Aloha nabs
$45 million loan

The airline receives final approval
for federal backing of the private loan
arranged through Citibank

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By Russ Lynch
rlynch@starbulletin.com

Aloha Airlines is able to put $45 million in the bank and use it to beef up operations, buy new equipment and move ahead as it recovers from the type of setbacks airlines suffered after the Sept. 11 attacks.

The Air Transportation Stabilization Board yesterday approved a federal guarantee of $40.5 million to help Aloha's parent, privately held Aloha AirGroup Inc., secure a $45 million loan from New York-headquartered Citibank.

Aloha is one of only three airlines, along with America West Holdings Corp. and American Trans Air parent ATA Holdings Corp., to win full final loan approval from the board, which has $10 billion available.

Aloha said its Citibank loan was arranged by investment consultant Salomon Smith Barney and Mercer Management Consulting acted as a financial adviser.

In the conditional approval it announced Nov. 5, the ATSB said it would require some additional financial commitments from Aloha's owners, the Ching and Ing families of Hawaii.

Glenn Zander, Aloha president and chief executive officer, was not available for comment yesterday.

However, he told national trade publication Aviation Daily that Aloha AirGroup had tentatively agreed to issue warrants to the ATSB worth 17.5 percent of Aloha's ownership, as additional security.

The warrants would allow the federal agency to step in as a partial owner if needed.

The federal board has made it clear, particularly in its rejection earlier this month of the $1.8 billion guarantee to United Airlines, that it won't approve guarantees unless the finances add up to its satisfaction. The board's rejection forced United parent UAL Corp. into bankruptcy reorganization.

Aloha made the cut. Three others -- U.S. Airways, Frontier Airlines and cargo carrier Evergreen International -- have won conditional approval, as Aloha did in its first step.

But eight others, including United, were rejected and the most common reason was that the board did not trust their financial projections and believed they would end up as a drain on U.S. taxpayers.

One of the big reasons Aloha was able to secure the loan was that its unions last week wrapped up new contracts taking pay cuts. Management also will take pay cuts.

In his statement yesterday, Zander thanked the workers and all the others involved for the concessions they made that led to the ATSB loan approval.

He also thanked Hawaii's congressional delegation for its support.

Competitor Hawaiian Airlines and its parent Hawaiian Holdings Inc. have not asked for financial support through the board.

Both airlines compete head-to-head in interisland service, where another 9/11 emergency measure has allowed them to adjust capacity mutually on interisland routes.\

Both airlines also fly mainland-Hawaii and Hawaii-South Pacific routes.