Sunday, March 30, 2008


Pure corporate welfare for Aloha Airlines planned

by Larry Geller

HB509, the poor bill that has been gutted to save Aloha Airlines, is pretty explicit about its intent:

The purpose of this Act is to assist Hawaii inter-island air carriers whose operations and revenues have been adversely affected by the recent inter-island travel fare wars by authorizing the department of business, economic development, and tourism, through its director, to guarantee loans from private lending institutions.

In other words, three businesses (Hawaiian, Aloha, and Mesa) have freely chosen, as a business practice, to engage in a perpetual fare war, and now one is paying the consequences. So we, the people, are supposed to bail them out? And does this bill do that? Won't the fare war continue? Won't it destroy Aloha in the end even with a loan?

There is a legitimate argument for maintaining availability of interisland air travel. The economy of the state would be in a shambles if all we had were the Superferry. The Legislature should look at all the available options, including (if it's possible) fare regulation.

The bill provides that the loan may be used for working capital. What's to prevent Aloha from simply spending it down to nothing?

Loan guarantees are also a gift to companies that might extend them. They are eligible to keep the profits, but protected against the loss. This is the same thinking that saves Bear Stearns but lets homeowners swing in the wind.

What about a small business that makes a bad decision? Will the State of Hawaii be there with legislation to keep them afloat? No way. The state would have plenty of reasons why bad choices shouldn't be rewarded at public expense. Those same reasons should apply to Aloha.


Excellent points, Larry, especially about the unlikelihood of small businesses getting the similar bailout.

I find it interesting how quickly government officials will jump to try and intervene in the "free market" to try and effectuate a "special privilage" to an individual company. Government officials are not qualified to effectively manipulate markets; they only create distortions and waste the people's money when they try to do so. They would be better off to address the energy issue from a general market standpoint which is the source of this problem. Aloha, Brad

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