Aloha Airlines files for Chapter 11 bankruptcy, blames competition

HONOLULU -- Aloha Airlines filed for Chapter 11 bankruptcy protection Thursday, a little more than two years after emerging from bankruptcy.

Aloha said it will continue to fly as long as a bankruptcy court accepts the airline's financial plan to keep operating.

The airline said in its filing that it was unable to generate sufficient revenue due to what it called "predatory pricing" by Mesa Air Group Inc.'s go! airline.

Aloha Airgroup Inc. emerged from bankruptcy protection in February 2006, just 14 months after filing under Chapter 11.

Phoenix-based Mesa Air Group launched go! into the interisland market later in 2006 to compete with Aloha, as well as Hawaiian Airlines Inc.

In January, go! reported a $20 million operating loss in its first 16 months of operations. Meanwhile, Aloha and Hawaiian reported combined losses of nearly $65 million since go! began operating.

Aloha 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.

"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.

Mesa Air Group CEO Jonathan Ornstein declined comment, saying the company had not yet read the filing.

In October, a U.S. bankruptcy judge ordered Mesa to pay Hawaiian Airlines $80 million for using confidential information it obtained from Hawaiian's own bankruptcy proceedings to launch go!. Mesa is appealing the ruling. Hawaiian emerged from bankruptcy in June 2005.

Aloha said it will ask a bankruptcy court to approve a financing arrangement with General Motors Acceptance Corp. that will allow the privately held airline to continue operating.

"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."

Mark Dunkerley, president and CEO of Hawaiian Airlines, said Aloha's bankruptcy filing reflects the difficult operating environment in Hawaii's airline industry.

"It is extremely challenging and marked by high operating costs, record high fuel prices and a very competitive pricing structure," Dunkerley said.

Gov. Linda Lingle said she was concerned over the future of Aloha's employees in the wake of the airline's bankruptcy filing.

"I am hopeful that this action will allow Aloha Airlines to successfully emerge from reorganization as they have done in the past," she said. "The continued, uninterrupted service of the airline is in the best interest of the employees, Hawaii residents and visitors and our state's economy."

Aloha operates a fleet of 26 Boeing 737s to serve five Hawaiian airports and six mainland U.S. destinations.

In May 2007, Chicago-based United Airlines and Aloha expanded their existing partnership in the Hawaii and TransPacific markets. Aloha and United have been marketing partners since the early 1990s. Frequent flyers in the AlohaPass and United Mileage Plus programs had earned miles and redeemed them for travel on either airline.

Aloha Airlines does not fly directly into Chicago.

What to do

If you booked a flight through Aloha Airlines, here's what to expect:

Q. Will tickets, coupons and reservations for future Aloha flights be honored throughout the reorganization process?

A. Aloha will be asking the Bankruptcy Court to allow its to continue operations so that it can honor existing reservations, accept new reservations, and carry on our cargo and contract

services businesses. As long as the court accepts our financial plan to continue operating, it should be business as usual.

Q. Does the Chapter 11 filing affect the AlohaPass frequent flyer program?

A. As long as the court allows the airline to keep operating there should be no change to the AlohaPass program.

Q. What if I am holding a reservation and will be traveling in the next 48 hours, can I still expect my Aloha flight to operate?

Q. Will the Aloha AirAwards Card continue to earn mileage?

A. Yes to both, as long as the court allows it to operate.

Q. Will this mean a reduction in inter-island or transpacific flight schedules?

Q. Will there be any changes to Aloha's air-freight cargo service?

Q. Will there be any changes to Aloha's contract service business?

A. At this time, the airline does not anticipate any changes.

Q. Can passengers request a refund for unused unrestricted refundable tickets?

A. Yes. There are no changes to Aloha's refund and ticketing policies.

Q. How do I get more information?

A. Go to the Web site at www.AlohaAirlines.com where updates will be provided.

Source: Aloha Airlines