Starbulletin.com



Hawaiian Airlines files
for bankruptcy protection

The action is taken to let existing
management run the company
and try to work out problems


By Dave Segal and Russ Lynch
dsegal@starbulletin.com rlynch@starbulletin.com

Hawaiian Airlines filed today for Chapter 11 bankruptcy, a proceeding that is aimed at letting existing management run the company while it tries to work out financial problems.

Although the company had negotiated more than $15 million in labor cost concessions from most of its unions, it said the inability to reach concessions with some of its aircraft lessors prompted the filing. The company had been seeking $15 million in leasing concessions as well.

Hawaiian Air John Adams, chairman and chief executive officer of Hawaiian, said the company hopes to complete the restructuring and emerge from Chapter 11 this fall.

Hawaiian said "it will be business as usual" during the restructuring and that tickets will be honored, maintenance and service will continue and the company's HawaiianMiles program will continue to offer award benefits. He also said that code-share agreements with partner airlines should not be affected.

"Clearly, we would have preferred to complete our restructuring outside of the Bankruptcy Court, particularly in light of our significant progress to date," said John Adams, chairman and chief executive officer of Hawaiian. "A major element of our strategic plan and the key to the future financial health of the company is to mark our aircraft lease rates to market, but without the support of certain of our aircraft lessors, we felt obliged to protect the assets of the company, including the continued use of our aircraft while the restructuring is finalized."

The company has leasing arrangements with Boeing Co., its largest lessor, along with International Lease Financing Corp. and Ansett Worldwide.

The 20 largest unsecured claims listed in today's filing add up to $35 million, according to filings in Honolulu Bankruptcy Court. The debts include large amounts owed to Hawaii companies.

Panda Travel, a prominent Honolulu travel agency, is owed $5.6 million. Tesoro Hawaii Corp. is owed $1.8 million for fuel supplied to the airline.

Other local creditors include the advertising agency Starr Seigle Communications, owed $570,000, and two suppliers of employee medical insurance, Hawaii Medical Service Association, owed $550,000, and Hawaii Dental Services, owed $420,000.

The biggest single creditor is Wells Fargo Bank in Salt Lake City, with a $10.3 million debt for airline lease financing.

There is also a $2.5 million bill for insurance from Aviation Insurance Services in Las Vegas. American Airlines is listed as claiming $2.2 million, related to a DC-10 jet formerly used by Hawaiian, but Hawaiian is disputing that amount.

In Chapter 11 cases, the debtor is not allowed to pay debts incurred prior to the filing date until after court approval, which usually follows a lengthy hearing process. Typically, however, the court allows the debtor to pay wages and other expenses to maintain operations.

Trading was halted on the American Stock Exchange for the shares of the airline's parent company, Hawaiian Holdings Inc. The shares, which had traded as low as $1.01 over the past 52 weeks, were at $1.65 when the stock was halted.

Hawaiian has been through a Chapter 11 reorganization before, filing in 1993 and emerging from bankruptcy about a year later.

Hawaiian Holdings has yet to report its financial results for all of 2002. It lost $43.2 million in the first nine months of the year. The airline has more than 3,300 employees.

Both Hawaiian and competitor Aloha Airlines have been struggling to raise revenue as the interisland market has eroded in favor of direct neighbor island flights from the mainland.

In December, the two airlines received an exemption from federal antitrust laws, allowing them to coordinate interisland total seat capacity, and split the market 50-50.

Hawaiian Airlines spokesman Keoni Wagner said the employees had been informed that Chapter 11 was a possibility.

"The employees were very well aware this was a multistep approach," Wagner said. "Part of it was labor concessions and part of it was operating efficiencies in the system, but a big part of it was the leases and the cost of the those leases," Wagner said. "The company kept (the unions) very much in the loop with this stuff. They're very familiar with the different aspects of the steps of this restructuring, and it was more than just the employees."

Wagner said the company will continue to negotiate with its lessors.

Hawaiian pilot Joseph Mocarski said he believes the local Air Line Pilots Association representatives were blindsided by the filing.

"Absolutely," he said. "I think the (master executive council representatives were) caught by surprise, even though they were continuously apprised of the financial health of the company."



Hawaiian Airlines


| | | PRINTER-FRIENDLY VERSION
E-mail to City Desk

BACK TO TOP


Text Site Directory:
[News] [Business] [Features] [Sports] [Editorial] [Do It Electric!]
[Classified Ads] [Search] [Subscribe] [Info] [Letter to Editor]
[Feedback]
© 2003 Honolulu Star-Bulletin -- https://archives.starbulletin.com


-Advertisement-