Aloha Flies Back into Bankruptcy Territory

The airline files for Chapter 11 only two years after its last emergence from bankruptcy.
Stephen TaubMarch 21, 2008

Aloha Airgroup Inc., the parent of Aloha Airlines Inc., has filed for Chapter 11. The news comes a little more than two years after it emerged from bankruptcy.

In its court filing for bankruptcy protection, Aloha blamed its inability to generate sufficient revenues from its interisland passenger business on its price war with Mesa Air Group’s Go airline. The Hawaii-based company said it was forced to match Go’s “below-cost fares” at a time when the airline industry was facing “unprecedented increases” in the cost of jet fuel, which has meant an annual increase of $71 million in fuel expenses.

“It is a travesty and a tragedy that the illegal actions of a competitor and other factors completely beyond our control have forced us to take this action,” said David Banmiller, Aloha’s president and CEO.

Aloha wants court approval of a cash collateral financing arrangement with its principal working capital lender, General Motors Acceptance Corp., to provide financing for operations pending a further hearing under bankruptcy rules.

The airline said the goal of the bankruptcy filing is to protect 3,500 jobs, honor thousands of passenger travel reservations, keep U.S. mail and air cargo moving between the Hawaiian islands, and continue to provide essential ground-handling services for domestic and international airlines serving the state. “Through this filing, we hope to ÂÂ…continue to earn the support of our loyal customers, business partners, vendors, and financial backers,” said Banmiller.

The last time Aloha filed for bankruptcy protection, its competitor Mesa Air made a stab at investing in the carrier. The initial talks and Mesa’s exposure to Aloha’s proprietary data eventually led to the firing of Aloha’s CFO.

Last October a U.S. bankruptcy judge ordered Mesa to pay Hawaiian Airlines $80 million for violating its confidentiality agreement. Several days later, Mesa fired CFO George “Peter” Murnane III, noting that the court had found he “intentionally and in bad faith destroyed evidence” pertinent to Hawaiian’s breach-of-contract lawsuit against Mesa.

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