Losses may justify
merger of airlinesThe issue: Filings with the SEC display
the red ink burdening the two island carriers.FINANCIAL documents from Hawaii's two interisland airlines furnish evidence that at some point losses would likely have compelled one of them to shut down. The fiscal strains both are under may quell some concerns about the airlines' pending merger, but government officials should not abandon efforts to assure that a monopolistic enterprise will not exploit Hawaii's captive market.
Disclosures filed with the Securities and Exchange Commission showed Hawaiian Airlines lost $12 million to $17 million in the last three months of 2001 while Aloha Airlines' red ink totaled about $11 million. Neither had ended a year in the black since 1998.
In December, the struggling airlines announced an agreement to merge operations through a deal put together by Greg Brenneman, former head of Continental Airlines. The documents tend to bolster contentions by Brenneman, who will head the combined company, that the merger "is necessary to maintain the viability of Hawaii's interisland air service." They show that in the last quarter of 2001, Hawaiians' losses totaled as much as $100,000 a day. Aloha dropped between $109,000 and $170,000 daily.
The filings also showed that in the first nine months of the year, Hawaiian had generated profits of $15.2 million. Some have argued that Hawaiian, which received $22 million from the federal government to compensate for Sept. 11-related losses, would have been able to hold on. However, the future for Aloha, which lost $5.6 million in the earlier quarters, remained uncertain.
The merger will require approval of shareholders as well as antitrust clearance from the state Attorney General's Office and the U.S. Department of Justice. Brenneman has been making the rounds through the state to drum up support for his proposal and has received the blessings of Gov. Cayetano. But in recent weeks, several class-action lawsuits on behalf of employees and shareholders have been filed, and a citizens' group has petitioned Cayetano, seeking to block the merger, saying it would lead to job losses and higher ticket prices.
There is no doubt that jobs and interisland flights will be cut and that fares will go up. Brenneman already has said so; he's not taking on the business to lose money. Nonetheless, Brenneman must be mindful of the fact that Hawaii's residents and businesses are almost entirely dependent on air service with reasonable fares and freight charges. His company must carefully balance profits with the responsibility of doing business in an island state.
Meanwhile, state officials should continue to keep a close eye on the situation so that Hawaii consumers are treated fairly.
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Ban contractor bucks in
political campaignsThe issue: Legislators have shelved a
proposal to ban government
contractors' contributions.STATE legislators who seemed intent on putting an end to political contributions by state and county contractors are backing away from such a reform. Instead of propelling them into action, the controversy surrounding Mayor Harris's campaign contributions has sent them scurrying for constitutional shelter that is hard to find.
Federal law prohibits anyone who contracts with the U.S. government from making any contributions to a political party, committee or candidate for federal office, or be solicited for such a contribution. Corporations with government contracts can -- and do -- form political action committees for such purposes.
A proposal by Democratic Sen. Colleen Hanabusa would similarly forbid state or county contractors from giving money to non-federal political candidates as part of a more extensive campaign-finance reform bill. However, Senate committee chairpersons Brian Kanno (Judiciary), Cal Kawamoto (Transportation and Government Affairs) and Donna Mercado Kim (Tourism and Intergovernmental Affairs), all of whom expressed support of the bill, led votes to strip away the contractor contribution ban.
Kanno said the campaign-finance system should be "transparent" but not prohibitive, reflecting the widely held view that campaign contributions are a form of political expression protected by the First Amendment. However, contributions can be restricted for the purpose of eliminating corruption or the appearance of corruption. Giving money to a campaign does not receive the same constitutional protection as campaign spending by candidates.
Robert Watada, executive director of the state Campaign Spending Commission, said government contractors would welcome relief from the obligatory campaign contributions.
"Companies, officers, families and close family members go to extraordinary lengths to funnel money to the chosen candidates," Watada said. "They cheat, they will miss payroll to their employees and lay off employees, but they will not miss a requirement to give generously and often ... The system is not healthy."
Dan Chun of the American Institute of Architects prefers reforming state and county contract requirements over limiting contributions. However, powerful changes would be required to counter the incentive of politicians for campaign funds and companies for government contracts.
Chun said architects would be confused about whether to bid on a government contract, depending on when they made contributions. The solution: When in doubt, don't contribute.
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Published by Oahu Publications Inc., a subsidiary of Black Press.Don Kendall, Publisher
Frank Bridgewater, managing editor 529-4791; fbridgewater@starbulletin.com
Michael Rovner, assistant managing editor 529-4768; mrovner@starbulletin.com
Lucy Young-Oda, assistant managing editor 529-4762; lyoungoda@starbulletin.comJohn Flanagan, contributing editor 294-3533; jflanagan@starbulletin.com
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