Hawaiian Air's operating income last month was $4.7 million

Hawaiian Air
on the move

It posts its fifth straight
monthly profit en route
to its best September ever


Wednesday, Oct. 22, 2003

>> Hawaiian Airlines flies the Boeing 767 and 717. A story on Page C1 yesterday said incorrectly that it files 767s and 737s.

The Honolulu Star-Bulletin strives to make its news report fair and accurate. If you have a question or comment about news coverage, call Editor Frank Bridgewater at 529-4791 or email him at

Hawaiian Airlines, capitalizing on a stronger-than-expected rebound in the airline industry, enjoyed its best September ever with its fifth straight profitable month.

Hawaiian Air The carrier, which filed its monthly operating report yesterday with U.S. Bankruptcy Court, had net income of just under $4 million in September to boost its year-to-date net income to $47.7 million. The net income was down from a gain of $20.3 million in August but was a significant turnaround from a $6.5 million loss in September of 2002.

"What stands out in the results is that we did a much better job of filling seats this year than we did last September," said Hawaiian Airlines Joshua Gotbaum and Mark Dunkerley, president and chief operating officer, in a joint letter to the airline's employees. "We have also worked hard to increase fares where competition permits."

In September, Hawaiian flew 462.3 million revenue passenger miles systemwide, 20 percent fewer than in August but 13 percent more than the previous September. A revenue passenger mile is one paying passenger carried one mile. The airline's average load factor was 81.9 percent in September, down from 88 percent in August but up from 69.5 percent last September. The load factor is the percentage of seats that are filled.

Meanwhile, Hawaiian's 2003 net income includes $17.5 million Hawaiian received in May as part of $2.3 billion distributed under the Emergency Wartime Supplemental Appropriations Act. The act compensates carriers for the suspension of passenger security fees from June 1 through Sept. 30 and costs associated with installing strengthened flight deck doors and locks.

Hawaiian, which filed for Chapter 11 reorganization bankruptcy on March 21, had operating income last month of $4.7 million to boost its nine-month total to $57.8 million. Operating revenues were $52 million in September and for the year are $521 million.

"I think all airlines saw stronger markets this summer than anticipated, and that carried over into September," Hawaiian spokesman Keoni Wagner said.

In another development, parent company Hawaiian Holdings Inc. revealed in a Bankruptcy Court filing on Friday that it has been advised by counsel for Hawaiian Airlines trustee Joshua Gotbaum and the Air Line Pilots Association that the two parties have agreed to an approximate 120-day continuance of a pension hearing involving the pilots' pension plan. The continuance is expected to be brought up at 10 a.m. Friday at a regularly scheduled hearing.

Hawaiian Airlines, which has said it needed to suspend pension payments to conserve cash, reported yesterday that its unrestricted cash and cash equivalents slipped to $81.9 million as of Sept. 30 from $83.2 million at the beginning of the month and above the $71.9 million it had at the beginning of 2003.

Hawaiian listed total assets of $328.5 million at the end of September, up from $257 million at the start of the year. The airline had total liabilities of $355.5 million at the end of the month, down from $398.8 million at the beginning of 2003.

In August, trustee attorney Bruce Bennett asked Bankruptcy Court Judge Robert Faris to allow Hawaiian Airlines to suspend a $4.25 million federally mandated payment that was due to the pilots' pension plan on Sept. 15. Faris gave the two sides roughly a month, or until this Friday, to work out an agreement.

Wagner said yesterday that he couldn't comment on discussions with ALPA and ALPA's national spokesman, Rusty Ayers, said it was his understanding that the parties were going to discuss the proposed continuance Friday with Faris. Vance Tilley, spokesman for ALPA's Hawaiian unit, said the union will issue a press release today.

Gotbaum and Dunkerley said the September results, albeit encouraging, are no guarantee of success in the future.

"Travel to and within Hawaii is already much less than it was in the summer and our competitors are doing everything they can to divert our customers," the two Hawaiian officials said.

They added that they are continuing to work toward achieving a route, fleet, and cost structure that will allow the company to sustain profits consistently and over the long term.

Additionally, Boeing Capital's fifth extension with Hawaiian Airlines is due to expire on Oct. 31 and Russ Young, spokesman for the aircraft lessor, said yesterday that the sides are discussing a sixth extension. An extension would prohibit Boeing Capital from repossessing its planes during that period. Boeing Capital leases three Boeing 767s and 13 Boeing 737s to Hawaiian Airlines.


A ‘vulture’ group buys
unpaid debts of creditors
for 12 cents on the dollar

A self-described "vulture" organization in San Diego has invested less than $5,000 to take over $39,000 in bills owed by Hawaiian Airlines to several dozen unsecured creditors, paying the creditors 12 cents on the dollar for debts that may never be collected.

"We heard about it. It was just a flip of the coin," said Tom Scheidt, a partner in Debt Acquisition Co., which made the offer to hundreds of creditors in the Hawaiian Airlines Chapter 11 bankruptcy reorganization attempt.

Nearly 40 of the unsecured creditors, with bills from about $100 to about $5,000, had taken advantage of the offer as of late yesterday. Most of them did not want to talk about it but in off-the-record comments they made it clear that the chance of getting cash now rather than waiting for maybe nothing later appealed to them.

One who did go on the record was Lori Iwata, office manager of Applied Graphics Inc., a company that is owed $3,461 in the Hawaiian Airlines case.

To her, 12 cents on the dollar was acceptable. "We felt it was going to take forever. We've had several customers that did go under and it took forever" to get anything back, she said.

Another business operator, with about $2,000 owed by Hawaiian Airlines, said the advice to take the offer "and just get rid of it" seemed best.

To Debt Acquisition Co., which has picked up debts in a number of bankruptcies with hopes of spending, say, 40 cents on the dollar for a reasonable return in a few months of 60 cents on the dollar, this was a small gamble, Scheidt said.

"We're hoping to get more than nothing," but a few thousand lost in that cause would not be a killer, he said.

He thinks airlines don't disappear. "They're not going to go away. They'll reorganize somehow, (but) if anything trickles down to us is a complete guess," Scheidt said. But his firm can wait and knows that unsecured creditors come last after secured creditors, the income tax people and the lawyers in the case. "I would be shocked if we see a penny in the next year," he said.

But Scheidt said it is worth the bet. One thing he is sure of is that he doesn't want to get new shares in a reorganized airline, in place of debt. "Stock is garbage," he said.

His company did pick up some creditors' tabs in the Liberty House bankruptcy for 30 cents on the dollar and made a profit and has bought out creditors in other cases across the country for 40 cents on the dollar and got back 60 cents or more.


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