"Outcomes perverse and otherwise"

Paul Brewbaker about a month ago when GMAC started cutting credit to Aloha said, “The game is afoot, literally, and we should not be surprised by outcomes perverse and otherwise.”

Keep in mind, Aloha Air Cargo is profitable as opposed to some other new interisland businesses which are not. I think when the pilots union voted last week to approve a strike, if needed, to keep their seniority agreements in place, that that made the company bought directly from Aloha much less appealing. Under the new senerio all previous agreements with Aloha are washed away.

Aloha's cargo planes are still here. Before the company might have been worth something between $13 to $16 million. Now the planes are worth something slightly less than that, but now whoever buys them is free to use junior pilots that they can pay less.

I would look for a previous competitor to quickly buy these Aloha planes and hire the junior pilots who flew them and get the operations going again soon, but also work over time to make the sales pitch to shift some aspects of this time-sensitive interisland cargo to their slightly different existing operations. In order for that to work, they will have to change their commercial pricing, as the their price structure now is weighted too heavily toward large loads and makes smaller commercial load shipments too expensive.

At $13 million this is a steal compared to the money lost over the past year by at least one new interisland start-up company here. And, that buyer would gain quite a bit of coerced leverage with the state and prospective customers to force the growth of their existing unprofitable business. "...Outcomes perverse and otherwise," indeed.

Today in the Honolulu Advertiser:
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20080429/NEWS01/304300006
Posted on: Tuesday, April 29, 2008
"Hawaii loses 85% of air cargo capability
'This is a critical link in the state economy,' local economist says"

"...Attorneys for the pilots union and Aloha's unsecured creditors said in bankruptcy court that Aloha will get less than $13 million by shutting down the cargo operations and selling its equipment.
"For GMAC to walk away from legitimate offers makes absolutely no sense at all," added pilot John Riddel. "It's a travesty. This should have never happened. Hundreds of dedicated employees are being victimized today."
Paul Brewbaker, chief economist at the Bank of Hawaii, said it may be some time before competing carriers and cargo operators fill the void left by Aloha.
"This is huge," said Brewbaker. "I don't doubt that somebody will come in and fill the void but in the short-term, anyone who wants to go to market is hung up..."

Aloha, Brad