United Buys Stake in Aloha Airlines

May 4, 2007
United will receive a seat on Aloha's board and could expand its share over time. Financial terms were not disclosed.

HONOLULU -- UAL Corp.'s United Airlines announced Thursday that it is acquiring a minority stake in Aloha Airlines as the two carriers seek to strengthen their partnership in the Hawaii and trans-Pacific markets.

United will receive a seat on Aloha's board and could expand its share over time. Financial terms were not disclosed.

The agreement helps stabilize struggling Aloha, which emerged from Chapter 11 bankruptcy reorganization in February 2006. The carrier has been rocked by record fuel prices and a new aggressive competitor in the interisland market.

"It gives great financial stability for our company," said David A. Banmiller, Aloha's president and chief executive.

Banmiller said Aloha will benefit from the financial and worldwide marketing strength of United, the nation's No. 2 carrier. Honolulu-based Aloha will also try to cut costs with joint-use of facilities and utilizing United's purchasing power with vendors.

The two carriers have worked together since the early 1990s and have been code-share partners for several years.

"Based upon the contribution they're making to the improvements in our economics, both revenue and expense, we felt it was justifiable to have them have a position in the company and a board seat," Banmiller said. "We're both winning in this."

Jake Brace, United's executive vice president and chief financial officer, said the company has been serving Hawaii for 60 years and was pleased to broaden and deepen its relationship with Aloha.

"Hawaii is one of the most important travel destination for our customers, and by expanding our code share with Aloha, we are providing both Aloha's and United's customers more opportunities to both earn miles and travel seamlessly across carriers," Brace said in a statement.

The closest the carriers come to competing on routes is between Hawaii and California. Aloha flies to Oakland and Orange County while United flies to San Francisco and Los Angeles.

"There's no loss of jobs. There's no reduction of routes. There's no reduction of airplanes. It's really setting a platform for growth," Banmiller said.

Aloha filed for Chapter 11 protection in December 2004 because of cash shortfalls caused by rising fuel costs. At the time, it only had $2 million in cash.

In emerging from bankruptcy, Aloha took on new majority shareholders in billionaire supermarket chain owner Ron Burkle's Yucaipa Cos. LLC and former pro football star Willie Gault. It kept the previous owners of the airline, the Ching and Ing families, as minority shareholders.

The company was recapitalized with $63 million in equity and $35 million in debt financing.

Founded in 1946, Aloha is a subsidiary of privately held Aloha Airgroup Inc. It is one of Hawaii's biggest employers with 3,482 employees and operates a fleet of 21 Boeing 737 aircraft.


On the Net:

Aloha Airlines: http://www.alohaairlines.com

United Airlines: http://www.united.com

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