Aloha Airlines' efforts to emerge from bankruptcy passed a major obstacle after a federal agency agreed to drop its objections to the local airline's reorganization plan.

Paul Singerman, Aloha's attorney, told U.S. Bankruptcy Judge Robert Faris yesterday that the airline has reached an agreement in principle with the federal Pension Benefit Guaranty Corp., which opposed the company's plan to terminate pensions for workers.

Singerman did not say whether Aloha will proceed with its plan to terminate the pensions. He told Faris that he was unable to discuss details of the deal at yesterday's hearing because of an agreement with the PBGC.

Airline spokesman Stu Glau-berman had no comment when asked about specifics of the deal.

The PBGC is a federal organization that guarantees basic pension benefits.

An agreement with the PBGC is one of the last hurdles to Aloha's plan to exit bankruptcy protection.

Aloha, the state's second largest carrier, filed for bankruptcy protection in December 2004 after its fuel costs took off.

The 50-year-old airline was set to emerge from bankruptcy protection on Dec. 15 under the ownership of California billionaire Ron Burkle's Yucaipa Companies and former professional football player Willie Gault.

However, the PBGC appealed a bankruptcy court ruling to terminate the airline's pensions.

A key provision in the reorganization plan called for Aloha to terminate its defined-benefits pension plans and hand them over to the PBGC.

Aloha said that the termination of the pension plan was vital to its emergence from bankruptcy. The company previously said it could save $36.6 million to $58.8 million by terminating its pensions.

Most of the savings would come from terminating the pilots' pension. Pilots could lose up to 50 percent of their annual pension benefits.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.