Funding is extended as pilots study new deal
Aloha Airlines' main lender agreed yesterday to fund the bankrupt company's air cargo and aviation services operations through Monday to give the Air Lines Pilots Association enough time to review a settlement offer made by Aloha late Thursday night.
ALPA later countered with an offer to the company, but Aloha was declining further comment as of last night.
An ALPA source familiar with the union's offer said, "As far as we're concerned, we're done. We've just saved them millions of dollars."
"A hearing has been set for 1:30 p.m. Monday at federal Bankruptcy Court.
"The parties recognize these are tenuous times," Aloha labor attorney Sheldon Kline said yesterday in court. "That heightens the importance of reaching an agreement with Aloha. There are hundreds of jobs at stake, and we're hopeful we can get the job done."
"Without an agreement, Aloha would run out of money and be forced to close its two remaining divisions because lender General Motors Acceptance Corp. has said it will not finance future operations without a settlement with the pilots.
The union is at odds with the company over seniority rights for flying the cargo planes, furlough pay, medical coverage and job-search expenses. Senior passenger pilots who lost their jobs when Aloha shut down its passenger operations on Monday have been trying to remain employed by bumping junior cargo pilots.
A shutdown of the remainder of the company would have far-reaching consequences besides the loss of 1,450 additional jobs. Not only have 2,050 employees already been terminated, but the state's economy would be damaged since Aloha flies 85 percent of Hawaii's air cargo as well as all U.S. mail to Maui and the Big Island.
"We're really hopeful it's going to be a happy outcome with the pilots and that it will put all the pieces in place in order to go to auction and to have a successful and profitable result," Aloha attorney David Farmer said. "Everybody's pulling that way. There's so much at stake on everybody's side that I believe reasonable minds will prevail and we'll have a reasonable settlement."
"Under ALPA's proposal to the company, many of the 37 cargo pilots scheduled to fly in April will be furloughed after this month "because senior pilots who were in the passenger operation will take their position," according to the ALPA source familiar with the union's offer.
In addition, senior passenger pilots who want to keep their jobs by flying the cargo planes would begin retraining starting Monday, the source said. The pilots also offered to substantially reduce the amount of furlough pay they are entitled to under their collective-bargaining agreement, according to a news release disseminated by ALPA.
In return the pilots are seeking the company's and eventual buyer's help in continuing medical coverage for 30 days and obtaining reduced-rate travel in coordination with other airlines to enable the search for new jobs in a tightening market for pilots, ALPA said. The union said that few pilot jobs are available in Hawaii and that the company has more than 300 pilots, with most of them living in Hawaii.
"We've given them a fairly good proposal," the source said. "We're prepared to sign. People need their newspapers and their bread, and the neighbor islands need their products delivered to Oahu. The state needs Aloha cargo and we're going to fly it."
"The additional funding, called cash collateral, that Aloha is getting from GMAC is actually from Aloha's own business receipts. Ordinarily, GMAC would have first rights to that money, but it is allowing Aloha to tap those funds.
A court document indicates that Aloha will have a negative cash balance during the period that started yesterday and ends Monday. Aloha will have $544,000 in cash receipts coming in during that period but will have total expenses for operations and professional fees of $1.13 million. Aloha is projected to end Monday with a cash balance of $2.2 million.
None of the figures incorporate the loss of revenue from Aloha's aviation services division related to the shutdown of ATA Airlines. ATA accounted for 20 percent of Aloha's revenue in aviation services.
A settlement with the pilots also would clear the way for GMAC to proceed with new financing of $3.5 million to $4 million that the lender would put into Aloha to allow it to get through the auction period for its cargo unit. A hearing on approving a buyer is scheduled for April 24.
Seattle-based Saltchuk Resources Inc. has offered $13 million for the cargo unit as well as the accounts receivable owed Aloha. The airline has about $6 million in accounts receivable, with approximately $4.5 million of that considered collectable. The remaining amount is more than 90 days past due.
Saltchuk, which said it already has spent $200,000 in laying the groundwork for the offer, said it will not be seeking a break-up fee if another bidder is chosen. However, Saltchuk's offer allows it to recover up to $400,000 in expenses. Also, any bidders for cargo will have to make an offer at least $650,000 higher than Saltchuk's offer, according to the procedures for the auction.
In another development yesterday, Bankruptcy Judge Lloyd King approved an order allowing Aloha to end the leases of 14 aircraft from its fleet of 27. The remaining planes are either being used for cargo or are owned by Aloha.