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Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues

Sunday, January 4, 2004


» Flying through turbulence
» Safeguard your PC
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PHOTO ILLUSTRATION BY DAVID SWANN / DSWANN@STARBULLETIN.COM



Flying through turbulence


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Hawaiian's trustee seeks changes
to position airline for the future


Hawaiian Airlines, Hawaii's oldest and (I think) best airline, began its 75th anniversary year in bankruptcy. When the company filed for bankruptcy in March, then-CEO John Adams said all Hawaiian had to do was negotiate lower aircraft rentals with Boeing and everything would be fine.

Many believed him, but it wasn't true. Hawaiian lost money for nine of the 10 years before it became bankrupt, a worse record than any other (surviving) major airline. Under Adams, Hawaiian rented an expensive new fleet, even though its routes and costs meant it couldn't afford them. The pension plan we all recognize is so important to Hawaiian's pilots has been underfunded for six years and is now more than $60 million "in the red." (Rather than propose dissolving the plan -- as some others have done -- I received court permission to defer contributions while we attempt to work out a solution with the pilots. While we're doing so, Hawaiian continues to pay all pension benefits.)

This past year, Hawaiian has done much better, but in the incredibly competitive airline industry that's no guarantee of the future. Thanks to Sen. Daniel Inouye, Hawaiian and Aloha were given a year to reorganize their interisland operations and make them profitable. Both did so, but that year is over and no one knows if Hawaii's two carriers will co-exist. Hawaiian has also done well against mainland carriers, but now they've cut costs and increased service, and fares are dropping. In short, Hawaiian's next year is going to be much tougher than the last.

Last winter, less than six months after he paid himself and his investors more than $20 million of Hawaiian's cash, John Adams asked Hawaiian's aircraft lessors and employees for concessions. Hawaiian's employees agreed. Adams promised, if they gave the 8 percent he asked, Hawaiian wouldn't need any more, even if it went into bankruptcy.

They believed him, but that statement wasn't true either. Even as Hawaiian was talking, United and American Airlines proposed much larger cuts -- and negotiated them. American negotiated labor cost reductions of some 20 percent; United of 35 percent. They also renegotiated aircraft and other costs. Now their costs are as low as Hawaiian's, and they have much bigger passenger networks. They announced more service to Hawaii, and started dropping fares. At the same time, ATA, an already lower-cost carrier, announced large increases in service from the mainland.

For travelers to Hawaii, all of this is good news, but for Hawaiian Airlines it poses a very stark choice: get competitive costs or go out of business. For the past 10 years, Hawaiian (like others) has tried to succeed as a high-quality, high-cost carrier. It didn't work. More and more, airlines compete on the basis of low cost.

The costs of running an airline are many. Like others, Hawaiian is negotiating lower aircraft and insurance costs and smaller fees to travel agents. We will reduce fuel costs by buying in bulk from Asia. We are also trying to reduce operating costs and improve service at Honolulu's airport by getting approval to operate out of one terminal instead of two.

And, as in the past, Hawaiian will turn to its 3,000-plus employees. They are the airline's lifeblood and soul, the reason Hawaiian has become both the most punctual and one of the best airlines in America.

Many times in the 25 years since airlines were deregulated, Hawaiian's employees have been asked to accept lower wages and longer hours to preserve the airline and their jobs. Each time, they had to overcome legitimate skepticism, because management always said "this is enough" and, as the industry continued to change, it never was. Each time, because Hawaiian's unions are democratic, they had to engage in long discussions with their members to decide the right thing to do. And, each time, they concluded that Hawaiian needed their help and gave it.

The situation today isn't much different. Some will join John Adams and claim "everything's all right," that Hawaiian doesn't need to change to survive. Others will argue that changes should be postponed, in the hope that a fairy godmother ("new management" or "new owners") will come along with a new approach that magically avoids the need. But in the end I think most will face facts and, as in the past, make changes by consensus and negotiation, rather than dropping everything into the lap of the Bankruptcy Court.

The airline industry is extremely competitive. Many airlines failed to adapt and disappeared. But plenty, including some that can't compare to Hawaiian and its employees, are still flying. As Hawaiian approaches its 75th anniversary, I'm confident it will emerge from bankruptcy and continue to provide the good jobs and excellent service that Hawaii and its travelers deserve.


