• by Erik Sass  @eriksass1, March 12, 2010

The economy may or may not be making an anemic recovery, but many newspapers are still in trouble, as illustrated by the news that all 600 employees of The Honolulu Advertiser will be laid off in the near future, once its sale and merger with a rival newspaper, the Honolulu Star-Bulletin, is complete.

Gannett, which owns the Advertiser, hopes to sell the newspaper to Star-Bulletin owner Oahu Publications before May.

Some of the employees may be re-hired by the merged newspaper, but it's unclear how many can hope to get their old jobs back. The situation is complicated by the fact that Oahu Publications is simultaneously entertaining offers for the Honolulu Star-Bulletin as part of an agreement with the U.S. Justice Department, which will satisfy antitrust provisions and enable the newspaper merger to happen.

However, newspaper buyers nationwide have been in short supply in the last few years. Assuming that no buyer for the Star Bulletin steps forward, Oahu will buy the Advertiser from Gannett and merge the newspapers in late April.

The terms of the deal are testimony to the dismal state of the newspaper business, with the planned seller (Gannett) loaning Oahu Publications $40 million to help close the deal.

Gannett is trying to stabilize its finances after one of the steepest revenue declines in the company's history. In the fourth quarter of 2009, Gannett said its total revenues fell 14.4% -- from $1.7 billion in 2008 to $1.5 billion -- while operating expenses dipped 16.2% to $1.2 billion. (The figures do not count a $4.5 billion non-cash impairment charge in the fourth quarter of 2008.)

Honolulu is the latest in a series of cities to lose one of its two daily newspapers, following Seattle, Denver and Tucson. There have also been a number of close calls.

In 2008-2009, the San Francisco Chronicle was threatened with closure by Hearst Corp., Advance Publications threatened to close Newark's Star-Ledger, The New York Times Co. threatened to close The Boston Globe and the Detroit Free Press and Detroit News cut back their publication schedule to three days per week.

In February, Gannett announced that the wage freeze at its national flagship newspaper, USA Today, would continue through the second quarter. Gannett also said that USA Today employees would be asked to take another week of unpaid leave in the second quarter.

On a more positive note, Gannett Co. also said earlier this month that the company's U.S. Community Publishing division is ending its wage freeze on April 1, lifting a year-long hold on raises for employees of the company's local newspaper operations.