Aloha Air shuts down

The air carrier filed for bankruptcy March 20 and is ending passenger service after today

Aloha Airlines, which has been operating since before Hawaii became a state, abruptly announced yesterday it is shutting down passenger service after today.

The 61-year-old carrier, which filed for Chapter 11 bankruptcy just 10 days earlier -- its second such filing in a little more than three years -- said it ran out of time to find a qualified buyer or secure continued financing for its passenger business.

David Banmiller, president and chief executive of Aloha, accused Mesa Air Group's go! of pushing Aloha over the edge.

"Unfair competition has succeeded in driving us out of business," said Banmiller, referring to a below-cost interisland airfare war that go! triggered when it entered the Hawaii market in June 2006.

Gov. Linda Lingle said the state will attempt to block or stall the shutdown today by asking Bankruptcy Judge Lloyd King to require that Aloha provide sufficient time and proper notification to employees of the closure, and provide financial information to determine whether the shutdown is necessary.

The airline said 1,900 of its approximate 3,500 employees will receive layoff notices today.

Aloha said its air cargo and aviation services units will continue to operate while the federal Bankruptcy Court seeks bids from potential buyers.

Aviation industry analyst Robert Mann called it a "sad day for competition" and said the shutdown now creates "a more colorable and tangible damage claim" in Aloha's lawsuit against Mesa.

Aloha attorney David Farmer said he expects the suit against Mesa, scheduled to be heard in October, will go forward even if the airline is no more.

"That is an asset of the estate," he said.

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Aloha Airlines, which overcame the 2001 terrorist attacks and a 2004 bankruptcy filing, said yesterday it could not survive an interisland airfare war and that it was ceasing all passenger service after today.

The 61-year-old carrier, which 10 days earlier filed for its second bankruptcy in a little more than three years, said it had run out of money, and blamed its demise on an interisland fare war triggered by Mesa Air Group's go!, which entered the market in June 2006. When it filed for Chapter 11 on March 20, Aloha also cited record fuel costs for seeking bankruptcy protection.

Aloha said its air cargo and aviation services units will continue to operate while the federal Bankruptcy Court seeks bids from potential buyers.

The airline said 1,900 of its approximate 3,500 employees will receive layoff notices today.

"This is an incredibly dark day for Hawaii," said David Banmiller, president and chief executive of Aloha. "Despite the groundswell of support from the community and our elected officials, we simply ran out of time to find a qualified buyer or secure continued financing for our passenger business. We had no choice but to take this action."

Gov. Linda Lingle said the state will attempt to block or stall the shutdown by asking Bankruptcy Judge Lloyd King today to require that Aloha provide sufficient time and proper notification to employees of the closure, and provide financial information to determine whether the shutdown is necessary.

Aloha has a hearing scheduled for 2 p.m. today in Bankruptcy Court on a motion to establish a bidding procedure for its air cargo business. Saltchuk Resources Inc., the parent of interisland ocean shipper Young Bros. Ltd., offered $13 million for the air cargo operations last week.

Aloha will ask the court to add to the docket motions to discontinue Aloha's remaining aircraft leases and discontinue its flight operations.

Banmiller blasted Lingle for her belated effort to assist Aloha.

"We have been in close contact with the governor for weeks in regards to possible government support and to let her know we had no tangible or substantive offers (on the passenger business)," he said. "Unfortunately, the governor is misinformed, and that's a disappointment to us all."

Aloha had attempted to stave off bankruptcy and rescue its passenger operations by working out a deal with United Airlines, ATA and Mesa, but United backed out of the deal to force Aloha's hand, a person familiar with the situation said.

"Unfortunately, unfair competition has succeeded in driving us out of business," Banmiller said in reference to the price war triggered by go!

Barring a last-minute stay of execution, Aloha said it will conduct its final interisland flights today and all flights originating on the mainland to Hawaii. There will be no flights from Hawaii to the West Coast.

Code-share partner United, Hawaiian Airlines, go! and other carriers have offered to assist inconvenienced passengers.

"We have been competing with Aloha for 61-odd years," said Mark Dunkerley, president and CEO of Hawaiian. "At no point have we ever wished ill on their employees. Today, as we deal with the consequences of their decision to shut down their airline operations, I think our first view, our first feelings, or first reaction goes to 3,500 people, many of who are directly related to those who work at Hawaiian Airlines."

Hawaiian said starting tomorrow it will expand its interisland flight schedule by more than 6,000 seats -- up from 14,000 daily interisland seats -- and will beef up airport personnel to alleviate the backlog of displaced ticket holders.

History Of Aloha Airlines [ click image to enlarge ]

Go! said it will increase its number of daily seats to 4,700 from 2,700 beginning tomorrow.

Both Hawaiian and go! also said all interisland seats will be priced at $49 per ticket for one-way travel through next Monday. In addition, Hawaiian said it will offer free standby flights for the ticketed day of departure for interisland and trans-Pacific flights beginning tomorrow through Thursday. Go! has the same standby offer for interisland travel.

Mesa Chairman and CEO Jonathan Ornstein, whose airline is being sued by Aloha for alleged predatory pricing and alleged use of confidential information obtained while a potential investor during Aloha's first bankruptcy, declined to comment about Mesa's alleged role in Aloha's demise.

But he said in a statement that "we will continue to adjust our schedule to satisfy demand and work hard to provide the highest-quality, lowest-cost service to the people of Hawaii."

Aloha Airlines pilot Sean O'Neill, who flies Boeing 737-700s on mainland routes, said he was "blindsided" by the announcement.

O'Neill, who has been with Aloha for six years and has a wife and two children, said, "There's only so much you can blame go! for it."

"I think a lot of it has to do with go!, but I think you can also blame the management. I don't think they lived up to their part. And, unfortunately, there's other extenuating circumstances with fuel and stuff."

Capt. Anthony Denzer, who flew three interisland round-trip flights yesterday on Boeing 737-200s, called the shutdown "a shame."

"I thought there would be a last-minute investor that would see value in the people and the name," said Denzer, who is married with one son.