note or its underlying
collateral, on any business day
that is a special distribution
date specified by the
subordination agent upon 20 days'
notice, to permit, in each case,
the subordination agent to make a
policy drawing for an amount
equal to the then outstanding
principal balance of that secured
promissory note and accrued
interest on that secured
promissory note at the stated
interest rate to that special
distribution date, after giving
effect to any policy drawings
previously paid by the policy
provider in respect of principal
on the secured promissory note,
and any drawings paid on the
special distribution date under
the class G liquidity facility or
withdrawals made on the special
distribution date from the class
G cash collateral account
attributable to that secured
promissory note.
In addition, regardless of whether the
policy provider makes the election,
the policy provider will honor
drawings by the liquidity provider
to cover the payment to the
liquidity provider of interest
accruing on the liquidity
obligations for the class G and
class C liquidity facilities from
and after the end of the 24-month
period as and when the interest
becomes due in accordance with the
liquidity facilities.
Any shortfall to the holders of the
class G Exchange Certificates will
be calculated after the application
of available funds through the
payment priorities of the
intercreditor agreement and of funds
received from the escrow agent, the
class G liquidity facility and the
class G cash collateral account. The
insurance policy will cover only the
class G Exchange Certificates, and
the proceeds of any policy drawing,
except as noted above, will be
applied only to the outstanding
balance of, and interest on, the
class G Exchange Certificates. The
subordination agent will reimburse
the policy provider for any policy
drawings. That reimbursement
obligation ranks junior to
14
<PAGE>
further distributions on the class G
Exchange Certificates but (except in
certain limited circumstances)
senior to distributions on the class
C Exchange Certificates.
Escrowed Funds...................... Funds paid to the escrow agent by a
class of Exchange Certificateholders
will be deposited with the depositary
and held as deposits under a separate
deposit agreement for the pass
through trust that issued that class
ofcertificates. Funds may be
withdrawn by the escrow agent at the
direction of the pass through trustee
for that class of Exchange
Certificates to purchase secured
promissory notes prior to the
delivery period termination date. On
each regular distribution date, the
depositary will pay to the paying
agent interest accrued on the deposits
relating to that pass through trust
at a rate equal to the interest rate
applicable to the Exchange
Certificates issued by that pass
through trust. The paying agent, on
behalf of the escrowagent, will pay
that interest to that class of
Exchange Certificateholders. The
deposits relating to a pass through
trust and interest paid on the
deposits will not be subject to the
subordination provisions. Except as
noted in the next paragraph, the
deposits cannot be used to pay any
other amount relating to the Exchange
Certificates.
Unused Escrowed Funds............... We may not use all the deposits held in
escrow prior to the delivery period
termination date. This may happen
because of delays in the delivery of
aircraft or other reasons. If any
funds remain as deposits with respect
to any pass through trust after the
delivery period termination date,they
will be withdrawn by the escrow agent
for that pass through trust and
distributed, with accrued and unpaid
interest, to the holders of escrow
receipts relating to the respective
pass through trust. The holders of
escrow receipts will receive at least
15 days' prior written notice of this
distribution. This distribution will
also include a premium payable by ATA,
provided that no premium will be paid
on unused deposits attributable to the
failure of an aircraft to be delivered
prior to the delivery period
termination date for any reason that
was not ATA's fault or was not caused
by ATA's negligence or where unused
deposits are less than $5.0 million.
Any premium paid on unused deposits
will not be subject to the
subordination provisions. See
"Description of the Deposit
Agreements--Unused Deposits."
Obligation to Purchase
Secured Promissory Notes......... Under the note purchase agreement, the
class G and class C pass through
trustees will be obligated to
purchase the series G and series C
secured promissory notes,respectively,
issued for each aircraft.
In the case of a leased aircraft, the
terms of the financing agreements
entered into may differ from the
forms of those agreements described
in this prospectus because ATA,
Amtran or the owner participant may
request changes. However, under the
note purchase agreement, the terms
of those financing agreements must
(a) contain mandatory document terms
that are included in the note
15
<PAGE>
purchase agreement with only those
modifications as are permitted by
the note purchase agreement and (b)
not vary mandatory economic terms
that are included in the note
purchase agreement. In addition, ATA
must (a) certify to
the pass through trustees that any
modifications to the forms of the
financing agreements do not
materially and adversely affect the
Exchange Certificateholders, or
adversely affect the policy provider
and (b) obtain written confirmation
from each rating agency that the use
of versions of agreements modified
in any material respect will not
result in a withdrawal, suspension
or downgrading of the rating of any
class of Exchange Certificates,
without regard to the insurance
policy. The pass through trustees
will not be obligated to purchase
secured promissory notes if, at the
time of issuance, ATA is in
bankruptcy or certain other
specified events have occurred. The
pass through trustees will also have
no right or obligation to purchase
the secured promissory notes after
the delivery period termination
date.
Secured Promissory Notes
(a) Issuer....................... Leased Aircraft. Promissory notes
secured by aircraft leased
by ATA will be issued by an owner
trustee. These secured promissory
notes will not be recourse to the
owner trustee in its individual
capacity. ATA has an obligation to
provide funds under the related lease
and related documents in amounts
sufficient to pay scheduled
payments on those secured promissory
notes.
Owned Aircraft. ATA will be the issuer
of promissory notes secured by aircraft
that ATA owns.
(b) Interest..................... The secured promissory notes held in
each pass through trust will accrue
interest at the annual rate for the
Exchange Certificates issued by that
pass through trust shown on the cover
page of this offering prospectus.
Interest on all secured promissory
notes will be payable on January 15,
April 15, July 15 and October 15 of
each year, commencing on April 15,
2000. Interest is calculated on the
basis of a 360-day year consisting of
twelve 30-day months.
(c) Principal.................... Principal payments on the series G and
series C secured promissory notes
held in each related trust are
scheduled to begin on January 15,
2001.
(d) Redemption and Purchase...... Aircraft Event of Loss. If an aircraft
Under the related financing
agreements is lost, destroyed or
damaged beyond repair or other events
of loss occur with respect to an
aircraft, all the secured promissory
notes issued for that aircraft will
be redeemed, unless ATA replaces the
aircraft under the related financing
agreements. This redemption price will
be the unpaid principal amount of
those secured promissory notes,
together with accrued interest, but
without any premium.
Optional Redemption. The issuer of the
secured promissory notes for an
aircraft may elect to redeem the notes
prior to
16
<PAGE>
maturity. This redemption price will
be the unpaid principal amount of
those secured promissory notes,
together with accrued interest plus a
premium. See "Description of the
Secured Promissory Notes--Redemption."
Purchase by Owner. If an event of
default under a lease between ATA
and an owner trustee occurs and is
continuing, the applicable owner
trustee or owner participant of an
aircraft may elect to purchase all
the secured promissory notes with
respect to that aircraft, subject to
the terms of the relevant leased
aircraft indenture. The purchase
price will be the unpaid principal
amount of those secured promissory
notes, together with accrued
interest, but without any premium
except under certain circumstances
specified in the relevant leased
aircraft indenture. In the case of
an owned aircraft, ATA will have no
comparable right to purchase the
secured promissory notes.
(e) Security..................... The secured promissory notes issued for
each aircraft will be secured by a
security interest in that aircraft
and, in the case of each leased
aircraft, in the related owner
trustee's rights under the lease for
that aircraft, subject to limited
exceptions. The secured promissory
notes are not cross-collateralized.
This means that the secured promissory
notes issued for an aircraft will not
be secured by any other aircraft or
lease. Any proceeds from the sale of
an aircraft or from the exercise of
other default remedies for an
aircraft will not be available to
cover shortfalls with respect to any
other aircraft. The secured
promissory notes are cross-
subordinated under the intercreditor
agreement. This means that payments
received on a junior class of secured
promissory notes issued for one
aircraft may be applied to make
payments relating to a more senior
class of Exchange Certificates. There
are no cross-default provisions in
the indentures or in the leases unless
otherwise agreed to between an owner
participant and ATA. This means that
if the secured promissory notes
issued for one aircraft are in
default and the secured promissory
notes issued for the remaining
aircraft are not in default, no
remedies will be exercisable with
respect to the remaining aircraft.
Although the secured promissory notes
issued in respect of the leased
aircraft are not obligations of, or
guaranteed by, ATA or Amtran, the
amounts payable by ATA (and
guaranteed by Amtran)under the lease
will be sufficient to pay when due all
amounts payable on the secured
promissory notes. The secured
promissory notes issued in respect of
the owned aircraft will be direct
obligations of ATA, and will be
unconditionally guaranteed by Amtran.
(f) Section 1110 Protection...... Our outside counsel will provide its
opinion to the pass through trustees
and the policy provider that the loan
trustee will be entitled to the
benefits of Section 1110 of the U.S.
Bankruptcy Code with respect to the
relevant aircraft. See "Description
of the Secured Promissory Notes--
Remedies."
17
<PAGE>
U.S. Income Tax Matters............. The arrangement represented by the pass
through trusts will be classified as
one or more grantor trusts (or as a
partnership) for U.S. federal income
tax purposes. The pass through
trusts will take the position that
they will be treated as one or more
grantor trusts. Under this approach,
each U.S. person acquiring an
interest in the Exchange
Certificates will be treated as the
owner of a pro rata undivided
interest in the assets of the pass
through trust allocable to such
Exchange Certificates and will be
required to report on its federal
income tax return its pro rata share
of the entire income from the
relevant deposits and its pro rata
share of the entire income from the
secured promissory notes and other
property held by the relevant pass
through trust. See "U.S. Federal
Income Tax Consequences."
ERISA Considerations................ In general, employee benefit plans
subject to Title I of ERISA or
Section 4975 of the U.S. tax code, or
entities that may be deemed to hold
the assets of those plans, will be
eligible to purchase the Exchange
Certificates, subject to the
conditions and circumstances that
apply to those plans. Each person who
acquires an Exchange Certificate
will be deemed to have represented
and warranted that either: (a) no
employee benefit plan assets have
been used to purchase that
certificate or (b) the purchase and
holding of that Exchange Certificate
are exempt from the prohibited
transaction restrictions of ERISA and
Section 4975 of the U.S. tax code
pursuant to one or more prohibited
transaction statutory or
administrative exemptions. See
"ERISA Considerations."
Exchange Offer; Registration
Rights........................... Pursuant to a registration rights
agreement between ATA and each pass
through trustee and the initial
purchasers of the Outstanding
Certificates, we are obligated to:
o file with the SEC a registration
statement with respect to an
offer to exchange the Outstanding
Certificates for Exchange
Certificates of the pass through
trusts having substantially
identical terms as the
Outstanding Certificates (except
that the Exchange Certificates
will not have transfer
restrictions) within 90 days
after the date of the original
issuance of the Outstanding
Certificates; and
o use our reasonable best efforts
to cause such registration
statement to become effective
under the Securities Act of 1933
within 180 days after the date of
the issuance of the Outstanding
Certificates.
Under certain circumstances, we have
also agreed to file a shelf
registration statement with respect
to the resale of the Outstanding
Certificates and use our reasonable
best efforts to keep such shelf
registration statement effective
until two years after the date of
issuance of the Outstanding
Certificates.
18
<PAGE>
The interest rate on the secured
promissory notes is subject to
increase under certain circumstances
if we do not comply with our
obligations under the registration
rights agreement. Upon the completion
of the exchange offer, we will have
no further obligations to register
the Outstanding Certificates or the
Exchange Certificates. See "Exchange
Offer; Registration Rights."
USE OF PROCEEDS
There will be no proceeds from the Exchange Certificates. The proceeds
from the sale of the original certificates were deposited with the
depositary on behalf of the applicable escrow agent for the benefit of the
certificateholders of the pass through trusts. Upon the request of the pass
through trustees, the escrow agent has and will withdraw the deposits and
deliver the proceeds to the pass through trustees to purchase one or more
secured promissory notes.
If an owner trustee issues the secured promissory notes, the owner
trustee will use the proceeds of the sale of the secured promissory notes
to finance or refinance a portion of the purchase price of an aircraft.
Upon the purchase of an aircraft by an owner trustee, the aircraft will be
leased by the owner trustee to ATA. ATA presently intends to operate the
aircraft, however, it is permitted to sublease the aircraft to other
carriers.
If ATA issues the secured promissory notes, ATA will use the proceeds
from the sale of the secured promissory notes to finance or refinance the
purchase of aircraft that ATA will own.
RISK FACTORS
For a description of certain factors that should be considered by
holders who tender their Outstanding Certificates in the exchange offer,
see "Risk Factors" beginning on page 22.
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
In the table below, we provide you with the summary historical
financial data and other operating information of Amtran, Inc. We have
prepared the selected financial data included in this information using the
consolidated financial statements of Amtran, Inc. for the five years ended
December 31, 1999. The financial statements for the five fiscal years ended
December 31, 1999 have been audited by Ernst & Young LLP, independent
auditors. The summary consolidated financial data for the three months
ended March 31, 2000 and 1999 is derived from our unaudited consolidated
financial statements. The unaudited consolidated financial statements
include all adjustments, consisting of normal recurring accruals, that we
consider necessary for the fair presentation of our financial position and
results of operations for these periods.
When you read this summary historical financial data, it is important
that you read along with it the historical financial statements and related
notes in our annual reports filed with the SEC, as well as the section of our
annual reports titled "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
Year Ended December 31, Three Months 31,
------------------------------------ Ended March 31, 31,
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ----- -----
(Dollars in thousands, except ratios and per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Operating revenues................. $715,009 $750,851 $783,193 $919,369 $1,122,366 $277,909 $321,366
Depreciation and amortization...... 55,827 61,661 62,468 78,665 96,038 21,658 31,572
Operating income (loss)(1)......... 17,936 (36,056) 13,484 75,373 90,027 28,959 2,564
Interest expense................... 4,163 4,465 9,454 12,808 20,966 5,074 7,660
Income (loss) before income taxes.. 14,653 (39,581) 6,027 67,210 77,797 27,443 (3,071)
Net income (loss).................. 8,524 (26,674) 1,572 40,081 47,342 16,540 (1,954)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Three Months 31,
Year Ended December 31, Ended March 31, 31,
---------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ----- -----
(Dollars in thousands, except ratios and per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss) per share--basic(2) 0.74 (2.31) 0.14 3.41 3.86 1.36 (0.16)
Net income (loss) per share--diluted(2) 0.74 (2.31) 0.13 3.07 3.51 1.22 (0.16)
Balance Sheet Data (at end of period):
Cash............................... $ 92,741 $ 73,382 $104,196 $172,936 $ 120,164 $124,759 $125,205
Non-cash working capital
(deficiency)(3).................... (80,639) (65,472) (100,731) (112,276) (128,191 (135,148) (146,887)
Property and equipment, net........ 240,768 224,540 267,681 329,332 511,832 407,341 524,902
Total assets....................... 413,137 370,287 450,857 594,549 815,281 658,188 841,975
Short-term debt (including current
maturities)........................ 3,606 30,271 8,975 1,476 2,079 1,476 3,791
Long-term debt..................... 134,641 119,786 182,829 245,195 345,792 245,076 355,163
Total debt......................... 138,247 150,057 191,804 246,671 347,871 246,552 358,954
Shareholders' equity(4)............ 81,185 54,744 56,990 102,751 151,376 119,734 145,881
Other Financial Data:
EBITDAR(5)......................... $130,381 $ 91,972 $132,390 $211,811 $ 253,454 $ 69,419 $ 52,247
EBITDA(5).......................... 74,643 26,545 77,949 158,683 194,801 54,175 36,161
Net cash provided by operating
activities 87,078 32,171 99,936 151,812 159,563 68,470 47,763
Net cash used in investing activities (44,032) (63,161) 76,055) (142,352) (305,718) (116,944) (50,241)
Net cash provided by (used in) 11,631
financing activities................ (12,057) 6,933 59,280 93,383 297 7,519
Ratio of earnings to fixed charges(6) 1.60 -- 1.19 3.03 2.65 3.38 --
Deficiency of earnings available to
cover fixed charges(6)............. -- $ 40,931 -- -- -- -- $ 3,908
</TABLE>
<TABLE>
<CAPTION>
Three Months 31,
Year Ended December 31, Ended March 31, 31,
----------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ------ -----
(Dollars in thousands, except ratios and per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operating
Data for Passenger
Service(7)
Available seat
miles (millions)(8).... 12,521.4 13,295.5 12,647.7 13,851.7 15,082.6 3,723.0 4,018.5
Revenue passenger
miles (millions)(9).... 8,907.7 9,172.4 8,986.0 9,758.1 10,949.0 2,687.0 2,871.2
Passenger load
factor(10)............. 71.1% 69.0% 71.0% 70.5% 72.6% 72.2% 71.5%
Revenue per
available seat mile.... 5.71(ct) 5.65(ct) 6.19(ct) 6.64(ct) 7.44(ct) 7.46(ct) 8.00(ct)
Operating expense
per ASM(11)............ 5.56(ct) 5.92(ct) 6.09(ct) 6.09(ct) 6.84(ct) 6.69(ct) 7.93(ct)
Block hours
flown(12).............. 126,295 138,114 139,426 160,403 175,460 43,168 46,624
Average daily aircraft
utilization
(block hours per day)(13):
Lockheed L-1011-50/100...... 8.88 6.55 6.48 6.72 6.51 6.93 6.89
Lockheed L-1011-500......... -- -- -- -- 6.47 8.88 6.81
Boeing 727-200 ADV.......... 9.28 7.62 7.94 9.02 8.95 9.11 8.77
Boeing 757-200..............11.71 11.06 10.86 11.88 11.86 12.30 11.73
Total aircraft................46 45 45 48 53 48 54
</TABLE>
(1) Amtran has reclassified gain (loss) on the sale of operating assets
for 1995 from nonoperating gain (loss) to operating income (loss) to
be consistent with the 1996-2000 presentations. Also, in the third
quarter of 1996, Amtran recorded a $4.7 million loss on the disposal
of leased assets associated with the reconfiguration of its fleet.
(2) In 1997, Amtran adopted Financial Accounting Standards Board
Statement 128, "Earnings per Share," which established new standards
for the calculation and disclosure of earnings per share. All prior
period amounts disclosed in this five-year summary have been restated
to conform to the new standards under Statement 128.
(3) Non-cash working capital consists of total current assets (excluding
cash) less total current liabilities (excluding current maturities of
long term debt).
(4) No dividends were paid in any of the periods presented.
(5) EBITDAR represents net income plus interest expense (net of
capitalized interest), income tax expense, depreciation, amortization
and aircraft rentals. EBITDA represents net income plus interest
expense (net of capitalized interest), income tax expense,
depreciation and amortization. EBITDAR and EBITDA are presented
because each is a widely accepted financial indicator of a company's
ability to incur and service debt. However, EBITDAR and EBITDA should
not be considered in isolation, as a substitute for net income or
cash flow data prepared in accordance with generally accepted
accounting principles or as a measure of a company's profitability or
liquidity.
(6) The "ratio of earnings to fixed charges" represents earnings divided
by fixed charges, as defined in the following paragraph. The
"deficiency" represents the amount of fixed charges in excess of
earnings.
20
<PAGE>
For purposes of these computations, earnings consist of income
(loss) before income taxes, plus fixed charges, adjusted to
exclude the amount of any interest capitalized during the period.
Fixed charges include the total of: (i) interest, whether
expensed or capitalized; (ii) amortization of debt expense
relating to any indebtedness, whether expensed or capitalized;
and (iii) such portion of rental expense as can be demonstrated
to be representative of the interest factor.
(7) The operating data (other than revenue per ASM and operating expense
per ASM) pertain only to ATA (including operations under the Chicago
Express code share agreement) and do not include information for
other operating subsidiaries of Amtran.
(8) "Available seat miles" or "ASMs" represent the number of seats
available for sale to passengers multiplied by the number of miles
those seats are flown.
(9) "Revenue passenger miles" or "RPMs" represent the number of miles
flown by revenue passengers.
(10) "Passenger load factor" represents revenue passenger miles divided by
available seat miles.
(11) "Operating expense per ASM" for any period represents the amount
determined by dividing total operating expense for such period by the
total ASMs for such period.
(12) "Block hours flown" for any aircraft represents the elapsed time
computed from the moment the aircraft first moves under its own power
from the boarding ramp at one airport to the time it comes to rest at
the boarding ramp of the next point of landing.
(13) "Average daily aircraft utilization" is determined with respect to
each aircraft type for any period by dividing the block hours flown
by all aircraft of such type during such period by the number of days
during such period that aircraft of such type were owned or leased by
ATA.
(14) The following summarized financial data (unaudited) in this table has
been derived from the financial statements of ATA for each of the
respective periods presented. ATA is the principal subsidiary of
Amtran. The following financial data excludes the other subsidiaries
of Amtran (Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber
Travel, Inc., American Trans Air Execujet, Inc., Amber Air Freight
Corporation and American Trans Air Training Academy, Inc.) as ATA is
the principal operating subsidiary of Amtran. Amtran allocates certain
expenses, such as income taxes, to the various subsidiaries
as if they were operating on a stand alone basis.
<TABLE>
<CAPTION>
Three Months ,
Year Ended December 31, Ended March 31,
----------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ------ -----
(Dollars in thousands)
Statement of Operations Data: (14)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................. $682,106 $712,915 $744,153 $877,187 $1,008,855 $248,619 $286,206
Depreciation and amortization...... 55,056 61,267 62,281 78,595 93,820 21,488 30,079
Operating income (loss)(a)......... 14,819 (40,674) 10,325 80,920 97,558 29,020 3,839
Interest expense, net.............. 3,773 4,466 9,454 12,808 20,969 5,080 7,665
Income (loss) before income taxes.. 11,389 (44,416) 2,627 72,528 84,989 27,355 (1,916)
Net income (loss).................. 6,006 (31,509) 69 43,329 51,951 16,451 (799)
</TABLE>
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
------ ------ ------ ------ ------ ------ -----
(Dollars in thousands)
Balance Sheet Data (at end of period):
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital (deficiency)(b).... $(49,710) $(86,207) $(51,939) $ 10,768 $(32,049) $(49,252) $(35,388)
Property and equipment, net........ 239,864 224,232 267,556 328,661 508,210 405,770 512,519
Total assets....................... 409,354 369,086 466,923 593,489 823,090 643,478 882,596
Short-term debt (including
current maturities).......... 3,606 30,271 8,975 1,476 2,079 1,476 3,791
Long-term debt..................... 134,641 119,786 182,829 245,195 345,792 245,076 355,163
Total debt......................... 138,247 150,057 191,804 246,671 347,871 246,552 358,954
Shareholders' equity(c)............ 30,372 (9,934) 6,762 50,091 102,039 66,542 101,240
</TABLE>
(a) ATA has reclassified gain (loss) on the sale of operating assets for
1995 from nonoperating gain (loss) to operating income (loss) to be
consistent with the 1996-2000 presentations. Also, in the third
quarter of 1996, ATA recorded a $4.7 million loss on the disposal of
leased assets associated with the reconfiguration of its fleet.
(b) Working capital consists of total current assets less current
liabilities.
(c) No dividends were paid in any of the periods presented.
21
<PAGE>
RISK FACTORS
You should carefully read this entire prospectus and the documents
incorporated by reference in this prospectus before investing in the
certificates. Among the factors that may adversely affect an investment in
the certificates are the following:
Risk Factors Relating to the Company
Our high proportion of debt compared to our equity capital may impair our
flexibility.
We have a higher proportion of debt compared to our equity capital
than some of our principal competitors. We need substantial cash resources
to meet scheduled debt and lease payments and to finance day-to-day
operations. As a result, we may be less able than some of our competitors
to withstand a prolonged recession in the airline industry or respond to
changing economic and competitive conditions. We may be restricted in our
ability to exploit new business opportunities. In addition, our ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions or other purposes may be impaired.
As of March 31, 2000, we had:
o $125.2 million of cash, cash equivalents and short-term investments;
and
o $359.0 million of indebtedness outstanding (approximately $52.2
million of which was secured).
As a result, at that date, total consolidated debt was 71.1% of total
capitalization, which represents significant financial leverage, even in
the highly leveraged airline industry. In addition, ATA has substantial
obligations under operating leases for 26 aircraft (exclusive of the
aircraft relating to the certificates), which are not recorded as
indebtedness.
We had interest expense of approximately $7.7 million for the three
months ended March 31, 2000 and $5.1 million for the three months ended
March 31, 1999. This resulted in an EBITDA to interest expense ratio of
approximately 10.7 times for the three months ended March 31, 1999 and 4.7
times for the three months ended March 31, 2000. The ratio of EBITDAR to
the sum of interest (net of capitalized interest) plus aircraft rentals was
3.4 for the three months ended March 31, 1999 and 2.2 for the three months
ended March 31, 2000.
Our ability to satisfy our obligations will be dependent upon our
future performance, which is subject to general economic conditions and to
financial, business and other factors, including factors beyond our
control. Our operating results and cash flow could be adversely affected by
many factors, including price competition, increases in fuel costs, a
downturn in general economic conditions and adverse regulatory changes.
We generally operate with a working capital deficit, and we will require
additional financing to meet our obligations.
Although we, like most other airlines, generally operate with a
working capital deficit, we have met our obligations as they have become
due. In order to meet short-term cash needs, ATA maintains bank credit
facilities. At March 31, 2000, our current assets were $238.7 million, and
our current liabilities were $264.2 million.
In addition, we require significant levels of capital investment for
aircraft, engine and airframe maintenance and acquisition to maintain our
competitive position and to expand our operations. For the year ended
December 31, 2000, we expect that:
o capital expenditures for scheduled maintenance will total approximately
$111.6 million;
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<PAGE>
o capital expenditures for acquisitions of additional aircraft,
deposits on aircraft scheduled for future delivery and construction
of certain facilities at the Chicago-Midway Airport will total
approximately $108.4 million; and
o additional capital expenditures will total approximately $40.3
million.
We also may decide to refinance our long-term debt at or prior to its
maturity.
We may seek to supplement our current sources of financing with other
sources of long-term financing, including obtaining vendor financing,
entering into sale-leaseback transactions and making public and private
debt offerings. We may also seek additional equity financing. We cannot
assure you that any such financing would be available on satisfactory
terms. If we are unable to obtain sufficient financing for capital
expenditures and to refinance maturing debt, our operations and ability to
pay debt service may be adversely affected.
Our earnings have been volatile.
For the year ended December 31, 1996, we had a net loss of $26.7
million. For the year ended December 31, 1997, we had net income of $1.6
million, for the year ended December 31, 1998, we had net income of $40.1
million and for the year ended December 31, 1999, we had net income of
$47.3 million. Although we recorded net income in 1997, 1998 and 1999, we
cannot assure you that this profitability will continue. Moreover, because
of the cyclicality of the airline industry, our results of operations may
continue to be volatile.
We may pursue strategic alternatives that result in a change of control and
increased leverage, and we may not be able to satisfy all of our obligations
upon the occurrence of a change of control.
We actively consider and enter into discussions regarding possible
business combinations with air carriers and others, and plan to continue to
do so. It is possible that we will enter into a transaction that will
result in a change of control of Amtran. If we enter into such a
transaction, it could result in an increase in our indebtedness. In
addition, upon a change of control of Amtran, all borrowings outstanding
under the bank credit facilities maintained by ATA, which are guaranteed by
Amtran, will become due, and in the event a change of control is
accompanied by a ratings downgrade, we will be required to offer to
purchase all amounts due under the 10 1/2% senior notes due 2004 and the 9
5/8% senior notes due 2005 issued by Amtran at 101% of par plus accrued
interest. We cannot assure you that we would be able to satisfy all of our
obligations under the bank credit facilities and the notes in these
circumstances. The failure to satisfy our obligations would materially
adversely affect our business, operations and financial results as well as
the market price of the certificates.
Our existing financing agreements and operating leases contain restrictive
covenants that may limit our flexibility and if we fail to comply with these
restrictions, our debt obligations could be accelerated and our operating
leases could be canceled.
Our existing debt financing agreements and our operating leases
relating to some of our aircraft contain restrictive covenants that impose
significant operating and financial restrictions on us. For example, the
bank credit facilities maintained by ATA and the indenture relating to our
10 1/2% senior notes due 2004 prohibit or restrict our ability to:
o incur additional indebtedness;
o create material liens on our assets;
o sell assets or engage in mergers or consolidations;
o redeem or repurchase outstanding debt;
23
<PAGE>
o make specified investments;
o pay cash dividends; and
o engage in other significant transactions.
The indenture relating to our 9 5/8% senior notes due 2005 contains similar
restrictions. In addition, our financing agreements and our operating leases
require us to maintain compliance with specified financial ratios and other
financial and operating tests.
These restrictions and requirements may limit our financial and
operating flexibility. In addition, if we fail to comply with these
restrictions or to satisfy these requirements, our obligations under our
debt and operating leases may be accelerated. We cannot assure you that we
would be able to satisfy all of these obligations upon acceleration. The
failure to satisfy these obligations would materially adversely affect our
business, operations and financial results as well as the market price of
the certificates.
Compliance with Department of Transportation regulations could reduce our
liquidity.
Under current Department of Transportation regulations regarding
charter transportation originating in the United States, all charter
airline tickets must generally be paid for in cash and all funds received
from the sale of charter seats and, in some cases, the costs of land
arrangements, must be placed in escrow by the tour operator or protected by
a surety bond satisfying certain prescribed standards. Currently, we
provide a third-party bond that is unlimited in amount to satisfy our
obligations under these regulations. Under the terms of our bonding
arrangements, the issuer of the bond has the right to terminate the bond at
any time on 30 days' notice. We provide a $1.5 million letter of credit to
secure our potential obligations to the issuer of the bond. If the bond
were to be materially limited or canceled, we, like all other U.S. charter
airlines, would be required to escrow funds to comply with the Department
of Transportation regulations. Compliance with these regulations would
reduce our liquidity and require us to fund higher levels of working
capital ranging up to $16.9 million based on 1998' s peak pre-paid bookings
and up to $32.4 million based on peak pre-paid bookings for 1999.
We may incur substantial losses in the event of an aircraft accident.
We may incur substantial losses in the event of an aircraft accident.
These losses may include the repair or replacement of a damaged aircraft,
and the consequent temporary or permanent loss of the aircraft from
service, as well as claims of injured passengers and other persons.
We are required by the Department of Transportation to carry liability
insurance on each of our aircraft. We currently maintain public liability
insurance in the amount of $1.5 billion. Although we believe our insurance
coverage is adequate, we cannot assure you that the amount of our insurance
coverage will not be changed or that we will not be forced to bear
substantial losses from accidents. Substantial claims resulting from an
accident could have a material adverse effect on our business, operations
and financial results and could seriously inhibit passenger acceptance of
our services.
Our customers may cancel or default on their contracts with us.
Customers who have contracted with us may cancel or default on their
contracts, and we may not be able to obtain other business to cover the
resulting loss in revenues. If customers with large contracts cancel or
default and we are not able to obtain other business, our financial
position could be materially adversely impacted.
Our largest customer during each of the last three years was the U.S.
military, which accounted for 11.2% of our total operating revenues in
1996, 16.8% of our total operating
24
<PAGE>
revenues in 1997, 13.3% of our total operating revenues in 1998 and 11.2%
of operating revenues in 1999.
In 1999, our five largest non-military customers accounted for
approximately 12.5% of total operating revenues, and our ten largest
non-military customers accounted for approximately 14.7% of total operating
revenues. No single non-military customer accounted for more than 10% of
total operating revenues during this period.
Our airline business is significantly affected by seasonal factors, and our
results of operations for any one quarter are not necessarily indicative of
our annual results of operations.
Our airline businesses are significantly affected by seasonal factors.
Historically, we have experienced reduced demand during the fourth quarter
as demand for leisure airline services during this period is lower relative
to other times of the year. Our results of operations for any one quarter
are not necessarily indicative of our annual results of operations.
In 1998 and 1999, our results for the first three quarters were
significantly stronger than we have experienced in any comparable first
three quarters of any prior year. Also in 1998 and 1999, we experienced our
only profitable fourth quarters since becoming a public company in 1993. We
cannot assure you that the level of profitability achieved in 1998 and 1999
will be maintained in subsequent years.
Many of our employees are represented by unions, and a prolonged dispute with
our employees could have an adverse impact on our operations.
Our flight attendants are represented by the Association of Flight
Attendants, our cockpit crews are represented by the Air Line Pilots
Association and our dispatchers are represented by the Transport Workers
Union. A prolonged dispute with our employees who are represented by either
of these unions, or any sizable number of our employees, could have an
adverse impact on our operations.
Our current collective bargaining agreement with the Association of
Flight Attendants became subject to amendment, but did not expire, in
December 1998. During the first quarter of 2000, we completed renegotiation
of this contract, and the new contract was ratified. Our current collective
bargaining agreement with the Air Line Pilots Association will be subject
to amendment, but will not expire, in September 2000.
Our revenues could be adversely impacted by our relationship with travel
agents and tour operators.
Our revenues could be adversely impacted if travel agents and tour
operators elect to favor other airlines or to disfavor us. Our relationship
with travel agents and tour operators may be affected by:
o the size of override commissions offered by other airlines;
o changes in our arrangements with other distributors of airline tickets;
and
o the introduction of new methods of selling tickets.
In 1999, approximately 65% of our revenues were derived from tickets
sold by travel agents or tour operators, and, in 1998, approximately 68% of
our revenues were derived from tickets sold by travel agents or tour
operators. Although we will continue to strive to offer competitive
products to travel agencies and tour operators, we cannot assure you that
we will be able to maintain favorable relationships with these ticket
sellers.
25
<PAGE>
Risk Factors Relating to the Airline Industry
Because the airline industry is characterized by low gross profit margins and
high fixed costs, a minor shortfall from expected revenue could have a
significant impact on earnings.
The airline industry as a whole and scheduled service in particular
are characterized by low gross profit margins and high fixed costs. The
costs of operating each flight do not vary significantly with the number of
passengers carried and, therefore, a relatively small change in the number
of passengers or in fare pricing or traffic mix could, in the aggregate,
have a significant effect on operating and financial results. Accordingly,
a minor shortfall from expected revenue levels could have a significant
impact on earnings.
Our products and services face varying degrees of competition.
Competition for Scheduled Services. In scheduled service, we compete
against both the large U.S. scheduled service airlines and, from time to
time, against smaller regional or start-up airlines. Competition is
generally based on price, schedule, quality of service and convenience. All
of the major U.S. scheduled airlines are larger than we are, and most of
them have greater financial resources than we do. Where we seek to expand
our service by adding routes or frequency, competing airlines may respond
with intense price competition. In addition, when other airlines seek to
establish a presence over new routes, they may engage in significant price
discounting. Because of our size and financial resources relative to the
major airlines, we are less able to absorb losses from these activities
than many of our competitors.
Competition for Commercial Charter Services. In commercial charter
service, we compete against both the major U.S. scheduled airlines and
smaller U.S. charter airlines, including Sun Country and Miami Air. We also
compete against several European and Mexican charter and scheduled
airlines, some of which are larger than we are and have substantially
greater financial resources than we do.
The scheduled carriers compete for leisure travel customers with our
commercial charter operations in a variety of ways, including by:
o wholesaling discounted seats on scheduled flights to tour operators;
o promoting packaged tours to travel agents for sale to retail customers;
and
o selling discounted, excursion airfare-only products to the public.
As a result, all charter airlines, including ATA, generally compete for
customers against the lowest revenue-generating seats of the scheduled
airlines. During periods of dramatic fare cuts by other scheduled airlines, we
are forced to respond competitively to these deeply discounted prices.
We also compete directly against other charter airlines. In the United
States, these charter airlines are smaller in size than we are. In Europe,
several charter airlines are as large or larger than we are. Some of these
European charter airlines are affiliates of major scheduled airlines or
tour operators. As a result, in addition to their greater access to
financial resources, these charter airlines may have greater distribution
capabilities, including, in some cases, exclusive or preferential
relationships with affiliated tour operators.
Competition for Military and Other Government Charter Services. We
generally compete for military and other government charters with primarily
smaller U.S. passenger airlines. The allocation of U.S. military air
transportation contracts is based upon the number and type of aircraft a
carrier, alone or through a teaming arrangement, makes available for use to
the military. The formation of competing teaming arrangements that have
larger partners than those in which we participate, an increase by other
air carriers in their commitment of aircraft to the military or the
withdrawal of our current partners could adversely affect our U.S. military
charter business.
26
<PAGE>
Significant increases in the cost of aircraft fuel could adversely impact our
operating results.
Fuel costs are a significant portion of our operating costs,comprising
approximately 16.3% of our operating costs in 1998 and approximately 16.6% of
our operating costs in 1999. In 1999 our monthly average fuel cost rose
approximately 12.0% as compared to 1998, resulting in an increase of $18.0
million between years. In the first quarter of 2000, fuel costs continued to
adversely impact our operating results. For the three months ended March 31,
2000, our monthly average fuel cost rose approximately 76.9% as compared to the
same period in 1999, resulting in an increase in fuel and oil expense of
approximately $27.5 million between quarters. Increased fuel costs may also
adversely impact our operating results in future periods. Fuel costs may
significantly affect our scheduled service and our charter contracts that do
not contain fuel cost escalation provisions. In addition, substantial increases
in fuel costs and any resulting increase in air fares could cause a reduction
in leisure travel or the cancellation or renegotiation of previously booked
commitments from tour operators.
Fuel prices are affected by, among other factors, political and
economic influences that we cannot control. In the event of a fuel supply
shortage resulting from a disruption of oil imports or other events, higher
fuel prices or the curtailment of scheduled service could result.
We have worked to reduce some of the risks associated with a rise in
fuel costs. In 1998, approximately 45.0% of our total operating revenues
were derived from contracts that enable us to pass through increases in
fuel costs, including contracts with the U.S. military. In 1999,
approximately 41.1% of our total operating revenues were derived from these
types of contracts, and in the first three months of 2000, approximately
41.6% of our total operating revenues were derived from these types of
contracts.. We are, however, exposed to increases in fuel costs that occur
within 14 days of flight time, to all increases associated with our
scheduled service (other than bulk seat sales) and to increases affecting
contracts that do not include fuel cost escalation provisions.
The profitability of our operations is influenced by economic conditions as
demand for leisure travel diminishes during economic downturns.
The profitability of our operations is influenced by the condition of
the U.S. and European economies, including fluctuations in currency
exchange rates, that may impact the demand for leisure travel and our
competitive pricing position. The majority of our charter and scheduled
airline business, other than military, is leisure travel. Because leisure
travel is discretionary, we have historically tended to experience somewhat
weaker financial results during economic downturns and other events
affecting international leisure travel, such as the Persian Gulf War.
Nevertheless, our performance during these periods has been significantly
better than that of the U.S. passenger airline industry as a whole.
The airline industry is heavily regulated, and changes in our governmental
authorizations or certificates, or changes in governmental regulations, could
adversely impact our business.
We are subject to a wide range of governmental regulation, including
regulation by the Department of Transportation and the Federal Aviation
Administration. A modification, suspension or revocation of any of our
Department of Transportation or Federal Aviation Administration authorizations
or certificates could adversely impact our business.
The Department of Transportation principally regulates economic
matters affecting air service, including:
o air carrier certification and fitness;
o insurance;
o leasing arrangements; allocation of route rights and authorization of
proposed scheduled and charter operations;
27
<PAGE>
o allocation of landing slots and departure slots;
o consumer protection; and
o competitive practices.
The Federal Aviation Administration primarily regulates flight operations,
especially matters affecting air safety, including airworthiness requirements
for each type of aircraft and pilot and crew certification.
Under the Airport Noise and Capacity Act of 1990 and related Federal
Aviation Administration regulations, our aircraft must comply with
specified Stage 3 noise restrictions. These regulations prohibit us from
operating any Stage 2 aircraft after December 31, 1999. We met the December
31, 1999 Stage 3 fleet requirements through Boeing 727-200 hushkit
modifications. We believe we are in compliance with all requirements
necessary to maintain in good standing our operating authority granted by
the Department of Transportation and our air carrier operating certificate
issued by the Federal Aviation Administration.
The Federal Aviation Administration has issued a series of
airworthiness directives under its aging aircraft program. These directives
are applicable to our Lockheed L-1011 and Boeing 727- 200 aircraft. We do
not currently expect that the cost of compliance with these directives will
be material.
Changes in governmental regulation could also adversely impact our
business. In recent years, for example, the Federal Aviation Administration
has issued or proposed mandates relating to, among other things:
o collision avoidance systems;
o airborne windshear avoidance systems;
o noise abatement; and
o increased inspections and maintenance procedures.
We expect to incur expenses as we seek to comply with changes in
Federal Aviation Administration regulations, particularly those relating to
noise and aging aircrafts. The Federal Aviation Administration requires
each carrier to obtain an operating certificate and operations
specifications authorizing the carrier to fly to specific airports using
specified equipment. Several aspects of airline operations are subject to
regulation or oversight by federal agencies other than the Department of
Transportation and the Federal Aviation Administration. For example, the
United States Postal Service has jurisdiction over certain aspects of the
transportation of mail and related services that we provide through our
cargo affiliate. Labor relations in the air transportation industry are
generally regulated under the Railway Labor Act, which vests in the
National Mediation Board regulatory powers with respect to disputes between
airlines and labor unions arising under collective bargaining agreements.
We are also subject to the jurisdiction of the Federal Communications
Commission regarding the use of radio facilities. In addition, we are
subject to regulation on international flights by the Commerce Department,
the Customs Service, the Immigration and Naturalization Service and the
Animal and Plant Health Inspection Service of the Department of
Agriculture. Also, while our aircraft are in foreign countries, we must
comply with the requirements of similar authorities in those countries. We
are also subject to compliance with standards for aircraft exhaust
emissions promulgated by the Environmental Protection Agency and with
regulations adopted by various local authorities that operate the airports
we serve throughout our route network, including aircraft noise regulations
and curfews. The Commerce Department also regulates the export and
re-export of our U.S.-manufactured aircraft and equipment. While we intend
to maintain all
28
<PAGE>
appropriate government licenses and to comply with all appropriate standards,
we cannot assure you that we will be successful.
In addition to various federal regulations, local governments and
authorities in certain markets have adopted regulations governing various
aspects of aircraft operations, including noise abatement, curfews and use
of airport facilities. Many U.S. airports have adopted or are considering
adopting a passenger facility charge of up to $3.00 generally payable by
each passenger departing from the airport. This charge must be collected
from passengers by transporting air carriers and must be remitted to the
applicable airport authority. Airport operators must obtain approval of the
Federal Aviation Administration before they may implement a passenger
facility charge. The $3.00 maximum on passenger facility charges must be
raised if Congress enacts an amendment to the legislation authorizing these
charges.
We are subject to biennial inspections by the Department of Defense as
a condition of retaining our eligibility to perform military charter
flights. The last such inspection was completed in September 1999. As a
result of our military business, we have been required from time to time to
meet operational standards beyond those normally required by the Department
of Transportation, the Federal Aviation Administration and other government
agencies.
At our aircraft line maintenance facilities, we use materials that are
regulated as hazardous under federal, state and local laws. We are required
to maintain programs to protect the safety of our employees who use these
materials and to manage and dispose of any waste generated by the use of
these materials in compliance with these laws. More generally, we are also
subject at these facilities to federal, state and local regulations
relating to protection of the environment and to discharge of materials
into the environment. We do not expect that the costs associated with
ongoing compliance with any of these regulations will have a material
impact upon our capital expenditures, earnings or competitive position.
Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by, for
instance, imposing additional requirements or restrictions on operations.
In addition, laws and regulations have been considered from time to time
that would prohibit or restrict the ownership and/or transfer of airline
routes or takeoff and landing slots.
Based upon bilateral aviation agreements between the United States and
other nations, and, in the absence of such agreements, comity and
reciprocity principles, we, as a charter carrier, are generally not
restricted as to the frequency of our flights to and from most foreign
destinations. However, these agreements generally restrict us to the
carriage of passengers and cargo on flights which either originate in the
United States and terminate in a single foreign nation or which originate
in a single foreign nation and terminate in the United States. Proposals
for any additional charter service must generally be specifically approved
by the civil aeronautics authorities in the relevant countries. Approval of
these requests is typically based on considerations of comity and
reciprocity and cannot be guaranteed.
Risk Factors Relating to the Certificates
The appraisals of the aircraft are only estimates of value, and they may
differ significantly from the actual sales value of the aircraft.
Three independent appraisal and consulting firms have prepared base
value appraisals of the aircraft. Letters summarizing these appraisals are
attached to this prospectus as Appendix II. These appraisals, which are
based on the base value of the aircraft, rely on assumptions and
methodologies and may not reflect current market conditions that could
affect the fair market value of the aircraft. Base value is the theoretical
value for an aircraft that assumes a balanced market, while current market
value is the value for an aircraft in the actual market. The appraisals
were prepared without physical inspection of the aircraft. Appraisals based
on other assumptions and methodologies may result in valuations that are
materially different from those contained in the appraisals. See
"Description of the Aircraft and the Appraisals." An appraisal is only an
estimate of value. It does not indicate the price at which an aircraft may
be purchased from the aircraft manufacturer or the price at which an
aircraft may be sold in connection with the
29
<PAGE>
exercise of remedies under any indenture. Therefore, the appraisal should not
be relied upon as a measure of the actual sales value of the aircraft. The
proceeds realized upon a sale of any aircraft may be less than its appraised
value. In particular, the appraisals of the aircraft to be delivered after the
date of this prospectus are estimates of values as of future delivery dates.
The value of an aircraft, if remedies are exercised under the applicable
indenture, will depend on market and economic conditions, the supply of similar
aircraft, the availability of buyers, the condition of the aircraft and other
factors. As a result, aircraft sale proceeds on any exercise of remedies may
not be enough to pay the total amount due on the certificates.
The secured promissory notes are not cross-collateralized. This means
that liquidation proceeds from the sale of an aircraft in excess of the
principal amount of the secured promissory notes related to that aircraft will
not be available to cover losses, if any, on any other secured promissory
notes.
If the aircraft purchased with the proceeds of the certificates are not
properly maintained, the value of the aircraft may be adversely affected.
ATA is responsible for the maintenance, service, repair and overhaul
of the aircraft purchased with the proceeds of the certificates, but only
to the extent required by the relevant leases. The failure of ATA to
maintain, service, repair or overhaul an aircraft adequately may adversely
affect the value of the aircraft. In addition, even if ATA complies with
its obligations under the leases regarding the maintenance, service, repair
and overhaul of the aircraft, the value of the aircraft may deteriorate.
Any decrease in the value of an aircraft may adversely affect the holders
of the promissory notes upon a default by ATA (and Amtran).
If ATA does not maintain adequate insurance on the aircraft, the proceeds
obtained in the event of a loss may not be sufficient to cover the entire
loss.
ATA is responsible for the maintenance of public liability, property
damage and all-risk aircraft hull insurance on the aircraft to the extent
required by the relevant leases or owned aircraft indentures. ATA's failure
to maintain adequate levels of insurance for the aircraft, or the inclusion
of deductible amounts, will affect the proceeds which could be obtained
upon an event of loss and, thus, may affect the proceeds available to repay
the holders of the secured promissory notes.
The aircraft may be operated, registered or leased outside of the United
States, which may hinder the efforts of a loan trustee to repossess an
aircraft after a default under the relevant lease or owned aircraft indenture.
The leases and owned aircraft indentures do not contain any general
geographic restriction on ATA's ability to operate the aircraft. Although
ATA has no current intention to do so, ATA is permitted, upon compliance
with the leases and owned aircraft indentures, to register the aircraft in
foreign jurisdictions and to lease or sublease the aircraft to other
entities. While the loan trustees' rights and remedies in the event of a
default under the leases and owned aircraft indentures include the right to
terminate the leases and repossess the aircraft, it may be difficult,
expensive and time-consuming to obtain possession of the aircraft,
particularly when an aircraft located outside the United States has been
registered in a foreign jurisdiction or is subleased to a foreign operator.
Any exercise of the right to repossess the aircraft may be subject to the
limitation and requirements of applicable law, including the need to obtain
consents or approvals for deregistration or re-export of the aircraft,
which may be subject to delays and to political risk. When a defaulting
sublessee or other permitted transferee is the subject of a bankruptcy,
insolvency or similar event, such as protective administration, additional
limitations may apply.
Furthermore, certain jurisdictions may accord higher priority to
certain other liens or third- party rights over the aircraft. These factors
could limit the benefits of the security interest in the aircraft. As
permitted under the leases and owned aircraft indenture, at any time an
airframe subject to a lease or owned aircraft indenture might not be
equipped with engines subject to the same lease or indenture and engines
subject to a lease or indenture might not be on an airframe
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<PAGE>
subject to that lease or indenture. As a result, although ATA contractually
agrees to transfer title to the lessor of engines not owned by the applicable
owner trustee that are attached to repossessed aircraft (or, for owned
aircraft, to obtain for the related loan trustee a perfected first- priority
security interest in engines attached to repossessed aircraft and not so
owned), at the time of obtaining repossession it could be difficult, expensive
and time-consuming to assemble an aircraft consisting of an airframe and the
engines subject to the same lease or owned aircraft indenture.
If the controlling party sells the promissory notes for less than their
outstanding principal amount upon a default under the relevant indenture,
certificateholders will receive a smaller amount of principal distributions
than expected.
If a default under an indenture is continuing, whichever of the pass
through trustee, the liquidity provider or the policy provider that is the
controlling party may direct the loan trustee under that indenture to exercise
remedies under that indenture. Remedies exercisable under an indenture may
include accelerating the applicable secured promissory notes under the
indenture or foreclosing the lien on the aircraft securing those secured
promissory notes. See "Description of the Certificates--Indenture Defaults and
Certain Rights Upon an Indenture Default."
The controlling party will be:
o the policy provider, until final distributions of the outstanding
balance of the class G certificates, together with accrued and unpaid
interest, are made to the holders of the class G certificates and
thereafter, if, and while, no obligations owing to the policy
provider remain outstanding or, if a default has occurred with
respect to the policy provider and is continuing, the class G pass
through trustee, until payment of final distributions together with
accrued interest to the holders of the class G certificates, then;
o the class C pass through trustee; and after that;
o if class D certificates have been issued, the class D pass through
trustee.
Under certain circumstances, the liquidity provider with the greater amount
owed to it may elect to act as the controlling party, unless the policy
provider amends its insurance policy to cover all outstanding liquidity
facility obligations and certain other conditions are met or the policy
provider pays to the liquidity provider all outstanding liquidity facility
obligations, in which case, the policy provider will be the controlling party
(so long as no policy provider default has occurred and is continuing). See
"Description of the Intercreditor Agreement--Intercreditor Rights."
During the continuation of any indenture default, the controlling
party may accelerate and sell the secured promissory notes issued under
that indenture, subject to certain limitations. See "Description of the
Intercreditor Agreement--Intercreditor Rights--Sale of Secured Promissory
Notes or Aircraft." The market for secured promissory notes during any
indenture default may be very limited, and we cannot assure you as to the
price at which they could be sold. If the controlling party sells any
secured promissory notes for less than their outstanding principal amount,
some certificateholders will receive a smaller amount of principal
distributions than expected and will not have any claim for the shortfall
against us, any owner trustee, any owner participant, any liquidity
provider, the policy provider (except with respect to the holders of the
class G certificates, as provided in the insurance policy) or any pass
through trustee.
The ratings of the certificates from Moody's and Standard & Poor's do not
constitute a recommendation to purchase the certificates, and the ratings
are subject to change.
It is a condition to the issuance of each class of certificates
that they receive at least the following ratings from Moody's and Standard
& Poor's.
Moody's Standard & Poor's
Class G Certificates........ Aaa AAA
Class C Certificates........ Ba1 BBB
A rating is not a recommendation to purchase, hold or sell
certificates, because that rating does not address market price or
suitability for a particular investor. A rating may not remain for any
given period of time and may be lowered or withdrawn entirely by a rating
agency if at any time, in its judgment, circumstances in the future,
including the downgrading of us, the depositary, the policy provider or the
liquidity provider, so warrant.
The rating of each class of certificates is based primarily on the
default risk of the secured promissory notes purchased by that class, the
policy provider (in the case of the Class G certificates), the depositary
for that class, the availability of the liquidity facility for the benefit
of holders of that class of certificates, the collateral value provided by
the aircraft relating to the secured promissory notes and the subordination
provisions that apply to the certificates. Standard & Poor's has indicated
that its rating applies to a unit consisting of certificates representing
beneficial interests in certain rights to $238,641,000 of deposits under
escrow agreements (less any amount of the proceeds used to finance aircraft
on the date the certificates are issued). Amounts deposited under the
escrow agreements are not our property and are not entitled to the benefits
of Section 1110 of the U.S. Bankruptcy Code. Neither the certificates nor
the escrow receipts may be separately assigned or transferred.
ATA's ability to pay any premium due upon distribution of deposits not
used to purchase secured promissory notes during the delivery period has
not been rated by either rating agency.
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If the proceeds from the offering of the original certificates are not used to
purchase aircraft within a specified period, they will be returned to the
certificateholders.
We may not use all of the deposits held in escrow prior to the delivery
period termination date. See "Description of the Deposit Agreements -- Unused
Deposits." If any funds remain as deposits with respect to any pass through
trust after the delivery period termination date, those remaining funds will be
withdrawn by the escrow agent for that pass through trust and distributed, with
accrued and unpaid interest, to the certificateholders of that pass through
trust. In addition, ATA will pay a premium with respect to those remaining
deposits, but ATA will not pay a premium for any deposits that are returned
because an aircraft is not delivered prior to the delivery period termination
date for any reason that is not ATA's fault or caused by ATA's negligence. See
"Description of the Deposit Agreements--Unused Deposits."
The delivery of the newly manufactured aircraft as scheduled is subject
to delays in the manufacturing process and to Boeing's right to postpone
deliveries under its agreement with ATA. See "Description of the Aircraft and
the Appraisals--Deliveries of Aircraft."
Since the maximum principal amount of secured promissory notes may not be
issued with respect to an aircraft and, in any such case, the series C secured
promissory notes are more likely not to be issued in the maximum principal
amount as compared to the other secured promissory notes, it is more likely
that a distribution of unused deposits will be made with respect to the class
C certificates as compared to the other certificates.
The terms of the agreements relating to the secured promissory notes may
differ from the terms described in this prospectus.
The actual participation agreements, leases and leased aircraft
indentures that we enter into may differ from the descriptions of these
agreements in this prospectus because ATA, Amtran or the owner participant
may request changes. The degree to which these agreements may change is
limited because:
o the agreements are required to contain certain mandatory document
terms and mandatory economic terms, which are described in this
prospectus under the heading "Description of the Certificates --
Obligation to Purchase Secured Promissory Notes";
o ATA must certify that changes to the form agreements do not
materially and adversely affect the certificateholders or the policy
provider; and
o if ATA uses forms of financing agreements that are modified in any
material respect from forms attached to the note purchase agreement
or otherwise approved by the rating agencies, ATA is obligated to
obtain written confirmation from the rating agencies that the use of
those versions of agreements will not result in a withdrawal,
downgrade or suspension of the rating of any class of certificates.
Manufacturers of airframes and jet engines used by ATA may act as owner
participants with respect to the aircraft, and the business relationship may
influence their actions as owner participants.
Manufacturers of airframes and jet engines used by ATA may act as owner
participants with respect to aircraft, directly or through affiliates. These
manufacturers and their affiliates have various business relationships with
ATA, including as suppliers of equipment to ATA, and these business
relationships could influence the actions of these manufacturers or their
affiliates as owner participants.
Each owner participant will have the right to sell, assign or otherwise
transfer its interests as owner participant in any of such leveraged leases,
subject to the terms and conditions of the relevant participation agreement
and related documents.
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The certificates are new securities for which there is no established public
market.
The certificates are new securities for which there is no established
public market. ATA does not intend to apply for listing of the certificates
on any securities exchange or otherwise. We have been advised by the
initial purchasers that they intend to make a market in the certificates,
as permitted by applicable laws and regulations, after consummation of the
offering of the certificates. The initial purchasers are not obligated,
however, to make a market in the certificates and any market-making
activity may be discontinued at any time without notice at the sole
discretion of the initial purchasers. There can be no assurance that an
active public market for the certificates will develop or that an
investment in these certificates will be liquid. Each purchaser of
certificates in making its purchase will be deemed to have made certain
acknowledgments, representations and agreements. Transfers of certificates
are subject to certain restrictions. See "Notice to Investors."
Risk Factors Relating to the Policy Provider
The impact of any decline in the financial condition of the Policy Provider
The credit ratings assigned by Standard & Poor's Corporation and
Moody's Investor Services Inc. to the class G certificates are based,
primarily, on the existence of the insurance policy insuring the complete
and timely payment of interest accrued and payable on those certificates on
each scheduled date for the payment of interest accrued and the payment of
principal on or (under certain circumstances described in this prospectus)
before the final maturity date for those certificates. Any decline in the
financial condition of the policy provider or the insolvency of the policy
provider may result in the downgrade of the foregoing ratings of the class
G certificates and may impair the ability of the policy provider to make
payments to the holders of the class G certificates pursuant to the
insurance policy. In addition, in the event of the insolvency of the policy
provider under insurance insolvency proceedings it is possible that the
subordination agent would be unable to recover the full amount due under
the class G certificates on its unsecured claim against the policy
provider. For details of the financial information generally available with
respect to the policy provider, see "Description of the Policy Provider"
and "Description of the Policy and the Policy Provider Agreement--The
Policy."
The Limited Nature of the Policy
The insurance policy's support of interest payments and principal
payments will be limited to the class G certificates and, as a result, the
insurance policy will only run to the benefit of the holders of the class G
certificates. Although drawings under the insurance policy for interest
payments may be made when interest is due, drawings for principal payments
may not, except in certain circumstances, be made until the final maturity
date for the class G certificates. The insurance policy provides no
coverage for the class C certificates or, if issued, the class D
certificates.
The Policy Provider as a Controlling Party
Unless certain events constituting a policy provider default have
occurred, the policy provider will operate as the controlling party unless
a liquidity provider has the right, and elects, to become the controlling
party as described in "Description of the Intercreditor Agreement --
Intercreditor Rights -- Controlling Party". As the controlling party, the
policy provider will have the ability, subject to certain limitations, to
direct the subordination agent in the exercise of all remedies, including
the ability to direct the subordination agent to sell any or all of the
secured promissory notes or to instruct the loan trustee under the
applicable indenture to accelerate the secured promissory notes issued
under such indenture and to foreclose upon the lien created under the
indenture. As the controlling party, the policy provider will be in a
position to take actions that are beneficial to the policy provider and the
holders of the class G certificates but detrimental to the holders of the
class C certificates or, if issued, the class D certificates.
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<PAGE>
DESCRIPTION OF THE POLICY PROVIDER
The information set forth in this section, including any financial
statements incorporated by reference in this section, has been provided by
Ambac Assurance Corporation ("Ambac" or the "Policy Provider") for
inclusion in this prospectus, and such information has not been
independently verified by ATA, Amtran, the Initial Purchasers, the Trusts,
the Depositary or the Liquidity Provider. Accordingly, notwithstanding
anything to the contrary herein, none of ATA, Amtran, the Initial
Purchasers, the Trusts, the Depositary or the Liquidity Provider assumes
any responsibility for the accuracy, completeness or applicability of such
information.
Ambac is a Wisconsin-domiciled stock insurance corporation regulated
by the Office of the Commissioner of Insurance of the State of Wisconsin
and licensed to do business in 50 states, the District of Columbia, the
Commonwealth of Puerto Rico and the Territory of Guam. Ambac primarily
insures newly issued municipal and structured finance obligations. Ambac is
a wholly owned subsidiary of Ambac Financial Group, Inc. (formerly AMBAC
Inc.), a 100% publicly held company. Moody's, Standard & Poor's and Fitch
IBCA, Inc. have each assigned a triple-A financial strength rating to
Ambac.
We incorporate by reference into this prospectus the consolidated
financial statements of Ambac Assurance Corporation and its subsidiaries as
of December 31, 1999 and December 31, 1998 and for each of the years in the
three year period ended December 31, 1999 included in its Annual Report on
Form 10-K of Ambac Financial Group, Inc. (which was filed with the SEC on
March 30, 2000; SEC File Number 1-10777), and the unaudited consolidated
financial statements of Ambac and its subsidiaries as of June 30, 2000 and
June 30, 1999, included in the Quarterly Report on Form 10-Q of Ambac
Financial Group, Inc. for the period ended June 30, 2000 (which was filed
with the SEC on August 11, 2000). Any statement contained in a document
incorporated herein by reference shall be modified or superseded for the
purposes of this prospectus to the extent that a statement contained herein
by reference also modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
All financial statements of Ambac and its subsidiaries included in
documents filed by Ambac Financial Group, Inc. with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended, subsequent to the date of this prospectus and prior to the date
on which the exchange offer made hereby is consummated shall be deemed to
be incorporated by reference into this prospectus and to be a part hereof
from the respective dates of filing such financial statements.
The following table sets forth the capitalization of Ambac as of
December 31, 1998, December 31, 1999 and June 30, 2000 respectively in
conformity with generally accepted accounting principles.
Ambac Assurance Corporation
Consolidated Capitalization Table
Three Months
Year Ended December 31, Ended
March 31,
1998 1999 2000
------ ------ -----
(unaudited)
(Dollars in Millions)
Unearned premiums.......... $1,303 $1,442 $1,428
Other liabilities.......... 548 524 477
------- -------- --------
Total liabilities........... 1,851 1,966 1,905
------- ------- -------
Stockholder's equity:
Common stock................. 82 82 82
Additional paid-in capital... 541 752 752
cumulated other comprehensive
income (loss)................ 138 (92) (36)
Retained earnings............... 1,405 1,674 1,749
------- ------- -------
Total stockholder's equity...... 2,166 2,416 2,547
------- ------- -------
Total liabilities and
stockholder's equity........... $4,017 $4,382 $4,452
====== ====== ======
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<PAGE>
For additional financial information concerning Ambac, see the audited
financial statements of Ambac incorporated by reference herein. Copies of the
financial statements of Ambac incorporated herein by reference and copies of
Ambac's annual statement for the year ended December 31, 1999 prepared in
accordance with statutory accounting standards are available, without charge,
from Ambac. The address of Ambac's administrative offices and its telephone
number are One State Street Plaza, New York, New York 10004 and (212)
668-0340.
Ambac makes no representation regarding the class G certificates or
the advisability of investing in the class G certificates and makes no
representation regarding, nor has it participated in the preparation of,
this prospectus other than the information supplied by Ambac and presented
under the heading "Description of the Policy Provider" and the financial
statements of Ambac Financial Group, Inc. incorporated herein by reference.
THE EXCHANGE OFFER
Terms of the Exchange Offer; Period for Tendering Outstanding Certificates
Subject to the terms and conditions in this prospectus and in the
accompanying Letter of Transmittal, we will exchange unregistered
Outstanding Certificates properly tendered on before the expiration date
and not withdrawn for registered Exchange Certificates. The expiration date
is 5:00 p.m., New York City time, on , 2000 unless we extend it.
As of the date of this prospectus, $201,901,000 aggregate principal
amount of class G certificates is outstanding and $36,740,000 aggregate
principal amount of class C certificates is outstanding. This prospectus,
together with the Letter of Transmittal, is first being sent on or about ,
2000, to all holders of Outstanding Certificates known to us. Our
obligation to accept Outstanding Certificates for exchange is subject to
certain conditions as set forth below under "--Certain Conditions to the
Exchange Offer".
We may, at any time or from time to time, extend the expiration date,
by giving oral or written notice of such extension in the manner described
below. During any such extension, all Outstanding Certificates previously
tendered will remain subject to the exchange offer and we may accept them
for exchange. Any Outstanding Certificates that we do not accept for
exchange for any reason will be returned to you without cost as promptly as
practicable after the expiration or termination of the exchange offer.
Outstanding Certificates tendered in the exchange offer must be in
denominations of principal amounts of $1,000 and any integral multiples
thereof.
We expressly reserve the right to amend or terminate the exchange
offer. We also reserve the right to refuse for exchange any Outstanding
Certificates not theretofore accepted for exchange, if any of the events
specified below under "--Certain Conditions to the Exchange Offer" occur.
We will give oral or written notice of any extension, amendment,
non-acceptance or termination to you as promptly as practicable any notice
with respect to any extension will be issued by means of press release or
other public announcement no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
Procedures for Tendering Outstanding Certificates
Certificates for such Outstanding Certificates must be received by:
(i) the Exchange Agent along with the Letter of Transmittal; or
(ii) a timely confirmation of a book-entry transfer of the
Outstanding Certificates, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company
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<PAGE>
pursuant to the procedure for book-entry transfer described below, must
be received by the Exchange Agent prior to the expiration date with the
Letter of Transmittal or Agent's Message in lieu of such Letter of
Transmittal; or
(iii) the holder must comply with the guaranteed delivery procedures
described below.
The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to and received by the Exchange Agent. It
forms a part of a Book-Entry Confirmation, which states that the Book-Entry
Transfer Facility has received an express acknowledgment from the tendering
participant, which states that the participant has received and agrees to
be bound by the Letter of Transmittal and that we may enforce the Letter of
Transmittal against such participant. THE METHOD OF DELIVERY OF THE
OUTSTANDING CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. DELIVERY OF DOCUMENTS TO DTC IN
ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT. NO LETTER OF TRANSMITTAL OR OUTSTANDING CERTIFICATES SHOULD BE SENT
TO US.
Signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by:
o a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
o a commercial bank; or
o a trust company having an office or correspondent in the United States
(collectively, Eligible Institutions)
unless the Outstanding Certificates tendered are tendered:
(i) by a registered holder of the Outstanding Certificates who has
not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal; or
(ii) for the account of an Eligible Institution.
If Outstanding Certificates are registered to a person who did not
sign the Letter of Transmittal, the Outstanding Certificates surrendered
for exchange must be endorsed by, or be accompanied by a written transfer
or exchange, duly executed by the registered holder with the signature
guaranteed by an Eligible Institution. All questions of satisfaction of the
form of the writing will be determined by us in our sole discretion.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Outstanding Certificates listed therein, such
Outstanding Certificates must be endorsed or accompanied by appropriate
powers of attorney, signed exactly as the name of the registered holder
appears on the Outstanding Certificates.
If the Letter of Transmittal or any Outstanding Certificates or powers
of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing,
and unless waived by us, evidence satisfactory to us of their authority to
so act must be submitted with the Letter of Transmittal.
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<PAGE>
We will determine all questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of the tendered
Outstanding Certificates. Our determination will be final and binding. We
reserve the absolute right to reject any and all tenders of any particular
Outstanding Certificates not properly tendered or to not accept any
particular Outstanding Certificates our acceptance of which would, in our
opinion or in the opinion of our counsel, be unlawful. We also reserve the
absolute right to waive any defects or irregularities or conditions of the
exchange offer as to any particular Outstanding Certificates either before
or after the expiration date.
Our interpretation of the terms and conditions of the exchange offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Outstanding Certificates must be cured within a
time period we determine. Neither we, the Exchange Agent nor any other
person is under any duty to give notification of defects or irregularities
with respect to tenders of Outstanding Certificates nor shall any of them
incur any liability for failure to give such notification. Any Outstanding
Certificates will not be considered to have been properly tendered until
such defects or irregularities have been cured or waived. Any Outstanding
Certificates received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned without cost by the Exchange Agent to the tendering
holders unless otherwise provided in the Letter of Transmittal as soon as
practicable following the expiration date.
In addition, we reserve the right in our sole discretion to:
(i) purchase or make offers for any Outstanding Certificates that
remain outstanding subsequent to the expiration date, or, as set forth
below under "--Certain Conditions to the Exchange Offer," to terminate
the exchange offer; and
(ii) to the extent permitted by applicable law, purchase Outstanding
Certificates in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers may differ from the
terms of the exchange offer.
By tendering, each holder of Outstanding Certificates will represent
to us, among other things that:
o the Exchange Certificates acquired pursuant to the exchange offer are
being obtained in the ordinary course of business of the person
receiving the Exchange Certificates, whether or not that person is
the holder;
o neither the holder nor any other person has any arrangement or
understanding with any person to participate in the distribution of the
Exchange Certificates; and
o such holder is not engaged in, or intends to engage in, a distribution
of the Exchange Certificates.
If any holder or any such other person is an "affiliate," as defined
under Rule 405 of the Securities Act, of the Company, or is engaged in or
intends to engage in or has an arrangement or understanding with any person to
participate in a distribution of such Exchange Certificates to be acquired in
the exchange offer, such holder or any such other person:
(i) could not rely on the applicable interpretations of the staff of
the Commission; and
(ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives Exchange Certificates for
its own account in exchange for Outstanding Certificates, where such
Outstanding Certificates were acquired by the broker-dealer as a result
of market- making activities or other trading activities, must
acknowledge that it will deliver a
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<PAGE>
prospectus in connection with any resale of such Exchange Certificates.
See "Plan of Distribution."
Acceptance of Outstanding Certificates for Exchange; Delivery of Exchange
Certificates
Upon satisfaction or waiver of the conditions to the exchange offer,
we will accept, promptly,all Outstanding Certificates properly tendered and
will issue the Exchange Certificates. See "--Certain Conditions to the
Exchange Offer."
We are deemed to have accepted properly tendered Outstanding
Certificates for exchange if or when we give oral or written notice of
acceptance to the Exchange Agent, with written confirmation of any oral notice
to follow promptly.
For each Outstanding Certificate accepted for exchange, holders of
that Outstanding Certificate will receive an Exchange Certificate having a
principal amount equal to that of the surrendered Outstanding Certificate.
Interest on the Outstanding Certificates will accrue from the most recent
interest payment date or if no interest has been paid, from February 15,
2000. Interest on the Outstanding Certificates and the Exchange
Certificates is payable on each January 15, April 15, July 15 and October
15, beginning April 15, 2000. Holders of Outstanding Certificates whose
Outstanding Certificates are accepted for exchange will be deemed to have
waived the right to receive any payment in respect of accrued and unpaid
interest on the Outstanding Certificates accrued from the most recent
interest payment date or if no interest has been paid, from February 15,
2000 to the date of the issuance of the Exchange Certificates. The Exchange
Certificates will entitle holders to receive any interest payment that
would have otherwise been payable with respect to the Outstanding
Certificates. Consequently, holders who exchange their Outstanding
Certificates for Exchange Certificates will receive the same interest
payment on April 15, 2000 (the first interest payment date with respect to
the Outstanding Certificates and the Exchange Certificates occurring after
the closing of the exchange offer) that they would have received had they
not accepted the exchange offer.
In all cases, issuance of Exchange Certificates for Outstanding
Certificates that are accepted for exchange will be made only after timely
receipt by the Exchange Agent of:
(i) certificates for such Outstanding Certificates or a timely
Book-Entry Confirmation of such Outstanding Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility;
(ii) a properly completed and duly executed Letter of Transmittal or
an Agent's Message in lieu thereof; and
(iii) all other required documents.
If any tendered Outstanding Certificates are not accepted for any reason set
forth in the terms and conditions of the exchange offer or if Outstanding
Certificates are submitted for a greater principal amount than the holder
desired to exchange, the unaccepted or non-exchanged Outstanding Certificates
will be returned without expense to the tendering holder (or, in the case of
Outstanding Certificates tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
procedures described below, the non-exchanged Outstanding Certificates will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the exchange
offer.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Outstanding Certificates at the Book-Entry Transfer Facility
for purposes of the exchange offer within two business days after the date of
this prospectus. Any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of
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<PAGE>
Outstanding Certificates by causing the Book-Entry Transfer Facility to
transfer the Outstanding Certificates into the Exchange Agent's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Outstanding
Certificates may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal (or a facsimile thereof or an
Agent's Message in lieu thereof), with any required signature guarantees and
any other required documents, must still be transmitted to and received by the
Exchange Agent at one of the addresses set forth below, under "--Exchange
Agent" on or prior to the expiration date or the guaranteed delivery
procedures described below must be complied with.
