United Airlines’ recent strategic push into the Hawaiian islands is up in the air after its code-share partner, Aloha Airways Inc., became the first airline to reorganize amid the latest industry downturn.
Aloha, which emerged from bankruptcy protection just 14 months ago, blamed its return to Chapter 11 on escalating oil prices and cutthroat competition from another budget carrier, Go, launched in Hawaii by Mesa Airlines Inc. in 2006.
Honolulu-based Aloha, which operates about 840 flights each week within Hawaii and to a handful of West Coast cities, asked a federal bankruptcy court Friday to allow it to continue operations uninterrupted as it reorganizes.
The company also requested that it be allowed to continue a recently struck partnership that enables Aloha and United to jointly sell tickets on some flights and to provide flights to members of both carriers’ frequent-flier plans.
“We will work with Aloha Airlines to continue to serve our customers,” said United spokeswoman Jean Medina.
In bankruptcy documents filed late Thursday, Aloha named Chicago-based United as its second-largest unsecured creditor, with a claim of $5.5 million. Medina declined to provide details of United’s claim. Aloha representatives couldn’t be reached for comment.
Bankruptcy filings reveal that Aloha also owes United $5.2 million for a revolving loan made in July, as the two carriers cemented a partnership that gave United a minority stake in Aloha and a seat on its board.
United never publicly disclosed details of its new ties to Aloha, saying only that it “expands marketing, operational and financial opportunities for both carriers.”
In addition to the secured loan provided by United, Aloha said in court documents that it gained easier access to destinations served solely by United, “streamlined ticketing, baggage handling and check-in procedures between the two airlines, and the ability for customers of Aloha and United to earn frequent-flier miles on flights of either carrier.”
Aloha said it provided travel worth about $3 million to United’s Mileage Plus members in 2007.
The Hawaiian carrier emerged from its previous bankruptcy with backing from a fund associated with billionaire Ron Burkle and a business plan to operate as a low-cost carrier, but it never turned a profit.
The carrier lost a cumulative $168.2 million from 2005 through 2007, as well as $11 million on operating revenue of $35 million during January, according to court documents. Aloha said it had run low on funds, with $3.8 million in unrestricted cash on hand when it filed for bankruptcy protection.
Aloha owes $157 million to two other principal secured creditors: GMAC Commercial Finance and Burkle’s Yucaipa Corporate Initiatives Fund I LP.
———-
jjohnsson@tribune.com
