Aloha Air halting passenger service after 62 years

"All of us are deeply saddened to learn that Aloha Airlines has succumbed to the ever-increasing costs and demands of today's airline industry," said Mark Dunkerley, Hawaiian's chief executive officer.

"Aloha was a proud airline with a 61-year legacy of serving Hawaii's residents and visitors."

Established in 1946 as Trans-Pacific Airlines, Aloha is the state's second-largest airline with about 3,500 workers.

The company first filed for bankruptcy protection in December 2004 after fuel prices began to soar and emerged from reorganization in February 2006 under new ownership led by California billionaire Ron Burkle and former football star Willie Gault.

Since then, it had strengthened its position by adding United Airlines as an investor and by naming former Continental Airlines CEO Gordon Bethune as its chairman.

Yesterday's announcement shocked state legislators, who are attempting to come up with a last-minute bail-out plan that included millions of dollars in state loan guarantees for the financially strapped company.

Honolulu Mayor Mufi Hannemann and Gov. Linda Lingle said the city and state are ready to assist affected Aloha employees through their various job-seeker services.

"This is a very troubling development that will have far-reaching consequences," Hannemann said.

In a news release yesterday, Lingle said the state will ask federal Bankruptcy Judge Lloyd King not to approve the shutdown of Aloha's interisland and transpacific flight operations.

The state said it will also seek financial information from the court "to determine whether the shutdown is in fact necessary."

"We fully understand the urgency Aloha's decision has created for the employees and their families, and we will do everything we can to assist the employees during this very difficult time," Lingle said.

Speaking through a company spokesman, Banmiller, Aloha's CEO, said Lingle's comments questioning the necessity of the shutdown are "misinformed."

Banmiller said Aloha has been in close contact with the Lingle administration for weeks seeking "possible political and government support" and that company executives told the administration that they had no substantive offers for Aloha.

Over the past year, the company received minimal support from the administration and other lawmakers, Banmiller said.

The chances that Aloha could save or resurrect its passenger service appear slim. In a filing yesterday, the company asked judge King for approval to return its Boeing 737-700 and 737-200 aircraft and other equipment, which had been leased.

The airline, which had $3.8 million in unrestricted cash when it filed for bankruptcy this month, said its cash holdings were down to $900,000 yesterday.

The company said it couldn't find a lender to keep it flying.

The company said in a filing Friday that lender GMAC Commercial Finance was willing to provide another $3 million in loans but only if the money was used to finance the company's profitable divisions such as its air cargo unit, and not used to pay for operating costs for Aloha's passenger service.

Analysts said Aloha's demise means that go! was able to accomplish its goal of driving the state's No. 2 carrier out of the market.

They cited e-mails uncovered in a lawsuit against Mesa in which Mesa's chief financial officer at the time, Peter Murnane, stated: "We definitely don't want to wait for (Aloha) to die, rather we should be the ones who give them the last push."

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