Aloha Airlines could emerge from its yearlong bankruptcy as early as Dec. 15 under a new owner who promises to invest $100 million in the state's No. 2 carrier.

The airline settled a pension dispute with its pilots yesterday, and Federal Judge Robert Faris tentatively approved its plan for reorganization.

"It's a fabulous day," said David Banmiller, CEO of the 60-year-old airline. "This company today is as well positioned as it has ever been in its long history."

The rebuilding of Aloha will be welcomed by Hawai'i consumers, who have seen the price of a one-way ticket between islands double over the past decade from about $40 to about $80 today.

A healthy Aloha competing with Hawaiian Airlines, the state's largest carrier, offers hope to travelers that those prices may eventually fall. In addition, Phoenix-based Mesa Air Group Inc., one of the nation's largest regional carriers, plans to start a new interisland service in the first quarter of 2006 with low-priced tickets.

"From a consumer's standpoint, I think it's good to have competition, otherwise the airline would charge whatever they could get away with," said Hilton Lui of Wai'alae Iki. Lui, a member of Aloha's frequent flier club, said he flies to Neighbor Islands at least once a month and higher fares have forced him to pass on the cost to clients of his private investigations firm.

Aloha's exit from bankruptcy will mark the first time in nearly three years that one of the state's two main airlines was not operating under court protection. Hawaiian Airlines emerged from bankruptcy in June after seeking protection from creditors in March 2003.

Aloha will emerge from bankruptcy a much leaner airline in better position to compete with low-cost competitors, Banmiller said. The company was able to shed more than $75 million in annual costs during its reorganization, he said.

The lower costs are in addition to more than $100 million in new financing planned by California billionaire Ron Burkle's Yucaipa Companies and former football star Willie Gault's Aloha Aviation Investment Group, which will become the new owners of Aloha.

Banmiller said yesterday that the new capital will allow the airline to modernize its fleet. The airline plans to replace five of its older Boeing 737-200 jets with newer 737-200s for Neighbor Island flights. Aloha also is considering newer aircraft to replace the Boeing 737-700 jets used on its Mainland flights.

Aloha pilots, who earlier objected to the airline's plans to terminate its pension, yesterday accepted that their pensions will be reduced.

The pilots pensions will be terminated and turned over to a federal agency as early as Dec. 15 unless new federal laws affecting how companies account for pension losses takes effect.

If Congress passes those laws by the end of the year, the pilots pension will not be terminated but will be frozen at existing levels, said Daniel Katz, attorney for the pilots union, who noted that the pilots' tentative deal requires approval by the full union.

Pilots stand to lose up to 50 percent of their annual pension benefits if their plans are terminated and handed over to the Pension Benefit Guaranty Corp., the federal agency that insures basic pension benefits.

Under the freeze, the pilots' benefits will remain at existing levels, and the company will not contribute more to the pension fund.

Katz said the pilots felt pressured to work out a deal.

"There was a very urgent sense to all parties to make this transaction go through and allow the airline to continue to provide service for the community," Katz said.

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