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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, June 16, 2008

ATA Sues FedEx for Breach of Contract

Ata_airlines_logo_2001Ahh, ATA.  I have such pleasant memories of flying on your planes out of Midway to LaGuardia.  Where are you now, old friend?  Alas, like most air carriers, you are in the throes of bankruptcy.  Supporters of deregulation, be careful what you wish for.

But even while in bankruptcy, airlines still retain their legal personhood and they also retain attorneys, and so according to The New York Times, ATA is suing FedEx, alleging that the latter breached an agreement with ATA in January when it dropped ATA from its military charter team. 

The Associated Press quotes ATA's attorney as claiming that notice of FedEx's decision to drop ATA came "out of the blue."  That's rich!  Get it?  Airplane contracts? out of the blue?!?  It's clever, no?  Unfortunately, the loss of the contract with FedEx was no laughing matter for ATA, which relied on the military personnel charters to generate over $400 million in revenue annually.  ATA had been a member of the FedEx team for over 20 years and had just spent $50 million buying aircraft from Northwest Airlines in reliance on its continued membership in the team.  Damages sought are not yet specified but are expected to be in the tens of millions.

ATA alleges that FedEx's breach drove the airline into bankruptcy.  I wonder what drove all the other airlines into bankruptcy?

Also, why do we use a freight company to transport military personnel?

[Jeremy Telman]

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