Mahalo backer:

Still room for
3rd airline

By Russ Lynch
Star-Bulletin

Robert Iwamoto Jr. says he still believes there's room for a third interisland airline that would concentrate on taking care of Hawaii residents.

Iwamoto said that he believes this despite a federal bankruptcy court judge's decision yesterday to reject attempts to resurrect Mahalo Airlines Inc. and to place it in Chapter 7 liquidation.

He believes it despite saying goodbye to a personal $5 million investment in Mahalo. And that was only what he put in last year, in an unsuccessful attempt at recapitalization. Iwamoto would "rather not say" what he put in to get Mahalo started in 1993.

And Iwamoto is still a believer in a third force in interisland aviation despite the earlier failures of Mid Pacific Airlines and Discovery Airways.

"I'll always be interested," said Iwamoto, who controls one of Hawaii's biggest tourism and transportation companies, Roberts Hawaii Tours & Transportation Inc.

He made the comments yesterday after U.S. Judge Lloyd King agreed with attorneys in the case that allowing more efforts to restart the airline would just add more expenses to an already lost cause. "For me, I wanted this thing to get started again, because for the locals we really need a third airline," Iwamoto said.

He said an earlier offer he made, rejected by the court, should have been accepted. Iwamoto had offered to put up $50,000 in cash toward the regulatory process of getting the airline's operating certificate transferred to his group.

If the transfer went ahead, Iwamoto was willing to pay about $280,000 in back wages owed to more than 100 laid-off employees, he said. And he would have honored about $500,000 worth of tickets paid for by would-be travelers but unusable because of the bankruptcy.

The court didn't accept it, largely because of concerns that it was too contingent on regulatory decisions and other factors that would take time and money to resolve.

In early December, however, Judge King rescinded an earlier liquidation order and gave Mahalo's attorney Jerrold Guben some time to solicit bids.

By yesterday's deadline, however, there was only one offer on the table, a new one from an unnamed investor group represented in court by Doug Caldwell, former marketing vice president of Mahalo. Caldwell's group, made up of what he said were experienced airline people, offered to pay $175,000 to the bankrupt company's estate if the U.S. authorities approved transfer of Mahalo's certificates to the group.

But Mahalo's attorney Guben told the judge the offer was even more conditional than Iwamoto's bid had been.

Judge King agreed that chances of recovering any real money for creditors were slim. "The bubble that we're chasing keeps getting smaller," he said. In the end, he ordered a Chapter 7 liquidation and appointed a trustee, Paul Sakuda of Honolulu, to oversee it.

King approved the sale of the remaining aircraft parts to a Los Angeles firm, Airmotive Corp., after its representative, John White, said in court that the deal offered a good chance for some money.

Airmotive will pay $20,000, freight the parts to the mainland at its own expense and pay the bankruptcy estate 75 percent of everything it gets from selling them. White said he estimates the parts would be worth at least $175,000.

Yesterday's action spells a final farewell to the airline that began flying in 1993, offering interisland service on turboprop aircraft less than half the size of the jets of Aloha and Hawaiian airlines.

After fighting over money and maintenance problems with companies that leased it equipment, Mahalo held off creditors with a Chapter 11 bankruptcy filing last July and stopped flying Sept. 2, laying off about 200 employees. Mahalo's leased planes were returned to their owners.