Hawaiian may
name new CEO
next week

The airline is in strong shape
after the collapse of merger
talks, chairman says

By Dave Segal

Its merger attempt may have come to a complete stop but Hawaiian Airlines Inc. hardly has been stopped in its tracks.

The airline, which announced a reduced mainland fall schedule yesterday, said it is zeroing in on its choice for chief executive officer, cautioned that it may need to lay off some workers, and noted that it has greater financial stability than if the merger with rival Aloha Airlines had succeeded.

Hawaiian Air John Adams, chairman, president and CEO of Hawaiian, said after yesterday's shareholders' meeting at the Royal Hawaiian Hotel that he has narrowed his search for a combined CEO and chief operating officer to one candidate who is not from Hawaii and is with a major airline.

Adams wouldn't identify the candidate but said they are in serious discussions and that he hopes to make an announcement by the end of the month.

The candidate emerged from an initial group of 125 who made it through the initial screening conducted by a national recruiting firm. Adams interviewed the nine finalists before narrowing his search to three and then, over the last two weeks, to one.

Both positions -- which now will become combined -- became open during the past four months when two key executives resigned shortly after the proposed merger between Hawaiian and Aloha fell through.

Robert Zoller, the former president and chief operating officer, left the company April 15; while Paul Casey, the vice chairman and CEO who later inherited Zoller's president post, quit on June 30. Casey, who at one time was rumored to be the next CEO of the Hawaii Tourism Authority, has joined a friend in Bangkok, Thailand, to work on a software product for the travel industry.

In the shareholders' meeting yesterday, Gregory Anderson was elected to replace Casey on the board. Shareholders also approved the restructuring of the airline, which created a new parent company. It now will be called Hawaiian Holdings Inc. and will shift its incorporation from Hawaii to Delaware. Hawaiian Airlines will become a wholly owned subsidiary.

Adams, who is seeking greater labor productivity from the airline's work force, said he may need to reduce staff due to the impending flight reductions and the slumping economy.

"I think it's premature for me to say how many, if any, employees we're going to cut," he said. "There may be some adjustment of our labor force to accommodate the current economic environment."

In recent weeks, US Air has filed for bankruptcy while United Airlines is apparently on the brink. In addition, American Airlines and Continental Airlines have cut flights. But despite the fact that Hawaiian lost nearly $50 million through the first six months of this year, Adams said the company's balance sheet is strong.

"Ironically, not going though with the merger creates greater financial stability for Hawaiian Airlines today because it does not have to go through a very expensive merger," Adams said.

He cited the expenses that would have been involved in dealing with two fleets of aircraft and going through the process of terminating employees and integrating operations.

"We anticipated in the merger a good 12 to 18 months of adjustments and limitations on our ability to make money to get the merger done," Adams said. "Not having to go through the merger, we are able to avoid all those costs associated with the merger and have more plans that are necessary for the operation of an airline.

"I think it was very obvious even during the merger that Hawaiian Airlines has a very strong balance sheet. And that's not being jeopardized by a corporate transaction. While I'm concerned about the financial future of Hawaiian Airlines -- I think you would be foolish not to be with any airline -- I think we have the ability to use the strength of our balance sheet and creatively adapt to the changed environment."

Meanwhile, Hawaiian, trying to adjust to a slowdown in fall travel, said yesterday it was reducing the frequency of five of its daily round-trip mainland flights, but increasing the seat capacity of another. The changes will reduce overall seat capacity by 4 percent.

The changes, effective from Sept. 3 to Dec. 12, will affect these daily round-trip flights: San Francisco-Maui will move to Friday, Saturday and Sunday; Los Angeles-Maui will move to Friday, Saturday, Sunday and Monday; Ontario, Calif.-Honolulu will be daily except Tuesday and Wednesday; of two Los Angeles-Honolulu flights, one will be daily except Tuesday and Wednesday and the other will go Friday, Saturday, Sunday and Monday with the larger McDonnell Douglas DC-10 and Tuesday, Wednesday and Thursday with the Boeing 767-300ER. San Francisco-Honolulu service, which will remain daily, will shift to the larger DC-10 on Friday, Saturday and Sunday.

Hawaiian is in the process of transitioning from the DC-10, which seats 304 passengers, to the 767, which seats between 252 and 262 passengers.

"These are fine-tuning adjustments that will have minimal impact on customers while increasing the efficiency and profitability of our operations during the off-peak fall season," Adams said.

He added that the company in November will reassess the frequency of its flights and will boost its capacity during the holiday season and again toward the end of February when passenger traffic seasonally picks up.

Hawaiian and Aloha also have been trying to get an exemption from the federal Department of Transportation that would enable them to coordinate interisland service to reduce expenses. Currently, the two airlines are reluctant to decrease their flight service for competitive reasons.

"I think that the only way that both of us can reduce our capacity significantly enough to get to be a profitable operation interisland and to have the confidence that the other person will is to have an exemption so we can sit and agree prospectively how many seats we'll fly," Adams said.

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