It was 5 p.m. on a Monday in April 2008 when Love’s Bakery President and CEO Mike Walters found out that bankrupt Aloha Airlines was abruptly shutting down its cargo operations.
Aloha Air Cargo
>> President: Lee Steele
The state’s largest wholesale baker of freshly baked bread already had produced its goods for the nightly shipment to the neighbor islands, and they were sitting on the airline’s property waiting to be transported.
"It was devastating," Walters recalled. "We had to scramble throughout the night to make arrangements through other carriers to get products to the neighbor islands. Ultimately, the products had to be shipped (on United Airlines) to the mainland and back to the neighbor islands. It was very, very costly, but our customers on the neighbor islands appreciated what we did."
The three-day cargo shutdown that sent ripples through the state’s economy is merely a memory now.
Aloha Air Cargo survived the events of April 2008 and will celebrate its third anniversary Saturday.
While Aloha Airlines ended passenger service on March 31, 2008, and laid off more than 2,000 employees, the company’s profitable cargo operations lived on. Seattle-based Saltchuk Resources Inc. bought the cargo division out of bankruptcy for $10.5 million in May 2008 and renamed it Aloha Air Cargo.
Today, Aloha Air Cargo continues as a key component of the state’s transportation network with 70 percent of the interisland air freight market. That translates to about 300,000 pounds a day, or more than 100 million pounds a year.
Aloha Air Cargo’s largest customers are Love’s Bakery, UPS, FedEx and the U.S. Post Office.
"Most of the loyal customers we had — about 1,900 — stuck with it even though there was a brief transition from the airline to Aloha Air Cargo," President Lee Steele said. "Our business model is pretty much the same."
Love’s Bakery and Aloha Air Cargo have a "mutual beneficial relationship," said Walters. Love’s Bakery recently signed a contract extension that runs into 2012.
"They have a very proactive management team," Walters said of Aloha Air Cargo. "They listen to what our concerns are and what our needs are. I think the follow-up is much greater. That’s not to say we didn’t have a good working relationship with Aloha (Airlines) prior to the closure of operations, but in terms of comparison, it’s a much more professional relationship now."
Love’s Bakery ships 200,000 pounds of bread and cake each week on Aloha Air Cargo from Honolulu to Maui, Kauai and the Big Island. It uses interisland cargo shipper Young Bros. Ltd., also owned by Saltchuk, to send goods to Molokai and Lanai. Saltchuk also owns Hawaiian Tug & Barge.
"Air cargo is essential because Love’s Bakery is known for its freshness," Walters said. "We don’t freeze our products. We want to provide the neighbor islands with the same quality and freshness as Oahu receives."
Aloha Air Cargo has about 350 employees, approximately 50 fewer than when it started three years ago due to streamlining. About 70 percent of today’s employees came from Aloha Airlines.
"Not much has changed because the spirit of Aloha Airlines I can still feel here with Aloha Air Cargo," said account executive Gail Hayashi, who joined the airline in 1986 and spent five months unemployed after the shutdown before being picked up by Aloha Air Cargo.
"It was comforting when I came back to Aloha Air Cargo to work because many of the people were former Aloha Airlines employees. We all had this same feeling coming from Aloha Airlines because back then our mission was always to serve the people. Our current owner, Saltchuk, is very family-oriented and giving to the community."
Aloha Air Cargo, which generates about $60 million in annual revenue, has been expanding under its new owner. It recently purchased two Saab 340 aircraft to supplement its fleet of four Boeing 737-200 jets which make 32 daily flights. The first Saab is expected to arrive early next month with the second one scheduled to be delivered in July or August. Each Saab turboprop has one-third the cargo capacity of a 737-200.
Steele said the Saabs will be used to supplement night flying when the cargo can’t fill up the larger jets, will open up opportunities in the daytime for new markets and will allow Aloha Air Cargo to get into smaller markets such as Molokai, Lanai and West Maui.
One of the markets Steele hopes to regain involves time-sensitive materials such as blood supplies, lab specimens and bank paperwork. Those items previously were carried by Aloha Airlines, but the contracts were lost to Hawaiian Airlines after Aloha shut down. Before it lost those contracts, Aloha Airlines carried 85 percent of the state’s interisland air cargo. Hawaiian Airlines now has just under 10 percent of the state’s interisland air cargo market.
Steele said about 80 percent of what Aloha Air Cargo ships is either perishable or time-sensitive. Besides mail and bakery items, the company transports pets, mostly dogs, for dog clubs, kennels and individual owners.
The company also transports produce and fish. It carries papaya from Hilo to Honolulu that is then put on international carriers for global distribution. It also ships abalone from Kona to Honolulu that then travels to Japan.
Aloha Air Cargo carries more than half the interisland mail in the state through a multiyear contract with the U.S. Postal Service and has agreements with express carriers UPS and FedEx. Aloha Air Cargo delivers mail between Honolulu and Maui as well as between Honolulu and both Hilo and Kona on the Big Island.
Aloha competes with Corporate Air, which handles mail delivery for Kauai, Molokai and Lanai.
Aloha Air Cargo also picks up packages that UPS and FedEx fly in to Honolulu every night and delivers them to the neighbor islands.
The company also expanded its services by forming Aloha Tech Ops to perform maintenance for several airlines that fly to Hawaii but don’t have their own maintenance departments. Among the airlines served are Alaska Airlines, WestJet and American Airlines.