ALOHA SHUTS CARGO
FL MORRIS / FMORRIS@STARBULLETIN.COM
Aloha Air cargo planes sat on the tarmac at Honolulu Airport yesterday afternoon after the abrupt shutdown of operations when two bidders for the profitable unit pulled out.
Bidders drop out and funding halts
Some 400 are jobless after Aloha officials decide to liquidate
In an abrupt, chaotic ending to Aloha Airlines' nearly 62-year history, the bankrupt carrier pulled the plug on its cargo operations yesterday after two bidders for the profitable unit dropped out and Aloha's lender refused to provide additional funding.
Aloha attorney Paul Singerman informed federal Bankruptcy Court that the company's board of directors had decided to convert the case to a Chapter 7 liquidation from a Chapter 11 reorganization. Bankruptcy Judge Lloyd King ordered that an interim trustee be appointed.
The sudden ending resulted in the termination of 400 cargo pilots and mechanics, leaving the company with only about 950 employees in its aviation contract services unit. Aloha's work force was the 10th largest in the state at 3,500 before it ceased passenger operations on March 31.
Aloha, which canceled flights from four cargo freighters last night, had flown 85 percent of the state's air cargo, including time-sensitive goods such as fresh bread, milk, produce and fruit.
The company also had the major U.S. mail contracts for Maui and the Big Island, but the U.S. Postal Service said yesterday it had been working on a contingency plan for the past several weeks and has lined up Corporate Air to deliver mail to the two islands. Corporate Air also delivers mail to Lihue and other destinations.
"There is a possibility of some service impact to customers," said Duke Gonzales, a Honolulu-based spokesman for USPS. "We are going to do everything we can to minimize the impact and make it as short term as possible."
Hawaiian Airlines, which flies 8 to 10 percent of the interisland cargo, said last night it was prepared to increase cargo capacity as much as possible but was limited by its fleet.
King said there did not seem to be anything that could be done legally to stop the shutdown.
"We've known for quite some time this was a day-by-day case ... and that what happened today was a possibility, but because it's a grim possibility, it still takes us by surprise," King said. "I'm sorry for the hardship this bankruptcy case has imposed on so many people. I've been a bankruptcy judge since 1975, and I've never seen anything like this."
Aloha's aviation contract services employees will find out their fate after the probable interim trustee, Dane Field, confers with Aloha's lender, General Motors Acceptance Corp. The sale of the contract services unit to Los Angeles-based Pacific Air Cargo was approved Thursday but was not supposed to close until this Monday.
It was unclear yesterday whether GMAC would continue funding the operation, but the union leader overseeing contract services instructed those employees to continue working to avoid a disruption until a determination could be made.
"I told them to work at least for (last night) until we get our readings better," said Randy Kauhane, assistant general chairman of the International Association of Machinists and Aerospace Workers, District Lodge 141.
Gov. Linda Lingle said she was disappointed an agreement could not be reached for Aloha to continue cargo operations. But she added many shippers that used Aloha cargo have been exploring options since the original bankruptcy filing and have made contingency plans with other air or sea carriers.
"We are also concerned, of course, for the ... employees and their families," Lingle said in a statement released through her office.
A Rapid Response Team, headed by the state Labor Department, will be available to assist displaced workers with potential job placement, health insurance and other unemployment concerns.
House Speaker Calvin Say (D, St. Louis Heights-Palolo Valley-Wilhelmina Rise) also said legislative leaders would work with neighbor island lawmakers on how best to help residents.
He called the cargo shutdown "a wake-up call for all of us on the importance of our transportation infrastructure."
Singerman said Aloha was forced to liquidate its assets after Seattle-based Saltchuk Resources Inc., parent of interisland shipper Young Bros. Ltd., and Jupiter Holdings Group LLC, headed by Hawaii businessman Rick Cho, dropped out of the bidding.
Saltchuk, which initially bid $13 million, walked out of the cargo bidding auction on April 21 when GMAC informed Saltchuk that the minimum starting bid was $20 million. Saltchuk issued a press release Thursday that said it had terminated its participation, but Aloha continued to pursue a deal.
Jupiter, the top bidder at $13.65 million, said yesterday it dropped out after GMAC imposed additional conditions that were not in the court orders and wanted $15 million from Jupiter, plus an additional deposit of $2 million on top of Jupiter's earlier $500,000 deposit.
Star-Bulletin reporters Jennifer Sudick, Allison Schaefers and B.J. Reyes contributed to this article.