ATA Airlines Sues FedEx for Cancelled Contract - June 13, 2008

FedEx has its fingers in lots of pies. 

Although the company is recognized primarily for its delivery services for the public, FedEx has long been a large contractor for the federal government and military.  FedEx in 2007 was the 35th largest federal contractor and 25th largest contractor for the Defense Department alone.

FedEx has a line of business where air passenger services and "urgent missions to move mine resistant, ambush protected vehicles" are provided to the Department of Defense to ferry servicemen and women around the globe.  The "Federal Express Charter Programs Team Arrangement" seems to be a consortium of FedEx and other airline and air cargo companies and is one of many such "teaming arrangements" that receive DoD contracts.

Up until very recently, ATA Airlines was a member for many years of the "Federal Express Charter Programs Team Arrangement" contract.  Early in 2008, FedEx notified ATA that they were out of the teaming arrangement.  Due to this loss in projected revenue, ATA management felt they had no choice but to file for bankruptcy and immediately cease operations.  This led to hundreds of passengers - including many returning military personnel - stranded.  More than 2,200 ATA employees lost their jobs.

Now, ATA is suing FedEx for deciding to not include ATA in the next go-round of the teaming arrangement contract.  This lawsuit must be in the proper context as part of the ATA bankruptcy proceedings.   But certainly some decisions taken in Memphis will be scrutinized in the course of this suit.