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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?

As I mentioned on 2 April 2008, Aloha Airlines is still flying cargo flights in the state of Hawaii. It hasn’t been easy. Aloha flies 85% of the state’s air cargo, including postal mail, bread and other time-sensitive items. If Aloha stops flying, Hawaii’s economy will feel the effects within two days.

A report posted this evening on the newspaper’s web site says that GMAC has agreed to provide US$3 million in bridge financing while the Air Line Pilots Association and Aloha management are still negotiating.

UPDATE: here’s the full article from the Star-Bulletin’s 9 April 2008 print edition.

The main issue is which pilots will be retained when the cargo business is sold at auction on 24 April. Aloha management wants junior pilots, while ALPA favors the current collective bargaining agreement and senior pilots.

Cancellations and allegations

Meanwhile, Aloha canceled 7 of its 16 cargo flights today after pilots staged a sick-out. Mail and other time-sensitive cargo was shipped, but the situation will only get worse if the sick-outs continue.

An earlier report in the Tuesday print edition has more details. In the article, ALPA representatives claim that Aloha is blocking pilots from flying to Oahu for job fairs by confiscating their ID cards and turning off some information systems.

Senator Daniel Inouye (D-Hawaii) will hold a hearing of the US Senate Commerce, Science and Transportation Committee on Thursday, according to this Star-Bulletin report. Inouye chairs the committee, and he will examine the current state of the airline industry in Hawaii.

Aloha Airlines president David Banmiller and the state’s three other Congressional representatives have been invited to testify. Banmiller has become more vocal in recent days, as he provides more information about how state officials refused to assist Aloha Airlines during the last two years. This Pacific Business Story has more details.

No backup plan?

Meanwhile, USPS spokesman Duke Gonzales stated that there is no contingency plan for interisland mail service if Aloha stops flying. Aloha flies in all of the mail for the islands of Hawaii and Maui.

Hawaii residents have enough problems already, as Kilauea producing an increasing amount of vog. The Honolulu Advertiser reported this afternoon that Volcano National Park has been closed as air quality deteriorates.

Yesterday, the Hawaii Superferry started sailing between Honolulu and Kahului, Maui after a two-month repair cycle. See this Star-Bulletin story for more details. The Superferry can handle large delivery trucks and their cargo, but the company has been unable to maintain a reliable daily schedule since the service was launched in August 2007. The departure of ATA and Aloha Airlines gives the Superferry a fighting chance to hit breakeven, which is possible with about 400 passengers and 110 cars per voyage.

UPDATE: The Star-Bulletin ran a long article on the Superferry in the 9 April 2008 print edition, with a timeline and plenty of details.