A federal judge has approved the sale of Aloha Airlines' contract services division to a Los Angeles-based company.

U.S. Bankruptcy Judge Randall Newsome yesterday authorized the $2.05 million sale to Pacific Air Cargo. The deal is expected to close May 5.

The profitable aviation services unit, which employs about 1,100 workers, handles customer service, baggage service, ticket agents and ramp agents for United Airlines, Japan Airlines and other carriers that serve Hawai'i.

"We are very pleased with the outcome," said David Banmiller, Aloha's chief executive officer. "This transaction will be a positive one for our employees and our contract services customers."

Founded in 1946, Aloha was the state's second-largest carrier before it shut down its passenger services operations last month and laid off 1,900 workers.

Pacific Air operates five cargo flights a week between Honolulu and Los Angeles. The company, which was founded in 2000, also flies cargo between Honolulu and the Neighbor Islands.

Aloha said it is in the process of auctioning off its cargo operations, which employ about 300 people and handle about 85 percent of the air freight between O'ahu and the Neighbor Islands.

Earlier this week, a leading bidder for the cargo division, Seattle-based Saltchuk Resources Inc., dropped out of the auction after Aloha's representatives unexpectedly raised the price of the cargo division to $20 million. Saltchuk, which owns Young Brothers/Hawaiian Tug & Barge, had bid $13 million for the unit. A second prospective buyer, whose identity has not been disclosed, offered to pay $13.65 million, Saltchuk said.

Those offers do not include another $5 million in receivables that will be included in the final purchase price.