Aloha Airlines
is dropping
4 more planes

It is also ending a San Diego
route Aloha just started flying

CORRECTION Wednesday, July 27, 2005 » A story on Page C1 Saturday incorrectly said that Aloha Airlines was returning four Boeing 737-700s being used for trans-Pacific routes. Only three of the planes being returned are for trans-Pacific service. The fourth plane, a Boeing-737-200, is used for interisland routes. The Honolulu Star-Bulletin strives to make its news report fair and accurate. If you have a question or comment about news coverage, call Editor Frank Bridgewater at 529-4791 or email him at corrections@starbulletin.com.

Aloha Airlines will cut four planes from its mainland flights next month, eliminating the Honolulu-San Diego route the carrier initiated in April.

The changes are part of Aloha's efforts to become profitable and emerge from bankruptcy reorganization.

Aloha also is proposing a new compensation and severance package for its president and chief executive, David Banmiller, to entice him to remain with the airline at least until it emerges from bankruptcy.

Aloha proposes to extend the term of Banmiller's contract another year to Dec. 31, 2010, increase his housing allowance to $90,000 from $59,400 and provide him lifetime first-class travel on Aloha Airlines. No changes are proposed for Banmiller's base salary.

Banmiller is receiving $455,400 in salary and could get severance pay of more than $1.1 million if he is not retained after the carrier comes out of reorganization, according to an Aloha bankruptcy filing. A hearing on the matter is scheduled for Tuesday in Bankruptcy Court.

Banmiller, who currently is not receiving his housing allowance because he lives in corporate housing, also own 5 percent of stock in parent company Aloha Airgroup Inc., according to the filing. In addition, Banmiller is provided with a car and is eligible for a success fee if the company emerges from bankruptcy.

Aloha, which had 27 planes when it filed for bankruptcy in December, earlier this year returned two Boeing 737-700s that it used on trans-Pacific routes. With the return of four more planes -- all used for mainland routes -- the carrier has reduced its fleet by nearly one-fourth to 21 aircraft.

One of the four planes is being repossessed by Boeing Capital Corp. after Aloha was unable to renegotiate a lease. A similar disagreement between Hawaiian Airlines and Boeing Capital plagued Hawaiian's bankruptcy reorganization, which the carrier emerged from last month.

Aloha spokesman Stu Glauberman said the airline is returning the three other planes to GE Capital because they weren't needed for the airline's new fall schedule.

"The timing of this shouldn't affect our schedule or the passengers who have booked reservations on us," he said. "The reduction in fleet comes at a time when we traditionally reduce flying in the fall when there's less demand."

The airline, which still has a direct route to San Diego from Maui, began its Honolulu-San Diego service on April 3. The last flight will be Aug. 21. Last month, Aloha announced it was dropping its Reno-San Diego service.

Glauberman said the short-lived Honolulu-San Diego flight "was not as successful as we had hoped."

"We probably didn't give enough time to grow it, but we had to drop something to make the (airline's) eight-plane (trans-Pacific) schedule work," Glauberman said.

As part of the new changes, Aloha's Oakland-Las Vegas service will switch to Orange County-Las Vegas on Aug. 22.

Aloha's reduced fleet will consist of eight 737-700s for trans-Pacific routes and 10 737-200s for interisland flights. In addition, Aloha has three 737-200s for cargo service.

The airline said it is seeking to improve Banmiller's severance package because he has little job security and he may be recruited by other employers.

"By working tirelessly to attract equity investment to save the airline and the jobs of its 3,600 employees, Banmiller may be increasing the likelihood that he will be replaced as president and chief executive officer should a new investor assume control of the airline," the filing said.

Banmiller, hired a month before Aloha filed for bankruptcy, initially was to get $562,222 but he never received that base salary because of a 10 percent pay cut that also affected other Aloha executives. Another 10 percent was taken off later to leave Banmiller with his current base salary of $455,400.

If Banmiller leaves Aloha after the airline emerges from bankruptcy due to "certain triggering events," he will receive two years pay at the original rate of $562,222. If he involuntarily leaves before Aloha is out of bankruptcy, he will have an administrative bankruptcy claim against the airline limited to two years at his current $455,400 base pay.

Banmiller will not be entitled to an administrative claim if he leaves the airline voluntarily during the reorganization. If he is hired by another company, his new salary will be adjusted so that it does not exceed the annualized amount of the severance he would receive from Aloha.