Aloha receives funding to continue flying cargo

The bankrupt airline is planning to sell the profitable operation

Aloha Airlines got some breathing room yesterday when its primary lender agreed to provide the bankrupt carrier with $3 million in new financing.

The cash infusion by General Motors Acceptance Corp. came despite an apparent pilot sickout Monday night that resulted in nearly half of the company's cargo flights being canceled. Flights were operating normally yesterday, but the company called up reserve pilots just in case there was a shortage.

GMAC's financing will allow Aloha to meet its March 31 payroll of $2.5 million and paves the way for the auction of the profitable cargo unit.

Separately, Aloha voluntarily dismissed its motion for a temporary restraining order against the Air Line Pilots Association, and two former employees filed a class-action lawsuit alleging the company violated a displaced-workers law by failing to give adequate termination notice. The suit seeks 60 days' wages and benefits for all terminated employees.

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Aloha Airlines' primary lender agreed yesterday to provide the bankrupt carrier with $3 million in new financing despite an apparent pilot sickout Monday night that resulted in nearly half of the company's cargo flights being canceled.

The record number of flight cancellations came amid "deteriorating" labor talks between the Air Line Pilots Association and the company.

General Motors Acceptance Corp. had provided Aloha with enough cash to last only through Monday, but with GMAC first in line to receive the proceeds from a sale of Aloha's cargo division and aviation services unit, the lender decided it was in its best interest to give Aloha additional funding.

"It was a tough decision by GMAC on how to proceed," GMAC attorney Douglas Lipke said during a federal Bankruptcy Court hearing. "But it was more disturbing to us to hear the company's report that there were an unusual high number of canceled flights due to the absence of pilots. We're going to give the benefit of the doubt that it was just a bad day."

However, Lipke warned that there is a default clause in the $3 million lending agreement in which the lender could stop its financing in the event of a disruption of cargo services.

Aloha spokesman Stu Glauberman said the company's cargo operations were running normally yesterday after seven of 16 flights were canceled Monday night. All time-sensitive goods and U.S. mail were delivered Monday, he said.

But Glauberman added that the company called up reserve pilots yesterday to assist with the flight schedule.

"There were some larger shipments that had to be held back (Monday night) that hopefully (were flown last night)," Glauberman said.

On a peak day, the company flies 16 round trips at night and three to five round trips during the day, according to Peter Clark, Aloha's vice president of flight operations.

At the urging of Bankruptcy Judge Lloyd King, Aloha voluntarily dismissed yesterday its motion for a temporary restraining order against the pilots union, but reserved the right to refile it again if necessary. Aloha filed the motion last week because it had been concerned about possible disruptions to the cargo operations, but union attorney James Linsey said that having a TRO motion hanging over the union's head wasn't helping negotiations.

The legal maneuvering continued late yesterday when terminated Aloha employees Dayna Stoker and Charles Oh filed a class-action lawsuit against the company. Stoker and Oh said the company allegedly violated the Worker Adjustment and Retraining Notification Act for failing to provide at least 60 days' advance notice of termination. The plaintiffs are seeking 60 days' worth of wages, salary, commissions, bonuses, accrued holiday pay and accrued vacation pay for all terminated employees, and want the claim classified as administrative priority status to increase their chance of collecting. The suit also said that the company failed to make 401(k) contributions and provide health insurance coverage and other employee benefits. The suit seeks reimbursement for those benefits as well.

Linsey, who said he didn't know the reason behind the record number of cargo-flight cancellations on Monday night, said yesterday that "cargo operations are breathing normally."

However, he couldn't say the same for the negotiations between the pilots union and the airline, which he said have deteriorated in "substance, tone and tenor."

"I'm not at all sanguine there will be an agreement," he said.

Linsey said the central issue for the union is the retention of Aloha pilots when the new owner of the cargo division takes over. There currently are no such provisions in the bidding-procedure motion proposed by Aloha and approved by Seattle-based Saltchuk Resources Inc., which has offered $13 million for the cargo division, plus up to $6 million for accounts receivable.

Linsey said the 35 to 40 cargo pilots who will continue to fly after last week's shutdown of passenger operations need assurances they will be retained after the new owner takes over Aloha's cargo operations, and want that matter included as a condition in the sales transaction.

King asked Aloha attorney Sheldon Kline who was calling the shots on the negotiations.

"The ultimate shot caller is Mr. David Banmiller," responded Kline, referring to Aloha's president and chief executive officer.