A key factor contributing to the collapse of Aloha Airline's cargo division was the inability of Aloha's lender and the two bidders for the unit to come to terms on what the purchase would entail, an Aloha attorney said yesterday.

"There were misunderstandings about what the deal was going to be and they could never get on the same page after that," said attorney David Farmer, who represents Aloha in its bankruptcy case.

An attorney for one of the bidders, Jupiter Holdings Group, said the sale fell through because the lender, GMAC Commercial Finance, insisted on eleventh-hour changes, including a higher price, that ultimately torpedoed any deal.

"It wasn't that the buyers pulled out," said James Wagner, who represents Jupiter. The lender "demanded changes at the last minute, and the changes were unacceptable to both buyers."

The deal's demise Monday prompted Aloha to abruptly shut down its cargo operation after GMAC cut off financing. Three hundred Aloha employees were left jobless as a result.

Wagner said Jupiter, which bid $13.65 million for the cargo unit, was only told about the new demands on Monday, and GMAC gave no explanation on why it was seeking the last-minute changes, including a minimum price of $15 million.

"I suspect they wanted more money because they wanted more money," Wagner said.

GMAC spokeswoman Kelly Rionda declined to discuss the collapsed deal. "We don't comment on our customers," she said.

A spokeswoman for Saltchuck Resources, which had signed a letter of intent to purchase Aloha's cargo division for $13 million, yesterday said the company had no comment. Saltchuck, the Seattle-based owner of Young Brothers/Hawaiian Tug & Barge, pulled its bid last week after Aloha and GMAC changed the terms of the bidding.

'VALUE IS GONE'

The shutdown of Aloha's cargo operation means it likely will be sold in the same fashion as the rest of Aloha, via a Chapter 7 liquidation process in bankruptcy court, or through a liquidation process outside the court.

But it's unclear what the shutdown cargo operation — or what's left of it now that former employees and customers are moving on — could fetch.

Asked if Jupiter would be interested in what's left, Wagner replied: "There isn't anything to buy as far as we're concerned. The value is gone."

Farmer said there was no way to tell, given the many variables involved, whether GMAC would get less through a Chapter 7 sale than it would have netted had the deal with Jupiter or Saltchuck gone through.

Generally, shuttered operations fetch far less than selling companies still in business.

"It may be indeed that this is the best that can be done," Farmer said.

John Riddel, an Aloha pilot and member of the pilots union, yesterday said people were still baffled about why the purchase unraveled so quickly and why GMAC insisted on 11th-hour changes — even after the bankruptcy court signed off on the parameters.

"Therein lies the big question," Riddel said. "Everybody's scratching their heads on why (GMAC) did that. Nobody understands why the specifics of the deal would change like that."

The cargo deal was complicated by a dispute between GMAC and Aloha's pilots, who threatened to strike over an issue related to whether pilots left jobless when Aloha's passenger service shut down March 31 would have the option to work for the cargo division.

UNION OUT OF PICTURE

Now that the bankruptcy case has been converted to Chapter 7, the collective bargaining agreement with its pilots essentially has ended.

If a buyer were to emerge now, it would not have to deal with a pilots union contract, fueling speculation that getting rid of the union may have been a factor in the deal's collapse.

Among the changes that GMAC insisted on Monday, according to Wagner, the Jupiter attorney, were an increase in the purchase price and deposit amount, and a reduction in the transition period for the new owner.

Under the original terms, the buyer had 100 days to get the needed permits and other matters in place, including authority to fly the planes, Wagner said. But on Monday, GMAC insisted on the period being reduced to 60 days, he said.

GMAC's $15 million price was not credible, and when combined with "unreasonable pilots," the buyers walked, said Ned Laird, managing director of Seattle-based Air Cargo Management Group and publisher of a trade newsletter Cargofacts.com.

"Can you imagine fighting over jobs that are all going to disappear instead of trying to find a way to preserve jobs?" Laird said.

"That created an uncertain atmosphere for the buyers."