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$100M bid made for Aloha Airlines

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Midnight Mike

Well-known member
Dec 10, 2002
100M bid made for Aloha Airlines [font=Trebuchet MS, Verdana]Pair betting on struggling Aloha Air[/font][font=Trebuchet MS, Verdana]Agreement to help carrier emerge from bankruptcy[/font][font=Trebuchet MS, Verdana]Aloha Airlines timeline[/font][font=Trebuchet MS, Verdana]

[font=Trebuchet MS, Verdana]By Rick Daysog
Advertiser Staff Writer

[/font][font=Times New Roman, Times, serif]

A California billionaire and his partners have agreed to buy Aloha Airlines with a $100 million investment that will allow Hawai'i's No. 2 carrier to emerge from bankruptcy by the end of the year.

[/font][font=Times New Roman, Times, serif]Aloha has signed a letter of intent with billionaire Ron Burkle's Yucaipa Companies and Aloha Aviation Invest-ment Group LLC, which is led by former professional football standout Willie Gault. Yucaipa will become the new majority shareholder.

[/font][font=Times New Roman, Times, serif]The deal, which requires court approval, breathes new life into Aloha and ensures that travelers in Hawai'i will continue to have two fierce competitors in the interisland air market.

[/font][font=Times New Roman, Times, serif]"The state of Hawai'i needs at least two airlines to have more choices and prevent almost a monopoly," said Kristi-Lyn Ueoka, a paralegal from Wailuku, Maui, who flies on Aloha two or three times per month. "If they didn't have competition or somebody taking away their ridership, what would be the incentive for them to provide stellar customer service? I would be very disappointed if they weren't around anymore."

[/font][font=Times New Roman, Times, serif]Hawaiian Airlines, the state's largest airline on the basis of revenue, was bought by a California investment company, Ranch Capital LLC, earlier this year and emerged from bankruptcy in June.

[/font][font=Times New Roman, Times, serif]The $100 million investment into Aloha will allow the 3,600-employee company to preserve jobs, continue operating at current levels and pay off more than $65 million it owes to its lenders, the company said.

[/font][font=Times New Roman, Times, serif]"This clearly gives us the platform to exit bankruptcy by the end of the year," said David Banmiller, Aloha's chief executive officer. "It creates a positive sense of momentum in the company."

[/font][font=Times New Roman, Times, serif]Banmiller will remain as the airline's chief executive officer. The company's longtime owners — the heirs of local investor Hung Wo Ching and developer Sheridan Ing — will become minority shareholders.

[/font][font=Times New Roman, Times, serif]The Ing and Ching families will continue to be represented on the company's board of directors. The airline's senior management team will remain in place.

[/font][font=Times New Roman, Times, serif]Aloha will remain privately owned.

[/font][font=Times New Roman, Times, serif]With nearly $500 million in annual revenues, Aloha operates about 700 weekly interisland flights and about 140 weekly flights to the Mainland. Aloha filed for bankruptcy protection in December because of rising costs due in large part to higher prices for jet fuel.

[/font][font=Times New Roman, Times, serif]Banmiller met with about 400 of Aloha's employees at the Honolulu airport yesterday to announce the deal.

[/font][font=Times New Roman, Times, serif]Banmiller said later in an interview that Aloha's primary concern will be to emerge from bankruptcy and stabilize its operations. During the past several years, the price for jet fuel has more than doubled to $2 a gallon, forcing the airline to make significant cost cuts.

[/font][font=Times New Roman, Times, serif]Since December, the airline has reduced its costs by $60 million a year, Banmiller said.

[/font][font=Times New Roman, Times, serif]According to Aloha, the new investors have a proven track record in working with distressed companies.

[/font][font=Times New Roman, Times, serif]Yucaipa, founded by Burkle in 1986, is a private equity investment firm that has taken part in more than $30 billion worth of mergers and acquisitions. In June, the company invested $150 million for a 40 percent stake in Pathmark Stores Inc., a New Jersey-based grocery store operator.

[/font][font=Times New Roman, Times, serif]AAIG is a private equity firm managed by Gault, a former All-Pro wide receiver for the Chicago Bears. Gault, who is a principal in Los Angeles-based IBS Capital Holdings, and other investors in AAIG recently acquired ERA Aviation Inc., a regional airline serving Alaska.

[/font][font=Times New Roman, Times, serif]In a bankruptcy court filing yesterday, Aloha provided a summary of a reorganization plan, which it will submit in the next few months to the bankruptcy court for approval.

[/font][font=Times New Roman, Times, serif]According to the summary, Aloha intends to pay off more than $65 million borrowed from Ableco Finance LLC and Goldman Sachs Credit Partners LP after the carrier filed for bankruptcy. The airline also will repay some $4.7 million in loans issued to the company from the Ing and Ching families.

[/font][font=Times New Roman, Times, serif]The summary did not say how much other creditors will receive when Aloha emerges from bankruptcy.

[/font][font=Times New Roman, Times, serif]Aloha also said that it may exclude payments to employees' pension plans but did not provide details.

[/font][font=Times New Roman, Times, serif]Mike Feeney, a spokesman for the 340-member Aloha chapter of the Air Line Pilots Association, said union members look forward to working with the new investors. Since December, pilots have agreed to about $12 million in wage concessions, and many have been frustrated by the "slow pace" of the bankruptcy proceedings, he said.

[/font][font=Times New Roman, Times, serif]"This will take us out of bankruptcy and it will help us explore new growth opportunities," said Feeney.

[/font][font=Times New Roman, Times, serif]For Banmiller, the deal culminated several months of on-and-off deal-making. The airline, which was down to about $3 million in cash when it went into bankruptcy, initially courted Maitlin Patterson Global Opportunities Partners this past spring, but the deal fell through.

