Auwe! Aloha to cease operations

 "We simply ran out of time," said CEO David Banmiller, in his Sunday announcement that Aloha Airlines would cease operations Tuesday.It hadn't been announced and it wasn't widely known, but while others at Aloha Airlines were dealing with creditors and the bankruptcy court, Banmiller was working around the clock courting prospective investors or merger partners. To an outside observer it looked promising. The Sunday announcement, even before a Monday hearing on longer term debtor-in-possession financing, showed that it did not bear fruit, not necessarily because no one was interested but because no one could move fast enough to save the day. Aloha had three things goings against it, but other things going for it, and with more time it probably would have found a buyer.The negatives:

1. Jet fuel has risen by two thirds in the past year.
2. Aloha has an older fleet -- gas guzzlers, in other words.
3. Mesa Air, parent of go!, continues to wage the fare war that, according to an email by its former chief financial officer, may have been designed to produce precisely this result.

Aloha had these things going for it:

1. Its mainland routes are mostly successful and could be profitable even at current fuel prices with more fuel-efficient jets.
2. It has enormous brand loyalty in Hawaii and among Hawaii ex-pats on the mainland. Aloha was founded by ethnic Asians at a time when Hawaiian bumped some people for others, and this led to some family loyalty that exists to this day.
3. While others have spoken of the contracting interisland market, the fact remains that there is enough interisland business to support two carriers if, again, the jets are fuel-efficient. Some people just won't fly smaller aircraft between islands and are not lured by go!, Island Air or other players at any price.
4. Later in the year it has a suit against Mesa, which already lost an $80 million judgment against Hawaiian. Aloha could use the same evidence Hawaiian found, including the smoking gun email, which, while described at one point as a joke, was backed up by charts and graphs showing how to use Mesa's deeper pockets to muscle Aloha to the sidelines. (The eventual judgement could even be larger than $80 million since the judge refused to award damages for current or future operations, only for demonstrable predatory pricing going back in time.)
5. Aloha is second only to Hawaiian as the most on-time airline in the republic, and has the lowest complaint ratio of any airline.

Other media have recommended against what they called a state bailout for Aloha, but two points should be made. First, the state bailed out Hawaiian Airlines with loan guarantees not so long ago, so it would have been unfair not to extend similar assistance to Aloha, not for its sake but in the enlightened self-interest of saving 3,500 jobs. Second, a key bit of assistance that the legislature was moving to offer -- and it needs to be said, the legislature was really moving quite rapidly, even if it proved not fast enough -- was merely to level the playing field in one key respect. Current law taxes interisland jet fuel but not jet fuel expended to fly out-of-state; exempting interisland fuel from taxation makes economic sense for an archipelago state. Even now I wouldn't rule out a relaunch of Aloha by a new owner using more fuel-efficient jets. I haven't looked into their economic ability to manage such a deal this year but from an operational point of view it would be interesting to see such a deal with Southwest, Alaska or JetBlue. I would add JAL, ANA or even Qantas, KAL or PAL, but there is a U.S. law barring majority ownership of a U.S. airline by foreign interests.