Case 04-19866-BHL-11 Doc 231 Filed 11/02/04 EOD 11/02/04 16:42:52 Pg 1 of 9

IN THE UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

In re: ) Chapter 11 ) ATA Holdings Corp., et al.,1 ) Case No. 04-19866 ) (Jointly Administered) Debtors. )

MOTION TO (I) APPROVE PROCEDURES Hearing: November 30, 2004 FOR BILLINGS BY AND PAYMENTS TO 1:30 p.m. EST PROFESSIONALS RETAINED IN THESE CASES FOR FEES AND EXPENSES Location: U.S. Courthouse INCURRED AND (II) APPROVE 46 E. Ohio Street, Room 310 PROCEDURES AND DEFERRAL OF Indianapolis, IN 46204 DRAW DOWN OF RETAINER PAID TO Telephonic PROFESSIONALS RETAINED IN THESE Participation CASES UNTIL REQUESTED BY Dial-In: 1-877-213-2541 DEBTORS Passcode: 9470432#

MOTION TO (I) APPROVE PROCEDURES FOR BILLINGS BY AND PAYMENTS TO PROFESSIONALS RETAINED IN THESE CASES FOR FEES AND EXPENSES INCURRED AND (II) APPROVE PROCEDURES AND DEFERRAL OF DRAW DOWN OF`RETAINER PAID TO PROFESSIONALS RETAINED IN THESE CASES UNTIL REQUESTED BY DEBTORS

Debtors, by counsel, (the "Debtors"), respectfully request in this motion (the

"Professional Billings Motion") that the Court authorize Baker & Daniels and all other professionals retained in these cases with the authorization and approval of the Court (the

"Professionals") to (i) bill Debtors on the Professionals' customary billing cycle and be paid by

Debtors on an ongoing basis in the ordinary course of Debtors' business postpetition, and (ii)

1 The Debtors are the following entities: ATA Holdings Corp. (04-19866), ATA Airlines, Inc. (04-19868), Ambassadair Travel Club, Inc. (04-19869), ATA Leisure Corp. (04-19870), Amber Travel, Inc. (04-19871), American Trans Air Execujet, Inc. (04-19872), ATA Cargo, Inc. (04-19873), and Chicago Express Airlines, Inc. (04-19874).

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approve the procedure for interim draws against retainers, to the extent applicable, paid to the

Professionals by Debtors at the commencement of these chapter 11 cases, with such draws to be

deferred until Debtors' request, all in accordance with the procedures set forth below. In support of

this Professional Billings Motion, Debtors state:

JURISDICTION

1. On October 26, 2004 (the “Petition Date”), each of the Debtors filed with

the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division (the

“Bankruptcy Court”), its respective voluntary petition for relief under Chapter 11 of Title 11 of the

United States Code, 11 U.S.C. §§ 101 et seq. as amended (the “Bankruptcy Code”) commencing these chapter 11 cases (the "Chapter 11 Cases"). The Debtors continue to operate their businesses and manage their properties as debtors-in-possession pursuant to §§ 1107(a) and 1108 of the

Bankruptcy Code. By Order dated October 29, 2004, these Chapter 11 Cases have been consolidated for administrative purposes only.

2. No trustee or examiner has been appointed, and no committee has yet been appointed or designated.

3. This Court has jurisdiction to consider this Professional Billings Motion

Motion pursuant to 28 U.S.C. §§ 157 and 1334. This matter is a core proceeding pursuant to 28

U.S.C. § 157(b)(2). Venue is proper before this Court under 28 U.S.C. §§ 1408 and 1409.

4. The statutory bases for the relief sought herein are §§ 105(a), 330 and 331 of the Bankruptcy Code.

BACKGROUND

5. In 1973, J. George Mikelsons founded the precursor to ATA Airlines, Inc.

(“ATA”), in Indianapolis, Indiana. Today, ATA Holdings Corp. (“ATAH”) and its wholly-owned

direct and indirect subsidiaries operate the tenth largest passenger airline in the United States.

