billso.com

Hawaiian Telcom, commonly referred to as HawTel, is the state of Hawaii’s ILEC and the succesor of several companies, including Verizon Hawaii, GTE, and the Hawaiian Telephone Company.

The Carlyle Group purchased Verizon’s Hawaiian units, except for its mobile phone service, in 2005.

• 25 July 2008: Fixing the DNS security hole with OpenDNS
• 5 February 2008: HawTel replaces CEO with turnaround specialist.
• 11 June 2007: HECO tests smart electric meters
• 7 June 2007: PC Magazine: HawTel, Time Warner Oceanic provide slow Internet connections
• 21 March 2007: About e-commerce 3: The broadband connection
• 16 November 2006: HawTel claims that system problems are consultants’ fault

From the Honolulu Advertiser: Aloha’s air cargo unit is flying a full schedule today. All six of the company’s Boeing 737-200 cargo jets will fly today, after GMAC and Saltchuk Resources came to terms. It’s hard to believe that these 6 planes handled 85% of Hawaii’s air cargo, but it’s true.

Saltchuk, the owners of interisland barge company Young Brothers, will pay US$10.2 million, which is $3M less than the company’s offer of late last week.

Dane Field finally accepted his appointment as bankruptcy trustee, which helped break the impasse he helped create. He had refused to confirm his appointment on Monday, which led to the air cargo unit’s closure and a subsequent layoff.

Aloha cargo employees and pilots have reported back for work, but Saltchuk can hire or fire whoever the company pleases after the deal is finalized on 14 May 2008. Salaries and wages may be changes, which is a major blow for the Air Line Pilots Association (ALPA). The union wanted Aloha to use more expensive senior passenger-rated pilots.

Hawaii’s senior senator, Daniel Inouye (D), was credited with bringing the parties back to the negotiating table:

Douglas Lipke, GMAC’s attorney, said Inouye called GMAC’s president on Monday to urge the lender to reconsider its decision to cut off Aloha.

Inouye also called Saltchuk executives to stress the importance of a service that transported 85 percent of all goods flown between O’ahu and the Neighbor Islands, Saltchuk president Tim Engle said.

“He (Inouye) was the architect of bringing this back together,” Banmiller said.

According to this article in the Honolulu Star-Bulletin, 1300 jobs were saved. Two planes flew last night from Honolulu to Kona and Kauai, according to another Star-Bulletin article.

Contract services group sold

In a related story, Aloha’s contract services group was sold yesterday to Pacific Air Cargo of Los Angeles. US Bankruptcy Court Judge Lloyd King order the sale to close immediately, instead of Monay, 5 May 2008. PAC paid US$2.05 million for the 1100 employee unit. According to the Advertiser, “[t]he contract services division handles ticketing, baggage services, ramp duties and other ground services for United Airlines, Japan Air Lines and other carriers that serve Hawaii.”

I hope we have no more surprises coming at the airport. It’s been a weird week for tourists, hotels, groceries, restaurants and other businesses who were affected by Monday’s air cargo shutdown.

Related posts on billso.com

• 30 April 2008: Will Aloha Airlines’ contract services unit shut down?
• 29 April 2008: Aloha Airlines shuts down its air cargo unit
• 2 April 2008: Aloha cargo sale and neighbor island mail service in jeopardy
• 8 April 2008: Aloha cargo flights disrupted - is Hawaii’s economy next?
• 30 March 2008: Aloha Airlines shuts down

The Honolulu Star-Bulletin reported this morning that the last remaining business unit of bankrupt Aloha Airlines may shut down as early as today. I mentioned yesterday in this billso.com article that Aloha had shut down its air cargo business Monday.

If the contract services business does shut down, passenger flights on the following carriers may be suspended and thousands of passengers will might be stranded in the State of Hawaii:

• American Airlines
• US Airways
• Japan Airlines
• Air Canada
• Korean Air
• China Airlines

Aloha’s services unit provided gate agents, baggage services and ground personnel for these and other airlines. Outsourcing these functions to Aloha helped these airlines reduce or eliminate their payrolls in Hawaii

Pacific Air Cargo had made a bid to buy the contract services business, but the US Bankruptcy Court did not appoint a liquidation trustee yesterday to supervise the contract services business. Kany of the 950 contract services employees have decided to continue working without any guarantee that they might be paid. The deal is set to close next Monday, 5 May 2008, but PAC is trying to advance that date, and the Honolulu Advertiser reported today that PAC may try to start its own interisland air cargo business.

“I put the burden on all of our guys,” said Randy Kauhane, assistant general chairman of International Association of Machinists and Aerospace Workers, District Lodge 141. “I told our guys to continue to work for free if it means keeping the operation going until we can find out more details what’s going to happen. If we stop, it would interrupt the operations of the carriers that we service.”

