Aloha's CEO weighs in

David Banmiller speaks out on competition, fares and his company's upcoming anniversary

ALOHA AIRLINES was all but written off nearly two years ago.

Down to its last couple million dollars, the ailing carrier filed for bankruptcy in December 2004 to gain breathing room and attract investors.

Now, five days shy of its 60th birthday and five months removed from reorganization, Aloha said it's here to stay despite some industry talk that interisland newcomer go! is trying to put Aloha out of business.

"We went through 14 months of sheer terror in the bankruptcy environment with a lot of times where we had some tough calls," David Banmiller, president and chief executive of Aloha, said yesterday. "This is simply a competitive environment. I think (the employees) are used to a competitive environment with Hawaiian and they have this positive attitude that we will prevail."

The entry of Mesa Air Group's go! into the Hawaii market in June has been cheered by many consumers who have welcomed the lower ticket prices brought on by a fare war. But there also is concern among some Aloha employees and other industry observers that go!'s $39 one-way interisland fares are a money-losing proposition designed to ground Aloha and its 3,500 employees.

"This is an aggressive industry," Banmiller said. "People are always trying to gain market share. In (Mesa's) case, (it's) trying to gain market presence in Hawaii to see if there's an opportunity. We think four carriers (including Island Air) in the marketplace and the significant increase in seat capacity is problematic for all four carriers."

Banmiller said Aloha has estimated numbers on go!'s cost structure and determined that Mesa can't make a profit by offering $39 one-way fares, especially given the high price of fuel that has caused Aloha's fuel costs to double over the last three years.

Jonathan Ornstein, chairman and CEO of Mesa, said, "I appreciate his (Banmiller's) concern about our profitability, but I feel he should be worrying about their profitability. He wants to steer the public to thinking that we're a flash in the pan, but I will say without any equivocation that we'll be in Hawaii for a very long time, and it won't be in my lifetime, but we'll celebrate our 60th anniversary in Hawaii."

Ornstein said go! is performing far above his expectations, and that in July the carrier was very close to being profitable with a single-digit loss.

He also said the perception that Mesa is trying to put Aloha* or any other interisland carrier out of business is "absolutely not true."

If it comes down to money, Banmiller said, Aloha can weather the storm, even though Mesa and Hawaiian, both publicly traded, had $271 million and $154 million of unrestricted cash, respectively, at the end of the first quarter. Aloha, which is private and isn't required to disclose its financial numbers, shed $75 million to $90 million in annual expenses during its 13 1/2-month stay in reorganization and also eliminated $250 million in debt obligations, Banmiller said. Aloha's major investor, Yucaipa Cos., is headed by billionaire grocery chain magnate Ronald Burkle.

"We have the total support of our new ownership," Banmiller said. "They have told me that they're committed to this enterprise. Yucaipa certainly has the wherewithal to manage us and support us through these short-term challenges."

Banmiller is characterizing 2006 as a "block-and-tackle" year in which he wants to focus on the employees and customer service.

"Let's just make sure bags are delivered on time and we run a good on-time airline with a good quality product," he said.

To that extent, Banmiller said Aloha is taking aim at ending Hawaiian's 31-month streak as the No. 1 on-time performance airline in the nation.

He's met with employees during the last three weeks and set targets for turning around the planes faster. He's also told Aloha's vice presidents that they have to be "on" seven days a week until Aloha is No. 1.

In May, the last month that figures were available, the U.S. Department of Transportation reported that Hawaiian's flights were 95 percent on time (arriving within 15 minutes of schedule) while Aloha was second at 88.7 percent.

"We're tired of being No. 2 and we're working really hard at seeking how we can become No. 1, and I think we'll get there ... I think that's important for the morale of the employees and for the good of the customers."

Banmiller also said Aloha is supporting the company's pilots by backing federal legislation that would allow the Pension Benefit Guaranty Corp. to treat pilots, who must retire at age 60, as if they had retired at age 65. This would allow pilots to receive the maximum benefit from the PBGC, which is taking over Aloha's benefit payments following Aloha's distress termination of the pilots' defined-benefit plan.

Aloha also is seeking legislation that would allow defined-benefit plans to be frozen and the company's obligation to be amortized over 20 years. If that were to pass, Aloha could take back oversight of the pilots' pension plan.

Banmiller, pointing to a study conducted last month by Hawaii aviation historian Peter Forman, also defended the interisland fares that Aloha was charging prior to the fare war. The study compared fares in Hawaii with fares on the mainland and showed that prior to the fare war that mainland routes of comparable distance actually had higher fares than those within Hawaii.

"All I know is the nautical mile comparison for the average fare is substantially higher on the mainland, and I think this perception about the cost of flying within the islands needs to be put into perspective for the consumer," said Banmiller, noting that Aloha's cost of flying 188 nautical miles from Honolulu to Hilo is "substantially less" then the $87 one-way fare that is charged to fly 186 nautical miles from Washington National to New York LaGuardia.

Birthday bash Aloha Airlines will mark its 60th anniversary on Wednesday with several events. The day has been proclaimed Aloha Airlines Day by Gov. Linda Lingle and Lt. Gov. Duke Aiona. » Every paying passengers who flies on Aloha on this day will receive a certificate that can be redeemed for a free interisland trip on the individual's birthday in 2007. Aloha expects to give out about 10,000 certificates. For rules, go to www.AlohaAirlines.com » Fashion show of Aloha Airlines uniforms through the decades at Honolulu Airport interisland terminal gates 49 to 53, accompanied by live music, and the unveiling of a new look at Aloha's Makai Pier gates. Ticketed passengers can take part in the event but it's closed to the general public because it's beyond the security entrance. » Aloha, in cooperation with the Mayor's Office of Culture and the Arts, presents a concert at Mission Memorial Auditorium, next to Honolulu Hale, featuring entertainers Nina Keali'iwahamana, Mahi Beamer and the island band Maunalua. Danny Akaka Jr. will emcee.

CORRECTION Friday, July 21, 2006 In this article, we inadvertently referred to go! instead of Aloha in the following paragraph. We regret the error.: "He also said the perception that Mesa is trying to put Aloha or any other interisland carrier out of business is 'absolutely not true.'"