HONOLULU -- Hundreds of Aloha employees lost their jobs this week as the airline began its conversion from Chapter 11 bankruptcy to Chapter 7.

Aloha Cargo Suddenly Shuts Down

On Monday, 400 Aloha employees were released after the airline shut down its cargo division, which handles 85 percent of all air cargo between the islands, KITV reported.

Aloha attorney David Farmer said on KITV 4 Island Television News This Morning that 950 employees of the Aloha Aviation Contract Services division have lost their jobs as well. He retracted that statement later, saying he was wrong.

Aloha's main lender, GMAC, said it will continue to finance the contract services division through Monday when a new company will take over.

Pacific Air Cargo bid about $2.2 million for the division last week. Pacific Air Cargo President Beti Ward said she has worked out details with the companies involved to keep operations and contracts going without interruption.

The contract services division handles ground operations, including check-in and baggage for 20 other airlines such as United and Japan Airlines.

Experts said conversion to Chapter 7 basically means that all of the operations cease including employees.

An interim trustee of the bankrupt airline is scheduled to be appointed on Tuesday.

Aloha's cargo unit grounded flights on Monday afternoon after two potential buyers canceled their offers and Aloha's lender also pulled out.

The action left 85 percent of the interisland cargo business in limbo, with shippers looking for alternatives.

Most big shippers had already been scoping out other ways of getting their goods between islands.