Aloha Air claims
equipment is being
held hostage

Aloha Airlines claims it is being held hostage by one of its creditors and has gone to court to try to get back some of its airplane equipment.

The company has filed a contempt motion against Aero Controls Inc., saying the Auburn, Wash.-based equipment service provider refused to return about $6 million of equipment it serviced for Aloha.

Aloha claims Aero is violating the bankruptcy code because Aero is forcing the airline to make pre-bankruptcy payments of between $260,000 and $309,000 before any equipment is returned. Under bankruptcy law, creditors are barred from attempting to collect debt accumulated before a bankruptcy filing, unless approved by a court.

Aloha, which filed for Chapter 11 reorganization on Dec. 30, said it has even offered to pay Aero $366,000 -- the invoiced amount of the repairs -- to have some specific parts returned.

Aero attorney Tyler Firkins, disputing Aloha's claims, said the airline has defaulted on about $700,000 of maintenance payments since the bankruptcy. Including debt from before the bankruptcy filing, Firkins said Aloha will owe Aero about $1.5 million.

"The truth is that they're not offering to pay for the equipment," he said. "(After the bankruptcy), Aloha forwarded lots of parts to Aero to repair under the maintenance contract and Aero forwarded them invoices. Today, Aloha has paid zero dollars and zero cents. If you contract with someone to work after you file a petition for bankruptcy, you can't default on those payments, which Aloha has. So when they pay, they'll get their parts."

A hearing is scheduled for March 17.

Aloha, which has two equipment leasing contracts with Aero in addition to the service contract, made good yesterday on a court-approved $628,374 to pay Aero for equipment leased since the start of the year. Money owed Aero under the maintenance contract is under discussion, according to Aloha spokesman Stu Glauberman.

Firkins, though, characterized the $6 million figure that Aloha cited in its motion as "fictional," adding that "none of what Aloha is talking about is remotely true." He said Aero's refusal to return Aloha's parts has nothing to do with money that Aero was owed before the bankruptcy filing.

"Aloha is trying to cherry pick parts," Firkins said. "What they want to do is have the judge say that Aero has to serve as their bank and allow them to pick the parts they want the most and continue to finance Aloha during the pendency of the bankruptcy."

Firkins, who acknowledged that the two sides are negotiating the maintenance payments, scoffed at Aloha's claim to pay Aero $366,000.

"They orally made a statement, 'What if we send you $366,000, will you just send us some of the parts.' Aero's response was, 'Why not send us money for all the parts?'"