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Pilots' union chief wants pension
money and quick reorganization



I'm a pilot for Hawaiian Airlines and chairman of the Hawaiian unit of the Air Line Pilots Association. I represent the 437 pilots of our airline. In 18 years with the company, I've never been more concerned and frustrated than I am today.

From a business standpoint, airlines are risky. We are highly capitalized and sell an extremely perishable product: the airline seat. Once an airplane pushes off the gate, any unsold seats are lost. But that doesn't mean that healthy financial rewards cannot be achieved. Hard work and smart business decisions can earn an airline financial success.

Right now, today, Hawaiian has earned that success. Years of hard work, sacrifice, and reinvestment are paying off, and paying off big. We have transitioned to a new fleet of highly efficient and reliable airplanes; we have reduced the number of active employees (including the furlough of 112 pilots); and we have rationalized our marketing strategies. And we're making money.

So why are we in Chapter 11 if we're doing so well? Only because our former chairman and chief executive officer, John Adams, wanted to leverage Boeing on our lease payments. We really shouldn't be in this mess. He should have cut the deal with Boeing and moved on. Instead, he got the boot, and we got saddled with a bankruptcy trustee who wants to reinvent the airline on the backs of its employees, particularly the pilots.

This is particularly frustrating because this amazing turnaround was made possible through the sacrifices of Hawaiian's employees. Hawaiian's pilots have repeatedly agreed to take pay cuts and other concessions to help Hawaiian survive. The trade publication Aviation Daily says Hawaiian had the second-lowest percentage of pilot labor costs in its airline category in the second quarter of this year.

So why is bankruptcy trustee Joshua Gotbaum trying to reinvent the airline on the backs of its pilots? Gotbaum claims the airline doesn't have enough money to make a $4.25 million payment into the pilots' pension plan. Yet apparently it does have enough money to dole out $3 million in profit sharing, and to pay approximately $1 million each month in fees to bankruptcy attorneys and consultants. It's clear that Hawaiian has the money to make the payment to our plan. If nothing else, Gotbaum should ask the court for permission to pay it.

It is true the Hawaiian pilots' pension plan is underfunded. That's a fact that both management and we have been fully aware of since long before Gotbaum came along. That's why we committed early this year to sit down and discuss the issue. We feel if there are creative solutions to reduce the burden on the company, we're willing to talk. But if anyone believes we'll agree to come out of this with no retirement plan, then let me correct that misunderstanding right now.

At the same time that he shortchanges my members' retirement fund, Gotbaum has asked for a lavish pay and benefits package. He wants to be paid almost $1 million per year: a $500- per-hour salary, an unspecified monthly housing allowance, a free car, free air travel and health care. Plus, he would like the option of applying for a bonus when Hawaiian emerges from bankruptcy. On top of all that, he wants to buy the loyalty of the company's top executives and nonunion workers with golden parachutes and, he has advised, a likely bonus pay plan.

And what is he doing for his money? So far he has alienated and insulted each and every pilot, and he hasn't closed the deal with Boeing. Now he wants to hire yet another high-priced consultant. This time he wants to consolidate our trans-Pacific and interisland operations in Honolulu. While this is a bona fide issue, it's a long-term problem that only bricks and mortar can solve.

The state of Hawaii needs to build terminal facilities in Honolulu that make sense for the airlines of Hawaii. And there is zero chance this will happen in Gotbaum's lifetime as Hawaiian's trustee. Remember, Gotbaum is a temporary appointee, brought in to ensure that the company is able to satisfy its obligations to its creditors.

Time and time again we pilots have stepped up to the plate to keep HAL competitive. And it's paying off. What this airline needs now, and what Gotbaum should be focusing his attention on, is a quick reorganization. Hawaiian needs to become a real corporation, with an independent board of directors and a diverse shareholder group. No more vulture capitalists, no more mainland carpetbaggers, no more New York investment bankers reinventing themselves as glamorous airline deal-makers.