Guaranteed Delivery Procedures
A holder who wishes to tender its Outstanding Certificates; and
(i) whose Outstanding Certificates are not immediately available; or
(ii) who cannot deliver their Outstanding Certificates, the Letter of
Transmittal, or any other required documents to the Exchange Agent prior
to the expiration date; or
(iii) who cannot complete the procedure for book-entry transfer on a
timely basis, may effect a tender if:
(a) the tender is made through an Eligible Institution; and
(b) before the expiration date, the Exchange Agent receives from
the Eligible Institution:
o a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and
address of the holder of the Outstanding
Certificates;
o the certificate number or numbers of such
Outstanding Certificates and the principal amount
of Outstanding Certificates tendered, stating that
the tender is being made thereby, and guaranteeing
that the certificates for all physically tendered
Outstanding Certificates, in proper form for
transfer, or a Book-Entry Confirmation, as the
case may be, together with a properly completed
and duly executed Letter of Transmittal (or a
facsimile thereof or an Agent's Message in lieu
thereof) with any required signature guarantees,
and all other documents required by the Letter of
Transmittal are received by the Exchange Agent
within three NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery;
and
o the certificates for all physically tendered
Outstanding Certificates, in proper form for
transfer, or a Book-Entry Confirmation, as the
case may be, together with a properly completed
and duly executed Letter of Transmittal (or a
facsimile thereof or an Agent's Message in lieu
thereof), with any required signature guarantees
and any other documents required by the Letter of
Transmittal, that will be deposited by the
Eligible Institution with the Exchange Agent
within three New York Stock Exchange trading days
after the date of execution of the Notice of
Guaranteed Delivery.
Withdrawal of Rights
Except as otherwise provided herein, tenders of Outstanding
Certificates may be withdrawn at any time prior to 5:00 p.m., New York City
time, on the expiration date.
39
<PAGE>
To withdraw a tender of Outstanding Certificates, a written notice of
withdrawal must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the expiration date. Any
such notice of withdrawal must:
(i) specify the name of the person having tendered the
Outstanding Certificates to be withdrawn (the Depositor);
(ii) include a statement that the Depositor is withdrawing its
election to have Outstanding Certificates exchanged, and identify the
Outstanding Certificates to be withdrawn (including the certificate
number or numbers and principal amount of such Outstanding Certificates);
and
(iii) where certificates for Outstanding Certificates have been
transmitted, specify the name in which such Outstanding Certificates are
registered, if different from that of the withdrawing holder.
If certificates for Outstanding Certificates have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of
such certificates the withdrawing holder must also submit:
(i) the serial numbers of the particular certificates to be
withdrawn; and
(ii) signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution.
If Outstanding Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Outstanding Certificates and
otherwise comply with the procedures of the facility.
We will determine all questions as to the validity, form and
eligibility (including time of receipt) for such withdrawal notices. Our
determination shall be final and binding on all parties.
Any Outstanding Certificates so withdrawn will be considered not to
have been validly tendered for purposes of the exchange offer and no
Exchange Certificates will be issued with respect thereto unless the
Outstanding Certificates so withdrawn are validly retendered.
Any Outstanding Certificates which have been tendered but which are
not accepted for exchange for any reason will be returned to the holder
without cost (or, in the case of Outstanding Certificates tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry
Transfer Facility pursuant to the book-entry transfer procedures described
above, such Outstanding Certificates will be credited to an account
maintained with such Book-Entry Transfer Facility for the Outstanding
Certificates) as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn Outstanding
Certificates may be retendered by following one of the procedures described
above under "--Procedures for Tendering Outstanding Certificates" at any
time prior to 5:00 p.m., New York City time, on the expiration date.
Certain Conditions to the Exchange Offer
The exchange offer is not subject to any conditions, other than that
the exchange offer does not violate applicable law or any applicable
interpretation of the staff of the Commission. We cannot assure you that
any such condition will not occur. Holders of Outstanding Certificates will
have certain rights against us under the registration rights agreement
should we fail to consummate the exchange offer.
40
<PAGE>
If we determine that we may terminate the exchange offer, as set forth
above, we may:
(i) refuse to accept any Outstanding Certificates and return any
Outstanding Certificates that have been tendered;
(ii) extend the exchange offer and retain all Outstanding
Certificates tendered prior to the expiration date, subject to the rights
of such holders of tendered Outstanding Certificates to withdraw their
tendered Outstanding Certificates; or
(iii) waive a termination event with respect to the exchange offer
and accept all properly tendered Outstanding Certificates that have not
been withdrawn. If such waiver constitutes a material change in the
exchange offer, we will disclose that change through a supplement to this
prospectus that will be distributed to each registered holder of
Outstanding Certificates. In addition, we will extend the exchange offer
for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Outstanding Certificates, if the exchange offer would
otherwise expire during such period.
Exchange Agent
Wilmington Trust Company has been appointed as Exchange Agent for the
exchange offer. All executed Letters of Transmittal and written notices of
withdrawal should be directed to the Exchange Agent at one of the addresses
set forth below. Questions and requests for assistance and requests for
additional copies of this prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Hand, Mail or Overnight Courier Facsimile Transmission Number
Wilmington Trust Company (302) 651-8882
Rodney Square North (For Eligible
100 North Market Street Institutions Only)
Wilmington, DE 19890
Attention: David Vanaskey, Corporate Trust Confirm by Telephone
Administration
Personal and Confidential (302) 651-8726 or
(302) 651-1000
(If by Mail, Registered or
Certified Mail Recommended)
DELIVERY OF THE LETTER OF TRANSMITTAL OR OF WRITTEN NOTICES OF
WITHDRAWAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
Fees and Expenses
We will not make any payments to brokers, dealers or other persons
soliciting acceptances of the exchange offer.
The estimated cash expenses to be incurred in connection with the
exchange offer will be paid by us and are estimated to be $130,000.
Transfer Taxes
Holders who tender their Outstanding Certificates for exchange will
not be obligated to pay any transfer taxes in connection with the exchange.
However holders who instruct us to register Exchange Certificates in the
name of, or request that Outstanding Certificates not tendered or not
accepted in the exchange offer be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
41
<PAGE>
Consequences of Exchanging Outstanding Certificates
Holders of Outstanding Certificates who do not exchange them for
Exchange Certificates in the exchange offer will continue to be subject to
the provisions in the Indenture regarding their transfer and exchange. Any
Outstanding Certificates not exchanged will continue to accrue interest,
but will not retain any rights under the registration rights agreement and
will bear the legend which sets forth the restrictions on transfer to which
they are subject as a consequence of the issuance of the Outstanding
Certificates pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable
state securities laws.
In general, the Outstanding Certificates may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We do not currently anticipate that we will register
Outstanding Certificates under the Securities Act. See "Exchange Offer;
Registration Rights."
Based on interpretations by the staff of the Commission, as set forth
in no-action letters issued to third parties, we believe that Exchange
Certificates issued in the exchange offer in exchange for Outstanding
Certificates may be offered for resale, resold or otherwise transferred by
holders thereof (other than any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Certificates are acquired in
the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Exchange Certificates.
However, we do not intend to request the Commission to consider, and
the Commission has not considered, the exchange offer in the context of a
no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the exchange
offer as in such other circumstances. Each holder, other than a
broker-dealer, must acknowledge that:
(i) the Exchange Certificates received by such holder will be
acquired in the ordinary course of its business;
(ii) at the time of the consummation of the exchange offer such
holder will have not engaged in, and does not intend to engage in, a
distribution of Exchange Certificates and has no arrangement or
understanding to participate in a distribution of Exchange Certificates;
and
(iii) such holder is not an affiliate of the Company within the
meaning of Rule 405 of the Securities Act or if it is such an
affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act, to the extent applicable.
If any holder is an affiliate of the Company, is engaged in or intends
to engage in or has any arrangement or understanding with respect to the
distribution of the Exchange Certificates to be acquired pursuant to the
exchange offer, such holder:
(i) could not rely on the applicable interpretations of the staff
of the Commission; and
(ii) must comply with the registration and prospectus delivery
requirement of the Securities Act in connection with any resale
transaction.
Each broker-dealer that receives Exchange Certificates for its own
account in exchange for Outstanding Certificates must acknowledge that such
Outstanding Certificates were acquired by such broker-dealer as a result of
market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of such Exchange
Certificates.
42
<PAGE>
The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
This prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Certificates received in exchange for Outstanding Certificates, where such
Outstanding Certificates were acquired by such broker- dealer as a result
of market-making activities or other trading activities.
We have agreed that for a period of 180 days after the expiration
date, we will make this prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
In addition, to comply with state securities laws, the Exchange
Certificates may not be offered or sold in any state unless they have been
registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
The offer and sale of the Exchange Certificates to "Qualified
Institutional Buyers" (as such term is defined under Rule 144A of the
Securities Act) is generally exempt from registration or qualification under
state securities laws. We currently do not intend to register or qualify the
sale of the Exchange Certificates in any state where an exemption from
registration or qualification is required and not available.
CAPITALIZATION
The following table sets forth our actual consolidated capitalization
derived from our unaudited consolidated financial statements at March 31,
2000.
(Dollars in
thousands)
Cash.................................................... $125,205
---------
Short-term debt (consisting of current
maturities of long-term debt).......................... $ 3,791
----------
Long-term debt
Tax-exempt mortgage bonds, due 2020.................. 6,000
Tax-exempt mortgage bonds, due 2001.................. 10,000
10 1/2% Senior Notes due 2004........................ 175,000
9 5/8% Senior Notes due 2005.......................... 125,000
Special Facility Revenue Bonds due 2029.............. 16,960
8.3% Mortgage due 2014............................... 7,517
Note payable to bank due 2005........................ 9,658
Unsecured debt....................................... 5,028
---------
Total long-term debt............................... 355,163
---------
Total debt........................................ 358,954
---------
Total shareholders' equity..................... 145,881
---------
Total capitalization........................... $504,835
========
---------------
The completion of the offering will have no effect on the
capitalization of Amtran or ATA as of March 31, 2000.
43
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with the selected historical
financial data of Amtran, Inc. We have prepared the selected financial data
included in this information using the consolidated financial statements of
Amtran, Inc. for the five years ended December 31, 1999. The financial
statements, for five fiscal years ended December 31, 1999 have been audited
by Ernst & Young LLP, independent auditors. The selected consolidated
financial data for the three months ended March 31, 2000 and 1999 is
derived from our unaudited consolidated financial statements. The unaudited
consolidated financial statements include all adjustments, consisting of
normal recurring accruals, that we consider necessary for the fair
presentation of our financial position and results of operations for these
periods.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
---------- ----------- ----------- ---------- ----------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
(Dollars in thousands, except ratios and per share amounts)
Statement of Operations Data:
Operating revenues:
Scheduled service........ $361,967 $386,488 $371,762 $511,254 $ 624,647 $144,269 $168,486
Charter.................. 307,091 310,569 359,177 344,482 389,979 107,340 119,620
Ground package........... 20,421 22,302 22,317 23,186 58,173 15,558 22,086
Other.................... 25,530 31,492 29,937 40,447 49,567 10,742 11,174
---------- ---------- ---------- ---------- ---------------------- ----------
Total operating revenues 715,009 750,851 783,193 919,369 1,122,366 277,909 321,366
--------- --------- --------- --------- ---------- --------- ---------
Operating expenses:
Salaries, wages and
benefits 141,072 163,990 172,499 211,304 252,595 60,799 68,702
Fuel and oil............. 129,636 161,226 153,701 137,401 170,916 35,578 63,436
Handling, landing and
navigation fees........ 74,400 70,122 69,383 74,640 89,302 22,399 25,385
Passenger service........ 34,831 32,745 32,812 34,031 39,231 9,572 11,170
Aircraft rentals......... 55,738 65,427 54,441 53,128 58,653 15,244 16,086
Aircraft maintenance,
materials and repairs.. 55,423 55,175 51,465 53,655 55,645 13,741 19,679
Depreciation and
amortization........... 55,827 61,661 62,468 78,665 96,038 21,658 31,572
Other.................... 150,146 176,561 172,940 201,172 269,959 69,959 82,772
--------- --------- --------- --------- ----------- ---------- ----------
Total operating expenses 697,073 786,907 769,709 843,996 1,032,339 248,950 318,802
--------- --------- --------- --------- ---------- --------- ---------
Operating income (loss)(1) 17,936 (36,056) 13,484 75,373 90,027 28,959 2,564
---------- ---------- ---------- ---------- ---------------------- -----------
Other income (expense):
Interest income.......... 410 617 1,584 4,433 5,375 1,763 1,913
Interest (expense)....... (4,163) (4,465) (9,454) (12,808) (20,966) (5,074) (7,660)
Other.................... 470 323 413 212 3,361 1,795 112
---------------------------------------------------------------------------------
Other income (expense). (3,283) (3,525) (7,457) (8,163) (12,230) (1,516) (5,635)
----------- ---------- ----------- ----------- ---------- -----------------------
Income (loss) before income
taxes.................... 14,653 (39,581) 6,027 67,210 77,797 27,443 (3,071)
Income taxes (credits)...... 6,129 (12,907) 4,455 27,129 30,455 10,903 (1,117)
----------- ---------- ----------- ---------- ---------------------- ------------
Net income (loss)........... $ 8,524 $(26,674) $ 1,572 $40,081 $ 47,342 $ 16,540 $(1,954)
========== ========= ========== ========= ========= ========= ===========
Net income (loss) per share--
basic(2)................. $ 0.74 $ (2.31) $ 0.14 $ 3.41 $ 3.8 $ 1.36 $ (0.16)
============ ========= =========== ========== ========= ========= =========
Net income (loss) per share--$ 0.74 $ (2.31) $ 0.13 $ 3.07 $ 3.5 $ 1.22 $ (0.16)
diluted(2)............... ============= ========= =========== ========== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
----------- ---------- ----------- ----------- ---------- ----------- -------
(Dollars in thousands, except ratios and per share amounts)
Balance Sheet Data (at end of
period):
<S> <C> <C> <C> <C> <C> <C> <C>
Cash....................... $ 92,741 $ 73,382 $104,196 $172,936 $120,164 $124,759 $125,205
Non-cash working capital
(deficiency)(3)......... (80,639) (65,472) (100,731) (112,276) (128,191) (135,148) (146,887)
Property and equipment, net 240,768 224,540 267,681 329,332 511,832 407,341 524,902
Total assets............... 413,137 370,287 450,857 594,549 815,281 658,189 841,975
Short-term debt (including
current maturities)..... 3,606 30,271 8,975 1,476 2,079 1,476 3,791
Long-term debt............. 134,641 119,786 182,829 245,195 345,792 245,076 355,163
Total debt................. 138,247 150,057 191,804 246,671 347,871 246,552 358,954
Shareholders' equity(4).... 81,185 54,744 56,990 102,751 151,376 119,734 145,881
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
----------- ---------- ----------- ----------- ---------- ----------- -------
(Dollars in thousands, except ratios and per share amounts)
Other Financial Data:
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDAR(5)................. $130,381 $91,972 $132,390 $211,811 $253,454 $69,419 $52,247
EBITDA(5).................. 74,643 26,545 77,949 158,683 194,801 54,175 36,161
Net cash provided by
operating activities.... 87,078 32,171 99,936 151,812 159,563 68,470 47,763
Net cash used in investing
activities.............. (44,032) (63,161) (76,055) (142,352) (305,718) (116,944) (50,241)
Net cash provided by (used in)
financing activities.... (12,057) 11,631 6,933 59,280 93,383 297 7,519
Ratio of earnings to fixed
charges(6).............. 1.60 -- 1.19 3.03 2.65 3.38 --
Deficiency of earnings -- $40,931 -- -- -- -- $3,908
available to cover fixed
charges(6)..............
</TABLE>
(1) Amtran has reclassified gain (loss) on the sale of operating assets for
1995 from nonoperating gain (loss) to operating income (loss) to be
consistent with the 1996-2000 presentations. Also, in the third quarter
of 1996, Amtran recorded a $4.7 million loss on the disposal of leased
assets associated with the reconfiguration of its fleet.
(2) In 1997, Amtran adopted Financial Accounting Standards Board Statement
128, "Earnings per Share," which established new standards for the
calculation and disclosure of earnings per share. All prior period
amounts disclosed in this five-year summary have been restated to
conform to the new standards under Statement 128.
(3) Non-cash working capital consists of total current assets (excluding
cash) less total current liabilities (excluding current maturities of
long term debt).
(4) No dividends were paid in any of the periods presented.
(5) EBITDAR represents net income plus interest expense (net of capitalized
interest), income tax expense, depreciation, amortization and aircraft
rentals. EBITDA represents net income plus interest expense (net of
capitalized interest), income tax expense, depreciation and
amortization. EBITDAR and EBITDA are presented because each is a widely
accepted financial indicator of a company's ability to incur and service
debt. However, EBITDAR and EBITDA should not be considered in isolation,
as a substitute for net income or cash flow data prepared in accordance
with generally accepted accounting principles or as a measure of a
company's profitability or liquidity.
(6) The "ratio of earnings to fixed charges" represents earnings divided by
fixed charges, as defined in the following paragraph. The "deficiency"
represents the amount of fixed charges in excess of earnings.
For purposes of these computations, earnings consist of income (loss)
before income taxes, plus fixed charges, adjusted to exclude the amount
of any interest capitalized during the period. Fixed charges include the
total of: (i) interest, whether expensed or capitalized; (ii)
amortization of debt expense relating to any indebtedness, whether
expensed or capitalized; and (iii) such portion of rental expense as can
be demonstrated to be representative of the interest factor.
(7) The following summarized financial data (unaudited) in this table has
been derived from the financial statements of ATA for each of the
respective periods presented. ATA is the principal subsidiary of
Amtran. The following financial data excludes the other subsidiaries
of Amtran (Ambassadair Travel Club, Inc., ATA Leisure Corp., Amber
Travel Inc., American Trans Air Execujet, Inc., Amber Air Freight
Corporation and ATA Training Academy Inc.) as ATA is the principal
operating subsidiary of Amtran. Amtran allocates certain expenses,
such as income taxes, to the various subsidiaries as if they were
operating on a stand alone basis.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
----------- ---------- ----------- ----------- ---------- ----------- -------
(Dollars in thousands)
Statement of Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues:........... $682,106 $712,915 $744,153 $877,187 $1,008,855 $248,619 $286,206
Depreciation and amortization. 55,056 61,267 62,281 78,595 93,820 21,488 30,079
Operating income (loss)(1).... 14,819 (40,674) 10,325 80,920 97,558 29,820 3,839
Interest expense, net......... 3,773 4,466 9,454 12,808 20,969 5,080 7,665
Income (loss) before income taxes 11,389 (44,416) 2,627 72,528 84,989 27,355 (1,916)
Net income (loss)............. 6,006 (31,509) 69 43,329 51,951 16,451 (799)
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------- ----------------
1995 1996 1997 1998 1999 1999 2000
----------- ---------- ----------- ----------- ---------- ----------- -------
(Dollars in thousands)
Balance Sheet Data (at end of period):
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital (deficiency)(2) $(49,710) $(86,207) $(51,939) $ 10,768 $(32,049) $ (49,252) $ (35,388)
Property and equipment, net... 239,864 224,232 267,556 328,661 508,210 405,770 512,519
Total assets.................. 409,354 369,086 466,923 593,489 823,090 643,478 882,596
Short-term debt (including
current maturities).......... 3,606 30,271 8,975 1,476 2,079 1,476 3,791
Long-term debt................ 134,641 119,786 182,829 245,195 345,792 245,076 355,163
Total debt.................... 138,247 150,057 191,804 246,671 347,871 246,552 358,954
Shareholder's equity(3)....... 30,372 (9,934) 6,762 50,091 102,039 66,542 101,240
</TABLE>
(1) ATA has reclassified gain (loss) on the sale of operating assets for 1995
from non-operating gain (loss) to operating income (loss) to be
consistent with the 1996-2000 presentations. Also, in the third quarter
of 1996, ATA recorded a $4.7 million loss on the disposal of leased
assets associated with the reconfiguration of its fleet.
(2) Working capital consists of total current assets less current liabilities.
(3) No dividends were paid in any of the periods presented.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company is a leading provider of targeted scheduled airline
services and charter airline services to leisure and other value-oriented
travelers. Amtran, through its principal subsidiary, American Trans Air,
Inc. ("ATA"), has been operating for 27 years and is the eleventh largest
U.S. airline in terms of 1999 revenues. ATA provides scheduled service
through nonstop and connecting flights from the gateways of Chicago-Midway
and Indianapolis to popular vacation destinations such as Hawaii, Las
Vegas, Florida, California, Mexico and the Caribbean, as well as to
Philadelphia, Boston, Seattle, Ronald Reagan Washington National, Denver,
Dallas-Ft. Worth and New York City's LaGuardia and John F. Kennedy
Airports. ATA also provides charter service throughout the world to
independent tour operators, specialty charter customers and the U.S.
military.
Results of Operations
For the year ended December 31, 1999, the Company generated record
operating income and net income. Although all business units performed well
during this period, scheduled service continued to generate the strongest
overall growth in pricing and traffic of the major business units.
o Scheduled service revenue per available seat mile ("RASM")
increased 7.5% in 1999, as compared to 1998.
o Scheduled service available seat miles increased 13.6% between
1999 and 1998.
o Load factor increased to 77.4% in 1999 as compared to 74.4% in
1998.
For the quarter ended March 31, 2000, the Company earned $2.6 million
in operating income, a decrease of 91.0% as compared to operating income of
$29.0 million in the comparable period of 1999; and the Company recorded a
$2.0 million net loss in the first quarter of 2000, as compared to a net
income of $16.5 million in the first quarter of 1999.
Operating revenues increased 15.7% to $321.4 million in the first quarter
of 2000, as compared to $277.9 million in the same period of 1999.
Consolidated revenue per available seat mile ("RASM") increased 7.2% to 8.00
cents in the 2000 first quarter, as compared to 7.46 cents in the first
quarter of 1999.
46
<PAGE>
Operating expenses increased 28.0% to $318.8 million in the first
quarter of 2000, as compared to $249.0 million in the comparable period of
1999. Consolidated operating cost per available seat mile ("CASM")
increased 18.5% to 7.93 cents in the first quarter of 2000, as compared to
6.69 cents in the first quarter of 1999.
Results of Operations in Cents Per ASM
The following table sets forth, for the periods indicated,
consolidated operating revenues and expenses expressed as cents per
available seat mile ("ASM"):
<TABLE>
<CAPTION>
Cents per ASM
Cents per ASM Three Months Ended
Year Ended December 31, March 31,
----------------------- ---------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Consolidated operating revenues:........ 6.19 6.64 7.44 7.46 8.00
Consolidated operating expenses:
Salaries, wages and benefits......... 1.36 1.52 1.67 1.63 1.71
Fuel and oil......................... 1.22 0.99 1.13 0.96 1.58
Depreciation and amortization........ 0.49 0.57 0.64 0.58 0.79
Handling, landing and navigation fees 0.55 0.54 0.59 0.60 0.63
Aircraft maintenance, materials and
repairs........................... 0.41 0.39 0.37 0.37 0.49
Ground package cost.................. 0.15 0.14 0.33 0.35 0.47
Aircraft rentals..................... 0.43 0.38 0.39 0.41 0.40
Crew and Other employee travel....... 0.29 0.30 0.33 0.33 0.38
Passenger service.................... 0.26 0.24 0.26 0.26 0.28
Commissions.......................... 0.21 0.21 0.26 0.26 0.28
Other selling expenses............... 0.12 0.16 0.19 0.17 0.21
Advertising.......................... 0.10 0.13 0.12 0.15 0.16
Facilities and other rentals......... 0.07 0.07 0.09 0.08 0.09
Other................................ 0.43 0.45 0.47 0.54 0.46
-------------- --------------- ---------- ------------ --------------
Total consolidated operating
expenses........................ 6.09 6.09 6.84 6.69 7.93
-------------- --------------- ---------- ------------ --------------
Consolidated operating income........... 0.10 0.55 0.60 0.77 0.07
-------------- --------------- ---------- ============ ==============
ASMs (in thousands)..................... 12,647,683 13,851,731 15,082,630 3,723,035 4,018,536
</TABLE>
Beginning in 1999, the Company's consolidated measures of RASM and CASM
were impacted by the acquisition of tour operators Travel Charter and Key
Tours, because these companies contributed significant operating revenue and
expense to consolidated results, without increasing ASMs. The operations of
these tour operators, along with the Company's existing vacation package
brand, ATA Vacations, have been combined and reported as a separate operating
segment, ATA Leisure Corp. ("ATALC") (see Note 13 to Consolidated Financial
Statements).
The following table sets forth, for the periods indicated, operating
revenues and expenses for each reportable segment, in thousands of dollars,
and expressed as cents per ASM.
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
---------------------- --------
1997 1998 1999 1999 2000
---------- ---------- -------------- ----------- ---------
Airline and Other
<S> <C> <C> <C> <C> <C>
Operating revenue (000s)...... $758,971 $897,884 $1,027.526 $254,292 $282,103
RASM (cents)................. 6.00 6.48 6.81 6.83 7.02
Operating expense (000s)...... $755,492 $830,977 $961,935 $226,658 $277,741
CASM (cents).................. 5.97 6.00 6.38 6.09 6.91
ATALC
Operating revenue (000s)...... $ 24,222 $ 21,485 $ 94,840 $ 23,617 $ 39,263
RASM (cents).................. 0.19 0.16 0.63 0.63 0.98
Operating expense (000s)...... $ 14,217 $ 13,019 $ 70,404 $ 22,292 $ 41,061
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
--------------------------------------------------------- ----------------
1997 1998 1999 1999 2000
---------- ---------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
CASM (cents).................. 0.12 0.09 0.46 0.60 1.02
</TABLE>
ATALC operating revenue and expense presented above include those
from external sources, and those generated or incurred through another
segment. Airline and other operating revenue and expense presented above
include intercompany eliminations.
Consolidated Flight Operating and Financial Data
The following table sets forth, for the periods indicated, certain key
operating and financial data for the consolidated flight operations of the
Company. Data shown for "Jet" operations include the consolidated operations
of Lockheed L-1011, Boeing 727-200 and Boeing 757-200 aircraft in all of the
Company's business units. Data shown for "J31/SAAB" operations include the
consolidated operations of Jetstream 31 and SAAB 340B propeller aircraft by
Chicago Express Airlines, Inc. ("Chicago Express") as the ATA Connection.
<TABLE>
<CAPTION>
Twelve Months Ended December 31, Three Months Ended March 31,
----------------------------------------- --------------------------------------
%Inc. % Inc.
1998 1999 Inc (Dec) (Dec) 1999 2000 Inc (Dec) (Dec)
---- ---- --------- ----- ---- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Departures Jet.......... 45,881 50,207 4,326 9.43 12,506 13,387 881 7.04
Departures J31/SAAB (a). 16,388 17,716 1,328 8.10 4,080 4,320 240 5.88
---------- --------- --------- ------ --------- --------- -------- -----
Total Departures (b). 62,269 67,923 5,654 9.08 16,586 17,707 1,121 6.76
========== ========= ========= ====== ========= ========= ======== =====
Block Hours Jet......... 144,237 157,481 13,244 9.18 39,002 42,237 3,235 8.29
Block Hours J31......... 16,166 17,979 1,813 11.21 4,166 4,387 221 5.30
---------- --------- --------- ------ --------- --------- -------- -----
Total Block Hours (c) 160,403 175,460 15,057 9.39 43,168 46,624 3,456 8.01
========== ========= ========= ====== ========= ========= ======== =====
RPMs Jet (000s)......... 9,727,097 10,913,081 1,185,984 12.19 2,679,029 2,861,397 182,368 6.81
RPMs J31/SAAB (000s)... 30,991 35,922 4,931 15.91 8,001 9,800 1,799 22.48
---------- ---------- --------- ------ --------- --------- ------- -----
Total RPMs (000s) (d) 9,758,088 10,949,003 1,190,915 12.20 2,687,030 2,871,197 184,167 6.85
========== ========== ========= ====== ========= ========= ======= =====
ASMs Jet (000s)......... 13,799,507 15,025,000 1,225,493 8.88 3,710,088 4,003,394 293,306 7.91
ASMs J31/SAAB (000s).... 52,224 57,630 5,406 10.35 12,947 15,142 2,195 16.95
---------- ---------- --------- ------ --------- --------- ------- -----
Total ASMs (000s) (e) 13,851,731 15,082,630 1,230,899 8.89 3,723,035 4,018,536 295,501 7.94
========== ========== ========= ====== ========= ========= ======= =====
Load Factor Jet......... 70.49 72.63 2.14 3.04 72.21 71.47 (0.74) (1.02)
Load Factor J31/SAAB.... 59.34 62.33 2.99 5.04 61.80 64.72 2.92 4.72
---------- ---------- --------- ------- --------- --------- ------- -----
Total Load Factor (f) 70.45 72.59 2.14 3.04 72.17 71.45 (0.72) (1.00)
========== ========== ========= ======= ========= ========= ======= ======
Passengers Enplaned Jet. 5,991,662 6,838,339 846,677 14.13 1,759,104 1,886,292 127,188 7.23
Passengers Enplaned
J31/SAAB................ 176,604 206,304 29,700 16.82 46,333 56,352 10,019 21.62
---------- ---------- --------- ------- --------- --------- ------- -----
Total Passengers
Enplaned (g)......... 6,168,266 7,044,643 876,377 14.21 1,805,437 1,942,644 137,207 7.60
========= ========== ========= ======= ========= ========= ======= =====
Revenue (000)s.......... 919,369 1,122,366 202,997 22.08 277,909 321,366 43,457 15.64
Revenue, excluding fuel
escalation (000s)(h) 922,115 1,120,572 198,457 21.52 278,556 315,231 36,675 13.17
RASM in cents (h)....... 6.64 7.44 0.80 12.05 7.46 8.00 0.54 7.24
RASM in cents (i), excluding
fuel escalation (h). 6.66 7.43 0.77 11.56 7.48 7.84 0.36 4.81
CASM in cents (i)....... 6.09 6.84 0.75 12.32 6.69 7.93 1.24 18.54
CASM in cents (j), excluding
fuel cost........... 5.10 5.71 0.61 11.96 5.73 6.35 0.62 10.82
Yield in cents (k)...... 9.42 10.25 0.83 8.81 10.34 11.19 0.85 8.22
---------------------------
See footnotes (f) through (k) on page 51.
</TABLE>
(a) Chicago Express Airlines provides service between Chicago-Midway and the
cities of Indianapolis, Milwaukee, Des Moines, Dayton, Grand Rapids,
Lansing and Madison as the ATA Connection, using Jetstream 31 and SAAB
340B propeller aircraft.
(b) A departure is a single takeoff and landing operated by a single aircraft
between an origin city and a destination city.
(c) Block hours for any aircraft represent the elapsed time computed from the
moment the aircraft first moves under its own power from the origin city
boarding ramp to the moment it comes to rest at the destination city
boarding ramp.
48
<PAGE>
(d) Revenue passenger miles (RPMs) represent the number of seats occupied by
revenue passengers multiplied by the number of miles those seats are
flown. RPMs are an industry measure of the total seat capacity actually
sold by the Company.
(e) Available seat miles (ASMs) represent the number of seats available for
sale to revenue passengers multiplied by the number of miles those seats
are flown. ASMs are an industry measure of the total seat capacity
offered for sale by the Company, whether sold or not.
(f) Passenger load factor is the percentage derived by dividing RPMs by ASMs.
Passenger load factor is relevant to the evaluation of scheduled service
because incremental passengers normally provide incremental revenue and
profitability when seats are sold individually. In the case of commercial
charter and military/government charter, load factor is less relevant
because an entire aircraft is sold by the Company instead of individual
seats. Since both costs and revenues are largely fixed for these types of
charter flights, changes in load factor. Consolidated load factors and
scheduled service load factors for the Company are shown in the
appropriate tables for industry comparability, but load factors for
individual charter businesses are omitted from applicable tables.
(g) Passengers enplaned are the number of revenue passengers who occupied
seats on the Company's flights. This measure is also referred to as
"passengers boarded."
(h) Certain commercial charter and military contracts include fuel
reimbursement clauses. When actual fuel costs are lower than the
contracted price, the Company must reimburse the customer. When actual
fuel prices exceed the contracted prices the customer reimburses the
Company. These adjustments are recorded to revenue.
(i) Revenue per ASM (expressed in cents) is total operating revenue divided
by total ASMs. This measure is also referred to as "RASM." RASM measures
the Company's unit revenue using total available seat capacity. In the
case of scheduled service, RASM is a measure of the combined impact of
load factor and yield (see (j) below for the definition of yield).
(j) Cost per ASM (expressed in cents) is total operating expense divided by
total ASMs. This measure is also referred to as "CASM." CASM measures the
Company's unit cost using total available seat capacity.
(k) Revenue per RPM (expressed in cents) is total operating revenue divided
by total RPMs. This measure is also referred to as "yield." Yield is
relevant to the evaluation of scheduled service because yield is a
measure of the average price paid by customers purchasing individual
seats. Yield is less relevant to the commercial charter and
military/government charter businesses because the entire aircraft is
sold at one time for one price. Consolidated yields and scheduled service
yields are shown in the appropriate tables for industry comparability,
but yields for individual charter businesses are omitted from applicable
tables.
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Operating Revenues
Scheduled Service Revenues. The following table sets forth, for the
periods indicated, certain key operating and financial data for the
scheduled service operations of the Company. Data shown for "Jet"
operations include the combined operations of Lockheed L-1011, Boeing
727-200 and Boeing 757-200 aircraft in scheduled service. Data shown for
"J31/SAAB" operations include the operations of Jetstream 31 and SAAB 340B
propeller aircraft by Chicago Express as the ATA Connection.
Three Months Ended March 31,
------------------------------------------------
1999 2000 Inc (Dec) % Inc (Dec)
-------- --------- ---------- ----------
Departures Jet 8,413 9,163 750 8.91
Departures J31/SAAB(a) 4,080 4,320 240 5.88
---------- --------- ----------- -----------
Total Departures (b) 12,493 13,483 990 7.92
=========== ========= =========== ===========
49
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------
1999 2000 Inc (Dec) % Inc. (Dec)
------ ---- -------- ------------
<S> <C> <C> <C> <C>
Block Hours Jet 24,266 27,138 2,872 11.84
Block Hours J31/SAAB 4,166 4,387 221 5.30
------------ ------------ ----------- -----------
Total Block Hours (c) 28,432 31,525 3,093 10.88
=========== =========== =========== ===========
RPMs Jet (000s) 1,520,152 1,759,031 238,879 15.71
RPMs J31/SAAB (000s) 8,001 9,800 1,799 22.48
------------ ------------ ----------- ------------
Total RPMs (000s) (d) 1,528,153 1,768,831 240,678 15.75
========= ========= ========= ============
ASMs Jet (000s) 1,986,298 2,305,370 319,072 16.06
ASMs J31/SAAB (000s) 12,947 15,142 2,195 16.95
----------- ----------- ----------- ------------
Total ASMs (000s) (e) 1,999,245 2,320,512 321,267 16.07
========= ========= ========= ============
Load Factor Jet 76.53 76.30 (0.23) (0.30)
Load Factor J31/SAAB 61.80 64.72 2.92 4.72
------------ ------------ ----------- -------------
Total Load Factor (f) 76.44 76.23 (0.21) (0.27)
============ ============ ========== -------------
Passengers Enplaned Jet 1,135,654 1,328,650 192,996 16.99
Passengers Enplaned J31/SAAB 46,333 56,352 10,019 21.62
----------- ----------- -------- -------------
Total Passengers Enplaned (g) 1,181,987 1,385,002 203,015 17.18
--------- --------- ------- -------------
Revenues (000s) $144,269 $168,486 $24,217 16.79
RASM in cents (i) 7.22 7.26 0.04 0.55
Yield in cents (k) 9.44 9.53 0.09 0.95
Rev per segment (l) $ 122.06 $121.65 (0.41) (0.34)
</TABLE>
See footnotes (a) through (k) on pages 50 and 51.
(l) Revenue per segment flown is determined by dividing total scheduled
service revenues by the number of passengers boarded. Revenue per segment
is a broad measure of the average price obtained for all flight segments
flown by passengers in the Company's scheduled service route network.
Scheduled service revenues in the first quarter of 2000 increased 16.8%
to $168.5 million from $144.3 million in the first quarter of 1999. Scheduled
service revenues comprised 52.4% of consolidated revenues in the 2000 first
quarter, as compared to 51.9% of consolidated revenues in the same period of
1999.
The Company's first quarter 2000 scheduled service at Chicago-Midway
accounted for approximately 61.1% of scheduled service ASMs and 80.7% of
scheduled service departures, as compared to 58.0% and 76.4%, respectively, in
the first quarter of 1999. Beginning in May 1999, the Company operated nonstop
flights to Philadelphia, which were not provided during the first quarter of
1999. In addition to this new service, the Company served the following
existing jet markets in both quarters: Dallas-Ft. Worth, Denver, New York's
LaGuardia Airport, San Juan, Ft. Lauderdale, Ft. Myers, Las Vegas, Los
Angeles, New York's John F. Kennedy Airport, Orlando, Phoenix, St. Petersburg,
San Francisco and Sarasota. The Company also had a code share agreement with
Chicago Express under which Chicago Express operated 19-seat Jetstream 31
propeller aircraft between Chicago-Midway and the cities of Indianapolis,
Milwaukee, Des Moines, Dayton, Grand Rapids, Lansing and Madison. In April
1999, the Company acquired all of the issued and outstanding stock of Chicago
Express Airlines, Inc., which continued to operate these services as a wholly
owned subsidiary of the Company.
The Company anticipates that its Chicago-Midway operation will represent
a focus of growing significance for its scheduled service business in 2000 and
beyond. The Company operated 72 daily jet and commuter departures from
Chicago-Midway and served 23 destinations on a nonstop basis in the first
quarter of 2000, as compared to 22 nonstop destinations served in the first
quarter of 1999. The Company also presently expects to occupy 12 jet gates and
one
50
<PAGE>
commuter aircraft gate at the new Chicago-Midway terminal, scheduled for
completion in 2004, as compared to the six jet gates currently occupied in the
existing terminal.
The Company's growing commitment to Chicago-Midway is consistent with
its strategy for enhancing revenues and profitability in scheduled service
by focusing primarily on low cost, nonstop flights from airports where it
has market or aircraft advantages in addition to its low cost. The Company
expects its growing concentration of connecting flights at Chicago-Midway
to provide both revenue premiums and operating cost efficiencies, as
compared to the Company's other gateway cities. In addition, the Company
plans to build a Federal Inspection Service facility at Chicago-Midway to
facilitate direct international flights.
The Company's Indianapolis service accounted for 15.8% of scheduled
service ASMs and 10.8% of scheduled service departures in the first quarter
of 2000, as compared to 16.9% and 12.3%, respectively, in the first quarter
of 1999. In both quarters, the Company operated nonstop to Cancun, Ft.
Lauderdale, Ft. Myers, Las Vegas, Los Angeles, Orlando, St. Petersburg, San
Francisco and Sarasota. The Company has served Indianapolis for 27 years
through the Ambassadair Travel Club and in scheduled service since 1986.
The Company's Hawaii service accounted for 13.9% of scheduled service
ASMs and 3.8% of scheduled service departures in the first quarter of 2000,
as compared to 15.9% and 4.0%, respectively, in the first quarter of 1999.
The Company provided nonstop services in both periods from Los Angeles,
Phoenix and San Francisco to both Honolulu and Maui, with connecting
service between Honolulu and Maui. The Company provides these services
through a marketing alliance with the largest independent tour operator
serving leisure travelers to Hawaii from the United States. The Company
distributes the remaining seats on these flights through normal scheduled
service distribution channels. The Company believes it has superior
operating efficiencies in west coast-Hawaii markets due to the relatively
low ownership cost of the Lockheed L-1011 fleet and because of the high
daily hours of utilization obtained for both aircraft and crews.
The Company continuously evaluates the profitability of its scheduled
service markets and expects to adjust its service from time to time. The
Company has announced new service between Chicago-Midway and Ronald Reagan
Washington National Airport beginning April 3, 2000, and new service to
Boston and Seattle beginning May 7, 2000. Beginning July 10, 2000, the
Company will also offer service from Chicago-Midway to Minneapolis-St.
Paul.
Commercial Charter Revenues. The Company's commercial charter revenues
are derived principally from independent tour operators and specialty
charter customers. The Company's commercial charter product provides
full-service air transportation to hundreds of customer-designated
destinations throughout the world. Commercial charter revenues accounted
for 23.0% of consolidated revenues in the first quarter of 2000, as
compared to 26.4% in the first quarter of 1999.
During the last several years, the Company has deployed some Boeing
727-200 and Boeing 757-200 aircraft into its rapidly-growing scheduled
service markets, reducing the availability of aircraft capacity for
commercial and military/government charter flying. The Company has
addressed this capacity limitation in the commercial and
military/government charter business units through the acquisition of
long-range Lockheed L-1011 series 500 aircraft. Although Lockheed L-1011
series 500 maintenance procedures and cockpit design are similar to the
Company's existing fleet of Lockheed L-1011 series 50 and series 100
aircraft, they differ operationally in that their ten-to-eleven-hour range
permits them to operate nonstop to parts of Asia, South America and Central
and Eastern Europe using an all-coach seating configuration preferred by
the U.S. military and most of the Company's commercial charter customers.
The deployment of these aircraft into the Company's fleet has increased the
available seat capacity for these charter business units, in addition to
opening new long-range market opportunities. These new aircraft also supply
much of the additional seat capacity which the Company needs to operate its
expanded military/government business for the contract year ending
September 30, 2000.
51
<PAGE>
The following table sets forth, for the periods indicated, certain key
operating and financial data for the commercial charter operations of the
Company.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------------
% Inc
1999 2000 Inc (Dec) (Dec)
-------------- ------------- -------------- ------------
<S> <C> <C> <C> <C>
Departures (b)................................. 2,888 2,822 (66) (2.29)
Block Hours (c)................................ 10,133 9,916 (217) (2.14)
RPMs (000s) (d)................................ 918,286 789,941 (128,345) (13.98)
ASMs (000s) (e)................................ 1,117,331 1,041,798 (75,533) (6.76)
Passengers Enplaned (g)........................ 562,588 478,689 (83,899) (14.91)
Revenue (000s)................................. $73,334 $74,028 $694 0.95
Revenue, excluding fuel escalation (000s) (h).. $73,334 $69,760 $(3,574) (4.87)
RASM in cents (i).............................. 6.56 7.11 0.55 8.38
RASM in cents (i), excluding fuel escalation (h) 6.56 6.70 0.14 2.13
</TABLE>
See footnotes (a) through (k) on pages 50 and 51.
The Company operates in two principal components of the commercial
charter business, known as "track charter" and "specialty charter." The larger
track charter business component is generally comprised of low frequency but
repetitive domestic and international flights between city pairs, which
support high passenger load factors and are marketed through tour operators,
providing value-priced and convenient nonstop service to vacation destinations
for the leisure traveler. Since track charter resembles scheduled service in
terms of its repetitive flying patterns between fixed city pairs, it allows
the Company to achieve reasonable levels of crew and aircraft utilization
(although less than for scheduled service), and provides the Company with
meaningful protection from some fuel price increases through the use of fuel
escalation reimbursement clauses in tour operator contracts. Track charter
accounted for approximately $57.2 million in revenues in the first quarter of
2000, as compared to $54.9 million in the first quarter of 1999.
Specialty charter (including incentive travel programs) is a product
which is designed to meet the unique requirements of the customer and is a
business characterized by lower frequency of operation and by greater
variation in city pairs served than the track charter business. Specialty
charter includes such diverse contracts as flying university alumni to
football games, transporting political candidates on campaign trips and moving
NASA space shuttle ground crews to alternate landing sites. The Company also
operates an increasing number of trips in all-first-class configuration for
certain corporate and high-end leisure clients. Although lower utilization of
crews and aircraft and infrequent service to specialty destinations often
result in higher average operating costs, the Company has determined that the
revenue premium earned by meeting special customer requirements more than
compensates for these increased costs. The diversity of the Company's three
fleet types also permits the Company to meet a customer's particular needs by
choosing the aircraft type which provides the most economical solution for
those requirements. Specialty charter accounted for approximately $8.9 million
in revenues in the first quarter of 2000, as compared to $8.5 million in the
first quarter of 1999.
Military/Government Charter Revenues. The following table sets forth, for
the periods indicated, certain key operating and financial data for the
military/government flight operations of the Company.
<TABLE>
<CAPTION>
Three Months Ended March 31,
---------------------------------------------------------------
1999 2000 Inc (Dec) % Inc (Dec)
-------------- ---------------- ---------------- -----------
<S> <C> <C> <C> <C>
Departures (b)....................... 1,181 1,402 221 18.71
Block Hours (c)...................... 4,530 5,183 653 14.42
RPMs (000s) (d)...................... 235,404 312,425 77,021 32.72
ASMs (000s) (e)...................... 598,754 656,226 57,472 9.60
Passengers Enplaned (g).............. 58,324 78,953 20,629 35.37
Revenue (000s)....................... $ 34,006 $ 45,592 $11,586 34.07
Revenue, excluding fuel
escalation (000s) (h).............. $ 34,653 $ 43,725 $ 9,072 26.18
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------------------
1999 2000 Inc (Dec) % Inc (Dec)
---- ---- --------- -----------
<S> <C> <C> <C> <C>
RASM in cents (i) 5.68 6.95 1.27 22.36
RASM in cents (i), excluding fuel
escalation (h)................... 5.79 6.66 0.87 15.03
</TABLE>
See footnotes (a) through (k) on pages 50 and 51.
The Company participates in two related military/government charter
programs known as "fixed award" and "short-term expansion." Pursuant to the
U.S. military's fixed-award system, each participating airline is awarded
certain "mobilization value points" based upon the number and type of aircraft
made available by that airline for military flying. In order to increase the
number of points awarded, the Company has traditionally participated in
contractor teaming arrangements with other airlines. Under these arrangements,
the team has a greater likelihood of receiving fixed-award business and, to
the extent that the award includes passenger transport, the opportunity for
the Company to operate this flying is enhanced since the Company represents a
majority of the passenger transport capacity of the team. As part of its
participation in this teaming arrangement, the Company pays a commission to
the team, which passes that revenue on to all team members based upon their
mobilization points.
Short-term expansion business is awarded by the U.S. military first on a
pro rata basis to those carriers who have been provided fixed-award business
and then to any other carrier with aircraft availability. Expansion flying is
generally offered to airlines on very short notice.
The overall amount of military flying that the Company performs in any
one year is dependent upon several factors, including (i) the percentage of
mobilization value points represented by the Company's team as compared to
total mobilization value points of all providers of military service; (ii) the
percentage of passenger capacity of the Company with respect to its own team;
(iii) the amount of fixed-award and expansion flying required by the U.S.
military in each contract year; and (iv) the availability of the Company's
aircraft to accept and fly expansion awards.
Under its current teaming arrangement, the Company expects its
military/government charter revenues to increase to approximately $180.0
million for the contract year beginning October 1999. This represents more
than a 40% increase over the Company's fiscal year 1999 military/government
charter revenues of $126.2 million.
Ground Package Revenues. The Company earns ground package revenues
through the sale of hotel, car rental and cruise accommodations in conjunction
with the Company's air transportation product. The Company has traditionally
marketed these ground packages to its Ambassadair club members and through its
ATA Leisure Corp. subsidiaries to its charter and scheduled service
passengers. In the first quarter of 2000, ground package revenues increased
41.7% to $22.1 million, as compared to $15.6 million in the first quarter of
1999.
As is more fully described in footnote 3, the Company acquired several
Detroit-based tour operators in January and April 1999, which were included in
the Company's consolidated results of operations for the entire first quarter
of 2000. The majority of the change in ground package revenues between
quarters was attributable to these acquisitions.
The number of ground packages sold and the average revenue earned by the
Company for a ground package sale are a function of the seasonal mix of
vacation destinations served, the quality and types of ground accommodations
offered and general competitive conditions in the Company's markets, all of
which factors can change from period to period.
Other Revenues. Other revenues are comprised of the consolidated revenues
of affiliated companies, together with miscellaneous categories of revenue
associated with the scheduled and charter operations of the Company. Other
revenues increased to $11.2 million in the first quarter
54
<PAGE>
of 2000 as compared to $10.7 million in 1999, which represents a 4.7% increase
between years. In the first quarter of 2000, other revenues comprised 3.5% of
consolidated revenues as compared to 3.9% of consolidated revenues in the same
period of 1999.
Operating Expenses
Salaries, Wages and Benefits. Salaries, wages and benefits include the
cost of salaries and wages paid to the Company's employees, together with the
Company's cost of employee benefits and payroll-related local, state and
federal taxes. Salaries, wages and benefits expense in the first quarter of
2000 increased 13.0% to $68.7 million from $60.8 million in the first quarter
of 1999.
The Company increased its average equivalent employees by approximately
19.2% between the first quarters of 2000 and 1999, partially to appropriately
staff the 7.9% growth in ASMs flown between periods. The increase is also
partially attributable to the acquisitions of Chicago Express, Amber Air
Freight and ATALC. (See footnote 3). In the first quarter of 1999, the Company
recorded a charge of approximately $2.8 million in variable compensation
expected to be paid at the end of the year. This estimate of variable
compensation is based on Company profitability, so no corresponding charge was
recorded in the first quarter of 2000.
Fuel and Oil. Fuel and oil expense increased 78.1% to $63.4 million in
the first quarter of 2000, as compared to $35.6 million in the same period of
1999. The Company consumed 9.1% more gallons of jet fuel for flying operations
between years, which resulted in an increase in fuel expense of approximately
$2.9 million. Jet fuel consumption increased primarily due to the increased
number of block hours of jet flying operations between periods. The Company
flew 42,237 jet block hours in the first quarter of 2000, as compared to
39,002 jet block hours in the first quarter of 1999, an increase of 8.3%
between periods.
Fuel consumption growth between the first quarters of 2000 and 1999 was
greater than total block hour growth, since block hour growth in the first
quarter of 2000 was in the wide-body Lockheed L-1011 fleet, which consumes
approximately twice the gallons of jet fuel per block hour as compared to the
narrow-body Boeing 727-200 and Boeing 757-200 aircraft.
During the first quarter of 2000, the Company's average cost per gallon
of jet fuel consumed increased by 76.9% as compared to the first quarter of
1999, resulting in an increase in fuel and oil expense of approximately $27.5
million between periods.
During the first quarter of 1999, the Company entered into several fuel
price hedge contracts under which the Company sought to reduce the risk of
fuel price increases. The Company recorded approximately $2.1 million more in
fuel and oil expense under its first quarter 1999 hedge contracts than in the
first quarter 2000, when there were no such fuel hedges in place.
Depreciation and Amortization. Depreciation and amortization expense
increased 45.6% to $31.6 million in the first quarter of 2000, as compared to
$21.7 million in the first quarter of 1999.
Depreciation expense attributable to owned airframes, engines and
leasehold improvements increased $4.0 million in the first quarter of 2000, as
compared to the same period of 1999. The Company also increased its investment
in rotable parts and computer hardware and software, among other items of
property and equipment. These changes resulted in an increase in depreciation
expense of $2.1 million in the first quarter of 2000, as compared to the first
quarter of 1999.
Amortization of capitalized engine and airframe overhauls increased $2.0
million in the first quarter of 2000, as compared to the same period of 1999,
after including amortization of related manufacturers' credits. Changes to the
cost of overhaul amortization were partly due to the increase in total block
hours and cycles flown between comparable quarters for the Boeing 727-200 and
Lockheed L-1011 fleets, since such expense varies with that activity, and
partly due to the completion of more engine and airframe overhauls between
periods for these fleet types.
55
<PAGE>
Rolls-Royce-powered Boeing 757-200 aircraft, nine of which were delivered new
from the manufacturer between late 1995 and late 1999, are not presently
generating any material engine or airframe overhaul expense, since the initial
post-delivery overhauls for these aircraft are not yet due under the Company's
maintenance programs.
The cost of engine overhauls that become worthless due to early engine
failures and which cannot be economically repaired is charged to depreciation
and amortization expense in the period the engine fails. Depreciation and
amortization expense attributable to these write-offs increased $1.6 million
in the first quarter of 2000, as compared to the first quarter of 1999. When
these early engine failures can be economically repaired, the related repairs
are charged to aircraft maintenance, materials and repairs expense.
The Company recorded $0.2 million more in amortization expense due to the
goodwill associated with the acquisition of businesses discussed in footnote 3.
Handling, Landing and Navigation Fees. Handling and landing fees include
the costs incurred by the Company at airports to land and service its aircraft
and to handle passenger check-in, security, cargo and baggage where the
Company elects to use third-party contract services in lieu of its own
employees. Where the Company uses its own employees to perform ground handling
functions, the resulting cost appears within salaries, wages and benefits. Air
navigation fees are incurred when the Company's aircraft fly over certain
foreign airspace.
Handling, landing and navigation fees increased by 13.4% to $25.4 million
in the first quarter of 2000, as compared to $22.4 million in the first
quarter of 1999. The total number of system-wide jet departures between the
first quarters of 2000 and 1999 increased by 7.0% to 13,387 from 12,506,
resulting in approximately $1.3 million in volume-related handling and landing
expense increases between periods. The increase in handling and landing
expenses related to price and aircraft mix changes were $1.6 million in the
first quarter 2000, as compared to the first quarter 1999. In conjunction with
the Company's strategy to expand to more business travel destinations, such as
LaGuardia and Dallas, it is experiencing higher handling and landing fees
associated with these destinations.
The Company also incurred approximately $0.5 million in higher deicing
costs in the first quarter of 2000 as compared to the same period of 1999.
Aircraft Maintenance, Materials and Repairs. This expense includes the
cost of expendable aircraft spare parts, repairs to repairable and rotable
aircraft components, contract labor for maintenance activities, and other
non-capitalized direct costs related to fleet maintenance, including spare
engine leases, parts loan and exchange fees, and related shipping costs.
Aircraft maintenance, materials and repairs expense increased 43.8% to $19.7
million in the first quarter of 2000, as compared to $13.7 million in the same
period of 1999.
The Company performed a total of 14 maintenance checks on its fleet
during the first quarter of 2000 as compared to 12 in 1999. The cost of
materials consumed and components repaired in association with such checks and
other maintenance activity increased by $3.6 million between quarters. In
addition, six of these maintenance checks were performed by third party
vendors in 2000, as compared to the use of internal labor in 1999. This
resulted in an increase of $1.5 million in related labor costs in 2000, as
compared to 1999.
Ground Package Cost. Ground package cost is incurred by the Company with
hotels, car rental companies, cruise lines and similar vendors who provide
ground and cruise accommodations to Ambassadair and ATALC customers. Ground
package cost increased 43.2% to $18.9 million in the first quarter of 2000, as
compared to $13.2 million in the first quarter of 1999, in conjunction with
the growth in ground package revenues and due to the acquisition of ATALC (see
footnote 3).
Aircraft Rentals. Aircraft rentals expense for the first quarter of 2000
increased 5.9% to $16.1 million from $15.2 million in the first quarter of
1999. The Company financed two
56
<PAGE>
additional Boeing 757-200 aircraft in the first quarter of 2000 as compared to
the same quarter of 1999, adding $1.8 million in aircraft rentals expense as
compared to the prior year. This increase was partially offset by $1.1 million
in canceled leases for eight Boeing 727-200 aircraft, which were purchased
late in the first quarter of 1999.
Crew and Other Employee Travel. Crew and other employee travel is
primarily the cost of air transportation, hotels and per diem reimbursements
to cockpit and cabin crew members incurred to position crews away from their
bases to operate Company flights throughout the world. The cost of crew and
other employee travel increased 24.8% to $15.1 million in the first quarter of
2000, as compared to $12.1 million in the first quarter of 1999.
The average cost of crew positioning per full-time-equivalent crew member
increased 21.7% in the first quarter of 2000, as compared to the first quarter
of 1999. The average hotel cost per full-time-equivalent crew member increased
16.0% in the first quarter of 2000, as compared to the same period of 1999.
Both costs were affected by the increase in military business, which is
typically less cost-efficient due to more international destinations and less
notification prior to departures for expansion flying. Hotel costs also
increased due to higher room rates paid in the 2000 period.
Passenger Service. Passenger service expense includes the onboard costs
of meal and non-alcoholic beverage catering, the cost of alcoholic beverages
and in-flight movie headsets sold, and the cost of onboard entertainment
programs, together with certain costs incurred for mishandled baggage and
passengers inconvenienced due to flight delays or cancellations. For the first
quarters of 2000 and 1999, catering represented 80.1% and 81.3%, respectively,
of total passenger service expense.
The total cost of passenger service increased 16.7% to $11.2 million in
the first quarter of 2000, as compared to $9.6 million in the first quarter of
1999. The Company experienced an increase of approximately 7.7% in the average
unit cost of catering each passenger between periods primarily because in the
first quarter of 2000 there were relatively more military passengers boarded
in the Company's business mix, who are provided a more expensive catering
product due to the longer-stage-length of these flights. This resulted in
additional catering expense due to price-and-business-mix of $0.6 million in
the first quarter of 2000, as compared to the same period of 1999. Total jet
passengers boarded increased 7.2% between quarters, resulting in approximately
$0.5 million in higher volume-related catering expenses between the same sets
of comparative periods.
Commissions. The Company incurs commissions expense in association with
the sale by travel agents of single seats on scheduled service. In addition,
the Company incurs commissions to secure some commercial and
military/government charter business. Commissions expense increased 15.5% to
$11.2 million in the first quarter of 2000, as compared to $9.7 million in the
first quarter of 1999.
Approximately $1.7 million of the increase in commissions in the first
quarter of 2000 was attributable to commissions paid to travel agents by ATA
Leisure Corp. The Company also had an increase in the first quarter 2000 in
military commissions of $1.4 million, which is consistent with the growth in
military revenue. These increases were offset by a $1.6 million decrease in
scheduled service commission during the first quarter of 2000 due to an
industry decrease in travel agency commissions from 8.0% to 5.0%, effective in
the fourth quarter of 1999.
Other Selling Expenses. Other selling expenses are comprised primarily of
booking fees paid to computer reservation systems ("CRS"), credit card
discount expenses incurred when selling single seats and ground packages to
customers using credit cards for payment, and toll- free telephone services
provided to single-seat and vacation package customers who contact the Company
directly to book reservations. Other selling expenses increased 33.9% to $8.3
million in the first quarter of 2000, as compared to $6.2 million in the same
period of 1999. Selling expenses increased primarily due to growth in the
scheduled service business unit between
57
<PAGE>
periods, as well as due to the acquisition of tour operator businesses in the
first half of 1999 (see footnote 3).
Advertising. Advertising expense increased 17.9% to $6.6 million in the
first quarter of 2000, as compared to $5.6 million in the first quarter of
1999. The Company incurs advertising costs primarily to support single-seat
scheduled service sales and the sale of air-and-ground packages. Advertising
support for these lines of business was increased in the first quarter of
2000, consistent with the Company's overall strategy to continue to enhance
scheduled service RASM through increases in load factor and yield, and also
increased due to the acquisition of tour operator businesses in the first half
of 1999 (see footnote 3).
Facilities and Other Rentals. Facilities and other rentals include the
cost of all ground facilities that are leased by the Company such as airport
space, regional sales offices and general offices. The cost of facilities and
other rentals increased 15.6% to $3.7 million in the first quarter of 2000, as
compared to $3.2 million in the first quarter of 1999. Growth in facilities
costs between periods was primarily attributable to facilities rent at
Chicago-Midway to support Chicago Express, a subsidiary acquired April 30,
1999, which was not included in the 1999 first quarter results of operations.
Other Operating Expenses. Other operating expenses decreased 4.5% to
$19.1 million in the first quarter of 2000, as compared to $20.0 million in
the first quarter of 1999. Approximately $3.6 million of this decrease between
quarters was attributable to the higher cost of passenger air transportation
purchased by ATALC from air carriers other than the Company in the first
quarter of 1999, whereas ATALC primarily used the Company's own air
transportation in the first quarter of 2000. Additionally, in the first
quarter of 1999, prior to the acquisition of Chicago Express, other operating
expenses included the Company's costs for the code-share agreement with
Chicago Express, which were approximately $2.3 million in the first quarter of
1999, with no corresponding expense incurred in the first quarter of 2000.
These decreases in other operating expense were partially offset by many
individually insignificant increases in other operating expense categories.
Interest Income and Expense. Interest expense in the first quarter of
2000 increased to $7.7 million as compared to $5.1 million in the same period
of 1999. The increase in interest expense between periods was primarily due to
changes in the Company's capital structure resulting from the sale in December
1999 of $75.0 million in principal amount of 10.5% unsecured senior notes.
Interest expense of $2.0 million was recorded in the first quarter of 2000 for
these notes, which was not incurred in the first quarter of 1999.
The Company invested excess cash balances in short-term government
securities and commercial paper and thereby earned $1.9 million in interest
income in the first quarter of 2000, as compared to $1.8 million in the same
period of 1999.
Other Income. Other income decreased 94.4% to $0.1 million in the first
quarter 2000 from $1.8 million in the same period of 1999. The Company
recorded a gain of $1.7 million on the sale of a portion of its interest in
Equant, N.V. in the first quarter of 1999, while no such gain was recognized
in the first quarter of 2000.
Income Tax Expense. In the first quarter of 2000 the Company recorded a
tax credit of $1.1 million applicable to a $3.1 million pre-tax loss for that
period, while in the first quarter of 1999, income tax expense was $10.9
million applicable to $27.4 million pre-tax income. The effective tax rate
applicable to the first quarter 2000 tax credit was 36.4%, as compared to a
rate of 39.7% applicable to the tax expense recorded in the first quarter of
1999.
Income tax expense in both sets of comparative periods was affected by
the permanent non- deductibility for federal income tax purposes of a
percentage of certain amounts paid for crew per diem (40% in 2000 and 45% in
1999). The effect of this and other permanent differences on the effective
income tax rate for financial accounting purposes is to decrease the effective
rate as amounts of pre-tax income increase.
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<PAGE>
Year Ended December 31, 1999, Versus Year Ended December 31, 1998
Operating Revenues
Total operating revenues in 1999 increased 22.0% to $1.122 billion from
$919.4 million in 1998. This increase was due to a $113.4 million increase in
scheduled service revenues, a $41.2 million increase in commercial charter
revenues, a $35.0 million increase in ground package revenues, a $9.1 million
increase in other revenues, and a $4.3 million increase in military/government
charter revenues.
Scheduled Service Revenues. The following table sets forth, for the
periods indicated, certain key operating and financial data for the scheduled
service operations of the Company. Data shown for "Jet" operations include the
combined operations of Lockheed L-1011, Boeing 727-200 and Boeing 757-200
aircraft in scheduled service. Data shown for "J31" operations include the
operations of Jetstream 31 propeller aircraft operated by Chicago Express as
the ATA Connection.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------------------------------
1998 1999 Inc (Dec) % Inc (Dec)
---- ---- -------- -----------
<S> <C> <C> <C> <C>
Departures Jet................................ 31,237 35,402 4,165 13.33
Departures J31(a)............................. 16,388 17,716 1,328 8.10
----------- ----------- ------------ -----------
Total Departures (b)....................... 47,625 53,118 5,493 11.53
=========== =========== ------------ ==========
Block Hours Jet............................... 92,263 104,555 12,292 13.32
Block Hours J31............................... 16,166 17,979 1,813 11.21
----------- ---------- ------------ ----------
Total Block Hours (c)...................... 108,429 122,534 14,105 13.01
=========== =========== =========== ==========
RPMs Jet (000s)............................... 5,777,555 6,828,181 1,050,626 18.18
RPMs J31 (000s)............................... 30,991 35,922 4,931 15.91
----------- ----------- ------------ ----------
Total RPMs (000s) (d) ..................... 5,808,546 6,864,103 1,055,557 18.17
========= ========= ========= ==========
ASMs Jet (000s)............................... 7,756,330 8,809,564 1,053,234 13.58
ASMs J31 (000s)............................... 52,224 57,630 5,406 10.35
----------- ----------- ------------ ----------
Total ASMs (000s) (e)...................... 7,808,554 8,867,194 1,058,640 13.56
========= ========= ========= ----------
Load Factor Jet............................... 74.49 77.51 3.02 4.05
Load Factor J31............................... 59.34 62.33 2.99 5.04
------------ ------------ ------------- ----------
Total Load Factor (f)...................... 74.39 77.41 3.02 4.06
============ ============ ============= ==========
Passengers Enplaned Jet....................... 4,094,454 4,878,643 784,189 19.15
Passengers Enplaned J31....................... 176,604 206,304 29,700 16.82
---------- ---------- ---------- ---------
Total Passengers Enplaned (g).............. 4,271,058 5,084,947 813,889 19.06
========= ========= ========= =========
Revenue (000s)................................ $511,254 $624,647 $113,393 22.18
RASM in cents (h)............................. 6.55 7.04 0.49 7.48
Yield in cents (j)............................ 8.80 9.10 0.30 3.41
Revenue per segment $ (k)..................... 119.70 122.84 3.14 2.62
----------------------
</TABLE>
See footnotes (a) through (k) on pages 50 and 51.
Scheduled service revenues in 1999 increased 22.2% to $624.6 million from
$511.3 million in 1998. Scheduled service revenues comprised 55.7% of
consolidated revenues in 1999, as compared to 55.6% of consolidated revenues
in 1998.
The Company's scheduled service at Chicago-Midway accounted for
approximately 56.7% of scheduled service ASMs and 77.2% of scheduled service
departures in 1999, as compared to
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<PAGE>
53.4% and 73.5%, respectively, during 1998. During 1998, the Company began
nonstop service to New York's LaGuardia Airport, Dallas-Ft. Worth and Denver,
which continued throughout 1999. During 1999, the Company began nonstop
service to Philadelphia, which was not served during 1998. In addition to
these new services, the Company served the following existing jet markets in
both years: Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles, New York's John
F. Kennedy International Airport, Orlando, Phoenix, St. Petersburg, San
Francisco and Sarasota. The Company has announced that effective April 3, 2000
it will begin nonstop service to Washington D.C., and effective May 7, 2000,
it will begin nonstop service from Chicago-Midway to both Boston and Seattle.
Beginning in 1997, the Company also had a code-share agreement with
Chicago Express under which, as later amended, Chicago Express operated
19-seat Jetstream 31 propeller aircraft between Chicago-Midway and the cities
of Indianapolis, Milwaukee, Des Moines, Dayton, Grand Rapids, Lansing and
Madison. On April 30, 1999, the Company acquired all of the issued and
outstanding stock of Chicago Express Airlines, Inc., which continues to
operate these services as a wholly owned subsidiary of the Company.
The Company's operations at Chicago-Midway continued to be the fastest
growing portion of its scheduled service business in 1999. The Company
operated a peak schedule of 67 daily jet and commuter departures from
Chicago-Midway and served 22 destinations on a nonstop basis in the summer of
1999, as compared to 57 peak daily departures and 21 nonstop destinations
served in the summer of 1998. In 1998, the Company completed a $1.7 million
renovation of the existing terminal facilities at Chicago-Midway to enhance
their attractiveness and convenience for its customers. The Company also
presently expects to occupy 12 jet gates and one commuter aircraft gate at the
new Chicago-Midway terminal which is presently scheduled for completion in
2004, as compared to the six jet gates currently occupied in the existing
terminal.
The Company's growing commitment to Chicago-Midway is consistent with its
strategy for enhancing revenues and profitability in scheduled service by
focusing primarily on low cost, nonstop flights from airports where it has
market or aircraft advantages in addition to its low cost. The Company expects
its growing concentration of connecting flights at Chicago-Midway to provide
both revenue premiums and operating cost efficiencies, as compared to the
Company's other gateway cities. In addition, the Company plans to build an FIS
facility at Chicago-Midway to facilitate direct international flights.
The Company's Hawaii service accounted for 18.5% of scheduled service
ASMs and 4.7% of scheduled service departures in 1999, as compared to 21.3%
and 5.4%, respectively, in 1998. The Company provided nonstop services in both
years from Los Angeles, Phoenix and San Francisco to both Honolulu and Maui,
with connecting service between Honolulu and Maui. The Company provides these
services through a marketing alliance with the largest independent tour
operator serving leisure travelers to Hawaii from the United States. The
Company distributes the remaining seats on these flights through normal
scheduled service distribution channels. The Company believes it has superior
operating efficiencies in west coast-Hawaii markets due to the higher daily
hours of utilization obtained for both aircraft and crews in this market than
for other commercial charter and military applications.
The Company's Indianapolis service accounted for 14.0% of scheduled
service ASMs and 10.8% of scheduled service departures in 1999, as compared to
16.1% and 12.7%, respectively, in 1998. In 1999 and 1998, the Company operated
nonstop to Cancun, Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles, Orlando,
St. Petersburg, San Francisco and Sarasota. The Company has served
Indianapolis for 27 years through the Ambassadair Travel Club and in scheduled
service since 1986.
On June 9, 1999, nonstop service commenced between Ft. Lauderdale and San
Juan, Puerto Rico, and on June 16, 1999, nonstop service was begun between New
York's John F. Kennedy International Airport and San Juan. Between June and
September 1999, the Company operated seasonal service between New York's John
F. Kennedy International Airport and Dublin and Shannon, Ireland.
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<PAGE>
The Company continuously evaluates the profitability of its scheduled
service markets and expects to adjust its service from time to time. The
Company believes that scheduled service yields and load factors in 1999 and
1998 have benefitted from strong customer demand for air transportation in
the United States during a period of constrained industry growth in seat
capacity relative to this demand.
Commercial Charter Revenues. The Company's commercial charter revenues
are derived principally from independent tour operators and specialty
charter customers. The Company's commercial charter product provides
full-service air transportation to hundreds of customer-designated
destinations throughout the world. The Company believes that tour operator
and specialty charter are businesses where the Company's experience and
size provide meaningful competitive advantage and are businesses to which
the Company remains committed. Commercial charter revenues accounted for
23.5% of consolidated revenues in 1999, as compared to 24.2% in 1998.
The Company has expanded its seat capacity in the commercial and
military/government charter business units through the acquisition of
long-range Lockheed L-1011 series 500 aircraft. In July 1998, the Company
committed to the purchase of five such aircraft for delivery between the
third quarter of 1998 and the end of 1999. Although Lockheed L-1011 series
500 maintenance procedures and cockpit design are similar to the Company's
existing fleet of Lockheed L-1011 series 50 and series 100 aircraft, they
differ operationally in that their ten-to-eleven-hour range permits them to
operate nonstop to parts of Asia, South America and Central and Eastern
Europe using an all-coach seating configuration preferred by the U.S.
military and most of the Company's commercial charter customers. The
Company placed four of these aircraft into service in commercial and
military/government charter operations during 1999, which has increased the
available seat capacity for these charter business units, in addition to
opening new long-range market opportunities to the Company which it cannot
serve with its existing fleet. The Company expects to place the fifth
L-1011 series 500 aircraft into service in the first quarter of 2000.
