STAR-BULLETIN / AUGUST 2006 Aloha Airlines cargo workers Paul Apuna, right, and Gary Jenkins lift frozen tuna onto pallets to ready them for shipping. Airline officials will appear in bankruptcy court at 1:30 p.m. today to determine whether cargo operations can continue operating. Aloha Airlines' cargo division flies interisland, domestic and international cargo going to and from Honolulu.

Fate of Aloha cargo rests with hearing

Conflict leaves court to decide business unit's fate

Calling it a "white-knuckle" event, Aloha Airlines attorney David Farmer said a hearing in bankruptcy court this afternoon will likely determine the fate of the carrier's air freight operation, which handles 85 percent of interisland shipments as well as mail for two islands.

At issue is whether General Motors Acceptance Corp. will provide additional funding to keep the bankrupt company's cargo unit operating. The company remained at odds yesterday with the union representing Aloha Air's pilots.

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Aloha's primary lender, General Motors Acceptance Corp., has said it will withhold more funding to operate the company's cargo operations if the company and pilots do not reach an agreement.

Aloha Airlines' cargo operations, which handle 85 percent of the state's air freight and U.S. mail to two islands, will run out of operating cash today.

If Aloha's cargo division shuts down, neighbor islands might not get deliveries of newspapers, bread and other goods. Neighbor island businesses will suffer because goods typically are sent to Honolulu en route to the mainland.

"It's a very, very white-knuckle, buckle-your-seat-belt night tonight," said David Farmer, local co-counsel for Aloha Airlines in bankruptcy court.

Company officials and the Air Line Pilots Association, which represents Aloha's unionized pilots, had some progress in negotiations over the weekend but remained at odds yesterday, according to one source close to the situation.

Pilots are upset because some cargo pilots still working have less seniority than the passenger pilots who were laid off. The union wants the company to honor seniority.

"There needs to be dialogue on the future of those 37 jobs," the source said. "If they're not going to go to Aloha pilots, then why on earth should we help them out? We've proposed modifications to the contract to get them through this transition but part of the assumption is that there will be jobs at the end of that."

"Seattle-based Saltchuk Resources Inc. has offered $13 million for the cargo operations, with the bidding process to start April 21, but Farmer said the value will plummet if cargo operations shut down. Aloha's cargo division has about 200 employees.