How do we get there? It's pretty straightforward -- Hawaiian needs to cut a deal with Boeing, get real about our pension plan, and position itself to catch the next economic wave of expansion. We're seeing other airlines expanding into our markets. It's time to get going. In this business, if you're not out front, you don't survive. There's little room for second place. If the trustee wastes time trying to squeeze every last dime out of Boeing or trying to force additional concessions out of the employees, we will get left behind.


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Take a few steps
to safeguard your
PC and data


PCs have become a valuable part of our lives, and online security is a New Year's resolution that we all need to think about.

Although Microsoft has done a good job trying patch flaws in its operating system, software is less than perfect.

Here are some no-nonsense actions to take on if you want to keep your family's data safe and secure.

Make sure you install antivirus software and keep it updated daily. If you don't own antivirus software, you're playing Russian roulette with your PC. It's just a matter of time before you lose. The newer programs such as Norton Anti-Virus will automatically download updates, but some older versions don't. My suggestion: If you own an older version of antivirus software, update it and get an edition that enables automatic updates and scans incoming mail. Without this, you're playing the odds -- and with all those nasty viruses out there, the odds are clearly not with you. Note that automatic updates will work only if you have broadband. Figure on spending about $25 to $70 on antivirus software.

Make certain that you set up a firewall for your computers. One thing you need to understand is that without a firewall, your computer is vulnerable to hackers. If your machine connects to the Internet, you'll need protection. Windows XP comes equipped with a firewall, but you'll want something better. The best way to go is a firewall/router that will allow you to protect your entire family's network in one fell swoop. These can be either wireless or connected by cables, and you can purchase them locally from CompUSA or online for under $100. Another, less expensive option (but not as good, in my opinion) is to download a free software firewall from a company such as ZoneAlarm (www.zonealarm.com) or Kerio (www.kerio.com/us/kpf_home.html). You can also get good personal firewalls from Norton as part of its antivirus protection suites, such as Norton Internet Security.

Back up your data daily. This is a must. Some of your most important assets, whether it's business records or photos of your kids, are most likely on your computer. A few years ago, backing up was something that was done manually and was a pain. Nowadays, the whole process can be automated. All you need to do is set up some software, and even in the worst possible scenario -- fire, theft, tsunami, etc. -- you'll be protected. There are a number of media to back up your data: CD-RW, tape drives or portable hard drives. If your computer came with a CD writer, this is the least expensive way to do it, but it requires some work and discipline on your part. Portable hard drives, like the One-Touch system from Maxtor, are also easy to use but will cost you a few hundred dollars. Another option (which our company and others provide) is online backup service, where data is stored offsite and you're charged a fee ($10 to $15 a month) to upload it. This method is the easiest because once it's set up, it requires no daily work on your part.

Keep your operating system patched. One thing many of us neglect to do is keep our OS current. An operating system, by definition, is a work in progress, and to date, more than 60 megabytes of patches have been provided since Windows XP was launched. It's not too hard if you have broadband, but it's a pain for dial-up users because it sometimes takes hours to download the fixes. The good news is that Microsoft's Windows Update Web site makes it easy to keep up with the latest patches. Both XP and Windows 2000 have an icon on the bottom-right side of your screen that makes the process fairly simple. Just follow the instructions and download the patches. You can also set this up to happen automatically.

Keep alert. You can never be too careful. To be even more vigilant, I'd consider downloading the free Spybot Search & Destroy (www.safer-networking.org) or Ad-aware (www.lavasoftusa.com), which is one of the coolest innovations to come along in a while. Spybot Search & Destroy finds sneakware that installs itself on your computer without your knowledge. You don't want these kinds of programs, which send data they find on your computer to people you don't know. You also might want to tweak your e-mail software so that it displays messages without graphics. Why bother? HTML pages, which display graphic images, might actually be spyware. Some other basic tips: Avoid opening e-mail attachments, which are avenues for viruses.

Finally, if you have a wireless network at home, keep it encrypted. It's fairly easy to do.

I don't want to sound paranoid, but consider computer security as commonsense safety advice -- like keeping your car or bicycle in good working order.


Kiman Wong, general manager of Internet services at Oceanic Time Warner Cable, is an engineer by training and a full-time computer geek by profession. Questions or comments should be addressed to kiman.wong@oceanic.com


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