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The Honolulu Advertiser
Posted on: Saturday, January 31, 2009

Aloha Airlines' name sale challenged

By Rick Daysog
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Aloha Airlines is gone, but its rival has made a deal to take over the name. That deal is now being challenged in court.

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A federal judge could prevent the sale of Aloha Airlines' brand and logo over questions about how the sale was handled.

U.S. Bankruptcy Judge Lloyd King has set a March 3 hearing and has asked Aloha's court-appointed trustee Dane Field whether the sale of the defunct carrier's trade name to Aloha's former owner, Yucaipa Companies, was publicly held as required by law.

"You are hereby ordered to show cause, if any you have, why the unconfirmed auction sale to Yucaipa ... of the debtors' intellectual property, including the name 'Aloha Airlines,' should not be declared invalid, because it was not a public auction," King wrote in his Jan. 23 order.

Once the state's second-largest airline, Aloha shut down March 31 and terminated 1,900 workers because of soaring fuel prices and a costly fare war initiated by the June 2006 launch of go! airline.

Yucaipa was the high bidder for Aloha's brand name in an auction held Dec. 2. Yucaipa, in turn, has reached a licensing agreement to let the parent of go!, Phoenix-based Mesa Air Group, use the Aloha name and logo in exchange for a minimum of $6 million.

The sale to Yucaipa requires King's approval.

King, who previously criticized the sale of the Aloha brand to Mesa as insensitive to the plight of Aloha's former workers, said he received an e-mailed letter from this reporter Dec. 3 stating that the media was excluded from observing the auction.

The auction, held in a conference room at the offices of Field's attorneys, was attended by attorneys for Yucaipa and Hawaiian Airlines and local investor Richard Ing.

This reporter was not allowed in the conference room, despite raising objections about the exclusion. Randy Kauhane, assistant general secretary for the International Association of Machinists and Aerospace Workers' District 141, said he also was excluded.

"Everything was held behind closed doors," Kauhane said.

Jim Wagner, an attorney for the trustee, could not be reached. A Yucaipa spokesman did not return a call.

If King sets aside the Dec. 2 auction, he could order a new auction and could change the terms of that auction.

In the Dec. 2 auction, Yucaipa offered to pay $750,000 for the Aloha brand and logo. But most of the bid was in the form of a credit against millions of dollars owed by Aloha, not in cash.

Yucaipa subsequently agreed to license the Aloha name to Mesa for 10 years for a minimum of $600,000 a year to settle a lawsuit alleging that Mesa and go! drove Aloha out of business.

Mesa also agreed to pay $2 million in cash, give Yucaipa 2.7 million shares of Mesa stock and provide travel benefits to Aloha's roughly 3,500 former employees on go! airline.

In court papers, Kauhane, the machinists' union and the Association of Flight Attendants have asked King not to approve the sale to Yucaipa.

Kauhane said the machinists' union recently collected 4,000 signatures from local residents and Mainland travelers opposed to the deal. He added that 84 percent of respondents in recent viewer polls conducted by television stations KGMB and KHON were against the transfer of Aloha's name to Mesa.

"Mesa, which drove Aloha out of business and ended the careers of thousands of longtime employees, will fly as Aloha using the goodwill generated by those employees' years of service," the flight attendants' union said.

"AFA submits that in light of the substantial evidence that Mesa's bad faith conduct caused the liquidation of Aloha and the subsequent total loss of jobs and benefits for Aloha's employees, this transaction should be disallowed, absent consideration for the Aloha employees who were damaged by the liquidation of Aloha."

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.