Adams deal rejected
The Hawaiian Airlines CEO told
creditors he would step down in
exchange for a new board of directors
A deal offered by Hawaiian Airlines' John Adams to resign his positions as chairman and chief executive officer in exchange for a revamped board of directors has been rejected by the seven-member committee representing the carrier's unsecured creditors, sources close to the situation said today.
Adams, who has been under fire for his handling of the airline's finances, offered to step down in exchange for Mark Dunkerley, Hawaiian's president and chief operating officer, being named CEO and Dunkerley and Chief Financial Officer Christine Deister being named to the 11-member board.
A counterproposal from the creditors' committee that included Adams' resignation and a different make-up of the board subsequently was rejected by Hawaiian.
Hawaiian spokesman Keoni Wagner declined to comment.
Airline representative met with the creditors' committee yesterday in an attempt to work out a deal before a U.S. Bankruptcy Court hearing begins Thursday on the matter of appointing a trustee to replace Adams and take control of the company during Chapter 11 reorganization. Boeing Capital Corp. filed the trustee motion on March 31, 10 days after the airline filed for Chapter 11. The airline said at the time it was seeking reorganization because it was unable to renegotiate leases with its three aircraft lessors, which included Boeing Capital.
Meanwhile, Hawaiian revealed yesterday that its assets on the day it filed for Chapter 11 exceeded its liabilities by nearly $100 million. The airline listed assets of $174.2 million and liabilities of $79 million in a filing yesterday with U.S. Bankruptcy Court.
Although the filing appears to show a brighter financial outlook for the airline, Wagner said it does not include the revenue from tickets that haven't been used yet. That air traffic liability is carried on the books of all airlines as a liability, he said.
Wagner said it wasn't required to be included in the filing because it was covered under first-day orders from Bankruptcy Court. Wagner also said there also are other smaller liabilities not included.
In its filing, Hawaiian listed a $5.8 million liability to creditors holding secured claims, $1.7 million to creditors with unsecured priority claims and $71.5 million to creditors with unsecured nonpriority claims. All of Hawaiian's assets were listed under personal property.
Secured claims have collateral that has been pledged and secured creditors have the right to be paid in full.
In its March 21 bankruptcy petition, Hawaiian listed assets of $256 million and liabilities of $399 million as of Dec. 31, 2002. Hawaiian also said at the time that as of Dec. 31, 2001, its assets were $305 million and liabilities were $327 million.
In a separate filing, Adams said he blamed Boeing Capital for forcing the carrier into bankruptcy.
Adams, in direct testimony submitted by Hawaiian, said the airline's discussions with aircraft lessors Ansett Worldwide and International Lease Finance Corp. would have put Hawaiian in a position to reach an agreement with those lessors.
"Hawaiian was forced into bankruptcy, in my opinion, by BCC's refusal to restructure its leases with us, notwithstanding the admitted changes and issues confronting the airline industry," Adams testified.
Adams said Boeing Capital had insisted that a condition for restructuring the leases was that AIP LLC, Adams' partnership, reinvest the money back into Hawaiian that it received in a $25 million tender offer. Adams, whose partnership received more than $17 million, said he told Boeing Capital he believed AIP would be willing to do so if the leases could be restructured in a way that Hawaiian could be profitable. The inability to agree on those issues and the deteriorating market prompted the bankruptcy, Adams said.
Adams also said in his testimony that the appointment of a trustee could have "decidedly adverse consequences for Hawaiian's viability and operations."
"For example," he said, "the flying public would likely perceive the appointment of a trustee as the first step to liquidation and, as a result, cease flying with Hawaiian."
Adams added that the appointment of a trustee would create uncertainty for Hawaiian's employees and undermine employee morale. He said it's already starting to have that effect.
Boeing Capital Corp.
Hawaiian Airlines