Bankruptcy

Aloha, Aloha

By John Pottow

Some readers might have seen that Aloha airlines went into chapter 11.  Again.  They earlier flew there in 2004, scrubbed their books a bit, and then emerged.

Why back in?  Couple reasons, they say.  First, fuel is really expensive.  (Who knew?)  Second, Mesa (allegedly) ripped off their business plan in violation of a confidentiality agreement signed during the 2004 proceedings when they were soliciting capital.  Bankruptcy whining?  Not necessarily: Mesa lost a trial against fellow plaintiff Hawaiian airlines just recently (and is appealing).

This raises a question in my mind.  Is Aloha's refiling a "failure" of chapter 11?  Is it a chapter 22?  On the one hand, if it's just gas-is-expensive, then maybe they should have foreseen that.  Or, more precisely, maybe if their viability is so marginal that even a freshly restructured Aloha can't survive with these gas prices, then they should liquidate.

On the other hand, if they got screwed unexpectedly by a commercial party, then maybe it's just bad timing.  As such, is refiling "per se" proof of a chapter 11 system failure?

Full post as published by Credit Slips on March 24, 2008 (boomark / email).