Cash-strapped Aloha Airlines of Hawaii closes down cargo division

16 May, 2008: Aloha Airlines, a cargo and passenger airline headquartered in Honolulu, Hawaii, the United States, has shut down its cargo division after its primary lender, GMAC Commercial Finance, deciding not to provide further financing.

Aloha Airlines, operating from a hub at Honolulu International Airport, was carrying 85% of the inter-island air cargo of the state of Hawaii – a wide variety of items, including all mail to and from Maui and the Big Island as well as agricultural produce and fresh flowers.

Media reports said the decision by GMAC Commercial Finance to stop financing Aloha Airlines came after two companies interested in buying the cargo division pulled out.

An official of Jupiter Holdings Group, one of the two companies that wanted to Aloha Airlines, was quoted as saying that his company withdrew when Aloha and GMAC increased the asking price to $15 million. Jupiter Holdings Group had been the highest bidder, with an offer of $13.65 million.

Now the United States bankruptcy court will appoint a trustee to oversee the liquidation Aloha Airlines’ cargo division. US Bankruptcy Court Judge Lloyd King was quoted as commenting: “Because it was a grim possibility, it takes us all by surprise.”

Aloha Airlines had filed for bankruptcy in March 2008 and then shut down its unprofitable passenger service on March 31 after it was unable to find a buyer. The passenger business division has been suffering for a long time owing to rising fuel prices and stiff competition vis-à-vis inter-island airfare.

On the contrary, Aloha Airlines’ cargo business division has been making good profits.

According to US Bankruptcy Court Judge Lloyd King, reports the news agency AP, the latest developments will not affect the sale of Aloha Airlines’ contract services division to Pacific Air Cargo for $2.2 million.

Aloha’ contract services division, which looks after baggage handling and other ground services in Hawaii for Japan Airlines, United Airlines and other carriers, was nominally profitable. The division employs about 1,100 people.

The sudden shutdown of Aloha Airlines’ cargo division has hit hard Hawaii’s business in general and farmers in particular, Radio New Zealand International’s website rnzi.com has reported.

Aloha has been dominating the inter-island cargo business, flying about 85% of the cargo between Oahu and Kauai, Maui and the Big Island. Now, businesses are scrambling to find alternatives to ship goods.

The website quoted Alan Takemoto, executive director of Hawaii Farm Bureau, as reacting: “It is a major setback for businesses. The timing of it all is very bad. I mean, with the economy slowing down, fuel prices going up, both Aloha’s passenger service closing down, ATA airlines closing down, the overall cost of doing business is going up and now they have to deal with this closure of the cargo service on Aloha Airlines is not good timing.”