WASHINGTON — Aloha Airlines CEO David Banmiller and Sen. Daniel K. Inouye said yesterday they hope the carrier's passenger service, which shut down last week, can someday be revived.

"We still hold out hope that investors would look at resurrecting Aloha's entire passenger operation in the future," Banmiller said at a U.S. Senate Commerce Committee hearing on Hawai'i airline service.

"I hope that someday we can revive Aloha," Inouye, D-Hawai'i and the committee chair, told Banmiller after the hearing.

Banmiller cautioned that bringing back Aloha is a long shot.

"We aren't optimistic," he said. "I'm one of those people that never says never — and I think that's all I care to say right now."

It was a "sad day for Hawai'i" when Aloha shut down, Inouye said.

The state's No. 2 carrier shuttered its passenger service and laid off 1,900 workers on March 31. The closure, representing the largest layoff the state has ever seen, came after the airline lost more than $120 million in the past two years.

Aloha puts much of the blame for its failure on Mesa Air Group, owner of discount carrier go!, which is itself in financial difficulty.

Phoenix-based Mesa launched an interisland fare war with the June 2006 start of go! Since go!'s entry one-way fares between islands dropped by about half to between $39 and $49.

Mesa representatives did not testify at yesterday's hearing.

Mesa's stock dropped from nearly $8 to less than $1 per share in the past year. It traded at a 19-year low yesterday, falling 15 cents to close at 81 cents on the Nasdaq market.

MESA EFFECT

In October, a federal judge ordered Mesa to pay Hawaiian Airlines $80 million after he found that Mesa executives misused confidential business information to launch go!

On Monday, Mesa warned investors that it could default on its bonds after the airline lost a $20 million-a-month contract with Delta Air Lines. Mesa is suing Delta to enforce the contract, which generates more than 70 percent of Mesa's annual operating revenues of $327.8 million.

Charles Willis, owner and chairman of interisland carrier Island Air, said he has been trying to determine the effect it would have on Hawaiian service if Mesa's financial problems forced it to leave the Hawai'i market.

If Mesa were to follow Aloha, ATA and Skybus into bankruptcy, the company would likely shut go!, said Willis, who was in Washington for the hearing.

"That's why I was saying to the committee about how important it is to keep the existing carriers in place and to support the local carriers," he said. "I wish I could be more specific, but the problem is, once they (Mesa) go into bankruptcy you have no idea (what will happen)."

Inouye said he would explore suggestions offered during the hearing to help the airline industry.

Many airlines are struggling with the high price of jet fuel, which has skyrocketed since January. Aloha officials have said fuel costs combined with competition from go! pushed it into bankruptcy.

James C. May, president and CEO of the Air Transport Association, an airline trade association, said just stopping the purchase of oil for the country's strategic petroleum reserve and releasing some of it — 10 million barrels or so — to the market could help restrain prices.

The group also is pushing for the Energy Department to release oil from the Home Heating Oil Reserve, which could remove the premium for jet fuel, May said.

Willis also would like to see the remaining airlines craft an interisland cooperation agreement such as the one Hawaiian Airlines and Aloha had after Sept. 11, 2001.

"That gives stabilization and I think that might be helpful," he said.

LOAN PROGRAM

Willis said he would like to see the Hawai'i state Legislature adopt a measure now under consideration to set up a loan guarantee program for interisland airlines.

Barry Fukunaga, chief of staff for Gov. Linda Lingle, said the governor was concerned about the loan program because it did not contain a budget to allow it to be carried out. That has to be corrected before the program could be implemented, he said.

However, Lingle does support other legislation to do away with the state tax on jet fuel in the foreign trade zone, Fukunaga said.

Rep. Mazie Hirono, D-Hawai'i, a member of the House Transportation and Infrastructure Committee, said that since deregulation in 1978, the airline industry has been in a state of turmoil, illustrated by the safety concerns that have grounded hundreds of passenger jets across the country this week.

"I worry about to what extent those safety violations were inspired, at least in part, by cost-cutting considerations," she said. "One wonders whether increased regulation at the national level is warranted."

But Michel W. Reynolds, an acting assistant secretary for the Transportation Department, said he did not believe that the Bush administration would support any economic re-regulation of the airline passenger industry at this time.

Reynolds said that since airline deregulation, there have been more than 170 airline bankruptcies, averaging almost six a year.

Staff writer Rick Daysog contributed to this report.