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Operating a fleet consisting of eighty-four aircraft, ATA is a leading provider of low-cost

scheduled airline services, is one of the largest commercial charter airline in the United States and

is one of the largest providers of passenger airline charter services to the U.S. military. ATA

currently provides scheduled service primarily from its gateway cities of Chicago-Midway and

Indianapolis to popular vacation and business destinations such as Phoenix, Las Vegas, Florida,

California, Mexico and the Caribbean, as well as to New York’s LaGuardia Airport, Philadelphia,

Denver, Dallas-Ft. Worth, Washington, D.C., Boston, Seattle, Minneapolis-St. Paul, Newark,

Charlotte and Pittsburgh. ATA also provides transpacific service between the Western United

States and Hawaii. ATAH’s wholly-owned subsidiary, Chicago Express Airlines, Inc. (“Chicago

Express”) provides commuter passenger scheduled service between Chicago-Midway and the

cities of Indianapolis, Dayton, Des Moines, Flint, Grand Rapids, Madison, Milwaukee, Moline,

Toledo, South Bend and Fort Wayne. ATAH’s other subsidiaries are Ambassadair Travel Club,

Inc., ATA Leisure Corp., Amber Travel, Inc., American Trans Air ExecuJet, Inc. and ATA Cargo,

Inc. As of the Petition Date, the Debtors employed a staff of approximately 7,324 full- and part-

time personnel, of whom approximately 3,550 were employed under collective bargaining

agreements.

6. The geopolitical impact of the conflict in the Middle East and generally

weak economic conditions of the past several years have adversely affected the airline industry as

a whole, and have caused many airlines, including ATA and Chicago Express, to suffer massive

financial losses since 2001. This trend continues in 2004, as the industry and ATA experience a

very weak revenue environment and substantially increased fuel costs. These conditions have

caused several air carriers, including United Airlines, American Airlines, Delta Airlines, Hawaiian

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Airlines, and US Airways, to seek bankruptcy protection or warn that bankruptcy may be in the

offing.

7. ATA faces a competitive pricing environment that includes extraordinary

fare discounting by several airlines in many of the scheduled service markets that ATA serves. At

the same time, jet aviation fuel prices have escalated far beyond any price per gallon previously

experienced on a sustained basis by the air carrier industry and far beyond the increases expected

by ATA. In addition, the highly destructive hurricanes and tropical storms which hit Florida and

the Southern coast of the United States in the third quarter of 2004 had a very severe and

continuing impact on ATA’s revenues as a significant portion of the scheduled service routes of

ATA serve these hard-hit areas of the United States.

8. A significant portion of ATA’s current leases of aircraft were negotiated

with higher payments in early years in order to reduce total rental costs over the related lease

terms. These large cash payments made in 2003 and 2004 resulted in substantial use of ATA’s

cash.

9. ATA has taken many measures to prevent the filing of the Chapter 11 Cases,

including working with its three major lessors to restructure its lease obligations. ATA also has

sought to reduce costs through, among other measures, negotiating labor cost reductions under its

collective bargaining agreements, implementing pay reductions for its non-union employees and

substantially reducing the number of employees. In addition to cutting costs, ATAH has conducted an exhaustive search for buyers for certain of ATAH’s significant assets, such as the

Chicago Midway operations of ATA and Chicago Express, as well as for ATA as a whole.

Despite its cost-cutting efforts, Debtors will realize an overwhelming net loss for the full year of

2004. Based on current operating assumptions and market conditions, absent the initiation of

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these Chapter 11 Cases, ATAH projects that it would not be able to meet its cash obligations

within the next 60 days, and perhaps sooner.

10. Coincident with the filing of the Chapter 11 Cases, the Debtors will ask the

Court to approve a sale of “Midway Assets” to AirTran Airways, Inc. for $87.5 million or to

another buyer making a higher or better offer for such assets (the “AirTran Transaction”). Debtors

are discussing the procurement of adequate DIP financing from third-party lenders. Debtors intend

to procure such DIP financing during the period in which the ATSB Lending Parties consent to

Debtors’ use of the cash collateral to support Debtors’ obligations. The combination of the

AirTran Transaction and a DIP Lending Facility will provide liquidity and business arrangements

that will allow ATA and Chicago Express to continue normal airline operations for the foreseeable

future and provide a springboard for a successful reorganization of ATAH and the affiliated

Debtors.

RELIEF REQUESTED

11. On the Petition Date, Debtors filed a number of Applications seeking authority to employ certain of the Professionals (the "Retention Applications"). The Retention

Applications are pending before this Court. It is anticipated that other Professionals representing one or more committees appointed pursuant to Bankruptcy Code § 1102 will soon apply to the

Court to be employed. As of the Petition Date, some, but not all, of the Professionals, received and held retainers paid by Debtors as disclosed in the specific Retention Application (the "Retainers").

Notwithstanding the Retainers held by some of the Professionals, Debtors' postpetition budget projects and allows for monthly payments by the Debtors of the Professionals' fees.

