United Airlines will acquire a minority stake in Aloha Airlines, providing the struggling local carrier with the backing of the nation's second largest airline.

Airline industry experts say the deal all but guarantees a more prolonged interisland fare war — with $39 fares — which is about to enter its second year.

"It sends a signal to everyone that we are here to stay," said Aloha Chief Executive Officer David Banmiller.

"The beauty of this for Aloha is that we will benefit from the financial and worldwide marketing strength of one of the world's largest airlines."

Industry analysts say Aloha, which emerged from bankruptcy protection last year, is the weakest of Hawai'i's three interisland carriers. Aloha's finances have been reeling in wake of higher fuel prices and the June 9 launch of Phoenix-based Mesa Air Group's low-cost carrier go!.

Aloha posted a $10.6 million operating loss during the third quarter 2006, which is the last time the privately held company disclosed its quarterly financial results.

"While this doesn't guarantee Aloha's survival, Aloha is better situated financially so that the airfare wars will continue unabated and consumers will benefit," said Scott Hamilton, a Washington-based aviation industry expert.

"This not only strengthens them financially and strategically, but it also strengthens them psychologically."

United did not say how large its stake would be but did say its holdings in the state's No. 2 airline could grow. United will receive a seat on Aloha's nine-member board of directors.

The Chicago-based carrier isn't paying cash to Aloha but has agreed to expand its marketing and operational ties.

MARKETING PARTNERS

Since the early 1990s, Aloha and United have been marketing partners under a code-share agreement that lets passengers earn and redeem frequent-flier miles on both airlines.

Banmiller said that the partnership also will allow Aloha to use United's purchasing leverage with vendors. Aloha also may explore the replacement of its aging Boeing 737-200 aircraft used on interisland flights with newer planes currently operated by United.

Banmiller said he met with employees yesterday to announce the airline's new partnership. He said the reaction from workers was positive.

"It's good news for Aloha and its employees anytime you can add the worldwide marketing exposure of the second largest airline to your company," said Aloha pilot John Riddel, a 21-year company employee.

The reaction from Aloha's competitors was more guarded.

Jonathan Ornstein, chief executive officer of go! airline's parent Mesa Air Group, declined comment, citing his company's business relationship with United. As the operator of United Express service, Mesa is United's second largest shuttle operator.

Hawaiian Airlines spokesman Keoni Wagner said, "It's hard to speculate about the exact scope of this agreement, since details are not being shared, but we're confident that it won't change Hawaiian's position as Hawai'i's leading carrier."

Founded in 1946, Aloha is the state's second largest carrier with 3,500 employees.

United, which has served the Hawai'i market since 1947, is the nation's second largest carrier with more than 3,600 flights per day. It also offers more service to the Islands than any other carrier.

"We are pleased to broaden and deepen our relationship with Aloha, as we celebrate our 60th anniversary of serving Hawai'i," said Jake Brace, United's executive vice president and chief financial officer, in a news release.

The deal is the latest involving Aloha since it emerged from bankruptcy in February 2006. As part of its reorganization plan, California billionaire Ron Burkle's Yucaipa Co. and former football star Willie Gault invested about $100 million in Aloha.

FARE WARS

Aloha filed for bankruptcy in December 2004 after fuel prices soared and air travel slumped as a result of the Sept. 11 tragedy.

More recently, the airline has been struggling because of the fare war started by go!, which has sent one-way ticket prices as low as $19. In most cases, Aloha has matched discounts go! offered, but not without complaining.

Last year, Aloha sued Mesa, alleging that the company misused confidential information in an attempt to drive Aloha out of business. Aloha executives also argued that all three interisland carriers are losing money when they sell interisland tickets below $50.

Hamilton, the aviation industry consultant, said the United deal provides Aloha with additional leverage against Mesa.

To protect its interests in Aloha, United could demand that Mesa "straighten up" its business practices in Hawai'i or face the risk of losing some of its shuttle business, Hamilton said.

"This sends a not-too-subtle shot across the bow to Mesa," Hamilton said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.