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Wednesday, May 3, 2000

Hawaiian Airlines
studies offers

The airline hires a financial
adviser to look into offers to
buy or invest in the carrier

Hawaiian posts quarterly loss

By Russ Lynch


Hawaiian Airlines Inc. said today that outside investors have expressed interest in buying the airline, and it has hired a financial adviser who has already been in touch with some of them.

Hawaiian Air However, Hawaiian said, no deal is in the works, and no decision will be made until the financial adviser has completed a process of checking with those who have made inquiries and looking into all the possibilities.

The airline said "it has received inquiries from time to time about a possible acquisition of, or investment in, the company."

Analysts said today that Hawaiian's shares are undervalued -- typical for airlines.

Hawaiian Airlines' stock, traded on the American Stock Exchange, rose 25 cents, or 12 percent, to close today at $2.31, with 273.1 thousand shares changing hands, about six times the average daily volume for the past year. But even at that level the stock is down 23 percent from a year ago.

"Hawaiian Airlines stock, where it's at right now, it's up a little but it's still low by historical standards," said Lantz Stringham in Portland, Ore., who follows the company for Red Chip Review.

In a December report on the company, Stringham predicted a long-term rise in the stock to $3.62 1/2, based on his estimate of earnings of 28 cents a share next year. Hawaiian lost 83 cents a share last year.

Stringham said he had not heard rumors of a potential buyout.

"It's interesting. I have not heard anything at all about rumors of an acquisition, so I would have to think this is a recent development," he said.

Robert Mann of R.W. Mann & Co., an airline industry analysis and consulting firm in Port Washington, N.Y., said the interest in Hawaiian is "probably a function of the stock price being down around $2." But there are other factors at work behind today's announcement by Hawaiian, he said.

Hawaiian may want to stir up some interest in the stock, maybe getting more than one party involved "and then causing a bidding war to erupt," Mann said.

"At the end of the day, you would have to find some mainland carrier interested in subsidizing interisland service for this to be of interest. Historically, that hasn't been the case," Mann said.

Aviation industry consultant Barbara Beyer of Arlington, Va.-based Avmark Inc. said Hawaiian's situation, where the stock market value is well below the value of the company's assets, is typical.

But there has not been any interest in airlines by big investors for some time, and all the big guns such as Frank Lorenzo, Carl Icahn and Donald Trump who jumped into airlines in the 1980s lost their money, Beyer said.

Hawaiian's balance sheet shows total assets, as of March 31, of $259 million. At today's closing price, its 41 million shares would be worth a total of less than $95 million.

Paul J. Casey, president and chief executive officer, said today that there was "no magic or secret in the timing" of today's announcement.

"There are a number of people in the last few months who have expressed interest, so we decided to hire a financial adviser," he said. The company would not name any of the potential investors, but Casey said Hawaiian is willing to consider a number of arrangements.

"We're looking at whatever people want to put on the table," he said.

Hawaiian also said it is continuing the stock buy-back it started March 21 but may discontinue it because of the process of talking to potential investors. If the airline does drop the buy-back program, it won't announce that decision, Hawaiian said.

In fact, there will be no more announcements like today's until the company has made "definitive decisions on its future strategic direction," Hawaiian said.

The oldest airline in the islands, Hawaiian has been increasing in financial strength and expanding its service since completing a bankruptcy reorganization in 1994.

In 1996 a mainland group headed by Hawaiian's current chairman, John W. Adams, gained control of Hawaiian's board of directors in return for investing $20 million in new capital.

However, they do not own a lot of Hawaiian's stock, and the airline has no single shareholder or group of shareholders that could force or reject a decision to sell.

Bloomberg News contributed to this report.

Hawaiian Airlines Inc.

Bullet Founded: 1929 as Inter-Island Airways Ltd. Became Hawaiian Airlines in 1941.
Bullet Headquarters: Honolulu.
Bullet Employees: About 3,050.
Bullet Ranking: 12th-largest U.S. airline
Bullet Service: Interisland, South Pacific and six West Coast markets.
Bullet Fleet: 28 jets, including 13 DC-10s and 15 DC-9s.
Bullet Financial: $29.3 million loss in 1999 vs. $8.2 million profit in 1998.
Bullet Stock: As of yesterday's close of $2.06, the American Stock Exchange-traded stock was down 25 percent over the last 52 weeks.
Bullet History: Emerged from Chapter 11 bankruptcy in September 1994.
Bullet Plans: Last fall, the airline said it would spend $430 million to replace its interisland fleet of DC-9s with 13 new Boeing 717-200s. The deal included an option to buy another seven aircraft.
Source: Star-Bulletin, Bloomberg News

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