Hawaiian loses $15M
The airline also is forecasting
a loss in the second quarterTrustee hunt progresses
Closing the book on a quarter it would like to forget, Hawaiian Airlines said today it lost $15.5 million in the first three months of the year as the Iraq war, SARS, higher fuel costs and a Chapter 11 bankruptcy filing all had negative effects on the carrier's earnings.
In what is seasonally a weak travel period, Hawaiian posted its second straight quarterly loss.
Earlier this month, the airline also projected in a U.S. Bankruptcy Court filing it would lose $5.3 million in the second quarter.
The loss, though, was narrower than the $18.6 million it lost in the same period a year ago. Earnings per share for the quarter were a loss of 55 cents compared with a loss of 54 cents a year ago.
Hawaiian said its net operating loss was $13.6 million compared with a loss of $18.6 million in the first quarter of 2002. Operating revenues rose 13.7 percent to $157.1 million from $138.1 million.
The airline said its cash and cash equivalents in the quarter shrunk to $30.6 million as of March 31 from $71.9 million at the end of the year and $93.6 million a year ago.
Hawaiian's cash position was a key issue during the airline's recent trustee hearing when aircraft lessor Boeing Capital Corp. questioned the timing of Hawaiian's $25 million tender offer last June.
Bankruptcy Judge Robert Faris last week ordered the appointment of a trustee to oversee the airline through bankruptcy.
The airline also had $36.9 million in restricted cash at the end of the quarter. The restricted cash, which the airline is not able to use, represents escrow deposits required by Hawaiian's credit card processors, the airline travel agency clearinghouse and security for workers compensation obligations.
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Hawaiian Air trustee
hunt progressesThe Trustee's Office hopes
to decide within two weeks
The next chapter in the Hawaiian Airlines trustee case took on a sense of urgency yesterday as the three main parties talked via conference call with the Honolulu U.S. Trustee's Office.
Curtis Ching, a U.S. Trustee trial attorney who is coordinating the search, said he is hoping to have a trustee named within the next two weeks. He said he has received 10 unsolicited resumes so far and also will be receiving the names of additional candidates from aircraft lessor Boeing Capital Corp., the unsecured creditors committee and, probably, from Hawaiian Airlines.
Boeing Capital executive Anil Patel, who negotiates aircraft leases to Hawaiian, said yesterday the lessor and the committee were collaborating to come up with three to five names which they plan to submit to the Trustee's Office before the end of the week. Hawaiian filed for Chapter 11 reorganization on March 21.
Michael McQuay, who was executive vice president and chief operating officer of Hawaiian from 1995 to 1997, and Paul Casey, a former vice chairman, chief executive officer and president, who was with the airline from 1997 to 2002, are the only two names that have been made public. McQuay is president of Dallas-based Bombardier Business Jet Solutions while Casey works for a travel software company in Bangkok, Thailand.
"We're trying to gauge the level of interest with a number of people," Patel said. "We need to get somebody who's going to come in there and restructure the airline. Having the right kind of person is the goal now."
Ching said trustee candidates will be required to fill out a lengthy application and the top candidates will be interviewed.
A list of finalists then will be forwarded to San Diego-based U.S. Trustee Steven Katzman, who will make the final decision.
The trustee, who will have full authority in running the airline's operations, will be able to retain or release any of Hawaiian's management.
The only sure casualty right now, Ching said, is Chairman and CEO John Adams, who U.S. Bankruptcy Judge Robert Faris singled out Friday as putting the shareholders' interests ahead of those of the creditors.
In ordering the appointment of a trustee, Faris cited a $25 million tender offer Hawaiian made to shareholders, including Adams, when the company was in "severe financial distress" and $500,000 transferred to its parent company, Hawaiian Holdings Inc., on the eve of its bankruptcy filing.
A bankruptcy expert said the Hawaiian trustee, however, may find that some of the management team won't want to stick around to find out their fate.
"In some cases, the entire management might want to leave and take jobs elsewhere so as not to leave it up to the trustee," said Ken Klee, a Los Angeles-based lawyer and professor at the UCLA School of Law. "The trustee will look at senior management to determine whether there's trustworthiness, reliability and whether their compensation is reasonable."