The following table sets forth, for the periods indicated, certain key
operating and financial data for the commercial charter operations of the
Company.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
----------------------------------------------
1998 1999 Inc (Dec) % Inc (Dec)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Departures (b)..................... 9,602 10,212 610 6.35
Block Hours (c).................... 33,516 37,119 3,603 10.75
RPMs (000s) (d).................... 3,009,638 3,253,165 243,527 8.09
ASMs (000s) (e).................... 3,882,202 4,129,966 247,764 6.38
Passengers Enplaned (g)............ 1,617,901 1,753,237 135,336 8.36
Revenue (000s)..................... $222,571 $263,766 $41,195 18.51
RASM in cents (h).................. 5.73 6.39 0.66 11.52
</TABLE>
See footnotes (b) through (h) on pages 50 and 51.
The Company operates in two principal components of the commercial
charter business, known as "track charter" and "specialty charter." The
larger track charter business component is generally comprised of low
frequency but repetitive domestic and international flights between city
pairs, which support high passenger load factors and are marketed through
tour operators, providing value-priced and convenient nonstop service to
vacation destinations for the leisure traveler. Since track charter
resembles scheduled service in terms of its repetitive flying patterns
between fixed-city pairs, it allows the Company to achieve reasonable
levels of crew and aircraft utilization (although less than for scheduled
service), and provides the Company with meaningful protection from some
fuel price increases through the use of fuel escalation reimbursement
clauses in tour operator contracts. Track charter accounted for
approximately $193.8 million in revenues in 1999, as compared to $176.4
million in 1998.
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<PAGE>
Specialty charter (including incentive travel programs) is a product
which is designed to meet the unique requirements of the customer and is a
business characterized by lower frequency of operation and by greater
variation in city pairs served than the track charter business. Specialty
charter includes such diverse contracts as flying university alumni to
football games, transporting political candidates on campaign trips and moving
NASA space shuttle ground crews to alternate landing sites. The Company also
operates an increasing number of trips in all-first-class configuration for
certain corporate and high-end leisure clients. Although lower utilization of
crews and aircraft and infrequent service to specialty destinations often
result in higher average operating costs, the Company has determined that the
revenue premium earned by meeting special customer requirements more than
compensates for these increased costs. The diversity of the Company's three
fleet types also permits the Company to meet a customer's particular needs by
choosing the aircraft type which provides the most economical solution for
those requirements. Specialty charter accounted for approximately $40.0 million
in revenues in 1999, as compared to $35.1 million in 1998.
Military/Government Charter Revenues. The following table sets forth,
for the periods indicated, certain key operating and financial data for the
military/government flight operations of the Company.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
----------------------------------------------
1998 1999 Inc (Dec) % Inc (Dec)
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Departures (b)..................... 4,447 4,444 (3) (0.07)
Block Hours (c).................... 16,389 15,354 (1,035) (6.32)
RPMs (000s) (d).................... 821,813 818,627 (3,186) (0.39)
ASMs (000s) (e).................... 1,963,069 2,027,471 64,402 3.28
Passengers Enplaned (g)............ 205,641 199,013 (6,628) (3.22)
Revenue (000s)..................... $121,911 $126,213 $4,302 3.53
RASM in cents (h).................. 6.21 6.23 0.02 0.32
</TABLE>
---------------------
See footnotes (b) through (h) on pages 50 and 51.
The Company participates in two related military/government charter
programs known as "fixed-award" and "short-term expansion." Pursuant to the
U.S. military's fixed-award system, each participating airline is awarded
certain "mobilization value points" based upon the number and type of
aircraft made available by that airline for military flying. In order to
increase the number of points awarded, the Company has traditionally
participated in contractor teaming arrangements with other airlines. Under
these arrangements, the team has a greater likelihood of receiving fixed-award
business and, to the extent that the award includes passenger transport, the
opportunity for the Company to operate this flying is enhanced since the
Company represents a majority of the passenger transport capacity of the team.
As part of its participation in teaming arrangements, the Company pays a
commission to the team, which passes that revenue on to all team members based
upon their mobilization points.
All airlines participating in the fixed-award business contract annually
with the U.S. military from October 1 to the following September 30. For each
contract year, reimbursement rates are determined for aircraft types and
mission categories based upon operating cost data submitted by the
participating airlines. These contracts are generally not subject to
renegotiation once they become effective.
Short-term expansion business is awarded by the U.S. military first on a
pro rata basis to those carriers who have been provided fixed-award business
and then to any other carrier with aircraft availability. Expansion flying is
generally offered to airlines on very short notice.
The overall amount of military flying that the Company performs in any one
year is dependent upon several factors, including: (i) the percentage of
mobilization value points represented by the Company's team as compared to
total mobilization value points of all
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<PAGE>
providers of military service; (ii) the percentage of passenger capacity of the
Company with respect to its own team; (iii) the amount of fixed-award and
expansion flying required by the U.S. military in each contract year; and (iv)
the availability of the Company's aircraft to accept and fly expansion awards.
In April 1999, the Company announced that it had joined a new teaming
arrangement with several major passenger and cargo airlines. Under this new
teaming arrangement, the Company expects its military/government charter
revenues to increase to approximately $180.0 million for the contract year
beginning October 1999. This represents more than a 40% increase over the
Company's fiscal year 1999 military/government charter revenues of $126.2
million.
Ground Package Revenues. The Company earns ground package revenues through
the sale of hotel, car rental and cruise accommodations in conjunction with the
Company's air transportation product. The Company markets these ground packages
to its Ambassadair club members and through its ATA Leisure Corp. subsidiary to
its scheduled service and tour operator customers. In 1999, ground package
revenues increased 150.9% to $58.2 million, as compared to $23.2 million in
1998.
Effective January 31, 1999, the Company completed the acquisition of
Travel Charter International ("TCI") in Detroit, Michigan (see Note 12 to
Consolidated Financial Statements). TCI provides tour packages, including
ground arrangements, primarily to Mexican, Caribbean and Central American
destinations during the winter season, and to Europe in the summer. Prior to
the acquisition, the Company had a relationship with TCI as a major provider
of passenger airline services for over 14 years. Approximately $15.6 million
of the increase in ground package revenues was attributable to the incremental
ground package revenues of TCI, none of which were included in the Company's
results of operations in 1998.
Effective April 30, 1999, the Company completed the purchase of Key
Tours, Inc. and affiliated companies, also a tour operator serving the Detroit
metropolitan area (see Note 12 to Consolidated Financial Statements). Key Tours
provides tour packages, including ground arrangements, to such leisure
destinations as Las Vegas and Florida. The Company has had a relationship with
Key Tours as a major provider of passenger airline services for over 15 years.
Approximately $16.6 million of the increase in ground package revenues was
attributable to the incremental ground package revenues of Key Tours, none of
which were included in the Company's results of operations in 1998.
The number of ground packages sold and the average revenue earned by
the Company for a ground package sale are a function of the mix of vacation
destinations served, the quality and types of ground accommodations offered
and general competitive conditions with other air carriers offering similar
products in the Company's markets, all of which are factors that can change
from period to period.
Other Revenues. Other revenues are comprised of the consolidated
revenues of affiliated companies, together with miscellaneous categories of
revenue associated with the scheduled and charter operations of the Company.
Other revenues increased 22.8% to $49.6 million during 1999, as compared to
$40.4 million in 1998. The Company's other revenues increased primarily due to
higher revenues earned in non-passenger airline businesses, especially cargo
revenues which increased approximately $6.5 million, largely due to the
acquisition of the remaining 50% of the Amber Air Freight partnership at the
beginning of 1999 (see Note 12 to Consolidated Financial Statements).
Operating Expenses
Salaries, Wages and Benefits. Salaries, wages and benefits include the
cost of salaries and wages paid to the Company's employees, together with
the Company's cost of employee benefits and payroll-related local, state
and federal taxes. Salaries, wages and benefits expense in 1999 increased
19.5% to $252.6 million, as compared to $211.3 million in 1998.
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<PAGE>
The Company increased its average equivalent employees by approximately
14.8% in 1999 as compared to 1998, in order to appropriately staff the
Company's growth between periods. This growth was most significant in
categories of employees which are influenced directly by flight activity. Some
employment growth in 1999 was also provided to improve customer service in
targeted areas, such as at airport ticket counters, in reservations and in
other departments primarily involved in delivering services to the Company's
customers. The Company also recorded $6.7 million in additional salaries, wages
and benefits in 1999 attributable to new companies acquired (see Note 12 to
Consolidated Financial Statements). The average rate of pay earned by the
Company's employees (including all categories of salaries, wages and benefits)
increased by approximately 4.1% in 1999 as compared to 1998.
In 1999, the Company recorded $6.4 million in variable compensation
and related payroll taxes as compared to 1998, when $8.9 million in such
compensation was recorded. The Company's variable compensation plans in
both 1999 and 1998 paid significant cash awards to employees as a result of
the achievement of specific profitability targets.
Salaries, wages and benefits cost per ASM increased 9.9% in 1999 to
1.67 cents, as compared to 1.52 cents in 1998. This unit-cost increase was
attributable both to the faster rate of growth in average equivalent
employees between years than seat capacity, and to the increase in average
salaries paid between years.
Fuel and Oil. Fuel and oil expense increased 24.4% to $170.9 million
in 1999, as compared to $137.4 million in 1998. The Company consumed 11.3%
more gallons of jet fuel for flying operations between years, which
resulted in an increase in fuel expense of approximately $15.0 million. Jet
fuel consumption increased primarily due to the increased number of block
hours of jet flying operations between periods. The Company flew 157,481
jet block hours in 1999, as compared to 144,237 jet block hours in 1998, an
increase of 9.2% between years.
Fuel consumption growth between 1999 and 1998 was more than total
block hour growth since the Lockheed L-1011 fleet flew proportionately more
block hours and consumes approximately twice the gallons per block hour of
the Boeing 727-200 and Boeing 757-200.
During 1999, the Company's average cost per gallon of jet fuel
consumed increased by 12.0% as compared to 1998, resulting in an increase
in fuel and oil expense of approximately $18.0 million between years. This
increase in fuel price was experienced generally in the airline industry as
a result of significant increases in average crude oil and distillate
market prices as compared to 1998, particularly in the last two quarters of
1999.
The Company entered into fuel price hedge contracts during 1998 and
the first six months of 1999 under which the Company sought to reduce the
risk of fuel price increases. These hedges impacted fuel and oil expense by
1.8% and 1.2% in 1999 and 1998, respectively.
Fuel and oil expense increased 14.1% to 1.13 cents per ASM in 1999, as
compared to 0.99 cents per ASM in 1998, primarily due to the
period-to-period increase in the average price of fuel consumed.
Depreciation and Amortization. Depreciation and amortization expense
increased 22.0% to $96.0 million in 1999, as compared to $78.7 million in
1998. The Company recorded goodwill amortization expense of $0.9 million in
1999 due to the acquisition of new businesses (see Note 12 to Consolidated
Financial Statements), which was not incurred in 1998.
Depreciation expense attributable to owned engines, airframes and
leasehold improvements increased $9.0 million in 1999, as compared to 1998.
The Company purchased nine Boeing 727-200 aircraft in 1999, which had been
previously financed through operating leases, thereby increasing
depreciation expense on engines and airframes between years. The Company
recorded a reduction in aircraft rental expense between periods for the
termination of operating leases for these aircraft, which is further
described below under "Aircraft Rentals." The Company also placed four
Lockheed L-1011-500 owned aircraft into service in 1999, none of which were
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<PAGE>
owned in 1998. The Company also increased its investment in rotable parts
and computer hardware and software, among other items of property and
equipment, resulting in an increase in depreciation expense of $6.6 million
in 1999, as compared to 1998.
Amortization of capitalized engine and airframe overhauls increased
$9.7 million in 1999, as compared to 1998, after including the offsetting
amortization associated with manufacturers' credits. Changes to the cost of
overhaul amortization were partly due to the increase in total block hours
and cycles flown between comparable periods for the Boeing 727-200 and
Lockheed L-1011 fleets since such expense varies with that activity, and
partly due to the completion of more engine and airframe overhauls between
periods for these fleet types. Rolls-Royce-powered Boeing 757-200 aircraft,
nine of which were delivered new from the manufacturer between late 1995
and late 1999, are not presently generating any engine or airframe overhaul
expense since the initial post-delivery overhauls for these aircraft are
not yet due under the Company's maintenance programs.
The cost of engine overhauls that become worthless due to early engine
failures and which cannot be economically repaired is charged to
depreciation and amortization expense in the period the engine fails.
Depreciation and amortization expense attributable to these write-offs
decreased $2.3 million in 1999, as compared to 1998. When these early
engine failures can be economically repaired, the related repairs are
charged to aircraft maintenance, materials and repairs expense.
As is more fully explained in Note 11 to Consolidated Financial
Statements, certain changes in accounting estimates for depreciation have
been made by the Company. Effective July 1, 1998, the Company extended the
estimated useful life of the 13 owned Lockheed L-1011 series 50 and series
100 aircraft to a common retirement date of December 2004, and also reduced
the estimated salvage value of the related airframes, engines and rotables.
This change in estimate reduced depreciation expense in 1999 by $2.0
million, as compared to 1998. In addition, effective January 1, 1999, the
Company extended the estimated useful lives of capitalized Boeing 727-200
airframes, engines and improvements, all leasehold improvements, and all
rotable parts associated with this fleet, and reduced the associated
estimated salvage values. The effect of this change in estimate was to
reduce depreciation expense in 1999 by $4.6 million, as compared to 1998.
Depreciation and amortization expense per ASM increased 12.3% to 0.64
cents in 1999, as compared to 0.57 cents in 1998.
Handling, Landing and Navigation Fees. Handling and landing fees
include the costs incurred by the Company at airports to land and service
its aircraft and to handle passenger check-in, security and baggage where
the Company elects to use third-party contract services in lieu of its own
employees. Where the Company uses its own employees to perform ground
handling functions, the resulting cost appears within salaries, wages and
benefits. Air navigation fees are incurred when the Company's aircraft fly
over certain foreign airspace.
Handling, landing and navigation fees increased by 19.7% to $89.3
million in 1999, as compared to $74.6 million in 1998. The total number of
system-wide jet departures between 1999 and 1998 increased by 9.4% to
50,207 from 45,881, resulting in approximately $6.8 million in volume-related
handling and landing expense increases between periods. Many of these
departures were to destinations with significantly higher handling costs and
landing fees, and proportionately more such departures were made by wide-body
L-1011 aircraft which incur higher handling and landing costs per departure.
These price and departure mix variances resulted in $4.7 million more handling
and landing costs in 1999 than in 1998. The Company incurred approximately
$1.1 million in higher deicing costs in 1999, as compared with 1998,
attributable to the impact of more winter weather on flight operations in 1999
than in 1998. Additionally, the Company recorded approximately $1.4 million in
higher cargo handling expenses in 1999, as compared to 1998, due to the
acquisition of T.G. Shown Associates, Inc. in January 1999 (see Note 12 to
Consolidated Financial Statements).
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<PAGE>
The cost per ASM for handling, landing and navigation fees increased
9.3% to 0.59 cents in 1999, from 0.54 cents in 1998.
Aircraft Rentals. Aircraft rentals expense for 1999 increased 10.5% to
$58.7 million from $53.1 million in 1998. The Company financed four and
refinanced one additional Boeing 757-200 aircraft in 1999 with operating
leases, including two aircraft delivered new from the manufacturer at the
end of 1998, and two others delivered in October and November 1999,
increasing aircraft rentals expense by $12.5 million in 1999, as compared
to 1998.
The Company also owned nine Boeing 727-200 aircraft during most of
1999 which had been financed through operating leases during most of 1998,
thereby reducing aircraft rentals expense by $6.9 million between years.
Aircraft rentals cost per ASM for 1999 was 0.39 cents, an increase of
2.6% from 0.38 cents per ASM in 1998.
Aircraft Maintenance, Materials and Repairs. This expense includes the
cost of expendable aircraft spare parts, repairs to repairable and rotable
aircraft components, contract labor for airframe check and line maintenance
activities, and other non-capitalized direct costs related to fleet
maintenance, including spare engine leases, parts loan and exchange fees, and
related shipping costs. Aircraft maintenance, materials and repairs expense
increased 3.5% to $55.6 million in 1999, as compared to $53.7 million in 1998.
The Company expensed a total of 53 maintenance checks on its fleet
during 1999, as compared to 51 in 1998. The cost of materials consumed and
components repaired in association with such checks and other maintenance
activity increased by $2.3 million between 1999 and 1998.
The cost per ASM of aircraft maintenance materials decreased 5.1% to
0.37 cents in 1999, as compared to 0.39 cents in 1998.
Crew and Other Employee Travel. Crew and other employee travel is
primarily the cost of air transportation, hotels and per diem reimbursements
to cockpit and cabin crew members incurred to position crews away from their
bases to operate Company flights throughout the world. The cost of air
transportation is generally more significant for the commercial and
military/government charter business units since these flights often operate
between cities in which Company crews are not normally based and may involve
extensive international positioning of crews. Hotel and per diem expenses are
incurred for scheduled, commercial and military/government charter services,
although higher per diem and hotel rates generally apply to international
assignments.
The cost of crew and other employee travel increased 19.5% to $49.7
million in 1999, as compared to $41.6 million in 1998. During 1999, the
Company's average full-time-equivalent cockpit and cabin crew employment
was 9.7% higher than in 1998, while jet block hours flown increased by 9.2%
between the same periods. The Company also experienced lower utilization of
crew members due to the increase in military business.
The average cost of hotel rooms per full-time-equivalent crew member
increased 17.6% in 1999, as compared to 1998. Such hotel costs increased
primarily due to higher room rates paid in 1999.
The cost per ASM for crew and other employee travel increased 10.0% to
0.33 cents in 1999, from 0.30 cents in 1998.
Ground Package Cost. Ground package cost is incurred by the Company with
hotels, car rental companies, cruise lines and similar vendors who provide
ground and cruise accommodations to Ambassadair and ATA Vacations customers
as well as to customers of Travel Charter and Key Tours, which were acquired
by the Company in 1999 (see Note 12 to
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<PAGE>
Consolidated Financial Statements). Ground package cost increased 151.3% to
$49.0 million in 1999, as compared to $19.5 million in 1998. Approximately
$27.3 million of this increase was attributable to the operations of Travel
Charter and Key Tours in 1999, none of which costs were incurred in 1998.
The cost per ASM of ground packages increased 135.7% to 0.33 cents in
1999, as compared to 0.14 cents in 1998. This increase is a result of the
acquisition of the tour operators, Travel Charter and Key Tours.
Passenger Service. Passenger service expense includes the onboard
costs of meal and non-alcoholic beverage catering, the cost of alcoholic
beverages and in-flight movie headsets sold, and the cost of onboard
entertainment programs, together with certain costs incurred for mishandled
baggage and passengers inconvenienced due to flight delays or cancellations.
For 1999 and 1998, catering represented 82.0% and 84.1%, respectively, of
total passenger service expense.
The total cost of passenger service increased 15.3% to $39.2 million in
1999, as compared to $34.0 million in 1998. The Company experienced a decrease
of approximately 2.7% in the average unit cost of catering each passenger
between years, primarily because in 1999 there were relatively more scheduled
service passengers in the Company's business mix, who are provided a less
expensive catering product than the Company's longer-stage-length commercial
and military/government charter passengers. This resulted in a price-and-
business-mix reduction of $1.0 million in catering expense in 1999, as compared
to 1998. Total jet passengers boarded, however, increased 14.1% between years,
resulting in approximately $3.9 million in higher- volume-related catering
expenses between the same sets of comparative periods.
The cost per ASM of passenger service increased 8.3% to 0.26 cents in
1999, as compared to 0.24 cents in 1998.
Commissions. The Company incurs commissions expense in association
with the sale by travel agents of single seats on scheduled service and
ground packages for its tour operator customers. In addition, the Company
incurs commissions to secure some commercial and military/government
charter business. Commissions expense increased 37.2% to $39.1 million in
1999, as compared to $28.5 million in 1998.
Approximately $7.5 million of the increase in commissions in 1999, as
compared to 1998, was attributable to commissions paid to travel agents by
Travel Charter and Key Tours, which were acquired during the first half of
1999 (see Note 12 to Consolidated Financial Statements). Such commissions
were not included in the Company's results of operations in 1998.
Scheduled service commissions expense increased by $2.8 million
between 1999 and 1998, due to the corresponding increase in commissionable
revenues earned between periods. The Company experienced a decrease in
fourth quarter 1999 commission expenses due to an industry decrease in
travel agency commissions paid from 8.0% to 5.0%. Commission expense cost
per ASM increased 23.8% to 0.26 cents in 1999, as compared to 0.21 cents in
1998.
Other Selling Expenses. Other selling expenses are comprised primarily
of booking fees paid to computer reservation systems ("CRS"), credit card
fees incurred when selling single seats and ground packages to customers
using credit cards for payment, and toll-free telephone service for
customers who contact the Company directly to book reservations. Other
selling expenses increased 27.1% to $28.1 million in 1999, as compared to
$22.1 million in 1998. Scheduled service passengers boarded increased 19.1%
between the same periods. All such selling expenses increased due to growth
in the scheduled service and tour operator business units between periods.
Other selling cost per ASM increased 18.8% to 0.19 cents in 1999, as
compared to 0.16 cents in 1998.
Advertising. Advertising expense increased 4.5% to $18.6 million in
1999, as compared to $17.8 million in 1998. The Company incurs advertising
costs primarily to support single-seat
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<PAGE>
scheduled service sales and the sale of air-and-ground packages. Advertising
support for these lines of businesses was increased in 1999, consistent with
the Company's overall strategy to enhance scheduled service RASM through
increases in load factor and yield. The cost per ASM of advertising decreased
7.7% to 0.12 cents in 1999, as compared to 0.13 cents in 1998.
Facilities and Other Rentals. Facilities and other rentals include the
cost of all ground facilities that are leased by the Company such as airport
space, regional sales offices and general offices. The cost of facilities and
other rentals increased 40.0% to $13.3 million in 1999, as compared to $9.5
million in 1998. Approximately $1.7 million of the growth in facilities costs
between periods was attributable to the need to provide facilities at airport
locations to support new scheduled service destinations and expanded services
at existing destinations. Facility costs also increased $0.8 million as a
result of the acquisition of new business (see Note 12 to Consolidated
Financial Statements). The cost per ASM for facilities and other rentals
increased 28.6% to 0.09 cents in 1999, as compared to 0.07 cents in 1998.
Other Operating Expenses. Other operating expenses increased 16.1% to
$72.2 million in 1999, as compared to $62.2 million in 1998. Other
operating expenses increased primarily due to the cost of passenger air
transportation purchased by Travel Charter and Key Tours from air carriers
other than the Company during 1999, none of which was included in the
Company's 1998 results of operation. Other operating cost per ASM increased
4.4% to 0.47 cents in 1999, as compared to 0.45 cents in 1998.
Interest Income and Expense. Interest expense in 1999 increased to
$21.0 million, as compared to $12.8 million in 1998. The increase in
interest expense between periods was primarily due to changes in the
Company's capital structure resulting from the sale in December 1998 of
$125.0 million in principal amount of 9.625% unsecured senior notes. In
December 1999, the Company completed an additional sale of $75.0 million
principal amount of 10.5% unsecured senior notes. Interest expense of $11.5
million was recorded in 1999 for these notes, which was not incurred in
1998.
The interest expense increase in 1999 was partially offset by $1.7
million due to more interest being capitalized primarily on Boeing 757-200
and Lockheed L-1011-500 fleet acquisitions, and $2.3 million due to the
repayment of a note payable secured by a Boeing 757-200 aircraft, which had
been outstanding during 1998.
The Company invested excess cash balances in short-term government
securities and commercial paper and thereby earned $5.4 million in interest
income in 1999, as compared to $4.4 million in 1998.
Other Non-Operating Income. The Company holds a membership interest in
the SITA Foundation ("SITA"), an organization which provides data
communication services to the airline industry. SITA's primary asset is its
ownership in Equant N.V. ("Equant"). In February and December 1999, SITA
sold a portion of its interest in Equant in a secondary public offering and
distributed the pro rata proceeds to certain of its members (including
Amtran, Inc.) that elected to participate in the offering. The Company
recorded a gain on the sale of Equant shares of $1.7 million in the first
quarter of 1999 and a similar gain of $1.3 million in the fourth quarter of
1999.
Income Tax Expense. In 1999 the Company recorded $30.5 million in
income tax expense applicable to $77.8 million of pre-tax income for that
period, while in 1998, income tax expense was $27.1 million on pre-tax
income of $67.2 million. The effective tax rate applicable to 1999 was
39.2%, as compared to 40.4% in 1998.
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<PAGE>
Year Ended December 31, 1998, Versus Year Ended December 31, 1997
Operating Revenues
Total operating revenues in 1998 increased 17.4% to $919.4 million
from $783.2 million in 1997. This increase was due to a $139.5 million
increase in scheduled service revenues, a $10.5 million increase in other
revenues and a $0.9 million increase in ground package revenues, partially
offset by a $5.5 million decrease in commercial charter revenues, and a
$9.2 million decrease in military/government charter revenues.
Scheduled Service Revenues. The following table sets forth, for the
periods indicated, certain key operating and financial data for the
scheduled service operations of the Company. Data shown for "Jet"
operations include the combined operations of Lockheed L-1011, Boeing
727-200 and Boeing 757-200 aircraft in scheduled service. Data shown for
"J31" operations include the operations of Jetstream 31 propeller aircraft
operated by Chicago Express as the ATA Connection.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------------------
1997 1998 Inc (Dec) % Inc (Dec)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Departures Jet....................... 23,800 31,237 7,437 31.25
Departures J31(a).................... 10,091 16,388 6,297 62.40
---------- ---------- --------- -------
Total Departures (b)............... 33,891 47,625 13,734 40.52
========== ========== ========= =======
Block Hours Jet...................... 72,883 92,263 19,380 26.59
Block Hours J31...................... 10,210 16,166 5,956 58.33
---------- ---------- --------- -------
Total Block Hours (c).............. 83,093 108,429 25,336 30.49
========== ========== ========= =======
RPMs Jet (000s)...................... 4,523,245 5,777,555 1,254,310 27.73
RPMs J31 (000s)...................... 18,055 30,991 12,936 71.65
---------- ---------- --------- -------
Total RPMs (000s) (d).............. 4,541,300 5,808,546 1,267,246 27.90
========== ========== ========= =======
ASMs Jet (000s)...................... 6,209,825 7,756,330 1,546,505 24.90
ASMs J31 (000s)...................... 32,453 52,224 19,771 60.92
---------- ---------- --------- -------
Total ASMs (000s) (e).............. 6,242,278 7,808,554 1,566,276 25.09
========== ========== ========= =======
Load Factor Jet...................... 72.84 74.49 1.65 2.27
Load Factor J31...................... 55.63 59.34 3.71 6.67
---------- ---------- --------- -------
Total Load Factor (f).............. 72.75 74.39 1.64 2.25
========== ========== ========= =======
Passengers Enplaned Jet.............. 3,087,706 4,094,454 1,006,748 32.61
Passengers Enplaned J31.............. 96,812 176,604 79,792 82.42
---------- ---------- --------- -------
Total Passengers Enplaned (g) ..... 3,184,518 4,271,058 1,086,540 34.12
========== ========== ========= =======
Revenue (000s)....................... $371,762 $511,254 $139,492 37.52
RASM in cents (h) ................... 5.96 6.55 0.59 9.90
Yield in cents (j)................... 8.19 8.80 0.61 7.45
Revenue per segment $(k)............. 116.74 119.70 2.96 2.54
</TABLE>
See footnotes (a) through (k) on pages 50 and 51.
Scheduled service revenues in 1998 increased 37.5% to $511.3 million
from $371.8 million in 1997. Scheduled service revenues comprised 55.6% of
consolidated revenues in 1998, as compared to 47.5% of consolidated
revenues in 1997.
Between April 1997 and April 1999, the Company operated under a code
share agreement with Chicago Express under which Chicago Express flew
19-seat Jetstream 31 propeller aircraft as the ATA Connection between
Chicago-Midway and the cities of Indianapolis, Milwaukee,
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<PAGE>
Des Moines, Dayton, Grand Rapids, Lansing and Madison. The period-to-period
percentage changes in departures, block hours and passengers boarded were
significantly impacted by the operation of ATA Connection Jetstream 31 commuter
flights in the twelve months ended December 31, 1998, which operated only
during the nine months ended December 31, 1997. Such operations in all periods
generate comparatively less impact to ASMs and RPMs due to the small seat
capacity and short stage length of ATA Connection propeller aircraft as
compared to the Company's jet aircraft. In April 1999, the Company acquired
all of the issued and outstanding stock of Chicago Express Airlines, Inc.,
which continues to operate these services as a wholly owned subsidiary of the
Company.
The Company's 1998 scheduled service at Chicago-Midway accounted for
approximately 53.4% of scheduled service ASMs and 73.5% of scheduled
service departures, as compared to 42.9% and 63.2%, respectively, in 1997.
On May 1, 1998, the Company began three daily nonstop flights to Dallas-Ft.
Worth and two daily nonstop flights to Denver, none of which services were
provided during 1997. In addition to these new services, the Company added
frequencies in 1998 to most existing jet markets, including Ft. Lauderdale,
Ft. Myers, Las Vegas, Los Angeles, Orlando, Phoenix, St. Petersburg and San
Francisco. Flight frequencies to Sarasota declined between periods. ATA
Connection Jetstream 31 flights in 1998 and the nine months ended December
31, 1997, served Chicago-Midway from the cities of Dayton, Des Moines,
Grand Rapids, Indianapolis and Milwaukee. In addition, the Company operated
ATA Connection Jetstream 31 service between Chicago-Midway and the cities
of Lansing and Madison throughout 1998, while such service was operated
only during the fourth quarter of 1997. The Company operated 57 peak daily
jet and commuter departures from Chicago-Midway and served 21 destinations
on a nonstop basis in the summer of 1998, as compared to 15 nonstop
destinations served in the summer of 1997.
The Company's Hawaii service accounted for 21.3% of scheduled service
ASMs and 5.4% of scheduled service departures in 1998, as compared to 24.6%
and 6.8%, respectively, in 1997. The Company provided nonstop services in
both years from Los Angeles, Phoenix and San Francisco to both Honolulu and
Maui, with connecting service between Honolulu and Maui. In addition, in
1998, seasonal nonstop service was operated from San Diego to Honolulu,
which was not operated in 1997.
The Company's Indianapolis service accounted for 16.1% of scheduled
service ASMs and 12.7% of scheduled service departures in 1998, as compared
to 20.5% and 18.1%, respectively, in 1997. In 1998, the Company operated
nonstop to Cancun, Ft. Lauderdale, Ft. Myers, Las Vegas, Los Angeles,
Orlando, St. Petersburg, San Francisco and Sarasota.
Commercial Charter Revenues. Commercial charter revenues accounted for
24.2% of consolidated revenues in 1998, as compared to 29.1% in 1997. Track
charter accounted for approximately $176.4 million in revenues in 1998, as
compared to $184.3 million in 1997. Specialty charter accounted for
approximately $35.1 million in revenues in 1998, as compared to $34.6
million in 1997.
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The following table sets forth, for the periods indicated, certain key
operating and financial data for the commercial charter operations of the
Company.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------------------
1997 1998 Inc (Dec) % Inc (Dec)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Departures (b).......................... 10,589 9,602 (987) (9.32)
Block Hours (c)......................... 36,836 33,516 (3,320) (9.01)
RPMs (000s) (d)......................... 3,373,840 3,009,638 (364,202) (10.79)
ASMs (000s) (e)......................... 4,169,102 3,882,202 (286,900) (6.88)
Passengers Enplaned (g)................. 1,840,056 1,617,901 (222,155) (12.07)
Revenue (000s).......................... $228,062 $222,571 $(5,491) (2.41)
RASM in cents (h)....................... 5.47 5.73 0.26 4.75
</TABLE>
See footnotes (b) through (h) on pages 50 and 51.
Military/Government Charter Revenues. The following table sets forth,
for the periods indicated, certain key operating and financial data for the
military/government flight operations of the Company.
<TABLE>
<CAPTION>
Twelve Months Ended December 31,
-----------------------------------------------
1997 1998 Inc (Dec) % Inc (Dec)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Departures (b)........................ 4,860 4,447 (413) (8.50)
Block Hours (c)....................... 18,704 16,389 (2,315) (12.38)
RPMs (000s) (d)....................... 1,044,317 821,813 (222,504) (21.31)
ASMs (000s) (e)....................... 2,165,169 1,963,069 (202,100) (9.33)
Passengers Enplaned (g)............... 265,862 205,641 (60,221) (22.65)
Revenue (000s)........................ $131,115 $121,911 $(9,204) (7.02)
RASM in cents (h)..................... 6.06 6.21 0.15 2.48
</TABLE>
See footnotes (b) through (h) on pages 50 and 51.
Ground Package Revenues. In 1998, ground package revenues increased
4.0% to $23.2 million, as compared to $22.3 million in 1997.
The Company's Ambassadair Travel Club offers hundreds of
tour-guide-accompanied vacation packages to its approximately 38,000
individual and family members annually. In 1998, total packages sold
decreased 5.0% as compared to 1997, but the average revenue earned for each
ground package sold increased 20.4% between periods.
Other Revenues. Other revenues are comprised of the consolidated
revenues of affiliated companies, together with miscellaneous categories of
revenue associated with the scheduled and charter operations of the
Company. Other revenues increased 35.1% to $40.4 million in 1998, as
compared to $29.9 million in 1997.
In 1998, as compared to 1997, the Company earned $4.3 million more in
substitute service revenues, $3.2 million more in cancellation and
administrative fees, and $2.4 million more in cargo and other affiliate
company revenues, partially offset by $0.6 million less revenue earned from
the sale of surplus and obsolete aircraft parts.
A substitute service agreement typically provides for the Company to
operate aircraft with its crews on routes designated by the customer
airline to carry the passengers of that airline for a limited period of
time. The Company experienced increased demand for this type of service in
1998 due to delays in new aircraft deliveries being encountered by various
airlines. The Company also increased its administrative fee for
change-of-reservation on non-refundable
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<PAGE>
scheduled service tickets from $50 to $60 per change effective August 1998,
and the volume of such fees earned also increased between years in proportion
to the increase in scheduled service passengers boarded.
Operating Expenses
Salaries, Wages and Benefits. Salaries, wages and benefits expense in
1998 increased 22.5% to $211.3 million from $172.5 million in 1997.
The Company increased its average equivalent employees by 18.4%
between 1998 and 1997 in order to appropriately staff the growth in
available seats offered between periods. Categories of employees where this
growth was most significant included cockpit and cabin crews, reservations
agents, airport passenger and ramp service agents, and aircraft maintenance
personnel, all of which are influenced directly by flight activity. Some
employment growth in 1998 was also needed to correct for certain employee
shortages in 1997, particularly in the areas of cockpit crews, reservations
agents, and airframe and power plant mechanics.
The average rate of pay earned by the Company's employees (including
all categories of salaries, wages and benefits, except for variable
compensation) was unchanged between 1998 and 1997. While most employees
received wage rate increases between years, new employees are generally
hired at lower average starting rates of pay than those rates in effect for
more senior employees. The wage-rate reductions attributable to new
employees between 1998 and 1997 approximately offset the wage rate
increases paid to more senior employees.
In 1998, the Company recorded $8.9 million in variable compensation
and related payroll taxes as a result of the significant improvement in
earnings as compared to 1997, when no such compensation was incurred. In
the second quarter of 1997, a one-time charge of $2.0 million was recorded
for variable compensation expense associated with the resignation of the
Company's former President and Chief Executive Officer.
Salaries, wages and benefits cost per ASM increased 11.8% in 1998 to
1.52 cents, as compared to 1.36 cents in 1997. This unit-cost increase was
attributable to the faster rate of growth in average equivalent employees
between years than seat capacity, and to the variable compensation earned
in 1998, which was not earned in 1997.
Fuel and Oil. Fuel and oil expense decreased 10.6% to $137.4 million
in 1998, as compared to $153.7 million in 1997. This decrease occurred
despite the Company consuming 9.8% more gallons of jet fuel for flying
operations between years, which resulted in an increase in fuel expense of
approximately $15.0 million. Jet fuel consumption increased primarily due
to the increased number of block hours of jet flying operations between
periods. The Company flew 144,237 jet block hours in 1998, as compared to
129,216 jet block hours in 1997, an increase of 11.6% between years.
Fuel consumption growth between 1998 and 1997 was less than total
block hour growth, however, since most of the block hour growth in 1998 was
in the narrow-body Boeing 727-200 and Boeing 757-200 fleets, which consume
approximately 50% of the gallons per block hour consumed by the Lockheed
L-1011 fleet.
During 1998, the Company's average cost per gallon of jet fuel
consumed decreased by 20.0% as compared to 1997, resulting in a decrease in
fuel and oil expense of approximately $34.4 million between years. This
reduction in fuel price was experienced generally in the airline industry
throughout 1998 as a result of significant reductions in average crude oil
and distillate market prices as compared to 1997.
During the first, second and fourth quarters of 1998, the Company
entered into several fuel price hedge contracts under which the Company
sought to reduce the risk of fuel price increases during the year. The
Company hedged some 1998 fuel consumption under swap agreements
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which established specific swap prices for designated periods and hedged other
1998 fuel consumption under fuel cap agreements which guaranteed a maximum
price per gallon for designated periods. Since the price of fuel declined
during most of 1998, the Company recorded approximately $2.5 million in
additional fuel and oil expense under its hedge contracts, which added
approximately one cent to its average cost per gallon in 1998.
Fuel and oil expense decreased 18.9% to 0.99 cents per ASM in 1998, as
compared to 1.22 cents per ASM in 1997, primarily due to the
period-to-period decrease in the average price of fuel consumed.
Depreciation and Amortization. Depreciation and amortization expense
increased 25.9% to $78.7 million in 1998, as compared to $62.5 million in
1997.
Depreciation expense attributable to owned airframes and leasehold
improvements increased $3.0 million in 1998, as compared to 1997. The
Company purchased one Boeing 757-200 and one Boeing 727-200 aircraft in
late 1997 which had been previously financed through operating leases,
thereby increasing depreciation expense on airframes between years. (The
Company recorded a reduction in aircraft rental expense between periods for
the termination of operating leases for these aircraft. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Operating Expenses--Aircraft Rentals.")
The Company also recorded additional inventory obsolescence expense
for certain aircraft parts held for sale which were sold during the first
quarter of 1998, and increased its investment in rotable parts and computer
hardware and software, among other items of property and equipment. These
changes resulted in an increase in depreciation expense of $2.4 million in
1998, as compared to 1997.
Amortization of capitalized engine and airframe overhauls increased
$11.1 million in 1998, as compared to 1997, after including the offsetting
amortization associated with manufacturers' credits. Changes to the cost of
overhaul amortization were partly due to the increase in total block hours
and cycles flown between comparable periods for the Boeing 727-200 and
Lockheed L-1011 fleets, since such expense varies with that activity, and
partly due to the completion of more engine and airframe overhauls between
periods for these fleet types. Rolls-Royce-powered Boeing 757-200 aircraft,
seven of which were delivered new from the manufacturer between late 1995
and late 1998, are not presently generating any engine or airframe overhaul
expense since the initial post-delivery overhauls for these aircraft are
not yet due under the Company's maintenance programs.
The cost of engine overhauls that become worthless due to early engine
failures and which cannot be economically repaired is charged to
depreciation and amortization expense in the period the engine fails.
Depreciation and amortization expense attributable to these write-offs
increased $1.3 million in 1998 as compared to 1997. When these early engine
failures can be economically repaired, the related repairs are charged to
aircraft maintenance, materials and repairs expense.
Effective July 1, 1998, the Company extended the estimated useful life
of the 13 owned Lockheed L-1011 series 50 and series 100 aircraft to a
common retirement date of December 2004, and also reduced the estimated
salvage value of the related airframes, engines and rotables. The effect of
this change in estimate was to reduce depreciation expense in 1998 by $2.1
million, as compared to 1997.
Depreciation and amortization expense per ASM increased 16.3% to 0.57
cents in 1998, as compared to 0.49 cents in 1997.
Handling, Landing and Navigation Fees. Handling, landing and
navigation fees increased by 7.5% to $74.6 million in 1998, as compared to
$69.4 million in 1997. The total number of system-wide jet departures
between 1998 and 1997increased by 16.1% to 45,881 from 39,517,
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resulting in approximately $8.8 million in volume-related handling and landing
expense increases between periods.
This volume-related increase was partially offset, however, by a
decrease of approximately $3.3 million in price-and-mix-related handling
and landing expenses for 1998, as compared to 1997, attributable primarily
to a change in jet departure mix.
The cost per ASM for handling, landing and navigation fees decreased
1.8% to 0.54 cents in 1998, from 0.55 cents in 1997.
Aircraft Rentals. Aircraft rentals expense for 1998 decreased 2.4% to
$53.1 million from $54.4 million in 1997. The Company purchased one leased
Boeing 757-200 in September 1997; returned one leased Boeing 757-200 to the
lessor in November of 1997; and added one new leased Boeing 757-200 each in
December 1997 and August 1998. These fleet changes resulted in a reduction
in Boeing 757-200 rentals expense of $0.9 million in 1998, as compared to
1997. Aircraft rentals expense for the Boeing 727-200 and Lockheed L-1011
fleets did not change significantly between years.
Aircraft rentals cost per ASM for 1998 was 0.38 cents, a decrease of
11.6% from 0.43 cents per ASM in 1997.
Aircraft Maintenance, Materials and Repairs. Aircraft maintenance,
materials and repairs expense increased 4.3% to $53.7 million in 1998, as
compared to $51.5 million in 1997. The Company performed a total of 51
light airframe checks on its fleet during 1998, as compared to 44 such
checks performed in 1997, an increase of 15.9% between years. The cost of
materials consumed and components repaired in association with such light
checks and other maintenance activity increased by $1.6 million between
1998 and 1997.
The cost per ASM of aircraft maintenance, materials and repairs
decreased 4.9% to 0.39 cents in 1998, as compared to 0.41 cents in 1997.
Crew and Other Employee Travel. The cost of crew and other employee
travel increased 13.7% to $41.6 million in 1998, as compared to $36.6
million in 1997. During 1998, the Company's average full-time-equivalent
cockpit and cabin crew employment was 13.5% higher than in 1997, while jet
block hours flown increased by 11.6% between the same periods.
The average cost of hotel rooms per full-time-equivalent crew member
increased 4.4% in 1998, as compared to 1997. Such hotel costs increased due
to both higher room rates paid in 1998, and due to aircraft flow changes
associated with the Company's 1998 summer schedule which resulted in more
crews terminating their daily flying away from their home bases than in the
prior year.
The average cost of crew positioning per full-time-equivalent crew
member decreased 5.4% in 1998, as compared to 1997. Crew positioning costs
declined primarily due to the shift of revenue production from commercial
charter and military/government charter to scheduled service. Crews
positioning out of base for scheduled service can often position at no cost
on Company flights, whereas positioning to remote international locations
for charter service is usually done on other carriers at an incremental
cost.
The cost per ASM for crew and other employee travel increased 3.4% to
0.30 cents in 1998, as compared to 0.29 cents in 1997.
Ground Package Cost. Ground package cost increased 1.0% to $19.4
million in 1998, as compared to $19.2 million in 1997. The number of
Ambassadair ground packages sold in 1998 decreased 5.0%, as compared to
1997, while the average cost of Ambassadair ground packages sold increased
by 29.8% between years. The number of ATA Vacations ground packages sold in
1998 decreased 10.2% as compared to 1997, while the average cost of ATA
Vacations ground
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packages sold decreased by 7.6% between the same periods. The cost per ASM of
ground packages decreased 6.7% to 0.14 cents in 1998, as compared to 0.15 cents
in 1997.
Passenger Service. For 1998 and 1997, catering represented 84.1% and
83.0%, respectively, of total passenger service expense.
The total cost of passenger service increased 3.7% to $34.0 million in
1998, as compared to $32.8 million in 1997. The Company experienced a
decrease of approximately 10.2% in the average unit cost of catering each
passenger between years, primarily because in 1998 there were relatively
more scheduled service passengers in the Company's business mix who are
provided a less-expensive catering product than the Company's
longer-stage-length commercial and military/government charter passengers.
This resulted in a price-and-business-mix reduction of $3.3 million in
catering expense in 1998, as compared to 1997. Total jet passengers
boarded, however, increased 15.0% between years, resulting in approximately
$4.0 million in higher volume-related catering expenses between the same
sets of comparative periods.
The cost per ASM of passenger service declined 7.7% to 0.24 cents in
1998 from 0.26 cents in 1997.
Commissions. Commissions expense increased 9.2% to $28.5 million in
1998, as compared to $26.1 million in 1997.
Scheduled service commissions expense increased by $2.3 million
between 1998 and 1997. This increase was lower than the related increase of
37.5% in scheduled service revenues between the same periods, partially
because of an industry-wide reduction in the standard travel agency
commission rate from 10% to 8% which became effective in October 1997, and
partially due to relatively more non-commissionable bulk seat scheduled
service sales being made in 1998, as compared to 1997. Neither commercial
charter nor military/government charter commissions expense changed
significantly between 1998 and 1997.
The cost per ASM of commissions expense was unchanged at 0.21 cents
for both 1998 and 1997.
Other Selling Expenses. Other selling expenses increased 42.6% to
$22.1 million in 1998, as compared to $15.5 million in 1997. Scheduled
service passengers boarded increased 34.1% between the same periods.
CRS fees increased $3.1 million in 1998, as compared to 1997, due to a
40.2% increase in total CRS bookings made for the expanded scheduled
service business unit between periods and due to a 7.5% increase in the
average cost of each CRS booking. Toll-free telephone costs increased $0.5
million between 1998 and 1997, primarily due to higher toll-free usage
related to higher scheduled service reservations activity. Credit card fees
increased $3.0 million in 1998, as compared to 1997, due to higher 1998
earned revenues in scheduled service which were sold using credit cards as
payment. Other selling cost per ASM increased 33.3% to 0.16 cents in 1998,
as compared to 0.12 cents in 1997.
Advertising. Advertising expense increased 40.2% to $17.8 million in
1998, as compared to $12.7 million in 1997. The 40.2% increase in total
advertising expense between years was slightly greater than the 37.5%
increase in scheduled service revenues between the same periods. The
majority of the Company's growth in 1998 was from increased frequencies at
existing gateway cities such as Chicago-Midway, which provided some
advertising efficiencies in 1998 as compared to the prior year. Such
market-related efficiency was partially offset, however, due to temporarily
higher advertising support required in the second and third quarters of
1998 for the introduction of the Company's new services to Dallas-Ft.
Worth, Denver, San Juan and New York's LaGuardia Airport, as well as to
launch the Company's fall promotions in the third and fourth quarters of
1998. The cost per ASM of advertising increased 30.0% to 0.13 cents in
1998, as compared to 0.10 cents in 1997.
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Facilities and Other Rentals. Facilities and other rentals include the
cost of all ground facilities that are leased by the Company such as
airport space, regional sales offices and general offices. The cost of
facilities and other rentals increased 10.5% to $9.5 million in 1998, as
compared to $8.6 million in 1997. The rate of growth in facilities costs
between periods was comparable to the 9.5% rate of ASM growth between 1998
and 1997 due to the addition of new facilities for services to Denver,
Dallas-Ft. Worth and New York's LaGuardia Airport between periods. The cost
per ASM for facility and other rentals was unchanged at 0.07 cents in both
1998 and 1997.
Other Operating Expenses. Other operating expenses increased 14.5% to
$62.2 million in 1998, as compared to $54.3 million in 1997. Other
operating expenses which experienced significant changes between periods
included: (i) $3.1 million of additional costs for the Chicago Express
Jetstream 31 code share agreement, which agreement was not in effect in the
1997 first quarter, and because such code share was expanded to include
Lansing and Madison in 1998, which were served in only the fourth quarter
of 1997; (ii) $2.3 million in higher expenses associated with the operation
of the Company's affiliate businesses; and (iii) $1.7 million in higher
costs associated with the short-term leasing of substitute aircraft and the
reprotection of some of the Company's passengers on other airlines due to
higher-than-normal delayed and irregular flight operations, primarily in
the second quarter of 1998. Other operating cost per ASM increased 4.7% to
0.45 cents in 1998, as compared to 0.43 cents in 1997.
Interest Income and Expense. Interest expense in 1998 increased to
$12.8 million as compared to $9.5 million in 1997. The increase in interest
expense between periods was primarily due to changes in the Company's
capital structure resulting from the two financings completed on July 24,
1997, at which time the Company (i) sold $100.0 million principal amount of
10.5% unsecured seven-year notes, and (ii) entered into a new $50.0 million
secured revolving credit facility, thereby replacing the former secured
revolving credit facility of $122.0 million as of June 30, 1997.
Additionally, in December 1998, the Company sold $125.0 million principal
amount of 9.625% unsecured senior notes.
Prior to completing these new financings, the Company utilized secured
bank credit facilities to finance cash flow requirements of the Company as
they arose, thereby minimizing the level of borrowings on which interest
would be paid. During 1998, the Company's weighted average debt outstanding
was approximately $159.1 million, as compared to $117.2 million in 1997.
The weighted average effective interest rate applicable to the
Company's outstanding debt in 1998 was 8.56%, as compared to 8.06% in 1997.
The increase in the weighted average effective interest rates between years
was primarily due to the 10.5% interest rate applicable to the $100.0
million in unsecured notes issued on July 24, 1997, which was higher than
the average interest rate which was applicable to borrowings under the
former credit facility.
The Company invested excess cash balances in short-term government
securities and commercial paper and thereby earned $4.4 million in interest
income in 1998, as compared to $1.6 million in 1997.
Income Tax Expense. In 1998 the Company recorded $27.1 million in
income tax expense applicable to $67.2 million of pre-tax income for that
period, while in 1997, income tax expense was $4.5 million on pre-tax
income of $6.0 million. The effective tax rate applicable to 1998 was
40.4%, as compared to 73.9% in 1997.
Income tax expense in both sets of comparative periods was affected by
the permanent non-deductibility for federal income tax purposes of a
percentage of amounts paid for crew per diem (45% in 1998 and 50% in 1997).
The effect of this and other permanent differences on the effective income
tax rate for financial accounting purposes becomes more pronounced in cases
where before-tax income approaches zero, which was a significant reason for
the higher effective tax rate in 1997.
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Income tax expense for 1997 was also significantly affected by the
one-time $2.0 million charge to salaries, wages and benefits for the
executive compensation package provided to the Company's former President
and Chief Executive Officer. Of the total compensation paid to this former
executive of the Company in 1997, approximately $1.7 million was
non-deductible against the Company's federal taxable income.
Liquidity and Capital Resources
Cash Flows. In the first quarters of 2000 and 1999, net cash provided
by operating activities was $47.8 million and $68.5 million, respectively.
The decrease in cash provided by operating activities between periods was
attributable to such factors as lower earnings, lower deferred taxes, lower
accrued expenses and other factors, offset by higher depreciation and
amortization.
Net cash used in investing activities was $50.2 million and $116.9
million, respectively, in the first quarters of 2000 and 1999. Such amounts
primarily included capital expenditures totaling $41.9 million and $100.6
million, respectively, for engine and airframe overhauls, airframe
improvements and the purchase of rotable parts. Capital expenditures in the
first quarter of 1999 were higher primarily due to acquisition of certain
L-1011-500 aircraft and parts; due to the purchase of eight Boeing 727-200
aircraft; and due to advanced deposits paid on future deliveries of Boeing
757-200 aircraft from the manufacturer.
Net cash provided by financing activities was $7.5 million in the
first quarter of 2000 as compared to $0.3 million in the first quarter of
1999. The increase was primarily due to the first quarter 2000 financing of
$11.5 million, collateralized by one L-1011-500, offset by the first
quarter 2000 purchase of $3.9 million in treasury stock.
In 1999, 1998 and 1997, net cash provided by operating activities was
$159.6 million, $151.8 million and $99.9 million, respectively. The
increase in cash provided by operating activities between periods was
attributable to such factors as increased earnings, higher depreciation and
amortization, higher accrued expenses and other factors. These increases
were offset by higher investments in inventories and receivables, and a
lower amount of income tax deferred in 1999, as the Company utilized all
remaining net operating loss carryforwards from earlier tax years.
Net cash used in investing activities was $305.7 million, $142.4
million and $76.1 million, respectively, in the years ended December 31,
1999, 1998 and 1997. Such amounts primarily included capital expenditures
totaling $274.3 million, $175.4 million and $84.2 million, respectively,
for engine and airframe overhauls, airframe improvements, hushkit
installations, the purchase of rotable parts, and for purchase deposits
made on Boeing 757-200 and Lockheed L-1011-500 aircraft scheduled for
future delivery. Included in capital expenditures for 1999 were
approximately $41.5 million for the purchase of nine Boeing 727-200
aircraft that were previously leased and approximately $74.2 million for
the purchase and modification of five Lockheed L-1011-500 aircraft.
Net cash provided by financing activities for the year ended December
31, 1999, 1998 and 1997 was $93.4 million, $59.3 million and $6.9 million,
respectively. This cash provided by financing activities was primarily
attributable to proceeds from long-term debt of $99.9 million in 1999
consisting of a $75.0 million principal amount of unsecured senior notes, a
$17.0 million special facility revenue bond and a $7.9 million note
payable, as compared to $131.0 million for 1998 consisting of a $125.0
million principal amount of unsecured senior notes and a $6.0 million
special facility revenue bond. (See Note 4 to Consolidated Financial
Statements.) These proceeds were offset by payments on long-term debt of
$1.6 million in 1999 for certain monthly installment payments, as compared
to $71.5 million in 1998, for items such as $34.0 million repayment on the
revolving bank credit facility, $30.0 million repayment of a note payable
and $7.5 million for other repayments. These cash inflows were also offset
by cash outflows for the purchase of treasury stock of $8.6 million and
$0.1 million, respectively, in 1999 and 1998. Cash provided by financing
activities in 1997 of $134.0 million were primarily from the $100.0
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million principal amount of unsecured notes, which were offset by the full
repayment of the former credit facility.
Aircraft and Fleet Transactions. In November 1994, the Company signed
a purchase agreement for six new Boeing 757-200s which, as subsequently
amended, now provides for 13 total aircraft to be delivered between 1995
and 2000. As of March 31, 2000, the Company had accepted delivery of nine
aircraft under this agreement, which were financed under leases accounted
for as operating leases. The aggregate purchase price for the remaining
aircraft is approximately $50.0 million per aircraft, subject to
escalation. The final deliveries are scheduled for June and November 2000.
Advanced payments totaling approximately $27.2 million ($6.8 million per
aircraft) are required prior to delivery of the remaining aircraft, with
the remaining purchase price payable at delivery. As of March 31, 2000 and
1999, the Company had recorded fixed asset additions for $19.9 million and
$16.3 million, respectively, in advanced payments applicable to aircraft
scheduled for future delivery.
In January 2000, Chicago Express Airlines, Inc., a wholly owned
subsidiary of Amtran, entered into an agreement to purchase nine SAAB 340B
aircraft, including spare engines, spare parts and crew training, for an
aggregate purchase price of approximately $30.0 million. These aircraft
will be placed into service throughout 2000 in conjunction with the
retirement of the current fleet of Jetstream J31s, all of which are
currently leased. Chicago Express has taken delivery of three of these
aircraft, two of which were placed in revenue service in the first quarter
of 2000. The Company expects to place five aircraft into revenue service
during the second quarter of 2000, with the remaining two being placed into
revenue service in the third quarter of 2000.
Also in the first quarter of 2000, the Company placed the final of
five total Lockheed L-1011-500 aircraft into revenue service.
In November 1994, the Company signed a purchase agreement for six new
Boeing 757-200s which, as subsequently amended, now provides for 13 total
aircraft to be delivered between 1995 and 2000. In conjunction with the
Boeing purchase agreement, the Company entered into a separate agreement
with Rolls-Royce Commercial Aero Engines Limited to provide RB211-535E4
engines to power the new Boeing 757-200 aircraft. With the thirteenth
delivery, the Company will have purchased 26 installed engines and four
spare engines to support this fleet. The Company accepted delivery of the
first nine aircraft under these agreements between September 1995 and
December 1999, all of which were financed under leases accounted for as
operating leases. The aggregate purchase price under these agreements for
the remaining four aircraft is approximately $50.0 million per aircraft,
subject to escalation. Two deliveries under this agreement are scheduled
for June 2000, while the remaining two aircraft deliveries are scheduled
for the fourth quarter of 2000. Advanced payments totaling approximately
$27.2 million (approximately $6.8 million per aircraft) are required prior
to delivery of the remaining aircraft, with the remaining purchase price
payable at delivery. As of December 1999, the Company had recorded fixed
asset additions of $20.4 million in advanced payments applicable to
aircraft scheduled for future delivery. The Company intends to finance the
remaining deliveries under this agreement through sale/leaseback
transactions accounted for as operating leases.
In July 1998, the Company committed to the purchase of five Lockheed
L-1011 series 500 aircraft, three spare engines and certain associated
spare parts. These aircraft are powered by Rolls-Royce RB211-524B4 engines.
The Company accepted delivery of these aircraft under this purchase
agreement between August 1998 and November 1999. Subsequent to delivery of
each aircraft, the Company has completed certain modifications and
improvements to the airframes and interiors in order to qualify them to
operate in a coach seating configuration of 307 seats. Four aircraft were
placed into revenue service in 1999, operating primarily in the commercial
and military/government charter businesses. The fifth aircraft is expected
to enter revenue service in the first quarter of 2000. The Company used the
proceeds from the issuance of unsecured notes in December 1998 to acquire
and modify these aircraft.
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The Company purchased an additional Rolls-Royce-powered Boeing 757-200
aircraft from an aircraft lessor in September 1997, financing this purchase
through a payment of cash and the issuance of a $30.7 million note. The
note required monthly payments of $400,000 in principal and interest from
October 15, 1997, through September 1999, with the balance due at maturity.
The Company re-financed this aircraft through a sale/leaseback transaction
in December 1998, at which time the note was repaid in full. The new lease
initially expired in December 1999, but was amended and extended for an
additional two-year term. The lessor may also cancel the lease with six
months notice to the Company.
Significant Financings. In July 1997, the Company sold $100.0 million
principal amount of 10.5% unsecured senior notes. In December 1999, the
Company sold an additional $75.0 million principal amount of 10.5% senior
notes. The $75.0 million notes were issued as a private placement under
Rule 144A. The Company is obligated to complete an exchange offer in which
the new notes will be exchanged for registered notes having the same terms.
On January 25, 2000, the Company filed a registration statement with the
SEC in connection with this pending exchange offer.
In December 1998, the Company sold $125.0 million principal amount of
9.625% unsecured senior notes in a public offering.
In December 1999, ATA issued $17.0 million principal amount of special
facility revenue bonds to finance the construction of certain facilities at
Chicago-Midway Airport. The bonds are payable from and secured by a pledge
and assignment of special facility revenues, including certain of the City
of Chicago's rights under a special facility financing agreement between
the City of Chicago and the Company. Payment of the bonds is guaranteed by
the Company.
In the second quarter of 1999, the Company completed the construction
of a 120,000 square foot Maintenance and Operations Center immediately
adjacent to the Company's maintenance hangar at Indianapolis International
Airport. In June 1999, the Company financed this facility with an $8.0
million 15-year mortgage loan.
In December 1999, the Company revised its revolving credit facility to
provide a maximum of $100.0 million, including up to $50.0 million for
stand-by letters of credit. The facility matures January 2, 2003, and
borrowings under the facility bear interest, at the option of ATA, at
either LIBOR plus 1.25% to 2.50% or the agent bank's prime rate. This
facility is subject to certain restrictive covenants, and is collateralized
by certain L-1011-50 and Boeing 727-200 aircraft. As of March 31, 2000, the
Company had no borrowings against this credit facility, but did have
outstanding letters of credit secured by this facility aggregating $33.7
million.
In February 2000, the Company borrowed $11.5 million for operating
cash purposes. This debt is collateralized by one Lockheed L1011 series 500
aircraft and is secured by a five-year note.
Future Accounting Changes
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This accounting
standard, which is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000, requires that all derivatives be recognized
as either assets or liabilities at fair value. The Company is evaluating
the new statement's provisions and currently expects to adopt SFAS No. 133
in the first quarter of 2001. Although the Company currently does not have
any significant derivatives subject to the accounting provisions of SFAS
No. 133, the Company has engaged in certain fuel price hedging contracts in
recent years to which accounting or disclosure provisions of this statement
might have applied. The Company cannot predict what impact, if any,
adoption of the statement will have.
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Year 2000
The Company completed all year 2000 readiness work and experienced no
significant problems.
Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to certain market risks, including commodity
price risk resulting from aircraft fuel price fluctuations and interest
rate risk. The adverse effects of potential changes in these market risks
are discussed below. The sensitivity analyses presented do not consider the
effects that such adverse changes may have on overall economic activity,
nor do they consider additional actions management may take to mitigate the
Company's exposure to such changes. See the notes to consolidated financial
statements for a description of the Company's accounting policies and other
information related to these financial instruments.
Aircraft Fuel. The Company's results of operations are significantly
impacted by changes in the price of aircraft fuel. During 1999, aircraft
fuel accounted for approximately 16.6% of the Company's operating expenses.
Based on the Company's 2000 projected fuel consumption, a one cent change
in the average annual price per gallon of aircraft fuel would impact the
Company's annual aircraft fuel expense by approximately $2.8 million.
The Company's short-term risk is mitigated by contractual fuel price
escalators contained in military charter and commercial charter contracts,
which enable the Company to pass through some increases in fuel cost. The
Company has previously entered into certain fuel swap contracts and fuel
cap agreements. No such agreements are in place as of December 31, 1999.
Interest Rates. The Company's results of operations are affected by
fluctuations in market interest rates. As of December 31, 1999, the Company
has approximately $100.0 million of variable rate debt available through a
revolving credit facility. In 2000, the Company does not project to incur
significant borrowings under the facility, so the risk of exposure to
market interest rate fluctuations is not significant.
As of December 31, 1999, the Company had fixed-rate debt with a
carrying value of $300.0 million. Based upon discounted future cash flows
using current incremental borrowing rates for similar types of instruments,
the fair value of the fixed-rate debt is estimated at approximately $295.2
million. Market risk, estimated as the potential increase in fair value
resulting from a hypothetical 1.0% decrease in interest rates, was
approximately $7.5 million as of December 31, 1999.
If 2000 average short-term interest rates decreased by 1.0% over 1999
average rates, the Company's projected interest income from short-term
investments would decrease by approximately $1.5 million during 2000.
BUSINESS
The Company owns American Trans Air, Inc. ("ATA"), the eleventh
largest passenger airline in the United States (based on 1999 revenues) and
a leading provider of airline services in selected markets. The Company is
the largest commercial charter airline in the United States and the largest
provider of passenger airline services to the U.S. military, in each case
based on 1999 revenues. For the year ended December 31, 1999, the revenues
of the Company consisted of 55.7% scheduled service, 23.5% commercial
charter service and 11.2% military charter service, with the balance
derived from related services.
The Company actively considers and enters into discussions regarding
possible business combinations with air carriers and others, and plans to
continue to do so. See "Risk Factors."
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Scheduled Service
The Company provides scheduled service through ATA to selected
destinations primarily from its gateways at Chicago-Midway and Indianapolis
and also provides transpacific services between the western United States
and Hawaii. In 1999, the Company added scheduled service between
Chicago-Midway and Philidelphia. The Company focuses on routes where it
believes it can be a leading provider of nonstop service and targets
leisure and value-oriented business travelers.
The Company believes that it has significant competitive advantages in
each of its primary markets.
o Chicago-Midway, the Company's largest and fastest growing
gateway, represented approximately 56.7% of the Company's total
scheduled service capacity in 1999. The Company is the number one
carrier in terms of market share in 20 out of its 22 nonstop
routes from Chicago-Midway. The Company believes its service at
this gateway would be difficult to replicate because of limited
available airport capacity. This competitive position is enhanced
by Chicago-Midway's proximity to downtown Chicago and the fact
that, for a substantial portion of the population within the
metropolitan region, Chicago-Midway is the most convenient
airport. The Company began service at Chicago-Midway in December
1992.
o Hawaii represented approximately 18.5% of the Company's total
scheduled service capacity in 1999. The Company believes it is
the lowest-cost provider of scheduled service between the western
United States and Hawaii, which is critical in this
price-sensitive, predominantly leisure market. Furthermore, a
majority of the Company's capacity in the Hawaiian market is
contracted to the nation's largest independent Hawaiian tour
operator, which assumes capacity, yield and fuel risk. The
Company has served the Hawaiian market since 1974 through its
commercial charter operations and since 1987 through its
scheduled service operations.
o Indianapolis represented approximately 14.0% of the Company's
total scheduled service capacity in 1999. The Company began
scheduled service from Indianapolis in 1986 and believes that it
benefits from being perceived as the hometown airline. The
Company is the number one provider in terms of market share in
seven of its eight nonstop jet routes from Indianapolis. In
Indianapolis, the Company operates Ambassadair, the nation's
largest travel club with approximately 41,000 individual or
family memberships, providing the Company with a local marketing
advantage similar to a frequent flier program.
Commercial Charter Service
The Company is the largest commercial passenger charter airline in the
United States and provides services throughout the world, primarily to U.S.
and European tour operators. The Company seeks to maximize the
profitability of these operations by leveraging its leading market
position, diverse aircraft fleet and worldwide operating capability. The
Company believes its commercial charter services are a predictable source
of revenues and operating profits in part because its commercial charter
contracts require tour operators to assume capacity, yield and fuel price
risk, and also because of the Company's ability to re-deploy assets into
favorable markets. The Company's commercial charter services are marketed
through a network of domestic sales offices along with a London office.
Military/Government Charter Service
The Company has provided passenger airline services to the U.S.
military since 1983 and is currently the largest commercial airline
provider of these services. The Company believes that because these
operations are generally less seasonal than leisure travel, they have
tended to have a stabilizing impact on the Company's operating margins. The
U.S. government awards one-year contracts for its military charter business
and pre-negotiates contract prices for each type of
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aircraft that a carrier makes available. The Company believes that its fleet of
aircraft is well suited to the needs of the military.
Strategy
The Company intends to enhance its position as a leading provider of
passenger airline services to selected markets where it can capitalize on
its competitive strengths. The key components of this strategy are:
Participate in Markets Where it Can Be a Leader
The Company focuses on markets where it can be a leading provider of
airline services. In scheduled service, the Company concentrates on routes
where it can be the number one or number two carrier. The Company achieves
this result principally through superior nonstop schedules, value-oriented
service, focused marketing efforts and certain airport and aircraft
advantages. The Company is the leading provider of commercial and military
charter services in large part because of its variety of aircraft types,
superior operational performance and its worldwide service capability.
Maintain Low-Cost Position
For 1997, 1998 and 1999, the Company's operating cost per available
seat mile ("CASM") of 6.09(cent), 6.09(cent)and 6.84(cent), respectively,
was the lowest among large U.S. passenger airlines. The airline segment
CASM was 5.97(cent), 6.00(cent)and 6.38(cent), respectively, for the years
ended 1997, 1998 and 1999. See "--Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations in
Cents per ASM." The Company believes that its low-cost structure provides a
significant competitive advantage, allowing it to operate profitably while
pricing competitively in the scheduled service and commercial and military
charter markets. The Company believes its low-cost position is primarily
derived from its simplified product, route structure, low aircraft
ownership costs and low overhead costs.
Target Growth Opportunities
The Company intends to expand its operations selectively in areas
where it believes it can achieve attractive financial returns.
o Charter Expansion. The Company has acquired five long-range
Lockheed L-1011-500 aircraft primarily for commercial and
military charter service, whose low-cost and high-seating
capacity will enable the Company to compete for business that it
could not previously accommodate (e.g., nonstop service to
certain South American, European and Asian destinations).
o Scheduled Service Expansion at Chicago-Midway. The Company plans
to increase frequencies and add up to four destinations from its
Chicago-Midway gateway by the end of 2000 and to support this
expansion by adding four Boeing 757-200 aircraft to its fleet in
2000. Included in these new destinations is new scheduled service
between Chicago-Midway and Ronald Reagan Washington National
Airport, beginning April 3, 2000, as well as new scheduled
service to Boston and Seattle, beginning May 7, 2000. Beginning
July 10, 2000, the Company will also offer scheduled service from
Chicago-Midway to Minneapolis St. Paul. The Company will also
occupy additional gates upon completion of the new terminal at
Chicago-Midway to facilitate these expanding operations. In
addition, the Company will use the proceeds of a $17.0 million
Special Facility Revenue Bond issued in December 1999 to pay a
portion of the cost of construction of a Federal Inspection
Service facility ("FIS") at the Chicago-Midway Airport. This will
allow international flights to operate directly to and from
Chicago-Midway.
o Selected Acquisitions. The Company continually evaluates possible
acquisitions of related businesses or interests therein to
enhance its competitive position in its market segments. The
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Company also continues to evaluate possible business combinations
with air carriers and others that could result in a change of
control of Amtran.
Industry Overview
Scheduled Airline Service
In the United States, the scheduled airline business is dominated by
large scheduled airlines, most of which have developed hub-and-spoke route
systems. As a result of this structure, many smaller cities or airports are
not served by direct or nonstop flights to leisure destinations, and many
secondary leisure destinations do not receive direct or nonstop service
from more than a few major U.S. cities. In developing its business, the
Company has focused on low-frequency, nonstop or direct service from its
principal gateways to leisure or business destinations where there is
little or no competing direct or nonstop service.
Commercial and Military/Government Charter Airline Service
In the United States, the passenger charter airline business is served
by major scheduled airlines and a number of U.S. and non-U.S. charter
airlines. Historically, charter airlines have supplemented the service
provided by scheduled airlines by providing additional capacity at times of
peak demand, such as during the Persian Gulf War, and on a longer-term
basis to supplement the U.S. military's own passenger fleet. Based on the
most recently available Department of Transportation ("DOT") statistics,
total charter flights by all U.S. airlines represented approximately 2.5%
of all available seat miles ("ASMs") flown within the United States during
the twelve months ended March 31, 2000.
The Company's Airline Operations
Services Offered
The following table provides a summary of the Company's major revenue
sources for the periods indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(Dollars in millions)
<S> <C> <C> <C> <C> <C>
Scheduled service............ $362.0 $386.5 $371.8 $511.3 $624.6
Commercial charter........... 229.5 226.4 228.1 222.6 263.8
Military charter........ 77.5 84.2 131.1 121.9 126.2
Total charter service... 307.0 310.6 359.2 344.5 390.0
Other........................ 46.0 53.8 52.2 63.6 107.8
Total................... $715.0 $750.9 $783.2 $919.4 $1,122.4
====== ====== ====== ======= ========
</TABLE>
Scheduled Service
The Company provides scheduled airline services on selected routes
where it believes that it can be one of the leading carriers in the market,
focusing primarily on low-cost, nonstop or direct flights. The Company
currently provides scheduled service primarily from its gateway cities of
Chicago-Midway and Indianapolis to popular vacation destinations such as
Hawaii, Las Vegas, Florida, California, Mexico and the Caribbean, as well
as to New York's John F. Kennedy (seasonal) and LaGuardia Airports,
Philadelphia, Denver and Dallas-Ft. Worth.
In 1997, the Company began a code-share agreement with Chicago Express
to operate passenger airline services between Chicago-Midway and the cities
of Indianapolis, Milwaukee,
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Des Moines, Dayton, Grand Rapids, Lansing and Madison using Jetstream 31
propeller aircraft. In April 1999, the Company acquired all of the issued and
outstanding stock of Chicago Express. Chicago Express' results of operations,
beginning May 1999, were consolidated into the Company, replacing the fixed
fee per flight previously recorded by the Company. This generated no material
change to operating expenses and the operating revenues associated with these
operations were already reflected in the Company's results of operations.
