Aloha Airlines: Mahalo for the Memories

By Senator Sam Slom, Originally published in Hawaii Reporter

The announcement on March 30 that 61-year old Aloha Airlines would cease all passenger operations immediately (in 24 hours) was a shock to many that reverberated throughout the Aloha State.

Sure, there was the filing for bankruptcy on March 20, 2008, (the second filing in four years) and the 400+ employee rally for state government help at the Capitol on March 28, but still the suddenness and finality of the announcement stunned most people. (Apparently not shocked were the principal investors of the airline who discontinued support, suitors for acquisition, such as United Airlines, and Hawaiian Air and go! Airlines who already made plans to add additional seats and schedules). There was sadness -and anger - as well.

Aloha Airlines' business is actually made up of three components: passenger carrier, cargo, and ground control. There have been offers to buy the cargo operations, but not the entire airline.

This announcement followed by a week, the Molokai Ranch pronouncement that it would cease all operations on the "Friendly Isle," at the end of this month. Ranching, retailing, resort operations, gas station, all gone.

And this followed the recent announcement by Gov. Linda Lingle that the state should take over Turtle Bay Resort and the Kuulima North Shore lands for "preservation."

Hawaii is reeling from doses of major economic bad news. Not good news for any business climate or for any capital short state wooing new investment money. All of these events are entwined with Aloha's fate. Finger pointing began at once. Who is to blame?

First though, everyone extends their sympathy and best wishes for the more than 1,900 affected employees of Aloha. Aloha has been a good corporate neighbor and a welcomed interisland air carrier and competitor. The employees bravely provided service to the very last flight and what appears to be the end today.

Aloha was my primary local airline of choice since 1960. I even owned part of it when it was a public company.

But we should not forget just a few important historical facts:

The term "predatory" pricing has been used. But consumers have ruled. Interesting that "predatory" pricing is also used when attacking big box retailers like COSTCO or mega Mainland retailers like Wal-Mart. go! only enjoyed about 5-7% of the local interisland air market. Previous carriers tried to go head to head with Aloha and Hawaiian but did not have the deep pockets or business plan that go! employed. By any reasonable analysis, go! cannot be the ultimate bad guy here.

Fuel costs have been staggering, it's true. They affect all of us directly and indirectly. And all businesses. But business and individuals have to adjust and account for it and Aloha apparently didn't do enough. Hawaiian Air apparently did.

Management of Aloha Airlines must be questioned. They said go! was out to get them, but Aloha apparently played into the upstart's plans. Aloha matched lower fares knowing they couldn't afford to do so. They didn't play on their strengths: longevity, service, loyalty, aircraft, schedules and "local" airline. Aloha reportedly did have plans to modernize aircraft, revise schedules and offer new services but they didn't implement them. Some of Aloha's recent leaders were involved in previous airline losses. In contrast, Hawaiian Air faced the very same challenges and go! plan but managed differently. Good or bad, management always must be held accountable for what happens to a company during good times and crisis.

The unions - pilots, flight attendants and machinists - they were hand in hand to "save" Aloha last week but previously, during threatened strikes, they all talked stink about "their" airline. They also were instrumental in increasing salary, health care and retirement costs to the carrier. Granted, they did do some "givebacks" during the first bankruptcy, but it wasn't enough.

State government actions were anything but helpful. The Hawaii State Legislature, dominated 85 percent by one political party, has passed legislation for decades that has destroyed, not helped, local businesses. We have a business climate known internationally as hostile, not helpful.

Did the state save sugar, or pineapple or City Bank from the hostile Central Pacific Bank takeover? Did it save landmark retailers, hotels or manufacturers who failed? Did it step up for Hawaii Superferry after protesters attacked? Did it help the privately proposed Maui Hospital? None of them.

Business is tough. Business is tougher in Hawaii. It is all about change (and always was before Barrack Obama). High taxes, employer mandates, regulations (such as the 60-day advance notice plant closing law the Governor now wants to enforce against Aloha)) and intervention should have told everyone not to go to the Hawaii state government for assistance or a "bailout."

Interestingly, General Excise Tax exemptions and landing fee forgiveness are offered now, only after the airline was about to shutdown. None of these actions were even suggested for most other businesses; especially burdened small business (under 100 employees) that make up 98 percent of the state's total.

The Governor's plan: another "Rapid Response Team" accompanied by the state's bankruptcy counsel today asking the bankruptcy court not to allow the shutdown of Aloha Airlines' inter-island and transpacific flight operations until Aloha has shown it has exhausted all possible avenues for continuing its operations.

The state asked the court today to "require Aloha Airlines to provide sufficient time and proper notification to employees of the shutdown and that all additional steps be taken to protect the interests and rights of Aloha employees given Aloha's notice yesterday that it will cease airline passenger operations at end of business, March 31, 2008."

The state also sought to have Aloha provide its financial information to the court to determine whether the shutdown is in fact necessary. Necessary?

Late today, federal Judge Samuel P. King of the bankruptcy court ruled against the Governor and the state saying it was a business decision and one that Aloha Airlines alone could make. Immediately thereafter, some majority leaders in the Legislature turned their fingers toward the Governor for blame. Why didn't she act sooner? Why didn't she challenge GO's alleged "predatory" pricing?

But, where were they?

Then there were barbs exchanged between Aloha management and the Governor.

While it is possible (but unlikely) that there will be a post midnight hour rescue or acquisition of Aloha Airlines (one can still hope), we should be focusing on the causes-not symptoms-of Hawaii's growing business destruction and unattractive investment climate.

Economic illiteracy rules in Hawaii-especially in the halls of government.

Most people-and lawmakers- don't have a clue as to what it takes to stay in business, pay the freight and meet a payroll week after week.

Stop the finger pointing, unless you get it right.

As the once top comics character Pogo said more than 60 years ago, "We have looked into the mirror, and the enemy is us."