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Airline bankruptcy twofer raises specter of more shutdowns

This will be remembered as the week that two airlines, [% 2541752 | | Aloha %] and [% 2544741 | | ATA %], went out of business.

The shutdowns were unusually abrupt. Both carriers completely suspended operations soon after filing for Chapter 11 bankruptcy protection. Aloha submitted its bankruptcy paperwork on March 20 and grounded its planes on March 31. And ATA filed on April 3 and suspended operations the same day.

Both were significant players in the Hawaii market. Aloha had flown both interisland routes and flights to the mainland. The bulk of ATA’s flights were between Hawaii and Oakland, Los Angeles, Phoenix, and Las Vegas.

Both airlines had alliances with larger carriers. Aloha was linked to United through codesharing and through a reciprocal frequent flyer program tie-up. ATA had a similar relationship with Southwest.

Both cited the cost of jet fuel as a significant contributing factor in the erosion of their financial viability. Aloha also blamed predatory pricing in the Hawaii market. ATA cited the loss of a military cargo contract.

Both previously operated under protection of Chapter 11, restructured, and exited bankruptcy prepared, it was thought, for long-term survival.

Both left members of their frequent flyer programs empty-handed. Unredeemed points residing in the accounts of AlohaPass and Travel Awards members were instantly rendered worthless.

And both failures took industry-watchers, myself included, by surprise. For all the scrutiny that airlines receive from the government, from securities analysts, and from the travel and aviation press, no one was concerned enough about either airline’s prospects to warn consumers of the impending insolvencies.

That may be the big story here: that the plight of the airline industry is worse than we’d thought, and that other carriers are just one misstep away from the abyss that swallowed Aloha and ATA.

The watchword for the coming months, both for travel consumers and travel analysts and commentators, is vigilance. Because, as the Aloha and ATA shutdowns remind us, the only thing worse than having to put up with the airlines is not having the airlines around to put up with anymore.

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