But all airlines are struggling with record fuel prices, prompting new fees for passengers for everything from snacks to extra bags.
Notices were posted at ticket counters in the handful of cities that ATA still served, advising travelers that the airline had shut down operations.
The airline had approximately 50 flights per day, mostly between Hawaii and four west coast cities - Oakland, Los Angeles, Phoenix and Las Vegas, said company spokesman Michael Freitag.
ATA said has been in contact with other airlines that may be able to assist with travelers holding tickets that the airline can no longer honor.
On its Web site, the airline apologized for the disruption and suggested that customers seek alternative travel arrangements.
"Virtually all of ATA's employees are being notified today that their positions are eliminated," Freitag said.
The company had over 2,200 employees, Freitag said.
ATA's bankruptcy will also affect Southwest Airlines customers. The Dallas-based airline has a code-share agreement with ATA for travel to Hawaii.
Southwest said Thursday that it immediately began rebooking passengers with dates and times as close to the original travel plans as possible. Southwest said it would give priority to customers who are scheduled to travel in the next 14 days.
"ATA Airlines has been an outstanding partner for Southwest, and we are disappointed to hear this unfortunate news," Gary Kelly, Southwest Airlines chief executive officer, said in a press release. "We are sad to end our codeshare relationship with ATA but understand it's extremely difficult for an airline to flourish in today's arduous financial environment that has been plagued by soaring fuel prices."
The carrier retrenched in 2006 after emerging from bankruptcy, focusing on destinations in the Southwest and an increase in military charter business. But like other airlines, it has struggled in a foundering economy and has been unable to offset the exorbitant cost of fuel.
Fuel is one of the industry's top costs and has pushed some carriers into merger talks.
Major airlines have slashed amenities and added fees for second bags, traveling with pets and booking tickets by phone.
United Airlines said new luggage fees it has imposed on travelers will generate more than $100 million annually.
ATA came out of bankruptcy with several other carriers two years ago, and it became the second to declare bankruptcy in just the past two weeks, both with operations in Hawaii. Aloha Airlines filed for Chapter 11 bankruptcy protection last month, a little more than two years after emerging from bankruptcy.
ATA announced last month that it would leave Chicago's Midway Airport, which it had used as a hub since 1992.
The chief executive officer at ATA's parent company resigned two weeks ago. Subodh Karnik, who had been CEO at ATA, stepped down after heavy pressure from a major investment firm to turn the airline around.
