Aloha is a Hawaiian word that covers greeting, farewell, good wishes, and general welcoming warmth. It’s also the smaller of the two major carriers native to the Islands and Aloha is saying hello to a major new infusion of equity that should take it out of bankruptcy reorganisation in short order. The airline went into Chapter 11 on 30 December of last year, a few weeks after bringing in noted airline doctor David Banmiller, who had just finished a fix-up at Air Jamaica.
Now, Aloha has $100 million to finance its exit from bankruptcy with an equity and debt investment from Yucaipa Cos. and a Los Angeles-based private equity firm, IBS Capital Holdings. Yucaipa will become the majority shareholder in Aloha, while Aloha’s longtime owners – heirs of Hawaiian investor Hung Wo Ching and developer Sheridan Ing – will become minority shareholders. IBS Capital is managed by former Chicago Bears wide receiver Willie Gault, whose Aloha Aviation Investment Group recently acquired ERA Aviation, a regional in Alaska.
The $100-million investment, half cash and half debt, will allow Aloha to keep 3,600 airline jobs while paying off more than $65 million to lenders, including a Goldman Sachs unit. The airline also will repay $4.7 million in loans from the two longtime owners’ families. Banmiller tells Airline Business that he spent the first few months getting down costs and “getting rid of things that made no sense” such as some Aloha routes into the South Pacific. “Now we have our costs down and can look for new secondary cities where nobody else goes”. Aloha already serves Orange County, Calif., and Oakland. While in court protection, Aloha brought its seat mile costs down 14%, he says, forecasting “solid profits next year even with fuel costing as much as it does.” It will compete with profitable Hawaiian Airlines, which itself went though a bankruptcy that ended this past June with a major infusion from another California investment group.
Banmiller, who also did a turnaround at Sun County Airlines, says Yucaipa’s managing partner, Ron Burkle, “got serous about Aloha in the last few weeks and we met to see of the chemistry clicked. It did.” Burkle, who has financed numerous buyouts, sits on the Yahoo! board of directors (along with fellow Yahoo! board member Gary Wilson, the chairman of Northwest Airline’s board). A supermarket magnate and hockey team owner, Burkle has received a positive reaction from labour, with the Aloha pilot union chief welcoming him.
Banmiller says Aloha will be out “by November, one year after I came. I promised myself it would be a year”. That’s just in time. On the same day that Aloha told the bankruptcy court about its new investors, Mesa Air Group’s Jonathan Ornstein said the carrier will begin an interisland low-cost regional unit early next year. Mesa likely will start operating with six 50-seat RJs and eventually end up with 12 to 15, he said. The new airline, whose name will be disclosed later, could use CRJ 700s and 900s. Ornstein, who has been interested in the Hawaii market since 1990 when he looked at now-defunct Discovery Airways and later at Hawaiian, said he believes Mesa will be profitable. It will fly head-to-head with both Hawaiian and Aloha airlines along with smaller carriers Island Air and startup FlyHawaii Airlines, which also plans to begin service next year.
By David Field on 25 September, 2005 in Uncategorised
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