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Aloha will pay $5.5M to settle claims


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POSTED: Thursday, May 07, 2009

Aloha Airlines, which is liquidating in bankruptcy, won court approval to pay $5.5 million to settle claims it failed to protect employee pension plans invested in its own stock.

The deal, approved Monday by federal Bankruptcy Judge Lloyd King, resolves U.S. Labor Department allegations that the carrier didn't properly guard the plans' $10 million investment in Aloha's stock as it lost value.

Almost $4 million of the settlement will go to the pension fund for International Association of Machinists, court papers show. The deal also resolves claims by the Pension Benefit Guaranty Corp., a quasi-government corporation created by Congress to protect pension programs of bankrupt companies.

Aloha stopped passenger flights 11 days after its March 20 Chapter 11 bankruptcy filing. The company blamed its collapse on rising fuel costs and a passenger-fare price war triggered by Mesa Air Group Inc.'s go!. The reorganization case was later converted to Chapter 7 liquidation.

In a separate ruling, King approved a settlement Monday in which Aloha will pay $500,000 to Aloha Air Cargo—now owned by Seattle-based Saltchuk Resources Inc.—to adjust accounts receivable, post-closing amounts and the division of Aloha's assets related to the cargo business following Aloha's $10.5 million sale last May to Saltchuk.