Aloha’s ripple effects signal job slowdown tide

The demise of Aloha Airlines is a sign of things to come as the Hawaii economy slows, according to a local economist.

The decades-old airline, which ceased passenger service yesterday after 61 years, is laying off 1,900 of its approximately 3,500 employees after failing to withstand an interisland airfare war.

The news comes on the heels of layoffs by Molokai Ranch, Norwegian Cruise Lines and other financially struggling businesses feeling the effects of a slowing economy.

"This is really a sad sort of prominent manifestation of the kind of fallout one should expect to see over the next couple years," said Bank of Hawaii economist Paul Brewbaker. "This is precisely the kind of thing one would associate with slowing economic activity."

Brewbaker said that unemployment -- which stands at 3.2 percent -- has been rising for more than a year and is likely to reach 4 percent later this year and 4 to 5 percent in 2009.

According to the state Department of Business, Economic Development and Tourism, Aloha's 1,900 layoffs could trigger an additional 1,881 lost jobs in supporting industries.

In addition, the effect of Aloha employees' reduced spending in the economy could mean an additional job loss of 1,596.

Eugene Tian, DBEDT research and statistic officer, said the real impact will likely be smaller since many of Aloha's employees are expected to collect unemployment insurance and others could immediately find new jobs.

"The most effect is psychological because it's bad timing -- it's right after all the bad news including the closure of Molokai Ranch. It's really hurting the business image or business climate."

Some ripple effects of Aloha's shutdown are already being felt. Chelsea Food Services, a Continental Airlines affiliate that has handled food and beverage operations for Aloha for the past three years, plans to realign its work force in Hawaii, though company officials said yesterday they did not know by how much.

"It will impact our staffing for sure," said General Manager Annie Matsuwaka, who declined to provide total work-force numbers. "This is the airline industry, so anything could happen."

Albert Chee, spokesman for Chevron USA, which supplied fuel to Aloha locally and on the West Coast, said, "It does represent a loss of business ... but it's a small amount of our total business on the West Coast."