In January 2000, Chicago Express entered into an agreement to purchase
nine SAAB 340B aircraft, engines and related parts. As of March 31, 2000,
the Company had taken delivery of three of these aircraft. The remaining
aircraft will be placed into service throughout 2000. The current fleet of
Jetstream 31s will be returned to the lessor.
Included in the Company's jet scheduled service are bulk sales
agreements with tour operators. Under these arrangements, which are very
similar to charter sales, the tour operator may take up to 85% of an
aircraft as a bulk-seat purchase. The seats which the Company retains are
sold through its own scheduled service distribution network. Under bulk
sales arrangements, the Company is obligated to provide transportation to
the tour operators' customers even in the event of non-payment to the
Company by tour operators. To minimize its credit exposure under these
arrangements, the Company requires bonding or a security deposit for a
portion of the contract price. Bulk seat sales amounted to $59.0 million,
$68.6 million and $71.2 million in 1997, 1998 and 1999, respectively, which
represented 7.5%, 7.5% and 6.3%, respectively, of the Company's
consolidated revenues for such periods.
Commercial Charter
Commercial charter represented 29.1%, 24.2% and 23.5%, respectively of
the Company's consolidated revenues for 1997, 1998 and 1999. The Company's
principal customers for commercial charter are tour operators, sponsors of
incentive travel packages and specialty charter customers.
Tour Operator Programs. These leisure-market programs are generally
contracted for repetitive, round-trip patterns, operating over varying
periods of time. In such an arrangement, the tour operator pays a fixed
price for use of the aircraft, including the crew and all necessary
passenger and aircraft handling services, and assumes responsibility and
risk for the actual sale of the available aircraft seats. Under most of its
contracts with tour operators, the Company passes through increases in fuel
costs from a contracted price. Under these contracts, if the fuel increase
causes the tour operator's fuel cost to rise in excess of 10%, the tour
operator has the option of canceling the contract. The Company is exposed
to increases in fuel costs that occur within 14 days of flight time.
Although the Company serves tour operators on a worldwide basis, its
primary customers are U.S.-based. The Company's five largest tour operator
customers represented approximately 16.2%, 14.4% and 12.5%, respectively,
of the Company's consolidated revenues for 1997, 1998 and 1999, and the ten
largest tour operator customers represented approximately 20.8%, 17.5% and
14.7%, respectively, of the Company's consolidated revenues for the same
periods.
Incentive Travel Programs. Many corporations offer travel to leisure
destinations or special events as incentive awards for their employees. The
Company has historically provided air travel for many corporate incentive
programs. Incentive travel customers range from national incentive
marketing companies who arrange such programs for corporate clients, to
large corporations that handle their incentive travel programs on an
in-house basis.
Specialty Charters. The Company operates a significant number of
specialty charter flights. These programs are normally contracted on a
single round-trip basis and vary extensively in nature. These flights allow
the Company to increase aircraft utilization during off-peak periods.
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Military/Government Charter
In 1997, 1998 and 1999, sales to the U.S. military and other
governmental agencies were approximately 16.8%, 13.3% and 11.2%,
respectively, of the Company's consolidated revenues. Traditionally, the
Company's focus has been on short-term military "contract expansion"
business which is routinely awarded by the U.S. government based on
availability of appropriate aircraft. The U.S. government awards one-year
contracts for its military charter business, and pre-negotiates contract
prices for each type of aircraft a carrier makes available. Such contracts
are awarded based upon the participating airlines' average costs. The
short-term expansion business is awarded pro rata to those carriers with
aircraft availability who have been awarded the most fixed-award business,
and then to any additional carrier that has aircraft available. The
Company's current contractor teaming arrangement significantly increases
the likelihood that the team will receive both fixed-award and contract
expansion business. See "--Management's Discussion and Analysis of
Financial Condition and Results of Operations--Military/Government Charter
Revenues."
The Company is subject to biennial inspections by the Department of
Defense as a condition of retaining its eligibility to perform military
charter flights. The last such inspection was completed in the fourth
quarter of 1999.
Other Business
In addition to its core charter and scheduled service businesses, the
Company operates several other smaller businesses that complement its core
businesses. The Company sells ground arrangements (hotels, car rentals and
attractions) through its Ambassadair and ATA Leisure Corp. subsidiary
brands such as ATA Vacations, Travel Charter and Key Tours; provides
airframe and powerplant mechanic training through American Trans Air
Training Corporation; and provides helicopter charter services through its
ExecuJet subsidiary. Additionally, the Company, through its subsidiary
Amber Air Freight, markets cargo services in the Company's scheduled and
charter operations. In aggregate, these businesses, together with
incidental revenues associated with core charter and scheduled service
operations, accounted for 6.6%, 6.9% and 9.6%, respectively, of
consolidated revenues in 1997, 1998 and 1999.
Aircraft Fleet
As of March 31, 2000, the Company was certified to operate a fleet of
19 Lockheed L-1011s, 24 Boeing 727-200s and 11 Boeing 757-200s. The Company
also acquired Chicago Express in April 1999, which is separately certified
to operate nine Jetstream 31 propeller aircraft. These Jetstream 31
propeller aircraft will be replaced with 34-seat SAAB 340B propeller
aircraft by the end of 2000.
Lockheed L-1011 Aircraft
The Company's 19 Lockheed L-1011 aircraft are wide-body aircraft, 11
of which have a range of 2,971 nautical miles, three of which have a range
of 3,425 nautical miles, and five of which have a range of 5,577 nautical
miles. These aircraft conform to the FAA's Stage 3 noise requirements and
have a low ownership cost relative to other wide-body aircraft types. See
"--Environmental Matters." These aircraft have an average age of
approximately 24 years. As of March 31, 2000, 18 of these aircraft were
owned by the Company and one was under an operating lease that expires in
March 2003. Certain of the Lockheed L-1011 aircraft owned by the Company
are subject to mortgages and other security interests granted in favor of
the Company's lenders under its revolving credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Boeing 727-200 ADV Aircraft
The Company's 24 Boeing 727-200 ADV aircraft are narrow-body aircraft
equipped with high-thrust, JT8D-17/-17A engines and have a range of 2,050
nautical miles. These aircraft
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conform to Stage 3 noise requirements as of March 31, 2000 and have an average
age of approximately 20 years. The Company leases 14 of these aircraft, with
initial lease terms that expire between October 2000 and September 2003,
subject to the Company's right to extend each lease for varying terms or
purchase the aircraft.
Boeing 757-200 Aircraft
The Company's 11 Boeing 757-200 aircraft are relatively new,
narrow-body aircraft, all of which have a range of 3,679 nautical miles.
These aircraft, all of which are leased, have an average age of
approximately three years and meet Stage 3 noise requirements. The
Company's Boeing 757-200s have higher ownership costs than the Company's
Lockheed L-1011 and Boeing 727-200 ADV aircraft, but lower operational
costs. In addition, the Company's Boeing 757-200s have the capacity to
operate on extended flights over water. The leases for the Company's Boeing
757-200 aircraft have initial terms that expire on various dates between
December 2001 and October 2019, subject to the Company's right to extend
each lease for varying terms.
In order to enhance the reliability of its service, the Company seeks
to maintain at least two spare Lockheed L-1011 and three spare Boeing
727-200 aircraft at all times. Spare aircraft can be dispatched on short
notice to most locations where a substitute aircraft is needed for
mechanical or other reasons.
Although Lockheed L-1011 and Boeing 727-200 ADV aircraft are subject
to the FAA's Aging Aircraft program, the Company does not currently expect
that its cost of compliance for these aircraft will be material. See
"--Regulation."
Flight Operations
Worldwide flight operations are planned and controlled by the
Company's Flight Operations Group based in Indianapolis, Indiana, which is
staffed on a 24-hour basis, seven days a week. Logistical support necessary
for extended operations away from the Company's fixed bases is coordinated
through its global communications network. The Company has the ability to
dispatch maintenance and operational personnel and equipment as necessary
to support temporary operations around the world.
Maintenance and Support
The Company's Maintenance and Operations Center is located at
Indianapolis International Airport. This 120,000 square-foot facility was
designed to meet the maintenance needs of the Company's fleet and to
provide supervision and control of purchased maintenance services. The
Company has approximately 1,200 employees supporting its maintenance and
technical efforts.
The Company currently maintains 16 permanent maintenance facilities,
including its Indianapolis facility. In addition, the Company utilizes
"road teams," which are dispatched primarily as charter flight operations
require to arrange and supervise maintenance services at temporary
locations. The Company also uses road teams to supervise all maintenance
not performed in-house.
Fuel Price Risk Management
The Company has fuel reimbursement clauses and guarantees which
applied to approximately 53.4%, 45.0% and 34.8%, respectively, of
consolidated revenues in 1997, 1998 and 1999. The Company did not engage in
any material fuel hedging activities in 1997, but engaged in a fuel hedging
program from 1998 to mid-1999, which hedged a significant portion of its
scheduled service fuel exposure during that time period. The Company does
not expect to be engaged in any fuel hedging program in 2000. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Operating Expenses--Fuel and Oil."
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Competition
The Company's products and services face varying degrees of
competition in diverse markets.
Competition for Scheduled Services
In scheduled service, the Company competes both against the large U.S.
scheduled service airlines and, from time to time, against smaller regional
or start-up airlines. Competition is generally on the basis of price,
schedule and frequency, quality of service and convenience.
Competition for Commercial Charter Services
In the commercial charter market, the Company competes both against
the major U.S. scheduled airlines and against small U.S. charter airlines.
The Company also competes against several European and Mexican charter and
scheduled airlines. The scheduled carriers compete for leisure travel
customers with the Company's commercial charter operations in a variety of
ways, including wholesaling discounted seats on scheduled flights to tour
operators, promoting packaged tours to travel agents for sale to retail
customers and selling discounted, airfare-only products to the public. As a
result, all charter airlines, including the Company, generally are required
to compete for customers against the lowest revenue-generating seats of the
scheduled airlines.
The Company also competes directly against other charter airlines. In
the United States, these charter airlines are smaller in size than the
Company. In Europe, several charter airlines are as large or larger than
the Company. Certain European charter airlines are affiliates of large
scheduled airlines or tour operators.
Competition for Military/Government Charter Services
The Company competes for military and other government charters with
primarily smaller U.S. airlines. The allocation of U.S. military air
transportation contracts is based upon the number and type of aircraft a
carrier, alone or through a teaming arrangement, makes available for use to
the military.
Insurance
The Company carries types and amounts of insurance customary in the
airline industry, including coverage for public liability, passenger
liability, property damage, aircraft loss or damage, baggage and cargo
liability and workers' compensation. Under the Company's current insurance
policies, it will not be covered by such insurance were it to fly, without
the consent of its insurance provider, to certain high-risk countries. The
Company will support certain U.S. government operations in areas where its
insurance policy does not provide coverage when the U.S. government
provides replacement insurance coverage.
Employees
As of March 31, 2000, the Company had approximately 7,000 full and
part-time employees, approximately 2,400 of whom were represented under
collective bargaining agreements. The Company's flight attendants are
represented by the Association of Flight Attendants ("AFA"), the Company's
cockpit crews are represented by the Air Line Pilots Association ("ALPA")
and the Company's dispatchers are represented by the Transport Workers
Union. The current collective bargaining agreement with the AFA became
subject to amendment, but did not expire, in December 1998. During the
first quarter of 2000, the Company completed renegotiation of this contract
and the new contract was notified. The current collective bargaining
agreement with ALPA will be subject to amendment, but will not expire, in
September 2000.
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The Company believes that relations with its employees are good. A
prolonged dispute with employees who are represented by a union, or any
sizable number of employees, could have an adverse impact on the Company's
operations.
Regulation
The Company is subject to a wide range of governmental regulation,
including that of the DOT and the Federal Aviation Administration ("FAA").
The DOT principally regulates economic matters affecting air service,
including: air carrier certification and fitness; insurance; leasing
arrangements; allocation of route rights and authorization of proposed
scheduled and charter operations; allocation of landing slots and departing
slots; consumer protection; and competitive practices. The FAA primarily
regulates flight operations, especially matters affecting air safety,
including airworthiness requirements for each type of aircraft and crew
certification. The FAA requires each carrier to obtain an operating
certificate and operations specifications authorizing the carrier to fly to
specific airports using specified equipment.
Several aspects of airline operations are subject to regulation or
oversight by federal agencies other than the DOT and FAA. The United States
Postal Service has jurisdiction over certain aspects of the transportation
of mail and related services provided by the Company through its cargo
affiliate. Labor relations in the air transportation industry are generally
regulated under the Railway Labor Act, which vests in the National
Mediation Board certain regulatory powers with respect to disputes between
airlines and labor unions arising under collective bargaining agreements.
The Company is subject to the jurisdiction of the Federal Communications
Commission regarding the utilization of its radio facilities. In addition,
the Immigration and Naturalization Service, the U.S. Customs Service, and
the Animal and Plant Health Inspection Service of the Department of
Agriculture have jurisdiction over inspection of the Company's aircraft,
passengers and cargo to ensure the Company's compliance with U.S.
immigration, customs and import laws. Also, while the Company's aircraft
are in foreign countries, they must comply with the requirements of similar
authorities in those countries. The Commerce Department also regulates the
export and re-export of the Company's U.S.-manufactured aircraft and
equipment.
In addition to various federal regulations, local governments and
authorities in certain markets have adopted regulations governing various
aspects of aircraft operations, including noise abatement, curfews and use
of airport facilities. Many U.S. airports have adopted or are considering
adopting a Passenger Facility Charge of up to $3.00 generally payable by
each passenger departing from the airport and remitted by the Company to
the applicable airport authority.
At the Company's aircraft maintenance facilities, materials are used
that are regulated as hazardous under federal, state and local laws. The
Company is required to maintain programs to protect the safety of the
employees who use these materials and to manage and dispose of any waste
generated by the use of these materials in compliance with these laws. More
generally, the Company is also subject at these facilities to federal,
state and local regulations relating to protection of the environment and
to discharge of material into the environment. The Company does not expect
that the costs associated with ongoing compliance with any of these
regulations will have a material impact on the Company's capital
expenditures, earnings or competitive position. Additional laws and
regulations have been proposed from time to time that could significantly
increase the cost of airline operations by, for instance, imposing
additional requirements or restrictions on operations.
Based upon bilateral aviation agreements between the U.S. and other
nations, and, in the absence of such agreements, comity and reciprocity
principles, the Company, as a charter carrier, is generally not restricted
as to the frequency of its flights to and from most foreign destinations.
However, these agreements generally restrict the Company to the carriage of
passengers and cargo on flights which either originate in the U.S. and
terminate in a single foreign nation, or
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which originate in a single foreign nation and terminate in the U.S. Proposals
for any additional charter service must generally be specifically approved by
the civil aeronautics authorities in the relevant countries. Approval of such
requests is typically based on considerations of comity and reciprocity and
cannot be guaranteed.
The Company believes it is in compliance with all requirements
necessary to maintain in good standing its operating authority granted by
the DOT and its air carrier operating certificate issued by the FAA. A
modification, suspension or revocation of any of the Company's DOT or FAA
authorizations or certificates could have a material adverse effect upon
the Company.
Environmental Matters
Under the Airport Noise and Capacity Act of 1990 and related FAA
regulations, the Company's aircraft must comply with certain Stage 3 noise
restrictions by certain specified deadlines. In general, the Company is
prohibited from operating any Stage 2 aircraft after December 31, 1999. As
of December 31, 1999, the Company's entire fleet met Stage 3 requirements.
In addition to the aircraft noise regulations administered by the FAA,
the Environmental Protection Agency regulates operations, including air
carrier operations, which affect the quality of air in the United States.
The Company believes it has made all necessary modifications to its
operating fleet to meet fuel-venting requirements and smoke-emissions
standards.
DESCRIPTION OF PRINCIPAL INDEBTEDNESS
Revolving Credit Facility
We maintain a revolving credit facility to assist us in managing our
working capital and in meeting our short-term cash needs.
In December 1999, we revised our credit facility to provide for
maximum borrowings of $100.0 million, including stand-by letters of credit
in a maximum amount of $50.0 million. All borrowings under the credit
facility are guaranteed by Amtran and all of its other operating
subsidiaries and secured by some of Amtran's L-1011 and B727 aircraft and
engines, as well as specified additional assets as may be required to
provide a loan-to-value ratio not in excess of 75%. The credit facility
will mature, and all borrowings under the credit facility will become due
and payable, on January 2, 2003. As of March 31, 2000, the Company had no
borrowings under the facility, but it secured $33.7 million in outstanding
letters of credit.
So long as no event of default is continuing, borrowings under the
credit facility bear interest, at the option of ATA, at either:
o LIBOR plus 1.25% to 2.50%, depending upon specified financial
ratios; or
o the agent bank's prime rate.
In addition, ATA incurs a quarterly commitment fee ranging from 0.25% to 0.50%
per annum on the average unused portion of the commitment, depending upon
specified ratios.
The credit facility contains covenants that, absent the prior written
consent of the lenders, limit the ability of ATA, Amtran and the other
guarantors to, among other things:
o incur debt;
o grant liens;
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o make capital expenditures;
o pay dividends, distributions and other payments to stockholders;
o engage in mergers and similar business combinations;
o dispose of assets; and
o prepay debt.
In addition, for a specified period, ATA must maintain a number of specified
ratios, including minimum net worth, cash flow to interest expense after rentals
and total adjusted liabilities to tangible net worth.
An event of default will occur if, among other things, a reduction
below 20% occurs in:
o Mr. Mike Isons' or his heirs' beneficial ownership of Amtran's
outstanding capital stock; or
o Amtran's beneficial ownership of ATA's outstanding capital stock.
10 1/2% Notes
In 1997, Amtran issued $100.0 million principal amount of 10 1/2%
senior notes due 2004. All of Amtran's obligations under the 10 1/2% notes
are guaranteed by all of its operating subsidiaries, including ATA. In
December 1999, Amtran sold an additional $75.0 million principal amount of
10 1/2% senior notes due 2004. The terms of the additional notes are
identical to those of the original notes. The $75 million principal amount
of 10 1/2% senior notes were issued as a private placement under Rule 144A.
The Company is obligated to complete an exchange offer in which the new
notes will be exchanged for registered notes having the same terms. In
January 2000, the company filed a registration statement with the SEC in
connection with this pending exchange offer.
Principal, Maturity and Interest. The 10 1/2% notes are limited in
aggregate principal amount to $175.0 million and will mature on August 1,
2004. Interest on the 10 1/2% notes accrues at 10 1/2% per annum and is
payable semiannually in cash on February 1 and August 1 of each year.
Interest is computed on the basis of a 360-day year comprised of twelve
30-day months.
Ranking and Guarantee. The 10 1/2% notes are unsecured obligations of
Amtran, rank pari passu in right of payment with all existing and future
unsecured unsubordinated obligations of Amtran and rank senior in right of
payment to all existing and future subordinated obligations of Amtran. The
10 1/2% notes are also effectively subordinated to all existing and future
secured indebtedness of Amtran and the guarantors to the extent of the
security.
Redemption. The 10 1/2% notes redeemable, at Amtran's option, in whole
or in part, at any time on or after August 1, 2002, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon to the applicable redemption date, if
redeemed during the 12-month period beginning on August 1 of the year
indicated below:
Year Percentage
---- ----------
2002.................................... 105.250%
2003.................................... 102.625%
In addition, at any time prior to August 1, 2000, Amtran may redeem up
to 35% of the original aggregate principal amount of the 10 1/2% notes with
the proceeds of one or more sales of
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common stock, at a redemption price equal to 110.500% of their principal amount
plus accrued and unpaid interest, so long as at least $113.8 million of
aggregate principal amount of 10 1/2% notes remains outstanding immediately
after the redemption.
Covenants. The indenture governing the 10 1/2% notes limits the
ability of Amtran and its subsidiaries to, among other things:
o incur debt;
o make specified restricted payments;
o create restrictions on the ability of some of its subsidiaries to
pay dividends and make distributions;
o allow some of its subsidiaries to issue or sell capital stock;
o all some of its subsidiaries to provide guarantees;
o engage in transactions with affiliates;
o create liens;
o engage in sale/leaseback transactions; and
o dispose of assets.
Events of Default. The indenture governing the 10 1/2% notes contains
various events of default, including:
o default in the payment of principal, premium or interest;
o default in compliance with some of the covenants contained in
indenture;
o failure to pay at maturity or upon acceleration of more than $10
million in aggregate of other debt;
o failure to pay more than $10 million of judgments that have not
been stayed by appeal or otherwise; and
o occurrence of specified events, including the bankruptcy of
Amtran or some of its subsidiaries.
9 5/8% Notes
In 1998, Amtran issued $125.0 million principal amount of 9 5/8%
senior notes due 2005. All of Amtran's obligations under the 9 5/8% notes
are guaranteed by all of its operating subsidiaries, including ATA.
Principal, Maturity and Interest. The 9 5/8% notes are limited in
aggregate principal amount to $125.0 million and will mature on December
15, 2005. Interest on the 9 5/8% notes accrues at 9 5/8% per annum and is
payable semiannually in cash on June 15 and December 15 of each year.
Interest is computed on the basis of a 360-day year comprised of twelve
30-day months.
Ranking and Guarantee. The 9 5/8% notes are unsecured obligations of
Amtran, rank pari passu in right of payment with all existing and future
unsecured unsubordinated obligations of Amtran and rank senior in right of
payment to all existing and future subordinated obligations of Amtran. The
9 5/8% notes are also effectively subordinated to all existing and future
secured indebtedness of Amtran and the guarantors to the extent of the
security.
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Redemption. The 9 5/8% notes redeemable, at Amtran's option, in whole
or in part, at any time on or after June 15, 2003, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued
and unpaid interest thereon to the applicable redemption date, if redeemed
during the 12-month period beginning on June 15 of the year indicated
below:
Year Percentage
---- ----------
2003....................................... 104.81%
2004....................................... 102.41%
In addition, at any time prior to June 15, 2001, Amtran may redeem up
to 35% of the original aggregate principal amount of the 9 5/8% notes with
the proceeds of one or more sales of common stock, at a redemption price
equal to 109.625% of their principal amount plus accrued and unpaid
interest, so long as at least $81.25 million of aggregate principal amount
of 9 5/8% notes remains outstanding immediately after the redemption.
Covenants. The indenture governing the 9 5/8% notes contains covenants
substantially identical to the covenants contained in the indenture
governing the 10 1/2% notes.
Events of Default. The indenture governing the 9 5/8% notes contains
events of default substantially similar to those contained in the indenture
governing the 10 1/2% notes.
Special Facility Revenue Bonds
In December 1999, ATA issued $17.0 million principal amount of
variable rate special facility revenue bonds due 2029 to finance the
construction of certain facilities at Chicago Midway Airport. The bonds
were issued under and are secured by a trust indenture from the city of
Chicago to LaSalle Bank National Association, as trustee. The bonds are
payable solely from and secured by a pledge and assignment of special
facility revenues, including certain of the City of Chicago's rights under
a special facility financing agreement between the City of Chicago and ATA.
Payment of the bonds is guaranteed by Amtran pursuant to a Guaranty
Agreement between Amtran and the trustee.
Upon the issuance of the bonds, ATA caused a letter of credit to be
issued for the benefit of the owners of the bonds. The trustee is required
under the indenture to draw upon the letter of credit to pay (i) principal
of and interest on the bonds when due whether on scheduled principal or
interest payment dates, upon redemption of all or part of the such bonds or
upon acceleration of the maturity of such bonds and (ii) the principal
portion of the tender price of the bonds upon optional or mandatory tender
for purchase that have not been remarketed and that portion of the tender
price of such bonds equal to interest accrued to the purchase date on such
bonds.
Mortgage
In the second quarter of 1999, the Company obtained an $8.0 million
15-year mortgage to finance its newly-completed 120,000 square foot
Maintenance and Operations Center in Indianapolis.
DESCRIPTION OF THE CERTIFICATES
The following is a summary of the general terms and provisions of the
Outstanding Certificates and the Exchange Certificates. The statements
under this caption are summaries and do not purport to be complete and are
qualified in their entirety by reference to all the provisions of the Pass
Through Trust Agreements, copies of which will be available upon request to
the pass through trustee, and to all the provisions of the certificates,
the Deposit Agreements, the Escrow Agreements, the Liquidity Facilities,
the Policy, the Policy Provider Agreement and the Intercreditor Agreement.
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Except as otherwise indicated, the following summary relates to each
of the pass through trusts and the certificates issued by each pass through
trust. The terms and conditions governing each of the pass through trusts
will be substantially the same, except as described under "Description of
the Intercreditor Agreement--Priority of Distributions" below and except
that the principal amount and scheduled principal repayments of the secured
promissory notes held by each pass through trust and the interest rate and
maturity date of the secured promissory notes held by each pass through
trust will differ. The references to sections in parentheses in the
following summary are to the relevant sections of the Pass Through Trust
Agreements unless otherwise indicated.
General
Each certificate will represent a fractional undivided interest in one
of the two American Trans Air, Inc. 2000-1 pass through trusts: the class G
pass through trust and the class C pass through trust, collectively
referred to as the "pass through trusts." The pass through trusts will be
formed pursuant to the Pass Through Trust Agreements. We will refer to the
certificates to be issued by the class G pass through trust and the class C
pass through trust as the class G certificates and the class C
certificates, respectively.
The property of each pass through trust will consist of:
o Subject to the Intercreditor Agreement, secured promissory notes
acquired under the Note Purchase Agreement and issued, at ATA's
election, either (a) on a nonrecourse basis by the Owner Trustees
of a separate owner trust for each leveraged lease transaction to
finance or refinance a portion of the purchase price of each
leased aircraft by the Owner Trustee, in which case the
applicable leased aircraft will be leased to ATA, or (b) on a
recourse basis by ATA in connection with each secured loan
transaction to finance a portion of the purchase price of each
aircraft owned by ATA.
o The rights of such pass through trust to acquire secured
promissory notes under the Note Purchase Agreement.
o The rights of such pass through trust under the applicable Escrow
Agreement to request the Escrow Agent to withdraw from the
Depositary funds sufficient to enable each such pass through
trust to purchase secured promissory notes on the delivery of
each aircraft during the Delivery Period.
o The rights of such pass through trust under the Intercreditor
Agreement (including all monies receivable in respect of such
rights).
o Monies receivable under the Liquidity Facility for such pass
through trust.
o Funds from time to time deposited with the pass through trustee
in accounts relating to such pass through trust.
o With respect to the class G pass through trust, all monies
receivable under the Policy.
The certificates of each pass through trust will be issued in fully
registered form only and will be subject to the provisions described below
under "--Book-Entry; Delivery and Form." Certificates will be issued only
in minimum denominations of $1,000 or integral multiples of $1,000 in
excess thereof, except that one certificate of each pass through trust may
be issued in a denomination of less than $1,000. (Section 3.01)
On the Transfer Date, each of the original pass through trusts will
transfer and assign all of its assets and rights to a substantially
identical successor pass through trust, and Wilmington Trust Company, as
the trustee of the new trust, will assume the obligations of the related
original pass through trusts under each transaction document to which such
original trustee was a party. Upon the effectiveness of such transfer,
assignment and assumption, each of the original pass through trusts will be
liquidated and each of the certificates will represent the same percentage
interest in
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the successor pass through trust as it represented in the original pass
through trust immediately prior to such transfer, assignment and assumption.
Unless the context otherwise requires, all references in this prospectus to
the pass through trusts, the trustees, the Pass Through Trust Agreements and
similar terms shall be applicable to the original pass through trusts until
the effectiveness of such transfer, assignment and assumption and thereafter
shall be applicable to the successor pass through trusts. See "--Liquidation
of Original Trusts."
The certificates will represent interests in the respective pass
through trusts, and all payments and distributions on the certificates will
be made only from the property of the related pass through trust. (Section
3.10) The certificates will not represent an interest in or obligation of
ATA, Amtran, the pass through trustees, any of the Loan Trustees or Owner
Trustees in their individual capacities, any Owner Participant or any
affiliate of any of them. The existence of the pass through trusts will not
limit the liability that holders of the certificates would otherwise incur
if they owned the secured promissory notes directly or otherwise directly
incurred the obligations of the pass through trusts.
Under the Escrow Agreement for each pass through trust, the holder of
a certificate of any such pass through trust will also be the holder of an
Escrow Receipt affixed to the certificate. The holder of an Escrow Receipt
will be entitled to certain rights with respect to amounts held in certain
accounts established under the Escrow Agreement. Those accounts will be
funded by payments made to the Depositary under the applicable Deposit
Agreement.
Any transfer of a certificate will have the effect of transferring the
corresponding rights with respect to such accounts. Escrow Receipts may not
be separately transferred by the holder of a certificate. Rights with
respect to the Deposits, payments and withdrawals to be made under the
applicable Deposit Agreement and the Escrow Agreement for a pass through
trust, except for the right to request withdrawals for the purchase of
secured promissory notes, will not constitute property of such pass through
trust.
Although the Outstanding Certificates have not been registered under
the Securities Act of 1933, ATA and Amtran have agreed to exchange the
certificates for substantially identical Exchange Certificates which have
been registered. This exchange offer is pursuant to that agreement. See
"Exchange Offer; Registration Rights."
Subordination
The subordination terms of the certificates vary depending upon
whether a Triggering Event has occurred. See "Description of the
Intercreditor Agreement--Priority of Distributions."
Payments and Distributions
The following description of distributions on the certificates should
be read together with the description of the Intercreditor Agreement
because the Intercreditor Agreement may change the effect of the following
provisions in a default situation. See "Description of the Intercreditor
Agreement--Priority of Distributions." Each payment of interest on the
Deposits with respect to each pass through trust will be made by the
Depositary to the Paying Agent and will be distributed by the Paying Agent
to the Receiptholders on the date receipt of such payment is confirmed by
the Paying Agent. Each payment of principal, premium, if any, and interest
on the secured promissory notes or payments on or with respect to other
trust property held in each pass through trust will be distributed by the
pass through trustee to certificateholders of such pass through trust on
the date receipt of such payment is confirmed by the pass through trustee,
except in the case of certain types of Special Payments.
The Deposits held with respect to each of the class G and class C pass
through trusts and the secured promissory notes held in each such pass
through trust, in the aggregate, will accrue interest at the applicable
annual rate for certificates to be issued by such pass through trust shown
on the cover page of this prospectus. Such interest will be payable on
January 15, April 15, July 15 and October 15 of each year, commencing on
April 15, 2000 (or, in the case of
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secured promissory notes issued after such date, commencing with the first such
date to occur after initial issuance of such secured promissory notes). The
interest rate applicable to each class of certificates is referred to as the
Stated Interest Rate for such pass through trust. All such interest payments
will be distributed to certificateholders of such pass through trust on each
such date until the final Distribution Date for such pass through trust,
subject to the Intercreditor Agreement in the case of payments on the secured
promissory notes. Interest is calculated on the basis of a 360-day year
consisting of twelve 30-day months.
Payments of interest applicable to the certificates to be issued by
each of the pass through trusts will be supported by a separate Liquidity
Facility to be provided by the Liquidity Provider for the benefit of the
holders of such certificates in an aggregate amount sufficient to pay
interest on the certificates at the Stated Interest Rate for such pass
through trust on the next six successive Regular Distribution Dates
(without regard to any future payments of principal on such certificates).
The Liquidity Facility with respect to each pass through trust does
not cover interest payable by the Depositary on the Deposits relating to
such pass through trust. The Liquidity Facility for any class of
certificates will not provide for drawings thereunder to pay for principal
of or premium on the certificates of such class or any interest on the
certificates of such class in excess of the Stated Interest Rate for such
class or more than six installments of interest thereon or principal of or
interest or premium on the certificates of any other class.
After use of any available funds under the Liquidity Facility or the
Cash Collateral Account for the class G certificates, the payment of
interest at the Stated Interest Rate on the class G certificates will be
covered by the Policy provided by the Policy Provider. See "Description of
the Policy and the Policy Provider Agreement."
Payments of principal of the secured promissory notes are scheduled to
be received by the pass through trustee on one or more of January 15, April
15, July 15 and October 15 in certain years, depending upon the terms of
the secured promissory notes held in the respective pass through trust.
Payment of principal of the class G certificates on the Final Maturity
Date, and in certain limited circumstances, earlier, will be covered by the
Policy. See "Description of the Policy and the Policy Provider Agreement."
The Paying Agent under each Escrow Agreement will distribute on each
Regular Distribution Date to the certificateholders of the pass through
trust to which such Escrow Agreement relates all Scheduled Payments
received in respect of the related Deposits, the receipt of which is
confirmed by the Paying Agent on such Regular Distribution Date. The pass
through trustee of each pass through trust will distribute, subject to the
Intercreditor Agreement, on each Regular Distribution Date to the
certificateholders of such pass through trust all Scheduled Payments
received in respect of secured promissory notes held on behalf of such pass
through trust, the receipt of which is confirmed by the pass through
trustee on such Regular Distribution Date. Each certificateholder of each
pass through trust will be entitled to receive its proportionate share,
based upon its fractional interest in such pass through trust, of any
distribution in respect of Scheduled Payments of interest on the Deposits
relating to such pass through trust and, subject to the Intercreditor
Agreement, of principal or interest on secured promissory notes held by the
Subordination Agent on behalf of such pass through trust. Each such
distribution of Scheduled Payments will be made by the applicable Paying
Agent or pass through trustee to the certificateholders of record of the
relevant pass through trust on the record date applicable to such Scheduled
Payment subject to certain exceptions. (Sections 4.01 and 4.02; Escrow
Agreement, Section 2.03) If a Scheduled Payment is not received by the
applicable Paying Agent or pass through trustee on a Regular Distribution
Date but is received within five days after such Regular Distribution Date,
it will be distributed on the date received to such holders of record. If
it is received after such five-day period, it will be treated as a Special
Payment and distributed as described below.
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Any payment in respect of, or any proceeds of, any secured promissory
note or any Collateral under an Indenture, other than a Scheduled Payment,
will be distributed on, in the case of an early redemption or a purchase of
any secured promissory note, the date of such early redemption or purchase
(which is a Business Day), and otherwise on the Business Day specified for
distribution of such Special Payment pursuant to a notice delivered by each
pass through trustee as soon as practicable after the pass through trustee
has received funds for such Special Payment. Any such distribution will be
subject to the Intercreditor Agreement.
Any unused Deposits to be distributed after the Delivery Period
Termination Date or the occurrence of a Triggering Event, together with
accrued and unpaid interest on the Deposits and any premium payable by ATA,
will be distributed on a date 35 days after the Paying Agent has received
notice of the event requiring such distribution (also a "Special
Distribution Date"). However, if such date is within ten days before or
after a Regular Distribution Date, such Special Payment will be made on
such Regular Distribution Date. Payments made on or with respect to the
Deposits are not subject to the Intercreditor Agreement.
Each Paying Agent, in the case of the Deposits, and each pass through
trustee, in the case of trust property or any premium payable by ATA in
connection with certain distributions of unused Deposits, will mail a
notice to the certificateholders of the applicable pass through trust
stating the scheduled Special Distribution Date, the related record date,
the amount of the Special Payment and the reason for the Special Payment.
In the case of a redemption or purchase of the secured promissory notes
held in the related pass through trust or any distribution of unused
Deposits after the Delivery Period Termination Date or the occurrence of a
Triggering Event, such notice will be mailed not less than 15 days prior to
the date such Special Payment is scheduled to be distributed, and in the
case of any other Special Payment, such notice will be mailed as soon as
practicable after the pass through trustee has confirmed that it has
received funds for such Special Payment. (Section 4.02(c); Escrow
Agreement, Section 2.03) Each distribution of a Special Payment, other than
a final distribution, on a Special Distribution Date for any pass through
trust will be made by the Paying Agent or the pass through trustee, as
applicable, to the certificateholders of record of such pass through trust
on the record date applicable to such Special Payment. (Section 4.02(b);
Escrow Agreement, Section 2.03) See "--Indenture Defaults and Certain
Rights upon an Indenture Default" and "Description of the Secured
Promissory Notes--Redemption."
If any distribution of proceeds from any "No Proceeds Drawing" or
"Avoidance Drawing" as described in "Description of the Policy and the
Policy Provider Agreement--The Policy" is to be made, the class G pass
through trustee will mail a notice to the certificateholders of the class G
pass through trust stating the scheduled Special Distribution Date, the
related record date, the amount of such distribution and the reason for
such distribution. The notice will be mailed not less than 20 days prior to
the date such proceeds are scheduled to be distributed. Each such
distribution will be made by the class G pass through trustee, as
applicable, to the certificateholders of record of the class G pass through
trust, as applicable, on the record date applicable to such distribution.
Each pass through trust agreement will require that the pass through
trustee establish and maintain a certificate Account for the deposit of
payments representing Scheduled Payments received by such pass through
trustee. Each pass through trust agreement will require that the pass
through trustee establish and maintain a Special Payments Account for the
deposit of payments representing Special Payments received by such pass
through trustee. A Special Payments Account will be non-interest bearing
except in certain circumstances where the pass through trustee may invest
amounts in such account in certain permitted investments. The terms of each
pass through trust agreement will require the pass through trustee to deposit
any Scheduled Payments relating to the applicable pass through trust received
by it in the Certificate Account of such pass through trust and to deposit any
Special Payments so received by it in the Special Payments Account of such pass
through trust. (Section 4.01) All amounts so deposited will be distributed by
the pass through trustee on a Regular Distribution Date or a Special
Distribution Date, as appropriate. (Section 4.02)
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Each Escrow Agreement requires that the Paying Agent establish and
maintain, for the benefit of the Receiptholders, one or more Paying Agent
Accounts, which are to be non-interest bearing. The terms of the Escrow
Agreement will require the Paying Agent to deposit interest on Deposits
relating to such pass through trust and any unused Deposits withdrawn by
the Escrow Agent in the Paying Agent Account. All amounts so deposited will
be distributed by the Paying Agent on a Regular Distribution Date or
Special Distribution Date, as appropriate.
The final distribution for each pass through trust will be made only
upon presentation and surrender of the certificates for such pass through
trust at the office or agency of the pass through trustee specified in the
notice given by the pass through trustee of such final distribution. The
pass through trustee will mail such notice of the final distribution to the
certificateholders of such pass through trust, specifying the date set for
such final distribution and the amount of such distribution. (Section
11.01) See "--Termination of the Pass Through Trusts" below. Distributions
in respect of certificates issued in global form will be made as described
in "--Book-Entry; Delivery and Form" below.
If any Distribution Date is on a day that is not a Business Day,
distributions scheduled to be made on such Regular Distribution Date or
Special Distribution Date will be made on the next succeeding Business Day
with the same force and effect as if made on such scheduled date and
without additional interest.
Pool Factors
The following table sets forth the Assumed Amortization Schedule for
the secured promissory notes held in each pass through trust and resulting
Pool Factors with respect to such pass through trust. The actual aggregate
principal amortization schedule applicable to a pass through trust and the
resulting Pool Factors with respect to such pass through trust may differ
from those set forth below, because the amortization schedule for the
secured promissory notes issued with respect to an aircraft may vary from
such illustrative amortization schedule so long as it complies with the
Mandatory Economic Terms. In addition, the table set forth below assumes
that each aircraft is delivered (or in the case of aircraft N515AT, N523AT,
N524AT, N525AT and N526AT financed) in the month scheduled for its delivery (or
financing) (see "Description of the Aircraft and the Appraisals--The
Appraisals" for the delivery schedule), that secured promissory notes in
the maximum principal amount in respect of all of the Aircraft are
purchased by the pass through trust. The scheduled distribution of
principal payments for any pass through trust will be affected if any
secured promissory notes held in such pass through trust are redeemed or
purchased or if a default in payment on such secured promissory notes
occurred. As a result, the aggregate principal amortization schedule
applicable to a pass through trust and the resulting Pool Factors may
differ from those set forth in the following table.
<TABLE>
<CAPTION>
Class G Class C
Secured Secured
Promissory Promissory
Notes Class G Notes Class C
Scheduled Trust Scheduled Trust
Payments of Expected Payments Expected
Dates Principal Pool Factor of Principal Pool Factor
----------------- ------------ ----------- -------------- -------------
<S> <C> <C> <C> <C>
January 15, 2001 $6,852,273 0.9660612 $4,861,438 0.8676800
January 15, 2002 6,925,289 0.9317608 4,975,156 0.7322647
January 15, 2003 7,022,222 0.8969803 5,893,654 0.5718495
January 15, 2004 6,978,023 0.8624187 7,048,257 0.3800080
January 15, 2005 8,849,164 0.8185895 6,381,430 0.2063164
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Class G Class C
Secured Secured
Promissory Promissory
Notes Class G Notes Class C
Scheduled Trust Scheduled Trust
Payments of Expected Payments Expected
Dates Principal Pool Factor of Principal Pool Factor
----------------- ------------ ----------- -------------- -------------
<S> <C> <C> <C> <C>
January 15, 2006 8,809,537 0.7749565 7,580,064 0.0000000
January 15, 2007 12,707,657 0.7120165 0 0.0000000
January 15, 2008 12,720,121 0.6490147 0 0.0000000
January 15, 2009 11,048,195 0.5942938 0 0.0000000
January 15, 2010 12,977,341 0.5300181 0 0.0000000
January 15, 2011 16,073,222 0.4504086 0 0.0000000
January 15, 2012 17,703,430 0.3627249 0 0.0000000
January 15, 2013 17,670,856 0.2752025 0 0.0000000
January 15, 2014 17,291,004 0.1895615 0 0.0000000
January 15, 2015 18,719,733 0.0968442 0 0.0000000
January 15, 2016 19,552,933 0.0000000 0 0.0000000
</TABLE>
The Pool Factor and Pool Balance of each pass through trust will be
recomputed if there has been an early redemption, purchase, or default in
the payment of principal or interest in respect of one or more of the
secured promissory notes held in a pass through trust, as described in
"--Indenture Defaults and Certain Rights upon an Indenture Default" and
"Description of the Secured Promissory Notes--Redemption," a special
distribution attributable to unused Deposits after the Delivery Period
Termination Date or the occurrence of a Triggering Event, as described in
"Description of the Deposit Agreements" or any drawing under the Policy
(other than a drawing in respect of interest on the class G certificates
only).
Reports to Certificateholders
On each Distribution Date, the applicable Paying Agent and pass
through trustee will include with each distribution by it of a Scheduled
Payment or Special Payment to certificateholders of the related pass
through trust a statement setting forth the following information (per
$1,000 aggregate principal amount of certificate for such pass through
trust, except as to the amounts described in items (1) and (6) below):
(1) The aggregate amount of funds distributed on such
Distribution Date under the Pass Through Trust Agreement and under the
Escrow Agreement, indicating the amount allocable to each source,
including the amount which is paid by the Liquidity Provider and/or
the Policy Provider.
(2) The amount of such distribution under the Pass Through Trust
Agreement allocable to principal and the amount allocable to premium
(including any premium paid by ATA with respect to unused Deposits),
if any.
(3) The amount of such distribution under the Pass Through Trust
Agreement allocable to interest.
(4) The amount of such distribution under the Escrow Agreement
allocable to interest.
(5) The amount of such distribution under the Escrow Agreement
allocable to unused Deposits, if any.
(6) The Pool Balance and the Pool Factor for such pass through
trust. (Section 4.03)
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So long as the certificates are registered in the name of DTC, or its
nominee, on the record date prior to each Distribution Date, the applicable
pass through trustee will request from DTC a securities position listing
setting forth the names of all DTC Participants reflected on DTC's books as
holding interests in the certificates on such record date. On each
Distribution Date, the applicable Paying Agent and pass through trustee
will mail to each such DTC Participant the statement described above and
will make available additional copies as requested by such DTC Participant
for forwarding to certificate owners.
In addition, after the end of each calendar year, the applicable pass
through trustee and Paying Agent will furnish to each certificateholder of
each pass through trust at any time during the preceding calendar year a
report containing the sum of the amounts determined pursuant to clauses
(1), (2), (3), (4) and (5) above with respect to the pass through trust for
such calendar year or, in the event such person was a certificateholder
during only a portion of such calendar year, for the applicable portion of
such calendar year, and such other items as are readily available to such
pass through trustee and which a certificateholder reasonably requests as
necessary for the purpose of such certificateholder's preparation of its
U.S. federal income tax returns. (Section 4.03) Such report and such other
items will be prepared on the basis of information supplied to the
applicable pass through trustee by the DTC Participants and will be
delivered by such pass through trustee to such DTC Participants to be
available for forwarding by such DTC Participants to certificate owners in
the manner described above.
At such time, if any, as the certificates are issued in the form of
definitive certificates, the applicable Paying Agent and pass through
trustee will prepare and deliver the information described above to each
certificateholder of record of each pass through trust as the name and
period of ownership of such certificateholder appears on the records of the
registrar of the certificates.
Indenture Defaults and Certain Rights upon an Indenture Default
An event of default under a Leased Aircraft Indenture will include an
event of default under the related lease. We will refer to an event of
default under a lease as a Lease Event of Default. See "Description of the
Secured Promissory Notes--Indenture Defaults, Notice and Waiver." Since the
secured promissory notes issued under an Indenture will be held in more
than one pass through trust, a continuing Indenture Default under such
Indenture would affect the secured promissory notes held by each such pass
through trust. There are no cross-default provisions in the Indentures or
in the leases unless otherwise agreed to between an Owner Participant and
ATA in respect of the leases relevant to that Owner Participant. This means
that events resulting in an Indenture Default under any particular
Indenture may or may not result in an Indenture Default under any other
Indenture, and a Lease Event of Default under any particular lease may or
may not constitute a Lease Event of Default under any other lease. If an
Indenture Default occurs in fewer than all of the Indentures,
notwithstanding the treatment of secured promissory notes issued under any
Indenture under which an Indenture Default has occurred, payments of
principal and interest on all of the secured promissory notes will continue
to be distributed to the holders of the certificates as originally
scheduled, subject to the Intercreditor Agreement. See "Description of the
Intercreditor Agreement--Priority of Distributions."
Under a Leased Aircraft Indenture, the applicable Owner Trustee and
Owner Participant will have the right under certain circumstances to cure
Indenture Defaults that result from the occurrence of a Lease Event of
Default under the related lease. If the Owner Trustee or the Owner
Participant exercises any such cure right, the Indenture Default will be
deemed to have been cured.
If the same institution acts as pass through trustee of multiple pass
through trusts, in the absence of instructions from the certificateholders
of any such pass through trust, such pass through trustee could be faced
with a potential conflict of interest upon an Indenture Default. In such
event, the pass through trustee will resign as pass through trustee of one
or all such pass through trusts, and a successor trustee will be appointed
in accordance with the terms of the
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applicable pass through trust agreement. Wilmington Trust Company will be the
initial pass through trustee under each pass through trust.
After the occurrence and during the continuation of an Indenture
Default, the Controlling Party will direct the Loan Trustee under such
Indenture in the exercise of remedies under such Indenture and may
accelerate and sell all (but not less than all) of the secured promissory
notes issued under such Indenture to any person, subject to certain
limitations. See "Description of the Intercreditor Agreement--Intercreditor
Rights--Sale of Secured Promissory Notes or Aircraft." The proceeds of such
sale will be distributed pursuant to the provisions of the Intercreditor
Agreement. Any such proceeds so distributed to any pass through trustee
upon any such sale will be deposited in the applicable Special Payments
Account and will be distributed to the certificateholders of the applicable
pass through trust on a Special Distribution Date. (Sections 4.01 and 4.02)
The market for the secured promissory notes at the time of the
existence of an Indenture Default may be very limited and there can be no
assurance as to the price at which they can be sold. If any such secured
promissory notes are sold for less than their outstanding principal amount,
class C certificateholders will receive a smaller amount of principal
distributions than anticipated and will not have any claim for the
shortfall against ATA, Amtran, any Liquidity Provider, the Policy Provider,
any Owner Trustee, any Owner Participant or any pass through trustee. A
shortfall in principal distributions to class G certificateholders will be
supported by the Policy in the manner described in "Description of the
Policy and the Policy Provider Agreement".
Any Special Payment made to the pass through trustee of any pass
through trust by the Subordination Agent following an Indenture Default
will be deposited in the Special Payments Account for such pass through
trust and will be distributed to the certificateholders of such pass
through trust on a Special Distribution Date. (Section 4.02) In addition,
if, following an Indenture Default under any Leased Aircraft Indenture, the
applicable Owner Participant or Owner Trustee exercises its option to
redeem or purchase the outstanding secured promissory notes issued under
such Leased Aircraft Indenture, the price paid by such Owner Participant or
Owner Trustee for the secured promissory notes issued under such Leased
Aircraft Indenture and distributed to such pass through trust by the
Subordination Agent will be deposited in the Special Payments Account for
such pass through trust and will be distributed to the certificateholders
of such pass through trust on a Special Distribution Date. (Sections 4.01
and 4.02)
Any funds representing payments received with respect to any defaulted
secured promissory notes, or the proceeds from the sale of any secured
promissory notes, held by the pass through trustee in the Special Payments
Account for such pass through trust will, to the extent practicable, be
invested and reinvested by such pass through trustee in Permitted
Investments at our direction pending the distribution of such funds on a
Special Distribution Date. (Section 4.04)
Each pass through trust agreement will provide that the pass through
trustee of the related pass through trust will, within 90 days after the
occurrence of any default known to the pass through trustee, give to the
certificateholders of such pass through trust notice, transmitted by mail,
of such uncured or unwaived default with respect to such pass through trust
known to it. However, except in the case of default in a payment of
principal, premium, if any, or interest on any of the secured promissory
notes held in such pass through trust, the applicable pass through trustee
will be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interests of such
certificateholders. (Section 7.01) The term "default" as used in this
paragraph only with respect to any pass through trust means the occurrence
of an Indenture Default under any Indenture pursuant to which secured
promissory notes held by such pass through trust were issued, as described
above, except that in determining whether any such Indenture Default has
occurred, any grace period or notice in connection with such Indenture
Default will be disregarded.
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Each pass through trust agreement will contain a provision entitling
the pass through trustee of the related pass through trust, subject to the
duty of such pass through trustee during a default to act with the required
standard of care, to be offered reasonable security or indemnity by the
holders of the certificates of such pass through trust before proceeding to
exercise any right or power under such pass through trust agreement at the
request of such certificateholders. (Section 7.02(e))
Subject to certain qualifications set forth in each Pass Through Trust
Agreement and to the Intercreditor Agreement, the certificateholders of
each pass through trust holding certificates evidencing fractional
undivided interests aggregating not less than a majority in interest in
such pass through trust will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the pass
through trustee with respect to such pass through trust or pursuant to the
terms of the Intercreditor Agreement, or exercising any trust or power
conferred on such pass through trustee under such Pass Through Trust
Agreement or the Intercreditor Agreement, including any right of such pass
through trustee as Controlling Party under the Intercreditor Agreement or
as holder of the secured promissory notes. (Section 6.04) In certain cases,
the certificateholders of a pass through trust evidencing fractional
undivided interests aggregating not less than a majority in interest of
such pass through trust may on behalf of the holders of all the
certificates of such pass through trust waive any past "event of default"
under such pass through trust (i.e., any Indenture Default under any
Indenture pursuant to which secured promissory notes held by such pass
through trust were issued) and its consequences or, if the pass through
trustee of such pass through trust is the Controlling Party, may direct the
pass through trustee to instruct the applicable Loan Trustee to waive any
past Indenture Default and its consequences, except (a) a default in the
deposit of any Scheduled Payment or Special Payment or in the distribution
of any Scheduled Payment or Special Payment, (b) a default in payment of
the principal, premium, if any, or interest with respect to any of the
secured promissory notes and (c) a default in respect of any covenant or
provision of the pass through trust agreement that cannot be modified or
amended without the consent of each certificateholder of such pass through
trust affected by such default. (Section 6.05) Each Indenture will provide
that, with certain exceptions, the holders of the majority in aggregate
unpaid principal amount of the secured promissory notes issued under such
Indenture may on behalf of all such holders waive any past default or
Indenture Default under such Indenture. Notwithstanding such provisions of
the Indentures, under the Intercreditor Agreement only the Controlling
Party will be entitled to waive any such past default or Indenture Default.
Purchase Rights of Certificateholders
Upon the occurrence and during the continuation of a Triggering Event,
with ten days' written notice to the pass through trustee and to each
certificateholder of the same class:
o the class C certificateholders will have the right to purchase
all, but not less than all, of the class G certificates;
o if the class D certificates are issued, the class D
certificateholders will have the right to purchase all of the
class G and class C certificates.
o whether or not such rights are exercised by the class C (or class
D) certificateholders, the Policy Provider will have the right to
purchase all, but not less than all, of the class G certificates.
In each case, the purchase price will be equal to the Pool Balance of
the relevant class or classes of certificates plus accrued and unpaid
interest on such Pool Balance to the date of purchase, without premium, but
including any other amounts due to the certificateholders of such class or
classes. Such purchase right may be exercised by any certificateholder of
the class or classes entitled to such right. In each case, if prior to the
end of the ten-day period, any other certificateholder of the same class
notifies the purchasing certificateholder that the other certificateholder
wants to participate in such purchase, then such other certificateholder
may join with the purchasing certificateholder to purchase the certificates
pro rata based on the interest in
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the pass through trust held by each certificateholder. The purchase rights of
the certificateholders arising by reason of the occurrence of a Triggering
Event will expire 180 days after the Triggering Event, after which the Policy
Provider's purchase rights in respect of the certificates will become
effective. (Trust Supplements, Section 4.01)
PTC Event of Default
A PTC Event of Default under each pass through trust agreement means
the failure to pay:
o The outstanding Pool Balance of the applicable class of
certificates within ten Business Days of the Final Maturity Date
for such class.
o Interest due on such class of certificates within ten Business
Days of any Distribution Date (unless the Subordination Agent has
made Interest Drawings, or withdrawals from the Cash Collateral
Account for such class of certificates or, in the case of the
class G certificates, a drawing under the Policy, in an aggregate
amount sufficient to pay such interest and has distributed such
amount to the relevant pass through trustee).
Any failure to make expected principal distributions for any class of
certificates on any Regular Distribution Date (other than the Final
Maturity Date) will not constitute a PTC Event of Default for such
certificates. A PTC Event of Default for the most senior outstanding class
of certificates resulting from an Indenture Default under all Indentures
will constitute a "Triggering Event." See "Description of the Intercreditor
Agreement--Priority of Distributions--After a Triggering Event" for a
discussion of the consequences of a Triggering Event.
Merger, Consolidation and Transfer of Assets
ATA will be prohibited from consolidating with or merging into any
other corporation or transferring substantially all of its assets as an
entirety to any other entity unless:
o The surviving successor corporation or transferee (a) is a "citizen of the
United States" as defined in Section 40102(a)(15) of Title 49 of the
United States Code, as amended, relating to aviation and (b) is a United
States certificated air carrier.
o The surviving successor corporation or transferee expressly assumes all of
ATA's obligations contained in the Pass Through Trust Agreements, the Note
Purchase Agreement, the Indentures, the Participation Agreements, the
leases, the Policy Provider Agreement and any other operative documents.
o ATA delivers a certificate and an opinion or opinions of counsel
indicating that such transaction, in effect, complies with such
conditions.
In addition, after giving effect to such transaction, no Lease Event
of Default, in the case of a leased aircraft, or Indenture Default, in the
case of an owned aircraft, will have occurred and be continuing. (Section
5.02; Leases, Section 13.2, Owned Aircraft Indenture, Section 4.07)
The Pass Through Trust Agreements, the Note Purchase Agreement, the
Indentures, the Participation Agreements and the leases will not contain
any covenants or provisions that would give any pass through trustee or
certificateholders protection in the event of a highly leveraged
transaction, including transactions effected by management or affiliates,
which may or may not result in a change in control of ATA or Amtran.
Modifications of the Pass Through Trust Agreements and Certain Other Agreements
Each Pass Through Trust Agreement will contain provisions permitting,
at ATA's request, the execution of amendments or supplements to such Pass
Through Trust Agreement or, if applicable, to the Indentures, the leases,
the participation agreements, the Deposit Agreements, the Escrow
Agreements, the Intercreditor Agreement, the Note Purchase Agreement, any
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Liquidity Facility, or, with respect to the pass through trust agreement
for the class G pass through trust, the Policy and the Policy Provider
Agreement, without the consent of the holders of any of the certificates of
such pass through trust:
o To evidence the succession of another corporation to ATA or
Amtran and the assumption by such corporation of ATA's or
Amtran's obligations under such Pass Through Trust Agreement, the
Note Purchase Agreement or the Policy Provider Agreement.
o To add to ATA's or Amtran's covenants for the benefit of holders
of such certificates or to surrender any right or power conferred
upon ATA or Amtran in such Pass Through Trust Agreement, the
Intercreditor Agreement, the Note Purchase Agreement, any
Liquidity Facility, the Policy or the Policy Provider Agreement.
o To correct or supplement any provision of such Pass Through
Trust Agreement, the Deposit Agreements, the Escrow
Agreements, the Intercreditor Agreement, the Note Purchase
Agreement, any Liquidity Facility, the Policy or the Policy
Provider Agreement which may be defective or inconsistent
with any other provision in such Pass Through Trust
Agreement, the Deposit Agreements, the Escrow Agreements,
the Intercreditor Agreement, the Note Purchase Agreement,
any Liquidity Facility, the Policy or the Policy Provider
Agreement, as applicable, or to cure any ambiguity or to
modify any other provision with respect to matters or
questions arising under such Pass Through Trust Agreement,
the Deposit Agreements, the Escrow Agreements, the
Intercreditor Agreement, the Note Purchase Agreement, any
Liquidity Facility, the Policy or the Policy Provider
Agreement, provided that such action will not materially
adversely affect the interests of the holders of such
certificates.
o To correct any mistake in such Pass Through Trust Agreement,
the Intercreditor Agreement, the Note Purchase Agreement,
any Liquidity Facility, the Policy or the Policy Provider
Agreement.
o To give effect to or provide for a Replacement Facility, as
provided in the Intercreditor Agreement.
o To comply with any requirement of the SEC, any applicable
law, rules or regulations of any exchange or quotation
system on which the certificates are listed, any regulatory
body or the Regulation Rights Agreement to effectuate the
Exchange Offer (as defined in the Registration Rights
Agreement).
o To add to such Pass Through Trust Agreement such other
provisions as may be expressly permitted by the Trust
Indenture Act of 1939.
o To provide for a successor pass through trustee or to add to
or change any provision of such Pass Through Trust Agreement
as shall be necessary to facilitate the administration of
the relevant pass through trust by more than one trustee.
o To modify, eliminate or add to the provisions such Pass
Through Trust Agreement to the extent necessary to provide
for the subordination of any class D certificates issued by
ATA; provided that no such action shall materially adversely
affect the interests of the certificateholders. (Section
9.01)
o To modify or eliminate provisions relating to the transfer
or exchange of the certificates or Exchange Certificates or
upon consummation of the exchange offer (as those terms are
defined in the Registration Rights Agreement) or
effectiveness of the Shelf Registration Statement or the
Exchange Offer Registration Statement (each as defined in
the Registration Rights Agreement).
A majority of the certificateholders of a pass through trust may, with
the consent of the applicable Owner Trustee (such consent not to be
unreasonably withheld), amend or supplement
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the provisions of the Pass Through Trust Agreement, the Deposit Agreements, the
Escrow Agreements, the Intercreditor Agreement, the Note Purchase Agreement,
the Registration Rights Agreement or any Liquidity Facility to the extent
applicable to such certificateholders or of modifying the rights and
obligations of such certificateholders under such Pass Through Trust Agreement,
the Deposit Agreements, the Escrow Agreements, the Intercreditor Agreement, the
Note Purchase Agreement or any Liquidity Facility. No such amendment or
supplement may, without the consent of the holder of each certificate so
affected by such amendment or supplement:
o Reduce in any manner the amount of, or delay the timing of,
any receipt by the pass through trustee (or, with respect to
the Deposits, the Receiptholders) of payments with respect
to the secured promissory notes held in such pass through
trust or distributions in respect of any certificate related
to such pass through trust (or, with respect to the
Deposits, payments to be made to Receiptholders), or change
the date or place of any payment in respect of any
certificate, or make distributions payable in coin or
currency other than that provided for in such certificates,
or impair the right of any certificateholder of such pass
through trust to institute suit for the enforcement of any
such payment when due.
o Permit the disposition of any secured promissory note held
in such pass through trust, except as provided in such Pass
Through Trust Agreement, or otherwise deprive such
certificateholder of the benefit of the ownership of the
applicable secured promissory notes.
o Alter the priority of distributions specified in the
Intercreditor Agreement in a manner materially adverse to
such certificateholders.
o Reduce the percentage of the aggregate fractional undivided
interests of the pass through trust provided for in such
Pass Through Trust Agreement, the consent of the holders of
which is required for any such supplemental trust agreement
or for any waiver provided for in such Pass Through Trust
Agreement.
o Modify any of the provisions relating to the rights of the
certificateholders in respect of the waiver of events of
default or receipt of payment.
o Adversely affect the status of the pass through trust as a
grantor trust under Subpart E, Part I of Subchapter J of
Chapter 1 of Subtitle A of the Code for U.S. federal income
tax purposes. (Section 9.01)
o To terminate or modify the Policy, other than amendments
already contemplated or required by Section 5.01 of the
Policy Provider Agreement or Section 2.6(c) of the
Intercreditor Agreement.
Obligation to Purchase Secured Promissory Notes
Each pass through trustee will be obligated to purchase the secured
promissory notes issued with respect to the aircraft during the Delivery
Period, subject to the terms and conditions of the Note Purchase Agreement
and the applicable Participation Agreement. Under the Note Purchase
Agreement, ATA agrees to finance each aircraft in the manner provided in
the Note Purchase Agreement. ATA will have the option of entering into a
leveraged lease financing or a secured debt financing with respect to each
aircraft.
o If ATA chooses to enter into a leveraged lease
financing with respect to an aircraft, the Note
Purchase Agreement provides for the relevant parties to
enter into a Participation Agreement, a lease and a
Leased Aircraft Indenture relating to the financing of
such leased aircraft.
o If ATA chooses to enter into a secured debt financing
with respect to an aircraft that ATA owns, the Note
Purchase Agreement provides for the relevant parties to
enter into a
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Participation Agreement and an Owned
Aircraft Indenture relating to the financing of such
owned aircraft.
Until October 15, 2001, ATA may convert a secured debt financing of an
owned aircraft to a leveraged lease financing of a leased aircraft by
entering into a sale-leaseback transaction. To do such a transaction, ATA
must (a) obtain written confirmation from each Rating Agency that such
transaction will not result in a withdrawal, suspension or downgrading of
the ratings of any class of certificates (without regard to the Policy),
and (b) cause to be delivered to the Loan Trustee an opinion of counsel
that the pass through trusts will not be subject to U.S. federal income tax
as a result of such transaction and (c) either (i) cause to be delivered to
the Loan Trustee an opinion of counsel that the certificateholders will not
recognize income, gain or loss for federal income tax purposes as a result
of such transaction and will be subject to federal income tax in the same
amounts, in the same manner and at the same time as would have been the
case if such transaction had not occurred, or (ii) cause to be delivered to
the Loan Trustee an opinion of counsel that such certificateholders should
not recognize income, gain or loss, and should be subject to federal income
tax, in each case, as referred to in clause (i) and also provide an
indemnification in favor of the certificateholders in form and substance
reasonably satisfactory to the pass through trustees. See "U.S. Federal
Income Tax Consequences--Taxation of Certificateholders Generally."
Mandatory Terms
The description of the Participation Agreements, the lease, the Leased
Aircraft Indenture and the Owned Aircraft Indenture in this prospectus is
based on the forms of such agreements to be utilized pursuant to the Note
Purchase Agreement. In the case of a leased aircraft, the terms of the
agreements actually entered into may differ from the forms of such
agreements and, as a result, may differ from the description of such
agreements contained in this prospectus. See "Description of the Secured
Promissory Notes." However, under the Note Purchase Agreement, the terms of
such agreements are required to (a) contain the Mandatory Document Terms
(as such Mandatory Document Terms are permitted to vary in accordance with
the terms of the Note Purchase Agreement) and (b) not vary the Mandatory
Economic Terms. In addition, we must certify to the pass through trustees
that any such modifications do not materially and adversely affect the
certificateholders, or adversely affect the Policy Provider, and we must
obtain written confirmation from each Rating Agency that the use of
versions of such agreements modified in any material respect will not
result in a withdrawal, suspension or downgrading of the rating of any
class of certificates.
Under the Note Purchase Agreement, it is a condition precedent to the
obligation of each pass through trustee to purchase the secured promissory
notes related to the financing of an aircraft that no Triggering Event has
occurred. The pass through trustees have no right or obligation to purchase
secured promissory notes after the Delivery Period Termination Date.
The "Mandatory Economic Terms," as defined in the Note Purchase
Agreement, will require, among other things, that:
o The maximum principal amount of all the secured promissory notes
issued with respect to an aircraft not exceed the maximum
principal amount of secured promissory notes indicated for each
such aircraft as set forth in "Prospectus Summary--Secured
Promissory Notes and the Aircraft" under the column "Maximum
Principal Amount."
o The initial loan to aircraft value with respect to an aircraft
(with the value of any aircraft for these purposes to equal the
Assumed Appraised Value) not exceed 50.1% in the case of series G
secured promissory notes and 60.7% in the case of series C
secured promissory notes.
o The loan to aircraft value ratio for each series of secured
promissory notes for each aircraft (computed (a) after
aggregating the principal amount of all series of secured
promissory notes that ranks senior to the series of secured
promissory notes for which loan to aircraft
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value is being calculated and (b) as of the date of the issuance of
the secured promissory notes on the basis of the Assumed
Appraised Value of such aircraft and the Depreciation Assumption)
must not exceed as of any Regular Distribution Date after secured
promissory notes are issued for that aircraft (assuming no
default in the payment of the secured promissory notes) 50.1% in
the case of the series G secured promissory notes and 60.7% in
the case of the series C promissory notes.
o With respect to each aircraft, the initial average life of the
series G secured promissory notes not extend beyond 10.8 years
and of the series C secured promissory notes not extend beyond
5.0 years, in each case from the Issuance Date.
o As of the Delivery Period Termination Date (or if earlier, the
date of the occurrence of a Triggering Event), the average life
of the class G certificates and the class C certificates shall
not extend beyond, respectively, 10.2 years and 3.9 years from
the Issuance Date (computed without regard to the acceleration of
any secured promissory notes and after giving effect to any
special distribution on the certificates thereafter required in
respect of unused Deposits).
o The final maturity date of each class of certificates is as set
forth in "Summary--Summary of the Exchange Certificates."
o The original aggregate principal amount of all of the secured
promissory notes of each series shall not exceed the original
aggregate face amount of the certificates issued by the
corresponding Trust.
o The interest rate applicable to each series of secured promissory
notes must be equal to the rate applicable to the certificates
issued by the corresponding pass through trust.
o The payment dates for the secured promissory notes and basic rent
under the leases must be January 15, April 15, July 15 and
October 15.
o The base lease term for each lease must expire by its terms on or
after the latest maturity date of the related secured promissory
notes.
o Basic rent, stipulated loss values and termination values under
the leases must be sufficient to pay amounts due with respect to
the related secured promissory notes.
o The amounts payable under the all-risk aircraft hull insurance
maintained with respect to each aircraft must be sufficient to
pay the applicable stipulated loss value.
The past-due rate in the Indentures and the leases, the Make-Whole
Amount payable under the Indentures, the provisions relating to the
redemption and purchase of secured promissory notes in the Indentures, and
the minimum liability insurance amount on Aircraft in the leases, in each
case must be no less favorable to the Loan Trustees, the Subordination
Agent, the Liquidity Provider, the Policy Provider, the pass through
trustees and the Note Holders than as set forth in the forms of Aircraft
Operative Agreements attached as exhibits to the Note Purchase Agreement.
The indemnification of the Loan Trustees, Subordination Agent,
Liquidity Provider, pass through trustees, Escrow Agent, Paying Agent and
Note Holders with respect to certain taxes and expenses shall be provided
as set forth in the forms of Participation Agreements attached as exhibits
to the Note Purchase Agreement.
The "Mandatory Document Terms" prohibit modifications in any
materially adverse respect as regards the interests of the Loan Trustees,
Subordination Agent, Liquidity Provider or the Note Holders, or in any
adverse respect as regards the interests of the Policy Provider, to certain
specified provisions of the Aircraft Operative Agreements annexed to the
Note Purchase Agreement, as follows:
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In the case of the Indentures, the following modifications are
prohibited:
(1) modifications to the granting clause of the Indentures so as (A)
to deprive the Note Holders of a first priority security interest in (i)
the aircraft, (ii) certain of ATA's rights under its aircraft purchase
agreement with the aircraft manufacturer and, (iii) in the case of a leased
aircraft, the lease or (B) to eliminate the obligations intended to be
secured by the Indenture;
(2) modifications to certain provisions relating to the issuance,
redemption, purchase, payments, and ranking of the secured promissory notes
(including the obligation to pay the Make-Whole Amount in certain
circumstances);
(3) modifications to certain provisions regarding Indenture Defaults,
remedies relating to Indenture Defaults and rights of the Owner Trustee and
Owner Participant in such circumstances;
(4) modifications to certain provisions relating to any replaced
airframe or engines with respect to an aircraft; and
(5) modifications to the provision that New York law will govern the
Indentures.
In the case of the leases, the following modifications are prohibited:
(1) modifications to certain provisions regarding ATA's unconditional
obligation to pay basic rent, stipulated loss value and termination value
to the Loan Trustee;
(2) modification of ATA's obligations to record the Leased Aircraft
Indenture with the FAA and to maintain such Indenture as a first-priority
perfected mortgage on the related aircraft;
(3) modification of ATA's obligations to furnish certain opinions with
respect to a replacement airframe; and
(4) modification of ATA's obligations to consent to the assignment of
the lease by the Owner Trustee as collateral under the Leased Aircraft
Indenture, as well as modifications which would either alter the provision
that New York law will govern the lease or would deprive the Loan Trustee
of rights expressly granted to it under the leases.
In the case of the Participation Agreements, the following
modifications are prohibited:
(1) modifications to certain conditions to the obligations of the pass
through trustees to purchase the secured promissory notes issued with
respect to an aircraft involving (a) good title to such aircraft, (b)
obtaining a certificate of airworthiness with respect to such aircraft, (c)
entitlement to the benefits of Section 1110 with respect to such aircraft,
(d) the execution and delivery by Amtran of a guarantee of ATA's
obligations under the Aircraft Operative Agreements and (e) filings of
certain documents with the FAA;
(2) modifications to the provisions restricting the Note Holder's
ability to transfer such secured promissory notes;
(3) modifications to certain provisions requiring the delivery of
legal opinions; and
(4) modifications to the provision that New York law will govern the
Participation Agreement.
o In the case of all of the Aircraft Operative Agreements,
modifications are prohibited that materially and adversely affect
the interests of the Note Holders, the Subordination Agent,
Liquidity Provider, the Policy Provider or the Loan Trustee in
the definition of "Make-Whole Amount."
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Notwithstanding the foregoing, any such Mandatory Document Term may be
modified to correct or supplement any such provision which may be defective
or to cure any ambiguity or correct any mistake, provided that any such
action does not materially and adversely affect the interests of the Note
Holders, the Subordination Agent, the Liquidity Provider, the Policy
Provider, Loan Trustees or the certificateholders. In addition, Amtran will
guarantee ATA's indemnification obligation under the Note Purchase
Agreement.
