Sad farewell to Aloha Airlines from island skies

THE ISSUE After 61 years, Aloha Airlines has terminated its passenger service.

ALOHA Airlines' announcement that it was going out of business should have come as a surprise to no one. The airline had been flying in the red while engaged in a fierce fare war for more than two years, and a surge in fuel prices forced it to land in bankruptcy, with no buyers emerging. Interisland travelers will miss Aloha's 61-year presence.

"Unfortunately, unfair competition has succeeded in driving us out of business," said David Banmiller, Aloha's president and chief executive. The remark was aimed at Mesa Air Group's go!, which arrived in Hawaii in June 2006 and began offering $19 interisland one-way fares and promotional fares that dipped as low as $1 last year.

However, Aloha had experienced financial problems before Mesa's arrival, having filed for bankruptcy in 2004, following the path of Hawaiian Airlines. Both carriers emerged from bankruptcy before go! entered the island skies. Having lost $41.2 million in 2005, Aloha proceeded to report losses of $46 million in 2006 and $81 million last year. It lost $11 million this January alone.

Fuel prices rose in recent months as the dollar weakened, damaging airlines trying to cope with an economy that increasingly is being recognized as a recession. Rep. Neil Abercrombie has called for the release of fuel from the petroleum reserve in response to what he regards as a national emergency.

The closure will result in the layoff of 1,900 Aloha employees, although 1,600 may keep their air cargo jobs. Saltchuk Resources Inc., the Seattle-based parent of Young Bros. Ltd., offered to buy the air cargo operation last week for $13 million. United Airlines, Aloha's marketing partner, may have backed away from a proposal involving ATA and Mesa to save the airline's passenger service.

Several industry experts anticipated Aloha's announcement. "It will be very difficult to maintain three interisland carriers," aviation industry consultant George Hamlin told the Star-Bulletin's Jennifer Sudick after Aloha's latest bankruptcy filing on March 20. "You can either have two fat cows or three skinny ones."

Mesa appears determined to keep go! flying in Hawaii, although a federal judge ordered it to pay more than $80 million for using confidential information obtained during Hawaiian's bankruptcy. Mesa has posted a $90 million bond to appeal the ruling.

Hawaiian has been able to cope with the price war, posting a $7.1 million profit last year. Competition between Hawaiian and go! should continue, but not at a level that could put either airline out of business. The worst scenario would leave the state with only one interisland airline.