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The Honolulu Advertiser
Posted on: Sunday, July 13, 2008

ALOHA ATTORNEYS
Put it on Aloha's tab

By Rick Daysog
Advertiser Staff Writer

Hawaii news photo - The Honolulu Advertiser

Bankruptcy attorneys, consultants reap benefits from carrier’s sudden shutdown.

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Hawaii news photo - The Honolulu Advertiser

Aloha Airlines ticket counters, which presumably had computers on them the day before, were empty on March 31 at Honolulu International Airport following the sudden decision to end the airline's operations.

ADVERTISER LIBRARY PHOTO | April, 1 2008

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The shutdown of Aloha Airlines is benefiting one sector of the economy: bankruptcy lawyers and their consultants.

Since March, attorneys and experts hired by Aloha have billed the defunct airline nearly $3 million, federal bankruptcy court filings show.

The legal tab is well below the $11 million that Aloha wracked up during its previous bankruptcy, but the amount is expected to increase since the case is still pending.

Employees and retirees say the money would have been spent better if it were used to keep the airline afloat. It also could have been used to pay for health benefits or severance for the 1,900 Aloha employees who lost their jobs when the airline went out of business on March 31, they said.

"It's outrageous to charge such fees when you are just closing the door and turning off the lights," said Steve Brenessel, a retired Aloha pilot.

"All that money could have been better spent by keeping the airline going instead of going into the pockets of lawyers."

Bankruptcy experts say the fees in the Aloha liquidation aren't out of line.

Typically, attorney fees and other costs for small bankruptcies amount to about 10 percent of the assets, said Lynn LoPucki, a law professor at the University of California-Los Angeles.

Aloha has received about $20 million from the sale of its profitable cargo and contract services unit. It expects to receive another $10 million to $15 million from the sale of its aircraft frames, engines and other aircraft parts.

"This is probably an ordinary fee for this size of a case," said LoPucki.

Founded in 1946, Aloha was the state's second largest airline before shutting down its passenger service on March 31 as a result of soaring fuel prices and a costly interisland fare war.

The closure came 11 days after Aloha filed for Chapter 11 bankruptcy reorganization, two years after Aloha emerged from its first bankruptcy.

In Aloha's previous bankruptcy, six law firms or investment banking firms billed more than $1 million while a seventh billed just under that amount.

This time, just one firm — Imperial Capital LLC — submitted a bill for more than $1 million.

Imperial, whose fees have not yet been approved by the bankruptcy court, helped Aloha sell the cargo division for $17 million to Saltchuk Resources Inc., the Seattle-based owner of Young Brothers/Hawaiian Tug & Barge.

Here's what the other firms billed Aloha:

  • Miami-based Berger Singerman P.A., which was Aloha's main bankruptcy attorney, received $644,991.51 in fees and expenses. In Aloha's first bankruptcy, the firm earned more than $3 million for its work in helping the airline emerge from reorganization under new ownership;

  • Sheppard, Mullin, Richter & Hampton LLP of Los Angeles, which represented Aloha on labor related issues, billed $303,904.62;

  • Char Sakamoto Ishii Lum & Ching, Aloha's long-time law firm, was paid $297,473.48, or less than a third of what it billed during Aloha's first bankruptcy.

  • Sonneschein Nath & Rosenthal LLP, which represented Aloha's unsecured creditors, earned $242,896.18.

    The fees do not include those for Aloha's court-appointed trustee Dane Field who, along with local attorney, James Wagner, have done much of the legal work surrounding the liquidation of Aloha's assets.

    Field and Wagner's firm, Wagner Choi & Verbrugge, have not yet applied for their fees.

    The total also does not include fees that will be paid to the Los Angeles litigation firm Latham & Watkins LLP and locally based Watanabe Ing Komeiji LLP.

    The Latham and Watanabe firms are handling Aloha's anti-trust lawsuit against Mesa Air Group, the Phoenix-based parent of go! airlines.

    Aloha recently sold its legal claims against Mesa to its main investor Yucaipa Co., which has agreed to retain the two firms and pay their legal bills.

    The suit — which alleges Mesa misused confidential business information to drive Aloha out of business — will likely result in legal fees exceeding $1 million.

    Reach Rick Daysog at rdaysog@honoluluadvertiser.com.

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