Possible Issuance of Class D Certificates
ATA may elect to issue series D secured promissory notes in connection
with the financing of owned aircraft, which will be funded from sources
other than this offering. ATA may elect to fund the sale of the series D
secured promissory notes through the sale of class D certificates. ATA did
not issue any series D secured promissory notes at any time prior to the
consummation of the initial offering. The Note Purchase Agreement provides
that ATA's ability to issue any series D secured promissory notes is
contingent upon its obtaining written confirmation from each Rating Agency
that the issuance of such series D secured promissory note will not result
in a withdrawal or downgrading of the rating of any class of certificates
(without giving effect to the Policy). If the class D certificates are
issued, the trustee with respect to such certificates will become a party
to the Intercreditor Agreement. See "Description of the Intercreditor
Agreements."
Liquidation of Original Trusts
At the Transfer Date, each of the original pass through trusts will
transfer and assign all of its assets and rights to a successor pass
through trust with substantially identical terms, except that (i) the
successor pass through trusts will not have the right to purchase new
secured promissory notes and (ii) New York law will govern both the
original pass through trusts and the successor pass through trusts. The
trustee of each of the original pass through trusts will also act as
trustee of the corresponding successor pass through trust, and each new
trustee will assume the obligations of the original trustee under each
transaction document to which such original trustee was a party. Upon the
effectiveness of such transfer, assignment and assumption, each of the
original pass through trusts will be liquidated and each of the
certificates will represent the same percentage interest in the successor
pass through trust as it represented in the original pass through trust
immediately prior to such transfer, assignment and assumption. Unless the
context otherwise requires, all references in this prospectus to the pass
through trusts, the trustees, the Pass Through Trust Agreements and similar
terms shall be applicable with respect to the original pass through trusts
until the effectiveness of such transfer, assignment and assumption and
thereafter shall be applicable with respect to the successor pass through
trusts. If for any reason such transfer, assignment and assumption cannot
be effected to any successor pass through trust, the related original pass
through trust will continue in existence until it is effected.
Termination of the Pass Through Trusts
ATA's and Amtran's obligations and those of the applicable pass
through trustee with respect to a pass through trust will terminate upon
the distribution to certificateholders of such pass through trust of all
amounts required to be distributed to them pursuant to the applicable pass
through trust agreement and the disposition of all property held in such
pass through trust. The applicable pass through trustee will send to each
certificateholder of such pass through trust notice of the termination of
such pass through trust, the amount of the proposed final payment and the
proposed date for the distribution of such final payment for such pass
through trust. The final payment to any certificateholder of such pass
through trust will be made only upon surrender of such certificateholder's
certificates at the office or agency of the applicable pass through trustee
specified in such notice of termination. (Section 11.01)
The Pass Through Trustees
The pass through trustee for each pass through trust will be
Wilmington Trust Company. With certain exceptions, the trustee makes no
representations as to the validity or sufficiency of the
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Pass Through Trust Agreements, the certificates, the secured promissory
notes, the Note Purchase Agreement, the Indentures, the leases, the
Participation Agreements, the Intercreditor Agreement, the Deposit
Agreements, the Escrow Agreements or other related documents. (Sections
7.03 and 7.14) The trustee of any pass through trust shall not be liable,
with respect to the certificates of such pass through trust, for any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the holders of a majority in principal amount of Outstanding
Certificates of such pass through trust. Subject to certain provisions, the
trustee shall be under no obligation to exercise any of its rights or
powers under any Pass Through Trust Agreement at the request of any holders
of certificates issued thereunder unless there shall have been offered to
the trustee reasonable indemnity. (Section 7.02(e)) Each Pass Through Trust
Agreement provides that the trustee in its individual or any other capacity
may acquire and hold certificates issued thereunder and, subject to certain
conditions, may otherwise deal with ATA, Amtran, any Owner Trustee or any
Loan Trustee with the same rights it would have if it were not the trustee.
(Section 7.04)
DESCRIPTION OF THE DEPOSIT AGREEMENTS
The following is a description of the particular terms of the Deposit
Agreements. The statements under this caption are summaries and do not
purport to be complete and are qualified in their entirety by reference to
all the provisions of the Deposit Agreements, copies of which are available
upon request to the pass through trustee. The provisions of the Deposit
Agreements are substantially identical except as otherwise indicated.
General
Under the Escrow Agreements, the Escrow Agent with respect to each
pass through trust will enter into a separate Deposit Agreement with the
applicable Depositary. Under the Deposit Agreements, the Depositary will
establish separate deposit accounts in the name of the Escrow Agent. On the
Issuance Date, the proceeds relating to the offering of each series of
certificates (excluding amounts used to purchase the secured promissory
notes related to the aircraft financed on the Issuance Date, if any) will
be deposited into the applicable Deposit Account by the initial purchaser,
in each case, on behalf of such Escrow Agent.
On each Regular Distribution Date, the Depositary will pay to the
Paying Agent on behalf of the applicable Escrow Agent, for distribution to
the holders of Escrow Receipts relating to the applicable pass through
trust, an amount equal to interest accrued on the Deposits relating to such
pass through trust during the relevant interest period at a rate per annum
equal to the interest rate applicable to the certificates issued by such
pass through trust.
In connection with the financing of each delivered aircraft during the
Delivery Period, the pass through trustee for each of the pass through
trusts will request that the Escrow Agent relating to the applicable pass
through trust withdraw from the Deposits relating to the applicable pass
through trust funds sufficient to enable the pass through trustee of such
pass through trust to purchase the secured promissory note of the series
applicable to such pass through trust issued with respect to such aircraft.
Accrued but unpaid interest on all such Deposits withdrawn will be paid on
the next Regular Distribution Date. Any portion of any Deposit withdrawn
which is not used to purchase such secured promissory note will be
redeposited by each pass through trustee into an account relating to the
applicable pass through trust.
The Deposits relating to the pass through trusts and interest paid on
such Deposits will not be subject to the subordination provisions of the
Intercreditor Agreement and will not be available to pay any other amount
in respect of the certificates.
Unused Deposits
The pass through trustees' obligations to purchase the secured
promissory notes issued with respect to each aircraft are subject to
satisfaction of conditions at the time of delivery, as set forth in the
Note Purchase Agreement and the Participation Agreements. See "Description
of the
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Certificates--Obligation to Purchase Secured Promissory Notes." Because
four of the seven aircraft which are to be delivered are scheduled for
manufacturer's delivery from time to time during the Delivery Period, no
assurance can be given that all such conditions will be satisfied at the
time of delivery for each aircraft. Moreover, the scheduled delivery date
of any new aircraft is subject to delays in the manufacturing process and
to the aircraft manufacturer's right to postpone deliveries under the
purchase agreement with ATA, the actual delivery date of any one of these
four aircraft may be delayed beyond its currently scheduled delivery date.
See "Description of the Aircraft and Appraisals--Deliveries of Aircraft."
Depending on the circumstances of the financing of each aircraft, the
maximum aggregate principal amount of secured promissory notes may not be
issued.
If any funds remain as Deposits with respect to any pass through trust
after the Delivery Period Termination Date, such funds will be withdrawn by
the Escrow Agent and distributed, with accrued and unpaid interest to the
holders of Escrow Receipts relating to the respective pass through trust.
Any return of unused Deposits will be made after at least 15 days' prior
written notice. In addition, if such remaining Deposits exceed the Par
Redemption Amount with respect to all of the pass through trusts, such
distribution will include a premium payable by ATA equal to the Deposit
Make-Whole Premium with respect to the remaining Deposits applicable to
such pass through trust in excess of such pass through trust's
proportionate share of the Par Redemption Amount. Since the maximum
principal amount of secured promissory notes may not be issued with respect
to an aircraft and, in any such case, the series C secured promissory notes
are more likely not to be issued in the maximum principal amount as
compared to the other secured promissory notes, it is more likely that a
distribution of unused Deposits will be made with respect to the class C
certificates as compared to the other certificates. In addition,
notwithstanding the Par Redemption Amount limitation, if any aircraft is
not delivered by the manufacturer on or prior to the Delivery Period
Termination Date for any reason that is not ATA's fault or caused by ATA's
negligence and no substitute aircraft is provided in lieu of such aircraft,
no Deposit Make-Whole Premium will be paid with respect to the unused
Deposits to be distributed as a result of such failure to deliver in an
amount equal to the maximum principal amount of secured promissory notes
that could have been issued and acquired by such pass through trust with
respect to such aircraft in accordance with the Mandatory Economic Terms
and such unused Deposits shall not be included in the calculation of the
Par Redemption Amount. The Policy does not cover the Deposit Make-Whole
Premium.
Distribution upon Occurrence of a Triggering Event
If a Triggering Event occurs prior to the Delivery Period Termination
Date, the Escrow Agent for the pass through trusts will withdraw any funds
then held as Deposits with respect to such pass through trusts and cause
such funds, with accrued and unpaid interest, but without any premium, to
be distributed to the holders of Escrow Receipts relating to such pass
through trusts by the Paying Agent on behalf of the Escrow Agent. Any
return of unused deposits will be made after at least 15 days' prior
written notice. Accordingly, if a Triggering Event occurs prior to the
Delivery Period Termination Date, the pass through trusts will not acquire
secured promissory notes issued with respect to aircraft delivered after
the occurrence of such Triggering Event.
Depositary
Citibank, N.A. will act as Depositary.
Citibank has short-term unsecured debt ratings of P-1 from Moody's and
A-1+ from Standard & Poor's.
Citibank, N.A. is a wholly owned subsidiary of Citicorp (a Delaware
corporation) and is Citicorp's principal subsidiary. (Citicorp has been a
wholly owned subsidiary of Citigroup Inc., a Delaware holding company
formerly known as Travelers Group Inc. ("Travelers"), since October 8,
1998, when Citicorp merged with a wholly owned subsidiary of Travelers.) As
of September 30, 1999, the total assets of Citibank and its consolidated
subsidiaries represented more than 80% of the total assets of Citicorp and
its consolidated subsidiaries.
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The Consolidated Balance Sheets of Citibank as of December 31, 1998
and as of December 31, 1997 are set forth in the Annual Report and Form
10-K of Citicorp and its subsidiaries for the year ended December 31, 1998
and as of September 30, 1999 and December 31, 1998 are set forth in the
Financial Review and Form 10-Q for the quarter ended September 30, 1999.
Copies of such reports are available upon request, without charge, by
writing or calling Citicorp Corporate Affairs Distribution, 850 Third
Avenue, 13th Floor, New York, New York, 10043, (212) 559-0233.
This information concerning Citibank was provided by Citibank. Neither
the Company nor ATA takes any responsibility for the accuracy of the
Citibank information.
Replacement of Depositary
If the Depositary's short-term unsecured debt rating falls below A-1+
from Standard & Poor's or P-1 from Moody's then we must, within 45 days of
such event occurring, replace the Depositary with a new depositary bank
that has short-term unsecured debt ratings of at least A-1+ from Standard &
Poor's and P-1 from Moody's, or such new depositary bank that will not
result in a withdrawal or downgrading of the rating of any class of
certificates (without giving effect to the Policy), as confirmed by the
rating agencies in writing.
DESCRIPTION OF THE ESCROW AGREEMENTS
The following is a description of the particular terms of the Escrow
Agreements. The statements under this caption are summaries only and do not
purport to be complete and are qualified in their entirety by reference to
all of the provisions of the Escrow Agreements, copies of which are
available upon request to the pass through trustee. The provisions of the
Escrow Agreements are substantially identical except as otherwise
indicated.
First Security Bank, National Association, as escrow agent in respect
of the pass through trusts, Wilmington Trust Company, as paying agent on
behalf of the Escrow Agent in respect of each such pass through trust, the
pass through trustee of each of the pass through trusts and the initial
purchaser of the certificates will enter into a separate Escrow Agreement
for the benefit of the certificateholders of each such pass through trust
as holders of the Escrow Receipts affixed to such certificates. The cash
proceeds of the initial offering of certificates (excluding amounts used to
purchase the secured promissory notes related to the aircraft financed on
the Issuance Date, if any) will be deposited by the initial purchasers on
behalf of the Escrow Agent (for the benefit of Receiptholders) with the
Depositary as Deposits relating to such pass through trusts.
Each Escrow Agent will permit the pass through trustee of the related
pass through trust to cause funds to be withdrawn from such Deposits on or
prior to the Delivery Period Termination Date so that such pass through
trustee may purchase the related secured promissory notes under the Note
Purchase Agreement. In addition, the Escrow Agent will direct the
Depositary to pay interest on the Deposits accrued in accordance with the
Deposit Agreement to the Paying Agent for distribution to the
Receiptholders.
Each Escrow Agreement requires that the Paying Agent establish and
maintain, for the benefit of the related Receiptholders, one or more Paying
Agent Account(s), which shall be non-interest bearing. The Paying Agent
will deposit interest on Deposits and any unused Deposits withdrawn by the
Escrow Agent in the related Paying Agent Account. The Paying Agent will
distribute these amounts on a Regular Distribution Date or Special
Distribution Date, as appropriate. Each Receiptholder, by its acceptance of
an Escrow Receipt, is deemed to agree that it will look solely to funds
deposited in the Paying Agent Account for any payment or distribution due
to such Receiptholder under the Escrow Agreement and the Escrow Receipt and
that it will have no recourse against ATA, Amtran, the pass through trustee
that issued the certificate to which the Escrow Receipt is attached, the
Paying Agent or the Escrow Agent, except as provided in the Escrow
Agreement and the pass through trust agreement pursuant to which the
certificate to which the Escrow Receipt is attached was issued.
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Upon receipt by the Depositary of a portion of the cash proceeds from
the initial offering of certificates, the Escrow Agent will issue one or
more Escrow Receipts. An Escrow Receipt will be affixed by the relevant
pass through trustee to each certificate. Each Escrow Receipt evidences a
fractional undivided interest in amounts from time to time deposited into
the Paying Agent Account and is limited in recourse to amounts deposited
into such account. An Escrow Receipt may not be assigned or transferred
except in connection with the assignment or transfer of the certificate to
which it is affixed. Each Escrow Receipt will be registered by the Escrow
Agent in the same name and manner as the certificate to which it is
affixed.
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following is a description of the particular terms of the
Liquidity Facilities and certain provisions of the Intercreditor Agreement.
The statements under this caption are summaries and do not purport to be
complete and are qualified in their entirety by reference to all of the
provisions of the Liquidity Facilities and the Intercreditor Agreement,
copies of which are available upon request to the pass through trustee. The
provisions of the Liquidity Facilities are substantially identical except
as otherwise indicated.
General
The Liquidity Provider will enter into a separate revolving credit
agreement with the Subordination Agent (each, a "Liquidity Facility") with
respect to the certificates of each pass through trust pursuant to which
the Liquidity Provider will, if necessary, make one or more advances to the
Subordination Agent that will be used solely to pay interest on such
certificates when due, subject to certain limitations. The Liquidity
Facility for each pass through trust is intended to enhance the likelihood
of timely receipt by the certificateholders of such pass through trust of
the interest passed through to them at the Stated Interest Rate for such
certificates on up to six consecutive quarterly Regular Distribution Dates.
If interest payment defaults occur that exceed the amount covered by or
available under the Liquidity Facility for a pass through trust, the
certificateholders of such pass through trust will bear their allocable
share of the deficiencies to the extent that there are no other sources of
funds (including, in the case of the class G certificates, funds from the
Policy). Although Citibank, N.A. is the initial Liquidity Provider for each
pass through trust, Citibank may be replaced by one or more other entities
with respect to the pass through trusts under certain circumstances.
Therefore, the Liquidity Provider for the pass through trusts may differ.
Drawings
The aggregate amount available under the Liquidity Facility for each
pass through trust at January 15, 2001, the first Regular Distribution Date
after the scheduled Delivery Period Termination Date, assuming that secured
promissory notes in the maximum principal amount with respect to all
aircraft are acquired by the pass through trusts and that all interest and
principal due on or prior to January 15, 2001, is paid, will be as follows:
Pass Through Trust Available Amount
------------------ ----------------
Class G ................................... $24,982,816
Class C.................................... $ 4,850,642
Except as otherwise provided below, the Liquidity Facility for each
pass through trust will enable the Subordination Agent to make Interest
Drawings under the Liquidity Facility on any Distribution Date to pay
interest then due and payable on the certificates of such pass through
trust at the Stated Interest Rate for such pass through trust to the extent
that the amount, if any, available to the Subordination Agent on such
Distribution Date is not sufficient to pay such interest. The maximum
amount available to be drawn under a Liquidity Facility with respect to
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any pass through trust on any Distribution Date to fund any shortfall of
interest on certificates of such pass through trust will not exceed the
Required Amount for such certificates.
The Liquidity Facility for any class of certificates will not provide
for drawings:
o to pay for principal of or premium on the certificates of such
class;
o to pay for any interest on the certificates of such class in
excess of the Stated Interest Rate for such class;
o to pay for principal of or interest or premium on the
certificates of any other class; or
o to pay for amounts payable with respect to the Deposits relating
to such pass through trust. (Liquidity Facilities, Section 2.2;
Intercreditor Agreement, Section 3.6)
Each payment by the Liquidity Provider will reduce by the same amount
the Maximum Available Commitment under such Liquidity Facility, subject to
reinstatement as described below. With respect to any Interest Drawings
under a Liquidity Facility, upon reimbursement of the Liquidity Provider of
all or any part of the amount of such Interest Drawings plus interest
thereon, the Maximum Available Commitment under such Liquidity Facility
will be reinstated by the amount of such repaid Interest Drawing to an
amount not to exceed the then Required Amount of such Liquidity Facility;
provided, however, that such Liquidity Facility will not be so reinstated
at any time if (a) a Liquidity Event of Default has occurred and is
continuing and (b) less than 65% of the then aggregate outstanding
principal amount of all secured promissory notes are Performing Secured
Promissory Notes. With respect to any other drawings under such Liquidity
Facility, amounts available to be drawn thereunder are not subject to
reinstatement.
The stated amount of the Liquidity Facility for any pass through trust
will be automatically reduced from time to time to an amount equal to the
next three successive interest payments due on the certificates of that
pass through trust (without regard to expected future payment of principal
of such certificates) at the Stated Interest Rate for that pass through
trust. The Liquidity Provider will be paid a fee on the average amount
available to be drawn under the initial Liquidity Facility until the
earlier of the date when the commitment under the Liquidity Facility
terminates and the date when a Downgrade Drawing, if any, is made, in an
amount and on the dates specified in the Liquidity Facilities. (Liquidity
Facilities, Sections 2.3 and 2.4(a); Intercreditor Agreement, Section
3.6(j)).
If at any time the short-term unsecured debt rating of the Liquidity
Provider for any pass through trust then issued by either rating agency is
lower than the Threshold Rating or, in the event the Liquidity Provider's
short-term unsecured debt is not rated by Moody's or Standard & Poor's,
then the Liquidity Provider for such pass through trust or the
Subordination Agent (in consultation with ATA) may arrange for a
Replacement Facility.
The provider of any Replacement Facility will have the same rights
(including, without limitation, priority distribution rights and rights as
Controlling Party) under the Intercreditor Agreement as the replaced
Liquidity Provider.
If such Liquidity Facility is not replaced with a Replacement Facility
within 30 days (or 10 days if the Liquidity Provider is rated lower than
P-3 or A-3 by Moody's or Standard & Poor's, respectively) after notice of
the downgrading and as otherwise provided in the Intercreditor Agreement,
the Subordination Agent will make a Downgrade Drawing in an amount equal to
the then Maximum Available Commitment under such Liquidity Facility. The
Subordination Agent will deposit the proceeds of any Downgrade Drawing in a
Cash Collateral Account for such class of certificates and will use these
proceeds for the same purposes and under the same circumstances and subject
to the same conditions as cash payments of Interest Drawings under such
Liquidity Facility would be used. (Liquidity Facilities, Section 2.6(a);
Intercreditor Agreement, Section 3.6(c))
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The Liquidity Facility for each pass through trust will provide that
the relevant Liquidity Provider's obligations under such Liquidity Facility
will expire on the earliest of:
o 364 days after the Issuance Date.
o The date on which the Subordination Agent delivers to such
Liquidity Provider a certification that all of the certificates
of such pass through trust have been paid in full.
o The date on which the Subordination Agent delivers to such
Liquidity Provider a certification that a Replacement Facility
has been substituted for such Liquidity Facility.
o The fifth Business Day following receipt by the Subordination
Agent of a Termination Notice from such Liquidity Provider (see
"--Liquidity Events of Default").
o The date on which the Liquidity Provider honors a Final Drawing.
o The date on which no amount is or may (by reason of
reinstatement) become available for drawing under such Liquidity
Facility. (Liquidity Facilities, Sections 1.1(a) and 2.4(b))
Each Liquidity Facility will provide that the scheduled expiration
date of such Liquidity Facility may be extended for additional 364-day
periods by mutual agreement. The Intercreditor Agreement will provide for
the replacement of any Liquidity Facility, if any, for any pass through
trust if it is scheduled to expire earlier than 15 days after the Final
Maturity Date for the certificates of such pass through trust if such
Liquidity Facility is not extended at least 25 days prior to its then
scheduled expiration date. If such Liquidity Facility is not so extended or
replaced by the 25th day prior to its then scheduled expiration date, the
Subordination Agent will make a Non-Extension Drawing in an amount equal to
the then Maximum Available Commitment. The Subordination Agent will deposit
the proceeds of the Non-Extension Drawing in the Cash Collateral Account
for the related class of certificates as cash collateral to be used for the
same purposes and under the same circumstances, and subject to the same
conditions, as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Section 2.2(b)(i))
The Subordination Agent, in consultation with ATA (whose
recommendations the Subordination Agent will accept in the absence of a
good faith reason not to), may, under certain circumstances, arrange for a
Replacement Facility to replace the Liquidity Facility for any pass through
trust. If a Replacement Facility is provided at any time after the
Downgrade Drawing or Non-Extension Drawing under such Liquidity Facility,
all funds on deposit in the relevant Cash Collateral Account will be
returned to the Liquidity Provider being replaced. (Intercreditor
Agreement, Section 3.6(e))
The Intercreditor Agreement provides that the Subordination Agent will
hold the proceeds of a Final Drawing made in accordance with the provisions
set forth under "--Liquidity Events of Default" below in the Cash
Collateral Account for the related pass through trust as cash collateral to
be used for the same purposes and under the same circumstances, and subject
to the same conditions, as cash payments of Interest Drawings under such
Liquidity Facility would be used. The Intercreditor Agreement further
provides that the Subordination Agent must make a Final Drawing under a
Liquidity Facility in accordance with and to the extent permitted by the
terms of such Liquidity Facility. (Intercreditor Agreement, Section 3.6(i))
Drawings (other than a Final Drawing) under any Liquidity Facility
will be made by delivery by the Subordination Agent of a certificate in the
form required by that Liquidity Facility. Upon receipt of a certificate,
the Liquidity Provider is obligated to make payment of the drawing
requested in immediately available funds. Upon payment by the Liquidity
Provider of the amount specified in any drawing under any Liquidity
Facility, the Liquidity Provider will be fully discharged of its
obligations under that Liquidity Facility with respect to such drawing and
from then on will not be obligated to make any further payments under that
Liquidity Facility in
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respect of such drawing to the Subordination Agent or any other person or
entity who makes a demand for payment in respect of interest on the related
certificates.
Reimbursement of Drawings
The Subordination Agent must reimburse amounts drawn under any
Liquidity Facility by reason of an Interest Drawing, Final Drawing,
Downgrade Drawing or Non-Extension Drawing and interest on such drawings,
but only to the extent that the Subordination Agent has funds available to
make such payments.
Interest Drawings and Final Drawings
Amounts drawn by reason of an Interest Drawing or Final Drawing will
be immediately due and payable, together with interest on the amount of
such drawing at a rate equal to the applicable LIBOR plus 2.25% per annum
or the applicable base rate plus 2.25% per annum.
Downgrade Drawings and Non-Extension Drawings
The amount drawn under any Liquidity Facility by reason of a Downgrade
Drawing or a Non- Extension Drawing will be treated as follows:
o Such amount will be released on any Distribution Date to the
applicable Liquidity Provider to the extent that such amount
exceeds the Required Amount.
o Any portion of such amount withdrawn from the Cash Collateral
Account for such certificates to pay interest on such
certificates will be treated in the same way as Interest
Drawings.
o The balance of such amount will be invested in certain specified
eligible investments.
The Downgrade Drawing or Non-Extension Drawing under any Liquidity
Facility will bear interest at a rate equal to the applicable LIBOR plus
0.55% per annum or the applicable base rate plus 0.55% per annum, as the
case may be. (Liquidity Facilities, Sections 2.3 (b) and 2.6)
Liquidity Events of Default
Events of default under each Liquidity Facility (known as a Liquidity
Event of Default) will consist of:
(i) the acceleration of all the secured promissory notes; or
(ii) certain bankruptcy of similar events involving ATA. (Liquidity
Facilities, Section 1.1)
If (i) a Liquidity Event of Default shall have occurred and be
continuing and (ii) less than 65% of the then aggregate outstanding
principal amount of all secured promissory notes are Performing Secured
Promissory Notes, the Liquidity Provider may, in its discretion, give a
notice of termination of the related Liquidity Facility, the effect of
which will be to cause:
(i) such Liquidity Facility to expire on the fifth Business Day after
the date on which such termination notice is received by the
Subordination Agent;
(ii) the Subordination Agent to promptly request, and the Liquidity
Provider to make, a Final Drawing thereunder;
(iii) any Drawing remaining unreimbursed as of the date of termination
to be automatically converted into a Final Drawing under such
Liquidity Facility; and
(iv) all amounts owing to the Liquidity Provider shall automatically
become accelerated.
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Notwithstanding the foregoing, the Subordination Agent will be
obligated to pay amounts owing to the Liquidity Provider only to the extent
of funds available therefor after giving effect to the payments in
accordance with the provisions described under "Description of the
Intercreditor Agreement--Priority of Distributions." (Liquidity Facilities,
Section 6.1)
Upon the circumstances described below under "Description of the
Intercreditor Agreement--Intercreditor Rights--Controlling Party," a
Liquidity Provider may become the Controlling Party with respect to the
exercise of remedies under the Indentures. (Intercreditor Agreement,
Section 2.6(c))
Liquidity Provider
The Liquidity Provider will be Citibank, N.A. See description under
"Description of the Deposit Agreements--Depositary."
DESCRIPTION OF THE POLICY AND THE POLICY PROVIDER AGREEMENT
The following summary describes certain terms of the Policy and
certain provisions of the Policy Provider Agreement. The summary does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Policy which will be filed by Amtran, Inc. with the
Commission as an exhibit to an Annual Report on Form 10-K, a Quarterly
Report on Form 10-Q, or a Current Report on Form 8-K.
The Policy
The Policy Provider will issue its certificate guaranty insurance
policy in favor of the Subordination Agent for the benefit of the class G
trustee and holders of the class G certificates. The Intercreditor
Agreement directs the Subordination Agent to make a drawing under the
Policy under the following five circumstances:
Interest Drawings
If on any Regular Distribution Date (other than the Final Maturity
Date), after giving effect to the application of funds in accordance with
the priorities set forth under "Description of the Intercreditor
Agreement--Priority of Distributions" and the application of any Prior
Funds, the Subordination Agent does not then have sufficient funds
available for the payment of all amounts due and owing in respect of
accrued interest on the class G certificates at the Stated Interest Rate
for the class G certificates, the Subordination Agent is to request a
policy drawing under the Policy in an amount sufficient to enable the
Subordination Agent to pay such interest.
Proceeds Deficiency Drawing
If, except as provided under "--No Proceeds Drawing" below, on any
Special Distribution Date established by the Subordination Agent by reason
of its receipt of a Special Payment consisting of the proceeds from a
Disposition with respect to any series G secured promissory note after
giving effect to the subordination provisions of the Intercreditor
Agreement and to the application of any Prior Funds, the Subordination
Agent does not then have sufficient funds available for a reduction in the
outstanding Pool Balance of the class G certificates by an amount equal to
the outstanding principal amount of such secured promissory note
(determined immediately prior to such Disposition) plus interest on the
amount of such reduction accrued at the Stated Interest Rate for the period
from the immediately preceding Regular Distribution Date to such Special
Distribution Date, the Subordination Agent is to request a policy drawing
under the Policy in an amount sufficient to enable the Subordination Agent
to pay the amount of such reduction plus such accrued interest.
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No Proceeds Drawing
On the first Business Day (which shall be a Special Distribution Date)
that is 24 months after the last date on which any payment was made on a
series G secured promissory note as to which there has subsequently been a
failure to pay principal or that has subsequently been accelerated, if the
Subordination Agent has not received a Special Payment constituting
proceeds from the Disposition with respect to that secured promissory note,
the Subordination Agent will request a drawing under the Policy in an
amount equal to the then outstanding principal amount of such secured
promissory note (without regard to the acceleration thereof) plus accrued
interest thereon at the Stated Interest Rate from the immediately preceding
Regular Distribution Date to that Special Distribution Date. The
Subordination Agent is to give prompt notice to each pass through trustee,
the Liquidity Provider and the Policy Provider setting forth the
non-receipt of any such Special Payment and establishing such Business Day
as such Special Distribution Date, which notice is to be given not less
than 25 days prior to such Special Distribution Date. After the payment by
the Policy Provider in full of such amount of principal and accrued
interest for such policy drawing, the Subordination Agent will have no
right to make any further policy drawing in respect of any subsequent sale
or other disposition of such secured promissory note except for an
"Avoidance Drawing" as described below.
Notwithstanding the foregoing, the Policy Provider has the right at
the end of any such 24-month period, so long as no Policy Provider Default
has occurred and is continuing, to elect instead (a) to pay on such Special
Distribution Date an amount equal to the shortfall in amounts available to
the Subordination Agent for the payment of scheduled principal (without
regard to the acceleration thereof) and interest at the Stated Interest
Rate for the class G certificates that came due on such secured promissory
note (after giving effect to the application of any Prior Funds) during
such 24-month period, (b) thereafter, on each Regular Distribution Date to
permit drawings under the Policy for an amount equal to the scheduled
principal and interest that were to become due on such secured promissory
note on the related payment date (without regard to any acceleration
thereof) until the establishment of an Election Distribution Date, and
(c)(i) on any Business Day (which will be a Special Distribution Date)
elected by the Policy Provider upon 20 days' notice to request the
Subordination Agent, or (ii) following either the occurrence and
continuation of a Policy Provider Default or a Disposition of or in respect
of such secured promissory note, on any Business Day (which will be a
Special Distribution Date) specified by the Subordination Agent upon 20
days' notice, the Subordination Agent will be required, in each case, to
make a policy drawing for an amount equal to the then outstanding principal
balance of such secured promissory note and accrued interest thereon at the
Stated Interest Rate to such Election Distribution Date less any policy
drawings previously paid by the Policy Provider in respect of principal on
such secured promissory note and, any drawings paid on the Special
Distribution Date under the class G Liquidity Facility or withdrawals made
on the Special Distribution Date from the class G Cash Collateral Account
attributable to such interest. The Intercreditor Agreement instructs the
Subordination Agent to make each such drawing under the Policy. Any such
drawing shall not relieve the Policy Provider from any and all obligations
with respect to previous Policy Drawings that remain unpaid.
In addition, regardless of whether or not the Policy Provider makes a
Policy Provider Election, the Policy Provider will honor drawings under the
Policy by a Liquidity Provider to cover the payment to the Liquidity
Provider of interest accruing on the Liquidity Obligations in respect of
the class G and class C Liquidity Facilities from and after the end of such
24-month period as and when such interest becomes due in accordance with
such Liquidity Facilities.
Final Policy Drawing
If on the Final Maturity Date of the class G certificates after giving
effect to the subordination provisions of the Intercreditor Agreement and
to the application of any Prior Funds, the Subordination Agent does not
then have sufficient funds available for the payment in full of the Final
Distribution (calculated as at such date but excluding any accrued and
unpaid premium) on such class of certificates, the Subordination Agent is
to request a policy drawing under the Policy in an amount sufficient to
enable the Subordination Agent to pay the Final Distribution
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(calculated as at such date but excluding any accrued and unpaid premium)
on such class of certificates.
Avoidance Drawing
If at any time prior to the expiration of the Policy the Subordination
Agent has actual knowledge of the issuance of any Order, the Subordination
Agent is to give prompt notice to each pass through trustee, each Liquidity
Provider and the Policy Provider of such Order and prior to the expiration
of the Policy, request a policy drawing for the relevant Preference Amount
and to deliver to the Policy Provider a copy of the documentation required
by the Policy with respect to such Order. To the extent that any portion of
such Preference Amount is to be paid to the Subordination Agent (and not to
any receiver, conservator, debtor-in-possession or trustee in bankruptcy as
provided in the Policy), the Subordination Agent shall establish as a
Special Distribution Date the date that is the earlier of the date of the
expiration of the Policy and the Business Day that immediately follows the
25th day after that notice.
General
All requests by the Subordination Agent for a policy drawing are to be
made by it no later than 1:00 p.m. (New York City time) on (or, in the case
of any Preference Amount, at least three days prior to) the applicable
Distribution Date and in the form required by the Policy and delivered to
the Policy Provider in accordance with the Policy. All proceeds of any
policy drawing by the Subordination Agent are to be deposited by the
Subordination Agent in the Policy Account and from there paid to the class
G pass through trustee for distribution to the holders of the class G
certificates without regard to the subordination provisions of the
Intercreditor Agreement. In the case of any Preference Amounts, however,
all or part of the policy drawing will be paid directly to the bankruptcy
receiver, debtor-in-possession or trustee to the extent such amounts have
not been so paid by the certificateholders. If any request for a policy
drawing is rejected because it does not satisfy the requirements of the
Policy, the Subordination Agent will resubmit the request so as to satisfy
those requirements.
The Policy provides that if such a request for a policy drawing is
properly submitted or resubmitted it will pay to the Subordination Agent
for deposit in the Policy Account the applicable payment under the Policy
no later than 4:00 p.m. on the later of the relevant Distribution Date and
the date the request is received by the Policy Provider (if the request is
received by 1:00 p.m. on such date) or on the next Policy Business Day (if
the request is received after that time).
The Policy Provider will be subrogated to all of the rights of the
holders of the series G secured promissory notes to the extent provided in
the Intercreditor Agreement and will not be subrogated to the class G
certificates. Once any payment made under the Policy is paid to the
Subordination Agent, the Policy Provider will have no further obligation in
respect of those payments. The Policy Provider shall not be required to
make any payment except at the times and in the amounts expressly set forth
in the Policy.
The Policy does not cover (i) shortfalls, if any, attributable to the
liability of the class G pass through trust, the class G pass through
trustee or the Subordination Agent for withholding taxes, if any (including
interest and penalties in respect of that liability), (ii) any premium,
prepayment penalty or other accelerated payment, which at any time may
become due on or with respect to any class G certificate, nor (iii) any
failure of the Escrow Agent, Subordination Agent or the class G pass
through trustee to make any payment due to the holders of the class G
certificates.
The Policy Provider's obligation under the Policy will be discharged
to the extent that funds are received by the Subordination Agent for
distribution to the class G pass through trustee and the holders of class G
certificates, whether or not the funds are properly distributed by the
Subordination Agent or the class G pass through trustee.
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The Policy is noncancellable. The Policy expires and terminates
without any action on the part of the Policy Provider or any other person
on the earlier of (i) July 16, 2018 and (ii) the date that is one year and
one day following the date on which the class G certificates have been paid
in full. Notwithstanding the foregoing, the Policy Provider will continue,
after termination of the Policy, to be obligated to pay amounts with
respect to which a request for a policy drawing has been made prior to
termination of the policy. No portion of the premium under the Policy is
refundable for any reason including payment, or provision being made for
payment.
The Policy is issued under and pursuant to, and shall be construed
under, the law of the State of New York.
The Policy Provider Agreement
ATA, the Subordination Agent and the Policy Provider will enter into
an insurance and indemnity agreement to be dated as of the date of issuance
of the class G certificates. Under the Policy Provider Agreement, the
Subordination Agent and the Company will agree to reimburse the Policy
Provider for drawings paid under the Policy. Pursuant to a policy fee
letter, the Company will agree to pay the Policy Provider a premium for the
Policy based on the Pool Balance of the class G certificates and a fee in
connection with any prepayment of the certificates (including by reason of
an acceleration of the underlying Secured promissory notes, but excluding a
prepayment associated with an event of loss of an Aircraft) and to
reimburse the Policy Provider for certain expenses.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following is a description of the particular terms of the
Intercreditor Agreement. The statements made under this caption are
summaries and do not purport to be complete and are qualified in their
entirety by reference to all of the provisions of the Intercreditor
Agreement, a copy of which is available upon request to the pass through
trustee.
Intercreditor Rights
General
The Intercreditor Agreement will be among each pass through trustee,
the Liquidity Provider, the Policy Provider and the Subordination Agent.
The secured promissory notes will be registered in the name of the
Subordination Agent or its nominee as agent and trustee for the applicable
pass through trustee solely for the purpose of facilitating the enforcement
of the other provisions of the Intercreditor Agreement.
Controlling Party
With respect to any Indenture at any given time, the Loan Trustee
under such Indenture will be directed in taking, or refraining from taking,
any remedial action under such Indenture or with respect to the secured
promissory notes issued under such Indenture, subject to certain
limitations, by the Controlling Party including acceleration of such
secured promissory notes or foreclosing the lien on the related aircraft.
See "Description of the Certificates--Indenture Defaults and Certain Rights
Upon an Indenture Default" for a description of the rights of the
certificateholders of each pass through trust to direct the respective pass
through trustees.
The Controlling Party will be:
o the policy provider, until final distributions of the aggregate
outstanding balance of the class G certificates, together with
accrued and unpaid interest, are made to the holders of the class
G certificates and thereafter, if, and while, no obligations
owing to the policy provider remain outstanding or, if a policy
provider default has occurred and is continuing, the class G pass
through trustee, until payment of final distributions together
with accrued interest to
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the holders of the class G certificates, until payment of final
distributions together with accrued interest to the holders of the
class G certificates, then;
o the class C pass through trustee.
The Liquidity Provider with the greater outstanding amount of
unreimbursed Liquidity Obligations and not then in default in its
obligations to make any advance under any Liquidity Facility will have the
right to become the Controlling Party with respect to any Indenture at any
time after 18 months from the earliest to occur of (x) the date on which
the entire available amount under any Liquidity Facility has been drawn
(for any reason other than a Downgrade Drawing or a Non-Extension Drawing)
and remains unreimbursed, (y) the date on which the entire amount of any
Downgrade Drawing or Non-Extension Drawing has been withdrawn from the
relevant Cash Collateral Account to pay interest on the relevant class of
certificates and remains unreimbursed and (z) the date on which all secured
promissory notes have been accelerated provided that if (a) the Policy
Provider amends the Policy to cover payments of principal of and interest
on Drawings in respect of the class G and class C Liquidity Facilities and
certain other conditions are met, including the Rating Agencies confirming
that they will not withdraw, suspend or downgrade their ratings on any
class of certificates, or (b) the Policy Provider pays to the Liquidity
Provider all outstanding Drawings in respect of the class G and class C
Liquidity Facilities including all interest accrued thereon to such date,
the Policy Provider will remain the Controlling Party so long as no Policy
Provider Default has occurred and is continuing (in which case such
Liquidity Provider, if it so elects and if Liquidity Obligations owing to
it remain outstanding (or, if it does not so elect or if no such Liquidity
Obligations remain outstanding, the class G pass through trustee), will
become the Controlling Party). (Intercreditor Agreement, Section 2.6(c))
For purposes of giving effect to the rights of the Controlling Party, the
pass through trustees (other than the Controlling Party) will irrevocably
agree, and the certificateholders (other than the certificateholders
represented by the Controlling Party) will be deemed to agree by virtue of
their purchase of certificates, that the Subordination Agent, as record
holder of the secured promissory notes, will exercise its voting rights in
respect of the secured promissory notes as directed by the Controlling
Party. (Intercreditor Agreement, Section 2.6) For a description of certain
limitations on the Controlling Party's rights to exercise remedies, see
"Description of the Secured Promissory Notes--Remedies."
Sale of Secured Promissory Notes or Aircraft
Upon the occurrence and during the continuation of any Indenture
Default under any Indenture, the Controlling Party will be entitled to
accelerate and, subject to the provisions of the immediately following
sentence, direct the Subordination Agent to sell all (but not less than
all) of the secured promissory notes issued under such Indenture to any
person. So long as any certificates are outstanding, during nine months
after the earlier of (x) the acceleration of the secured promissory notes
under any Indenture or (y) the bankruptcy or insolvency of ATA, without the
consent of each pass through trustee, no aircraft subject to the lien of
such Indenture or such secured promissory notes may be sold, if the net
proceeds from such sale would be less than the Minimum Sale Price for such
aircraft or such secured promissory notes. In addition, with respect to any
leased aircraft, the amount and payment dates of rentals payable by ATA
under the lease for such leased aircraft may not be adjusted, if, as a
result of such adjustment, the discounted present value of all such rentals
would be less than 75% of the discounted present value of the rentals
payable by ATA under such lease before giving effect to such adjustment, in
each case, using the weighted average interest rate of the secured
promissory notes outstanding under such Indenture as the discount rate.
(Intercreditor Agreement, Section 4.1)
After a Triggering Event occurs and any secured promissory note
becomes a Non-Performing Secured Promissory Note, the Subordination Agent
will be required to obtain the LTV Appraisals for the aircraft as soon as
practicable and additional LTV Appraisals on or prior to each anniversary
of the date of such initial LTV Appraisals; provided that, if the
Controlling Party reasonably objects to the appraised value of any aircraft
shown in any LTV Appraisal, the Controlling Party will have the right to
obtain or cause to be obtained substitute LTV Appraisals (including any LTV
Appraisals based upon physical inspection of the aircraft).
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Priority of Distributions
Before a Triggering Event
So long as no Triggering Event has occurred, payments in respect of
the secured promissory notes and certain other payments received on any
Distribution Date will be promptly distributed by the Subordination Agent
on such Distribution Date in the following order of priority:
o to the Liquidity Provider to the extent required to pay the
Liquidity Expenses and to the Policy Provider to the extent
required to pay the Policy Expenses, pro rata;
o to the Liquidity Provider and to the Policy Provider, pro
rata, to the extent required to pay interest accrued on the
Liquidity Obligations (as determined after giving effect to
payments made by the Policy Provider to the Liquidity
Provider in respect of drawings under the Liquidity
Facilities) and on certain Policy Provider Obligations (as
provided in the definition of Policy Provider Obligations),
respectively and, if the Policy Provider has elected to pay
to the Liquidity Provider all outstanding drawings and
interest thereon owing to the Liquidity Provider under the
Liquidity Facilities, to reimburse the Policy Provider for
the amount of such payment made to the Liquidity Provider
attributable to interest accrued on such drawings;
o to the Liquidity Provider to the extent required to pay or
reimburse the Liquidity Provider for the Liquidity
Obligations (other than amounts payable pursuant to the two
preceding clauses) and/or, if applicable, to replenish each
Cash Collateral Account up to the Required Amount and, if
the Policy Provider has elected to pay to the Liquidity
Provider all outstanding drawings and interest thereon owing
to the Liquidity Provider under the Liquidity Facilities, to
reimburse the Policy Provider for the amount of such payment
made to the Liquidity Provider in respect of principal of
drawings under the Liquidity Facilities, pro rata;
o to the class G pass through trustee to the extent required
to pay Expected Distributions on the class G certificates;
o to the Policy Provider to the extent required to pay or
reimburse any Policy Provider Obligations (other than
amounts payable pursuant to the first three clauses above
and any Excess Reimbursement Obligations);
o to the class C pass through trustee to the extent required
to pay Expected Distributions on the class C certificates;
o to the Policy Provider to the extent required to pay any
Excess Reimbursement Obligations;
o if class D certificates or series D secured promissory notes
have been issued, to the class D pass through trustee or
noteholder, as the case may be, to the extent required to
pay "Expected Distributions" (to be defined in a manner
equivalent to the definition for the other classes of
certificates) on the class D certificates or principal and
accrued interest on the series D notes, as the case may be;
and
o to the Subordination Agent and each pass through trustee for
the payment of certain fees and expenses.
After a Triggering Event
Subject to the terms of the Intercreditor Agreement, upon the
occurrence of a Triggering Event and at all times after such Triggering
Event, all funds received by the Subordination Agent in
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respect of the secured promissory notes and certain other payments will be
promptly distributed by the Subordination Agent in the following order of
priority:
o to the Subordination Agent, any pass through trustee, any
certificateholder, the Liquidity Provider or the Policy
Provider to the extent required to pay certain out-of-pocket
costs and expenses actually incurred by the Subordination
Agent, any pass through trustee, the Liquidity Provider or
the Policy Provider or to reimburse any certificateholder,
the Policy Provider or the Liquidity Provider in respect of
payments made to the Subordination Agent or any pass through
trustee in connection with the protection or realization of
the value of the secured promissory notes or any property
held in any Trust Indenture Estate or any Collateral;
o to the Liquidity Provider to the extent required to pay the
Liquidity Expenses and to the Policy Provider to the extent
required to pay the Policy Expenses, pro rata;
o to the Liquidity Provider and the Policy Provider, pro rata,
to the extent required to pay interest accrued on the
Liquidity Obligations (as determined after giving effect to
certain payments by the Policy Provider to the Liquidity
Provider) and interest on certain Policy Provider
Obligations (as provided in the definition of Policy
Provider Obligations), respectively and, if the Policy
Provider has elected to pay to the Liquidity Provider all
outstanding drawings and interest thereon owing to the
Liquidity Provider under the Liquidity Facilities, to
reimburse the Policy Provider for the amount of such payment
made to the Liquidity Provider attributable to interest
accrued on such drawings;
o to the Liquidity Provider to the extent required to pay the
outstanding amount of all Liquidity Obligations (as
determined after giving effect to certain payments by the
Policy Provider to the Liquidity Provider) and/or, if
applicable, with respect to any particular Liquidity
Facility, unless (x) less than 65% of the aggregate
outstanding principal amount of all secured promissory notes
are Performing Secured Promissory Notes and a Liquidity
Event of Default has occurred and is continuing under such
Liquidity Facility or (y) a Final Drawing has occurred under
such Liquidity Facility, to replenish the Cash Collateral
Account with respect to such Liquidity Facility up to the
Required Amount for the related class of certificates (less
the amount of any repayments of Interest Drawings under such
Liquidity Facility while sub-clause (x) of this clause is
applicable) and, if the Policy Provider has elected to pay
to the Liquidity Provider all outstanding drawings and
interest thereon owing to the Liquidity Provider under the
Liquidity Facilities, to reimburse the Policy Provider for
the amount of such payment made to the Liquidity Provider in
respect of principal of drawings under the Liquidity
Facilities, pro rata;
o to the Subordination Agent, any pass through trustee or any
certificateholder to the extent required to pay certain
fees, taxes, charges and other amounts payable;
o to the class G pass through trustee to the extent required
to pay Adjusted Expected Distributions on the class G
certificates;
o to the Policy Provider to the extent required to pay the
Policy Provider Obligations (other than amounts payable
pursuant to the first four clauses above and any Excess
Reimbursement Obligations);
o to the class C pass through trustee to the extent required
to pay Adjusted Expected Distributions on the class C
certificates;
o to the Policy Provider to pay any Excess Reimbursement
Obligations;
o if class D certificates have been issued, to the class D
pass through trustee to the extent required to pay "Adjusted
Expected Distributions" (to be defined in a manner
equivalent to the definition for the other classes of
certificates) on the class D certificates;
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o the balance shall be held in the Collection Account until
the next Distribution Date; and
o if all classes of certificates have been paid in full, the
balance, if any, shall be distributed to the
certificateholders of the related pass through trust.
For purposes of calculating Expected Distributions or Adjusted
Expected Distributions with respect to the certificates of any pass through
trust, any premium paid on the secured promissory notes held in that pass
through trust that has not been distributed to the certificateholders of
that pass through trust (other than such premium or a portion thereof
applied to the payment of interest on the certificates of that pass through
trust or the reduction of the Pool Balance of that pass through trust) will
be added to the amount of Expected Distributions or Adjusted Expected
Distributions. After a Triggering Event occurs and any secured promissory
note becomes a Non-Performing Secured Promissory Note, the Subordination
Agent will obtain LTV Appraisals of the aircraft securing such secured
promissory note as soon as practicable and additional LTV Appraisals on or
prior to each anniversary of the date of such initial LTV Appraisals;
provided that if the Controlling Party reasonably objects to the appraised
value of the aircraft shown in such LTV Appraisals, the Controlling Party
has the right to obtain or cause to be obtained substitute LTV Appraisals
(including LTV Appraisals based upon physical inspection of such aircraft).
(Intercreditor Agreement, Section 4.1(a))
Interest Drawings under the Liquidity Facility and withdrawals from
the Cash Collateral Account, in each case in respect of interest on the
certificates of any pass through trust, will be distributed to the pass
through trustee for such pass through trust, and drawings under the Policy
will be distributed by the class G pass through trustee, notwithstanding
the priority of distributions set forth in the Intercreditor Agreement and
otherwise described in this prospectus.
All amounts on deposit in the Cash Collateral Account for any pass
through trust which are in excess of the Required Amount for such pass
through trust and all investment earnings on such amounts on deposit in the
Cash Collateral Account will be paid to the Liquidity Provider to the
extent of Liquidity Obligations owed to the Liquidity Provider.
Voting of Secured Promissory Notes
In the event that the Subordination Agent, as the registered holder of
any secured promissory note, receives a request for its consent to any
amendment, modification or waiver under that secured promissory note, the
related Indenture, lease (if applicable), Participation Agreement or other
related document, if no Indenture Default with respect thereto shall have
occurred and be continuing, the Subordination Agent shall request
instructions for each series of secured promissory note from the trustee of
the pass through trust which holds such series of secured promissory notes.
The trustee in turn will request directions from certificateholders of such
pass through trust, provided that so long as the Final Distribution on the
class G certificates has not been made or any Policy Provider Obligations
remain outstanding and no Policy Provider default exists, the Subordination
Agent shall request directions from the Policy Provider rather than the
class G pass through trustee with respect to the series G secured
promissory notes. If any Indenture Default shall have occurred and be
continuing with respect to any such Indenture, the Subordination Agent will
exercise its voting rights as directed by the Controlling Party, subject to
certain limitations. No such amendment, modification or waiver shall,
without the consent of the Liquidity Provider and the Policy Provider,
reduce the amount of rent, Supplemental Rent or stipulated loss values
payable by ATA under any Lease or reduce the amount of principal or
interest payable by ATA under any secured promissory note issued under any
Owned Aircraft Indenture. (Intercreditor Agreement, Section 2.6 and 9.1(b))
Addition of Pass Through Trustee for Class D Certificates
If the class D certificates are issued, the class D pass through
trustee will become a party to the Intercreditor Agreement.
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The Subordination Agent
Wilmington Trust Company will be the Subordination Agent under the
Intercreditor Agreement. ATA and its affiliates may from time to time enter
into banking and trustee relationships with the Subordination Agent and its
affiliates. The Subordination Agent's address is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware
19890-0001, Attention: Corporate Trust Administration.
The Subordination Agent may resign at any time, in which event a
successor Subordination Agent will be appointed as provided in the
Intercreditor Agreement. Either the Controlling Party or the Liquidity
Provider may remove the Subordination Agent for cause as provided in the
Intercreditor Agreement. In such circumstances, a successor Subordination
Agent will be appointed as provided in the Intercreditor Agreement. Any
resignation or removal of the Subordination Agent and appointment of a
successor Subordination Agent does not become effective until acceptance of
the appointment by the successor Subordination Agent.
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
The Aircraft
The aircraft comprise seven Boeing 757-200ER aircraft. The Boeing
757-200ER aircraft is a long-range aircraft with a seating capacity of
approximately 216 passengers. The engine type utilized on ATA's 757-200ERs
is the Rolls Royce RB211-535E4. The aircraft comply with Stage 3 noise
level standards, which constitute the most restrictive regulatory standards
currently in effect in the United States for aircraft noise abatement. The
table below sets forth certain additional information for the aircraft.
<TABLE>
<CAPTION>
Aircraft Expected
Aircraft Tail Type Engine Manufacturer's Delivery
Number Type Serial No. Month Appraised Base Value
------------- ---------- ----------- -------------- ------------ ----------------------------------------
AISI MBA SH&E
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
N515AT Boeing RB211-535E4 27598 October 1995 $48,690,000 $50,200,000 $52,600,000
757-200ER
N523AT Boeing RB211-535E4 30232 Sept. 1999 57,110,000 59,900,000 65,500,000
757-200ER
N524AT Boeing RB211-535E4 30233 October 1999 57,180,000 60,000,000 65,500,000
757-200ER
N525AT Boeing RB211-535E4 30548 June 2000 58,100,000 61,100,000 65,500,000
757-200ER
N526AT Boeing RB211-535E4 30549 June 2000 60,260,000 61,100,000 66,800,000
757-200ER
N527AT Boeing RB211-535E4 TBD November 2000 60,950,000 61,580,000 66,800,000
757-200ER
N528AT Boeing RB211-535E4 TBD November 2000 60,950,000 61,580,000 66,800,000
757-200ER
</TABLE>
Appraised Value
The appraised values in the chart above were determined by the
following three independent aircraft appraisal and consulting firms as of
the dates indicated: AISI as of December 31, 1999, MBA as of January 18,
2000, and SH&E as of January 28, 2000. Each Appraiser was asked to provide
its opinion as to the fair market value of each aircraft. As part of this
process, all three Appraisers performed "desk-top" appraisals without any
physical inspection of the aircraft. The appraisals are based on various
assumptions and methodologies, which vary among the appraisals. The
Appraisers have delivered letters summarizing their respective appraisals,
copies
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of which are annexed to this prospectus as Appendix AII. For a discussion of
the assumptions and methodologies used in each of the appraisals, reference is
hereby made to such summaries.
An appraisal is only an estimate of value, is not indicative of the price
at which an aircraft may be purchased from the manufacturer, and should not be
relied upon as a measure of realizable value. In addition, the proceeds
realized upon a sale of any aircraft may be less than the appraised value
thereof. The value of the aircraft in the event of the exercise of remedies
under the applicable Indenture will depend on market and economic conditions,
the availability of buyers, the condition of the aircraft, whether the
aircraft are sold separately or together and other similar factors.
Accordingly, there can be no assurance that the proceeds realized upon any
such exercise with respect to the secured promissory notes and the aircraft
pursuant to the applicable Indenture would be as appraised or sufficient to
satisfy in full payments due on the secured promissory notes issued thereunder
or the certificates.
Deliveries of Aircraft
Under ATA's purchase agreements with Boeing, one Aircraft was delivered
to ATA in October 1995, one in September 1999, one in October 1999 and the
four remaining Aircraft are scheduled for delivery in June 2000 and November
2000. Under such purchase agreements, delivery of an Aircraft may be delayed
due to "Excusable Delay," which is defined to include, among other things,
acts of God, governmental acts or failures to act, strikes or other labor
troubles, inability to procure materials, or any other cause beyond Boeing's
control or not occasioned by Boeing's fault or negligence.
The Note Purchase Agreement provides that the Delivery Period will expire
on December 31, 2000, subject to extension, if the secured promissory notes
relating to all of the aircraft (or Substitute Aircraft in lieu thereof) have
not been purchased by the pass through trustees on or prior to such date due
to any reason beyond the control of ATA and not occasioned by ATA's fault or
negligence, to the earlier of (i) the date on which the pass through trustees
purchase secured promissory notes relating to the last aircraft (or a
Substitute Aircraft in lieu thereof) and (ii) May 31, 2001.
If delivery of any aircraft is delayed by more than 30 days after the
month scheduled for delivery or beyond December 31, 2000, ATA has the right to
replace such aircraft with a Substitute Aircraft, subject to certain
conditions. See "--Substitute Aircraft." If delivery of any aircraft is
delayed beyond the Delivery Period Termination Date and ATA does not exercise
its right to replace that aircraft with a Substitute Aircraft, there will be
unused Deposits that will be distributed to certificateholders together with
accrued and unpaid interest thereon and, if applicable, a premium. See
"Description of the Deposit Agreements--Unused Deposits."
Substitute Aircraft
If the delivery date for any aircraft is delayed (i) more than 30 days
after the month scheduled for delivery or (ii) beyond December 31, 2000, ATA
may identify for delivery a substitute aircraft meeting the following
conditions:
o a Substitute Aircraft must be a Boeing 757-200 aircraft manufactured
after the Issuance Date, and
o ATA will be obligated to obtain written confirmation from each
Rating Agency that substituting such Substitute Aircraft for the
replaced aircraft will not result in a withdrawal, suspension or
downgrading of the ratings of any class of certificates.
DESCRIPTION OF THE SECURED PROMISSORY NOTES
The following is a description of the terms of the secured promissory
notes. The summaries make use of terms defined in and are qualified in their
entirety by reference to all of the
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provisions of the secured promissory notes, the Indentures, the leases, the
Participation Agreements, the Leased Aircraft Trust Agreements, the Guarantees
and the Note Purchase Agreement, forms of which are available upon request to
either pass through trustee. Except as otherwise indicated, the following
summaries relate to the secured promissory notes, the Indenture, the lease,
the Participation Agreement, the Guarantee and the Leased Aircraft Trust
Agreement that may be applicable to each aircraft.
Under the Note Purchase Agreement, ATA will have the option of entering
into a leveraged lease financing or a debt financing with respect to each
aircraft. The Note Purchase Agreement provides for the relevant parties to
enter into either (i) with respect to each leased aircraft, a Participation
Agreement, a lease, the Guarantee and a Leased Aircraft Indenture (among other
documents) and (ii) with respect to each owned aircraft, a Participation
Agreement, the Guarantee and an Owned Aircraft Indenture. The description of
such agreements in this prospectus is based on the forms of such agreements
annexed to the Note Purchase Agreement.
ATA has obtained the commitments of three companies to act as the
Owner Participant in leveraged leases for five of the aircraft (ICX
Corporation for aircraft N515AT and N525AT, and Banc of America Commercial
Finance Corporation for aircraft N523AT and N524AT and The Provident Bank
for aircraft N526AT), and closed leveraged lease financings for those
aircraft during 1999 and 2000 using debt that ATA expects to re-fund with
proceeds of secured promissory notes. ATA plans to seek such commitments
from the same company or others for the remaining aircraft. We cannot
predict whether ATA will obtain such commitments. The commitments would be
subject to satisfaction of certain conditions and the execution of
definitive agreements, and ATA could elect to terminate such commitments.
Accordingly, ATA may select one or more other Owner Participants for some
or all of the aircraft or finance such aircraft as owned aircraft rather
than leased aircraft. A different Owner Participant may request revisions
to the forms of the Participation Agreement, the lease and the Leased
Aircraft Indenture that are contemplated by the Note Purchase Agreement, so
that the terms of such agreements for any particular leased aircraft may
differ from the description of such agreements in this prospectus. See
"Description of the Certificates -- Obligation to Purchase Secured
Promissory Notes." Each Owner Participant will be required to satisfy
certain requirements, including having a minimum combined capital and
surplus or net worth.
General
The secured promissory notes will be issued for each aircraft in two
series: the series G secured promissory notes and the series C secured
promissory notes, collectively referred to as the secured promissory notes.
However, ATA may elect to issue a third series with respect to owned aircraft,
which will be funded from sources other than this offering. See "Description
of the Certificates--Possible Issuance of Class D Certificates."
The secured promissory notes with respect to each leased aircraft will be
issued under a separate Leased Aircraft Indenture between First Security Bank,
National Association, as Owner Trustee of a trust for the benefit of the Owner
Participant who will be the beneficial owner of that aircraft, and Wilmington
Trust Company, as Loan Trustee.
The secured promissory notes with respect to each owned aircraft will be
issued under a separate Owned Aircraft Indenture between ATA and Wilmington
Trust Company, as Loan Trustee. The secured promissory notes are secured
obligations of ATA.
The Indentures will not provide for defeasance, or discharge upon deposit
of cash or certain obligations of the United States. ATA will lease each
leased aircraft from the related Owner Trustee under a separate lease. Under
each lease and the related Aircraft Operative Agreements, ATA will, in
general, be obligated to make rental and other payments or advances to the
related Loan Trustee on behalf of the related Owner Trustee. Such rental and
other payments or advances will be at least sufficient to pay in full when due
all payments required to be made on the related secured promissory notes. The
secured promissory notes issued with respect to the leased aircraft are not
ATA's or Amtran's direct obligations, and neither ATA nor Amtran guarantees
payment or performance of the leased aircraft notes. ATA's obligations under
each
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lease and the related Aircraft Operative Agreements are general unsecured
obligations. Amounts payable by ATA under each lease and each Owned Aircraft
Indenture will be unconditionally guaranteed by Amtran.
Each Owner Participant has the right to sell, assign or otherwise
transfer its interests as Owner Participant in any of such leveraged leases,
subject to the terms and conditions of the relevant Participation Agreement
and related documents.
Subordination
Series C secured promissory notes issued in respect of an aircraft will
be subordinated in right of payment to series G secured promissory notes
issued in respect of such aircraft; and, if ATA elects to issue series D
secured promissory notes with respect to an owned aircraft, such series D
secured promissory notes will be subordinated in right of payment to the
series C secured promissory notes. On each scheduled payment date, (a)
payments of interest and principal due on series G secured promissory notes
issued in respect to an aircraft will be made prior to payments of interest
and principal due on series C secured promissory notes issued in respect of
such aircraft; and (b) if ATA elects to issue series D secured promissory
notes with respect to an owned aircraft, payments of interest and principal
due on series C secured promissory notes will be made prior to payments of
interest and principal due on such series D secured promissory notes issued in
respect of such aircraft.
Principal and Interest Payments
Subject to the provisions of the Intercreditor Agreement, interest paid
on the secured promissory notes held in each pass through trust will be passed
through to the certificateholders of each such pass through trust on the dates
and at the rate per annum set forth on the cover page of this prospectus until
the final expected Regular Distribution Date (subject to change as provided in
the Registration Rights Agreement) for such pass through trust. Subject to the
provisions of the Intercreditor Agreement, principal paid on the secured
promissory notes held in each pass through trust will be passed through to the
certificateholders of such pass through trust in scheduled amounts on the
dates set forth in this prospectus until the final expected Regular
Distribution Date for such pass through trust.
Interest will be payable on the unpaid principal amount of each secured
promissory note at the rate applicable to such secured promissory note on
January 15, April 15, July 15 and October 15 of each year, commencing on April
15, 2000. Such interest will be computed on the basis of a 360-day year of
twelve 30-day months. Overdue amounts of principal, Make-Whole Amount and
interest on such series of secured promissory notes will bear interest at a
rate equal to 1.00% per annum over the applicable rate on such series of
secured promissory notes. Under certain circumstances described in "Exchange
Offer; Registration Rights", the interest rates for the Equipment Notes will
be increased (or following any such increase, decreased) to the extent
described in the Registration Rights Agreement.
Scheduled principal payments on the secured promissory notes will be made
on one or more of January 15, April 15, July 15 and October 15 in certain
years, commencing on January 15, 2001. See "Description of the
Certificates--Pool Factors" for a discussion of the scheduled payments of
principal of the secured promissory notes and possible revisions to such
scheduled payments.
The final payment made under each secured promissory note will be an
amount sufficient to discharge in full the unpaid principal amount, Make-Whole
Amount (if any) and to the extent permitted by law, interest and any other
amounts payable but unpaid with respect to such secured promissory note.
If any date scheduled for a payment of principal, premium or interest
with respect to the secured promissory notes is not a Business Day, such
payment will be made on the following
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Business Day with the same effect as if made on such scheduled payment date
and without any additional interest.
Redemption
If an Event of Loss occurs with respect to an aircraft and we do not
replace such aircraft under the related lease or under the related Owned
Aircraft Indenture, the secured promissory notes issued with respect to such
aircraft will be redeemed, in whole, in each case at a price equal to the
aggregate unpaid principal amount thereof, together with accrued interest
thereon, to the date of redemption and other amounts payable to the holders of
the secured promissory notes under the applicable Indenture and Participation
Agreement, but without Make-Whole Amount. Such redemption will be on a Special
Distribution Date. (Indentures, Section 2.10).
If ATA terminates a lease under its voluntary termination, early buyout
or burdensome buyout options under such lease, the secured promissory notes
relating to the applicable leased aircraft will be redeemed (unless ATA elects
to assume the secured promissory notes on a full recourse basis), in whole, on
a Special Distribution Date at a price equal to the aggregate unpaid principal
amount thereof, together with accrued interest thereon to but excluding the
redemption date, plus a Make-Whole Amount. If ATA assumes the Owner Trustee's
obligations in respect of the secured promissory notes, ATA will enter into a
supplemental indenture satisfactory to the relevant Loan Trustee which
contains provisions regarding permitted liens, registration, maintenance,
subleases, replacement of parts, alteration and modification to the aircraft,
events of loss and insurance which are substantially similar to the provisions
contained in the related lease. In addition, in connection with any such
assumption, Amtran shall deliver a guaranty of the secured promissory notes
substantially in the form of the Guarantee and ATA shall deliver an opinion of
counsel that such assumption has been duly and validly effected. Upon the
effectiveness of such assumption, the Owner Trustee and the Owner Participant
will be released from further obligations under the related Indenture and the
related Participation Agreement. (Leased Aircraft Indentures, Sections 2.10(b)
and 2.11) See "--The Leases--Lease Termination."
All of the secured promissory notes issued with respect to a leased
aircraft may be redeemed prior to maturity as part of a refunding or
refinancing thereof under the applicable Participation Agreement, and all of
the secured promissory notes issued with respect to the owned aircraft may be
redeemed prior to maturity at any time at the option of ATA, upon at least 30
days' revocable prior written notice to the related Loan Trustee and the
holders of the secured promissory notes, at a price equal to the aggregate
unpaid principal amount thereof, together with accrued interest to, but not
including, the date of redemption, plus a Make-Whole Amount, if any. (Leased
Aircraft Indentures, Section 2.12 and Owned Aircraft Indentures, Section 2.11)
If notice of such redemption is given in connection with a termination of
the lease, such notice is revocable and is deemed revoked in the event that
the lease does not in fact terminate on the specified termination date. If
notice of such redemption is given in connection with a refinancing, it is
revocable not later than three days prior to the redemption date. (Indentures,
Section 2.13(b))
With respect to a leased aircraft, either the Owner Trustee or the Owner
Participant may purchase all of the outstanding secured promissory notes
issued under the related Leased Aircraft Indentures for the aggregate unpaid
principal amount, plus accrued and unpaid interest to the date of purchase.
This option may be exercised upon:
(i) the declaration by the Loan Trustee that the secured promissory
notes have become due and payable following an Indenture Default or
notification by the Loan Trustee to the Owner Trustee that it intends to
take action to foreclose the lien or otherwise commence the exercise of
any significant remedy under the Indenture or Lease; or
(ii) a continuing Lease Event of Default.
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If the option is exercised in connection with a Lease Event of Default
continuing for less than 120 days, then the Make-Whole Amount will be added to
the purchase price. (Leased Aircraft Indentures, Section 2.14)
If (a) one or more Lease Events of Default exist and are continuing or
(b) the secured promissory notes with respect to a leased aircraft have been
accelerated or the Loan Trustee with respect to such secured promissory notes
takes action or notifies the applicable Owner Trustee that it intends to take
action to foreclose the lien of the related Leased Aircraft Indenture or
otherwise commence the exercise of any significant remedy under such Indenture
or the related lease or if certain events occur in a bankruptcy proceeding
involving us, then in each case the related Owner Trustee or Owner Participant
may buy all, but not less than all, of the secured promissory notes issued
with respect to such leased aircraft at a price equal to the aggregate unpaid
principal thereof, together with accrued and unpaid interest thereon to but
excluding, the purchase date but without any premium (provided that a
Make-Whole Amount is payable if such secured promissory notes are to be
purchased pursuant to clause (a) when a Lease Event of Default has been
continuing for less than 120 days). (Leased Aircraft Indentures, Section 2.14)
We as owner of the owned aircraft have no comparable right under the Owned
Aircraft Indentures to purchase the secured promissory notes under such
circumstances.
Security
The secured promissory notes issued with respect to each leased aircraft
are secured by a first priority security interest in that aircraft, the
related lease and all rent thereunder, the related Guarantee, the aircraft
purchase agreement (to the extent related to the leased aircraft), all rents,
profits and other income of such leased aircraft, all insurance and similar
proceeds covering loss of or damage to such leased aircraft, all rights of the
related Owner Trustee to amounts paid or payable by ATA under the related
Participation Agreement, all monies and securities deposited with the related
Loan Trustee, and all proceeds of the foregoing. Unless an Indenture Default
with respect to a leased aircraft has occurred and is continuing, the related
Loan Trustee may not exercise the Owner Trustee's rights under the related
lease except such Owner Trustee's right to receive rent. The Owner Trustee's
assignment to the Loan Trustee of the Owner Trustee's rights under the related
lease excludes the rights of the Owner Trustee and the Owner Participant to
indemnification for certain matters, liability insurance proceeds payable to
the Owner Trustee in its individual capacity and to the Owner Participant,
insurance proceeds payable to the Owner Trustee in its individual capacity or
to such Owner Participant, under certain casualty insurance maintained by the
Owner Trustee or the Owner Participant, and certain reimbursement payments
made by ATA to the Owner Trustee. (Leased Aircraft Indenture, Granting Clause)
The secured promissory notes are not cross-collateralized. This means that the
secured promissory notes issued in respect of any one aircraft are not secured
by any of the other aircraft or replacement aircraft (as described in "--The
Leases--Events of Loss") or the leases related thereto.
The secured promissory notes issued with respect to each owned aircraft
will be secured by:
o a mortgage to the Loan Trustee of such aircraft; and
o an assignment to the Loan Trustee of certain of ATA's rights under
its purchase agreement with the aircraft manufacturer.
Funds, if any, held from time to time by the Loan Trustee with respect to
any aircraft, including funds held as the result of an Event of Loss to such
aircraft or, in the case of a leased aircraft, termination of the related
lease, will be invested and reinvested by such Loan Trustee, at the direction
of the related Owner Trustee in the case of the leased aircraft or ATA in the
case of the owned aircraft (except in the case of certain Indenture Defaults),
in investments described in the related Indenture.
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Loan to Value Ratios of Secured Promissory Notes
The following table sets forth illustrative loan to aircraft value ratios
for the secured promissory notes issued in respect of each aircraft as of the
dates specified assuming that the secured promissory notes in the maximum
principal amount are issued in respect of each such aircraft. ATA used these
examples in preparing the Assumed Amortization Schedule, although the
amortization schedule for the secured promissory notes issued with respect to
an aircraft may vary from such assumed schedule so long as it complies with
the Mandatory Economic Terms. Accordingly, the schedule below may not apply to
any particular aircraft. See "Description of the Certificates--Pool Factors."
The loan to aircraft value ratios were obtained by dividing (a) the expected
outstanding balance (assuming no payment default) of such secured promissory
notes, determined immediately after giving effect to the payments scheduled to
be made on each such date, by (b) the assumed value (the "Assumed Aircraft
Value") of the aircraft securing such secured promissory notes.
