Says go! Pricing Forced Below-Cost Airfares
It's the first airline bankruptcy of
2008... and given the current economic forecast, we wouldn't bet on
it being the last. Aloha Airgroup, Inc., a Hawaii corporation whose
principal operating subsidiary is Aloha Airlines, Inc., announced
late Thursday night it filed a voluntary petition for protection
under Chapter 11 of the US Bankruptcy Code.
Aloha will seek the Court's approval to allow the Hawaii-based
company to continue operating. Aloha is also seeking Court approval
of a cash collateral financing arrangement with its principal
working capital lender, General Motors Acceptance Corporation, to
provide financing for operations pending a further hearing in
accordance with bankruptcy rules.
In doing so, Aloha seeks to protect 3,500 jobs, hold onto
passenger travel reservations, keep its US Mail and air cargo
contracts, and continue to provide ground-handling services for
domestic and international airlines serving Hawaii.
In its filing, Aloha cited its inability to generate sufficient
revenues from its inter-island passenger business due to predatory
-- and, in Aloha's opinion, "illegal" -- pricing by Mesa Air
Group's go! airline. The Mesa subsidiary started operations in
summer 2006... and promptly began hacking into the market
previously dominated by Aloha, and competitor Hawaiian
Airlines.
In the highly competitive inter-island market, Aloha 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. Late
last week, crude oil rose to an all-time record high of $111 a
barrel. According to Aloha, that means an annual increase of $71
million in its 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 A. Banmiller, Aloha's
president and chief executive officer. "Through this filing, we
hope to achieve a successful outcome that will protect the jobs of
3,500 dedicated employees who have made extraordinary sacrifices
for Aloha, and to continue to earn the support of our loyal
customers, business partners, vendors and financial backers.
"We are reaching out to all our friends here in Hawaii and
around the world to continue to support Aloha Airlines as we work
round-the-clock making every effort to continue our 61-year
tradition of serving our island home in the spirit of Aloha."