Aloha Files

Most of you know that oil prices have been over $100 a barrel for the past 10 days or so, and finally dropped to the mid 90's today. What you probably haven't noticed unless you drive a diesel is how high diesel and its close cousin Jet-A have been trading at during the past six months. In some places, I've seen diesel at $3.99/gallon. Take away the federal and state taxes, and that puts Jet-A just below $3.00/gallon, which is unsustainable for the airlines.

Unfortunately, it's a little too late for Aloha Airlines, who filed for bankruptcy today, the second time in about three years they've had to do so. The likelihood of surviving one bankruptcy is fair, but the likelihood of surviving two in short order is another story. Continental and US Airways filed twice within a few years of a previous filing, but the latter was bought out by a competitor. TWA filed twice, and eventually liquidated after selling itself to American.

Unfortunately, I don't think Aloha will be the only US airline to file for bankruptcy in the immediate future. Several other carriers are in just as bad shape (if not worse) than Aloha was, including Virgin America, Skybus, Midwest, Frontier, and yes, even Mesa.

Maxjet already fell victim to oil prices a few months back, but they also had a questionable business plan. Unfortunately, so do a few of the other airlines I listed....


The list of potential suitors for Aloha isn't short by any means:

• Last May, United Airlines announced it had taken a minority stake in Aloha, but I never saw any disclosure on how much of a stake it was. Would it be in their best interest to up their stake?
  
  
• Gordon Bethune is Chairman of Aloha, and former AirCal president David Banmiller has been CEO of Aloha for many years. Could Gordon's ties to CO or Banmiller's ties to AA be a factor?
  
  
• Will the merger with Hawaiian (as was attempted in 2002) finally happen?
  
  
• Could Southwest step in? Aloha's all-737 operation is a unique opportunity, plus it would give Southwest the ability to close the door completely on their somewhat diminished codeshare with ATA. All that's left for ATA's scheduled operation is West Coast - Hawaii, and Aloha's 737 fleet is overwater equipped...
  
  
• Even more bizzare, could Mesa try to offer up a reorganization plan? Not that they have the money or credit to do so, but Aloha vs. Mesa goes to trial next month, and based on the $80M+ already awarded to Hawaiian, Ornstein's got to be worried about another multi-million dollar judgement...
  

Time will tell. I don't think we'll be saying Aloha to Aloha quite yet, but we're in the midst of one of the worst economic storm to ever hit the US, much less the airlines. There are going to be a few more casualties, and I don't know that mergers are going to be an option for all of the victims.