The following tables are based on the Depreciation Assumptions. Other
rates or methods of depreciation would result in different loan-to-value
ratios, and no assurance can be given (a) that the depreciation rates and
method assumed for the purposes of the table are the ones most likely to occur
or (b) as to the actual value of any aircraft. Thus the table should be
considered not as a forecast or prediction of expected or likely loan to
aircraft value ratios, but simply as a mathematical calculation based on one
set of assumptions.
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<TABLE>
<CAPTION>
Aircraft Registration Aircraft Registration Aircraft Registration
Number: N515AT Number: N523AT Number: N524AT
Note Assumed Loan- Note Assumed Loan- Note Assumed Loan-
Outstanding Aircraft to- Outstanding Aircraft to- Outstanding Aircraft to-
Value Value Value Value Value Value Value Value Value
Date (millions) (millions) Ratio (millions) (millions) Ratio (millions) (millions) Ratio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 15, 2001 $26.83 $48.69 55.1% $31.38 $58.10 54.0% $31.39 $58.20 53.9%
January 15, 2002 24.85 47.19 52.7% 29.68 56.31 52.7% 29.69 56.40 52.6%
January 15, 2003 22.71 45.68 49.7% 27.86 54.51 51.1% 27.86 54.60 51.0%
January 15, 2004 20.41 44.18 46.2% 25.90 52.71 49.1% 25.89 52.80 49.0%
January 15, 2005 17.94 42.67 42.0% 23.78 50.92 45.7% 23.78 51.00 46.6%
January 15, 2006 15.46 41.16 37.6% 21.50 49.12 43.8% 21.50 49.20 43.7%
January 15, 2007 13.34 39.66 33.6% 19.05 47.32 40.3% 19.95 47.40 40.2%
January 15, 2008 12.30 38.15 32.2% 17.54 45.52 38.5% 17.48 45.60 38.3%
January 15, 2009 9.93 36.65 27.1% 16.51 43.73 37.7% 16.45 43.80 37.6%
January 15, 2010 7.39 35.14 21.0% 15.21 41.93 36.3% 15.33 42.00 36.5%
January 15, 2011 4.65 33.63 13.8% 13.02 40.13 32.5% 13.47 40.20 33.5%
January 15, 2012 1.70 31.63 5.4% 10.67 38.34 27.8% 11.15 38.40 29.0%
January 15, 2013 0.00 NA NA 8.13 36.54 22.2% 8.66 36.60 23.7%
January 15, 2014 0.00 NA NA 5.40 34.74 15.5% 5.98 34.80 17.2%
January 15, 2015 0.00 NA NA 2.45 32.94 7.5% 3.10 33.00 9.4%
January 15, 2016 0.00 NA NA 0.00 NA NA 0.00 NA NA
</TABLE>
<TABLE>
<CAPTION>
Aircraft Registration Aircraft Registration Aircraft Registration
Number: N525AT Number: N526AT Number: N527AT
Note Assumed Loan- Note Assumed Loan- Note Assumed Loan-
Outstanding Aircraft to- Outstanding Aircraft to- Outstanding Aircraft to-
Value Value Value Value Value Value Value Value Value
Date (millions) (millions) Ratio (millions) (millions) Ratio (millions) (millions) Ratio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
January 15, 2001 $34.18 $61.10 55.9% $34.18 $61.10 55.9% $34.49 $61.58 56.0%
January 15, 2002 32.53 59.27 54.9% 32.53 59.27 54.9% 32.88 59.73 55.0%
January 15, 2003 30.72 57.43 53.5% 30.72 57.43 53.5% 31.12 57.89 53.8%
January 15, 2004 28.75 55.60 51.7% 28.75 55.60 51.7% 29.19 56.04 52.1%
January 15, 2005 26.59 53.77 49.4% 26.49 53.77 49.4% 27.09 54.19 50.0%
January 15, 2006 24.21 51.94 46.6% 24.21 51.94 46.6% 24.79 52.34 47.4%
January 15, 2007 22.94 50.10 45.8% 22.94 50.10 45.8% 23.21 50.50 46.0%
January 15, 2008 20.55 48.27 42.6% 20.55 48.27 42.6% 21.31 48.65 43.8%
January 15, 2009 19.19 46.44 41.3% 19.19 46.44 41.3% 19.36 46.80 41.4%
January 15, 2010 17.31 44.60 38.8% 17.31 44.60 38.8% 17.23 44.95 38.3%
January 15, 2011 14.99 42.77 35.0% 14.99 42.77 35.0% 14.91 43.11 34.6%
January 15, 2012 12.46 40.94 30.4% 12.46 40.94 30.4% 12.40 41.26 30.0%
January 15, 2013 9.72 39.10 24.9% 9.72 39.10 24.9% 9.67 39.41 24.5%
January 15, 2014 6.74 37.27 18.1% 6.74 37.27 18.1% 6.71 37.56 17.9%
January 15, 2015 3.51 35.44 9.9% 3.51 35.44 9.9% 3.49 35.72 9.8%
January 15, 2016 0.00 NA NA 0.00 NA NA 0.00 NA NA
</TABLE>
Aircraft Registration
Number: N528AT
Note Assumed Loan-
Outstanding Aircraft to-
Value Value Value
Date (millions) (millions) Ratio
January 15, 2001 $34.49 $61.58 56.0%
January 15, 2002 32.88 59.73 55.0%
January 15, 2003 31.12 57.89 53.8%
January 15, 2004 29.19 56.04 52.1%
January 15, 2005 27.09 54.19 50.0%
January 15, 2006 24.79 52.34 47.4%
January 15, 2007 23.21 50.50 46.0%
January 15, 2008 21.31 48.65 43.8%
January 15, 2009 19.36 46.80 41.4%
January 15, 2010 17.23 44.95 38.3%
January 15, 2011 14.91 43.11 34.6%
January 15, 2012 12.40 41.26 30.0%
January 15, 2013 9.67 39.41 24.5%
January 15, 2014 6.71 37.56 17.9%
January 15, 2015 3.49 35.72 9.8%
January 15, 2016 0.00 NA NA
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Limitation of Liability
The secured promissory notes with respect to the leased aircraft will not
be obligations of, or guaranteed by, ATA, Amtran, the Loan Trustees, the Owner
Participants or the Owner Trustees in their individual capacities. None of the
Owner Trustees, the Owner Participants or the Loan Trustees, or any affiliates
thereof, will be personally liable to any holder of a secured promissory note
or, in the case of the Owner Trustees and the Owner Participants, to the Loan
Trustees for any amounts payable under the secured promissory notes or, except
as provided in each Leased Aircraft Indenture, for any other liability under
such Leased Aircraft Indenture. All payments of principal of, Make-Whole
Amount, if any, and interest on the secured promissory notes issued with
respect to any leased aircraft (other than payments made in connection with an
optional redemption or purchase of secured promissory notes by the related
Owner Trustee or the related Owner Participant) will be made only from the
assets subject to the lien of the Indenture with respect to such leased
aircraft or the income and proceeds received by the related Loan Trustee
therefrom (including rent payable by ATA under the lease with respect to such
leased aircraft or the related Guarantee).
The secured promissory notes issued with respect to the owned aircraft
will be direct obligations of ATA, and will be fully and unconditionally
guaranteed by Amtran.
Except as otherwise provided in the Indentures, each Owner Trustee in its
individual capacity is not answerable or accountable under the Indentures or
under the secured promissory notes under any circumstances except for its own
willful misconduct, gross negligence, negligence with respect to the
distribution of funds, or the falsity when made of a representation or
warranty made in its individual capacity. None of the Owner Participants has
any duty or responsibility under any of the Leased Aircraft Indentures or the
secured promissory notes to the Loan Trustees or to any holder of any secured
promissory note, nor does any Owner Participant have any duty or
responsibility to the Loan Trustees respecting the return or repossession of
the leased aircraft under any circumstances or respecting the condition of the
leased aircraft upon any return or repossession.
Indenture Defaults, Notice and Waiver
Indenture Defaults under each Indenture include:
o in the case of a Leased Aircraft Indenture, the existence of any
Lease Event of Default under the related lease (other than the
failure to make certain indemnity payments and other payments to the
related Owner Trustee or Owner Participant unless such Owner Trustee
or Owner Participant gives notice that such failure will constitute
an Indenture Default);
o the failure by the related Owner Trustee (other than as a result of
a Lease Default or Lease Event of Default) in the case of a Leased
Aircraft Indenture, or ATA in the case of an Owned Aircraft
Indenture, to pay any interest, or principal, or Make- Whole Amount,
when due, under such Indenture or under any secured promissory note
issued thereunder, continued for more than ten business days after
notice;
o the failure by the Owner Participant or the Owner Trustee in the
case of a Leased Aircraft Indenture, or ATA in the case of an Owned
Aircraft Indenture, to discharge certain liens, continued after
notice and specified cure periods;
o any representation or warranty made by the related Owner Trustee or
Owner Participant in such Indenture, the related Participation
Agreement or certain related documents furnished to the Loan Trustee
pursuant thereto being false or incorrect when made and continuing
to be material and remaining unremedied after notice and specified
cure periods;
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o failure by ATA, the related Owner Trustee or Owner Participant to
perform or observe any covenant or obligation for the benefit of the
Loan Trustee or holders of secured promissory notes under such
Indenture or certain related documents, continued after notice and
specified cure periods;
o the registration of the related aircraft ceasing to be effective as
a result of the Owner Participant (in the case of a leased aircraft)
or ATA (in the case of an owned aircraft) not being a citizen of the
United States and such circumstances continue for 60 days;
o with respect to the owned aircraft, the lapse or cancellation of
insurance required under the Owned Aircraft Indenture; or
o the occurrence of certain events of bankruptcy, reorganization or
insolvency of the related Owner Trustee or Owner Participant (in the
case of a leased aircraft) or ATA (in the case of the owned
aircraft). (Leased Aircraft Indentures, Section 4.02; Owned Aircraft
Indentures, Section 5.01)
There are no cross-default provisions in the Indentures or the Leases
(unless otherwise agreed between an Owner Participant and ATA). This means
that events resulting in an Indenture Default under any particular Indenture
may or may not result in an Indenture Default occurring under any other
Indenture, and a Lease Event of Default under any particular lease may or may
not constitute a Lease Event of Default under any other lease. (Leased
Aircraft Indenture, Section 4.02; Owned Aircraft Indentures, Section 5.01)
With respect to a leased aircraft, the Loan Trustee will give the holders
of the secured promissory notes, the Owner Trustee and the Owner Participant
prompt written notice of any Indenture Default of which the Loan Trustee has
actual knowledge and, if the Indenture Default results from a Lease Event of
Default, it will give the holders of the secured promissory notes, the Owner
Trustee and the Owner Participant not less than ten business days' prior
written notice of the date on or after which the Loan Trustee may commence the
exercise of any remedy described in "--Remedies" below.
If ATA fails to make any quarterly basic rental payment due under any
lease, within a specified period after notice from the Loan Trustee of such
failure, the applicable Owner Trustee or Owner Participant may furnish to the
Loan Trustee the amount due on the secured promissory notes, together with any
interest thereon on account of the delayed payment. In that case, the Loan
Trustee and the holders of outstanding secured promissory notes issued under
such Indenture may not exercise any remedies otherwise available under such
Indenture or such lease as the result of such failure to make such rental
payment, unless the relevant Owner Trustee or Owner Participant has previously
cured the preceding six consecutive payment defaults or twelve total payment
defaults with respect to Basic Rent. (Leased Aircraft Indentures, Section
4.03)
The Owner Trustee and/or the Owner Participant also have certain rights,
but not obligations, to cure Leased Aircraft Indenture Defaults not resulting
from the nonpayment of Basic Rent. If an Owner Trustee or Owner Participant
pays the amount due on the related secured promissory notes to the Loan
Trustee or cures the Indenture Default, the Owner Trustee or Owner Participant
will be subrogated to the rights of the Loan Trustee and the holders of the
secured promissory notes to the related Rent which was overdue at the time of
such payment, as well as interest payable by ATA on account of its being
overdue, and thereafter will be entitled to receive such overdue Rent and
interest thereon upon receipt by the Loan Trustee. However, if the principal
amount and interest on the secured promissory notes is due and payable
following an Indenture
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Default, such subrogation will, until the principal amount of, interest on,
Make-Whole Amount, if any, and all other amounts due with respect to all
secured promissory notes has been paid in full:
o such subrogation will be subordinate to the rights of the Loan
Trustee and the holders of the secured promissory notes in respect
of such payment of overdue Rent and interest; and
o the Owner Trustee will not be entitled to recover any such payment
except pursuant to the foregoing right of subrogation, by demand or
suit for damages.
The holders of a majority in principal amount of the outstanding secured
promissory notes issued with respect to any aircraft may, on behalf of all the
holders, waive any existing default and its consequences under the related
Indenture, except a default in the payment of the principal of, interest on,
or Make-Whole Amount, if any, on any such secured promissory notes or a
default in respect of any covenant or provision of such Indenture that cannot
be modified or amended without the consent of each holder of secured
promissory notes. (Leased Aircraft Indentures, Section 4.08; Owned Aircraft
Indentures, Section 5.06)
Remedies
If an Indenture Default exists under an Indenture the related Loan
Trustee may, and upon receipt of written demand from the holders of a majority
in principal amount of the secured promissory notes outstanding under such
Indenture shall, subject to the applicable Owner Participant's or Owner
Trustee's right to cure, declare the principal of all such secured promissory
notes issued under such Indenture immediately due and payable, together with
all accrued but unpaid interest thereon (without the Make-Whole Amount). The
holders of a majority in principal amount of secured promissory notes
outstanding under such Indenture may rescind any such declaration at any time
before the judgment or decree for the payment of the money so due shall be
entered if (a) there has been paid to the related Loan Trustee an amount
sufficient to pay all principal and interest on any such secured promissory
notes, to the extent such amounts have become due otherwise than by such
declaration of acceleration and (b) all other Indenture Defaults and potential
Indenture Defaults under such Indenture have been cured or waived. (Leased
Aircraft Indentures, Section 4.04(b); Owned Aircraft Indentures, Section
5.03(b))
If an Indenture Default exists under an Indenture, the related Loan
Trustee may exercise certain rights or remedies available to it under such
Indenture or under applicable law, including (if, in the case of a leased
aircraft, the corresponding lease has been declared in default) one or more of
the remedies under such Indenture or, in the case of a leased aircraft, such
lease with respect to the aircraft subject to such lease. If an Indenture
Default arises solely by reason of one or more events or circumstances which
constitute a Lease Event of Default, the related Loan Trustee's right to
exercise remedies under such Leased Aircraft Indenture is subject, with
certain exceptions, to its having proceeded to exercise one or more of the
remedies under the Lease to terminate the lease or take possession of and/or
sell the aircraft. However, the requirement to exercise such remedies under
such lease shall not apply if such exercise has been involuntarily stayed or
prohibited by applicable law or court order for a continuous period in excess
of 60 days or such other period as may be specified in Section 1110(a)(1)(A)
of the Bankruptcy Code (plus an additional period, if any, resulting from (a)
ATA or its trustee in such proceeding assuming, or agreeing to perform its
obligations under, such Lease with the approval of the applicable court, (b)
such Loan Trustee's consent to an extension of such 60-day period or (c) such
Loan Trustee's failure to give any requisite notice). See "--The Leases--Lease
Events of Default." Such remedies may be exercised by the related Loan Trustee
to the exclusion of the related Owner Trustee, subject to certain conditions
specified in such Indenture, and ATA, subject to the terms of such lease. Any
aircraft sold in the exercise of such remedies will be free and clear of any
rights of those parties, including the rights of ATA under the lease with
respect to such aircraft; provided that no exercise of any remedies by the
related Loan Trustee may affect the rights of ATA under any lease unless a
Lease Event of Default exists or the lease has been canceled
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because of a Lease Event of Default. (Leased Aircraft Indentures, Section
4.04; Leases, Section 15) The Owned Aircraft Indentures will not contain such
limitations on the Loan Trustee's ability to exercise remedies upon an
Indenture Default under an Owned Aircraft Indenture.
If the secured promissory notes issued in respect of one aircraft are in
default, the secured promissory notes issued in respect of the other aircraft
may not be in default, and, if not, no remedies will be exercisable under the
applicable Indentures with respect to such other aircraft.
Section 1110 of the Bankruptcy Code provides in relevant part that the
right of a lessor, conditional vendor, or holder of a security interest
with respect to "equipment" (as defined in Section 1110) to take possession
of such equipment in compliance with the provisions of a lease, conditional
sale contract or security agreement, and to enforce any of its other rights
under such lease, conditional sale contract, or security agreement, is not
affected by any other provision of the Bankruptcy Code or by any power of
the bankruptcy court. For example, such right is not affected by:
o the automatic stay provision of the Bankruptcy Code, which provision
enjoins repossessions by creditors for the duration of the
reorganization period;
o the provision of the Bankruptcy Code allowing the trustee in
reorganization to use property of the debtor during the
reorganization period; and
o Section 1129 of the Bankruptcy Code (which governs the confirmation
of plans of reorganization in Chapter 11 cases).
Section 1110 of the Bankruptcy Code provides that the lessor's,
conditional vendors, or secured party's right to take possession and to
enforce its other rights and remedies may not be exercised if, within 60
days following the date of commencement of the reorganization proceedings
(or such longer period consented to by the lessor, conditional vendor or
secured party), the debtor-airline agrees to perform the debtor's
obligations under the lease, conditional sale contract, or security
agreement cures all existing defaults (other than defaults resulting solely
from the financial condition, bankruptcy, insolvency or reorganization of
the debtor). "Equipment" is defined in Section 1110, in part, as "an
aircraft, aircraft engine, propeller, appliance, or spare part (as defined
in section 40102 of title 49) that is subject to a security interest
granted by, leased to, or conditionally sold to a debtor that, at the time
such transaction is entered into, holds an air carrier operating
certificate pursuant to chapter 447 of title 49 for aircraft capable of
carrying 10 or more individuals or 6,000 pounds or more of cargo", and
includes all records and related documents that the lease, conditional sale
contract, or security agreement requires be returned or surrendered with the
equipment.
It is a condition to the pass through trustees' obligation to purchase
secured promissory notes with respect to each aircraft that Troutman
Sanders LLP, special leveraged lease counsel to ATA, provide its opinion to
the pass through trustees that, if ATA were to become a debtor under
Chapter 11 of the Bankruptcy Code, that (a) if such aircraft is a leased
aircraft, the Owner Trustee, as lessor under the lease for such aircraft,
and the related Loan Trustee, as assignee of such Owner Trustee's rights
under such lease pursuant to the related Indenture, or (b) if such aircraft
is an owned aircraft, the related Loan Trustee, in either case, would be
entitled to the benefits of Section 1110 with respect to the airframe and
engines comprising the related aircraft. Each such opinion may be subject
to certain qualifications and assumptions including the assumptions that
ATA is and will continue to be a citizen of the United States holding an
air carrier operating certificate issued by the Secretary of Transportation
pursuant to chapter 447 of Title 49 of the United States Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds or more of
cargo. See "--The Leases--Events of Loss." Such opinions do not address the
possible replacement of an aircraft after an Event of Loss in the future,
however the consummation of such replacement is conditioned upon the
contemporaneous delivery of an opinion of counsel to the effect that the
related Loan Trustee will be entitled to Section 1110 benefits with respect
to such replacement unless there is a change in law or court interpretation
that results in Section 1110 not being available. See "--The Leases and
Certain Provisions of the Owned Aircraft Indentures--Events of Loss." Such
counsel's
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opinions also do not address the availability of Section 1110 of the
Bankruptcy Code with respect to the bankruptcy proceedings of any possible
sublessee of a leased aircraft if it is subleased by ATA, or to any
possible lessee of an owned aircraft if it is leased by ATA. For a
description of certain limitations on the Loan Trustee's exercise of rights
contained in the Indenture, see "--Indenture Defaults, Notice and Waiver."
During 1998, the U.S. District Court for the District of Colorado
issued two opinions, arising from the bankruptcy proceedings of Western
Pacific Airlines, Inc., relating to Section 1110. The decisions held that,
after an airline debtor reaffirms its obligations and cures its defaults
under an aircraft lease within the prescribed period in accordance with
Section 1110, the lessor under that lease is not entitled to repossess the
aircraft under Section 1110 if the airline subsequently defaults under that
lease. However, Section 1110 has since been amended to supercede those
decisions and those holdings no longer apply.
In a bankruptcy, insolvency, receivership or like proceedings involving
an Owner Participant, it is possible that, even though that the applicable
leased aircraft is owned by the related Owner Trustee in trust, such leased
aircraft and the related lease and secured promissory notes might become part
of such proceeding. In such event, payments under such lease or on such
secured promissory notes may be interrupted and the ability of the related
Loan Trustee to exercise its remedies under the related Indenture might be
restricted, though such Loan Trustee would retain its status as a secured
creditor in respect of the related lease and the related leased aircraft.
Modification of Indentures and Leases
Without the consent of holders of a majority in principal amount of the
secured promissory notes outstanding under any Indenture, the provisions of
such Indenture and any related lease, Participation Agreement, or the Leased
Aircraft Trust Agreement may not be amended or modified, except to the extent
indicated below.
Certain provisions of any Leased Aircraft Indenture, and of the lease,
the Participation Agreement, and the Leased Aircraft Trust Agreement, may be
amended or modified by the parties to those agreements without the consent of
the relevant Loan Trustee or any holders of the secured promissory notes
outstanding under such Indenture, subject to certain conditions. In the case
of each lease, such provisions include, among others, provisions relating to
(a) the return to the related Owner Trustee of the related aircraft at the end
of the term of such lease and (b) the renewal of such lease and the option of
ATA at the end of the term of such lease to purchase the related aircraft.
(Leased Aircraft Indentures, Section 9.01; Owned Aircraft Indentures, Section
10.01)
Without the consent of the holder of each secured promissory note
outstanding under any Indenture affected thereby, no amendment of or
supplement to such Indenture may among other things (a) reduce the principal
amount of, or Make-Whole Amount if any, or interest payable on, any secured
promissory notes issued under such Indenture or change the date on which any
principal or Make-Whole Amount, if any, or interest is due and payable, (b)
create any security interest with respect to the property subject to the lien
of such Indenture, except as provided in such Indenture, or deprive any holder
of a secured promissory note issued under such Indenture of the benefit of the
lien of such Indenture upon the property subject to such Indenture or (c)
reduce the percentage in principal amount of outstanding secured promissory
notes issued under such Indenture necessary to modify or amend any provision
of such Indenture or to waive compliance with such Indenture. (Leased Aircraft
Indentures, Section 9.01(b); Owned Aircraft Indentures, Section 10.01(a))
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Indemnification
ATA will be required to indemnify each Loan Trustee, each Owner
Participant, each Owner Trustee, the Liquidity Provider, the Subordination
Agent, the Escrow Agent and each pass through trustee, but not the
certificateholders, for certain losses, claims and other matters. ATA is
required under certain circumstances to indemnify each Owner Participant
against the loss of depreciation deductions and certain other benefits
allowable for certain income tax purposes with respect to the related leased
aircraft. Prior to seeking indemnification from the Indenture Estate, the Loan
Trustee will demand and take necessary action to pursue indemnification under
the Participation Agreement. Each Owner Trustee indemnifies the Loan Trustee
to the extent not reimbursed by ATA. If necessary, the Loan Trustee is
entitled to indemnification from the Indenture Estate for any liability,
obligation, loss, damage, penalty, claim or action to the extent not
reimbursed by ATA. The Loan Trustee is not indemnified, however, for actions
arising from its gross negligence, willful misconduct or, in the case of
handling funds, negligence, or for the inaccuracy of any representation or
warranty made in its individual capacity under the Indenture.
Each Owner Participant is required to indemnify the related Loan Trustee
and the holders of the secured promissory notes issued with respect to the
leased aircraft in which such Owner Participant has an interest for certain
losses that may be suffered as a result of the failure of such Owner
Participant to discharge certain liens or claims on or against the assets
subject to the lien of the related Indenture. The Loan Trustee is not under
any obligation to take any action, risk liability or expend its own funds
under the Indenture if it has reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk is not reasonably
assured to it.
The Amtran Guarantee
Amtran irrevocably, fully and unconditionally guarantees the payment and
performance of all obligations of ATA as lessee under each lease and as
obligor under the secured promissory notes relating to the owned aircraft and
as mortgagor under the Owned Aircraft Indenture. If ATA fails to make a
payment or perform a nonfinancial obligation when due for any reason,
including liquidation, bankruptcy or reorganization, Amtran will make the
payment and perform any nonfinancial obligations. The Guarantee is an
absolute, present and continuing guarantee of performance and payment rather
than mere collectibility, and it is not contingent upon any attempt to collect
payment from or file suit against ATA.
The Leases and Certain Provisions of the Owned Aircraft Indentures
Each leased aircraft is or will be leased by an Owner Trustee to ATA
under the relevant lease. Each owned aircraft will be owned by ATA.
Lease Terms and Rentals
ATA will lease each leased aircraft from an Owner Trustee for a term
commencing on the date that the related Owner Trustee acquires it and expiring
not earlier than the latest maturity date of the secured promissory notes
issued pursuant to the related Indenture. Basic Rent payments for each
aircraft are payable quarterly on each Lease Payment Date. Such payments,
together with certain other payments that ATA is obligated to make or cause to
be made under the related lease, have been assigned by the Owner Trustee under
the related Indenture to provide the funds necessary to make payments of
principal and interest due or expected to be due from the Owner Trustee on the
secured promissory notes issued under such Indenture and Liquidity Obligations
under the related Liquidity Facility. In certain cases, the Basic Rent
payments under the leases may be adjusted, but each lease provides that under
no circumstances will rent payments by ATA be less than the scheduled payments
on the related secured promissory notes. (Leases, Section 3.2.1) The balance
of any such quarterly Basic Rent payment and such other payments, after
payment of amounts due or expected to be due on the related secured promissory
notes and certain other amounts, including certain amounts owing to the
Liquidity Provider, will be paid over to the related Owner Trustee. (Leased
Aircraft Indentures, Section 3.01)
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ATA's obligations to pay rent and to make other payments under each lease
will be general unsecured obligations.
Net Lease; Maintenance
ATA's obligations in respect of each of the leased aircraft are those of
a lessee under a "net lease." Accordingly, ATA is obligated to cause the
leased aircraft under each lease to be duly registered in the name of the
Owner Trustee, to pay all costs of operating the leased aircraft and, at the
expense of ATA and to the extent set forth in such lease, to maintain,
service, repair and overhaul the leased aircraft in accordance with
maintenance standards required by, or substantially equivalent to those
required by, the FAA or the central civil aviation authority of Canada or
Japan or the Joint Aviation Authority (whose rules govern the central civil
aviation authorities of France, Germany, Japan, the Netherlands, and the
United Kingdom, among others) for the aircraft, so as to keep the leased
aircraft in as good operating condition as delivered to ATA, ordinary wear and
tear excepted, and, in such condition as may be necessary to enable the
airworthiness certification of such leased aircraft to be maintained at all
times, except during temporary periods of storage in accordance with
applicable regulations during the conduct of maintenance and modification
procedures, or during periods when the airworthiness certificates for other
similar aircraft have been revoked or suspended. Except when a sublease is in
effect ATA agrees to use the same standards of maintenance, service, repair or
overhaul used by ATA with respect to similar aircraft operated by ATA in
similar circumstances, and, during any period that a sublease is in effect,
cause the Sublessee thereunder to agree to utilize the same standards of
maintenance, service, repair or overhaul as used by the Sublessee with respect
to similar aircraft operated by the Sublessee in similar circumstances.
(Lease, Annex C, Section A) The Owned Aircraft Indenture imposes comparable
maintenance, service and repair obligations on ATA with respect to the Owned
Aircraft. (Owned Aircraft Indentures, Sections 4.02 and 4.04)
ATA will also maintain, use, service, repair, overhaul and inspect any
leased aircraft in compliance with applicable laws with respect to the
maintenance of the aircraft and in compliance with each applicable
airworthiness certificate, license, and registration relating to the aircraft
issued by a relevant aviation authority, other than minor or nonrecurring
violations with respect to which corrective measures are taken upon discovery
of the violation and, except to the extent ATA (or any Sublessee) is in good
faith contesting the validity or application of any requirements, in any
reasonable manner which, among other things specified in each Lease, does not
materially adversely affect the Owner Trustee or the interests of the relevant
Owner Participant, the relevant Loan Trustee, or any Trustee or
certificateholder. (Leases, Annex C, Section A)
ATA must make (or cause to be made) all alterations and modifications in
and additions to each airframe and engine necessary to meet the applicable
requirements of the FAA or any other applicable aviation authority having
jurisdiction over the operation of the aircraft, except that ATA (or any
Sublessee) may contest the validity or application of any such requirements in
any reasonable manner which does not adversely affect the Owner Trustee or the
relevant Loan Trustee. ATA (or any Sublessee) may add further parts and make
other alterations, modifications and additions to any airframe or any engine
as ATA (or any Sublessee) may deem desirable, including removal of parts
determined by ATA (or any Sublessee) to be obsolete or no longer suitable or
appropriate for use, so long as such alterations, modifications or additions,
do not materially diminish the fair market value, utility or useful life of
such airframe or engine below its fair market value, utility or remaining
useful life immediately prior to such alteration, modification, addition or
removal (assuming such airframe or engine was in the condition required by the
lease). Title to parts incorporated or installed in or added to such airframe
or engine as a result of such alterations, modifications or additions vest in
the Owner Trustee subject to certain exceptions. In certain circumstances, ATA
(or any Sublessee) is permitted to remove parts which were added by ATA (or
any Sublessee) (without replacement) from an airframe or engine so long as
certain conditions are met and any such removal does not materially diminish
the fair market value, utility, or remaining useful life which such airframe
or engine would have had at such time had such addition, alteration or
modification not occurred. (Leases, Annex C, Section D)
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Except as set forth above, ATA is obligated to replace or cause to be
replaced all parts (other than severable parts added at the option of ATA or
unsuitable parts that ATA is permitted to remove) that are incorporated or
installed in or attached to any airframe or any engine and become worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
permanently rendered unfit for use. Any such replacement parts become subject
to the related Lease and the lien of the related Leased Aircraft Indenture in
lieu of the part replaced. (Leases, Annex C, Section B)
Registration, Subleasing and Possession
Although ATA has no current intention to do so, ATA may, under certain
circumstances, register an aircraft in certain jurisdictions outside the
United States, subject to, among other conditions and limitations specified in
each Lease or Owned Aircraft Indenture, the lien of the related Indenture
continuing as a first priority security interest in the related aircraft and
lease. ATA is also permitted, subject to certain limitations, to sublease (or,
in the case of owned aircraft, lease) any aircraft to any United States
certificated air carrier or to certain foreign entities, and to certain
airframe and engine manufacturers or their affiliates, so long as the term of
any such sublease does not extend beyond the term of any lease applicable to
such aircraft, subject to certain exceptions. In addition, subject to certain
limitations, ATA is permitted to transfer possession of any airframe or any
engine other than by lease or sublease, including transfers of possession by
ATA or any lessee or Sublessee in connection with certain interchange and
pooling arrangements, transfers to the United States government and any
instrumentality or agency thereof, and transfers in connection with
maintenance or modifications. (Lease, Section 7) There are no general
geographical restrictions on ATA's (or any lessee's or Sublessee's) ability to
operate the aircraft. The extent to which the relevant Loan Trustee's lien
would be recognized in an aircraft if such aircraft were located in certain
countries is uncertain. See "Risk Factors--Risk Factors Relating to the
Certificates." The aircraft may be operated, registered or leased outside of
the United States, which may hinder the efforts of a loan trustee to repossess
an aircraft upon default under the relevant lease or Owned Aircraft Indenture.
In addition, any exercise of the right to repossess an aircraft may be
difficult, expensive and time-consuming, particularly when such aircraft is
located outside the United States and has been registered in a foreign
jurisdiction or subleased to a foreign operator, and may be subject to the
limitations and requirements of applicable law, including the need to obtain
consents or approvals for deregistration or re-export of the aircraft, which
may be subject to delays and political risk. When a defaulting lessee or
Sublessee or other permitted transferee is the subject of a bankruptcy,
insolvency or similar event such as protective administration, additional
limitations may apply.
At the time of obtaining repossession of the aircraft under the related
lease or foreclosing on the lien on the aircraft under the related Indenture,
an airframe subject to such lease or Indenture may not be equipped with
engines subject to the same lease or Indenture and, in such case, ATA is
required to deliver engines attached to such airframe which have not less than
equivalent value, utility and remaining useful life (without regard to
overhaul status) as the engines subject to such lease or Indenture.
Notwithstanding ATA's agreement in each lease or Owned Aircraft Indenture, in
the event ATA fails to transfer title to engines not owned by the Owner
Trustee, or fails to subject engines to the Owned Aircraft Indenture, that are
attached on repossessed aircraft, it could be difficult, expensive and
time-consuming to assemble an aircraft consisting of an airframe and engines
subject to the lease or Owned Aircraft Indenture. See "Risk Factors--Risk
Factors Relating to the Certificates." The aircraft may be operated,
registered or leased outside of the United States, which may hinder the
efforts of a loan trustee to repossess an aircraft upon default under the
relevant lease or Owned Aircraft Indenture.
Liens
ATA is required to maintain each aircraft free of any liens, other than
the respective rights of any Owner Trustee, as owner of the aircraft, and ATA,
as provided in the lease, the lien of the Indenture, and any other rights
existing pursuant to the Operative Documents related thereto, the
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rights of others in possession of the aircraft in accordance with the terms of
the lease (including Sublessees) or Owned Aircraft Indenture (including
lessees), and other than certain other customary liens permitted under such
documents, including liens for taxes either not yet due or being contested in
good faith, materialmen's, mechanics', and other similar liens arising in the
ordinary course of business securing obligations that are not overdue for a
period of more than 60 days, or are being contested in good faith by
appropriate proceedings; judgment liens discharged, vacated, stayed pending
appeal or reversed within a period of 60 days as specified in each lease or
Owned Aircraft Indenture, and any other lien with respect to which ATA (or any
Sublessee or lessee) has provided a bond, cash collateral or other security
adequate in the reasonable opinion of the relevant Owner Trustee or Loan
Trustee under an Owned Aircraft Indenture. (Leases, Section 6; Owned Aircraft
Indentures, Section 4.01)
Insurance
Subject to certain exceptions, ATA is obligated, at its expense (or at
the expense of a permitted lessee, in the case of the owned aircraft, or a
permitted Sublessee, in the case of a leased aircraft), to maintain or cause
to be maintained on each aircraft, with insurers of recognized responsibility,
passenger liability, property damage and contractual liability insurance and
all-risk aircraft hull insurance, in such amounts, covering such risks and in
such form as ATA customarily maintains with respect to other aircraft owned or
operated by ATA, in each case similar to such aircraft; provided, however,
that, except to the extent of any self-insurance, the all-risk hull insurance
shall be at least in an amount equal to the Stipulated Loss Value (as defined
in each lease) of such aircraft. (Leases, Annex D)
Subject to certain exceptions, the policies covering loss of or damage to
an aircraft shall be made payable, up to the Stipulated Loss Value for such
aircraft, to the related Loan Trustee for any loss involving proceeds in
excess of $5,000,000 and the entire amount of any loss involving proceeds of
$5,000,000 (or such lower amount as may be specified under the relevant lease)
or less shall be paid to ATA, except that in the event an Owned Aircraft
Indenture Event of Default or a Lease Event of Default exists, all insurance
proceeds will be paid to the relevant Loan Trustee. (Leases, Annex D, Section
B; Owned Aircraft Indentures, Section 4.06)
With respect to required insurance, ATA (and any lessee or Sublessee) may
self-insure (a) to the extent that its self-insurance does not exceed, during
any policy year, with respect to all of the aircraft in ATA's fleet, the
lesser of (1) 50% of the largest replacement value of any single aircraft in
ATA's fleet, and (2) 1 1/2% of the average aggregate insurable value of all
aircraft on which ATA then carries insurance, or (b) if higher, to the extent
of any applicable deductible per aircraft that does not exceed industry
standards for major U.S. airlines. (Lease, Annex D, Section G)
In respect of each Aircraft, ATA is required to cause the relevant Owner
Trustee and Loan Trustee and certain other persons to be included as
additional insureds as their respective interests may appear under all
insurance policies required by the terms of each lease with respect to such
aircraft. (Leases, Annex D, Section D)
Subject to certain customary exceptions, ATA may not operate (or permit
any lessee or Sublessee to operate) any aircraft in any area that is excluded
from coverage by any insurance policy in effect with respect to such aircraft
and required by the lease. (Leases, Section 7.1.5)
ATA's obligation for provide any insurance required by each lease or
Owned Aircraft Indenture shall be satisfied if indemnification from, or
insurance provided by, the United States government or one of certain other
permitted foreign governments or any agency or instrumentality thereof,
against the risks requiring such insurance under such lease is at least equal,
when added to the amount of insurance against such risks otherwise maintained
by ATA (or any lessee or Sublessee), to the amount of insurance against such
risks otherwise required by such lease. (Leases, Section 11.3)
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Lease Termination
ATA may terminate any lease on any Lease Payment Date occurring on or
after the fifth anniversary of the delivery date, if it determines that such
leased aircraft is obsolete or surplus to its needs and subject to certain
other limitations specified in such leases. Upon payment of the termination
value for such leased aircraft, which will be an amount at least equal to the
outstanding principal amount of the related secured promissory notes and an
amount equal to the Make-Whole Amount, if any, payable on such date of
payment, together with certain additional amounts and together with all
accrued and unpaid interest thereon, the lien of the relevant Indenture shall
be released, the relevant lease shall terminate, and the obligation of ATA
thereafter to make scheduled rent payments under such lease shall cease.
(Leases, Section 9; Leased Aircraft Indentures, Sections 2.10(b), 2.12 and
2.13)
Renewal and Purchase Options
At the end of the term of each lease after final maturity of the related
secured promissory notes and subject to certain conditions, ATA may have
certain options to renew such lease for additional limited periods. In
addition, ATA may have the right at the end of the term of each lease to
purchase the leased aircraft subject thereto for an amount to be calculated in
accordance with the terms of such lease. (Leases, Section 17)
ATA may also have the option to purchase the leased aircraft subject to
each lease on certain Rent Payment Dates for a purchase price calculated in
accordance with the provisions of the related lease, but which must be
sufficient to pay all principal of, Make-Whole Amount, if any, on and interest
on the related secured promissory notes in full and, upon payment thereof, ATA
shall acquire such aircraft free of the lien of the related Indenture. If ATA
buys the aircraft during the term pursuant to such a purchase option, ATA may
have the right to elect to assume the related secured promissory notes on a
fully-recourse basis, and thereby convert the leased aircraft to an owned
aircraft and the leveraged lease financing to a secured loan financing. To do
such an assumption transaction, ATA must (a) cause to be delivered to the Loan
Trustee an opinion of counsel that the pass through trusts will not be subject
to U.S. federal income tax as a result of such transaction, and (b) either (i)
cause to be delivered to the Loan Trustee an opinion of counsel that the
certificateholders will not recognize income, gain or loss for federal income
tax purposes as a result of such transaction and will be subject to federal
income tax in the same amounts, in the same manner and at the same time as
would have been the case if such transaction had not occurred, or (ii) cause
to be delivered to the Loan Trustee an opinion of counsel that such
certificateholders should not recognize income, gain or loss, and should be
subject to federal income tax, in each case, as referred to in clause (i) and
also provide an indemnification in favor of the certificateholders in form and
substance reasonably satisfactory to the pass through trustees. See "Certain
U.S. Federal Income Tax Consequences --Taxation of Certificateholders
Generally" for a discussion of certain tax consequences of such purchase and
assumption under current regulations. (Leases, Section 19; Indentures,
Sections 2.10(b) and 2.11; Participation Agreements, Section 8(x). See
"--Description of the Secured Promissory Notes--Redemption."
Events of Loss
If an Event of Loss occurs with respect to any aircraft, ATA is obligated
either (i) to replace such aircraft or (ii) to pay the applicable Stipulated
Loss Value to the related Owner Trustee (in the case of a leased aircraft) or
the outstanding principal and accrued interest on the secured promissory notes
to the Loan Trustee (in the case of the owned aircraft), together with certain
additional amounts. If ATA elects to replace such aircraft, it must do so no
later than 180 days after the related Event of Loss, with an airframe or
airframe and engines of the same or improved make and model free and clear of
all liens (other than certain permitted liens) and having a value, utility and
remaining useful life at least equal to such aircraft immediately prior to the
Event of Loss, assuming maintenance thereof in accordance with the relevant
lease or Owned Aircraft Indenture. If ATA elects to pay the Stipulated Loss
Value for such aircraft or (except if otherwise provided in the relevant
lease) elects to replace such aircraft but fails to do so within the time
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periods specified therefor, ATA must make such payment not later than the
180th day after the related Event of Loss. In the case of a leased aircraft,
upon making such payment, together with all other amounts then due under the
related lease with respect to such aircraft, which in all circumstances will
be at least sufficient to pay in full as of the date of payment the principal
amount of the related secured promissory notes and all accrued and unpaid
interest due thereon (but without any Make-Whole Amount), the lease for such
aircraft shall terminate and the obligation of ATA to make the scheduled Basic
Rent payments with respect thereto shall cease. (Leases, Sections 10;
Indentures, Section 5.06) If an Event of Loss occurs with respect to an engine
alone, ATA is required to replace such engine within 60 days from the date of
such Event of Loss with another engine, free and clear of all liens (other
than permitted liens), of the same or improved make and model (subject to
certain exceptions) and having a value, utility and remaining useful life at
least equal to the engine being replaced (assuming that such engine had been
maintained in accordance with the lease). (Leases, Section 10.2; Indentures,
Section 5.06)
Lease Events of Default
Although there may be differences among the leases, Lease Events of
Default generally include:
o failure by ATA or Amtran to pay any payment of Basic Rent or
Stipulated Loss Value under such lease within ten business days
after it becomes due;
o failure by ATA or Amtran to pay Supplemental Rent (other than
Stipulated Loss Value) within ten business days after ATA's receipt
of written demand therefor,
o failure by ATA to perform any other covenant or agreement to be
performed by it under the leases for 30 days after ATA or Amtran
receives written notice of such failure; provided, that no such
failure with respect to covenants in such lease that are curable
shall constitute a Lease Event of Default so long as ATA is
diligently proceeding to remedy such failure, and such failure is
remedied within 270 days of receipt of such notice;
o any representation or warranty (other than tax representations and
warranties) made by ATA or Amtran under the Operative Documents or
the Guarantee is incorrect in any material respect when made and
remains unremedied for 30 days after notice to ATA or Amtran;
o the occurrence of certain events of bankruptcy, reorganization or
insolvency of ATA or Amtran;
o failure by ATA to carry and maintain (or cause to be carried and
maintained) insurance on or in respect of any aircraft in accordance
with the provisions of such lease; and
o the Guarantee shall cease to be in full force and effect.
If a Lease Event of Default exists and the lease has been declared to be
in default, the Owner Trustee may, subject to certain limitations relating to
aircraft subject to the Civil Reserve Air Fleet Program, exercise one or more
of the remedies provided in the related lease, to the extent permitted by
applicable law. The listed remedies include the right to repossess and use or
operate such leased aircraft, to sell or release such leased aircraft free and
clear of ATA's rights and retain the proceeds and to require ATA to pay as
liquidated damages any accrued and unpaid Basic Rent plus an amount equal to
the excess of the Stipulated Loss Value of such leased aircraft over either
(a) the fair market sales value or fair market rental value of such Leased
Aircraft (as determined by independent appraisal) or (b) if such leased
aircraft has been sold, the net sale proceeds thereof. (Leases, Section 15)
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The Participation Agreement
Indemnification
Subject to certain exceptions, ATA has agreed to indemnify each Owner
Participant, each Owner Trustee, each Liquidity Provider, the Subordination
Agent, the Escrow Agent, each of the pass through trustees and each of the
Loan Trustees, but not the holders of the certificates, for certain
liabilities, losses, fees and expenses and for certain other matters arising
out of the transactions described herein or relating to the aircraft. In
addition, under certain circumstances ATA is required to indemnify certain
persons, but not the holders of the certificates, against certain taxes,
levies, duties, withholdings and for certain other matters (but excluding,
among other things, income and capital gains taxes) relating to such
transactions or the aircraft.
Transfer of Owner Participant Interests
Subject to certain restrictions, each Owner Participant may transfer its
interest in the related leased aircraft.
EXCHANGE OFFER; REGISTRATION RIGHTS
ATA and each pass through trustee have agreed pursuant to a registration
rights agreement (the "Registration Rights Agreement") with the Initial
Purchasers, for the benefit of the holders of the certificates, that ATA will,
at its cost, (a) not later than 90 days after the date of original issuance of
the certificates, file a registration statement (the "Exchange Offer
Registration Statement") with the SEC with respect to a registered offer to
exchange each class of Outstanding Certificates for new certificates issued by
the same pass through trust (the "Exchange Certificates") having terms
substantially identical in all material respects to the certificates (except
that the Exchange Certificates will not contain terms with respect to transfer
restrictions or interest rate increases as described below and the Exchange
Certificates will be available only in book-entry form) including having the
benefit of the Policy and (b) use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act not later than 180 days after the date of original issuance of
the certificates. Upon the effectiveness of the Exchange Offer Registration
Statement, ATA will offer the Exchange Certificates in exchange for surrender
of the Outstanding Certificates (the "Registered Exchange Offer").
ATA will keep the Registered Exchange Offer open for not less than 20
business days (or longer if required by applicable law) after the date notice
of the Registered Exchange Offer is mailed to the holders of the Outstanding
Certificates. For each Outstanding Certificate surrendered to ATA pursuant to
the Registered Exchange Offer, the holder of such Outstanding Certificate will
receive an Exchange Certificate representing an ownership interest in the
property held by the trust equal to that of the surrendered certificate. The
pass through trustee issuing each Exchange Certificate will pass through
interest on the secured promissory notes held by that trustee, such interest
will have accrued from the last Regular Distribution Date on which interest
was paid on the secured promissory notes or, if no interest has been paid on
such secured promissory notes, from the date of its original issue.
We believe, based on existing SEC interpretations, that the Exchange
Certificates would be freely transferable by holders of the Outstanding
Certificates other than affiliates of ATA after the Registered Exchange Offer
without further registration under the Securities Act if the holder of the
Exchange Certificates represents:
o that it is acquiring the Exchange Certificates in the ordinary
course of business;
o that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Certificates; and
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o that it is not an affiliate of ATA, as such terms are interpreted by
the SEC,
provided that broker-dealers ("Participating Broker-Dealers") receiving
Exchange Certificates in the Registered Exchange Offer will have a prospectus
delivery requirement with respect to resales of such Exchange Certificates.
The SEC has taken the position that Participating Broker- Dealers may fulfill
their prospectus delivery requirements with respect to Exchange Certificates
(other than a resale of an unsold allotment from the original sale of the
certificates) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, ATA is required to allow
Participating Broker-Dealers and other persons, if any, with similar
prospectus delivery requirements to use the prospectus contained in the
Exchange Offer Registration Statement in connection with the resale of such
Exchange Certificates.
A holder of certificates (other than certain specified holders) who
wishes to exchange such certificates for Exchange Certificates in the
Registered Exchange Offer will be required to represent:
o that any Exchange Certificates to be received by it will be acquired
in the ordinary course of its business;
o that at the time of the commencement of the Registered Exchange
Offer it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the
Securities Act) of the Exchange Certificates; and
o that it is not an "affiliate," as defined in Rule 405 of the
Securities Act, of ATA or the pass through trustee or a
broker-dealer tendering certificates acquired directly from ATA or
Amtran for its own account, or if it is an affiliate, that is will
comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable.
In the event that (a) applicable interpretations of the staff of the SEC
do not permit ATA to effect such a Registered Exchange Offer, (b) for any
other reason the Exchange Offer Registration Statement is not declared
effective within 180 days after the date of the original issuance of the
Outstanding Certificates or the Registered Exchange Offer is not consummated
within 210 days after the original issuance of the Outstanding Certificates,
(c) the Initial Purchasers so request with respect to Outstanding Certificates
not eligible to be exchanged for Exchange Certificates in the Registered
Exchange Offer or (d) any holder of Outstanding Certificates (other than the
Initial Purchasers) is not eligible to participate in the Registered Exchange
Offer, ATA will, at its cost:
o as promptly as practicable, file a shelf registration statement (the
"Shelf Registration Statement") covering resales of the certificates
or the Exchange Certificates, as the case may be;
o use its reasonable best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act;
o use its reasonable best efforts to keep the Shelf Registration
Statement continuously effective until two years after the original
issuance of the Outstanding Certificates or such shorter period
ending when all of the Outstanding Certificates have been sold or
cease to be outstanding.
ATA will, in the event a Shelf Registration Statement is filed, among
other things, provide to each holder for whom such Shelf Registration
Statement was filed copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resales of the Outstanding Certificates or the Exchange
Certificates, as the case may be. A holder selling such Outstanding
Certificates or Exchange Certificates pursuant to
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the Shelf Registration Statement generally would be required to be named as
a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will
be bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations).
In addition, each holder of such certificates or Exchange Certificates will
be required to deliver information to be used in connection with the Shelf
Registration Statement in order to have their certificates or Exchange
Certificates included in the Self Registration Statement.
In the event that neither an Exchange Offer Registration Statement nor a
Shelf Registration Statement has been declared effective by the Commission
(each, a "Registration Event") on or prior to the 210th day after the date of
original issuance of the Outstanding Certificates, the interest rate per annum
borne by the secured promissory notes and the Deposits shall be increased by
0.50% from and including such 210th day to but excluding the earlier of (i)
the date on which the Registration Event occurs and (ii) the date on which
there cease to be any registrable certificates. In the event that the Shelf
Registration Statement ceases to be effective at any time during the period
specified by the Registration Rights Agreement for more than 60 days, whether
or not consecutive, during any 12-month period, the interest rate per annum
borne by the Equipment Notes and the Deposits shall be increased by 0.50% from
the 61st day of the applicable 12-month period such Shelf Registration
Statement ceases to be effective until such time as the Shelf Registration
Statement again becomes effective (or, if earlier, the end of such period
specified by the Registration Rights Agreement).
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available upon request to the pass through
trustee.
BOOK-ENTRY; DELIVERY AND FORM
Exchange Notes will be represented by one or more permanent global Notes
in definitive, fully registered form without interest coupons (each a "Global
Note") and will be deposited with the Trustee as custodian for, and registered
in the name of a nominee of, DTC.
Ownership of beneficial interests in a Global Exchange Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. Ownership of beneficial interest in a
Global Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect
to interests of participants) and the records of participants (with respect to
interests of persons other than participants). Beneficial owners may hold
their interests in a Restricted Global Note directly through DTC if they are
participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or Holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, and interest on, a Global Note will be made
to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment
of principal or interest in respect of a Global Note, will credit
participants' accounts with payments in amounts
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proportionate to their respective beneficial interests in the principal amount
of such Global Note as shown on the records of DTC or its nominee. The Company
also expects that payments by participants to owners of beneficial interests
in such Global Note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken
by a Holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if
there is an Event of Default under the Notes, DTC will exchange the applicable
Global Notes for Certificated Notes, which it will distribute to its
participants.
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts or its participants, thereby eliminating the need for physical
movement of certificates and certain other organizations. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC,
it is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company nor
the Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of its obligations under the
rules and procedures governing its operations.
If DTC is at any time unwilling or unable to continue as a depositary of
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Notes.
U.S. FEDERAL INCOME TAX CONSEQUENCES
General
The following summary describes the principal U.S. federal income tax
consequences to certificateholders of the purchase, ownership and disposition
of the certificates. Except as otherwise specified, the summary is addressed
to beneficial owners of certificates ("U.S. Certificateholders") that are
citizens or residents of the United States, corporations, partnerships or
other entities created or organized in or under the laws of the United States
or any State, or estates or trusts the income of which is subject to U.S.
federal income taxation regardless of its source ("U.S. Persons") that will
hold the certificates as capital assets. This summary does not address the tax
treatment of U.S. Certificateholders that may be subject to special tax rules,
such as banks, insurance companies, dealers in securities or commodities,
tax-exempt entities, holders that will hold certificates as part of a straddle
or holders that have a "functional currency" other than the U.S. Dollar, nor
(except as expressly provided herein) does it address the tax treatment of
U.S. Certificateholders that did not acquire Outstanding Certificates as part
of the initial offering. The summary does not purport to be a comprehensive
description of all of the tax
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considerations that may be relevant to U.S. Certificateholders. This summary
does not describe any tax consequences arising under the laws of any State,
locality or taxing jurisdiction other than the United States.
The summary is based upon the tax laws and practice of the United States
as in effect on the date of this prospectus, as well as judicial and
administrative interpretations thereof (in final or proposed form) available
on or before such date. All of the foregoing are subject to change, which
change could apply retroactively. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
Tax Status of the Exchange Offer
The exchange of an Outstanding Certificate by a U.S. Certificateholder
for an Exchange Certificate (as described above under "Exchange Offer;
Registration Rights") will not constitute a taxable exchange. As a result, a
U.S. Certificateholder will not recognize taxable gain or loss upon receipt of
an Exchange Certificate. A U.S. Certificateholder's tax basis and holding
period for the related Deposits, secured promissory notes and any other assets
held by the corresponding trust will be the same as the tax basis and holding
period for such assets immediately prior to the exchange.
Tax Status of the Trusts
In the opinion of Cravath, Swaine & Moore, special tax counsel ("Tax
Counsel") to ATA, for U.S. federal income tax purposes, the arrangement
represented by the original and successor pass through trusts will be
classified as one or more grantor trusts (or as a partnership) and will not be
classified as an association or publicly traded partnership taxable as a
corporation. The original and successor pass through trusts will take the
position for all tax purposes that the pass through trusts will be classified
as one or more grantor trusts and that the Deposits are not assets of the
respective pass through trusts. Except as expressly provided otherwise, the
following discussion assumes this approach is correct.
Taxation of Certificateholders Generally
A U.S. Certificateholder will be treated as owning its pro rata undivided
interest in the relevant Deposits and each of the secured promissory notes,
the pass through trust's contractual rights and obligations under the Note
Purchase Agreement, and any other property held by the pass through trust.
Accordingly, each U.S. Certificateholder's share of interest paid on secured
promissory notes will be taxable as ordinary income, as it is paid or accrued,
in accordance with such U.S. Certificateholder's method of accounting for U.S.
federal income tax purposes, and a U.S. Certificateholder's share of premium,
if any, paid on redemption of a secured promissory note will be treated as
capital gain. Any amounts received by a Trust under a Liquidity Facility or
the Insurance Policy in order to make interest or principal payments will be
treated for U.S. federal income tax purposes as having the same
characteristics as the payments they replace.
It is possible that any Special Interest that becomes payable on the
secured promissory notes (as described above under "Exchange Offer;
Registration Rights") is "contingent" for U.S. federal income tax purposes. If
so treated, certain adverse U.S. federal income tax consequences could result.
However, ATA believes that these payments are not "contingent" for this
purpose (because they are "remote or incidental" under Treasury Regulations)
and intends to treat the payments accordingly.
It is not clear whether any Deposit Make-Whole Premium will be ordinary
income or capital gain. The Deposits will likely be subject to the original
issue discount and contingent payment rules. As a result, U.S.
Certificateholder will be required to include interest income from a Deposit
using the accrual method of accounting regardless of its normal method, and
there may be a slight deferral in the timing of income recognition as compared
to holding a single debt instrument with terms comparable to a certificate.
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An Owner Participant's conveyance of its interest in an owner trust
should not constitute a taxable event to U.S. Certificateholders. However, if
ATA were to assume an Owner Trusts's obligations under the related secured
promissory notes upon a purchase of a Leased Aircraft by ATA, such assumption
may be treated for federal income tax purposes as a taxable exchange by U.S.
Certificateholders of the secured promissory notes for "new" secured
promissory notes. A taxable exchange would result in the recognition of
taxable gain (but possibly not loss) equal to the difference between the U.S.
Certificateholder's adjusted basis in its interest in the secured promissory
note and the amount realized on such exchange (except to the extent
attributable to accrued interest, which would be taxable as interest income if
not previously included in income). For this purpose the amount realized (and
the issue price of the "new" secured promissory note) would be equal to the
U.S. Certificateholder's pro rata share of either (i) the fair market value of
the respective secured promissory note at such time (if certain conditions are
at that time satisfied concerning the availability of price quotes or sales
data in respect of the secured promissory notes) or (ii) the principal amount
of the respective secured promissory note (if such conditions are not
satisfied). If, in a sale-leaseback transaction, an Owner Trustee assumes
ATA's obligations under secured promissory notes issued for an owned aircraft,
such assumption could also be treated for federal income tax purposes as a
taxable exchange by U.S. Certificateholders of those notes for "new" secured
promissory notes as described above.
In the case of a subsequent purchaser of a certificate, the purchase
price for the certificate should be allocated among the relevant Deposits and
the assets held by the relevant pass through trust (including the secured
promissory notes and the rights and obligations under the Note Purchase
Agreement with respect to secured promissory notes not theretofore issued) in
accordance with their relative fair market values at the time of purchase. Any
portion of the purchase price allocable to the right and obligation under the
Note Purchase Agreement to acquire a secured promissory note should be
included in the purchaser's basis in its share of the secured promissory note
when issued. Although the matter is not entirely clear, in the case of a
purchaser after initial issuance of the certificates but prior to the Delivery
Period Termination Date, if the purchase price reflects a "negative value"
associated with the obligation to acquire a secured promissory note pursuant
to the Note Purchase Agreement being burdensome under conditions existing at
the time of purchase (e.g., as a result of the interest rate on the unissued
secured promissory notes being below market at the time of purchase of a
certificate), such negative value probably would be added to such purchaser's
basis in its interest in the Deposits and the remaining assets of the pass
through trust and reduce such purchaser's basis in its share of the secured
promissory notes when issued. The preceding two sentences do not apply to
purchases of certificates following the Delivery Period Termination Date.
A U.S. Certificateholder who is treated as purchasing an interest in a
Deposit or an secured promissory note at a market discount (generally, at a
cost less than its remaining principal amount) that exceeds a statutorily
defined de minimis amount will be subject to the "market discount" rules of
the Code. These rules provide, in part, that gain on the sale or other
disposition (including principal payments and partial redemption) of a debt
instrument with a term of more than one year is treated as ordinary income to
the extent of accrued but unrecognized market discount. The market discount
rules also provide for deferral of interest deductions with respect to debt
incurred to purchase or carry a debt instrument that has market discount. A
U.S. Certificateholder who purchases an interest in a Deposit or an secured
promissory note at a premium may elect to amortize the premium as an offset to
interest income on the Deposit or secured promissory note under rules
prescribed by the Code and Treasury regulations promulgated under the Code.
Each U.S. Certificateholder will be entitled to deduct, consistent with
its method of accounting, its pro rata share of fees and expenses paid or
incurred by the corresponding pass through trust as provided in Section 162 or
212 of the Code. Certain fees and expenses, including fees paid to the
Trustee, the Liquidity Provider and the Policy Provider, will be borne by
parties other than the Certificateholders. It is possible that such fees and
expenses will be treated as constructively received by the pass through trust,
in which event a U.S. Certificateholder will be required to include in income
and will be entitled to deduct its pro rata share of such fees and expenses.
If a U.S. Certificateholder is an individual, estate or trust, the deduction
for such
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holder's share of such fees or expenses will be allowed only to the extent
that all of such holder's miscellaneous itemized deductions, including such
holder's share of such fees and expenses, exceed 2% of such holder's adjusted
gross income. In addition, in the case of U.S. Certificateholders who are
individuals, certain otherwise allowable itemized deductions will be subject
generally to additional limitations on itemized deductions under the
applicable provisions of the Code.
If an original or successor pass through trust is classified as a
partnership (and not as a publicly traded partnership taxable as a
corporation) for U.S. federal income tax purposes, income or loss with respect
to the assets held by the pass through trust will be calculated at the pass
through trust level but the pass through trust itself will not be subject to
U.S. federal income tax. A U.S. Certificateholder would be required to report
its share of the pass through trust's items of income and deduction on its tax
return for its taxable year within which the pass through trust's taxable year
(which should be a calendar year) ends as well as income from its interest in
the relevant Deposits. A U.S. Certificateholder's basis in its interest in the
pass through trust would be equal to its purchase price therefor (including
its share of any funds withdrawn from the Depositary and used to purchase
secured promissory notes), plus its share of the pass through trust's net
income, minus its share of any net losses of the pass through trust, and minus
the amount of any distributions from the pass through trust. In the case of an
original purchaser of a certificate that is a calendar year taxpayer, income
or loss generally should be the same as it would be if the pass through trust
were classified as a grantor trust, except that income or loss would be
reported on an accrual basis even if the U.S. Certificateholder otherwise uses
the cash method of accounting. A subsequent purchaser generally would be
subject to tax on the same basis as an original holder with respect to its
interest in the original or successor pass through trust, but would not be
subject to the market discount rules or the bond premium rules during the
duration of the original or successor pass through trust.
Effect of Subordination of Class C Certificateholders
If the class C pass through trust (such pass through trust being the
"Subordinated Trust" and the related certificates being the "Subordinated
Certificates") receives less than the full amount of the receipts of principal
or interest paid with respect to the secured promissory notes held by it (any
shortfall in such receipts being the "Shortfall Amounts") because of the
subordination of the secured promissory notes held by such pass through trust
under the Intercreditor Agreement, the corresponding owners of beneficial
interests in the Subordinated Certificates (the "Subordinated
Certificateholders") would probably be treated for federal income tax purposes
as if they had (1) received as distributions their full share of such
receipts, (2) paid over to the relevant preferred class of certificateholders
an amount equal to their share of such Shortfall Amount, and (3) retained the
right to reimbursement of such amounts to the extent of future amounts payable
to such Subordinated Certificateholders with respect to such Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest
or other income of the corresponding Subordinated Trust that was a component
of the Shortfall Amount, even though such amount was in fact paid to the
relevant preferred class of certificateholders, (2) a loss would only be
allowed to such Subordinated Certificateholders when their right to receive
reimbursement of such Shortfall Amount became worthless (i.e., when it became
clear that funds will not be available from any source to reimburse such
loss), and (3) reimbursement of such Shortfall Amount prior to such a claim of
worthlessness would not be taxable income to Subordinated Certificateholders
because such amount was previously included in income. These results should
not significantly affect the inclusion of income for Subordinated
Certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to Subordinated Certificateholders on the cash method of
accounting by, in effect, placing them on the accrual method.
Dissolution of Original Pass Through Trusts and Formation of New Pass Through
Trusts
The dissolution of an original pass through trust and distribution of
interests in the related successor pass through trust will not be a taxable
event to U.S. Certificateholders, who will
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continue to be treated as owing their shares of the property transferred from
the original pass through trust to the successor pass through trust. The same
result would apply if the original pass through trust, the successor pass
through trust, or both, were treated as partnerships for U.S. federal income
tax purposes.
Sale or Other Disposition of the Certificates
Upon the sale, exchange or other disposition of a certificate or of a
certificate and an Escrow Receipt, a U.S. Certificateholder generally will
recognize capital gain or loss equal to the difference between the amount
realized on the disposition (other than any amount attributable to accrued
interest or market discount which will be taxable as ordinary income) and the
U.S. Certificateholder's adjusted tax basis in the related Deposits, secured
promissory notes and any other assets held by the corresponding Trust. A U.S.
Certificateholder's adjusted tax basis will equal the holder's cost for its
certificate and Escrow Receipt. Any gain or loss will be capital gain or loss
if the certificate (or the certificate and Escrow Receipt) was held as a
capital asset.
Foreign Certificateholders
Subject to the discussion of backup withholding below, payments of
principal and interest on the Deposits and secured promissory notes to, or on
behalf of, any beneficial owner of a certificate that is not a U.S. Person (a
"Non-U.S. Certificateholder") will not be subject to U.S. federal withholding
tax; provided, in the case of interest on the secured promissory notes, that
(i) such Non-U.S. certificateholder does not actually or constructively own
10% or more of the total combined voting power of all classes of the stock of
Amtran, any Owner Participant or any transferee of any Owner Participant's
interest, (ii) such Non-U.S. certificateholder is not a controlled foreign
corporation for U.S. tax purposes that is related to Amtran, an Owner
Participant or any transferee of any Owner Participant's interest and (iii)
either (A) the Non-U.S. Certificateholder certifies, under penalties of
perjury, that it is not a U.S. Person and provides its name and address or (B)
a securities clearing organization, bank or other financial institution that
holds customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the certificate certifies, under penalties
of perjury, that such statement has been received from the Non-U.S.
Certificateholder by it or by another financial institution and furnishes the
payor with a copy thereof. While Tax Counsel believes that the Deposit Make-
Whole Premium should not be subject to U.S. withholding tax, it is possible
that such withholding tax would apply at a rate of 30% or such lower rate as
provided by an applicable tax treaty.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of an Escrow Receipt or a certificate or upon receipt of premium
paid on an secured promissory note by a Non-U.S. Certificateholder will not be
subject to U.S. federal income or withholding taxes if (i) such gain is not
effectively connected with a U.S. trade or business of the holder and (ii) in
the case of an individual, such holder is not present in the United States for
183 days or more in the taxable year of the sale, exchange, retirement or
other disposition or receipt.
If the Certificateholders were treated as members of a partnership, Tax
Counsel believes that the partnership would not be engaged in a U.S. trade or
business for U.S. federal income tax purposes. As a result, interest payable
to Non-U.S. Certificateholders would be eligible for the exemption from U.S.
federal withholding tax discussed above. However, if the partnership were
considered engaged in a U.S. trade or business, interest and premium payable
to Non-U.S. Certificateholders would be subject to U.S. federal withholding
tax.
Backup Withholding
Payments made on the certificates and proceeds from the sale of
certificates will not be subject to a backup withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting
procedures or otherwise fails to establish an exemption from such tax under
applicable provisions of the Code.
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<PAGE>
DELAWARE TAXES
The pass through trustee is a Delaware banking corporation with its
corporate trust office in Delaware. In the opinion of Richards, Layton &
Finger, counsel to the pass through trustee, under currently applicable law,
assuming that the pass through trusts will not be taxable as corporations,
but, rather, will be classified as grantor trusts under subpart E, Part I of
Subchapter J, Chapter 1, Subtitle A of, or as partnerships under, the Code,
(i) the pass through trusts will not be subject to any tax (including, without
limitation, net or gross income, tangible or intangible property, net worth,
capital, franchise or doing business tax), fee or other governmental charge
under the laws of the State of Delaware or any political subdivision thereof
and (ii) certificateholders that are not residents of or otherwise subject to
tax in Delaware will not be subject to any tax (including, without limitation,
net or gross income, tangible or intangible property, net worth, capital,
franchise or doing business tax), fee or other governmental charge under the
laws of the State of Delaware or any political subdivision thereof as a result
of purchasing, holding (including receiving payments with respect to) or
selling a certificate.
ERISA CONSIDERATIONS
In General
Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain requirements on employee benefit plans
subject to ERISA ("ERISA Plans") and on those persons who are fiduciaries with
respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's
general fiduciary requirements, including the requirement of investment
prudence and diversification and the requirement that an ERISA Plan's
investment be made in accordance with the documents governing the ERISA Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans
that are not subject to ERISA but which are subject to Section 4975 of the
Code, such as individual retirement accounts (together with ERISA Plans,
"Plans")) and certain persons (referred to as "parties in interest" or
"disqualified persons") having certain relationships to such Plans, unless a
statutory or administrative exemption is applicable to the transaction. A
party in interest or disqualified person who engages in a non-exempt
prohibited transaction may be subject to excise taxes and other penalties and
liabilities under ERISA and the Code.
The Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation") describing what constitutes the
assets of a Plan as a result of the Plan's investment in an entity for
purposes of ERISA and Section 4975 of the Code. Under the Plan Asset
Regulation, if a Plan invests in a certificate, the Plan's assets would
include both the certificate and an undivided interest in each of the
underlying assets of the corresponding pass through trust, including the
secured promissory notes held by such pass through trust, unless it is
established that equity participation in the pass through trust by employee
benefit plans (including Plans, certain plans not subject to ERISA or the Code
and entities whose underlying assets include plan assets by reason of an
employee benefit plan's investment in the entity) is not "significant" within
the meaning of the Plan Asset Regulation. In that regard, the extent to which
there is equity participation in a particular pass through trust on the part
of employee benefit plans will not be monitored. If the assets of a pass
through trust were deemed to constitute the assets of a Plan, transactions
involving the assets of such pass through trust could be subject to the
prohibited transaction provisions of ERISA and Section 4975 of the Code unless
a statutory or administrative exemption were applicable to the transaction. In
addition, the pass through trustee could become a fiduciary of a Plan that has
invested in the certificates and there may be an improper delegation by such
Plan to the pass through trustee of the responsibility to manage Plan assets.
However, the duties of the pass through trustee under the pass through trust
are essentially custodial and ministerial in nature and it is not expected
that the pass through trustee will be required to exercise discretion in the
discharge of its responsibilities under the pass
151
<PAGE>
through trust other than in limited circumstances such as upon a default on
the secured promissory notes.
The fiduciary of a Plan that proposes to purchase and hold any
certificates should consider whether, among other things, such purchase and
holding may involve the indirect extension of credit to a party in interest or
a disqualified person. Such a result could arise, for example, if an equity
holder in an Owner Trust (including an equity holder acquiring its interest
after the initial offering of Outstanding Certificates) were a party in
interest or disqualified person with respect to a Plan holding any
certificates. In addition, whether or not the assets of a pass through trust
are deemed to be Plan Assets under the Plan Asset Regulation, if certificates
are purchased by a Plan and certificates of a subordinate class are held by a
party in interest or a disqualified person with respect to such Plan, the
exercise by the holder of the subordinate class of certificates of its right
to purchase the senior classes of certificates upon the occurrence and during
the continuation of a Triggering Event could be considered to constitute a
prohibited transaction unless a statutory or administrative exemption were
applicable.
Depending on the identity of the Plan fiduciary making the decision to
acquire or hold certificates on behalf of a Plan, Prohibited Transaction Class
Exemption ("PTCE") 91-38 (relating to investments by a bank collective
investment fund), PTCE 84-14 (relating to transactions effected by a
"qualified professional asset manager" (a "QPAM")), PTCE 95-60 (relating to
investments by an insurance company general account), PTCE 96-23 (relating to
transactions directed by an in-house professional asset manager (an "INHAM"))
or PTCE 90-1 (relating to investments by an insurance company pooled separate
account) (collectively, the "Class Exemptions") could provide an exemption
from the prohibited transaction provisions of ERISA and Section 4975 of the
Code. There can be no assurance that any of these Class Exemptions or any
other exemption will be available with respect to any particular transaction
involving the certificates, and the conditions of each potentially applicable
Class Exemption must be reviewed by the fiduciary of a Plan in the context of
a proposed investment in a certificate. For example, fiduciaries of Plans
intending to rely upon PTCE 84-14 or PTCE 96-23 should note that these
exemptions may not be available if the person having discretion to appoint the
QPAM or INHAM (for example, the Plan Sponsor or one of its "affiliates", as
defined in PTCE 84-14 or PTCE 96-23, as applicable) is also (a) an owner of
equity in an Owner Trust (including an equity holder acquiring such equity
after the initial offering of certificates) or (b) a provider of services
described in this prospectus.
Governmental plans (as defined in section 3(32) of ERISA) and certain
church plans (as defined in section 3(33) of ERISA), while not subject to the
fiduciary responsibility provisions of ERISA or the provisions of Section 4975
of the Code, may nevertheless be subject to state or other federal laws that
are substantially similar to the foregoing provisions of ERISA and the Code.
