Merger Between Aloha, Hawaiian Called Off

The planned merger of Hawaiian Airlines Inc. and Aloha Airlines, which generated widespread opposition from employees, stockholders and consumers, has been called off, a Hawaiian spokesman said.

“It’s clear that the parties will not be able to satisfy the conditions of the merger agreement,” Hawaiian spokesman Keoni Wagner said late Saturday.

Aloha and Hawaii unveiled the proposed merger in December, saying it was necessary for the financial health of both companies. A deadline of April 18 had been set for its completion.

Those opposed to the merger of the state’s only two interisland air carriers said it would lead to higher prices and poorer service.

Class-action lawsuits seeking to block the merger were filed in state court on behalf of several groups, including employees and shareholders.

Additionally, Hawaii’s three Republican state senators asked the Justice Department to block the deal.

Hawaiian Chairman John W. Adams announced earlier Saturday that the airline rejected a deadline extension requested by TurnWorks Inc., a Texas-based company working to merge the two carriers.

In response to the announcement, Aloha spokesman Stu Glauberman said, “Aloha is aware of the decision by Hawaiian Airlines, and will issue comments at the appropriate time.”

“TurnWorks is extremely disappointed,” the company said through a public relations firm in Hawaii.

The merger was to create a new company, Aloha Holdings Inc., to be headed by Greg Brenneman, TurnWorks’ chairman and chief executive. He helped lead Continental Airlines Inc. to its turnaround as its president and chief operating officer.

Hawaiian Airlines, which has a market value of $141.7 million and is the larger carrier, and the closely held parent of Aloha had said they need to combine because the global economic slowdown and the Sept. 11 terrorist attacks hurt demand for travel to Hawaii.

The merger would have given the combined carrier control of most flights among the state’s islands.

Under the terms of the proposed combination, the new company, Aloha Holdings Inc., would have been 52% owned by Hawaiian Air’s shareholders and 28% owned by Aloha Air Group Inc. shareholders.

The remaining 20% would have been held by Brenneman.

Hawaiian Air, which put itself up for sale in May 2000, offers about 140 daily flights, employs 3,100 workers and operates 29 aircraft. Aloha Air Group, which also is the parent to Island Air, operates about 180 daily flights, with about 3,000 employees and 23 aircraft.

Of the 27 routes the carriers fly, their service overlaps on 13 within the Hawaiian islands.

To address regulatory concerns, the companies had said the new Aloha Holdings would limit some fare increases.