Monday, April 28, 2008

Aloha Airlines cargo operations to liquidate

AlohaToday, April 28, 2008, Aloha Airlines notified the U.S. Bankruptcy Court of its intention to convert its Chapter 11 bankruptcy filing to a Chapter 7 filing for liquidation. The move came after both bidders for the cargo operation withdrew their offers. Subsequently, Aloha's lender, GMAC Commercial Finance, said it would no longer provide cash to the carrier to continue operations. Aloha had shut down its passenger operations at the end of March, but its cargo service had continued to operate.

An article about the shutdown of Aloha's cargo operations in the Honolulu Advertiser quoted an Aloha attorney, who said simply, "We don't have any money." With that, Aloha's dedicated inter-island cargo service, which had been operating since 1985, came to a final halt. The Advertiser article said:
The move will put 300 of Aloha's cargo employees out of work. It also could jeopardize the sale of its contract services to Los Angeles-based Pacific Air Cargo. Pacific Air last week agreed to buy the 1,100-employee aviation services unit, which handles baggage duties, ramp duties and other ground services for carriers that serve Hawai'i.
Early last week, the Aloha Airlines pilots' union, the Air Line Pilots Association (ALPA), asked the U.S. Bankruptcy court for a temporary restraining order and a preliminary injunction that would make the sale of Aloha's cargo operations contingent on retaining the contract between the airline and the pilots. Later in the week, the pilots' union also voted to authorize a strike if their contract terms were not met, but they also announced that they would not strike before they learned the outcome of this week's Bankruptcy Court proceedings. With the company in liquidation, all of that is now moot.

In a report to the members of the Aloha unit of ALPA, the leadership of the Master Executive Council (MEC) explained:
...We arrived at Bankruptcy Court for the conclusion of the TRO hearings at 2:00 PM Monday. As soon as the Judge took the bench, attorneys for Aloha Airlines asked for a one-hour delay in order to conduct an emergency conference call with the Aloha Board of Directors, the attorneys for GMAC (which has continued to provide financing during the bankruptcy), and the creditors committee.

The court proceeding resumed about 3:30 PM. At that time, the attorney for Aloha Airlines stunned the courtroom by announcing that GMAC was refusing to continue financing, and that Aloha Airlines was seeking immediate approval from the court to convert the proceeding from a Chapter 11 to Chapter 7 liquidation. According to the company’s attorney, one of the two bidders had withdrawn from the cargo auction process Monday morning…and the remaining bidder had withdrawn from the process approximately one hour prior to the hearing. It appears that, at the end, GMAC raised the minimum price that it would accept to release collateral and also asked for the prospective purchaser to be responsible for air cargo operating expenses during the transition period while the approved purchaser awaited any necessary regulatory approvals. GMAC was adamant that they would NOT continue providing financing.

The Creditors Committee attorneys requested that the Judge refuse the company’s request, arguing that the air cargo operation was profitable and should be funded while the auction proceeded. However, GMAC was adamant that they would not provide any additional financing. The Judge attempted to prod GMAC, but acknowledged that he was unable to force GMAC to provide additional operating financing during the transition to a new owner.

In the end, Judge King reluctantly granted the motion of Aloha Airlines to convert the proceeding to liquidation. An Interim Trustee from the Office of the US Bankruptcy Trustee was appointed to oversee the liquidation of the company. Aloha Airlines operations were immediately ceased. Afternoon cargo operations were cancelled.
The message from ALPA's Aloha MEC expressed concerns about issues ranging from retirement, to insurance, to the processing of pilots' training records; more immediately, union officials expressed uncertainty about whether the pilots will receive a final paycheck tomorrow.

Plans are to keep the ALPA office open during normal business hours. Aloha pilots are asked to remain in touch with the MEC.

[Photo Source]

UPDATE May 1, 2008: According to an article in today's Honolulu Advertiser, "Saltchuk Resources Inc. said it reached an agreement with Aloha and its chief lender GMAC Commercial Finance LLC to purchase the shuttered air freight operations... Saltchuk said it plans to hire existing Aloha employees but did not say if it would retain all 300 of the company's air cargo employees."