Fiduciaries of any such plans should consult with their counsel before
purchasing any certificates.
Any Plan fiduciary that proposes to cause a Plan to purchase any
certificates should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA
and the prohibited transaction provisions of Section 4975 of the Code to such
an investment, and to confirm that such purchase and holding will not
constitute or result in a non-exempt prohibited transaction or any other
violation of an applicable requirement of ERISA.
Class G Certificates
In addition to the Class Exemptions the Department of Labor has issued an
individual administrative exemption to Salomon Smith Barney Inc. (the
"Underwriter Exemption"), which generally exempts from the application of
certain, but not all, of the prohibited transaction provisions of Section 406
of ERISA and Section 4975 of the Code certain transactions relating to the
initial purchase, holding and subsequent secondary market sale of pass-through
certificates which represent an interest in a trust, the assets of which
include qualifying assets, such as promissory notes secured by leases,
provided that certain conditions set forth in the Underwriter
152
<PAGE>
Exemption are satisfied. The Underwriter Exemption might apply to the class G
certificates, but will not apply to the class C certificates.
The Underwriter Exemption sets forth a number of general and specific
conditions which must be satisfied for a transaction involving the initial
purchase, holding or secondary market sale of class G certificates to be
eligible for exemptive relief thereunder. In particular, the acquisition of
class G certificates by a Plan must be on terms that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an unrelated
party, the rights and interests evidenced by the certificates must not be
subordinated to the rights and interests evidenced by other certificates of
the same trust estate; the certificates at the time of acquisition by the Plan
must be rated in one of the three highest generic rating categories by
Moody's, Standard & Poor's, Duff & Phelps Inc. or Fitch Investors Service,
Inc.; and the investing Plan must be an "accredited investor" as defined in
Rule 501(a)(1) of Regulation D of the Commission under the Securities Act.
In addition, the trust corpus generally must be invested in qualifying
receivables, such as the secured promissory notes, but may not in general
include a pre-funding account (except for a limited amount of pre-funding
which is invested in qualifying receivables within a limited period of time
not to exceed three months following the closing).
It is not clear whether the investment restrictions set forth in the
Underwriter Exemption will be satisfied with respect to the original and
successor pass through trusts, and thus no assurance can be given that the
Underwriter Exemption will apply to the class G certificates. The Underwriter
Exemption might apply because an investment in a certificate will evidence
both an interest in the respective Original Trust as well as an interest in
the Deposits held in escrow by an Escrow Agent for the benefit of the
certificateholder. Under the terms of the Escrow Agreement, the proceeds from
the offering of the certificates of each class will be paid over by the
Underwriters to the Depositary on behalf of the Escrow Agent (for the benefit
of such certificateholders as the holders of the Escrow Receipts) and will not
constitute property of the Original Trusts. Under the terms of each Escrow
Agreement, the Escrow Agent will be irrevocably instructed to enter into the
Deposit Agreements with the Depositary and to effect withdrawals upon the
receipt of appropriate notice from the relevant pass through trustee so as to
enable such pass through trustee to purchase the identified secured promissory
notes on the terms and conditions set forth in the Note Purchase Agreement.
Interest on the Deposits relating to each pass through trust will be paid to
the certificateholders of such pass through trust as Receiptholders through a
Paying Agent appointed by the Escrow Agent. Pending satisfaction of such
conditions and withdrawal of such Deposits, the Escrow Agent's rights with
respect to the Deposits will remain plan assets subject to the fiduciary
responsibility and prohibited transaction provisions of ERISA and Section 4975
of the Code.
On the other hand, the Department of Labor might assert that the
Underwriter Exemption is inapplicable because the escrow arrangement is
tantamount to an impermissible pre-funding account.
Even if all of the conditions of the Underwriter Exemption are satisfied
with respect to the class G certificates, no assurance can be given that the
Underwriter Exemption would apply with respect to all transactions involving
the class G certificates or the assets of the class G pass through trust. In
particular, it appears that the Underwriter Exemption would not apply to the
purchase by class C certificateholders of class G certificates in connection
with the exercise of their rights upon the occurrence and during the
continuance of a Triggering Event. Therefore, the fiduciary of a Plan
considering the purchase of a class G certificate should consider the
availability of the exemptive relief provided by the Underwriter Exemption, as
well as the availability of any other exemptions, such as the Class
Exemptions, with respect to transactions to which the Underwriter Exemption
may not apply.
153
<PAGE>
Required Representation
Each person who acquires or accepts a certificate or an interest therein
will be deemed by such acquisition or acceptance to have represented and
warranted that either: (i) no Plan assets have been used to purchase such
certificate or an interest therein or (ii) the purchase and holding of such
certificate or interest therein by the particular Plan will not result in a
non-exempt prohibited transaction because of the applicability of one or more
statutory or administrative prohibited transaction exemptions under ERISA and
the Code (such as a Class Exemption). In addition, each fiduciary of a Plan
purchasing or holding a certificate, or an interest therein, will be deemed,
by virtue of such purchase or holding, to have appointed each person providing
services described herein to their respective positions and to have authorized
and approved each of the transactions described herein.
EACH PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A GOVERNMENTAL OR CHURCH PLAN
SUBJECT TO RULES SIMILAR TO THOSE IMPOSED ON PLANS UNDER ERISA) SHOULD CONSULT
WITH ITS LEGAL ADVISOR CONCERNING AN INVESTMENT IN ANY OF THE CERTIFICATES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account in
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of those Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for the
Outstanding Notes where such Notes were acquired as a result of market-making
activities or other trading activities. We have agreed that, starting on the
date of this Prospectus and ending on the close of business on the earlier to
occur of (i) the date on which all Exchange Notes held by broker-dealers
eligible to use the Prospectus to satisfy their prospectus delivery
obligations under the Securities Act have been sold and (ii) the date 180 days
after the completion of the Exchange Offer, we will make this Prospectus, as
amended or supplemented, available to any broker-dealer that requests such
documents in the Letter of Transmittal for use in connection with any such
resale.
We will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account in the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of those
methods of resale, at market prices prevailing at the time of resale, at
prices related to prevailing market prices or at negotiated prices. Any resale
of this kind may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from the broker-dealer or the purchasers of the Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account in the exchange offer and any broker or dealer that participates in a
distribution of these Exchange Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on the resale of
Exchange Notes and any commission or concessions received by any persons may
be deemed to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that, by acknowledging that it will deliver and by
delivering a Prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the certificates offered hereby and the related Guarantee
will be passed upon for ATA and Amtran by Troutman Sanders LLP, Atlanta,
Georgia. Certain federal income tax matters with respect to the pass through
trusts and certificateholders will be passed upon by Cravath, Swaine & Moore,
special tax counsel to ATA and Amtran. William P. Rogers, Jr., a partner at
Cravath, Swaine & Moore, is a director of Amtran, and beneficially owns 4,500
shares
154
<PAGE>
of common stock of Amtran and options to purchase 4,000 shares of such common
stock. From time to time, Milbank, Tweed, Hadley & McCloy LLP renders legal
services to Citibank, N.A. and its affiliates and is acting as Citibank,
N.A.'s counsel in connection with the Liquidity Facilities to be executed and
delivered by Citibank, N.A.
EXPERTS
The consolidated financial statements of Amtran, Inc. at December 31,
1999 and 1998, and for each of the three years in the period ended December 31,
1999, appearing in and also incorporated by reference, in this prospectus and
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere and
incorporated by reference herein, and are included in reliance upon such report
given on the authority of such firm experts in accounting and auditing.
The consolidated financial statements of Ambac Assurance Corporation
Inc. and its subsidiaries as of December 31, 1999 and December 31, 1998 and
for each of the years in the three-year period ended December 31, 1999, are
incorporated by reference in this prospectus, in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by
reference in this prospectus, and upon the authority of said firm as
experts in accounting and auditing.
The references to AISI, MBA and SH&E, and to their respective appraisal
reports, dated as of December 31, 1999 in the case of AISI, January 18, 2000
in the case of MBA and January 28, 2000 in the case of SH&E, are included
herein in reliance upon the authority of each such firm as an expert with
respect to the matters contained in its appraisal report.
155
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Audited Financial Statements:
Report of Independent Auditors....................................... F-2
Consolidated Balance Sheets at December 31, 1999 and 1998............ F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1999, 1998 and 1997............................. F-4
Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended December 31, 1999, 1998 and 1997........ F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997................................... F-6
Notes to Consolidated Financial Statements........................... F-7
Unaudited Consolidated Financial Statements:
Consolidated balance sheets at March 31, 1999 and 2000............... F-20
Consolidated statements of operations for the
three-month periods ended March 31,1999 and 2000................... F-21
Consolidated statements of cash flows for the
three-month periods ended March 31, 1999 and 2000.................. F-22
Notes to consolidated financial statements........................... F-23
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Amtran, Inc.
We have audited the accompanying consolidated balance sheets of Amtran,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Amtran, Inc. and subsidiaries at December 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/S/ ERNST & YOUNG LLP
Indianapolis, Indiana
January 27, 2000
F-2
<PAGE>
<TABLE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 172,936 $ 120,164
Receivables, net of allowance for doubtful accounts
(1999 - $1,511; 1998 - $1,163)............................. 24,921 52,099
Inventories, net........................................... 19,567 36,686
Prepaid expenses and other current assets.................. 25,604 22,945
---------- ----------
Total current assets.......................................... 243,028 231,894
Property and equipment:
Flight equipment........................................... 557,302 781,171
Facilities and ground equipment............................ 68,848 92,060
---------- ----------
626,150 873,231
Accumulated depreciation................................... (296,818) (361,399)
---------- ----------
329,332 511,832
Assets held for sale.......................................... 7,176 --
Goodwill...................................................... -- 23,453
Deposits and other assets..................................... 15,013 48,102
---------- ----------
Total assets $ 594,549 $ 815,281
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt....................... $ 1,476 $ 2,079
Accounts payable........................................... 7,158 20,234
Air traffic liabilities.................................... 76,662 93,507
Accrued expenses........................................... 98,548 126,180
---------- ----------
Total current liabilities............................... 183,844 242,000
Long-term debt, less current maturities....................... 245,195 345,792
Deferred income taxes......................................... 52,620 58,493
Other deferred items.......................................... 10,139 17,620
Commitments and contingencies
Shareholders' equity:
Preferred stock; authorized 10,000,000 shares;
none issued............................................. -- --
Common stock, without par value; authorized 30,000,000
shares; issued 12,884,306 - 1999; 12,374,577 - 1998..... 47,632 55,826
Treasury stock; 612,052 shares - 1999;
193,506 shares - 1998................................... (1,881) (10,500)
Additional paid-in-capital................................. 11,735 12,910
Retained earnings.......................................... 46,331 93,673
Deferred compensation - ESOP............................... (1,066) (533)
---------- ----------
102,751 151,376
---------- ----------
Total liabilities and shareholders' equity.................... $ 594,549 $ 815,281
========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues:
Scheduled service............................ $ 371,762 $ 511,254 $ 624,647
Charter...................................... 359,177 344,482 389,979
Ground package............................... 22,317 23,186 58,173
Other........................................ 29,937 40,447 49,567
----------- ----------- -----------
Total operating revenues........................ 783,193 919,369 1,122,366
=========== =========== ===========
Operating expenses:
Salaries, wages and benefits................. 172,499 211,304 252,595
Fuel and oil................................. 153,701 137,401 170,916
Depreciation and amortization................ 62,468 78,665 96,038
Handling, landing and navigation fees........ 69,383 74,640 89,302
Aircraft rentals............................. 54,441 53,128 58,653
Aircraft maintenance, materials and repairs.. 51,465 53,655 55,645
Crew and other employee travel............... 36,596 `41,565 49,707
Ground package cost.......................... 19,230 19,466 49,032
Passenger service............................ 32,812 34,031 39,231
Commissions.................................. 26,102 28,483 39,050
Other selling expenses....................... 15,462 22,147 28,099
Advertising.................................. 12,658 17,772 18,597
Facilities and other rentals................. 8,557 9,536 13,318
Other........................................ 54,335 62,203 72,156
----------- ----------- -----------
Total operating expenses........................ 769,709 843,996 1,032,339
=========== =========== ===========
Operating income................................ 13,484 75,373 90,027
Other income (expense):
Interest income.............................. 1,584 4,433 5,375
Interest expense............................. (9,454) (12,808) (20,966)
Other........................................ 413 212 3,361
----------- ----------- -----------
Other expenses.................................. (7,457) (8,163) (12,230)
----------- ----------- -----------
Income before income taxes...................... 6,027 67,210 77,797
Income taxes.................................... 4,455 27,129 30,455
----------- ----------- -----------
Net income...................................... $ 1,572 $ 40,081 $ 47,342
=========== =========== ===========
Basic earnings per common share:
Average shares outstanding...................... 11,577,727 11,739,106 12,269,474
Net income per share............................ $ 0.14 $ 3.41 $ 3.86
=========== =========== ===========
Diluted earnings per common share:
Average shares outstanding...................... 11,673,330 13,066,222 13,469,537
Net income per share............................ $ 0.13 $ 3.07 $ 3.51
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Additional Deferred
Common Treasury Paid-in Retained Compensation
Stock Stock Capital Earnings ESOP
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996........... $ 38,341 $ (1,760) $ 15,618 $ 4,678 $ (2,133)
Net income........................ -- -- -- 1,572 --
Issuance of common stock for ESOP. -- -- (214) -- 533
Restricted stock grants........... 419 -- (185) -- --
Executive stock options expired... -- -- 121 -- --
--------- --------- --------- --------- --------
Balance, December 31, 1997........... 38,760 (1,760) 15,340 6,250 (1,600)
Net income........................ -- -- -- 40,081 --
Issuance of common stock for ESOP. -- -- (257) -- 534
Restricted stock grants........... 147 -- (66) -- --
Stock options exercised........... 8,725 -- (4,089) -- --
Purchase of 8,506 shares of
treasury stock.................. -- (121) -- -- --
Disqualifying disposition of stock -- -- 807 -- --
--------- --------- -------- --------- --------
Balance, December 31, 1998........... 47,632 (1,881) 11,735 46,331 (1,066)
Net income........................ -- -- -- 47,342 --
Issuance of common stock for ESOP. -- -- 37 -- 533
Restricted stock grants........... 32 -- (10) -- --
Stock options exercised........... 6,897 -- (3,207) -- --
Purchase of 418,546 shares of --
treasury stock.................. -- (8,619) -- --
Disqualifying disposition of stock -- -- 3,887 -- --
Acquisition of businesses......... 1,265 -- 468 -- --
--------- --------- -------- --------- --------
Balance, December 31, 1999........... $ 55,826 $ (10,500) $ 12,910 $ 93,673 $ (533)
========= ========= ======== ========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
<TABLE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
-----------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Operating activities:
Net income............................................. $ 1,572 $ 40,081 $ 47,342
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 62,468 78,665 96,038
Deferred income taxes............................... 11,244 21,160 5,873
Other non-cash items................................ (666) 1,708 14,463
Changes in operating assets and liabilities:
Receivables......................................... (3,027) (1,655) (21,197)
Inventories......................................... (1,637) (4,356) (18,746)
Assets held for sale................................ 5,356 -- --
Prepaid expenses.................................... (6,321) (4,712) 7,484
Accounts payable.................................... (3,160) (3,353) 10,684
Air traffic liabilities............................. 18,655 8,108 (2,465)
Accrued expenses.................................... 15,452 16,166 20,087
--------- --------- ---------
Net cash provided by operating activities........... 99,936 151,812 159,563
--------- --------- ---------
Investing activities:
Proceeds from sales of property and equipment.......... 8,005 37,061 264
Capital expenditures................................... (84,233) (175,417) (274,300)
Acquisition of businesses, net of cash acquired........ -- -- 16,673
Reductions of (additions to) other assets.............. 173 (3,996) (48,355)
--------- --------- ---------
Net cash used in investing activities............... (76,055) (142,352) (305,718)
Financing activities:
Payments on short-term debt............................ -- (4,750) --
Proceeds from long-term debt........................... 134,000 131,000 99,902
Payments on long-term debt............................. (127,067) (71,485) (1,590)
Proceeds from stock option exercises................... -- 4,636 3,690
Purchase of treasury stock............................. -- (121) (8,619)
--------- --------- ---------
Net cash provided by financing activities........... 6,933 59,280 93,383
--------- --------- ---------
Increase (decrease) in cash and cash equivalents....... 30,814 68,740 (52,772)
Cash and cash equivalents, beginning of period......... 73,382 104,196 172,936
--------- --------- ---------
Cash and cash equivalents, end of period............... $ 104,196 $ 172,936 $ 120,164
========= ========= =========
Supplemental disclosures:
Cash payments for:
Interest............................................ $ 6,197 $ 14,685 $ 24,411
Income taxes (refunds).............................. (311) 7,897 11,910
Financing and investing activities not affecting cash:
Issuance of long-term debt directly for capital
expenditures..................................... $ 30,650 $ -- $ 2,416
Issuance of short-term debt directly for capital
expenditures..................................... 4,750 -- 313
</TABLE>
See accompanying notes.
F-6
<PAGE>
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Basis of Presentation and Business Description
The consolidated financial statements include the accounts of
Amtran, Inc. (the "Company") and its wholly owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
The Company operates principally in one business segment through
American Trans Air, Inc. ("ATA"), its principal subsidiary, which
accounts for approximately 90% of the Company's operating revenues. ATA
is a U.S.-certificated air carrier providing domestic and international
charter and scheduled passenger air services.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
Cash Equivalents
Cash equivalents are carried at cost and are primarily comprised of
investments in U.S. Treasury bills, commercial paper and time deposits
which are purchased with original maturities of three months or less (see
Note 2).
Assets Held For Sale
Assets held for sale are carried at the lower of net book value or
estimated net realizable value.
Inventories
Inventories consist primarily of expendable aircraft spare parts,
fuel and other supplies. Aircraft parts inventories are stated at cost
and are reduced by an allowance for obsolescence. The obsolescence
allowance is provided by amortizing the cost of the aircraft parts
inventory, net of an estimated residual value, over its estimated useful
service life. The obsolescence allowance at December 31, 1999 and 1998,
was $10.3 million and $8.4 million, respectively. Inventories are charged
to expense when consumed.
Revenue Recognition
Revenues are recognized when the transportation is provided.
Customer flight deposits and unused passenger tickets sold are included
in air traffic liability. As is customary within the industry, the
Company performs periodic evaluations of this estimated liability, and
any adjustments resulting therefrom, which can be significant, are
included in the results of operations for the periods in which the
evaluations are completed.
Passenger Traffic Commissions
Passenger traffic commissions are recognized as expense when the
transportation is provided and the related revenue is recognized. The
amount of passenger traffic commissions paid but not yet recognized as
expense is included in prepaid expenses and other current assets in the
accompanying consolidated balance sheets.
F-7
<PAGE>
Property and Equipment
Property and equipment is recorded at cost and is depreciated to
residual value over its estimated useful service life using the
straight-line method. Advanced payments for future aircraft purchases are
recorded at cost. As of December 31, 1999 and 1998, the Company had made
advanced payments for future aircraft deliveries totaling $20.4 million
and $13.0 million, respectively. The estimated useful service lives for
the principal depreciable asset classifications are as follows:
Asset Estimated Useful Service Life
Aircraft and related equipment:
Lockheed L-1011 (Series 50 and 100) Depreciating to common retirement date of
December 2004 (see Note 11)
Lockheed L-1011 (Series 500) Depreciating to common retirement date of
December 2010
Boeing 727-200 Depreciating to common retirement date of
December 2008 (see Note 11)
Boeing 727-200 20 years
Major rotable parts, avionics and Life of equipment to which applicable
assemblies (Generally from 6-16 years)
Improvements to leased flight
equipment Period of benefit or term of lease
Other property and equipment 3 - 7 years
The costs of major airframe and engine overhauls are capitalized and
amortized over their estimated useful lives based upon usage (or to
earlier fleet common retirement dates) for both owned and leased
aircraft.
Intangible Assets
Goodwill, which represents the excess of cost over fair value of net
assets acquired, is amortized on a straight-line basis over 20 years. The
Company periodically reviews the carrying amounts of intangible assets to
assess their continued recoverability in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of". The Company's policy is to record an impairment loss in the
period when it is determined that the carrying amount of the asset may
not be recoverable.
Financial Instruments
The carrying amounts of cash equivalents, receivables and both
variable-rate and fixed-rate debt (see Note 4) approximate fair value.
The fair value of fixed-rate debt, including current maturities, is
estimated using discounted cash flow analysis based on the Company's
current incremental rates for similar types of borrowing arrangements.
During 1998, the Company began entering into fuel hedge contracts to
reduce the risk of fuel price increases. The Company hedged fuel
consumption under both swap agreements, which establish specific swap
prices for designated periods, and fuel cap agreements, which guarantee a
maximum price per gallon for designated periods. When the market fuel
price remains below that established in hedge contracts, the Company
records the cost of the fuel
F-8
<PAGE>
hedge contract as a component of fuel expense in the period the fuel is
consumed. There were no significant fuel hedges during 1999.
2. Cash and Cash Equivalents
Cash and cash equivalents consist of the following:
December 31,
--------------------------
1998 1999
---------- ----------
(In thousands)
Cash.................................... $ 7,389 $ 19,831
Commercial paper........................ 161,285 99,948
U.S. Treasury repurchase agreements..... 4,262 385
---------- ----------
$ 172,936 $ 120,164
========== ==========
3. Property and Equipment
The Company's property and equipment consist of the following:
December 31,
--------------------------
1998 1999
---------- ----------
(In thousands)
Flight equipment, including airframes,
engines and other....................... $ 557,302 $ 781,171
Less accumulated depreciation........... 258,025 313,090
---------- ----------
299,277 468,081
---------- ----------
Facilities and ground equipment......... 68,848 92,060
Less accumulated depreciation........... 38,793 48,309
---------- ----------
30,055 43,751
---------- ----------
$ 329,332 $ 511,832
========== ==========
4. Long-Term Debt
Long-term debt consists of the following:
December 31,
--------------------------
1998 1999
---------- ----------
(In thousands)
Unsecured Senior Notes, fixed rate of
10.5%, payable in August 2004........... $ 100,000 $ 175,000
Unsecured Senior Notes, fixed rate of
9.625%, payable in December 2005........ 125,000 125,000
City of Chicago variable-rate special
facility revenue bonds, payable in
January 2029............................ -- 16,960
City of Indianapolis advance, payable
in June 2001............................ 10,000 10,000
Note payable to institutional lender;
fixed rate of 8.30% payable in varying
installments through June 2014.......... -- 7,886
City of Chicago variable-rate special
facility revenue bonds, payable in
December 2020........................... 6,000 6,000
F-9
<PAGE>
December 31,
--------------------------
1998 1999
---------- ----------
(In thousands)
Other................................... 5,671 7,025
---------- ----------
246,671 347,871
Less current maturities................. 1,476 2,079
---------- ----------
$ 245,195 $ 345,792
========== ==========
In December 1999, the Company issued $17.0 million in variable-rate
special facility revenue bonds through the City of Chicago. Interest on
the bonds is payable on the first of every month, and the principal is
due on January 1, 2029. Net proceeds from the bonds will be used to
finance costs related to designing, constructing, equipping and
installing a Federal Inspection Service facility at Chicago-Midway
Airport.
In June 1999, the Company obtained an $8.0 million, 15-year mortgage
loan on the new Maintenance and Operations Center. The construction of
the 120,000 square foot facility was completed in the second quarter of
1999.
In December 1998, the Company sold $125.0 million principal amount
of unsecured senior notes. Interest is payable on June 15 and December 15
of each year. The Company may redeem the notes, in whole or in part, at
anytime on or after June 15, 2003, initially at 104.81% of their
principal amount plus accrued interest, declining to 102.41% of their
principal amount plus accrued interest on June 15, 2004, then to 100.0%
of their principal amount plus accrued interest at maturity. At any time
prior to June 15, 2001, the Company may redeem up to 35.0% of the
principal amount of the notes with the proceeds of one or more sales of
its common stock, at a redemption price of 109.625% of their principal
amount plus accrued interest, provided that at least $81.25 million
aggregate principal amount of the notes remains outstanding after such
redemption.
The net proceeds of the $125.0 million unsecured notes were
approximately$121.0 million after deducting costs and fees of issuance.
The Company has used the net proceeds for the purchase of Lockheed
L-1011-500 aircraft, engines and spare parts, and, together with
available cash and bank facility borrowings, for the purchase of Boeing
727-200ADV aircraft, engines, engine hushkits and spare parts.
In July 1997, the Company sold $100.0 million principal amount of
unsecured senior notes. The Company sold an additional $75.0 million
principal amount of these notes in December 1999. Interest is payable on
February 1 and August 1 of each year. The Company may redeem the notes,
in whole or in part, at any time on or after August 1, 2002, initially at
105.25% of their principal amount plus accrued interest, declining
ratably to 100.0% of their principal amount plus accrued interest at
maturity. At any time prior to August 1, 2000, the Company may redeem up
to 35.0% of the original aggregate principal amount of the notes with the
proceeds of sales of common stock, at a redemption price of 110.5% of
their principal amount plus accrued interest, provided that at least
$113.8 million in aggregate principal amount of the notes remains
outstanding after such redemption. The net proceeds of the $100.0 million
unsecured notes issued in 1997 were approximately $96.9 million, after
deducting costs and fees of issuance. The Company used a portion of the
net proceeds to repay in full the Company's prior bank facility and used
the balance of the proceeds for general corporate purposes. The net
proceeds of the $75.0 million unsecured notes issued in 1999 were
approximately $73.0 million after deducting costs and fees of issuance.
The Company plans to use the net proceeds for general business purposes.
In 1998, the Company maintained a $5.0 million revolving credit
facility available for its short-term borrowing needs and for issuance
of letters of credit. The credit facility was available until January
1999 and was collateralized by certain aircraft engines. At December
31, 1998, the Company had outstanding letters of credit aggregating
$3.8 million under such facility. This facility was terminated in
January 1999.
F-10
<PAGE>
In January 1999, the Company revised its 1998 revolving bank credit
facility to provide a maximum of $75.0 million, including up to $25.0
million for stand-by letters of credit, as compared to a maximum of $50.0
million, including up to $25.0 million for stand-by letters of credit in
1998. ATA is the borrower under the credit facility, which is guaranteed
by the Company and each of the Company's other active subsidiaries. The
principal amount of the facility matures on January 2, 2003, and
borrowings are secured by certain Boeing 727-200 aircraft and certain
Lockheed L-1011-50 and L-1011-100 aircraft and engines. As of December
31,1999, the borrowing base was 75% of the total Boeing 727-200 aircraft
value and 63% of the total Lockheed L-1011-50 and L-1011-100 aircraft and
engine values. Borrowings under the facility bear interest, at the option
of ATA, at either LIBOR plus 1.25% to 2.5% or the agent bank's prime
rate.
In December 1999, the Company revised the revolving bank credit
facility to provide a maximum of $100.0 million, including up to $50.0
million for stand-by letters of credit. The terms and conditions remained
substantially the same, and the new facility is subject to similar
restrictive covenants as were effective under the prior facility.
The unsecured notes and credit facilities are subject to restrictive
covenants, including, among other things, limitations on: the incurrence
of additional indebtedness; the payment of dividends; certain
transactions with shareholders and affiliates; and the creation of liens
on or other transactions involving certain assets. In addition, certain
covenants require certain financial ratios to be maintained.
Future maturities of long-term debt are as follows:
December 31, 1999
-----------------
(In thousands)
2000................................... $ 2,079
2001................................... 12,025
2002................................... 1,894
2003................................... 1,371
2004................................... 176,191
Thereafter............................. 154,311
----------
$ 347,871
==========
Interest capitalized in connection with long-term asset purchase
agreements and construction projects was $3.9 million and $2.0 million,
respectively, in 1999 and 1998.
5. Lease Commitments
At December 31, 1999, the Company had aircraft leases on one
Lockheed L-1011-100, 14 Boeing 727-200s and 11 Boeing 757-200s. The
Lockheed L-1011-100 has an initial term of 60 months which expires in
2003. The Boeing 757-200s have initial lease terms which expire from 2001
through 2019. The Boeing 727-200s have initial lease terms of three to
seven years and expire between 2000 and 2003. The Company also leases
three engines for use on the Lockheed L-1011-500s and four engines for
use on the Boeing 757-200s. The L-1011-500 engine leases expire in 2006
and the 757-200 leases expire from 2008 through 2011. All aircraft leases
are accounted for as operating leases.
The Company is responsible for all maintenance costs on these
aircraft and engines and must meet specified airframe and engine return
conditions.
As of December 31, 1999, the Company had other long-term leases
related to certain ground facilities, including terminal space and
maintenance facilities, with lease terms that vary from 1.5 to 32
years and expire at various dates through 2028. The lease agreements
relating to the ground facilities, which are primarily owned by
governmental units or authorities, generally do not provide for
transfer of ownership nor do they contain options to purchase.
F-11
<PAGE>
The Company leases its headquarters facility from the City of
Indianapolis under a capital lease agreement which expires in December
2002. The agreement has an option to extend for two years. The Company is
responsible for maintenance, taxes, insurance and other expenses
incidental to the operation of the facilities.
Future minimum lease payments at December 31, 1999, for
noncancelable operating leases with initial terms of more than one year
are as follows:
Facilities
Flight and Ground
Equipment Equipment Total
------------ ----------- ---------
(In thousands)
2000.................... $ 63,621 $ 7,915 $ 71,536
2001.................... 59,423 5,966 65,389
2002.................... 51,187 6,056 57,243
2003.................... 45,457 4,848 50,305
2004.................... 44,594 6,629 51,223
Thereafter.............. 429,847 32,610 462,457
----------- --------- ----------
$ 694,129 $ 64,024 $ 758,153
=========== ========= ==========
Rental expense for all operating leases in 1999, 1998 and 1997 was
$72.0 million, $62.7 million and $63.0 million, respectively.
6. Income Taxes
The provision for income tax expense consisted of the following:
December 31,
-------------------------------------------
1997 1998 1999
--------- -------- ----------
(In thousands)
Federal:
Current................ $ 173 $ 6,403 $ 15,339
Deferred............... 3,706 18,102 10,889
--------- -------- ----------
3,879 24,505 26,228
State:
Current................ 163 686 1,284
Deferred............... 413 1,938 2,943
--------- -------- ----------
576 2,624 4,227
--------- -------- ----------
Income tax expense........ $ 4,455 $ 27,129 $ 30,455
========= ======== ==========
The provision for income taxes differed from the amount obtained by
applying the statutory federal income tax rate to income before income
taxes as follows:
December 31,
-------------------------------------------
1997 1998 1999
--------- -------- ----------
(In thousands)
Federal income taxes at
statutory rate............ $ 2,049 $23,523 $27,175
State income taxes, net
of federal benefit........ 367 1,711 1,997
Non-deductible expenses.... 1,947 1,234 1,578
Other, net................. 92 661 (295)
-------- ------- -------
Income tax expense......... $ 4,455 $27,129 $30,455
======== ======= =======
F-12
<PAGE>
Deferred income taxes arise from temporary differences between the
tax basis of assets and liabilities and their reported amounts in the
financial statements. The principal temporary differences relate to the
use of accelerated methods of depreciation and amortization for tax
purposes. Deferred tax liability and asset components are as follows:
December 31,
----------------------
1998 1999
------- --------
(In thousands)
Deferred tax liabilities:
Tax depreciation in excess of book
depreciation......................... $76,560 $84,505
Other taxable temporary differences... 502 474
------- -------
Deferred tax liabilities............. 77,062 84,979
------- -------
Deferred tax assets:
Tax benefit of net operating loss
carryforwards........................ 18,102 270
Alternative minimum tax and other
tax credit carryforwards............ 8,726 18,611
Vacation pay accrual.................. 3,225 3,839
Amortization of lease credits......... 1,964 1,897
Deferred gain on sale of fixed
assets............................... 966 3,411
Other deductible temporary
differences.......................... 2,336 2,565
------- -------
Deferred tax assets................. 35,319 30,593
------- -------
Deferred taxes classified as:
Current asset....................... $10,877 $ 4,107
======= =======
Non-current liability............... $52,620 $58,493
======= =======
At December 31, 1999, for federal tax reporting purposes, the Company
had approximately $0.7 million of net operating loss carry forward
available to offset future federal taxable income and $18.6 million of
alternative minimum tax and other tax credit carryforwards available to
offset future federal tax liabilities. The net operating loss carry
forward of $0.7 million expires in 2009. The alternative minimum tax and
other tax credit carryforwards of $18.6 million have no expiration dates.
7. Retirement Plan
The Company has a defined contribution 401(k) savings plan which
provides for participation by substantially all the Company's
employees who have completed one year of service. The Company has
elected to contribute an amount equal to 45.0% in 1999, 40.0% in 1998,
and 35.0% in 1997, of the amount contributed by each participant up to
the first six percent of eligible compensation. Company matching
contributions expensed in 1999, 1998 and 1997 were $3.1 million, $2.3
million and $1.8 million, respectively.
In 1993, the Company added an Employee Stock Ownership Plan
("ESOP")feature to its existing 401(k) savings plan. The ESOP used the
proceeds of a $3.2 million loan from the Company to purchase 200,000
shares of the Company's common stock. The selling shareholder was the
Company's principal shareholder. The Company recognized $0.7 million,
$0.7 million and $0.3 million in 1999, 1998 and 1997, respectively, as
compensation expense related to the ESOP. Shares of common stock held by
the ESOP are allocated to participating employees annually as part of the
Company's 401(k) savings plan contribution. The fair value of the shares
allocated during the year is recognized as compensation expense.
F-13
<PAGE>
8. Shareholders' Equity
In the first quarter of 1994, the Board of Directors approved the
repurchase of up to 250,000 shares of the Company's common stock. In the
second quarter of 1999, the Board of Directors approved the repurchase of
up to 600,000 additional shares of the Company's common stock. A total of
612,052 shares had been repurchased at a cost of $10.5 million as of
December 31, 1999.
The Company's 1993 Incentive Stock Plan for Key Employees (1993
Plan)authorizes the grant of options for up to 900,000 shares of the
Company's common stock. The Company's 1996 Incentive Stock Plan for Key
Employees(1996 Plan) authorizes the grant of options for up to 3,000,000
shares of the Company's common stock. Options granted have 5 to 10-year
terms and generally vest and become fully exercisable over specified
periods of up to three years of continued employment.
A summary of common stock option changes follows:
Weighted-
Number of Average
Shares Exercise Price
--------- --------------
Outstanding at December 31, 1996........... 1,629,900 $ 8.74
--------- -------
Granted................................ 1,588,500 8.49
Canceled............................... (706,000) 7.14
--------- -------
Outstanding at December 31, 1997........... 2,512,400 9.39
--------- -------
Granted................................ 560,900 9.67
Exercised.............................. (545,347) 8.50
Canceled............................... (157,700) 9.08
--------- -------
Outstanding at December 31, 1998........... 2,370,253 9.38
--------- -------
Granted................................ 582,510 26.33
Exercised.............................. (431,075) 8.56
Canceled............................... (28,528) 15.02
---------- -------
Outstanding at December 31, 1999........... 2,493,160 $ 13.41
========= =======
Options exercisable at December 31, 1998... 755,075 $ 10.13
========= =======
Options exercisable at December 31, 1999... 1,077,554 $ 10.04
========= =======
During 1996, the Company adopted the disclosure provisions of
FASB Statement No. 123 "Accounting for Stock-Based Compensation" (SFAS
No. 123) with respect to its stock options. As permitted by SFAS No.
123, the Company has elected to continue to account for employee stock
options following Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
The weighted-average fair value of options granted during 1999 and
1998 is estimated at $9.67 and $5.12 per share, respectively, on the
grant date. These estimates were made using the Black-Scholes option
pricing model with the following weighted-average assumptions for 1999
and 1998: risk-free interest rate of 6.29% and 5.0%; expected market
price volatility of 0.46 and 0.44; weighted-average expected option life
equal to the contractual term; estimated forfeitures of 5.6% and 5.0%;
and no dividends.
F-14
<PAGE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models use highly subjective assumptions, including the expected stock
price volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of
its employees' stock options. For purposes of pro forma disclosure, the
estimated fair value of the options is amortized to expense over the
options' vesting period (1 to 3 years). The Company's pro forma
information follows:
1997 1998 1999
-------- -------- --------
(In thousands, except per share data)
Net income as reported................ $ 1,572 $ 40,081 $ 47,342
Net income pro forma.................. 89 37,209 41,740
Diluted income per share as reported.. 0.13 3.07 3.51
Diluted income per share pro forma.... 0.01 2.85 3.10
Options outstanding at December 31, 1999, expire from August 2003 to
August 2009. A total of 407,453 shares are reserved for future grants as
of December 31, 1999, under the 1993 and 1996 Plans. The following table
summarizes information concerning outstanding and exercisable options at
December 31, 1999:
Range of Exercise Prices $7 - 14 $15 - 27
------------------------ ------- --------
Options outstanding:
Weighted-Average Remaining Contractual Life.... 7.3 years 8.0 years
Weighted-Average Exercise Price................ $8.96 $24.25
Number......................................... 1,766,650 726,510
Options exercisable:
Weighted-Average Exercise Price................ $9.10 $16.26
Number......................................... 936,954 140,600
9. Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Numerator:
Net income..................................... $ 1,572,000 $40,081,000 $47,342,000
Denominator:
Denominator for basic earnings per share -
weighted average shares...................... 11,577,727 11,739,106 12,269,474
Effect of dilutive securities:
Employee stock options....................... 64,725 1,327,116 1,200,063
Restricted shares............................ 30,878 -- --
----------- ----------- -----------
Dilutive potential common shares............... 95,603 1,327,116 1,200,063
----------- ----------- -----------
Denominator for diluted earnings per share
- adjusted weighted average shares........... 11,673,330 13,066,222 13,469,537
=========== =========== ===========
Basic earnings per share....................... $ 0.14 $ 3.41 $ 3.86
=========== =========== ===========
Diluted earnings per share..................... $ 0.13 $ 3.07 $ 3.51
=========== =========== ===========
</TABLE>
10. Commitments and Contingencies
In November 1994, the Company signed a purchase agreement for six
new Boeing 757-200s, which, as subsequently amended, now provides for the
delivery of 13 total aircraft.
F-15
<PAGE>
The amended agreement provides for deliveries of aircraft between 1995
and 2000. As of December 31, 1999, the Company had taken delivery of nine
Boeing 757-200s under this purchase agreement and financed those aircraft
using leases accounted for as operating leases. Two deliveries under this
agreement are scheduled for June 2000, and two deliveries are scheduled
for November 2000. The remaining aircraft have an aggregate purchase
price of approximately $50.0 million per aircraft, subject to escalation.
Advanced payments totaling approximately $27.2 million ($6.8 million per
aircraft) are required to be made for the remaining undelivered aircraft,
with the balance of the purchase price due upon delivery. As of December
31, 1999 and 1998, the Company had made $20.4 million and $13.0 million
in advanced payments, respectively, pertaining to future aircraft
deliveries.
The Company has signed a purchase agreement to acquire six of the
Boeing 727-200 ADV aircraft that are currently leased. These aircraft
will be purchased in 2000.
Various claims, contractual disputes and lawsuits against the
Company arise periodically involving complaints which are normal and
reasonably foreseeable in light of the nature of the Company's business.
The majority of these suits are covered by insurance. In the opinion of
management, the resolution of these claims will not have a material
adverse effect on the business, operating results or financial condition
of the Company.
11. Change in Accounting Estimate
In July 1998, the Company committed to the purchase of five Lockheed
L-1011 series 500 aircraft for delivery between August 1998 and November
1999. The Company already operates 14 Lockheed L-1011 series 50 and
series 100 aircraft, 13 of which are owned and one of which is leased.
The purchase agreement has expanded the size of the Lockheed L-1011 fleet
from 14 to 19 aircraft.
As a result of this fleet expansion, the Company expects to operate
its existing fleet of Lockheed L-1011 series 50 and series 100 aircraft
through December 2004, as opposed to previous retirement dates which had
ranged from 2000 to 2002. The Company implemented this change in
accounting estimate effective July 1, 1998, which, in addition to
extending the estimated useful lives of the 13 owned aircraft and related
engines, overhauls and spare parts, also reduced the estimated salvage
value for these aircraft as of the common retirement date of December
2004.
This change in accounting estimate resulted in a reduction of $4.1
million and $2.1 million, respectively, in depreciation and amortization
expense for the years ended December 31, 1999 and 1998, and resulted in
an increase in net income of $2.5 and $1.2 million in the same periods.
Basic and diluted earnings per share for the year ended December 31,
1999, were increased by $0.20 and $0.19, respectively, while basic and
diluted earnings per share for the year ended December 31, 1998, were
increased by $0.10 and $0.09, respectively.
In the first quarter of 1999, the Company purchased eight Boeing
727-200 aircraft which had previously been financed through leases
accounted for as operating leases. As of the first quarter of 1999, the
Company had also completed the renegotiation of certain contract terms
on its remaining 15 leased Boeing 727-200 aircraft which generally
provided for the purchase of these aircraft at the end of their initial
lease terms, extending from 1999 to 2003. The Company complied with
federal Stage 3 noise regulations by installing hushkits on its entire
fleet of 24 Boeing 727-200 aircraft, which permits the Company to operate
these aircraft after that date.
In the first quarter of 1999, the Company implemented a change in
accounting estimate to extend the estimated useful lives of capitalized
Boeing 727-200 airframes, engines, leasehold improvements and rotable
parts from the end of the initial lease terms of the related aircraft to
approximately 2008. This change in accounting estimate resulted in a
reduction of depreciation expense of $4.6 million for the year ended
December 31, 1999, which resulted
F-16
<PAGE>
in an increase in net income of $2.8 million in 1999. Basic and diluted
earnings per share for the year ended December 31, 1999 were increased by
$0.23 and $0.21, respectively.
12. Acquisition of Businesses
On January 26, 1999, the Company acquired all of the issued and
outstanding stock of T. G. Shown Associates, Inc., which owns 50% of the
Amber Air Freight partnership. The other 50% of the partnership was
already owned by the Company.
On January 31, 1999, the Company purchased the membership interests
of Travel Charter International, LLC ("TCI"), a Detroit-based independent
tour operator. ATA has been providing passenger airline services to TCI
for over 14 years. TCI's results of operations, beginning February 1999,
were consolidated into the Company.
On April 30, 1999, the Company acquired all of the issued and
outstanding stock of Agency Access Training Center, Inc. ("AATC") and Key
Tours Las Vegas, Inc. ("KTLV"), and additionally purchased the majority
of the current assets and current liabilities of Keytours, Inc. ("KTI"),
a Canadian corporation. All three companies (AATC, KTLV and KTI) were
previously under common control and jointly operated an independent tour
business in the Detroit metropolitan area, using the brand name of Key
Tours. ATA has been providing passenger airline services to Key Tours for
over 15 years. The results of operations, beginning May 1999, of Key
Tours brand were consolidated into the Company.
On April 30, 1999, the Company acquired all of the issued and
outstanding stock of Chicago Express Airlines, Inc. ("Chicago Express").
The Company had a code-share agreement with Chicago Express since April
1997. Chicago Express' results of operations, beginning May 1999, were
consolidated into the Company.
The Company paid approximately $16.1 million in cash and issued $1.3
million in stock for the purchase of all acquisitions discussed above
which were accounted for using the purchase method of accounting. The
Company evaluated the effect of the acquisitions on the financial
statements as if the acquisitions were effective January 1998, noting the
results of operations would not be materially different than reported.
13. Segment Disclosures
During 1999, the Company acquired several independent tour operator
businesses and combined their operations with the Company's existing
vacation package brand, ATA Vacations. (See Note 12). These companies
comprise the newly formed ATA Leisure Corp. ("ATALC").
The Company identifies its segments on the basis of similar products
and services. The airline segment derives its revenues primarily from the
sale of scheduled service or charter air transportation. ATALC derives
its revenues from the sale of vacation packages, which, in addition to
air transportation, includes hotels and other ground arrangements. ATALC
purchases air transportation for its vacation packages from ATA and other
airlines.
The Company's revenues are derived principally from customers
domiciled in the United States.
The most significant component of the Company's property and
equipment is aircraft and related improvements and parts. All aircraft
are registered in the United States. The Company therefore considers all
property and equipment to be domestic.
The United States government is the Company's only external customer
that accounted for more than 10.0% of consolidated revenues. U.S.
government revenues accounted for 11.2%, 13.3% and 16.8% of consolidated
revenues for 1999, 1998 and 1997, respectively.
F-17
<PAGE>
Segment financial data as of and for the years ended December 31,
1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
------------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
--------- ----- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
Operating revenue from
external customers.............. $ 972,081 $ 94,840 $ 55,445 $1,122,366
Inter-segment revenue........... 42,970 4,985 2,455 50,410
Operating expenses.............. 918,725 70,404 43,210 1,032,339
Operating income (loss)......... 88,173 (2,616) 4,470 90,027
Segment assets (at year-end).... 821,373 69,800 (75,892) 815,281
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
------------------------------------
Other/
Airline ATALC Eliminations Consolidated
--------- ----- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
Operating revenue from external
customers....................... $ 858,702 $ 21,485 $ 39,182 $ 919,369
Inter-segment revenue........... 24,620 0 2,152 26,772
Operating expenses.............. 806,411 13,019 24,566 843,996
Operating income (loss)......... 68,894 (43) 6,522 75,373
Segment assets (at year-end).... 637,101 274 (42,826) 594,549
</TABLE>
F-18
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1999
------------------------------------
Other/
Airline ATALC Eliminations Consolidated
--------- ----- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C>
Operating revenue from external
customer....................... $ 726,708 $ 24,222 $ 32,263 $ 783,193
Inter-segment revenue.......... 25,953 367 2,028 28,348
Operating expenses............. 735,169 14,217 20,323 769,709
Operating income............... 6,657 760 6,067 13,484
Segment assets (at year-end)... 517,264 4,651 (71,058) 450,857
</TABLE>
14. Subsequent Events
In January 2000, Chicago Express entered into an agreement to
purchase nine SAAB 340B aircraft, engines and spare parts for
approximately $30.0 million. These aircraft are nine years old. The SAAB
340B aircraft will be placed into service throughout 2000 in conjunction
with the return of the current fleet of Jetstream J31s to the lessor. The
Company intends to finance these aircraft through sale/leaseback
transactions.
The Company completed a $238.6 million Enhanced Equipment Trust
Certificate ("EETC") financing in February 2000. These funds will be used
as leveraged lease financing for seven of the Company's Boeing 757-200
aircraft, three of which had been financed with interim leveraged leases
in the third and fourth quarters of 1999. The remaining EETC financing is
expected to be applied to four 757-200 deliveries from the manufacturer,
two in June 2000 and two in November 2000. The Company expects its EETC
leveraged leases to be accounted for as operating leases.
<TABLE>
<CAPTION>
Financial Statements and Supplementary Data
Amtran, Inc. and Subsidiaries
1999 Quarterly Financial Summary
(Unaudited)
------------------------------------------------------------------------------------
(In thousands, except per share data) March 31 June 30 September 30 December 31
------------------------------------- -------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Operating revenues................... $277,909 $284,714 $302,921 $256,822
Operating expenses................... 248,950 254,284 275,851 253,254
Operating income..................... 28,959 30,430 27,070 3,568
Other expenses....................... (1,516) (3,603) (3,886) (3,225)
Income before income taxes........... 27,443 26,827 23,184 343
Income taxes (credits)............... 10,903 10,122 9,484 (54)
Net income........................... $ 16,540 $ 16,705 $ 13,700 $ 397
Net income per share - basic......... $1.36 $1.37 $1.10 $0.03
Net income per share - diluted....... $1.22 $1.24 $1.01 $0.03
Amtran, Inc. and Subsidiaries
1998 Quarterly Financial Summary
(Unaudited)
------------------------------------------------------------------------------------
(In thousands, except per share data) March 31 June 30 September 30 December 31
------------------------------------- -------- --------- ------------ -----------
Operating revenues................ $229,305 $238,464 $242,414 $209,186
Operating expenses................ 205,896 213,820 219,517 204,763
Operating income.................. 23,409 24,644 22,897 4,423
Other expenses.................... (2,138) (1,995) (2,049) (1,981)
Income before income taxes........ 21,271 22,649 20,848 2,442
Income taxes...................... 8,872 8,854 8,415 988
Net income........................ $ 12,399 $ 13,795 $ 12,433 $ 1,454
Net income per share - basic...... $1.07 $1.19 $1.06 $0.12
Net income per share - diluted.... $1.02 $1.05 $0.92 $0.11
</TABLE>
F-19
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, March 31,
1999 2000
------------ ----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents .................... $ 120,164 $ 125,205
Receivables, net of allowance for doubtful
accounts (2000 - $1,401; 1999 - $1,511) ...... 52,099 49,891
Inventories, net ............................ 36,686 36,805
Prepaid expenses and other current assets .... 22,945 26,799
--------- ---------
Total current assets .............................. 231,894 238,700
Property and equipment:
Flight equipment ............................. 781,171 810,389
Facilities and ground equipment .............. 92,060 95,744
--------- ---------
873,231 906,133
Accumulated depreciation ..................... (361,399) (381,231)
--------- ---------
511,832 524,902
Goodwill .......................................... 23,453 22,678
Deposits and other assets ......................... 48,102 55,695
--------- ---------
Total assets ...................................... $ 815,281 $ 841,975
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ......... $ 2,079 $ 3,791
Accounts payable ............................. 20,234 22,045
Air traffic liabilities ...................... 93,507 110,340
Accrued expenses ............................. 126,180 127,997
--------- ---------
Total current liabilities ......................... 242,000 264,173
Long-term debt, less current maturities ........... 345,792 355,163
Deferred income taxes ............................. 58,493 58,235
Other deferred items .............................. 17,620 18,523
Commitments and contingencies
Shareholders' equity:
Preferred stock; authorized 10,000,000 shares;
none issued ................................. -- --
Common stock, without par value;
authorized 30,000,000 shares;
issued 12,924,140 - 2000;
12,884,306 - 1999 ........................... 55,826 56,464
Additional paid-in-capital ................... 12,910 12,614
Deferred compensation - ESOP ................. (533) (533)
Treasury stock; 834,552 shares - 2000;
612,052 shares - 1999 ........................ (10,500) (14,383)
Retained earnings ............................ 93,673 91,719
--------- ---------
151,376 145,881
--------- ---------
Total liabilities and shareholders' equity ........ $ 815,281 $ 841,975
========= =========
See accompanying notes.
F-20
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months Ended March 31,
1999 2000
----------- -----------
(Unaudited) (Unaudited)
Operating revenues:
Scheduled service ......................... $ 144,269 $ 168,486
Charter ................................... 107,340 119,620
Ground package ............................ 15,558 22,086
Other ..................................... 10,742 11,174
----------- -----------
Total operating revenues ....................... 277,909 321,366
=========== ===========
Operating expenses:
Salaries, wages and benefits .............. 60,799 68,702
Fuel and oil .............................. 35,578 63,436
Depreciation and amortization ............. 21,658 31,572
Handling, landing and navigation fees ..... 22,399 25,385
Aircraft maintenance, materials and repairs 13,741 19,679
Ground package cost ....................... 13,222 18,895
Aircraft rentals .......................... 15,244 16,086
Crew and other employee travel ............ 12,131 15,091
Passenger service ......................... 9,572 11,170
Commissions ............................... 9,670 11,155
Other selling expenses .................... 6,195 8,290
Advertising ............................... 5,607 6,565
Facilities and other rentals .............. 3,155 3,699
Other ..................................... 19,979 19,077
----------- -----------
Total operating expenses ....................... 248,950 318,802
----------- -----------
Operating income ............................... 28,959 2,564
Other income (expense):
Interest income ................................ 1,763 1,913
Interest expense ............................... (5,074) (7,660)
Other .......................................... 1,795 112
----------- -----------
Other expense .................................. (1,516) (5,635)
=========== ===========
Income (loss) before income taxes .............. 27,443 (3,071)
Income tax expense (credit) .................... 10,903 (1,117)
----------- -----------
Net income (loss) .............................. $ 16,540 $ (1,954)
=========== ===========
Basic earnings per common share:
Average shares outstanding ..................... 12,183,785 12,089,652
Net income (loss) per share .................... $ 1.36 $ (0.16)
=========== ===========
Diluted earnings per common share:
Average shares outstanding ..................... 13,554,858 12,089,652
Net income (loss) per share .................... $ 1.22 $ (0.16)
============ ============
See accompanying notes.
F-21
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended
March 31,
1999 2000
---------- ---------
(Unaudited) (Unaudited)
Operating activities:
Net income (loss) .................................... $ 16,540 $ (1,954)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization ...................... 21,658 31,572
Deferred income taxes .............................. 5,919 (258)
Other non-cash items ............................... (222) (1,458)
Changes in operating assets and liabilities:
Receivables ........................................ (5,816) 2,208
Inventories ........................................ (4,740) (1,279)
Prepaid expenses ................................... (7,614) (3,854)
Accounts payable ................................... 4,932 1,811
Air traffic liabilities ............................ 27,538 16,833
Accrued expenses ................................... 10,275 4,142
--------- --------
Net cash provided by operating activities ....... 68,470 47,763
--------- --------
Investing activities:
Proceeds from sales of property and equipment ......... 51 25
Capital expenditures .................................. (100,564) (41,924)
Acquisition of businesses ............................. (10,472) --
Additions to other assets ............................. (5,959) (8,342)
--------- --------
Net cash used in investing activities .............. (116,944) (50,241)
--------- --------
Financing activities:
Proceeds from long-term debt .......................... -- 11,500
Payments on long-term debt ............................ (144) (442)
Proceeds from exercise of stock options ............... 456 344
--------- --------
Purchase of treasury stock ............................ (15) (3,883)
--------- --------
Net cash provided by financing activities .......... 297 7,519
--------- --------
Increase (decrease) in cash and cash equivalents ...... (48,177) 5,041
Cash and cash equivalents, beginning of period ........ 172,936 120,164
--------- --------
Cash and cash equivalents, end of period .............. $ 124,759 $125,205
========= ========
Supplemental disclosures:
Cash payments for:
Interest ........................................... $ 5,610 $ 7,167
Income taxes (refunds) ............................. (2,310) 118
See accompanying notes.
F-22
<PAGE>
AMTRAN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying consolidated financial statements of Amtran, Inc. and
subsidiaries (the "Company") have been prepared in accordance with
instructions for reporting interim financial information on Form 10-Q
and, therefore, do not include all information and footnotes necessary
for a fair presentation of financial position, results of operations and
cash flows in conformity with generally accepted accounting principles.
The consolidated financial statements for the quarters ended March 31,
2000 and 1999 reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and cash flows for
such periods. Results for the three months ended March 31, 2000, are not
necessarily indicative of results to be expected for the full fiscal year
ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31,
1999.
2. Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share:
Three Months Ended
March 31,
1999 2000
------ ------
Numerator:
Net income (loss) $16,540,000 $(1,954,000)
Denominator:
Denominator for basic earnings per share-
weighted average shares 12,183,785 12,089,652
Effect of dilutive securities:
Employee stock options 1,371,073 -
----------- -----------
Denominator for diluted earnings per share -
adjusted weighted average shares 13,554,858 12,089,652
----------- -----------
Basic earnings per share $ 1.36 $ (0.16)
=========== ===========
Diluted earnings per share $ 1.22 $ (0.16)
=========== ===========
In accordance with Financial Accounting Standards Board Statement No. 128,
"Earnings per Share," the impact of potentially dilutive securities has been
excluded from first quarter 2000 diluted earnings per share, because the
effect is antidilutive.
3. Acquisition of Businesses
On January 26, 1999, the Company acquired all of the issued and
outstanding stock of T. G. Shown Associates, Inc., which owned 50% of the
partnership, Amber Air Freight. The Company had already owned the other
50% of this air cargo operation.
On January 31, 1999, the Company purchased the membership interests of
Travel Charter International, LLC ("TCI"), a Detroit-based independent
tour operator. ATA has been providing passenger airline services to TCI
for over 14 years. TCI's results of operations, beginning February 1999,
were consolidated into the Company.
On April 30, 1999, the Company acquired all of the issued and
outstanding stock of Agency Access Training Center, Inc. ("AATC") and
Key Tours Las Vegas, Inc. ("KTLV"), and additionally purchased the
majority of the current assets and current liabilities of Keytours,
Inc. ("KTI"), a Canadian
F-23
<PAGE>
corporation. All three companies (AATC, KTLV and KTI) were previously
under common control and jointly operated an independent tour business
in the Detroit metropolitan area, using the brand name of Key Tours.
ATA has been providing passenger airline services to Key Tours for
over 15 years. The results of operations, beginning May 1999, of Key
Tours were consolidated into the Company. The Company combined the
operations of TCI, AATC, KTLV and KTI with its existing vacation
package brand, ATA Vacations, to form the ATA Leisure Corp. ("ATALC").
On April 30, 1999, the Company acquired all of the issued and outstanding
stock of Chicago Express Airlines, Inc. ("Chicago Express"). The Company
had a code-share agreement with Chicago Express since April 1997. Chicago
Express results of operations, beginning May 1999, were consolidated into
the Company.
4. Segment Disclosures
The Company identifies its segments on the basis of similar products and
services. The airline segment derives its revenues primarily from the
sale of scheduled service or charter air transportation. ATALC derives
its revenues from the sale of vacation packages, which, in addition to
air transportation, includes hotels and other ground arrangements. ATALC
purchases air transportation for its vacation packages from ATA and other
airlines.
Segment financial data as of and for the quarters ended March 31, 2000
and 1999 follows:
For the Three Months Ended March 31, 2000
------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
------- -------- ------------ ------------
(In thousands)
Operating revenue (external) $267,426 $ 38,536 $ 15,404 $321,366
Inter-segment revenue 22,767 727 (23,494) -
Operating expenses (external) 280,406 23,900 14,496 318,802
Inter-segment expenses 3,729 17,161 (20,890) -
Operating income (loss) 6,058 (1,798) (1,696) 2,564
Segment assets (at quarter-end) 880,926 106,305 (145,256) 841,975
For the Three Months Ended March 31, 1999
------------------------------------------
Other/
Airline ATALC Eliminations Consolidated
------- -------- ------------ ------------
(In thousands)
Operating revenue (external) $241,075 $ 23,617 $ 13,217 $277,909
Inter-segment revenue 9,109 - (9,109) -
Operating expenses (external) 223,119 17,423 8,408 248,950
Inter-segment expenses 1,770 4,869 (6,639) -
Operating income 25,295 1,325 2,339 28,959
Segment assets (at quarter-end) 630,995 24,516 2,677 658,188
5. Subsequent Events
On May 4, 2000, the Company entered into a preliminary agreement to
purchase 37 Boeing 737-800 aircraft and 10 Boeing 757-300 aircraft, also
receiving purchase rights for an additional 50 aircraft. As part of this
agreement, the Company has obtained financing commitments for all of the
aircraft. The financing commitments are comprised of various operating
leases, leveraged leases, single investor leases, and certain preferred
stock purchase commitments. Closing of this transaction is subject to the
completion of definitive documentation and customary closing conditions.
The Company plans to accept delivery of the new aircraft from 2001
through early 2003.
F-24
<PAGE>
APPENDIX AI
GLOSSARY
"Adjusted Expected Distributions" means, with respect to the certificates
of any pass through trust on any Distribution Date (for purposes of this
definition, the "Current Distribution Date"), the sum of (1) accrued and
unpaid interest on such certificates (excluding interest, if any, payable with
respect to the Deposits relating to such pass through trust) and (2) the
greater of:
(A) the difference between (x) the Pool Balance of such certificates
as of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the certificates of such pass through trust less the
amount of the deposits for such class of certificates as of such
preceding Distribution Date for, if the Current Distribution Date is the
first Distribution Date, the original aggregate amount of the Deposits of
such class of certificates), other than any portion of such Deposits
thereafter used to acquire secured promissory notes pursuant to the Note
Purchase Agreement and (y) the Pool Balance of such certificates as of
the Current Distribution Date calculated on the basis that (i) the
principal of the Non-Performing Secured Promissory Notes held in such
pass through trust has been paid in full and such payments have been
distributed to the holders of such certificates and (ii) the principal of
the Performing Secured Promissory Notes held in such pass through trust
has been paid when due (but without giving effect to any acceleration of
Performing Secured Promissory Notes) and such payments have been
distributed to the holders of such certificates, but without giving
effect to any reduction in the Pool Balance as a result of any
distribution attributable to Deposits occurring after the immediately
preceding Distribution Date; or
(B) the amount of the excess, if any, of (i) the Pool Balance of
such class of certificates as of the immediately preceding Distribution
Date, less the amount of the Deposits for such class of certificates as
of such preceding Distribution Date (or, if the Current Distribution Date
is the first Distribution Date, the original aggregate amount of the
Deposits for such class of certificates) other than any portion of such
Deposits thereafter used to acquire secured promissory notes pursuant to
the Note Purchase Agreement (the amount described in this clause (i), the
"Current Pool Balance"), over (ii) the Aggregate LTV Collateral Amount
for such class of certificates for the Current Distribution Date;
provided that, until the date of the initial LTV Appraisals, clause (B) will
not apply.
For purposes of calculating Adjusted Expected Distributions with respect
to the certificates of any pass through trust, any premium paid on the secured
promissory notes held in such pass through trust that has not been distributed
to the certificateholders of such pass through trust (other than such premium
or a portion thereof applied to the payment of interest on the certificates of
such pass through trust or the reduction of the Pool Balance of such pass
through trust) will be added to the amount of Adjusted Expected Distributions.
(Intercreditor Agreement, Section 1.1)
"Aggregate LTV Collateral Amount" for any class of certificates for any
Distribution Date means the sum of the applicable LTV Collateral Amounts for
each aircraft, minus the Pool Balance for each class of certificates, if any,
senior to such class, after giving effect to any distribution of principal on
such Distribution Date with respect to such senior class or classes.
(Intercreditor Agreement Section 1.1)
"Aircraft Operative Agreements" means, collectively, the Participation
Agreements, leases and Indentures.
"Appraised Current Market Value" means, for any aircraft, the lower of
the average and the median of the three most recent LTV Appraisals of such
aircraft.
<PAGE>
"Appraisers" means the independent aircraft appraisal and consulting
firms of Aircraft Information Services, Inc. ("AISI"), Morten Beyer and Agnew,
Inc. ("MBA") and Simat, Helliesen & Eichner, Inc. ("SH&E"). (Intercreditor
Agreement, Section 1.1)
"Assumed Amortization Schedule" means the assumed amortization schedule
for the secured promissory notes set forth in the table on page 99 of the
prospectus.
"Assumed Appraised Value" means, with respect to any aircraft, the value
for such aircraft set forth in the "Prospectus Summary--Secured Promissory
Notes and the Aircraft" under the column "Appraised Value."
"Average Life Date" for any secured promissory note means the date which
follows the redemption date by a period equal to the then Remaining Weighted
Average Life at the redemption date of such secured promissory note.
"Bankruptcy Code" means Title 11 of the United States Code.
"Base Rate" when used with respect to a Liquidity Facility, means a
fluctuating interest rate per annum in effect from time to time, which rate
per annum is at all times to be equal to (a) the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if
such day is not a business day, for the next preceding business day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day that is a business day, the average of the quotations for such day for
such transactions received by the applicable Liquidity Provider from three
federal funds brokers of recognized standing selected by it, plus (b) one
quarter of one percent (1/4 of 1%) per annum. (Liquidity Facility, Section
1.01)
"Basic Rent," with respect to each lease, means, for any aircraft, the
scheduled rent payable quarterly for the term for such aircraft pursuant to
the related lease.
"Boeing" means The Boeing Company.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks are authorized or required to close in Indianapolis,
Indiana, New York, New York, Wilmington, Delaware or Salt Lake City, Utah.
"Cash Collateral Account" means, for each class of certificates, the
account in the name of the Subordination Agent into which the proceeds of any
Downgrade Drawing, Non-Extension Drawing and Final Drawing will be deposited.
(Intercreditor Agreement, Section 1.1)
"Certificate Account" means one or more non-interest bearing accounts
established and maintained by the pass through trustee, for the deposit of
payments representing Scheduled Payments received by such pass through
trustee.
"Civil Reserve Air Fleet Program," with respect to each lease, means the
Civil Reserve Air Fleet Program currently administered by the United States
Air Force Air Mobility Command pursuant to Chapter 931, Section 9511, et seq.
of Title 10 of the United States Code, as amended, or any substantially
similar program of the United States government.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all of the Loan Trustee's right, title and interest in
the property described in the granting clause of an Owned Aircraft Indenture.
"Controlling Party" means:
o the policy provider, until final distributions of the aggregate
outstanding balance of the class G certificates, together with
accrued and unpaid interest, are made to the holders of the class G
certificates and thereafter, if, and while, no obligations owing to
the policy provider remain outstanding or, if a policy provider
default has occurred and is
AI-2
<PAGE>
continuing, the class G pass through trustee, until payment of final
distributions together with accrued interest to the holders of the
class G certificates, then;
o the class C pass through trustee;
o upon payment of Final Distributions to holders of class C
certificates, the class D pass through trustee, if class D
certificates have been issued.
Under certain circumstances, the Liquidity Provider may elect to act as
the Controlling Party. (Intercreditor Agreement, Section 2.6)
"Delivery Period" means the period commencing on the Issuance Date and
ending on the Delivery Period Termination Date.
"Delivery Period Termination Date" means the earlier of (a) December 31,
2000, or, if the secured promissory notes relating to all of the aircraft (or
substitute aircraft in lieu thereof) have not been purchased by the pass
through trustees on or prior to such date due to any reason beyond the control
of ATA and not occasioned by ATA's fault or negligence, May 31, 2001, and (b)
the date on which all secured promissory notes issued with respect to all of
the aircraft (or substitute aircraft in lieu thereof) have been purchased by
the pass through trustees in accordance with the Note Purchase Agreement.
"Deposit" means the proceeds of this offering that are deposited with the
Depositary and under the applicable Deposit Agreement.
"Deposit Account" means the accounts established in the name of the
Escrow Agent with respect to each pass through trust under the applicable
Deposit Agreement.
"Deposit Agreements" means all of the deposit agreements with respect to
all classes of certificates to be dated as of the Issuance Date between the
Escrow Agent and the Depositary.
"Deposit Make-Whole Premium" means, with respect to the distribution of
unused Deposits to holders of any class of certificates, as of any date of
determination, an amount equal to the excess, if any, of (a) the present value
of the excess of (i) the scheduled payment of principal and interest to
maturity of the related series of secured promissory notes, assuming the
maximum principal amount thereof (the "Maximum Amount") minus the Non-Premium
Amount attributable to such class of certificates and such class of
certificates' proportionate share (in the same proportion that the amount of
unused Deposits with respect to such class of certificates bears to the unused
Deposits with respect to all classes of certificates) of the Par Redemption
Amount were issued, on each remaining Regular Distribution Date for such class
under the Assumed Amortization Schedule over (ii) the scheduled payment of
principal and interest to maturity of the secured promissory notes actually
acquired by the pass through trustee for such class on each such Regular
Distribution Date, such present value computed by discounting such excess on a
quarterly basis on each Regular Distribution Date (assuming a 360-day year of
twelve 30-day months) using a discount rate equal to the Treasury Yield over
(b) the amount of such unused Deposits to be distributed to the holders of
such certificates, minus the Non-Premium Amount attributable to such class of
certificates and such class of certificates' proportionate share of the Par
Redemption Amount, plus accrued and unpaid interest on such net amount to but
excluding the date of determination from and including the preceding Regular
Distribution Date (or if such date of determination precedes the first Regular
Distribution Date, the date of issuance of the certificates). (Note Purchase
Agreement, Annex A)
"Depositary" means Citibank, N.A., for all classes of certificates.
"Depreciation Assumption" means the assumption that the initial appraised
value of each aircraft declines by approximately 3% per year for the first 15
years after the delivery of that aircraft to ATA from the manufacturer and by
approximately 4% per year after the first 15 years.
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"Disposition" means the disposition of any series G secured promissory
note (or any underlying collateral).
"Distribution Date" means each Special Distribution Date and Regular
Distribution Date.
"Downgrade Drawing" means a drawing by the Subordination Agent of the
Maximum Available Commitment under a Liquidity Facility at the time of such
drawing as a result of the downgrading of the unsecured debt rating of the
Liquidity Provider below the applicable Threshold Rating. (Liquidity Facility,
Section 2.2; Intercreditor Agreement, Section 3.6(c))
"Drawing" means any Interest Drawing, Downgrade Drawing, Non-Extension
Drawing or Final Drawing.
"DTC" means The Depository Trust Company.
"DTC Participants" means those securities brokers and dealers, banks,
trust companies and clearing corporations for whom DTC effects, directly or
indirectly, book-entry transfers and pledges of security deposited with DTC.
"Election Distribution Date" means (i) any Business Day (which will be a
Special Distribution Date) elected by the Policy Provider upon 20 days' notice
to request the Subordination Agent, or (ii) following either the occurrence
and continuation of a Policy Provider Default or a Disposition of or in
respect of any secured promissory note, any Business Day (which will be a
Special Distribution Date) specified by the Subordination Agent upon 20 days'
notice, selected by the Policy Provider pursuant to a Policy Provider
Election.
"Escrow Agent" means First Security Bank, National Association and any
successor appointed pursuant to the terms of an Escrow Agreement.
"Escrow Agreements" means all of the escrow and paying agent agreements
with respect to all classes of certificates to be dated as of the Issuance
Date, among the Escrow Agent, the Paying Agent, a pass through trustee and the
Initial Purchasers.
"Escrow Receipt" means one or more receipts issued by the Escrow Agent
under the applicable Escrow Agreement that will be affixed by the relevant
pass through trustee to each certificate and will evidence a fractional
undivided interest in amounts deposited in the applicable Paying Agent
Account.
"Event of Loss" with respect to an aircraft, airframe or any engine means
any of the following events with respect to such property:
o Loss of such property or its use due to destruction or damage
rendering repair uneconomic or such property permanently unfit for
normal use by ATA.
o Any damage to such property which results in an insurance settlement
with respect to such property on the basis of a total loss or
constructive or compromised total loss.
o The theft, disappearance, confiscation, condemnation, seizure, or
requisition (including loss of title) of such property (other than a
requisition for use by the United States government or any agency or
instrumentality thereof), involving, in the case of any event
referred to in this clause, loss of possession of such property for
a period of more than 180 consecutive days (or, if earlier, 30 days
after the end of the term of the Lease) or, in the case of a
requisition of title, such requisition has not been reversed within
90 days (or, if earlier, 30 days after the end of the term of the
Lease).
o Except as otherwise provided in each lease, as a result of any law,
rule, regulation, order or other action by the FAA, or any other
governmental authority of the country of registry of such property,
the use of such property in the normal course of business of air
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transportation shall have been prohibited for six consecutive
months, unless ATA, prior to the expiration of such six-month
period, has undertaken and is diligently carrying forward all steps
necessary or desirable to permit normal use of such property until
the date normal use of the Aircraft is resumed, or the expiration of
the term of the leases.
o The requisition for use of the aircraft by the United States
government or any instrumentality or agency thereof that continues
for 30 days beyond the end of the term of the lease.
o With respect to any engine, any divestiture of title to an engine
treated as an Event of Loss pursuant to the lease.
