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Low-cost Air South files for Chapter 11 bankruptcy protection

Air South has become the latest of the low-fare US start-ups to run into trouble, filing for Chapter 11 bankruptcy protection at the end of August, just days after its third anniversary.

The carrier was forced to suspend operations and ground its leased fleet of seven Boeing 737-200s, although Kiwi International Air Lines, which itself has only recently emerged from Chapter 11, stepped in with an offer to take on stranded passengers over the August bank holiday weekend.

Air South, which first went into service from Columbia, South Carolina, in August 1994, is understood to have hit a crisis when it was unable to pay its 700 workers. It says, however, that it still has hopes of resuming operations.

A year ago, the carrier had secured a much-needed cash infusion from investment banking firm Hambrecht & Quist, which in return acquired a controlling interest in the airline. The new owners brought in a fresh management team and cut the airline's flights by one-third to improve on-time performance. Hambrecht, which reportedly invested $25 million in the carrier, says that it expects to take a charge of $5.5 million in the fourth quarter related to its Air South investment.

Mahalo Air, set up four years ago to compete on Hawaiian inter-island services, also filed for Chapter 11 on 25 July, although it has continued operate with five of its seven Aero International (Regional) ATR 42 turboprops.

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