Aloha Airlines ends six decades as "the people's airline" today with the abrupt shutdown of its passenger service and the firing of 1,900 workers.
The state's No. 2 airline succumbed to a fierce, two-year interisland fare war and a rapid rise in jet fuel prices.
The shutdown, which left passengers holding potentially worthless tickets, will likely lead to fare hikes by the state's surviving two carriers, Hawaiian and go! airlines.
Aloha pulled the plug just 11 days after the airline filed for bankruptcy protection and as lawmakers rushed to assemble a bail-out package.
Tearful employees said they were shocked yesterday morning when they got the memo from Aloha CEO David Banmiller, saying they would no longer operate the airline's 700 weekly interisland flights and 120 flights to the West Coast.
"This is an incredibly dark day for Hawaii," Banmiller said in a news release. "We simply ran out of time to find a qualified buyer or secure continued financing for our passenger service. We had no choice but to take this action."
Tourism officials said the loss of Aloha will cause confusion and inconvenience for many visitors in the short term but shouldn't have lasting impact on the state's No. 1 industry.
For interisland travelers, Aloha's departure means the loss of an estimated 88,000 seats per week. Hawaiian and go! said they will add enough capacity to make up 56,000 of those seats, but also hinted that prices might rise as early as next week.
Hawaiian and go! said they plan to keep interisland fares at $49 at least until April 7.
Fares will likely rise, especially if oil prices remain at near-record levels of about $100 a barrel, said local aviation industry historian Peter Forman.
Forman, author of the 2005 book "Wings of Paradise: Hawaii's Incomparable Airlines," predicted that go! and Hawaiian will increase their base fares from $49 to at least $75 by the end of the year.
"The day of reckoning is coming soon for those of us who have enjoyed the fare war for the past year and a half," Forman said.
Aloha filed for bankruptcy protection March 20 — the second time since late 2004 — after it lost more than $120 million during the past two years.
The company blamed "unfair competition" by go! airlines, whose June 2006 entry into the interisland market kicked off a price war in which the cost of travel to the Neighbor Islands dropped by about half to $39.
Aloha said go! and its Phoenix-based parent, the Mesa Air Group, sold tickets below cost to drive out competition.
Jonathan Ornstein, Mesa's CEO, declined comment on Aloha's charges yesterday.
But in previous comments, Ornstein said Mesa didn't plan to drive Aloha out of business. Ornstein said his company attempted to invest $20 million in Aloha when it was trying to emerge from its earlier bankruptcy.
go! was quick to increase its flights following news of Aloha's closure.
"In response to demand, we have significantly increased the number of flights in all markets providing high frequency service throughout the business day," Ornstein said in a news release.
Hawaiian, the state's largest airline, said it will increase its daily passenger seat count on interisland flights by 42%, or 6,000 seats per day.
Hawaiian and go! said they will honor Aloha tickets that were purchased for travel from Tuesday through Thursday on stand-by basis.