Wednesday, April 2, 2008

Aloha, Aloha.

Honolulu-based Aloha Airlines declared bankruptcy and stopped operations on March 31, 2008. Aloha's decision, and the subsequent refusal of a bankruptcy judge to block the shutdown, ended 61 years of service and left nearly 2000 employees without jobs.

Hawaiian Airlines added 6000 seats in response and announced that it would accept Aloha passengers free of charge for three days; low-cost inter-island carrier go! also added service. But the distance from the islands to the mainland is far enough that standard domestic planes aren't likely to make the trip, which has left some passengers still scrambling to find their way home in one direction or the other.

The history of the airline industry is filled with bankruptcies. Even over the last five years, Northwest, Delta, and United have all been in bankruptcy at some point. More often than not, though, airlines secure new financing, restructure their operations, and bounce back. As a result, people tend to forget that airlines are businesses that can go under.

They can. They do.

Aloha's collapse is unexpected, but it isn't unprecedented. In the days of regulation, Pan Am was America's flagship carrier; it vanished in 1991, the same year as rival Eastern Airlines. Pan Am's earliest international rival, TWA, collapsed in 2001*. Washington D.C.-based Independence Air vanished in 2006, just after two years after its celebrated launch. Premium carrier MAXjet shut down on Christmas Eve in 2007. The airline industry has always been one subject to change.

More Changes Ahead

Although Monday's announcement by Aloha has gotten plenty of attention, another change went into effect the day before: March 30, 2008 marked the start of the EU-US Air Transport Agreement (more commonly known as the Open Skies Agreement). Prior to this agreement, flights between the United States and European Union had to originate from the country in which the operating carrier was based; now, they can originate from anywhere.

What does this mean? To the industry, it changes the playing field. German carrier Lufthansa can fly to the United States from Paris, or Air France can fly to the U.S. from Germany. American companies can also buy European carriers--though, perhaps surprisingly to those who don't understand how restricted the U.S. "free trade" economy is, foreign carriers remain forbidden to own U.S. airlines.

To passengers, Open Skies means more choice, especially with regards to popular destination London. Until now, only four airlines offered service between Heathrow and the United States: British Airways, Virgin Atlantic, United Airlines, and American Airlines. Open Skies makes gates at Heathrow available to U.S. carriers the previously had to fly into Gatwick (like Continental). The agreement also promises new transatlantic low-cost carriers, including British Airways' subsidiary OpenSkies and a plan by RyanAir executive Michael O’Leary that would offer fares to and from Europe of less than $20.

None of these changes helps the employees or passengers stranded by the collapse of Aloha Airlines. Instead of focusing on Aloha's sudden and inconvenient end, however, let's say mahalo for the 61 years that Aloha delighted its customers with a level of service fast disappearing against that backdrop of today's price wars and cutthroat competition.

All that we can hope is that there will be good changes to offset our farewell.

* Technically, TWA was acquired by American Airlines, which absorbed its massive debts.

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