Sky Wars

The rise and fall of Aloha Airlines

In entrepreneurship, they say, there's nowhere to go but up. That's particularly true of the airline business -- one day you're flying high, the next you're grounded. And while there is money to be made in an airline -- potentially, lots of money -- the people who get into the business have a streak of dreamy imagineering that tempers their business sense.

Flying is an upscale, romantic business. It also cannot be done halfway. The choices are operate, die or get swallowed by sharks. In the last week, Aloha Airlines, ATA and Champion Air of Minnesota have had to face current market realities and cease operations.

The history of Aloha is typical of regional airlines that sprang up after the catalyst of World War II. Postwar, there were thousands of trained pilots on the market, hundreds of surplus aircraft and, most important, a nation that had come to view air travel as a necessity rather than a luxury. Before the war, most Americans never traveled more than a few miles away from home. After, millions of citizen-soldiers had traveled the world.

Hawaii was in a unique position to benefit from this opportunity. Suddenly, both the concept and reality of air travel to, from and between the islands became a reality. Chinese-American publisher Ruddy Fah Tongg, who had formed a hui of like-minded small-businessmen early in the war and who prospered mightily from buying up properties abandoned by fleeing Caucasians, looked into the future in 1946 and saw air travel. It was also a potential investment that was not controlled by the "Big Five" corporations that ruled Hawaii's business.

The only competitor was Hawaiian Airlines, founded in 1929 as an adjunct to the Inter-Island Steamship Co. To put it bluntly, the burgeoning air-travel industry was also an entree for "local" businessmen to compete in a "haole" market. Tongg also saw beyond the island-hopping engaged in by Hawaiian, envisioning an airline that serviced the entire Pacific, particularly China.

By 1946, Tongg and his investors inaugurated the grandly named Trans-Pacific Airlines with a handful of war surplus C-47s. Although its flights were unscheduled, pending FAA approval of permanent routes, TPA transported more than 10,000 passengers in the first year, grossing tens of thousands of dollars. There was a cheerful pioneer spirit to the new carrier, typified by stewardesses performing impromptu hula in the aisles, pilots flying low so passengers could ooh and aah over waterfalls and the company marketing slogan -- TPA was "the aloha airline."

Alarmed, Hawaiian gained an injunction to bar TPA from operating as a scheduled airline. The ban was lifted 18 months later, during which the carrier suffered losses. It did not begin to show serious profits until the early '50s, when the boom in mainland tourism began in earnest. Hawaiian countered by investing in more modern, sleeker aircraft, the Convair 340. TPA quietly shelved Tongg's dream of becoming a Pacific-wide carrier. For the time being.

And so, in the first half-decade of Aloha's life, the ground rules for the airline's long duel with Hawaiian were established -- who would be the biggest fish in a small pond, using courts and investors and government regulators as competition tools, endlessly trying to one-up the other by buying newer and newer aircraft. Both airlines have, for more than half a century, played business hardball.

In 1958, investor Hung Wo Ching took control, and TPA officially changed its name to Aloha Airlines. After experimenting with turbine and turboprop designs, Aloha and Hawaiian became all-jet operators by the late '60s, with Aloha flying the new Boeing 737-200s and Hawaiian operating Douglas DC-9-30s. Between them the new planes provided more seats than the market could handle. (Operators say 120 seats is the ideal configuration for airlines of this size, although turboprops are far more efficient and less costly to operate. But Hawaiian and Aloha both bet the bank on operating all-jet fleets.)

In 1972, merger talks between the two airlines evaporated when Hawaiian President Jack Magoon left the table. It was only the first of several failed mergers over the years.

In the '80s, Aloha finally became a Pacific-wide carrier, operating leased DC-10s between Honolulu and Taipei. The experiment only lasted a couple of years, and Aloha did not leave the islands again until 2000, when it started operating 737-700s.

Aloha was hit hard by the instant airline recession created by Sept. 11, 2001, coupled with an aging fleet that cost more to operate. Even an antitrust exemption that allowed Hawaiian and Aloha to operate the same routes did not help. Aloha filed for Chapter 11 bankruptcy protection in 2004.

Sensing blood in the water, Mesa Air Group established go! airlines in the islands with below-cost fares. Passenger numbers fell off, and that, coupled with high fuel costs because of the Iraq war and a leveling of available investor capital thanks to the nationwide mortgage bust, put Aloha so squarely in the red that even another Chapter 11 filing did not help.