By Rob Stapleton
Alaska Journal of Commerce

Saltchuk Resources Inc. bought the Aloha Airlines' cargo operation for $10.5 million in a recent auction held in Hawaii.

Dave Karp, president of Alaska operator Northern Air Cargo, a Saltchuk Resources subsidiary, was in Hawaii earlier this month to help with the auction when Saltchuk made the bid.

Seattle-based Saltchuk announced March 26 it intended to purchase the assets, equipment and service lines of Aloha Air Cargo, a division of Hawaiian-based Aloha Airlines.

Aloha Air Cargo on March 31 filed for bankruptcy. Any sale is subject to approval by the U.S. Bankruptcy Court for the Hawaii District.

Initially Saltchuk's price offer was at $13 million, according to Tim Engle, president of Saltchuk Resources. After much finagling, Saltchuk and the bankruptcy court settled on $10.5 million.

Saltchuk had walked away from the auction when Jupiter Asset Managers of the United Kingdom made a bid, and the bankruptcy trustees then indicated they were not taking anything less than $20 million.

“At that point they had no bidders, when we got a call from (Hawaii) Sen. (Daniel) Inouye, who said that we needed to get together again with the trustees and work something out. There were too many jobs on the line,” said Karp. “So we came back at a lower price.

“There are a lot of moving parts to this deal,” said Karp. “The cargo operation was not a standalone operation so there was a lot of cross utilization within the company.”

For instance, one of the Boeing aircraft to be included in the auction was in Central America having a “C check,” or a major maintenance check, that would require an expenditure of $650,000 to retrieve the aircraft for use in Hawaii.

In other news, the bankruptcy trustees shut down Aloha Air's cargo operation on May 5, Karp said. On May 8 a bankruptcy judge ordered the airline to start flying again.

“The amazing thing about these employees that is similar to NAC employees is their sense of dedication,” said Karp. “When the airline was shut down the employees stayed on and continued to work without pay allowing the airline to start up with three hours notice.”

The cargo company will be renamed Aekokula, meaning “golden eagle” in Hawaiian. The airline will need most of its 300 employees, Karp said.

“Saltchuk wants this to go smoothly, said Karp. “This will make the second standalone cargo operating as a subsidiary under its umbrella.”

U.S. Bankruptcy Judge Lloyd King also approved Saltchuk's request to terminate collective bargaining agreements with Aloha's pilots, machinists and flight attendant unions.

An attorney for the Air Line Pilots Association said the company acted in bad faith in rejecting the collective bargaining agreements. Pilots have said Aloha's management violated its collective bargaining agreement when it terminated the pilots March 31 and allowed lower seniority pilots to continue flying for the cargo division, according to a story in the Honolulu Advertiser.

Engle said that should the pilots file suit or strike, the company would walk away from the deal to purchase Aloha's cargo assets and its employees.

Rob Stapleton can be reached at rob.stapleton@alaskajournal.com.