Hawaiian, pilots get
pension reprieveA Bankruptcy Court judge delays
his $4.25 million decision until February
to give the sides more time to talk
A federal Bankruptcy Court judge, adhering to a joint request from Hawaiian Airlines and its pilots' union, agreed yesterday to defer making a decision on the fate of a federally required $4.25 million payment that the carrier was due to pay Sept. 15 to the pilots' pension plan.
Judge Robert Faris adjourned the pension hearing for the 120-day period requested by the parties to allow the airline and the Air Line Pilots Association's Hawaiian unit to continue negotiating on the matter. He set a new date for Feb. 27 at 10 a.m. to revisit the issue. Hawaiian Airlines filed for Chapter 11 bankruptcy on March 21.
Hawaiian Airlines trustee Joshua Gotbaum, who was hired July 3 to oversee the airline through reorganization, told the Star-Bulletin earlier this week he was aiming for the airline to emerge from bankruptcy sometime next summer.
The local ALPA unit, which represents about 420 pilots, agreed to yesterday's hearing adjournment because Hawaiian Airlines said it would resume its 10 percent monthly contributions -- roughly $300,000 a month -- to the pilots' pension plan and would place the $4.25 million in a separate account while negotiations continue. Hawaiian agreed not to use that money for its own purposes without providing written notice to ALPA at least 20 days in advance.
The 10 percent monthly pension contribution is required as part of the pilots' collective bargaining agreement. It was suspended March 20 after an agreement was reached between Hawaiian and ALPA and hadn't been paid since February. Hawaiian recently made the October payment, which is based on pilot compensation for September.
In the other matter, the $4.25 million catch-up payment was federally required because the pilots' pension plan is underfunded. Hawaiian said in its August motion seeking financial relief from the court that the pension plan was underfunded by $67 million at the time.
Jim Giddings, chairman of ALPA's Hawaiian unit, said the airline still owes the back payments but that the temporary agreement will allow the two sides time for a "reasoned discussion."
"That's really what we were expecting right up to the point that the trustee filed his motion to defer the Sept. 15 payment," Giddings said. "We felt like our plan was under attack, and we're still anticipating some tough conversations. But at least the process is back on track."
Gotbaum told the Star-Bulletin he needs to conserve the airline's money any way he can despite the $81.9 million in unrestricted cash that the company had at the end of September.
"Hawaiian Airlines, unlike some companies in bankruptcy, does not have assets it can use to raise cash," he said. "We don't own our aircraft. We don't own our buildings. Essentially, the only cash we have to operate on is the cash we generate from operations. That means there's a premium on it, and until I know how to get out of bankruptcy, I conserve cash any way I can."
Gotbaum, who said there could be furloughs, as well as route and fleet changes, in the next few months, credited the employees for sticking with it.
"This is a really good airline, one of the best in the country, and it also is not a profitable airline," Gotbaum said. "That means we need to preserve what is really terrific, and part of what is really terrific here are the 3,000 people who work at Hawaiian that do a fantastic job and serve people really well. Conde Nast (Traveler magazine) said we have the best food and cabin service in America and Travel + Leisure magazine rated us the fifth-best airline in America. So we need to preserve that morale and cooperation while at the same time letting people know we have to make changes."
In another matter, Gotbaum said he expected the airline would enter into a sixth extension with Boeing Capital Corp. to continue discussions about restructuring leases of the 16 planes it rents from the aircraft lessor. Hawaiian leases 13 Boeing 717s, which are used for interisland flights, and three Boeing 767s, used for mainland flights. The filing asking for an extension is expected to be made early next week
Overall, Hawaiian has 27 planes in its fleet, with its other 11 767s being leased from Ansett Worldwide and International Lease Finance Corp. Hawaiian already has restructured its leases with those two lessors.
The existing Boeing Capital extension, due to expire Oct. 31, prevents Boeing Capital from repossessing any of its planes prior to that date.
