Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.
Sunday, February 10, 2002
Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.
Sunday, February 10, 2002
Economic jump start
Why HAL workers oppose merger
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Jump Start The aftermath of the Sept. 11 attacks not only shook the nerves of humanity, it also created havoc in our economy. The dismal domino effect of the paralyzed airline industry into contraction of other businesses did not take long to find its way to workers and consumers.
How to rebuild consumer confidence
and get the economy rolling? Encourage
the public to continue spending moneyBy Antonina Espiritu
This economic chain of events is no mystery as it exemplifies the circular flow of income and spending in a market-based economy. Simply, "one person's spending is another person's income." In other words, income received by businesses from the sale of their products must be paid to acquire resources. For example, in labor markets, businesses pay people for their time and talent; while in service and product markets, we purchase the goods and services that firms produce.
This personal spending translates to about two-thirds of the total spending in the economy. And this is precisely the reason why we need to rebuild consumer confidence if we want to keep our economy moving, both nationally and here in Hawaii.
The U.S. government's new war on global terrorism continues to boost defense spending. In addition to business bailouts, fiscal and monetary stimulus packages are now in place, and more are lined up for quick implementation to help get the economy going. However, the average consumer must also do his part to keep the circular flow of income and spending moving. So, the main question is how do we make Kimo Chan spend, which gets our businesses to produce and hire or keep their workers?
As mentioned earlier, the government has already provided some fiscal stimulus, while the Federal Reserve has provided more money or increased money into the system by lowering short-term interest rates. However, this fiscal-monetary stimuli work through the economic system with a lag and to get Kimo Chan spending now we need to have more incentives in place and make obvious the sensible reasons to spend now.
Here are some thoughts:
>> Those businesses spared or least affected by the tragic event could do their "patriotic" role by absorbing some of the displaced workers, if not refrain from laying off workers. And to make this economically viable for businesses, our politicians should support them by giving tax credits.
>> The use of economic bailouts should be done judiciously and only given to essential or deserving businesses.
>> Gainfully employed workers and retirees with substantial savings should not shy away from spending. With inflation almost non-existent, one's purchasing power is at its best nowadays.
>> One way to bring people to spend is to consider having a "sales tax holiday," "hotel tax holiday" and offerings of "zero percent financing" loan promotional packages.
These measures, however, should be considered temporary. For a well-functioning economy in the long run still entails allowing free market forces to determine the who, what, how, when and where basic economic questions as supported by sound monetary and fiscal decisions of the government.
Antonina Espiritu is an assistant professor of economics at Hawaii Pacific University. She can be reached at aespiritu@hpu.edu.
From testimony at the state Legislature and conversations with colleagues, it appears the employees of Hawaiian Airlines are more inclined to oppose this merger than their counterparts at Aloha. The basic reasons are sacrifice and loss of competition. Why many of Hawaiian's
workers oppose the mergerDespite proclamations of a
"merger of equals," the airline is
the dominant carrier in the stateBy Richard W. Rogers
Since the early 1980s, Hawaiian's employees have worked under concessionary contracts to keep our company alive. It has survived bankruptcy and emerged strong, lean and competitive. New York investor John Adams of Smith Management (majority shareholders of Hawaiian), has stated "the management and employees have together invested in Hawaiian's future." Hawaiian had finally turned profitable, invested in new state-of-the-art, fuel-efficient aircraft and was in a position to prosper in the years ahead.
Obviously Sept. 11 affected the airline industry worldwide, but in a newsletter to all employees dated Nov. 20, 2001, Bob Zoller, the chief operating officer of Hawaiian Airlines, spoke positively of the company's future. He wrote "While all airlines were dealing with some degree of operational and financial challenges before September (and much more severe ones after September), the collective efforts of each and every member of the Hawaiian Airlines' team has put us in a better position to recover than some other airlines. All these accomplishments have resulted in a solid foundation for the airline in the months and years ahead."
On the other hand, Aloha has done little to position itself for the future. The company suffers from high debt, aging aircraft and a decreasing share in the market. Instead of striving to improve its position, it would appear Aloha's management has decided to "cash out" at the expense of the Hawaiian employees and shareholders.
On Dec. 19, 2001, both carriers, along with Greg Brenneman of Turnworks Inc., announced what they described as "a merger of equals." Nothing could be further from the truth. The December 2001 issue of Air Transport World Magazine shows for the year 2000, Hawaiian's operating revenues were more than twice that of Aloha's. For the first seven months of 2001, Hawaiian carried 670,000 more passengers, flew almost four times the Available Seat Kilometers (ASK) and more than five times the Freight Ton Kilometers (FTK) than did Aloha. It also appears that while offering fewer inter-island seats, Hawaiian surpassed Aloha's inter-island passenger market share during the fourth quarter of 2001.
In the proposed new company, the stock allocation is 52 percent for the existing Hawaiian shareholders and 28 percent for Aloha's. This alone is an indicator of the imbalance of the deal. Yet all negotiations for contracts and seniority will weigh on the "merger of equals" and Hawaiian's junior employees will be penalized.
Brenneman, formerly with Continental Airlines and now with Turnworks Inc., is orchestrating the deal. There is no question Brenneman is a motivational speaker and has some good ideas about the improvements and expansion potential that are available to both airlines. What he and his representatives have been less forthcoming about is where the money will be going if the merger goes through.
According to documents filed with the Securities and Exchange Commission, Brenneman, as chief executive officer, will get 20 percent of the new company and a $380,000 annual salary for just showing up in Hawaii. Turnworks Inc. receives a merger advisory fee of $750,000 plus a $1.8 million annual consulting fee. Sonny Ching will be vice chairman of the new board of directors. Glenn Zander will receive a $4 million retirement package. Paul Casey is negotiating for more than the $1 million he was offered. Adams of Airline Investment Partners, the major stockholder at Hawaiian Airlines, will end up with a package worth more than $160 million. Aloha's owners will get $5 million cash plus 28 percent of the new company. Aloha's non-pilot pension fund will have to be reimbursed $10 million that was previously borrowed. It appears Hawaiian's cash reserves will be used to make these payouts and that will be a gross injustice to the Hawaiian Airline employees who sacrificed to help their company recover from bankruptcy and become successful.
Initially, hundreds of employees will be laid off with the potential for more. Hawaiian Airlines, or whatever Brenneman has decided to call us in the future, will continue to upgrade its fleet and increase the number of overseas destinations, a business plan that was already in effect. The big difference will be that our new company will be flat broke, the state's transportation system will be monopolized, and our seniority lists will be diluted with our competition.
If this merger is indeed a good deal for the employees of both airlines and the state, the case has yet to be made. We see no need for Hawaiian Airlines to weaken its position as the flagship airline of Hawaii in order for a few executives to rake in a windfall of millions of our hard-earned dollars, while at the same time eliminating the very competition that has pushed us to be the stronger and improved carrier that we are today.
Richard W. Rogers has been a pilot with Hawaiian Airlines for 15 years.
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