ATA Holdings Corp., parent of ATA Airlines, the nation's 10th-largest carrier, filed for Chapter 11 bankruptcy reorganization yesterday, becoming the third U.S. airline operating under court protection.

The Indianapolis-based budget carrier said it was forced to act because of rising fuel prices and heightened competition from low-cost rivals.

ATA is the latest casualty in an industry in turmoil. Delta Air Lines Inc., the nation's third-largest carrier, is expected to file for bankruptcy protection as early as today if it fails to secure about $1 billion in last-minute concessions from its pilots. UAL Corp.'s United Airlines, the second-largest carrier, has been operating under court protection for nearly two years. US Airways Group Inc. last month filed for bankruptcy protection for the second time in two years.

If Delta files, the U.S. airline industry will have four carriers in bankruptcy proceedings simultaneously for the first time. In 1992, three carriers -- Continental Airlines Inc., America West Holdings Corp. and TWA Airlines LLC -- operated under Chapter 11.

J. George Mikelsons, ATA chairman and chief executive, said low-cost carriers aren't immune to the financial troubles plaguing the industry.

"Just about every airline is looking at its route structure and operations to see where we can pare down because everyone is bleeding to death," Mikelsons said.

Although he did not give an expected date for the carrier's emergence from bankruptcy proceedings, Mikelsons added that ATA expects to "grow into a healthier and larger airline."

As part of its restructuring, ATA will sell its operations and 14 gates at Chicago Midway Airport to AirTran Holdings Inc., a low-cost competitor. The $87.6 million deal with AirTran includes the sale of ATA's one gate at Reagan National Airport and two gates at New York's LaGuardia Airport. AirTran also will take over ATA's landing and arrival slots at LaGuardia. ATA expects the sale to be finalized later this year or early next year, pending government and bankruptcy court approval.

In the meantime, the move may spark a bidding war among low-cost carriers. America West said yesterday it was also interested in some ATA assets.

"We believe a combined ATA and America West could create a more stronger, formidable low cost carrier," said America West spokeswoman Janice Monahan.

Among ATA's most prized assets are the gates at Midway and its young fleet of Boeing 757s. The airline negotiated its leases in 2000, a peak period for the airline industry, and is paying about $100 million above current lease rates, Mikelsons said.

ATA operates four daily nonstop flights to Midway from National, where it accounts for just 1 percent of the airport's departures. ATA was the leading carrier at Midway.

ATA executives said the airline will continue to operate outside of Chicago, Washington and New York, focusing on its Indianapolis hub and on service between San Francisco and Hawaii and its charter business. ATA and AirTran will operate a code-sharing marketing agreement that allows frequent fliers to earn and redeem miles on both carriers.

ATA Holdings warned in August that it would likely run out of cash in early 2005 and might have to sell some of its assets to restructure. The airline lost $90 million in the first half of 2004 on revenue of $778.1 million.

The carrier won approval for a $148.5 million loan guarantee from the Air Transportation Stabilization Board after the Sept. 11, 2001, terrorist attacks. An ATSB spokeswoman said in a statement yesterday that the board planned to "work with the airline" through its bankruptcy proceedings to "ensure taxpayers' interests are protected."

While the larger traditional hub-and-spoke airlines are wrestling with lowering costs to compete with budget carriers, the smaller low-fare airlines themselves are grappling with sharp competition and record fuel costs.

Low-cost carrier Independence Air, which launched this summer, filled less than half the seats on its 50-passenger regional jets in August and September. A report by airline analyst Robert N. Ashcroft of UBS Investment Research this week said the Dulles-based airline's parent, Flyi Inc., could face a Chapter 11 filing by January.

ATA will sell gates in Washington, New York and Chicago to competitor AirTran, and the two will enter a code-sharing agreement.