Judge to rule quickly on Aloha Air appeal
Aloha Airlines will go to U.S. District Court tomorrow to argue over a controversial pension issue that threatens to derail the company's reorganization plan and lead to the carrier's shutdown.
In an emergency hearing yesterday afternoon, U.S. District Judge J. Michael Seabright agreed to hear an appeal against the confirmation of Aloha's reorganization plan at 10:30 a.m. tomorrow and said he would issue an oral ruling by 5 p.m. the same day. Attorneys' briefs are scheduled to be filed today.
Aloha had a request granted yesterday morning to have its Bankruptcy Court records expedited to the U.S. District Court in Honolulu.
The company's tumultuous bankruptcy, which has lasted nearly a year, may hinge on a compromise between the airline and the Pension Benefit Guaranty Corp., the federal agency that insures pension plans. The agency filed three separate appeals relating to Bankruptcy Judge Robert Faris' recent order allowing Aloha to terminate its pension plans, effective today, in order to emerge from bankruptcy tomorrow.
Seabright, in agreeing to take the case in short order, said he likened the appeal to a temporary restraining order. He said that Aloha could suffer irreparable harm, which outweighs any inconvenience to the federal pension agency, which wanted more time to prepare its case. The PBGC reported a deficit of $22.8 billion in its last fiscal year.
Even if Aloha prevails, the federal agency still could delay Aloha's exit from bankruptcy by appealing to the 9th U.S. Circuit Court of Appeals, which the agency has said it would do.
That could prove disastrous for the airline because the company's Los Angeles-based investors filed a declaration on Monday saying they would not extend tomorrow's deadline for the company to emerge from bankruptcy. The company's $68 million loan also expires tomorrow.
The willingness of Seabright to hear the case was good news for Aloha coming on the heels of parting comments by Faris in a separate hearing yesterday morning.
In that hearing, Faris cautioned the carrier that it better have a backup plan ready.
"I hope you have a Plan B because there's no way this appeal is going to be decided by Dec. 15," Faris said.
Faris also chided the federal agency over its appeal since it increased the likelihood that the unions' defined-benefit plans could be terminated.
"I don't see how anyone can come to any conclusion other than (these points)," he said. "Either the plan gets confirmed and goes into effect and the defined-benefit pensions probably get terminated in a distressed termination, and maybe they don't if the legislation passes.
"The only other reasonable alternative is that the plan doesn't go into effect and if (Aloha) is liquidated, the defined-benefit plans get terminated and it's a liquidation termination and not a distress termination.
"Therefore I don't see the economic (reality) for the PBGC."
Stephen Schreiber, attorney for the agency, argued yesterday that the issues were complex and that Aloha's attempt to expedite the case was an attempt by the airline to deny the government "a reasonable opportunity" to prepare and have its appeals heard in an ordinary course of time.
But Aloha's attorney Paul Singerman said the carrier is "fighting for (its) corporate life" and to delay the expediting of court records would undo all the work that has been accomplished during the last year by the company, employees, creditors and others connected with the case.
Robert Klyman, the attorney for the combined investment groups Yucaipa Cos. LLC and Aloha Aviation Investment Group LLC, said a condition of the reorganization plan was that the defined-benefit plans of all the affected unions be terminated.
"We do not intend to make an investment without that condition," he said.