OST-2008-0159 - Aloha Airlines and Aeko Kula

Aloha Airlines, Inc. and Aeko Kula, Inc. d/b/a Aloha Air Cargo hereby request a pendente lite exemption from the provisions of 49 U.S.C. § 41105 to the extent necessary to permit AKI to close its purchase of AAl's cargo-related assets and perform intra-Hawaii cargo operations under new ownership, while the Department considers the Joint Application filed today to transfer AAl's certificate and exemption authority to AKI.

As the Department is aware, AAI filed for protection under Chapter 11 of the U.S. bankruptcy laws on March 20, 2008, and ceased scheduled passenger flights on March 30, 2008. In the period immediately following the shutdown of passenger operations, AAI continued to provide critical intra-Hawaii air cargo transportation services, with the intent of selling its cargo assets in the bankruptcy process. On April 25, an auction for AAl's assets was held, with the process failing to produce a successful bidder for the cargo assets.

To ensure the continued operation of cargo service in the market, the Joint Applicants require approval before May 14, 2008 (the proposed closing date of the transaction) of the transfer of AAl's certificate (and exemption authority) to AKI pursuant to 49 U.S.C. § 41105. Due to the short time frame required by the asset acquisition, the Joint Applicants request expedited processing of this pendente lite exemption application.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604, anita.mosner@hklaw.com for Aeko Kula / Squire Sanders, Edward Sauer, 202-626-6641, esauer@ssd.com for Aloha Airlines

OST-2008-0158 - Transfer of Certificate of Public Convenience and Necessity
OST-2008-0159 - Pendente Lite Exemption

On May 6, 2008, Aloha Airlines, Inc. and Aeko Kula, Inc. d/b/a Aloha Air Cargo filed a joint application in Docket OST-2008-0158 requesting that the Department transfer the interstate scheduled certificate
and other exemption authority held by Aloha to AKI pursuant to 49 U.S.C. § 41105 to enable AKI to close its purchase of Aloha's cargo-related assets and conduct intra-Hawaii cargo operations by May 14, the proposed closing date of the transaction. On that same date, the Joint Applicants filed an application in Docket OST-2008-0159 requesting that the Department grant them a pendente lite exemption from section 41105 in the event the Department is unable to act on their transfer application by May 14.

Concurrently, the Joint Applications filed a motion requesting that the Department shorten the answer period in this case to 12:00 p.m. on May 8, 2008,' to facilitate their request for expedited action in this matter and to enable the Joint Applicants to proceed with their commercial transaction.

On May 8, 2008, the Joint Applicants advised the Department that there were no objections to shortening the answer period or the underlying applications.

Under these circumstances, we have decided to grant the Joint Applicants' request for a shortened answer period in this case. Therefore, acting under authority assigned in 14 CFR 385.12, answers to the Joint Applicants request for a certificate transfer and a pendente lite exemption will now be due no later than 12:00 p.m. on May 9, 2008.

While the Department continues to believe that the public interest justifies a shortened answer period, in recognition of ALPA’s argument that that the time frame requested by the applicants is insufficient, we have decided to extend the period for answers by three additional days. Therefore, the Department now directs interested parties to file answers to the Joint Applicants’ request for a certificate transfer and a pendente lite exemption no later than 10:00 a.m. on May 12.

Air Line Pilots Association objects to the request of Aloha Airlines, Inc., and Aeko Kula, Inc., d/b/a Aloha Air Cargo to shorten the answer period to their certificate transfer and pendente lite exemption applications to 12:00 noon Eastern time May 8, 2008.

The application raises multiple difficult issues being addressed in Aloha's U.S. Bankruptcy Court proceeding (In re Aloha Airgroup Inc. Case No., 08-00337, U.S. Bankruptcy Court for the District of Hawaii). These issues include, but are not limited to, the calling back of Aloha pilots for its cargo operation out of seniority order in violation of Aloha's collective bargaining agreement with ALPA, and other violations of that agreement. In addition, ALPA requires further detail about the particular statements in the Applicants' papers that Aloha Air Cargo intends to employ certain Aloha pilots and aircraft to take an informed position on the merits. It is essential that all parties be given adequate time to review these facts, as well as the almost 60 pages of supporting documents, before responding to the pending applications.

Order 2008-5-17
OST-2008-0158 - Transfer of Certificate of Public Convenience and Necessity
OST-2008-0159 - Pendente Lite Exemption

By this order, we (1) find Aeko Kula, Inc. d/b/a Aloha Air Cargo fit, willing, and able to conduct interstate and foreign scheduled air transportation of property and mail; (2) transfer to AKI the scheduled cargo authority contained in the interstate scheduled persons, property, and mail certificate and in the exemption authority currently held by Aloha Airlines, Inc., subject to conditions; (3) cancel the passenger authority contained in the interstate certificate and exemption authority issued to Aloha; and (4) dismiss as moot the pendente lite exemption filed jointly by Aloha and AKI.

We have reviewed pleadings in this case, including the concerns raised by ALPA that none of AKI's management, with the exception of Messrs. Engle and Coffinan, are currently employed by or have been offered employment contracts with AM, and conclude that AM offering formal employment contracts to current Aloha employees before the Bankruptcy Court approved the sale of Aloha's cargo‑related assets to AKI would have been premature considering the sale order had yet to be signed. Moreover, AKI has assured the Department that such formal employment agreements will be entered into upon approval of the sale agreement and transfer of Aloha's assets to AKI by the Bankruptcy Court.

We find that approval of this transfer will have a positive effect on competition in the domestic airline industry and on the U.S. international trade market as the surviving company, with the financial support of Saltchuk, a private company with reported net profits of $83.4 million and $94.7 million in calendar years 2006 and 2007, respectively, is in a better position financially to continue the cargo operations previously provided by Aloha. In fact, absent the grant of a proposed transfer, the inter-Hawaii all-cargo air transportation currently provided by Aloha, which accounts for approximately 85 percent of the inter-island air cargo service in Hawaii, and the foreign cargo air transportation provided between Hawaii and Canada, would cease by May 14, 2008, the expiration of the company's interim financing. The transfer of Aloha's certificate and exemption authority, as described by this order, will prevent a disruption of air cargo services in Hawaii, which is critical to many local businesses and Hawaii's economy and will preserve competition in the Hawaii-Canada market and more than 200 local jobs.