The airline's owners are seeking
a buyer for its operating certificate

By Russ Lynch
Star-Bulletin

Mahalo Air Inc. was left today with no hope of getting back into the air.

A U.S. Bankruptcy Court ruling today set the stage for the airline's remaining assets to be sold off immediately after one more bankruptcy hearing, set for Nov. 10.

The only reason the airline wasn't placed in liquidation today was Judge Lloyd King's decision to leave the door open to see if any money can be gained by selling Mahalo's operating certificate.

Mahalo's attorney Jerrold Guben told a court session today that he has been told such a license could be worth $1 million. However, he said there are questions about whether it could be transferred to a buyer after liquidation starts. Guben also said he does not know if there is in fact a market for the license.

Curtis Ching, the federal trustee assigned to the case, said after the hearing that getting the airline started again is not an option. "At this point, as far as I am concerned, they are in a liquidation stage," he said.

During the session he told the judge that Mahalo had been unable to come up with financing to keep it alive.

Mahalo told the court it had no opposition to Ching's motion to liquidate.

The airline, the latest of several smaller carriers to go up against Hawaii's two big interisland carriers and fail, has not flown since Sept. 2. Its seven leased aircraft have been returned to the planes' owner.

Mahalo began flying on Oct. 4, 1993, with a fleet of French-built 44- to 46-seat turboprop planes, offering lower fares than Aloha and Hawaiian airlines.

Mahalo gained about a 6 percent market share but early this year it had maintenance problems and had to cancel flights, losing revenues.

On July 25, no longer able to pay bills, Mahalo filed for protection from creditors under Chapter 11 of the bankruptcy law, which allowed it to hold off paying most of its bills while it tried to reorganize.

It failed to meet today's deadline to come up with a new financial plan or be forced into a Chapter 7 liquidation.

Mahalo's 200-plus employees are claiming about $200,000 in salaries unpaid since the bankruptcy filing.

The biggest loser is Honolulu tour and transportation executive Robert Iwamoto Jr., who gave the airline an unsecured loan of $5 million to get it started.

Mahalo's initial bankruptcy filing showed $13.5 million in liabilities, including Iwamoto's loan, and assets of $3.5 million. The latest filings show debts of $4.6 million and assets of $1.1 million.

Mike Yocum, Mahalo president, has been on the mainland in a last-ditch effort to raise financing and could not be reached for comment this morning.