Aloha Air falls
into the red

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By Russ Lynch
rlynch@starbulletin.com

Aloha Airlines posted a net loss of $205,618 in the second quarter this year, a drop from a net profit of $519,159 in the same quarter a year ago.

But the airline's president and chief executive officer, Glenn R. Zander, said the loss was mostly due to startup costs of new mainland routes and new aircraft.

With all five of its new Boeing 737-700 extended-range aircraft now in service, those startup costs are largely over and the numbers should look better for the third quarter, Zander said.

Interisland business is down, with about a 10 percent drop in passenger numbers, but the yield the airline gets from the interisland passengers it does carry has been good, nearly making up for the traffic drop, Zander said.

Aloha does not issue public statements of its earnings and as a private company has no public shareholders to report to, but like all airlines it does have to file financial disclosures with the Department of Transportation in Washington, D.C.

The figures do not include results from Island Air, Aloha's operation that serves smaller airports in Hawaii.

The latest Aloha Airlines filing, made yesterday, shows second-quarter revenues of $82.1 million, up 13.6 percent from $72.3 million in the year-earlier quarter.

However, operating expenses of $82.2 million in the latest quarter were up 15.3 percent from $71.3 million in the second quarter of last year.

From operations alone, Aloha lost $162,419 in the latest quarter, compared to an operating profit of $1 million in the year-earlier period.

Zander said the loss in the latest quarter "is really just the windup of the growth that was taking place in the first six months of the year," which included adding Las Vegas and Orange County to the mainland routes it started with Oakland in February 2000.

"We phased in airplane number three (of the new 737-700s) in April, number four in May and number five in June. What you see is the first results of the revenue increases as those aircraft went into service," affected by increased costs for crew training, he said.

"Essentially, the story here is one of startup costs beyond the normal costs of operations," Zander said.

While the airline was expanding its mainland services, it was seeing an interisland downturn.

"The interisland segment is really underperforming the prior year," Zander said. There is a weakness in traffic coming from all three major market segments, he said. Japanese arrivals are down and mainland arrivals from east of California are down, possibly because of bargain deals luring travelers to Europe instead of Hawaii.

And in Hawaii's strongest market, the West Coast, more and more travelers are flying direct to the neighbor islands, decreasing demand for interisland carriers, Zander said.

"The local segment of the market is also down," he said, as higher hotel room rates have made interisland trips more expensive for residents.