High fuel costs
force Aloha Air
to cut staff

Aloha Airlines said soaring fuel costs are prompting the carrier to lay off 12 top managers and to freeze 35 open management positions, effective Jan. 5.

Employees were notified late Friday that the airline planned to streamline its top echelon, said Stu Glauberman, spokesman for Aloha Airlines.

"Like other airlines, Aloha is facing challenging times as the entire industry feels the financial impact of soaring fuel prices," Glauberman said. "Aloha is making tough decisions to reduce costs."

The layoffs and hiring freeze are just a few of the changes that have been taking place at Aloha Airlines since Air Jamaica executive David A. Banmiller took over as president and chief executive of parent company Aloha Airgroup Inc. in mid-November. Banmiller succeeded Glenn Zander, who remained on the company's board after stepping down to devote more time to his family.

Since Banmiller took over the carrier, it has announced plans to eliminate its twice-weekly flights to Pago Pago in American Samoa and to Kwajalein and Majuro in the Marshall Islands. Earlier in the year, Aloha said it would cut flights to Rarotonga in the Cook Islands.

Aloha is ending the flights because they are not generating sufficient revenue to cover operating expenses, Glauberman said.

The last major layoffs at Aloha Airlines took place in 2001 following the Sept. 11, 2001, terrorist attacks, when both Aloha and local competitor Hawaiian Airlines suffered significant losses from a decline in travel.

Banmiller has taken Aloha's reins at a turbulent time in the airline industry, when few carriers are making money and many are restructuring, including Hawaiian Airlines.

"We feel for our colleagues at Aloha," said Joshua Gotbaum, trustee of Hawaiian Airlines. "This is a time of unprecedented challenge in our industry and no airline is immune.

"Hawaiian has been restructuring for more than three years, but change is a constant in our business and the process of adjusting to change is really one that never ends."

Aloha Airlines blamed a 37.6 percent jump in fuel costs for its parent company's declining financial performance during the second quarter. Operating expenses for the airline in the quarter rose 4.4 percent to $106.1 million from $101.6 million. Aloha has yet to report its third-quarter financial results.

The privately held company, which had a $1.3 million profit in 2002 after four straight years of losses, began its recent string of quarterly losses with a $3.2 million decline in the fourth quarter of 2003. The airline lost $6.4 million in the second quarter, to extend its loss for the year to $13.6 million.

As part of Aloha's management restructuring, the company has appointed C. Thomas Nulty as senior vice president of marketing and sales, which was publicly announced yesterday along with the layoffs. Nulty, who retired in 2003 as president of corporate travel management services provider Navigant International Inc., will oversee sales, pricing/revenue management, advertising and other areas at Aloha.

Also, Aloha is shopping for a buyer for its contract-services and air-cargo divisions to put it in a better financial position.

Aloha Airlines, which was founded in 1946, employs more than 3,600 people and offers 620 interisland flights and 140 trans-Pacific flights per week.

While most airlines around the nation are streamlining, some are expanding, including Aloha's former subsidiary, Island Air.

"We've hired 175 people in the last six months because of all the growth," said Neil Takekawa, president of Island Air, which serves Hawaii's smaller communities. Takekawa said the airline has grown from 40 flights per day to 95 since adding routes to Hana, Maui; Hilo on the Big Island; and Lihue, Kauai.

"We still have a few management positions open," Takekawa said. "We are always interested in looking for well qualified individuals."