Aloha and ATA Airlines - four years later

It's the fourth anniversary of the collapse of ATA Airlines, just a couple day after the collapse of Aloha Airlines. The twin shutdowns took a sizable chunk of airlift out of the market and did years of harm to the Hawaii economy, from which we are only now recovering.

Jet fuel prices spiked even higher in 2008 than they are now, and both carriers were on the edge of disaster because of it. But both were also pushed. ATA Airlines died when a competitor underbid its lucrative defense charter contract. Aloha ran out of cash matching money-losing fares posted by Mesa Airlines' Go, which insisted it was battling price gouging by the local carriers even after an internal email by its chief financial officer surfaced, detailing a plan to put Aloha out of business. (Mesa's CEO insisted that the email, containing charts and graphs and projections, was merely a gag.) The idea was to post fares that would cause all interisland carriers to lose money, knowing that Mesa had more money to lose than Aloha today.

It worked. Aloha's mainland investor, Ron Burkle of Yucaipa Cos. (also the main investor in a meat parts company that filed for bankruptcy Monday, blaming bad publicity over pink slime), cut off the money spigot and cashed out by selling Mesa the rights to any damages that could be won in litigation over predatory pricing. (He also tried to sell the Aloha name but was blocked by the bankruptcy judge.)

Three thousand people based in Hawaii were thrown out of work by that predatory pricing, and some of them never found work at the same wage level again, while others had to move away to do so. Hawaiian Airlines, however, has hired many of them. Some who went to work for Mokulele Airlines wound up working for Go when Mokulele failed as an independent carrier and was folded into the Mesa operation.

And the low cost fares? Go today tends to charge about the same fares as the other interisland carriers, usually around $80.

Aloha Airlines service to John Wayne International Airport in Orange County has never been replaced - noise restrictions create weight restrictions at that airport - and no one else has tried flying to Burbank, which was convenient for many Los Angeles area residents. Hawaiian Airlines quickly replaced a small amount of ATA service but it remained for Alaska Airlines to replace most of it, securing its own niche in the Hawaii market, and not at ATA's discount prices.

Southwest Airlines, lacking ETOPS authority to serve Hawaii itelf, had been using ATA as an unofficial Hawaii arm, selling codeshare tickets on the ATA service from Oakland. Lacking that connection for four years, Southwest has been making plans to serve Hawaii on its own, and now has ETOPS authority through its acquisition of Air Tran. We may see flights next year.

Why did the price gouging argument, which was false, still resonate with Hawaii fliers? One reason was that many consumers simply could not believe that a company would deliberate operate service at a loss. But they did. Another is that it feels wrong for short interisland flights to cost so close to the fares to Las Vegas, so much farther away. But most of the fuel on any flight is consumed on takeoff, while the most fuel-efficient part of a flight is cruising. Interisland flights don't have any cruising. You take off, you land.