12. Baker & Daniels, counsel for the Debtors, has conferred with the United

States Trustee in other cases in this district about the procedures the United States Trustee has established for interim payments to professionals directly from a chapter 11 debtor and draws

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against retainers paid to professionals as an accommodation to professionals. Debtors request this

Court approve the following procedures for the Professionals to bill Debtors on their customary

billing cycle or, alternatively, upon Debtors' request, take interim draws against the Retainers

which Debtors believe are consistent with procedures applied in other cases in this District:

(a) The Professionals who received Retainers have deposited and will

retain the Retainers in their trust accounts.

(b) At the end of each billing cycle, each Professional will file with the

Bankruptcy Clerk, the United States Trustee, all counsel of record, the chairman of the unsecured

creditors' committee, and any other party so requesting, a notice (the "Notice") of the amount of

the bill (separately listing fees and expenses) that the Professional will submit to Debtors for

payment in the ordinary course of Debtors' business.

(c) Concurrent with the Notice, each Professional shall also send to

Debtors and the United States Trustee, a copy of the bill prepared in the ordinary course of

business by that Professional on which the Notice is based, and request that Debtors pay the bill

within seven (7) days of receipt of the bill. If the Debtors do not object to the statement within the

seven (7) day period, the Debtors shall promptly pay eighty percent (80%) of the Professional's

fees and one hundred percent (100%) of the Professional's expenses, except for any portion of the

fees and expenses objected to by the Debtors. Debtors propose that this arrangement continue

until Debtors advise a Professional that they would like that Professional to commence payment of

its bills by taking draws against the Retainer.

(d) Upon Debtors' request, B&D proposes alternatively that the

Professional draw against the Retainer on a basis tied to its customary billing cycle. The

Professional in such case will continue to file and serve the Notice in the manner set forth in

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paragraph 4(b) above. However, this Notice shall also refer to the amount of the initial Retainer

(or residual amounts, after taking the first draw), and the balance that will be remaining after the

proposed draw. The Professional shall be entitled to take the disclosed draw after providing notice

as provided for herein.

(e) Concurrent with the notice of draw, each Professional shall also send

to Debtors and the United States Trustee, a copy of the bill prepared in the ordinary course of

business by that Professional on which the draw is based.

(f) Every four (4) months after the Petition Date, or more frequently if

circumstances so warrant or the United States Trustee so requests, each Professional will file a

formal fee application pursuant to 11 U.S.C. §§ 330 and 331, whichever is applicable, reflecting

and incorporating all of the services which resulted in all payments by Debtors in the ordinary

course of business and draws against the Retainer. The Professionals acknowledge that the failure

of any party to object to any proposed payment in the ordinary course or draw shall not preclude

such party from objecting to any formal fee application filed by that Professional.

Notice

13. Pursuant to General Order 03-10, ¶ 8.5, a copy of this Motion shall be

delivered as soon as possible to all parties on the Service List (as defined in ¶ 3.1 of General Order

03-10).

No Prior Request

14. No prior motion for the relief requested herein has been made to this or any

other court.

WHEREFORE, Debtors respectfully request that this Court enter an Order

(i) authorizing each Professional to (a) bill Debtors on the Professional's customary billing cycle

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and be paid by Debtors on an ongoing basis in the ordinary course of Debtors' business in accordance with the terms of Paragraph 12(c) hereof, and alternatively, upon Debtors' request,

(b) take interim draws against the Retainer, if any, paid to it by Debtors in these cases, all in accordance with the procedures outlined herein; and (ii) granting the Professionals all other just and proper relief.

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Respectfully Submitted,

BAKER & DANIELS

By: /s/Melissa M. Hinds

James M. Carr (#3128-49) Attorneys for the Debtors and Debtors-in-Possession Terry E. Hall (#22041-49) Stephen A. Claffey (#3233-98) Melissa M. Hinds (#24230-49) 300 North Meridian Street, Suite 2700 Indianapolis, Indiana 46204 Telephone: (317) 237-0300 Facsimile: (317) 237-1000 [email protected] [email protected] [email protected] [email protected]

Wendy W. Ponader (#14633-49) Ponader & Associates, LLP 5241 North Meridian Street Indianapolis, Indiana 46208 Telephone: (317) 496-3072 Facsimile: (317) 257-5776 [email protected]

CERTIFICATE OF SERVICE

The undersigned hereby certifies that the foregoing was served this 2nd day of November, 2004, by expedited service (facsimile, e-mail, and/or overnight delivery) on the Core Group and 2002 List.

/s/Melissa M. Hinds

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