Feds OK
Aloha loan

The $40.5 million guarantee is
contingent on unspecified structural
and financial enhancements

By Tim Ruel

Aloha Airlines Inc. received an early Christmas present today in the form of a conditional $40.5 million loan guarantee it sought from the federal government.

Aloha applied for the guarantee, offered by the U.S. government under the Air Transportation Safety and System Stabilization Act, to back a $45 million private loan the airline has arranged. The guarantee is contingent on Aloha making unspecified "structural and financial enhancements," according to a letter today to the airline from the Air Transportation Stabilization Board.

Aloha Air Aloha disclosed last month that it wants employees to take a pay cut as part of its effort to get the loan guarantee.

The government offered as much as $10 billion in guarantees and $5 billion in cash after the attacks on Sept. 11, 2001. The feds would repay 90 percent of Aloha's $45 million financing if the carrier defaults on its debt.

Aloha's guarantee approval received unanimous support from the board's three members, according to the letter from the board. Final loan documents still must be negotiated by the board.

Hawaii's other locally based carrier, Hawaiian Airlines, has not applied for a loan guarantee because it is not having trouble raising funds, Hawaiian has said.

Both local airlines have received federal grants under a program to keep airlines flying after Sept. 11. Aloha received $8.5 million and Hawaiian received $31 million. That money will not have to be repaid.

Aloha and Hawaiian have also received U.S. Department of Transportation approval to jointly set the number of passenger seats available on key interisland routes, under a one-year exemption from antitrust law. Hawaiian and Aloha had sought a merger late last year, but that plan fell apart in March.

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