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The Honolulu Advertiser
Posted on: Wednesday, March 26, 2008

Lawmakers must seek way to help Aloha Air

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The many assets of our state include the beauty and charm of its tropical remoteness. However, that isolation compounds transportation costs, which are surely among its greatest liabilities.

That isolation — the state from Mainland and global suppliers and each island from the others — is what makes interisland transportation systems critical to the economy and so expensive to maintain.

So when Isle residents heard last week's news that Aloha Airlines had filed for bankruptcy protection for the second time in slightly more than three years, the reaction of concern was immediate, followed quickly by the impulse to help out the financially struggling carrier.

And it's the correct impulse. Aloha is an important part of the state economy. The loss of its 3,500 employees would be painful especially on the Neighbor Islands, where it is one of the key employers.

So the state Senate leadership was right to step up and commit to helping Hawai'i's No. 2 airline. It came after a meeting airline executives held with the governor, legislative leaders and key executive staffers before its bankruptcy announcement.

Aloha subsequently said it is looking for a buyer for all or some operations; it is also trying to attract new funding.

But for its part, the state would be wise to offer some cushioning to improve chances that the operations can continue without interruption during the difficult transition period:

  • House Bill 2860, which would exempt all the state's interisland airlines from paying the general excise and use taxes for fuel, will face decisionmaking at 9:45 a.m. tomorrow before the Senate Ways and Means Committee. The measure should be approved.

  • The committee is also contemplating authorizing loan guarantees to help the company attract new financing. There is precedent for guarantees to companies, including the $14 million in guarantees to Aloha's competitor, Hawaiian Airlines, which later decided not to use them.

  • If these measures soften the blow enough, perhaps Aloha will be able to meet its extended deadline of 2009 to repay past-due payments for lease rent and landing fees to the state. But lawmakers also should stand ready to provide another extension.

    Rising fuel costs have burdened Aloha, as well as an airfare war it has been fighting with go!, the newcomer to the market. It's unlikely the market can sustain three airlines for the long term, and the day may come when lawmakers decide the taxpayer cost of such assistance outweighs the public benefit.

    But today is not that day.

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