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Auction of 'Aloha Airlines' delayed again


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POSTED: Wednesday, April 29, 2009

Mesa Air Group's attempt to license the Aloha Airlines name was put on hold again yesterday after a federal judge questioned the “;past conduct”; of go!'s parent and brought up the possibility that Mesa could be disqualified from re-branding its aircraft as Aloha.

Bankruptcy Judge Lloyd King said he would issue an opinion and an order at “;a future date”; on whether to approve Aloha Chapter 7 trustee Dane Field's renewed motion for bidding and sales procedures for Aloha's intellectual property.

King is concerned that Yucaipa Cos., the leading bidder for the intellectual property, has a previously announced settlement to license the Aloha name to Mesa for 10 years in exchange for 1 percent of Mesa's interisland passenger ticket revenue, or a minimum of $600,000 a year.

Aloha previously sued Mesa for predatory pricing designed to run Aloha out of business and for misusing Aloha's confidential information obtained as a potential investor in 2005 during Aloha's first bankruptcy.

“;I think it's appropriate to look at Mesa as a co-purchaser (of the intellectual property),”; King said. “;The issue gets down to whether or not past conduct by a prospective purchaser can disqualify (it) from being a prospective purchaser of the Aloha assets.”;

King is trying to walk a fine line between allowing the purchaser of the Aloha name—in this case, Yucaipa—to do what it wants with the property and trying to cater to the sensitivity of many former Aloha employees who blame Mesa for forcing Aloha out of business on March 31 of last year.

Yucaipa, the former majority shareholder of Aloha, has the largest remaining secured claim against Aloha and could credit-bid—reduce the amount it is owed by Aloha—between $85 million and $90 million. Such a bid realistically would prevent any other potential bidders from winning.

In December, Yucaipa won the auction for the Aloha name by outbidding Hawaiian Airlines with a winning bid of $750,000, but King invalidated that auction last month because the attorneys conducting the public auction did not allow entry to the media.

For the new auction, Yucaipa has submitted a starting credit bid of $500,000, plus an additional $25,000 in cash to be deposited into the Aloha estate's administrative fund, since bidding rules require that 5 percent of the bid is required to go to the estate. The administrative fund is used to pay the fees of the trustee, as well as the attorneys and accountants connected with the case, and those who are overseeing the termination or transfer of the employees' retirement plans.

Field said Hawaiian has not renewed its interest in bidding and that if the Yucaipa sale were blocked, he does not know who else would buy the assets, whose sale benefits the estate.

“;My feeling is that we're selling the intellectual property to Yucaipa,”; he said. “;I don't think it's the trustee's job to look into what they're going to do with the assets.”;