Mahalo ‘death knell’

A court grants the airline
two weeks to find new financial backing;
it says it needs months

By Russ Lynch
Star-Bulletin

In a move that one Mahalo Air attorney called a "death knell" for the company, a federal judge ordered the airline into Chapter 7 bankruptcy liquidation.

However, Bankruptcy Judge Lloyd King yesterday also granted the grounded interisland carrier two weeks before executing the Chapter 7 ruling so that the company could have one last chance to raise money to get restarted.

Mahalo had asked for a couple of months to come up with more money.

Responding to the company's statement that its main investor, Hawaii tour and transportation operator Robert Iwamoto Jr., has expressed willingness to come up with more money in the right circumstances, the judge delayed enforcement of the liquidation order until Nov. 25.

It is time for Iwamoto or any other backers to put up cash now or give up, the judge said.

Iwamoto has said he needs time to decide how to raise the money and his attorneys asked for several months to explore options.

Rachel Trindle, a Washington D.C. attorney who specializes in aviation matters, testified by telephone that it would take at least three months to reorganize and refinance the airline and as much as year to get Mahalo restarted. Testifying for Mahalo, she said the airline's federal operating approvals only have value if they can be used to restart the airline in Hawaii.

Trindle said it would be extremely detrimental to the airline if the court were to put it in Chapter 7. She said it would render Mahalo's operating certificates virtually worthless.

"Obviously that is the death knell for Mahalo," she said.

Judge King questioned Trindle repeatedly about the real value of the operating certificates, reminding the court that the only reason he didn't put Mahalo in Chapter 7 at a hearing last month was to give the attorneys time to establish a dollar value for the certificates.

When they were unable to do so yesterday, he ordered the business liquidated.

Jerrold Guben, the local attorney for Mahalo, said Iwamoto is willing to put in more money. He has already invested $5 million to get the airline started and came up with additional money, including $100,000 to make one of Mahalo's last payrolls.

But he needs several months to work out ways to refinance the airline, Guben said.

King said the airline, which went into Chapter 11 reorganization bankruptcy in July and stopped flying Sept. 2, has had enough time.

Mahalo started flying interisland with 44- to 46-seat turboprop aircraft in October 1993 and carved out a niche among mostly local-resident travelers. The airline built up about a 7 percent share of the interisland market in competition with the jet fleets of Hawaiian Airlines and Aloha Airlines. However, it ran into mounting financial difficulties and was forced to shut down.