U.S. Bankruptcy Judge Lloyd King yesterday rejected a bonus request of up to $600,000 for former Aloha Airlines CEO David Banmiller, saying Banmiller should not "make a windfall off a collapse of the company."

Aloha, the state's No. 2 carrier, shut down its passenger service on March 31 and laid off 1,900 workers with little prior warning.

When an attorney argued it would be fair to pay a bonus to Banmiller and former Aloha Chief Financial Officer Jeffrey Kessler as they work to sell parts of the company, King said:

"I don't think fairness is an appropriate thing to discuss unless you want to talk about fairness to people who lost their jobs on virtually no notice (and) the hardship that has been imposed upon thousands of people. Now we have the top insiders potentially making a big score on this case. I think that's a very ugly aspect of this motion.

"It simply looks bad when the people who are with the company can make more money when it's going out of business than when it is a going concern."

Last month, the airline's court-appointed bankruptcy trustee, Dane Field, proposed paying Banmiller and Kessler incentives for helping sell off the carrier's assets. Under the plan, the two would get $50,000 each if the sale of Aloha's air cargo operations, contract services division and other assets fetches $19.25 million or more.

The two could receive as much as $600,000 each if the sale of Aloha's remaining assets fetches more than $26.5 million.

Those payments would be made by Aloha's chief lender GMAC Commercial Finance LLC from the proceeds of the asset sales.

The bonuses are on top of the $500 an hour that Banmiller and Kessler are now being paid to help the airline sell off its assets. The hourly pay is capped at $25,000 a month.

Prior to the bankruptcy, Banmiller received $500,000 a year in base salary as Aloha's CEO. When hired as Aloha's CFO in 2005, Kessler and his Atlanta-based firm Tatum CFO Partners received $3,000 a week, or $156,000 a year.

When reached by phone yesterday, Banmiller and Kessler declined to comment.

OTHERS FARED POORLY

During yesterday's hearing, King questioned why Banmiller and Kessler should receive a bonus when they were already being paid $500 an hour. He also asked why other airline industry consultants couldn't have been hired to do the same work.

"Should Mr. Banmiller and Mr. Kessler be singled out for such favorable treatment in a Chapter 7 (bankruptcy) case where the other employees of the company have come out so poorly?" King said.

Jim Wagner, attorney for Field, said his client played an important role in selling Aloha's cargo and contract services units, which saved more than 1,400 jobs and preserved a business that handles more than 85 percent of all air freight between O'ahu and the Neighbor Islands.

'WORKING VERY HARD'

Aloha Cargo was sold to Seattle-based Saltchuk Resources Inc. for $10.5 million and the contract services unit was sold to Los Angeles-based Pacific Air Cargo for $2.05 million.

"I think Mr. Banmiller or Mr. Kessler have been working very hard in good faith toward liquidating the estate's assets," Wagner said.

Douglas Lipke, an attorney for GMAC Commercial Finance LLC, said Banmiller's and Kessler's institutional memory are invaluable. They have extensive contacts in the airline industry and have the best handle on the value of assets, such as the company's receivables, Lipke said.

Former Aloha pilot John Riddel said the judge did the right thing in rejecting the bonus plan. Riddel said that many of the pilots who continued to fly Aloha's cargo planes after March 31 have not yet received their full pay.

Some are still owed about half their pay, Riddel said.

"We were improperly underpaid," he said.