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Ruling resurrects cargo unit

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Aloha Airlines' cargo division received the green light from a federal Bankruptcy Court judge to begin operating last night, capping off a chaotic day that earlier saw the sale of the company's airport contract services unit finalized four days early.

The courtroom action involving the two units saved about 1,300 jobs -- although in the case of the cargo unit, it amounts only to a two-week reprieve.

Bankruptcy Judge Lloyd King, acting on an order from new Chapter 7 trustee Dane Field, approved an oral motion to allow cargo operations to resume flying immediately. The pilots showed up last night, and the first flights were scheduled to take off around 11:30 p.m.

The decision to revive cargo operations brings needed relief to thousands of customers throughout the state who have been scrambling to make alternative plans since cargo operations were shut down Monday night.

King's order permits the cargo unit to operate until at least May 14, when an 11th-hour sales agreement to Saltchuk Resources is scheduled to close. A hearing is set for May 12.

Saltchuk, which had walked out of the cargo bidding auction last week, revived its interest after receiving a call from U.S. Sen. Daniel Inouye.

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In yet another twist in Aloha Airlines' bankruptcy saga, Federal Bankruptcy Judge Lloyd King approved an oral motion last night by the new Chapter 7 trustee to allow the company's cargo operation to resume flying immediately.

King's order, amounting to a two-week temporary reprieve for the cargo unit, permits it to operate until at least May 14 when an 11th-hour sales agreement to Saltchuk Resources, the parent of interisland cargo shipper Young Bros., is scheduled to close.

The decision to revive cargo operations brings needed relief to thousands of customers throughout the state who have scrambled to make alternative plans since Monday night when Aloha's lender, GMAC Commercial Finance LLC, cut off funding and prompted Aloha to convert its bankruptcy to Chapter 7 liquidation from Chapter 11 reorganization.

Earlier in the day, King ordered that the sale of Aloha's contract services division to Pacific Air Cargo for $2.05 million be expedited to close yesterday instead of Monday.

The survival of the two units saved about 1,300 jobs.

Former Aloha Chief Executive David Banmiller, who is being retained along with management during the interim period by new trustee Dane Field, said last night that Aloha pilots had been put on standby and that three planes were expected to be put in service to fly from eight to 10 segments. The pilots showed up last night, and the first flights were expected to go out around 11:30 p.m., according to a source familiar with the situation.

Saltchuk announced earlier in the day it had signed a letter of intent to buy the operations for $10.5 million after receiving a phone call from U.S. Sen. Daniel Inouye. However, Saltchuk stipulated that the offer was good only if cargo flights resumed by midnight. Last night, King declined to approve the sale due to the short notice but scheduled a hearing on the matter for May 12.

Aloha pilots agreed to fly the planes even though they were given no assurances of future employment by Saltchuk, despite objections by the Air Line Pilots Association.

In addition, Field told the court that he plans to file a motion to reject all six of Aloha's labor union contracts. That motion also will be heard on May 12.

Field, who had been wavering on accepting the trustee appointment over a pay dispute, did not ask King to resume cargo services until after Field had worked out a deal with GMAC for additional money that the trustee could use to pay for professional help and other expenses. Under the agreement, Field will get a $100,000 advance on a guaranteed $250,000 in compensation, plus 5 percent of net proceeds for the estate from the sale of any cargo assets and anything else sold, with the exception of contract services.

Field initially had asked for $1 million.

Although Field was appointed trustee Wednesday morning, his indecision in accepting the case prompted King to overrule the objections of U.S. Trustee Carol Muranaka and order that Pacific Air Cargo's deal be completed yesterday.

"If the trustee wants to get on board, the trustee needs to get on board," King snapped in reference to Field, who started his position in September after relocating from Texas.

By the afternoon, Field decided to accept the appointment even though his attorney, Simon Klevansky, had walked out. King then ordered a reluctant Field to execute the closing documents for the contract services sale.

Field later retained as his attorney Jim Wagner, who previously represented the other cargo bidder in the case.

Pacific Air Cargo CEO Beti Ward, who seemed overwhelmed by the entire event, said, "I'm close to hysterical, and I don't know if that's hysterical bad or hysterical good."

"We've got a business, and now we've got to figure out a way to make it run properly."

Ward praised the contract services workers who have stayed on the job without any guarantee of payment.

"These people have been fantastic," she said. "They're working on faith. All they've got is my personal guarantee that they're going to get paid, and they're believing in me."

Saltchuk, which walked away last week from bidding for the cargo unit after GMAC requested that Saltchuk raise its $13 million bid to $20 million, revived its interest after conversations with Inouye and his staff.

"He was greatly concerned about the 300 jobs and the vital service that Aloha Air Cargo has provided for the people of Hawaii and asked we try once again to see if we could make something happen," Saltchuk President Tim Engle said.

Aeko Kula Inc., a recently formed subsidiary of Saltchuk, intends to hire out of the existing Aloha cargo work force, the company said.

"We owe a tremendous amount of gratitude to our senior senator for interceding on behalf of the employees and the operation in working out a deal," Banmiller said.