[/font][font=Times New Roman, Times, serif]Founded in 1946 as TransPacific Airways by local publisher Rudy Tongg, Aloha has had a long tradition of local ownership. In 1986, then-Chairman Hung Wo Ching and Sheridan Ing fought off a takeover attempt from Dallas-based CNS Partners by taking the company private.

[/font][font=Times New Roman, Times, serif]"The Ching and Ing families are proud to have supported Aloha for more than half a century," said Han Ching, chairman of Aloha Airgroup Inc., the airline's parent company, in a news release.

[/font][font=Times New Roman, Times, serif]"We look forward to being actively involved in the future of this company with our new partners."

On the regional board, there is rumor of MESA airlines hitting the Islands

no rumors...

It's all over the news....it's official. Not sure how they goin' do it, but should be interesting....
Friday, September 23, 2005


Mesa Air
to fly isle skies

The company's chief executive
hints at lower interisland fares
and hirings in the hundreds

By Dave Segal
[email protected]
Undeterred by the bankruptcies of Hawaii's two largest airlines, a Phoenix-based regional carrier is planning to crowd into Hawaii's interisland market in the first quarter of next year by offering low-cost, high-frequency service to all the major islands.

Mesa Air Group

Headquarters: Phoenix
Aircraft: 182
Destinations: 165 cities, 44 states, District of Columbia, Canada and Mexico
Affiliations: Operates as America West Express, US Airways Express and United Express, and independently as Mesa Airlines
Employees: 5,000
Founded: 1982
Hawaii service: First quarter 2006
Routes: Oahu, Big Island, Maui, Kauai
Type of Hawaii planes: Canadair Regional Jets, seating 50, 70 or 86 passengers
Mesa Air Group Inc., which has been eyeing the Hawaii market for more than a decade, was expected to announce this morning it will establish an independent airline that will go head to head with Hawaiian and Aloha airlines along with smaller carriers Island Air and startup FlyHawaii Airlines, which plans to begin service next year.

Jonathan Ornstein, chairman and chief executive of Mesa, said yesterday that the carrier likely will start operating with six aircraft and eventually end up with 12 to 15 as the market grows. He said the new airline, whose name will be disclosed at a later date, initially will use Canadair Regional Jet 200s, which seat 50 passengers. He said the airline eventually could use CRJ 700s and 900s, which seat 70 and 86 passengers, respectively. Ornstein said the aircraft are new to Mesa's 182-plane fleet.

"The airline industry is going through restructuring and I think we're about to see a huge turn," Ornstein said. "One of the reasons we're doing this is because now is the time to take advantage of opportunities because I think a turn is coming."

Ornstein said he wasn't sure if Mesa's arrival in the islands would spark a fare war, but he emphasized that "we are not going to be underpriced."

"Prices are always the intersection of supply and demand," he said. "There will be a little more supply so that probably will tell you what will happen to air fares."

FlyHawaii, which in March announced its intention to debut early next year with low fares, still is finalizing its financing, according to Chris Parsons, vice president for administration.

"We're still pursuing a major long-term investment and we feel we're very close," Parsons said. "Once we lock that down, we'll be revising our startup schedule."

Parsons said FlyHawaii, which plans to begin with service to Maui, said the airline still plans to get off the ground in 2006 but that its starting date likely will be pushed back.

"We think there's tremendous growth potential in the interisland market contrary to what some of the other (local) airline executives have said recently," Parsons said. "We think people aren't flying interisland because prices are too high, and when prices come down, people will flock back to interisland travel."

Jonathan Ornstein: The Mesa Air chairman expects a huge turn in the airline industry

Ornstein, who has been interested in the Hawaii market since 1990 when he looked at now-defunct Discovery Airways, said he believes Mesa will be profitable here.

"One, we think that the interisland market works," he said. "We're not going to try to fly trans-Pacific, which doesn't work. Also, Mesa Airlines has the lowest cost of any regional airline in the United States and we can take those costs and bring them to Hawaii and operate in what is clearly a competitive environment."

Due to the competitive nature of the business, Ornstein said he's not ready yet to disclose additional details on routes other than to say that the airline will serve Honolulu; Hilo and Kona on the Big Island; Kahului, Maui; and Lihue, Kauai. He said the airline will begin talking to prospective employees in Hawaii in the next 30 to 45 days.

"We're going to start the service out conservatively," he said. "We've been in the airline business for awhile and you always want to do things step by step. But ultimately, the number of people we'd be looking at hiring there would be in the hundreds."

Mesa, founded in 1982 in New Mexico by Larry and Janie Risley, operates 1,100 daily departures to more than 165 cities, 44 states, the District of Columbia, Canada and Mexico.

The airline, which has been profitable for 27 of the last 28 quarters, expects to have revenue of $1.2 billion to $1.3 billion this year with a profit in excess of $100 million, Ornstein said. Last quarter, Mesa earned a pretax $30 million, its best three-month period in company history. The company also has $275 million in cash.

"We think that for our cost and the type of aircraft we operate, it will be profitable for us," Ornstein said. "A lot is how you allocate costs."

Mesa has about 5,000 employees, with roughly half unionized as members of the Air Line Pilots Association and the Association of Flight Attendants.

"On the regional side, our people are very well compensated," Ornstein said.

Ornstein, who had looked at investing in Hawaiian Airlines when that carrier was in bankruptcy, similarly considered Aloha Airlines, which is still in reorganization.

Ultimately, though, he said it was better for Mesa to come to Hawaii independently rather than entering the islands through acquisition.

"After doing our own analysis, we felt we could better serve the public and shareholders and Hawaii by doing it on our own," he said.

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