It may not be over for Aloha Airlines as state tries to bail out airline

March 31st, 2008

Hawaii’s leaders tried today to come up with a way to save Aloha Airlines and keep it from shutting down permanently.

Republican Gov. Linda Lingle said the state was asking a bankruptcy court judge to prohibit Aloha from closing its passenger flight business until the company has shown it has exhausted alternatives for continuing its operations. The airline announced it was ending all flights after today.

Before the announcement, state senators were crafting measures that would provide $50 million worth of loan guarantees in addition to tax breaks for Aloha.

“It isn’t over yet,” said Sen. Kalani English, D-East Maui-Lanai-Molokai, chairman for the Senate Transportation Committee.

But any effort to save the money-losing airline could be futile unless it can become profitable again.

Aloha has been caught up in a three-way pricing war with one-way fares as low as $1 since go! airlines, an interisland carrier started by Phoenix-based Mesa Air Group Inc., launched in June 2006.

Island air fares are expected to rise now that only two major interisland carriers will remain — Hawaiian Airlines and go!

The suddenness of Aloha’s going out of business — it filed for Chapter 11 bankruptcy protection March 20 — caused Lingle to question whether its finances were as dire as they’re being made to appear.

“Nobody can tell at this point if it’s too late,” Lingle said. “We don’t know what the cash position is of Aloha Airlines.”

State attorneys will ask the court not to approve any shutdown of the airline until it shows it has exhausted all possibilities of finding financing or a buyer for its flight operations, established that it lacks resources to continue operations, considered the views of other creditors, complied with a law requiring employees receive 60 days notice before closure and filed its bankruptcy in good faith.

About 1,900 employees may be affected by a shutdown, Lingle said. A government labor team has been formed to evaluate their job skills and determine what type of job placement assistance might be needed.

“I don’t want to hold out any false hope, but to make certain everyone’s aware we’ll do everything we can to help these employees and their families,” Lingle said.

Few air service disruptions are anticipated, said state tourism liaison Marsh Wienert.

Ticketed interisland passengers will get free seats on standby from Hawaiian Airlines through April 3. Passengers on longer flights will be able to fly on a standby basis on Hawaiian at no charge, and United Airlines is offering reduced rates.

“Although they may not get a seat at the time they want, they should be accommodated,” Wienert said. “We do believe there are adequate seats in our marketplace now that will absorb those seats we will lose by our Aloha Airlines trans-Pacific flights.”

A Hawaii vacation may become even pricier with higher airfares in the future, but lawmakers are hoping they stay reasonable, English said.

“The days of super-low fares are behind us,” he said. “Unsustainable tickets and fares aren’t going to be able to continue.”

Legislative proposals include exemptions for interisland carriers from paying the general excise and use taxes on fuel.

The state loan guarantees could give private lenders confidence to invest in Aloha’s assets without having to fear that they won’t get paid back, English said.

Entry Filed under: Kauai, Maui, Molokai, Oahu