Ending service is Aloha’s call, court says

Sixty-one years of passenger service, an 11th-hour challenge by the governor and the hopes and prayers of thousands of employees and customers were not enough yesterday to save Aloha Airlines.

In a hearing that took just less than an hour, federal Bankruptcy Judge Lloyd King quickly ended any suspense of a last-minute reprieve when he said that shutting down passenger operations was a business decision that could be made only by Aloha. The airline's last flight arrived in Honolulu last night from Kahului.

"It's really not the court's business as long as a good-faith-effort determination is made by the estate," King said. "I'm not going to be the one authorizing a shutdown. It's going to be the decision of the debtor's management and professionals."

Gov. Linda Lingle had asked the court to delay or block the shutdown until the company provided a cash-flow budget through April, so that it could be determined whether Aloha's financial situation was as dire as it claimed.

The governor's spokesman, Russell Pang, said after the request was denied that Lingle "was disappointed that the state's objections were unheard and the court refused to consider the matter."

And with the judge's ruling, Aloha's fate was sealed:

» 1,900 jobs lost, with possibly more to come later from Aloha's two remaining business units.

» Countless numbers of passengers scrambling to find alternative transportation plans.

» And finger-pointing all around on what was to blame -- go!'s interisland airfare war, record-high fuel prices, Aloha management, the state -- or possibly all four.

David Banmiller, president and chief executive of Aloha, said the airline nearly went under five times during the last three years and that up until Sunday -- the day it announced the shutdown -- he was trying to work a deal to keep the carrier alive.

But he said that after talking to the CEOs of five airlines and potential hedge-fund investors over a period of months, as well as Lingle and lawmakers two weeks ago, he had exhausted all options. The airline was at a point that it would be unable to financially make it through this week.

"This is a terrible day for this company," Banmiller said. "A lot of people are hurting and justifiably so. This is adversely affecting human beings, their lives, their futures and their families."

Less than two weeks after filing for the company's second bankruptcy in just more than three years, Banmiller said the airline had a responsibility "to do the right thing" because it could not legally sell tickets if it could no longer be certain it could fly those passengers.

Banmiller put most of the blame on Mesa Air Group's go!, which entered the market in June 2006 with what he calls below-cost "predatory pricing" designed to drive Aloha out of business. He said Aloha, which is suing Mesa, was unable to raise its fares to recover the rising fuel costs because it needed to match go!'s fares to remain competitive.

"The (damages) number (in the suit) is probably going to get bigger because of this," he said.

Banmiller said Mesa's below-cost pricing "was a clear attempt to destroy this company."

"That has cost this company $60 (million) to $75 million annually, and we proposed making $25 million when we came out of bankruptcy (in February 2006)," he said.

Banmiller also said that because of soaring oil prices, the airline now has an additional $71 million in annual fuel expenses that it did not have two years ago when it emerged from its first bankruptcy.

Aloha attorney Paul Singerman told Judge King that Aloha had lost $125 million since its first bankruptcy in February 2006 and lost money every month in 2007, en route to $81 million in losses for the year. He said Aloha had $1.7 million in cash as of yesterday and that it costs $1.5 million a day to operate the airline.

Singerman said the fate of Aloha's remaining 1,600 employees would be determined by the prospective buyers of the airline's remaining air cargo and aviation services units, both of which are profitable.

Saltchuk Resources Inc. already has offered $13 million for the air cargo operation, and Aloha hopes to set up a bidding process for that unit in a hearing rescheduled for today. Aloha has 400 employees in its cargo operation.

Singerman also said Aloha has received expressions of interest in its aircraft services unit, which employs 1,200 people, but does not yet have any letters of intent.

The airline also plans to seek additional revenue by selling its intellectual property, the Aloha name and other assets.

But First Officer Randall Cummings, a four-year employee who flies Boeing 737-700s to the mainland, said, "That name without the 3,500 employees is worthless."

Flight attendant Debi Ozawa, who has been with Aloha for 34 years, most recently flying mainland routes, was stunned by the outcome.

"We've given Aloha aloha," she said. "It's horrible to see an out-of-state company like Mesa take us down. What's Hawaii going to with this Arizona-based company? Hawaiian, our sister ship, is bringing in more seats and taking over Aloha like we never even existed."