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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?

Smells like… depseration! The New York Times reports that three of the largest recording companies will sell digital music through an updated MySpace music store. ReadWriteWeb has more details on the updated store, which EMI is avoiding for now.

While MySpace does have a large user base, the site can’t offer the easy integration that Apple’s iPod and iTunes have developed.

Previous efforts like Helio might have survived if MySpace had done a better job with its earlier music sales sites. See this 4 September 2006 New York Times article and an earlier article from Mashable for more details.

Related posts on billso.com

• 25 February 2008: Social Media 101
• 28 August 2007: EarthLink announces layoffs
• 20 June 2007: MySpace vs Facebook
• 17 June 2007: Anticipation builds for Apple’s iPhone
• 17 April 2007: Mobile telcos search for new business model
• 29 September 2006: ESPN sacked, Helio scrambling

From the Motley Fool and BrandWeek comes two updates on a favorite example of mine: Borders. Amazon had been handling Border’s e-commerce and web storefront, until Borders management ended the agreement in early 2007. Now there’s reports that Borders management is considering selling part or all of the company, after the company suspended its stock dividen and took on additional debt.

As both of the 2008 articles point out, Borders has plenty of competition. Warehouse stores sell bestsellers at steep discounts, and that keeps some potential Borders customers from making that extra trip. Barnes & Noble isn’t in great shape, but at least they’re competitive.

As I mentioned on 24 March 2008, the book publishing business is undergoing significant changes. So it’s not surprising that bookstores are struggling.

In this post on his blog, Kevin Kelly discusses how the Internet is a massive copying machine. This is a major reason that digital rights management (DRM) does not protect business models very well.

The music and movie industries have focused on protecting content and managing copying, instead of building and offering value that is difficult or hard to copy. U2’s manager recently attacked ISPs, search engines and other companies for aiding and abetting music and video file sharing on the Internet. (CBC).

Kelly, on the other hand, proposes a network economy where sharing and abundance are key success factors that every content publisher must satisfy. He also identifies 8 key success factors that spur customers to buy instead of copy.

It’s difficult to copy reputation and trust, but it’s rather easy to offer or measure these attributes. Just look at eBay.

Reputation and trust are relevant in education. Jason Schultz published links to several YouTube videos of students demonstrating how to cheat in school. BoingBoing’s Cory Doctorow discussed his own experiences with cheating when he linked to Schultz’s post.

Schools offer interpretation, which is another form of value that is difficult to copy. Grading, evaluation, advising are good examples of content that is very difficult to copy. These also have elements of personalization, which help increase their value.

Patronage is another factor. Some users want to pay for content, even if it can be downloaded free of charge.  Physical forms that cannot be downloaded through the Internet can also make content more valuable – cover art and booklets are examples in the music industry.

Convenience is also an important value generator. Immediate access to content may be more important to some users than eventually finding free access through peer-to-peer networks or file sharing. Metadata, XML and web services are some of the tools that small and independent publishers use to sell their content.

Blogs are also part of the value system that is created as multiple value chains link together from end to end. BoingBoing is a good example – that blog has several editors who promote their solo media projects through the web site. I discovered Kelly’s article on a BoingBoing post, as a matter of fact.