Aloha Air CEO is
making his moves

David Banmiller has rearranged flights
in hopes of getting out of bankruptcy

Aloha Airlines, taking rapid steps to turn around its fortunes after filing for bankruptcy last month, said yesterday it will add two daily flights to Orange County, Calif., and one to San Diego, and drop money-losing daily flights to Vancouver, Canada, and Burbank, Calif.

President and Chief Executive David Banmiller, in an interview at the company's Honolulu headquarters, said the airline lost about $24 million in 2004 and only had about $2 million in unrestricted cash when it filed for Chapter 11 reorganization bankruptcy on Dec. 30.

Banmiller, who took over Nov. 14 for Glenn Zander, said a $3 million loan from the majority shareholders -- the Ching and Ing families -- and a 60-day suspension of aircraft lease payments helped the airline accumulate nearly $10 million in cash.

He said he hopes to announce labor agreements in the next two weeks and said he is "fairly along" in negotiations on new aircraft leases. Banmiller, who is seeking $60 million in cost cuts, hopes to get $36 million of that through reduced labor costs and $10 million through renegotiated leases. Other costs cuts are expected to come from halting flights to the Marshall Islands and Pago Pago, American Samoa; fuel conservation; improved efficiency; and cuts to in-flight products, travel agent commissions and insurance premiums.

Banmiller, whose experience includes the Orange County market, said the airline wants to tap growth in that area by adding two flights, one from Honolulu and one from Maui, to bring the total to five between Hawaii and John Wayne Airport. In addition, the airline's new Honolulu-San Diego service will complement the Maui-San Diego service that began Dec. 15. The additional Orange County and San Diego flights will begin April 3.

"Orange County has a dramatically growing demographic, a high disposable-income environment and a lots of leisure travel opportunities," Banmiller said.

To make room for the additional flights, Aloha is discontinuing its Burbank-Reno, Nev., service effective Feb. 1 and eliminating all service to Burbank on April 3. The airline typically has two daily flights to Burbank -- one from Maui and one from Honolulu. Aloha's service to Vancouver will end April 11. Passengers booked on future flights to Burbank and Vancouver either will be switched to another airport, offered a refund or put on another airline.

Banmiller, who is hoping to get the airline out of bankruptcy as early as the fall, declined to identify potential investors but said more than 20 investors have signed nondisclosure agreements. He said the Ching and Ing families hope to remain in an ownership capacity.

"There's significant interest from very serious people," Banmiller said. "We're not dealing with people who would package an investment. We're only dealing with principals -- either investment houses, hedge funds, private individuals. And it's way beyond whoever was involved in Hawaiian."

Banmiller said the company has reached an agreement with the federal Air Transportation Stabilization Board to defer $2.8 million of a $3.5 million monthly payment on a $45 million loan. He also said negotiations are continuing with First Hawaiian Bank, which processes the airline's credit cards.

The former Air Jamaica executive said it is unlikely the airline will add any new routes this year, but it is still interested in Ronald Reagan Washington National Airport in Washington, D.C., after losing out last year in a federal application process. He said Midway Airport in Chicago also is a possibility.

Banmiller said the airline's cargo and contract services units that have been shopped around "are doing OK right now," and they only would be sold if the situation warrants and the price was right. He said the company has talked to Boeing about bringing in 717s to replace the 737-200s used for interisland fights.

But he said that due to parts availability, retraining and other factors, any fleet changes would be put off until after bankruptcy.

Banmiller, describing himself as "an eternal optimist," said he is not a quitter and that filing for Chapter 7 liquidation is "unacceptable." He said the airline might be able to show an operating profit in 2006.

"What I'm going to do is use this opportunity to clean up the balance sheet, stabilize the company, have a better cash position, effect a few changes and then go out and concentrate on running a fantastic airline," he said.

Airing it out Highlights from an interview yesterday with Aloha Airlines President and Chief Executive David Banmiller, who is seeking to bring the airline out of Chapter 11 bankruptcy: » The airline is adding two daily flights to Orange County, Calif., one from Maui and the other from Honolulu; it is also adding a Honolulu flight to San Diego. The new flights begin April 3. » Aloha also is eliminating Hawaii flights to Burbank, Calif., on April 3 and Burbank-Reno, Nev., on Feb. 1. It is discontinuing Honolulu service to Vancouver, Canada, on April 11. » The airline lost about $24 million in 2004.