Lawmakers Vow to Help Aloha Airlines, Industry Expert Provides Context

OAHU (KHNL) --  With Aloha Airline's future up in the air, Hawaii lawmakers pledge their support for the ailing airline as it enters bankruptcy.

"We need to keep Aloha Airlines solid and we need to send a message that we're a good place to do business, and that our economy is strong," said Sen. Gary Hooser, (D) Senate Majority Leader.

The proposed legislation could help Aloha Airlines from going out of business.  The local carrier came out of bankruptcy just over two years ago.  Strong support from lawmakers means key people are fighting to keep the airline alive.

Hawaii depends on interisland flights to keep its economy going.

"Being a neighbor island legislator, myself along with my colleagues on Maui and the Big Island are especially sensitive to interisland travel issues," said Sen. Hooser.

When Aloha filed for bankruptcy protection a few days ago, lawmakers felt the impact.

"I think it's really right now my focus is on the employees," said Sen. Hooser.  "Here's over 3,500 families, friends and neighbors of ours, that we need to look out for."

That's why Sen. Hooser and his colleagues hope to help the 61-year-old local airline.

"Everything's on the table," said the state senator from Kauai.  "We're really racking our brains, meeting and talking on a regular basis, trying to figure out what we can do."

They're looking at House Bill 2860 HD2 SD2 and Senate Bill 2913 SD2, which would exempt "from general excise and use taxes the fuel sold from a foreign-trade zone for interisland air transportation by common carriers."

And lawmakers are considering other options.

"We're looking at possible loan guarantees, possible tax credits, wide range of things we're hoping to put into place in the coming weeks," said Sen. Hooser.  "That will help support Aloha Airlines stay in business."

Although a move by lawmakers to help save a company is unusual, it's not the first time.

"We did it in 1993 for Hawaiian Airlines," said Sen. Hooser.  "We offered loan guarantees to them, which they never used but it helped provide confidence in their business, and we do it on a regular basis for different businesses.  We offer tax credits."

That's what Sen. Hooser hopes happens with Aloha as it continues its bankruptcy proceedings and looks for a buyer.

"Again our economy in many respects, especially neighbor island economy, is tied to this particular business," he said.  "Long term it could have implications, so I think we're obligated to step in and do what we can. We're not the end all, we're not the total answer, but we need to step in and help in whatever way we can."

Sen. Hooser believes there's enough support at the state Capitol to pass legislation that could help Aloha this session.  Lawmakers passed an amended version of the jet fuel bill, and it is now in the hands of the ways and means committee.

And one local industry expert says support from lawmakers would help Aloha Airlines, but it must convince potential investors that it can weather the current interisland airfare storm.

Peter Forman, an author and a former commercial pilot for a mainland airline, says Aloha should do fine once fares return to a rational level.

He speculates go! Airlines has been offering fares below cost to drive out the competition in this market.

"The whole idea here is to pressure Aloha into either cutting way back on their service or disappearing to make room for go! Airlines," said Forman. "So that's been the strategy from day one."

While this competition benefits air travelers short term, Forman says, long term effects could be devastating.

"I think some intervention by lawmakers may make sense because this is not competition under way," he said.  "This is one concerned effort from one big mainland company to come here and push out the low cost provider of air service here in Hawaii and in the long run, if they are successful, people here in Hawaii will not only have less air service, but they're going to pay more for it."

All three carriers have lost money since the airfare war began almost two years ago.

Forman says Aloha's planes eat up more fuel than the competitor's planes, so the spike in jet fuel prices has hit Aloha especially hard.

"The purchaser of the airline intended, I'm sure, to upgrade the fleet to fuel efficient fleet but wasn't able to do that because of the fare war that started immediately afterwards," said Forman.

He says Saturday's support from lawmakers is a golden opportunity for Aloha to reinvent itself.

"What they need to do is attract new capital to convince the new owners that they can survive this very damaging fare war, and once fares return to rational level, Aloha should do fine," said Forman.  "But they have to convince the new buyers that they can make it until the fare wars are over."

Forman says air fare wars are typically short term in order to advertise you're new to the market or to stimulate the market in slow times.  But the recent air fare wars have been unusual, something he has never seen before.