Carrier Flew 85 Percent Of Hawaii's Packages, Mail

Cargo operations in Hawaii took a major hit Monday, when bankrupt Aloha Airlines shut down its cargo division after being denied additional financing by its primary lender.

Despite the operation's profitability -- Aloha carries 85 percent of Hawaiian interisland cargo, including mail -- GMAC Commercial Finance pulled further financing to keep Aloha going, after both bidders for the cargo service withdrew their bids.

The Associated Press reports one of those companies, Jupiter Holdings Group, pulled out when Aloha and GMAC raised the asking price for the cargo division to $15 million -- above Jupiter's $13.65 million offer, which was the highest bid received.

Loss of funding means the assets of Aloha's cargo operation will be liquidated... and leaves the mayors of Maui, Kauai and the Big Island scrambling to establish continuing interisland cargo service.

"Because it was a grim possibility, it takes us all by surprise," US Bankruptcy Court Judge Lloyd King said.

As ANN reported, Aloha filed for Chapter 11 bankruptcy March 20, but continued operating its passenger service in hopes a buyer would materialize. No one stepped up to take over the unprofitable enterprise, however, and the carrier stopped all passenger operations March 31.

In business for 61 years, Aloha blamed its decision on rising fuel prices, and stiff competition from upstart carrier go! Airlines. That discount airline's entry into the Hawaii interisland passenger-carrying market in summer 2006 shook up the market dominated for years by Aloha and rival Hawaiian Airlines, as the Mesa Air Group subsidiary offered money-losing fares as low as $39 to attract fliers.

Aloha's air cargo business was its only division to make a large profit. Earlier this month, Aloha also announced the sale of the airline's moderately-profitable contract services division to Pacific Air Cargo for $2.2 million.

FMI: www.alohaairlines.com