Listing a 2002 net loss of $58 million, debts of $399 million and assets of $256 million, Hawaiian Airlines Inc. gained protection from its creditors in a Chapter 11 bankruptcy filing yesterday.
The airline blames the lessors
Bankruptcy Q&A
of its aircraft for forcing
yesterday’s Chapter 11 filingBy Russ Lynch
rlynch@starbulletin.comU.S. Bankruptcy Court Judge Robert J. Faris approved more than 30 motions from the airline, allowing it to keep operating, paying its employees, funding employee health and retirement plans and meeting its agreements with other airlines, credit card companies and service suppliers.
Hawaiian said it is business as usual while the bankruptcy process continues and it hopes to be out of the process this fall. Passengers should not notice any changes in the meantime.
The effect on stockholders is still up in the air. Trading in Hawaiian shares was halted yesterday on the American Stock Exchange.
Yesterday's hearing was largely a formal recognition of the court's protection, keeping creditors at bay while Hawaiian tries to work out its financial problems. But it produced some clues of bigger things to come.
Boeing Capital Corp. -- likely the airline's biggest secured creditor with what it said is a $476 million obligation for aircraft sold or leased to Hawaiian -- said it is watching the proceedings closely.
Boeing has a particular interest in possible "insider transactions" and has concerns about the $25 million Hawaiian used to buy back its own stock in July, Boeing attorney Steve Hedberg said in the hearing.
Hedberg participated in the Honolulu hearing by telephone from Portland, Ore.
Hedberg's comments echoed criticism by some shareholders and employees that the stock repurchase meant a gain for large shareholders, headed by John Adams, Hawaiian's chairman and chief executive officer. Adams was the biggest beneficiary of the buyback.
Adams has responded that he and his partners poured more than $50 million into the airline.
In comments in the hearing and outside, Hawaiian largely blamed the companies responsible for leasing it the aircraft for forcing it into bankruptcy.
Listing some $15 million in annual cost savings it achieved by new deals with its unions, Hawaiian said in its bankruptcy filing that it "has not been successful in its attempts to negotiate significant concessions from its aircraft lessors."
The airline has said it needs $15 million in concessions from the lessors.
Adams said after the hearing that Hawaiian had been working with unions and lessors and other creditors for months and was "80 to 85 percent along the way," but could not reach agreement with those who own or finance the aircraft.
A spokesman for Boeing Capital, which has a variety of lease and financing deals with Hawaiian, said Boeing owns the aircraft and could take them back, but there is no move to do that.
"We were unsuccessful in the attempt to reach a mutually agreeable solution," said Russ Young, a spokesman for Boeing in Seattle. Young said federal transportation law provides 60 days after a bankruptcy filing for decisions to be reached on whether equipment deals will be honored.
After that, the owner has the right to take back the equipment.
Attorney Lisa G. Beckerman, representing Hawaiian, said that counting all the stakeholders, such as members of the airline's frequent-flier system, there could be as may as 35,000 creditors listed in the case.
Meanwhile, the only creditors list on file in the U.S. Bankruptcy Court for the District of Hawaii so far is the 20 top unsecured creditors, those who have no contracted claim against particular assets of the company.
Their total debt comes to about $35 million and they include some prominent Hawaii companies.
Panda Travel, a major Honolulu travel agency, tops the local list with a debt of $5.6 million, according to a Hawaiian Airlines estimate in the court filing.
Panda issued a statement yesterday saying Hawaiian has assured it that schedules will remain unchanged and customers will see no difference after the bankruptcy filing.
Tesoro Hawaii Corp., listed in the filing as owed $1.8 million from Hawaiian for aircraft fuel, said the amount is actually only about $50,000.
Competitor Aloha Airlines said only that it is "in good financial condition," but declined further comment.
A second hearing is set for April 15, by which time a creditors' committee should be formed, attorneys said.
Question: I have a ticket for a future flight on Hawaiian Airlines. Will I have to do anything? Bankruptcy Q&A
Answer: No. The airline says its operations will run normally.
Q: I have accumulated frequent flier miles. Will I lose them?
A: No. Hawaiian Airlines will continue to operate its HawaiianMiles frequent flier program while in bankruptcy.
Q: Can I continue to book tickets on Hawaiian Airlines?
A: Yes. The airline will run its flight operations normally and continue to accept reservations.
Q: Will Hawaiian employees lose their jobs?
A: The airline has not announced any new layoffs.
Q: Where can I find out more information about the bankruptcy?
A: Hawaiian Airlines said it will launch a Web site, www.HALClaims.com, to provide up-to-date information. The site was not operational last night. You can read bankruptcy court documents at www.hib.uscourts.gov.
