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Air Hawaii, barred from selling tickets in the islands...

HONOLULU -- Air Hawaii, barred from selling tickets in the islands and under investigation in several states, has filed for Chapter 11 reorganization and protection from creditors under federal bankruptcy laws.

The airline, which flew regularly for only three months and ended its flights about a month ago, lists assets of more than $2 million and unsecured claims of $1.2 million as well as an unknown amount of secured claims.

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Air Hawaii was required by the U.S. Department of Transportation to hold in escrow $400 of $1,400 paid in advance for its ticket coupon books in Hawaii.

The airline sold 2,000 of the books in the islands and offered similar books on the mainland for $1,200. In Hawaii, passengers paid $1,400 for four $350 roundtrip tickets and received coupons good for 10 free future roundtrips.

If the company reorganizes and resumes service, coupon holders will be able to use their tickets. People who want refunds, however, must become unsecured creditors, who will be paid only after secured creditors.

World Airways has announced it will offer stranded Air Hawaii passengers flights home for $90, an offer good through March 27.

Air Hawaii, started by restauranteurs Nicholas Nickolas and Jeff Harman along with several other investors, began daily service to Los Angeles Nov. 22 and later added daily service to San Francisco.

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The company ceased operations Feb. 19 and announced it would merge with General Air Transport, but that deal fell through. On Feb. 26, Air Hawaii announced that Raymond Gray of Tahoe City, Calif., had bought the airline.

Air Hawaii chartered some flights during that period to accomodate passengers, but most people were put on other airlines. The airline announced last week it was suspending operations until its problems were resolved.

Air Hawaii was ordered by the state March 7 not to sell tickets until it once again was operating a regular schedule.

The Hawaii Office of Consumer Protection and the California Attorney General's Office have launched investigations into thecompany's operations.

The Utah Division of Consumer Protection last week filed a complaint against Air Hawaii, accusing the airline of deceptive business practices for ads in that state offering eight roundtrip tickets for the price of four.

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