Bankrupt Aloha Airlines
announces $100M bailout

In an effort to emerge from bankruptcy by the end of the year, the parent company of Aloha Airlines said yesterday it has signed a letter of intent with two Los Angeles-based private equity firms looking to make "a substantial equity investment" in Aloha Airgroup Inc.

Out of bankruptcy Employees: 3,500 Founded: 1946 Investors: The Yucaipa Cos. LLC, led by billionaire Ron Burkle, former owner of the Ralphs and Food 4 Less grocery chains; and Aloha Aviation Investment Group LLC, led by Willie Gault, a former NFL player for the Chicago Bears and Los Angeles Raiders. Both groups are based in Los Angeles. Financial commitment: $100 million in cash and financing, which covers about $67 million to Aloha Airlines' lenders. Projected bankruptcy confirmation hearing: Nov. 29.

Under the agreement, Yucaipa Cos. LLC and Aloha Aviation Investment Group LLC would invest more than $100 million, according to David A. Banmiller, who would continue as president, chief executive officer and board member of the reorganized company.

The Ing and Ching families, longtime owners of Aloha, would continue to have ownership interest, Banmiller said.

"They and AAIG will be significant minority shareholders, and Yucaipa will be the majority shareholder," he said. "The final percentages will be announced at a future date.

"But it's very positive that the families, the Ings and the Chings, are maintaining a significant position in the company and will have several board seats," Banmiller said.

The agreement, including a basic summary of terms and conditions of a reorganization plan, has been filed with U.S. Bankruptcy Court. The plan itself, which must be approved by the court, will be submitted later. The plan calls for the buyers to pay off about $67 million in loans owed by Aloha.

"The objective would be to hopefully be out of bankruptcy by the end of the year, if everything goes right," Banmiller said.

The filing projects a confirmation hearing on the reorganization plan on or about Nov. 29.

Aloha filed for Chapter 11 bankruptcy protection Dec. 30, citing higher operating costs and the need to renegotiate aircraft leases.

Yucaipa is run by billionaire investor Ron Burkle, who once owned the Ralphs and Food 4 Less grocery chains on the West Coast. AAIG is managed by Willie Gault of IBS Capital Holdings. Gault, an accomplished athlete, once played football for the National Football League's Chicago Bears and Los Angeles Raiders.

The Air Line Pilots Association's Aloha Airlines unit issued a statement that said: "Mr. Burkle has an excellent reputation for building outstanding franchises and we look forward to working with Yucaipa and AAIG as our airline exits bankruptcy and explores new growth opportunities."

"In partnership with Yucaipa and AAIG, we have a unique opportunity to carry forward Aloha's 60-year tradition of excellence," Banmiller said. "Combining the vision and resources of our new investors with the continuing support of the Ching and Ing family shareholders ensures the future for our employees, customers and the communities we serve, and will facilitate our growth."

Said Han H. Ching, chairman of the board of Aloha Airgroup: "The Ching and Ing families are proud to have supported Aloha for more than half a century. We look forward to being actively involved in the future of this company with our new partners."

Aloha's rival interisland carrier, Hawaiian Airlines, emerged from bankruptcy on June 2, more than two years after it filed for reorganization.

Founded in 1946, Aloha Airlines, with 3,500 employees, offers about 700 interisland flights per week, linking Hawaii's four largest islands. It also has 140 flights per week from Hawaii to California and Nevada.