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The Honolulu Advertiser
Posted on: Tuesday, April 1, 2008

Lawmakers' optimism has dwindled

By Derrick DePledge
Advertiser Government Writer

Hawaii news photo - The Honolulu Advertiser

An Aloha Airlines jet took off at Honolulu International Airport yesterday — the airline's last day.

GREGORY YAMAMOTO | The Honolulu Advertiser

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State House and Senate leaders said yesterday they are still willing to help Aloha Airlines but acknowledged there is little they can do to resurrect the failed interisland carrier.

Aloha has not made a detailed request to lawmakers for help and the optimism over the weekend about a potential bailout has faded.

"I think it's going to be very hard, in my mind, to do anything to keep Aloha in its current format," said state House Majority Leader Kirk Caldwell, D-24th (Manoa), who attended Aloha's bankruptcy hearing yesterday. "That's not to say we won't look at each and every opportunity that's brought before us.

"We have not heard anything from Aloha. I don't expect to hear anything from Aloha. But should something come forward, we'll consider it."

The state Senate yesterday passed a bill, which now goes back to the House, to exempt Aloha and other interisland carriers from paying general excise and use taxes on jet fuel sold in the state's foreign-trade zone. The exemption has been sought by interisland carriers for several years and was not specifically related to Aloha's most recent financial troubles.

The Senate Ways and Means Committee will hear a bill this morning to provide loan guarantees for Aloha, which the committee, and the Senate, may pass if a buyer unexpectedly comes forward or Aloha's financial circumstances somehow change in the coming weeks.

"Just in the off chance that there may still be someone who would want to look at the entire package of Aloha Airlines and not just the cargo or the contract services," said state Sen. Rosalyn Baker, D-5th (W. Maui, S. Maui), the committee's chairwoman. "I think we want to keep the door open even though it may have been slammed shut."

State Senate President Colleen Hanabusa, D-21st (Nanakuli, Makaha), said lawmakers want to be prepared and, in the case of the fuel-tax exemption, consider steps that benefit the other interisland carriers.

"We have an obligation to make sure this is not a 'tip of the iceberg' situation," Hanabusa said.

Three House committees — covering transportation, tourism and labor — will hold an informational briefing tomorrow on issues raised by Aloha's collapse. The committees will gauge the extent of other airlines' ability to move people and goods between the islands, seek to reassure international and Mainland tourists about interisland travel, and discuss ways the state may help Aloha employees who are losing their jobs.

"We just want to make sure that people can get to the Islands and between the Islands, because we're losing a chunk of seats," Caldwell said.

Aloha and other interisland carriers had been urging the Legislature to pass the tax exemption on jet fuel. Aloha and Hawaiian Airlines had lobbied for the bill before Aloha's most recent bankruptcy, because of higher fuel costs linked to the rising price of oil.

Airlines that serve Mainland and foreign destinations are exempt from general excise and use taxes when buying fuel in the Hawai'i Foreign Trade Zone. The airlines are tax-exempt under federal law because the activity is considered interstate and foreign commerce.

The state Department of Taxation estimates that 55 percent of the estimated 110 million gallons of fuel sold on O'ahu last fiscal year was not exempt from taxes.

The exemption, if it becomes law, would cost the state about $5 million a year in lost revenue.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.