Last night, Hawaii Governer Linda Lingle announced that she would not declare a state of emergency because of the Aloha cargo shutdown. I wonder what she will do if passengers are stranded? The Star-Bulletin published a blistering editorial this morning, taking Lingle and legislative leaders to task for their inaction during the last month.

Meanwhile, in another Star-Bulletin story, food services companies and Kauai businesses are asking the state to help restore Superferry service to that island. A small and vocal group of protesters helped stop the service in August 2007:

Jimmy Trujillo, one of the organizers of the anti-Superferry movement on Kauai, said the vessel still is not wanted.

“Aloha Air cargo is certainly a valued service. Perhaps Aloha Airlines should have been the beneficiary of a special legislative session,” Trujillo said.

“The military cargo Strykerferry isn’t the vehicle to carry depleted uranium and baked goods,” he added.

Trujillo was not available for further comment. Perhaps he has locked himself in the Iolani Palace with approximately 70 other sovereignty protesters who took over the grounds at 0530 this morning.

Got bread?

Yesterday’s shipment of Love’s bread and baked goods for Lihue is still in Los Angeles, because the contact shipper used United to fly items to Kauai. United Airlines has suspended its Kauai cargo shipments because the airline used Aloha’s cargo business for its Lihue ground services.

Love’s is shipping bread to Maui on the Superferry, according to this Star-Bulletin article.

From the Honolulu Advertiser and the Honolulu Star-Bulletin: Aloha Airlines shut down its air cargo unit yesterday. Aloha carried 85 percent of the state’s air cargo. I mentioned that this might happen in my billso.com articles of 2 April 2008 and 8 April 2008. Aloha’s passenger business shut down last month, as I discussed in this billso.com article on 30 March 2008.

Hawaii consumers will start felling the pinch shortly, especially on the neighbor islands. Love’s Bakery had to ship 22,000 pounds of bread and other products to Kauai and the island of Hawaii through Los Angeles. Perhaps their Maui shipments used the Superferry, which can handle cargo? Kauai residents who helped stop the Superferry last August may come to regret their decision in the next few days.

Other shippers were turned away at Aloha offices when they tried to drop off fruit and leis. That’s very bad news, as Lei Day is coming on 1 May, and neighbor island businesses planned to ship several thousand leis to Oahu for the event. One large florist had already made contingency plans to ship with United Airlines, but other businesses hadn’t thought ahead.

The value chain

Aloha’s cargo shutdown forces many time-sensitive shippers to find alternate means of supporting their value chain. Newspapers, auto parts and prescription drug shipments to the neighbor islands will also be affected. This Honolulu Advertiser article has more details.

The US Postal Service has made arrangements with Corporate Air to ship interisland mail, but there may be delays.

The Advertiser’s lead article describes how Saltchuk Resources, the Seattle-based holding company that owns Young Brothers/Hawaiian Tug & Barge had signed a letter of intent to purchase Aloha’s air cargo business for $13 million on 27 March. Another company, bid Jupiter Holdings Group bid $13.65 million.

Now the auction process may have to start again, and 400 Aloha employees have been laid off.

James Wagner, Jupiter’s attorney, said the company was prepared to go through with its purchase as recently as yesterday afternoon. But GMAC unexpectedly upped the price to $15 million and required a higher deposit, he said

Saltchuk, meanwhile, pulled its bid last week after Aloha and GMAC changed the terms of the bidding.

“This all has to do with other parties changing the deal without any warning,” Wagner said. “I’ve been in practice over 30 years and I’ve never seen a case end like this.

Related articles on billso.com

• 30 April 2008: Will Aloha Airlines’ contract services unit shut down?

My readers who don’t live in the state of Hawaii probably haven’t heard much about the Hawaii Superferry. I won’t bore them with the details. Yesterday, the Superferry announced it was suspending its Kauai service indefinitely, according to the Honolulu Star-Bulletin.

But the Economist published an article about this affair this week. That article was republished in the print edition of the Star-Bulletin’s Sunday editorial page.

That’s a bad sign. The Economist, a well-respected current affairs magazine with a worldwide audience, is questioning Hawaii’s ability to deal with change. This a weekly magazine that CEOs and top government officials read regularly in its print and web editions.

The Economist frames the Superferry debacle in the context of the Hawaii 2050 Sustainability Summit, which just concluded. The Honolulu Advertiser discussed the summit today, and I participated in the Hawaii Chamber of Commerce’s meeting on sustainability last Thursday.

The Advertiser published its own front page story today about the growing divide among the islands. The Superferry debate is only the most recent tipping point that has set neighbors against each other. It’s more than politics or business.

I just have one question.

If the Superferry traveled a regular route between Maui and Kauai without ever docking on Oahu, would there still be protesters, lawsuits and general governmental chaos?

Maybe the Superferry wouldn’t make as much revenue with that route – but they’re not making any money right now.

Keep the comments polite, please.