Aloha parent posts
third straight loss

Aloha Airlines' parent company said yesterday it lost money for the third quarter in a row as a 37.6 percent jump in fuel costs outweighed a 10.1 percent gain in revenue.

Privately held Aloha Airgroup Inc., which announced Tuesday that President and Chief Executive Glenn Zander is stepping down Oct. 5 due to his wife's health problems, had a narrower loss of $963,000 in the second quarter compared with a loss of $6.9 million a year earlier. Revenue increased to $114.2 million from $103.7 million a year earlier.

Rising fuel costs, which have plagued all airlines, rose to $1.2 million from $850,000 during the same period in 2003 while total operating expenses grew 24.3 percent to $119.1 million from $95.8 million.

Operating income swung to a $4.9 million loss from an operating gain of $8.7 million a year ago.

The financial results include both the performances of Aloha Airlines and its former sister carrier, Island Air, which was sold in May to San Francisco-based Gavarnie Holding LLC. Results for only Aloha Airlines will be released next week.

Zander said Aloha Airgroup will need to make some adjustments if fuel prices continue to remain high.

"We lost about a million dollars in the second quarter and what's happened since then is that you've had this catastrophic run-up in fuel prices," Zander said. "The spot price for jet fuel is running at $1.37 per gallon.

"Those are prices that are not sustainable over the long term in the current pricing structure of an airline business. Either air fares have got to go up to meet the new cost of (Aloha's operating) production or you've got to bring costs down. And that's not something in this business you can do overnight."

The parent company ended a string of four straight years of losses in 2003 when it posted a $3.2 million net gain. Aloha Airlines, likewise, concluded a four-year losing streak with a net profit of $1.3 million in 2003.

Zander said the company's financial performance was "OK" in July and August and "we'll have to see what September brings."

Although Zander won't be involved in the day-to-day operations of the airline, he will remain on the company's board in the newly created position of vice chairman. Brenda Cutwright will serve as the acting president and CEO until a replacement is found.

"What the board would like me to focus on is key strategic issues, such as what type of aircraft we ought to be flying, what type of new markets we should be considering, things of a very high-level nature," Zander said.

Some Aloha pilots, claiming Island Air has been profitable, have wondered why Aloha Airgroup would sell the interisland carrier and then end up competing against it.

Zander said, though, that Island Air's earnings were always marginal.

"It didn't make a lot and it didn't lose a lot," he said. "It was limited in its size because we had restrictive language in our labor agreement with (the Air Line Pilots Association) that limited our ability to grow the company.

"We were searching for a way to unlock the value in Island Air because the changing market opened up lots of opportunities in non-Honolulu markets. That was not something we were able to do under terms of the ALPA agreement as it stood. By selling the company, we were able to unlock that value."



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