Last-minute exit: Aloha emerges

The deal was clinched in a mens room corridor in a public building downtown, but he's still proud of it. Dave Banmiller, peripatetic fixer-upper of ailing airlines, tells Airline Business that the delayed emergence of Aloha Airlines from its bankruptcy reorganisation is on for Valentine's Day, having been postponed from a Christmas date when last-minute pensions watchdog objections emerged.

The federal Pension Benefit Guaranty Corp (PBGC) filed several objections a few minutes before the deadline on the Friday afternoon of the last day of the objection period back in December, says Banmiller, who adds that he was in negotiations with the PBGC within hours.

After the PBGC's protest over the proposed termination of several pensions schemes, Aloha had to rewrite its plan to accommodate these added costs and the rising price of fuel. The final approvals and agreements came just minutes before a final hearing in the bankruptcy court building in downtown Honolulu, with Banmiller making mobile phone calls from just outside the restrooms.

"But coming out," says Banmiller, "we'll have more equity than before and better equity/debt ratio, one of the best in the industry." The modified deal, worth $98 million, provides $63 million in cash and $35 million in exit debt financing. The previous reorganization plan was worth $100 million and provided $50 million in cash and up to $50 million in debt. The new deal also includes $4.5 million more in cost savings.

Banmiller, who had earlier done workouts at Sun Country, one of the Pan Am resurrections, and other struggling carriers, is sorry he couldn't do the Aloha reorganization within the year he had set as a goal, back on New Year's Eve of 2004, when Aloha filed for Chapter XI, but he calls the delays "just sort of a bump along the way". Banmiller is too diplomatic to point out that its island rival, the considerable larger Hawaiian Airlines, took about twice as long to do its Chapter XI reorganisation. The next step: intensified marketing on the west coast mainland markets that Aloha serves.

When the federal pensions watchdog forced Manmiller to redo the Aloha plan of reorganisation it had an unexpected upside, he says: more hometown participation. The plan had always included the Ching and Ing families, two longstanding pillars of Hawaiian commerce that had helped found the airline in 1946 years ago as Trans-Pacific Airlines (TPA). The January plan brings in a new group, Aloha Hawaii Investors, which includes notable investors Duane Kurisu and Colbert Matsumoto, who have also helped rescue a Honolulu radio station and newspaper. The group added $2.2 million to the total, while the chief investor, California supermarket billionaire Ron Burkle added another $10 million.

Banmiller, who engineered a turnaround at Air Jamaica before heading to Hawaii, says the hometown investment has the advantage of supporting the airline's identity as the local airline. Honolulu locals recall that in the bad old days when island society was strictly segregated along ethnic, racial and class lines, the old TPA was seen as 'the peoples airline': local lore has it that on some airlines, Hawaii native people were removed from flights to make room for a visitor or a westerner - but not on TPA. Whether or not this is strictly accurate historically (and one has to hope against hope that it isn't) the hometown branding has to help in Aloha's bid to attract the large number of island expats, Hawaiians who work on the mainland but still travel home frequently. (TPA became Aloha in 1958).

Banmiller says that once the funding is completed and the exit formalised, "I'll send off a damned big check to Goldman Sachs" the Wall Street firm that has financed Aloha while the carrier reorganised. After that, says Banmiller, who was chief operating officer of Air California and then vice president-international at American after it bought out Air Cal, says that, "the focus will be on the employees. They have made the sacrifices and the contributions that kept Aloha alive".