April 3 (Bloomberg) -- ATA Airlines Inc., the U.S. Midwest carrier that cut flights to try to survive, became the second regional airline to shut down this week.

ATA sought U.S. Bankruptcy Court protection for the second time in four years late last night in Indianapolis, where the airline is based. The company will no longer honor tickets or reservations, blaming high fuel prices and the loss of a contract for military charter flights for its demise.

ATA is at least the third low-cost carrier to file for bankruptcy since 2005 as a 70 percent increase in jet fuel prices in the past year has surpassed labor as the biggest expense for many airlines. Hawaiian carrier Aloha Airgroup Inc. ceased operations on March 31 following its bankruptcy.

``We deeply regret the disruption and hardship caused by the sudden shutdown of ATA, an outcome we and our employees had worked very hard and made many sacrifices to avoid,'' said Doug Yakola, chief operating officer of ATA, in the statement.

About 2,230 employees worked for ATA, a fourth of them in Indianapolis, court papers show. ATA said in a recorded message this morning that all operations will cease by the end of today.

Acquired Airlines

World Airways and North American Airlines, two airlines affiliated with ATA, aren't in bankruptcy, the company said in court records. Those airlines, acquired in August, are units of ATA parent ATA Acquisition Inc., a subsidiary of private equity fund MatlinPatterson Global Opportunities Partners LP.

ATA warned other airlines about its shutdown and asked them to help stranded passengers, ATA spokesman Michael Freitag said today in an interview.

Northwest Airlines Corp. said in a statement that it will honor ATA tickets until May 3 for a $100 fee per leg of flights to and from Hawaii and Cancun, Mexico.

Southwest Airlines Co. said it will honor any tickets it issued to its own customers who were booked on an ATA flight, or will give those ticket holders a refund. The company didn't say what it would do for ATA customers who hadn't booked a flight through Southwest's reservation system.

ATA listed debts of $100 million to $500 million and assets of $100 million to $500 million in court papers.

Curtailing Routes

The airline said in a March 6 statement that it planned to quit operating from its hub at Midway Airport in Chicago and shut down routes to Cancun and Guadalajara, Mexico, to save money. The company said then that it planned to concentrate on its charter business serving the military.

That business depended on a 2006 contract with Federal Express Team Arrangement. Federal Express told ATA it would no longer put any U.S. military personnel on ATA flights, Steven S. Turoff, the company's chief restructuring officer, said in court papers.

Without the charter business, it became impossible for ATA to get enough financing to stay in business, the company said in a statement today.

ATA came out of bankruptcy in February 2006, after firing workers, cutting flights and ending aircraft leases.

Southwest, the largest low-fare carrier, had invested $20 million in ATA to help it operate during bankruptcy. Southwest received ATA gates at Chicago's Midway Airport and entered into a marketing alliance with ATA as part of its investment.

Southwest said today that it would seek new partners for international flights because of ATA's shutdown. Southwest had been arranging to begin flights to Mexico, Canada and the Caribbean next year under a marketing accord with ATA.

Dallas-based Southwest now flies only in the U.S. Service outside the country would have been done with ATA aircraft.

A code-share agreement between the companies had allowed Southwest and ATA to book passengers on each other's flights to various locations, and gave Southwest customers access to Hawaii.

During its first bankruptcy, filed in 2004, the carrier ended service in Denver and San Juan, Puerto Rico.

Dulles, Virginia-based FLYi Inc.'s Independence Air filed for bankruptcy in December 2005 and closed the following month.

The case is In re ATA Airlines Inc., 08-3675, U.S. Bankruptcy Court, Southern District of Indiana (Indianapolis.)

To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net.

Last Updated: April 3, 2008 14:13 EDT