An Event of Loss with respect to an aircraft is deemed to have occurred
if an Event of Loss occurs with respect to the airframe which is a part of
such aircraft. (Leases, Section 10; Owned Aircraft Indentures, Section 4.05)
"Excess Reimbursement Obligations" means, (a) in the event of any Policy
Provider Election, the portion of the Policy Provider Obligations that
represents interest on the series G secured promissory note in respect of
which the Policy Provider Election has been made in excess of 24 months of
interest at the interest rate applicable to such secured promissory note and
(b) any interest on the Liquidity Obligations in respect of the class G and
class C Liquidity Facilities paid by the Policy Provider to the Liquidity
Provider from and after the end of the 24-month period referred to under the
caption "Description of the Policy and the Policy Provider Agreement--The
Policy--No Proceeds Drawing."
"Exchange Agent" means Wilmington Trust Company.
"Expected Distributions" means, with respect to the certificates of any
pass through trust on any Distribution Date (for purposes of this
distribution, the "Current Distribution Date"), the sum of (1) accrued and
unpaid interest on such certificates (excluding interest, if any, payable with
respect to the Deposits relating to such pass through trust) and (2) the
difference between:
(A) the Pool Balance of such certificates as of the immediately
preceding Distribution Date (or, if the Current Distribution Date is the
first Distribution Date, the original aggregate face amount of the
certificates of such pass through trust); and
(B) the Pool Balance of such certificates as of the Current
Distribution Date calculated on the basis that the principal of the
secured promissory notes held in such pass through trust has been paid
when due (whether at stated maturity or upon redemption, prepayment,
purchase, acceleration or otherwise) and such payments have been
distributed to the holders of such certificates, but without giving
effect to any reduction in the Pool Balance as a result of any
distribution attributable to Deposits occurring after the immediately
preceding Distribution Date (or, if the Current Distribution Date is the
first Distribution Date, occurring after the initial issuance of the
certificates of such pass through trust). In certain circumstances, the
Make-Whole Amount will be included as part of Expected Distributions.
For purposes of calculating Expected Distributions with respect to the
certificates of any pass through trust, any premium paid on the secured
promissory notes held in such pass through trust that has not been distributed
to the certificateholders of such pass through trust (other than such premium
or a portion thereof applied to the payment of interest on the certificates of
such pass through trust or the reduction of the Pool Balance of such pass
through trust) shall be added to the amount of such Expected Distributions.
(Intercreditor Agreement, Section 1.1)
"Final Distributions" means, with respect to the certificates of any pass
through trust on any Distribution Date, the sum of (x) the aggregate amount of
all accrued and unpaid interest on such certificates (excluding interest
payable, if any, on the Deposits relating to such pass through trust) and (y)
the Pool Balance of such certificates as of the immediately preceding
Distribution Date (less the amount of the Deposits for such class of
certificates as of such preceding Distribution Date other
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than any portion of such Deposits thereafter used to acquire secured
promissory notes pursuant to the Note Purchase Agreement). For purposes of
calculating Final Distributions with respect to the certificates of any pass
through trust, any premium paid on the secured promissory notes held in such
pass through trust that has not been distributed to the certificateholders of
such pass through trust (other than such premium or a portion thereof applied
to the payment of interest on the certificates of such pass through trust or
the reduction of the Pool Balance of such pass through trust) will be added to
the amount of such Final Distributions. (Intercreditor Agreement, Section 1.1)
"Final Drawing" means a drawing by the Subordination Agent under a
Liquidity Facility in an amount equal to the Maximum Available Commitment
under such Liquidity Facility at the time of such drawing as a result of the
termination of such Liquidity Facility by the applicable Liquidity Provider.
(Intercreditor Agreement 3.6(i))
"Final Maturity Date" means, for the class G certificates July 15, 2017
and for the class C certificates July 15, 2007.
"Guarantee" means the guarantee by Amtran of all obligations of ATA as
lessee under a lease or as obligor under an Owned Aircraft Indenture.
"Indenture" means each of the Leased Aircraft Indentures and the Owned
Aircraft Indentures.
"Indenture Default" means an event of default under any Indenture as the
term "Event of Default" is defined under that Indenture.
"Initial Purchasers" means Salomon Smith Barney Inc., Banc One Capital
Markets, Inc., Chase Securities Inc. and Morgan Stanley & Co. Incorporated.
"Intercreditor Agreement" means the intercreditor agreement to be dated
as of the Issuance Date among the pass through trustees, the Liquidity
Provider, the Policy Provider and the Subordination Agent.
"Interest Drawing" means a drawing made by the Subordination Agent under
the Liquidity Facility on any Distribution Date to pay interest then due and
payable on the certificates of the applicable pass through trust at the Stated
Interest Rate for such pass through trust. (Liquidity Facility, Section
2.2(a); Intercreditor Agreement, Section 3.6(a))
"Issuance Date" means the date of the initial issuance of the
certificates.
"Lease Default" means any event that with the giving of notice, or lapse
of time, or both would become a Lease Event of Default.
"Lease Event of Default" means an Event of Default under any lease as the
term "Event of Default" is defined under that lease.
"Lease Payment Default," with respect to each lease, means a default
under a lease relating to either payments of rent or involuntary bankruptcy or
similar events.
"Leased Aircraft Indenture" means each trust indenture and security
agreement entered into in connection with the financing of an aircraft that we
will lease.
"Leased Aircraft Trust Agreement" means, with respect to each aircraft,
the trust agreement between the related Owner Trustee and the related Owner
Participant.
"LIBOR" means, with respect to any interest period (a) the rate per annum
appearing on display page 3750 (British Bankers Association--LIBOR) of the Dow
Jones Markets Service (or any successor or substitute therefor) at
approximately 11:00 a.m. (London time) two business days before the first day
of such interest period, as the rate for dollar deposits with a maturity
comparable to such interest period, or (b) if the rate calculated pursuant to
clause (a) above is not available, the average
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(rounded upwards, if necessary, to the next 1/16 of 1%) of the rates per annum
at which deposits in dollars are offered for the relevant interest period by
three banks of recognized standing selected by the applicable Liquidity
Provider in the London interbank market at approximately 11:00 a.m. (London
time) two business days before the first day of such interest period in an
amount approximately equal to the principal amount of the LIBOR advance to
which such interest period is to apply and for a period comparable to such
interest period.
"Liquidity Expenses" means the Liquidity Obligations other than (a) the
principal amount of any Drawings under the Liquidity Facility and (b) any
interest accrued on any Liquidity Obligations. (Intercreditor Agreement,
Section 1.1)
"Liquidity Facility" means each of the revolving credit agreements dated
as of the Issuance Date between the Liquidity Provider and Subordination Agent
with respect to each pass through trust entered into by the Liquidity Provider
with the Subordination Agent with respect to the certificates of each pass
through trust pursuant to which the Liquidity Provider will, if necessary,
make one or more advances to the Subordination Agent that will be used solely
to pay up to six consecutive quarterly installments of interest on such
certificates when due, subject to certain limitations.
"Liquidity Obligations" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facilities or
certain other agreements. (Intercreditor Agreement, Section 1.1)
"Liquidity Provider" means Citibank, N.A., and any successor liquidity
provider.
"Loan Trustee" means the indenture trustee under any Indenture.
"LTV Appraisal" means a current fair market value appraisal (which may be
a "desk-top" appraisal) performed by any Appraiser or any other nationally
recognized appraiser on the basis of an arm's-length transaction between an
informed and willing purchaser under no compulsion to buy and an informed and
willing seller under no compulsion to sell and both having knowledge of all
relevant facts. (Intercreditor Agreement, Sections 1.1)
"LTV Collateral Amount" of any aircraft for any class of certificates
means, as of any Distribution Date, the lesser of (a) the LTV Ratio for such
class of certificates multiplied by the Appraised Current Market Value of such
aircraft (or with respect to any such aircraft which has suffered an Event of
Loss under and as defined in the relevant lease (in the case of a leased
aircraft) or Indenture (in the case of an owned aircraft), the amount of the
insurance proceeds paid to the related Loan Trustee in respect of such
aircraft to the extent then held by such Loan Trustee (and/or on deposit in
the Special Payments Account) or payable to such Loan Trustee in respect of
such aircraft) and (b) the outstanding principal amount of the secured
promissory notes secured by such aircraft after giving effect to any principal
payments of such secured promissory notes on or before such Distribution Date.
(Intercreditor Agreement, Section 1.1)
"LTV Ratio" means for the class G certificates 50.1% and for the class C
certificates 60.7%. (Intercreditor Agreement, Section 1.1)
"Make-Whole Amount" means, with respect to any secured promissory note,
the amount (as determined by an independent investment banker of national
standing) by which (a) the present value of the remaining scheduled payments
of principal and interest to maturity of such secured promissory note,
computed by discounting such payments on a semiannual basis from each payment
date under the applicable Indenture (assuming a 360-day year of twelve 30-day
months) using a discount rate equal to the Treasury Yield exceeds (b) the
outstanding principal amount of such secured promissory note plus accrued
interest to the date of determination.
"Mandatory Document Terms" means the Mandatory Document Terms described
under "Description of Certificates--Obligation to Purchase Secured Promissory
Notes."
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"Mandatory Economic Terms" means the Mandatory Economic Terms described
under "Description of Certificates--Obligation to Purchase Secured Promissory
Notes."
"Maximum Available Commitment" means the amount, at the time of
determination under each Liquidity Facility, equal to the then Required Amount
of such Liquidity Facility less the aggregate amount of each Interest Drawing
outstanding under such Liquidity Facility at such time, provided that
following a Downgrade Drawing, a Final Drawing or a Non-Extension Drawing
under a Liquidity Facility, the Maximum Available Commitment under such
Liquidity Facility will be zero.
"Minimum Sale Price" means, with respect to any aircraft or the secured
promissory notes issued in respect of such aircraft, at any time, the lesser
of (x) 75% of the Appraised Current Market Value of such aircraft and (y) the
aggregate outstanding principal amount of such secured promissory notes, plus
accrued and unpaid interest on such secured promissory notes. (Intercreditor
Agreement, Section 1.1)
"Non-Extension Drawing" means a drawing by the Subordination Agent of the
Maximum Available Commitment under a Liquidity Facility at the time of such
drawing, as a result of such Liquidity Facility not being extended or replaced
by the 25th day prior to its then scheduled expiration date. (Liquidity
Facility, Section 2.2(b); Intercreditor Agreement, Section 3.6(d))
"Non-Performing Secured Promissory Note" means a secured promissory note
that is not a Performing Secured Promissory Note.
"Non-Premium Amount" means the amount equal to unused Deposits to be
distributed due to the failure of any aircraft to be delivered prior to the
Delivery Period Termination Date due to any reason not occasioned by ATA's
fault or negligence.
"Note Holders" means registered holders of the secured promissory notes.
"Note Purchase Agreement" means the note purchase agreement dated as of
the Issuance Date among ATA, the pass through trustees, the Subordination
Agent, the Escrow Agent and the Paying Agent.
"Order" means the order referred to in the definition of the term
"Preference Amount."
"Owned Aircraft Indenture" means each indenture and security agreement
entered into in connection with the financing of an aircraft that ATA owns.
"Owner Participant" means the owner of the beneficial interest of an
owner trust in a leveraged lease transaction.
"Owner Trustee" means the trustee of an owner trust in a leveraged lease
transaction.
"Participation Agreement" means (a) in the case of a leased aircraft, an
agreement among ATA, the pass through trustees, the applicable Owner Trustee,
the applicable Owner Participant, the Loan Trustee and the Subordination Agent
stating the terms and conditions under which the parties will participate in a
leveraged lease financing relating to an aircraft and (b) in the case of an
owned aircraft, an agreement among ATA, the pass through trustees, the Loan
Trustee and the Subordination Agent stating the terms and conditions under
which the parties will participate in a mortgage financing relating to an
aircraft.
"Par Redemption Amount" means $5,000,000.
"Pass Through Trust Agreements" means the two pass through trust
agreements between ATA, Amtran and Wilmington Trust Company, as trustee, to be
dated as of the Issuance Date.
"Paying Agent" means Wilmington Trust Company and any successor appointed
in accordance with the terms of the Escrow Agreement.
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"Paying Agent Account" means a non-interest bearing deposit account
established by the Paying Agent in the name of the Escrow Agent.
"Performing Secured Promissory Note" means a secured promissory note with
respect to which no payment default has occurred and is continuing (without
giving effect to any acceleration); provided that if a bankruptcy proceeding
is commenced involving ATA under the U.S. Bankruptcy Code, (a) any payment
default existing during the 60-day period under Section 1110(a)(1)(A) of the
U.S. Bankruptcy Code (or such longer period as may apply under Section 1110(b)
of the U.S. Bankruptcy Code) (the "Section 1110 Period") will not be taken
into consideration, unless during the Section 1110 Period the trustee in such
proceeding or ATA refuses to assume or agree to perform our obligations under
the lease related to such secured promissory note (in the case of a leased
aircraft) or under the Owned Aircraft Indenture related to such secured
promissory note (in the case of an owned aircraft), and (b) any payment
default occurring after the date of the order of relief in such proceeding
will not be taken into consideration if such payment default is cured under
Section 1110(a)(1)(B) of the U.S. Bankruptcy Code before the later of 30 days
after the date of such default or the expiration of the Section 1110 Period.
(Intercreditor Agreement, Section 1.1)
"Permitted Investments" means obligations of the United States of America
or agencies or instrumentalities thereof for the payment of which the full
faith and credit of the United States of America is pledged, maturing in not
more than 60 days or such lesser time as is necessary for payment of any
Special Payment on a Special Distribution Date.
"Policy" means the certificate guaranty insurance policy issued by the
Policy Provider in favor of the Subordination Agent for the benefit of the
class G pass through trustee and the class G certificateholders.
"Policy Business Day", for the purposes of the "Description of the Policy
and the Policy Provider Agreement," means any day that is not a Saturday, a
Sunday or other day on which commercial banking institutions in the cities in
which the Corporate Trust Office of the Subordination Agent or the Policy
Provider are located are authorized or obligated by law or executive or
executive order to close.
"Policy Drawing" means any payment of a claim under the Policy.
"Policy Expenses" means all amounts (including amounts in respect of
expenses or indemnities) owing to the Policy Provider under the Policy
Provider Agreement or certain other agreements other than the amount of any
Policy Drawing and any interest accrued thereon, Excess Reimbursement
Obligations, reimbursement of and interest on the Liquidity Obligations in
respect of the Liquidity Facilities paid by the Policy Provider to the
Liquidity Provider, provided that if, at the time of determination, a Policy
Provider Default exists, the Policy Expenses shall also not include any
indemnity payments owed to the Policy Provider.
"Policy Provider" means Ambac Assurance Corporation.
"Policy Provider Agreement" means the insurance and indemnity agreement,
to be dated as of the Issuance Date, between ATA, the Subordination Agent and
the Policy Provider.
"Policy Provider Default" will mean the occurrence of any of the
following events: (a) the Policy Provider fails to make a payment required
under the Policy in accordance with its terms and such failure remains
unremedied for 2 business days following the delivery of written notice of
such failure to the Policy Provider or (b) the Policy Provider (i) files any
petition or commences any case or proceeding under any provisions of any
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization, (ii) makes a general assignment for the benefit
of its creditors or (iii) has an order for relief entered against it under any
federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization that is final and nonappealable, or (c) a court
of competent jurisdiction, the Wisconsin Department of Insurance or another
competent regulatory authority enters a final and nonappealable order,
judgment or decree (i) appointing a custodian, trustee, agent or receiver for
the Policy Provider or for all or any material
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portion of its property or (ii) authorizing the taking of possession by a
custodian, trustee, agent or receiver of the Policy Provider (or taking of
possession of all or any material portion of the Policy Provider's
property).
"Policy Provider Election" means the right of the Policy Provider to make
the election as described in the second paragraph of "Description of the
Policy and The Policy Provider Agreement--The Policy--No Proceeds Drawing."
"Policy Provider Obligations" means all reimbursement and other amounts,
including fees and indemnities, due to the Policy Provider under the Policy
Provider Agreement but will not include any interest on Policy Drawings
except, if the class G Liquidity Provider has failed to honor its obligation
to make any Interest Drawing, interest on the portion of any Policy Drawing
made to cover the shortfall attributable to such failure by the class G
Liquidity Provider in an amount equal to the amount of interest that would
have accrued on such Interest Drawing if such Interest Drawing had been made
at the interest rate applicable to such Interest Drawing until such Policy
Drawing has been repaid in full, up to a maximum of six such Policy Drawings.
For the avoidance of doubt, Policy Provider Obligations include reimbursement
of and interest on the Liquidity Obligations in respect of the class G and
class C Liquidity Facilities paid by the Policy Provider to the Liquidity
Provider.
"Pool Balance" means for each pass through trust, the original aggregate
face amount of the certificates of such pass through trust less the aggregate
amount of all payments made in respect of the certificates of such pass
through trust or in respect of Deposits relating to such pass through trust
other than payments made in respect of interest or premium on the certificates
or the Deposits or reimbursement of any costs or expenses incurred in
connection with the certificates or the Deposits. The Pool Balance for each
pass through trust or for the certificates issued by any pass through trust as
of any Distribution Date will be computed after giving effect to any special
distribution with respect to unused Deposits, payment of principal of the
secured promissory notes or payment with respect to other trust property held
in such pass through trust and the distribution to be made on that date.
"Pool Factor" means as of any Distribution Date the quotient (rounded to
the seventh decimal place) computed by dividing (a) the Pool Balance of such
pass through trust by (b) the original aggregate face amount of the
certificates of such pass through trust. The Pool Factor for each pass through
trust or for the certificates issued by any pass through trust as of any
Distribution Date will be computed after giving effect to any special
distribution with respect to unused Deposits, payment of principal of the
secured promissory notes or payments with respect to other trust property held
in such pass through trust and the distribution of the trust property to be
made on that date. Each pass through trust will have a separate Pool Factor.
The Pool Factor for each pass through trust will be 1.0000000 on the Issuance
Date of the certificates. After the Issuance Date, the Pool Factor for each
pass through trust will decline to reflect reductions in the Pool Balance of
such pass through trust. In the event of an early redemption, purchase or
default of the secured promissory notes held in a pass through trust, the Pool
Factor and the Pool Balance of such pass through trust will be recomputed
after giving effect thereto. The amount of a certificateholder's pro rata
share of the Pool Balance of a pass through trust can be determined by
multiplying the par value of the holder's certificate of such pass through
trust by the Pool Factor for such pass through trust as of the applicable
Regular distribution Date or Special Distribution Date. Notice of the Pool
Factor and the Pool Balance for each pass through trust will be mailed to
certificateholders of such pass through trust on each Regular Distribution
Date and special Distribution Date.
"Preference Amount" means any payment of principal or interest at the
Stated Interest Rate on the series G secured promissory notes made to the pass
through trustee or the Subordination Agent or (without duplication) any
payment of the Pool Balance of or interest at the Stated Interest Rate on the
class G certificates or any payment of the proceeds of any drawing under the
class G Liquidity Facility made to a holder which has become recoverable or
been recovered from the pass through trustee, the Subordination Agent or the
holders of the class G certificates (as the case may be) as a result of such
payment being determined or deemed a preferential transfer pursuant to the
United
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States Bankruptcy Code or otherwise rescinded or requested to be returned in
the accordance with a final, nonappealable order of a court of competent
jurisdiction.
"Prior Funds" means, collectively, any amounts available to the Escrow
Agent in the class G Paying Agent Account in respect of accrued interest on
the class G Deposits, any drawings under the class G Liquidity Facility in
respect of accrued interest on the class G certificates and any withdrawal of
funds from the class G Cash Collateral Account in respect of such interest.
"PTC Event of Default" means, with respect to the pass through trust
agreement for each class of certificates, the failure to pay within 10
Business Days of the applicable due date: (a) the outstanding Pool Balance of
the applicable class of certificates on the Final Maturity Date for such class
of certificates (unless the Subordination Agent has made a drawing under the
Policy in an amount sufficient to pay such Pool Balance); or (b) interest due
on such class of certificates on any Distribution Date (unless the
Subordination Agent has made a drawing under the applicable Liquidity Facility
(including under the Cash Collateral Account) or a drawing under the Policy in
an amount sufficient to pay such interest and has distributed such amount to
the applicable pass through trustee). (Intercreditor Agreement, Section 1.1)
"Purchase Agreement" means the purchase agreement to be entered into
between ATA and the Initial Purchasers relating to the purchase of the
certificates.
"Rating Agency" means collectively at any time, each nationally
recognized rating agency that we have requested to rate the certificates and
that is then rating the certificates. The initial Rating Agencies will be
Moody's Investors Service and Standard & Poor's Ratings Services.
"Receiptholder" means a holder of an Escrow Receipt.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement to be dated as of the Issuance Date among the Initial
Purchasers, the pass through trustees and ATA.
"Regular Distribution Dates" means January 15, April 15, July 15 and
October 15 of each year.
"Remaining Weighted Average Life" on a given date with respect to any
secured promissory note means the number of days equal to the quotient
obtained by dividing (a) the sum of the products obtained by multiplying (1)
the amount of each then remaining scheduled installment of principal of such
secured promissory note, including the payment due on the maturity date of
such secured promissory note, by (2) the number of days from and including the
redemption date to but excluding the scheduled payment date of such principal
installment, by (b) the then unpaid principal amount of such secured
promissory note.
"Rent Payment Dates" means, with respect to each lease, January 15, April
15, July 15 and October 15 during the term of such lease.
A "Replacement Facility" for any pass through trust will mean an
irrevocable liquidity facility in substantially the form of the initial
Liquidity Facility for such pass through trust, including reinstatement
provisions, or, subject to certain conditions, in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the certificates (before
downgrading of such ratings, if any, as a result of the downgrading of the
applicable Liquidity Provider, such ratings as determined without regard to
the Policy), and in the case of the class G Liquidity Facility only, to be
consented to by the Policy Provider, which consent will not be unreasonably
withheld or delayed, in a face amount equal to the Required Amount for such
Liquidity Facility and issued by a person having unsecured debt ratings issued
by the applicable Rating Agencies which are equal to or higher than the
Threshold Rating. (Intercreditor Agreement, Section 1.1) The provider of any
Replacement Facility will have the same rights (including, without limitation,
priority distribution rights and rights as "Controlling Party") under the
Intercreditor Agreement as the replaced initial liquidity provider.
AI-11
<PAGE>
"Required Amount" means, for any day and with respect to any pass through
trust, the sum of the aggregate amount of interest, calculated at the Stated
Interest Rate applicable to the certificates issued by such pass through
trust, that would be payable on such certificates on each of the six
consecutive Regular Distribution Dates immediately following such day or, if
such day is a Regular Distribution Date, on such day and the succeeding five
quarterly Regular Distribution Dates, in each case calculated based on the
Pool Balance for such class on such day and without regard to expected future
payments of principal on such certificates. The Pool Balance for purposes of
the definition of Required Amount with respect to the class G Liquidity
Facility will, in the event of any Policy Provider Election, be deemed to be
reduced by the amount by which (a) the outstanding principal balance of the
series G secured promissory note in respect of which such Policy Provider
Election has been made at the time such Policy Provider Election was made,
exceeds (b) the amount of any policy drawings previously paid by the Policy
Provider in respect of principal on such series G secured promissory note.
"Section 1110" means Section 1110 of the Bankruptcy Code.
"Scheduled Payment" means the scheduled payment of interest on the
Deposits and the scheduled payment of interest or principal on the secured
promissory notes or any payment of interest on the corresponding class of
certificates as specified on the cover page of the prospectus at the Stated
Interest Rate for such class of certificates, with funds drawn under the
applicable Liquidity Facility; provided, however, that any payment of
principal, premium, if any, or interest resulting from the redemption of
purchase of any secured promissory note will not constitute a Scheduled
Payment.
"Special Distribution Date" means each date on which a Special Payment
will be distributed to certificateholders.
"Special Payment" means any payment received by a pass through trustee
other than a Scheduled Payment.
"Special Payments Account" means one or more accounts established and
maintained by the pass through trustee for the deposit of payments
representing Special Payments received by such pass through trustee.
"Stated Interest Rate" means, for any class of certificates, the interest
rate applicable to such class of certificates as specified on the cover page
of the prospectus.
"Sublessee" with respect to each lease, means any sublessee under a lease
from time to time.
"Supplemental Rent," with respect to each lease, means all amounts,
liabilities and obligations (other than Basic Rent) which are owned by ATA
under each lease and the agreements related thereto.
"Subordination Agent" means Wilmington Trust Company or any successor
Subordination Agent appointed in accordance with the Intercreditor Agreement.
"Threshold Rating" means the short-term unsecured debt rating of P-1 by
Moody's and A-1+ by Standard & Poor's or, in the event a person's short-term
unsecured debt is not rated by either Moody's or Standard & Poor's, the
long-term unsecured debt rating by Moody's and Standard & Poor's at least
equal to the initial rating by each of Moody's and Standard & Poor's on the
class A certificates. (Intercreditor Agreement, Section 1.1)
"Transfer Date" means the earlier of (i) the first Business Day after
December 31, 2000 or, if later, the fifth Business Day after the Delivery
Period Termination Date and (ii) the fifth Business Day after the occurrence
of a Triggering Event.
"Treasury Yield" means, at the time of determination and for purposes of
determining the Make-Whole Amount and the Deposit Make-Whole Premium, the
interest rate (expressed as a quarterly equivalent and as a decimal and, in
the case of United States Treasury bills, converted to a bond equivalent
yield) determined to be the per annum rate equal to the semiannual yield to
AI-12
<PAGE>
maturity for United States Treasury securities maturing on the Average Life
Date of such secured promissory note and trading in the public securities
markets either as determined by interpolation between the most recent weekly
average yield to maturity for two series of United States Treasury securities
trading in the public securities markets, (a) one maturing as close as
possible to, but earlier than, the Average Life Date of such secured
promissory note and (b) the other maturing as close as possible to, but later
than, the Average Life Date of such secured promissory note, in each case as
published in the most recent H.15(519) or, if a weekly average yield to
maturity for United States Treasury securities maturing on the Average Life
Date of such secured promissory note is reported in the most recent H.15(519),
such weekly average yield to maturity as published in such H.15(519).
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Board of Governors of the Federal
Reserve System. The date of determination of a Make-Whole Amount will be the
third Business Day prior to the applicable payment or redemption date and the
"most recent H.15(519)" means the H.15(519) published prior to the close of
business on the third Business Day prior to the applicable payment or
redemption date.
"Triggering Event" means (x) the occurrence of an Indenture Default under
all of the Indentures resulting in a PTC Event of Default with respect to the
most senior class of certificates then outstanding, (y) the acceleration of,
or failure to pay at final maturity, all of the outstanding secured promissory
notes or (z) certain bankruptcy or similar events involving ATA.
(Intercreditor Agreement, Section 1.1)
AI-13
<PAGE>
[LOGO] APPENDIX AII
Mr. Charles Cleaver
American Trans Air
7337 West Washington Street
Indianapolis, IN 46251
Subject: AISI Report No. A9D164B57 Revision A
AISI Short Form Base Market Appraisal - Seven B757-200Etop Aircraft
Dear Mr. Cleaver:
As requested, Aircraft Information Services, Inc. (AISI) is pleased to offer
American Trans Air (ATA) our opinion of the sight unseen base market value of
seven B757-200 ETOP aircraft all equipped with RB211-535E4 engines, four
aircraft with 255,500 lb and three aircraft with 220,000 lb maximum take-off
weight MTOW. Revision A to this report adds two new aircraft, tail numbers
N527AT and N528AT to the original report.
1. Methodology and Definitions
---------------------------
The standard terms of reference for commercial aircraft value are 'half-life
base market value' and 'half-life current market value' of an 'average'
aircraft. Base value is a theoretical value that assumes a balanced market
while current market value is the value in the real market; both assume a
hypothetical average aircraft condition. AISI value definitions are consistent
with the current definitions of the International Society of Transport
Aircraft Trading (ISTAT), those of 01 January 1994. AISI is a member of that
organization and employs an ISTAT Certified and Senior Certified Aircraft
Appraiser.
AISI defines a 'base value' as that of a transaction between equally willing
and informed buyer and seller, neither under compulsion to buy or sell, for a
single unit cash transaction with no hidden value or liability, and with
supply and demand of the sale item roughly in balance. Base values are
typically given for aircraft in 'new' condition, 'average half-life'
condition, or in a specifically described condition unique to a single
aircraft at a specific time. An 'average' aircraft is an operable airworthy
aircraft in average physical condition and with average accumulated flight
hours and cycles, with clear title and standard unrestricted certificate of
airworthiness, and registered in an authority which does not represent a
penalty to aircraft value or liquidity, with no damage history and with
inventory configuration and level of modification which is normal for its
intended use and age. AISI assumes average condition unless otherwise
specified in this report. 'Half-life' condition assumes that every component
or maintenance service which has a prescribed interval that determines its
service life, overhaul interval or interval between maintenance services, is
at a condition which is one-half of the total interval. It should be noted
that AISI and ISTAT value definitions apply to a transaction involving a
single aircraft, and
<PAGE>
[LOGO]
31 December 1999
AISI File No. A9D164B57 Revision A
Page - 2 -
that transactions involving more than one aircraft are often executed at
considerable and highly variable discounts to a single aircraft price, for a
variety of reasons relating to an individual buyer or seller.
AISI defines a 'current market value', which is synonymous with the older term
'fair market value' as that value which reflects the real market conditions,
whether at, above or below the base value conditions. Assumption of a single
unit sale and definitions of aircraft condition, buyer/seller qualifications
and type of transaction remain unchanged from that of base value. Current
market value takes into consideration the status of the economy in which the
aircraft is used, the status of supply and demand for the particular aircraft
type, the value of recent transactions and the opinions of informed buyers and
sellers. Current market value assumes that there is no short term time
constraint to buy or sell.
AISI encourages the use of base values to consider historical trends, to
establish a consistent baseline for long term value comparisons and future
value considerations, or to consider how actual market values vary from
theoretical base values. Base values are less volatile than current market
values and tend to diminish regularly with time. Base values are normally
inappropriate to determine near term values. AISI encourages the use of
current market values to consider the probable near term value of an aircraft.
2. Market Analysis - B757
----------------------
The B757-200 is a twin engine, narrowbody, stage 3, two man crew aircraft
typically seating 186 passengers in mixed class configuration. Typical range
with full passengers at low MTOW is approximately 2,900 nautical miles, while
at high MTOW the range increases to approximately 4,000 nautical miles. A
variant of the aircraft is qualified for Extended Twin Engine Overwater
Operation (ETOP) giving the aircraft significant flexibility for use in both
domestic and limited international markets. The aircraft was first produced in
1982, and we do not anticipate termination of production in the foreseeable
future.
The B757-200 passenger aircraft has a large fleet of 711 active aircraft, with
93 on order, and a very strong customer base of 59 airlines with
representation in every major geographic area, however heavily concentrated in
North America and Europe. A significant number of the B757-200 fleet, 376
aircraft, are operated via either a finance lease or operating lease.
<PAGE>
[LOGO]
31 December 1999
AISI File No. A9D164B57 Revision A
Page - 3 -
The B757-200 occupies a unique place in the family of commercial aircraft in
that it does not have a direct competitor. Its closest narrowbody competitors,
the MD-83 and A321 neither have the range to compete with the B757, and the
MD-83 has considerably smaller passenger capacity. Airbus is considering
increasing the weights of the A321 to produce a 3,000mm range A321-300, but a
new larger wing would be required for the A321 to be truly competitive with
the B757. The closest widebody competitors, the B767-200 and A310-200/300, are
considerably larger aircraft and cost considerably more per plane mile to
operate. For the foreseeable future, it appears Airbus is content to permit
the B757 to remain unchallenged at the top of the larger, long range,
narrowbody market. Boeing, realizing it has a significant market in which it
is uncontested, has now committed to increase the size and weights of the
B757-200 creating the B757-300. This will further distance the B757 family
from its narrowbody competitors and place it closer to the smallest widebody
competitors, over whom it enjoys considerable plane mile operating cost
advantages.
AISI analysis of the market for the B757-200 indicates that demand had
stabilized in late 1995 and through 1996, increased from 1997 through 1998 but
has again stabilized and will continue so at least until the current uncertain
economic conditions become widespread. Orders and backlog for new aircraft
have declined but availability of newer B757 aircraft is tight; a production
rate decrease to 3 per month in 3rd quarter 1996 had been reversed to 4 per
month in 1997. Current market purchase prices and lease rates for both older
and newer used B757200 aircraft are now declining, probably in response to
general unsettled economic conditions, the southeast Asian crises and lower
domestic traffic growth in the United States. But as southeast Asia is not a
large market for the B757, US domestic traffic is still positive and European
domestic traffic growth is strong, the effect on the B757's value is as yet
moderate.
<PAGE>
[LOGO]
31 December 1999
AISI File No. A9D164B57 Revision A
Page - 4 -
3. Valuation
---------
The base market valuations are presented below in current USDollars subject to
the assumptions, definitions and disclaimers herein.
Base
Market Value
Tail Delivery MTOW Aircraft Current
Aircraft Type Number Date (lbs.) Engines Condition U.S. Dollars
B757-200Etop N515AT Oct 1995 255,500 RB211-535E4 Half Life $48,690,000
N523AT Sep 1999 220,000 RB211-535E4 3 mos old $57,110,000
N524AT Oct 1999 220,000 RB211-535E4 2 mos old $57,180,000
N525AT Jun 2000 220,000 RB211-535E4 New $58,100,000
N526AT Jun 2000 255,500 RB211-535E4 New $60,260,000
N527AT Nov 2000 255,500 RB211-535E4 New $60,950,000
N528AT Nov 2000 255,500 RB211-535E4 New $60,950,000
Note: Future deliveries are in then current US Dollars assuming 2.8% annual
inflation.
<PAGE>
[LOGO]
31 December 1999
AISI File No. A9D164B57 Revision A
Page - 5 -
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft or
equipment. AISI has no past, present, or anticipated future interest in the
subject aircraft or equipment. The conclusions and opinions expressed in this
report are based on published information, information provided by others,
reasonable interpretations and calculations thereof and are given in good
faith. Such conclusions and opinions are judgments that reflect conditions and
values which are current at the time of this report. The values and conditions
reported upon are subject to any subsequent change. AISI shall not be liable
to any party for damages arising out of reliance or alleged reliance on this
report, or for any parties action or failure to act as a result of reliance or
alleged reliance on this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
John D. McNicol
Vice President
Appraisals & Forecasts
<PAGE>
MORTEN BEYER & AGNEW
AVIATION CONSULTING FIRM
Appraisal of Seven (7)
Boeing B757-200 Aircraft
PREPARED FOR:
American Trans Air
&
Salomon Smith Barney
JANUARY 18, 2000
Washington, D.C. London
8180 Greensboro Drive Lahinch 62, Lashmere
Suite 1000 Copthorne
McLean, Virginia 22102 West Sussex
Phone +703 847 6598 Phone +44 1342 716248
Fax +703 847 1911 Fax +44 1342 718967
<PAGE>
I. INTRODUCTION AND EXECUTIVE SUMMARY
MORTEN BEYER & AGNEW, INC. (MBA), has been retained by American Trans Air
("ATA") to determine the Current Base Value of (7) Boeing 757-200 aircraft
(27598, 30232, 30233, 30548, 30549, and TBD) in passenger configuration, as of
December 31, 1999. The aircraft are further identified in Section II of this
report.
In performing this valuation, MBA did not inspect the aircraft or their
historical maintenance documentation, and we relied solely on information
provided to us by American Trans Air. Based on the information set forth
further in this report, it is our opinion that the Current Base Value of this
portfolio is $ 415,460,000 as noted in Section IV.
MBA uses the definition of certain terms, such as Current Market Value and
Base Value, as promulgated by the Appraisal Program of International Society
of Transport Aircraft Trading (ISTAT), a non-profit association of management
personnel from banks, leasing companies, airlines, manufacturers, brokers, and
others who have a vested interest in the commercial aviation industry and who
have established a technical and ethical certification program for expert
appraisers.
ISTAT defines Current Market Value (CMV) as the appraiser's opinion of the
most likely trading price that may be generated for an aircraft under market
conditions that are perceived to exist at the time in question. Current Market
Value assumes that the aircraft is valued for its highest, best use; that the
parties to the hypothetical sale transaction are willing, able, prudent and
knowledgeable and under no unusual pressure for a prompt sale; and that the
transaction would be negotiated in an open and unrestricted market on an
arm's-length basis, for cash or equivalent consideration, and given an
adequate amount of time for effective exposure to prospective buyers.
The ISTAT definition of Base Value (BV) has, essentially, the same elements of
Market Value except that the market circumstances are assumed to be in a
reasonable state of equilibrium. Thus, Base Value pertains to an idealized
aircraft and market combination, but will not necessarily reflect the actual
Current Market Value of the aircraft in question. BV is founded in the
historical trend of values and is generally used to analyze historical values
or to project future values.
1
<PAGE>
II. AIRCRAFT
<TABLE>
<CAPTION>
Boeing 757-23N (ETOPS)
<S> <C> <C> <C> <C> <C> <C> <C>
Serial Number 27598 30232 30233 30548 30549 TBD TBD
Registration Marking N515AT N523AT N524AT N525AT N526AT N527AT N528AT
Date of Manufacture 10/95 9/99 10/99 6/00 6/00 11/00 11/00
MTOW 255,500 255,500 255,500 255,500 255,500 255,500 255,500
Configuration 216Y 216Y 216Y 216Y 216Y 216Y 216Y
Engine Type RB211-535E4
Noise Compliance State III
</TABLE>
2
<PAGE>
III. CURRENT MARKET CONDITIONS
Boeing 757-200
Almost 1,000 B-757s have been built since it entered service in 1982, and
production rates continue firm despite competition from Airbus and from
Boeing's own increasingly larger B-737-800/900s. Seventy-nine have been built
as freighters, almost all for UPS. The aircraft is a reasonably good cargo
aircraft, comparable to the B-727-200, but will not be converted until used
prices decline. As of now a used B-757 sells for approximately what it cost
new. There are 13 B-757-200s on the market for sale or for lease including one
freighter. MBA estimates the current market value of older B-757-200s at 90
percent of Base Value. The high gross ER model is increasingly being used on
skinny Trans Atlantic and charter flights.
Boeing has also stretched the B-757 by 20 feet as the B-757-300, encroaching
on the territory of the all-but defunct B-767-200 of similar capacity. The
aircraft is off to a slow start, with only 17 orders to date. We value the
-300 at 100 percent of Base Value.
It is important to note in the case of these particular aircraft, American
Trans Air has opted to incur an additional fee from Boeing to have the option
to increase the Maximum Gross Take-off Weight (MTOW). MBA has valued these
aircraft at the highest possible rating of 255,500 pounds.
3
<PAGE>
IV. VALUATION
American Trans Air-Boeing 757-23N *Current Base Value ($000,000)
N515AT (s/n 27598) 50.20
N523AT (s/n 30232) 59.90
N524AT (s/n 30233) 60.00
N525AT (s/n 30548) 61.10
N526AT (s/n 30549) 61.10
N527AT (s/n TBD) 61.58
N528AT (s/n TBD) 61.58
* Current Base Value - includes a positive adjustment for ETOPS (1.00) and
for increased MTOW (.914); Each aircraft value is also adjusted for month
and year of manufacture.
In developing the Current Base Value of these aircraft, MBA did not inspect
the aircraft nor their historical maintenance documentation, but relied on
partial information supplied by the Client. Therefore, we used certain
assumptions that are generally accepted industry practice to calculate the
value of aircraft when more detailed information is not available. The
principal assumptions are as follows:
1. The aircraft is in good overall condition.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of mid-time/mid-life unless
otherwise specified.
3. The historical maintenance documentation has been maintained to
acceptable international standards.
4. The specifications of the aircraft are those most common for an aircraft
of its type and vintage.
5. The aircraft is in a standard airline configuration.
6. The aircraft is current as to all Airworthiness Directives and Service
Bulletins.
7. Its modification status is comparable to that most common for an
aircraft of its type and vintage.
8. Its utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
10. No accounting is made for lease obligations or terms of ownership.
4
<PAGE>
V. COVENANTS
This report has been prepared for the exclusive use of American Trans Air and
shall not be provided to other parties by MBA without the express consent of
American Trans Air.
MBA certifies that this report has been independently prepared and that it
fully and accurately reflects MBA's opinion as to the Current Base Value. MBA
further certifies that it does not have, and does not expect to have, any
financial or other interest in the subject or similar aircraft.
This report represents the opinion of MBA as to the Current Base Value of the
subject aircraft and is intended to be advisory only in nature. Therefore, MBA
assumes no responsibility or legal liability for any actions taken or not
taken by American Trans Air or any other party with regard to the subject
aircraft. By accepting this report, all parties agree that MBA shall bear no
such responsibility or legal liability.
PREPARED BY:
Bryson P. Monteleone
Director of Operations
REVIEWED BY:
Morten S. Beyer, Appraiser Fellow
Chairman and CEO
ISTAT Certified Senior Appraiser
5
<PAGE>
[SH&E Letterhead]
January 28, 2000
Mr. Charles Cleaver
American Trans Air, Inc.
P.O. Box 51609
Indianapolis, IN 46251
Re: Value Opinion of Five Boeing 757-200 ETOPS Aircraft
Dear Mr. Cleaver:
Simat, Helliesen & Eichner, Inc. ("SH&E"), was asked by American Trans Air
(the "Client") to determine the Base Value ("BV") for seven Boeing 757-200
ETOPS aircraft (the "Subject Aircraft") to be operated by American Trans Air,
Inc. The specifications for the Subject Aircraft are shown on Attachment A.
SH&E has determined the following values for the Subject Aircraft:
Subject Aircraft Values ($Mil)
Aircraft Aircraft Serial Delivery Base
Type Registration Number Date Value
==============================================================================
757-200 ETOPS N515AT 27598 October 1995 $52.6
757-200 ETOPS N523AT 30232 September 1999 $65.5
757-200 ETOPS N524AT 30233 October 1999 $65.5
757-200 ETOPS N525AT 30548 June 2000 $65.5
757-200 ETOPS N526AT 30549 June 2000 $66.8
757-200 ETOPS N527AT TBD November 2000 $66.8
757-200 ETOPS N528AT TBD November 2000 $66.8
The definitions and assumptions used in the SH&E valuation process are as
follows:
SH&E Valuation Methodology
Since SH&E was formed in 1963, the firm has appraised virtually every major
commercial jet and turboprop aircraft model and has also appraised many
general aviation and corporate aircraft models. SH&E's appraisal's are
performed according to the
<PAGE>
[LOGO]
Mr. Charles Cleaver
January 28, 2000
Page 2
International Society of Transport Aircraft Trading (ISTAT) principles of
appraisal practice and code of ethics. SH&E's staff includes two appraisers
certified by ISTAT.
The SH&E valuation approach starts by determining a half-life value. The term
"half-life" represents an aircraft whose major components (e.g. airframe,
engines, landing gear and APU) have used 50 percent of the time between
scheduled or expected overhauls. This initial appraisal can then be adjusted
(positive or negative) for each individual unit to reflect the aircraft's
maintenance status relative to the next overhaul. In most cases, the Base
Value of an aircraft assumes its physical condition is average for an aircraft
of its type and age, and its maintenance time status is at half-life (or
benefiting from an above-average maintenance status if it is new or nearly
new, as the case may be). SH&E half-life values are determined on a
semi-annual basis by reviewing recent past sales, aircraft availability
trends, technological aspects, environmental constraints and maintenance
requirements.
In the case of new aircraft, the above half-life values are automatically
adjusted upwards to reflect the fact that the aircraft has the full span of
maintenance overhaul intervals available. Consequently, SH&E's initial
depreciation of new aircraft is considerably greater than for a used aircraft,
thereby accounting for both the change in its maintenance status and its
intrinsic depreciation.
Base Value Definition
The Base Value (BV) is the appraiser's opinion of the price at which an
aircraft would change hands between a willing buyer and a willing seller,
neither being under compulsion to buy or sell, and both having knowledge of
all relevant facts. An aircraft's BV is founded in the historical trend of
values and in the projection of value trends, and presumes an arm's-length,
cash transaction.
Since BV pertains to a somewhat idealized aircraft and market combination, it
may not necessarily reflect the actual value of the aircraft in question, but
is a nominal starting value to which adjustments may be applied to determine
an actual value.
The BV of each aircraft is derived from SH&E's aircraft valuation models. The
SH&E BV models provide trend lines derived from known transactions,
econometric factors affecting aircraft values and aircraft economic life
estimates. Because it is related to long-term market trends, the BV definition
is normally applied to analyses of historical values and projections of
residual values.
<PAGE>
[LOGO]
Mr. Charles Cleaver
January 28, 2000
Page 3
Economic Useful Life
The Economic useful life is an economic and technological issue driven by two
sacrifices. The first sacrifice is the loss of interest on the funds invested
in the asset and the second is the economic depreciation of the asset.
The asset is deemed to have economic life remaining as long as it provides
positive inflow of funds (by generating revenues greater than its operating
costs) sufficient to exceed the sum of the two sacrifices described above. In
general terms, economic life can be reflected as that age in which an asset's
expected decline in real value is no longer material.
In the case of an aircraft, the economic life is influenced by many external
factors, including: fuel costs, environmental restraints, unexpected fatigue
and corrosion requirements, the capacity to generate adequate traffic yields
and the development of competing transportation technology.
Assumptions
SH&E used information supplied by the Client together with in-house data
accumulated through other recent studies of aircraft transactions. Data
sources included FAA and manufacturer forecasts and DOT Form 41, Schedule P5
Accounts. Specific assumptions included the following:
o SH&E assumed that the Subject Aircraft meet all of the specifications and
performance standards for typical 757-200 ETOPS aircraft.
o SH&E did not perform a physical inspection of the Subject Aircraft and
has assumed the Subject Aircraft to be in a condition similar to
equipment of comparable age and type.
o SH&E assumed that all normally required maintenance has been and will
continue to be performed including all Airworthiness Directives.
o SH&E assumed that the Subject Aircraft will remain in their current
configuration and continue to be certified for operations under the U.S.
Federal Aviation Administration (or a comparable authority) and have
maintenance performed that is in accordance with industry recognized
standards.
SH&E's opinions are based upon historical relationships and expectations that
it believes are reasonable. Some of the underlying assumptions, including
those described above are
<PAGE>
[LOGO]
Mr. Charles Cleaver
January 28, 2000
Page 4
detailed explicitly or implicitly elsewhere in this report, and may not
materialize because of unanticipated events and circumstances. SH&E's opinions
could, and would, vary materially, should any of the above assumptions prove
to be inaccurate.
Limitations
The opinions expressed herein are not given as an inducement or endorsement
for any financial transaction. They are prepared for the exclusive use of the
addressee and the addressee may not provide this report to other parties,
including third parties, without SH&E's written consent.
SH&E accepts no responsibility for damages, if any, that may result from
decisions made or actions taken by third parties that may be based upon this
report. In accepting this report the Client agrees to indemnify and hold SH&E
harmless against all losses, claims and costs arising as a result of this
report except when attributable to SH&E's gross negligence or willful
misconduct.
This report reflects SH&E's expert opinion and best judgment based upon the
information available to it at the time of its preparation. SH&E does not
have, and does not expect to have, any financial interest in the appraised
property.
Yours sincerely,
Clive G. Medland, FRAeS
Vice President
Senior Appraiser
International Society of Transport Aircraft Trading
<PAGE>
Attachment A
<TABLE>
<CAPTION>
American Trans Air
BOEING 757-200 AIRCRAFT SPECIFICATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Aircraft Type 757-200 757-200 757-200 757-200 757-200 757-200 757-200
Serial Number 27598 30232 30233 30548 30549 TBD TBD
Delivery Date Oct-95 Sep-99 Oct-99 Jun-00 Jun-00 Nov-00 Nov-00
ETOPS Yes Yes Yes Yes Yes Yes Yes
Engine Type R-B211-535E4 RB211-535E4 RB211-535E4 RB211-535E4 RB211-535E4 RB211-535E4 RB211-535E4
Configuration 216Y 216Y 216Y 216Y 216Y 216Y 216Y
Max. Take-Off Weight 255,500 220,000* 220,000* 220,000* 255,500 255,500 255,500
Max. Landing Weight 198,000 lb 198,000 lb 198,000 lb 198,000 lb 198,000 lb 198,000 lb 198,000 lb
Max. Zero Fuel Weight 184,000 lb 184,000 lb 184,000 lb 184,000 lb 184,000 lb 184,000 lb 184,000 lb
Fuel Capacity 11,276 gallons 11,276 gallons 11,276 gallons 11,276 gallons 11,276 gallons 11,276 gallons 11,276 gallons
<FN>
* Boeing Flexible Gross Weight Program allows ATA to operate aircraft at
255,500 MTOW when required but program is not transferable to next
operator,
</FN>
</TABLE>
<PAGE>
APPENDIX AIII
<TABLE>
<CAPTION>
SECURED PROMISSORY NOTES PRINCIPAL PAYMENT SCHEDULE
Regular Aircraft Registration Number
Distribution Date
N515AT N523AT N524AT N525AT N526AT N527AT N528AT
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
January 15, 2001 $1,841,095 $1,572,995 $1,579,853 $1,545,912 $1,545,912 $1,813,971 $1,813,971
January 15, 2002 1,982,456 1,693,771 1,700,681 1,652,000 1,652,000 1,609,768 1,609,768
January 15, 2003 2,134,670 1,823,820 1,829,337 1,805,337 1,805,337 1,758,688 1,758,688
January 15, 2004 2,298,572 1,963,854 1,967,724 1,974,621 1,974,621 1,923,444 1,923,444
January 15, 2005 2,475,058 2,114,640 2,116,581 2,161,452 2,161,452 2,100,705 2,100,705
January 15, 2006 2,477,269 2,277,004 2,276,698 2,373,243 2,373,243 2,306,073 2,306,073
January 15, 2007 2,120,331 2,451,834 2,448,929 1,269,193 1,269,193 1,574,089 1,574,089
January 15, 2008 1,042,335 1,514,182 1,568,058 2,391,252 2,391,252 1,906,521 1,906,521
January 15, 2009 2,363,163 1,031,435 1,029,910 1,366,776 1,366,776 1,945,068 1,945,068
January 15, 2010 2,544,608 1,292,878 1,128,295 1,870,813 1,870,813 2,134,967 2,134,967
January 15, 2011 2,739,985 2,188,828 1,858,298 2,327,422 2,327,422 2,315,634 2,315,634
January 15, 2012 2,950,363 2,356,887 2,315,660 2,526,528 2,526,528 2,513,732 2,513,732
January 15, 2013 1,699,281 2,537,851 2,490,838 2,742,667 2,742,667 2,728,776 2,728,776
January 15, 2014 0 2,732,709 2,679,268 2,977,297 2,977,297 2,962,217 2,962,217
January 15, 2015 0 2,942,528 2,881,952 3,231,998 3,231,998 3,215,629 3,215,629
January 15, 2016 0 2,454,548 3,099,969 3,508,489 3,508,489 3,490,719 3,490,719
</TABLE>
<PAGE>
--------------------------------------- ---------------------------------
--------------------------------------- ---------------------------------
$201,901,000
No dealer, salesperson or Class G Pass Through
other person has been authorized to Certificates, Series 2000-1
give any information or to make any
representations in connection with the
offer contained herein other than
those contained in this prospectus,
and, if given or made, such
information or representation must $36,740,000
not be relied upon as having been Class C Pass Through
authorized by the Company. This Certificates, Series 2000-1
prospectus does not constitute an
offer to sell or the solicitation of an
offer to buy to any person in any
jurisdiction in which such offer or American Trans Air, Inc.
solicitation is not authorized or in
which the person making such offer
or solicitation is not qualified to do so Applicable Underlying Payments
or to any person to whom it is Fully and Unconditionally
unlawful to make such offer or Guaranteed by
solicitation. Neither the delivery of Amtran, Inc.
this prospectus nor any sale made
hereunder shall under any OFFER TO EXCHANGE
circumstances create an implication
that there has been no change in the $201,901,000 Class G Pass Through
affairs of the Company since the date Certificates and
hereof or that the information $36,740,000 Class C Pass Through
contained herein is correct as of any Certificates
time subsequent to the date hereof.
FOR
------------------ A Like Amount of Registered Class G
and Class C
Pass Through Certificates
--------------------
PROSPECTUS
--------------------
--------------------------------------- ---------------------------------
--------------------------------------- ---------------------------------
<PAGE>
Part II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Information relating to indemnification of directors and officers is
incorporated by reference herein from Item 14 of the Company's Registration
Statement on Form S-1 (No. 33-59630).
Item 21. Exhibits.
Exhibit
Number Description
*3.1 -- Restated Articles of Incorporation of the Company *3.2 -- By-laws
of the Company
4.1 -- Form of Indenture (Leased Aircraft) Trust Indenture and Mortgage,
dated as of [ ], 2000, between First Security Bank, National
Association, not in its individual capacity, except as expressly
stated herein, but solely as Owner Trustee, and Wilmington Trust
Company, not in its individual capacity, except as expressly stated
herein, but solely as Loan Trustee
4.2 -- Form of Indenture (Owned Aircraft) Trust Indenture and Mortgage,
dated as of [ ], 2000, between American Trans Air, Inc., owner, and
Wilmington Trust Company, not in its individual capacity, except as
expressly stated herein, but solely as Mortgagee
4.3 -- Form of Class G American Trans Air, Inc. Pass Through Certificates
(included in Exhibit 4.5)
4.4 -- Form of Class C American Trans Air, Inc. Pass Through Certificates
(included in Exhibit 4.7)
4.5 -- Pass Through Trust Agreement, dated as of February 15, 2000,
between American Trans Air, Inc. and Wilmington Trust Company, as
Trustee, made with respect to the formation of American Trans Air
2000-1G-O Pass Through Trust and the issuance of 8.039% Initial
American Trans Air 2000-1G-O Pass Through Trust Certificates and
8.039% Exchange American Trans Air 2000-1G-O Pass Through Certificates
4.6 -- Pass Through Trust Agreement, dated February 15, 2000, between
American Trans Air, Inc. and Wilmington Trust Company, as Trustee,
made with respect to the formation of American Trans Air 2000-1G-S
Pass Through Trust and the issuance of 8.039% Initial American Trans
Air 2000-1G-S Pass Through Certificates and 8.039% Exchange American
Trans Air 2000-1G-S Pass Through Certificates
4.7 -- Pass Through Trust Agreement, dated as of February 15, 2000,
between American Trans Air, Inc. and Wilmington Trust Company, as
Trustee, made with respect to the formation of American Trans Air
2000-1C-O Pass Through Trust and the issuance of 9.644% Initial
American Trans Air 2000-1C-O Pass Through Certificates and 9.644%
Exchange American Trans Air 2000-1C-O Pass Through Certificates
4.8 -- Pass Through Trust Agreement, dated as of February 15, 2000,
between American Trans Air, Inc. and Wilmington Trust Company, as
Trustee, made with respect to the formation of American Trans Air
2000-1C-S Pass Through Trust and the issuance of 9.644% Initial
American Trans Air 2000-1C-S Pass Through Certificates and 9.644%
Exchange American Trans Air 2000-1C-S Pass Through Certificates
4.9 -- Revolving Credit Agreement (2000-1G), dated as of February 15,
2000, between Wilmington Trust Company, not in its individual capacity
but solely as Subordination Agent, as agent and trustee for the
American Trans Air 2000-1G Pass Through Trust, as Borrower, and
Citibank, N.A., as Liquidity Provider, relating to American Trans Air
2000-1G Pass Through Trust, Series 2000-1G, and 8.039% American Trans
Air Pass Through Certificates, Series 2000-1G-O
4.10 -- Revolving Credit Agreement (2000-1C), dated as of February 15,
2000, between Wilmington Trust Company, not in its individual capacity
but solely as Subordination Agent, as agent and trustee for the
American Trans Air 2000-1C Pass Through Trust, as Borrower, and
Citibank, N.A., as Liquidity Provider, relating to American
<PAGE>
Trans Air 2000-1C Pass Through Trust, Series 2000-1C 9.644% American
Trans Air Pass Through Certificates, Series 2000-1C-O
4.11 -- Intercreditor Agreement, dated as of February 15, 2000, among
Wilmington Trust Company, not in its individual capacity but solely as
Trustee under the American Trans Air 2000-1G Pass Through Trust and
American Trans Air 2000-1C Pass Through Trust, Citibank, N.A., as
Class G Liquidity Provider and Class C Liquidity Provider, Ambac
Assurance Corporation, as Policy Provider, and Wilmington Trust
Company, not in its individual capacity except as expressly set forth
herein but solely as Subordination Agent and Trustee
4.12-- Exchange and Registration Rights Agreement, dated as of February 15,
2000, among American Trans Air, Inc., Wilmington Trust Company, not in
its individual capacity but solely as Trustee under American Trans Air
Pass Through Trust, Series 2000-1G-O, American Trans Air Pass Through
Trust, Series 2000-1C-O, and Salomon Smith Barney Inc., Bank One
Capital Markets, Inc., Chase Securities Inc. and Morgan Stanley & Co.
Incorporated
4.13-- Deposit Agreement (Class G), dated as of February 15, 2000, between
First Security Bank, National Association, as Escrow Agent, and
Citibank, N.A., as Depositary
4.14-- Deposit Agreement (Class C), dated as of February 15, 2000, between
First Security Bank, National Association, as Escrow Agent, and
Citibank, N.A., as Depositary
4.15-- Escrow and Paying Agent Agreement (Class G), dated as of February
15, 2000, among First Security Bank, National Association, as Escrow
Agent, Salomon Smith Barney Inc., Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Banc One Capital Markets, Inc., as Initial
Purchasers, Wilmington Trust Company, not in its individual capacity
but solely as Pass Through Trustee for and on behalf of American Trans
air 2000-1G-O Pass Through Trust, as Pass Through Trustee, and
Wilmington Trust Company, as Paying Agent
4.16-- Escrow and Paying Agent Agreement (Class C), dated as of February
15, 2000, among First Security Bank, National Association as Escrow
Agent, Salomon Smith Barney Inc., Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Banc One Capital Markets, Inc., as Initial
Purchasers, Wilmington Trust Company, not in its individual capacity
but solely as Pass Through Trustee for and on behalf of American Trans
Air 2000-1C-O Pass Through Trust, as Pass Through Trustee, and
Wilmington Trust Company, as Paying Agent
4.17 -- Note Purchase Agreement, dated as of February 15, 2000, among
American Trans Air, Inc., Amtran, Inc., as Guarantor, Wilmington Trust
Company, as Pass Through Trustee under each of the Pass Through Trust
Agreements, Wilmington Trust Company, as Subordination Agent, First
Security Bank, National Association, as Escrow Agent, and Wilmington
Trust Company, as Paying Agent
4.18-- Certificate Guaranty Insurance Policy Endorsement, dated February
15, 2000, issued to Wilmington Trust Company not in its individual
capacity but solely as Subordination Agent under the Agreement,
Citibank, N.A., as Class G Liquidity Provider and Class C Liquidity
Provider, solely with respect to Deficiency Amounts descried in item
(g) of the definition of "Deficiency Amount"
4.19-- Indemnification Agreement with respect to Amtran Trans Air, Inc.
Pass Through Certificates, Series 2000-1G, dated as of February 15,
2000, on behalf of Ambac Assurance Corporation, Salomon Smith Barney
Inc., Morgan Stanley & Co., Incorporated, Chase Securities Inc., and
Banc One Capital Markets, Inc.
4.20-- Insurance and Indemnity Agreement with respect to American Trans
Air, Inc. Pass Through Certificates, Series 2000- 1G, dated as of
February 15, 2000, between Ambac Assurance Corporation, as Policy
Provider, American Trans Air, Inc. and Wilmington Trust Company, not
in its individual capacity but solely as Subordination Agreement
5.1-- Opinion of Troutman Sanders LLP as to the legality of the Exchange
Certificates and the Guarantee being registered hereby
12.1-- Computation of ratio of earnings to fixed charges
23.1-- Consent of Troutman Sanders LLP (included in Exhibit 5.1)
23.2-- Consent of Ernst & Young LLP
23.3-- Consent of Ambac's Accountants
23.4-- Consent of AISI
II-2
<PAGE>
23.5-- Consent of MBA
23.6-- Consent of SH&E
24.1-- Power of Attorney (see signature page in Part II of Registration
Statement)
25.1-- Statement of Eligibility of Wilmington Trust Company for the 2000-1G
Pass Through Certificates, on Form T-1
25.2-- Statement of Eligibility of Wilmington Trust Company for the 2000-1C
Pass Through Certificates, on Form T-1
99.1-- Form of Letter of Transmittal
99.2-- Form of Notice of Guaranteed Delivery
99.3-- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
99.4-- Form of Letter to Clients
-------------------------
* Previously filed as an exhibit to Amtran's Registration Statement on
Form S-1 (File No. 33-59630), and incorporated herein by reference.
II-3
<PAGE>
Item 22. Undertakings.
(a) The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one
business day of receipt of such request, and to send the incorporated
document by first-class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(d) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
(e) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) and section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Indianapolis, State of Indiana, on the 11th day of August, 2000.
AMTRAN, INC.
By /s/ J. George Mikelsons
J. George Mikelsons
Chairman of the Board of Directors
POWER OF ATTORNEY
The undersigned directors and officers of Amtran, Inc. do hereby
constitute and appoint John P. Tague and Kenneth K. Wolff, and each of them
with full power of substitution, our true and lawful attorneys-in-fact and
agents to do any and all acts and things in our name and behalf in our
capacities as directors and officers, and to execute any and all
instruments for us and in our names in the capacities indicated below which
such person may deem necessary or advisable to enable Amtran, Inc. to
comply with the Securities Act of 1933, as amended (the "Securities Act"),
and any rules, regulations and requirements of the Securities and Exchange
Commission, in connection with this Registration Statement, including
specifically, but not limited to, power and authority to sign for us, or
any of us, in the capacities indicated below and any and all amendments
(including pre-effective and post-effective amendments or any other
registration statement filed pursuant to the provisions of Rule 462(b)
under the Securities Act) hereto; and we do hereby ratify and confirm all
that such person or persons shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Titles Dates
---------- ------ -----
<S> <C> <C>
/s/ J. George Mikelsons
---------------------------- Chairman of the Board of Directors August 11, 2000
(J. George Mikelsons)
/s/ John P. Tague
---------------------------- President and Chief Executive Officer August 11, 2000
(John P. Tague) and Director (Principal Executive
Officer)
/s/ James W. Hlavacek
---------------------------- Executive Vice President and Chief August 11, 2000
(James W. Hlavacek) Operating Officer and Director
/s/ Kenneth K. Wolff
---------------------------- Executive Vice President and Chief August 11, 2000
(Kenneth K. Wolff) Financial Officer and Director
(Principal Financial and Accounting
Officer)
<PAGE>
/s/ Robert A. Abel
---------------------------- Director August 11, 2000
(Robert A. Abel)
/s/ William P. Rogers, Jr. Director August 11, 2000
----------------------------
(William P. Rogers, Jr.)
/s/ Andrejs P. Stipnieks
---------------------------- Director August 11, 2000
(Andrejs P. Stipnieks)
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Indianapolis, State of Indiana, on the 11th day of August, 2000.
AMERICAN TRANS AIR, INC.
By /s/ J. George Mikelsons
J. George Mikelsons
Sole Director
2
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
*3.1 -- Restated Articles of Incorporation of the Company
*3.2 -- By-laws of the Company
4.1 -- Form of Indenture (Leased Aircraft) Trust Indenture and Mortgage,
dated as of [ ], 2000, between First Security Bank, National
Association, not in its individual capacity, except as expressly
stated herein, but solely as Owner Trustee, and Wilmington Trust
Company, not in its individual capacity, except as expressly stated
herein, but solely as Loan Trustee
4.2 -- Form of Indenture (Owned Aircraft) Trust Indenture and Mortgage,
dated as of [ ], 2000, between American Trans Air, Inc., owner, and
Wilmington Trust Company, not in its individual capacity, except as
expressly stated herein, but solely as Mortgagee
4.3 -- Form of Class G American Trans Air, Inc. Pass Through Certificates
(included in Exhibit 4.5)
4.4 -- Form of Class C American Trans Air, Inc. Pass Through Certificates
(included in Exhibit 4.7)
4.5 -- Pass Through Trust Agreement, dated as of February 15, 2000,
between American Trans Air, Inc. and Wilmington Trust Company, as
Trustee, made with respect to the formation of American Trans Air
2000-1G-O Pass Through Trust and the issuance of 8.039% Initial
American Trans Air 2000-1G-O Pass Through Trust Certificates and
8.039% Exchange American Trans Air 2000-1G-O Pass Through
Certificates
4.6 -- Pass Through Trust Agreement, dated February 15, 2000, between
American Trans Air, Inc. and Wilmington Trust Company, as Trustee,
made with respect to the formation of American Trans Air 2000-1G-S
Pass Through Trust and the issuance of 8.039% Initial American Trans
Air 2000-1G-S Pass Through Certificates and 8.039% Exchange American
Trans Air 2000-1G-S Pass Through Certificates
4.7 -- Pass Through Trust Agreement, dated as of February 15, 2000,
between American Trans Air, Inc. and Wilmington Trust Company, as
Trustee, made with respect to the formation of American Trans Air
2000-1C-O Pass Through Trust and the issuance of 9.644% Initial
American Trans Air 2000-1C-O Pass Through Certificates and 9.644%
Exchange American Trans Air 2000-1C-O Pass Through Certificates
4.8 -- Pass Through Trust Agreement, dated as of February 15, 2000,
between American Trans Air, Inc. and Wilmington Trust Company, as
Trustee, made with respect to the formation of American Trans Air
2000-1C-S Pass Through Trust and the issuance of 9.644% Initial
American Trans Air 2000-1C-S Pass Through Certificates and 9.644%
Exchange American Trans Air 2000-1C-S Pass Through Certificates
4.9 -- Revolving Credit Agreement (2000-1G), dated as of February 15,
2000, between Wilmington Trust Company, not in its individual capacity
but solely as Subordination Agent, as agent and trustee for the
American Trans Air 2000-1G Pass Through Trust, as Borrower, and
Citibank, N.A., as Liquidity Provider, relating to American Trans Air
2000-1G Pass Through Trust, Series 2000-1G, and 8.039% American Trans
Air Pass Through Certificates, Series 2000-1G-O
4.10 -- Revolving Credit Agreement (2000-1C), dated as of February 15,
2000, between Wilmington Trust Company, not in its individual capacity
but solely as Subordination Agent, as agent and trustee for the
American Trans Air 2000-1C Pass Through Trust, as Borrower, and
Citibank, N.A., as Liquidity Provider, relating to American Trans Air
2000-1C Pass Through Trust, Series 2000-1C 9.644% American Trans Air
Pass Through Certificates, Series 2000-1C-O
4.11 -- Intercreditor Agreement, dated as of February 15, 2000, among
Wilmington Trust Company, not in its individual capacity but solely as
Trustee under the American Trans Air 2000-1G Pass Through Trust and
American Trans Air 2000-1C Pass Through Trust, Citibank, N.A., as
Class G Liquidity Provider and Class C Liquidity Provider, Ambac
Assurance Corporation, as Policy Provider, and Wilmington Trust
Company, not in its individual capacity except as expressly set forth
herein but solely as Subordination Agent and Trustee
3
<PAGE>
4.12-- Exchange and Registration Rights Agreement, dated as of February 15,
2000, among American Trans Air, Inc., Wilmington Trust Company, not in
its individual capacity but solely as Trustee under American Trans Air
Pass Through Trust, Series 2000-1G-O, American Trans Air Pass Through
Trust, Series 2000-1C-O, and Salomon Smith Barney Inc., Bank One
Capital Markets, Inc., Chase Securities Inc. and Morgan Stanley & Co.
Incorporated
4.13-- Deposit Agreement (Class G), dated as of February 15, 2000, between
First Security Bank, National Association, as Escrow Agent, and
Citibank, N.A., as Depositary
4.14-- Deposit Agreement (Class C), dated as of February 15, 2000, between
First Security Bank, National Association, as Escrow Agent, and
Citibank, N.A., as Depositary
4.15-- Escrow and Paying Agent Agreement (Class G), dated as of February
15, 2000, among First Security Bank, National Association, as Escrow
Agent, Salomon Smith Barney Inc., Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Banc One Capital Markets, Inc., as Initial
Purchasers, Wilmington Trust Company, not in its individual capacity
but solely as Pass Through Trustee for and on behalf of American Trans
air 2000-1G-O Pass Through Trust, as Pass Through Trustee, and
Wilmington Trust Company, as Paying Agent
4.16-- Escrow and Paying Agent Agreement (Class C), dated as of February
15, 2000, among First Security Bank, National Association as Escrow
Agent, Salomon Smith Barney Inc., Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Banc One Capital Markets, Inc., as Initial
Purchasers, Wilmington Trust Company, not in its individual capacity
but solely as Pass Through Trustee for and on behalf of American Trans
Air 2000-1C-O Pass Through Trust, as Pass Through Trustee, and
Wilmington Trust Company, as Paying Agent
4.17 -- Note Purchase Agreement, dated as of February 15, 2000, among
American Trans Air, Inc., Amtran, Inc., as Guarantor, Wilmington Trust
Company, as Pass Through Trustee under each of the Pass Through Trust
Agreements, Wilmington Trust Company, as Subordination Agent, First
Security Bank, National Association, as Escrow Agent, and Wilmington
Trust Company, as Paying Agent
4.18 -- Certificate Guaranty Insurance Policy Endorsement, dated February
15, 2000, issued to Wilmington Trust Company not in its individual
capacity but solely as Subordination Agent under the Agreement,
Citibank, N.A., as Class G Liquidity Provider and Class C Liquidity
Provider, solely with respect to Deficiency Amounts descried in item
(g) of the definition of "Deficiency Amount"
4.19-- Indemnification Agreement with respect to Amtran Trans Air, Inc.
Pass Through Certificates, Series 2000-1G, dated as of February 15,
2000, on behalf of Ambac Assurance Corporation, Salomon Smith Barney
Inc., Morgan Stanley & Co., Incorporated, Chase Securities Inc., and
Banc One Capital Markets, Inc.
4.20 -- Insurance and Indemnity Agreement with respect to American Trans
Air, Inc. Pass Through Certificates, Series 2000- 1G, dated as of
February 15, 2000, between Ambac Assurance Corporation, as Policy
Provider, American Trans Air, Inc. and Wilmington Trust Company, not
in its individual capacity but solely as Subordination Agreement
5.1-- Opinion of Troutman Sanders LLP as to the legality of the Exchange
Certificates and the Guarantee being registered hereby
12.1-- Computation of ratio of earnings to fixed charges
23.1-- Consent of Troutman Sanders LLP (included in Exhibit 5.1)
23.2-- Consent of Ernst & Young LLP
23.3-- Consent of Ambac's Accountants
23.4-- Consent of AISI
23.5-- Consent of MBA
23.6-- Consent of SH&E
24.1-- Power of Attorney (see signature page in Part II of Registration
Statement)
25.1-- Statement of Eligibility of Wilmington Trust Company for the 2000-1G
Pass Through Certificates, on Form T-1
25.2-- Statement of Eligibility of Wilmington Trust Company for the 2000-1C
Pass Through Certificates, on Form T-1
4
<PAGE>
99.1-- Form of Letter of Transmittal 99.2-- Form of Notice of Guaranteed
Delivery 99.3-- Form of Letter to Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees 99.4-- Form of Letter to Clients
________________________________
* Previously filed as an exhibit to Amtran's Registration Statement on
Form S-1 (File No. 33-59630), and incorporated herein by reference.
5
