Trustee alters pay plan
The new compensation request by
Hawaiian's Gotbaum is lower to start
than a much-criticized plan, but could
wind up paying more over all
The trustee for Hawaiian Airlines yesterday cut his much-criticized request for compensation by nearly 30 percent for the interim, with the understanding that a federal judge will consider back-end loading the package upon the carrier's reorganization.
Joshua Gotbaum, who was hired as trustee of the bankrupt airline in July, had sought a $840,000-plus compensation package for his service. The request prompted legal complaints from Hawaiian Holdings Inc., the parent company of Hawaiian Airlines, the Association of Flight Attendants; the Air Line Pilots Association; and Robert C. Konop, a pilot for Hawaiian Airlines. The request also brought forth a limited objection from American Airlines and a conditional objection from Boeing Capital Corp. and BCC Equipment Leasing Corp.
The new compensation package seeks up to $50,000 a month in interim compensation, capping out to $600,000 a year. The request also asks for up to $10,000 a month in expenses, said Bruce Bennett, an attorney who represents Gotbaum and Hawaiian Airlines.
The request was made with the caveat that Gotbaum's final compensation will be greater than his interim compensation and that it will be based on results, Bennett said.
"The total package will conceivably be the same or larger than the original package and more back-end loaded," Bennett said, adding the decision to present a new compensation request was not based on the objections that have been filed in court.
Capt. Jim Giddings, spokesman for the Air Line Pilots Association, called the new request "a step in the right direction." The Association of Flight Attendants and the other parties that filed complaints could not be reached for comment.
Gotbaum's earlier requested compensation package had been criticized by some who had said it would net the executive at least a quarter of a million dollars a year more than his predecessor John Adams, former chairman and chief executive officer of the airline.
However, a declaration filed Dec. 5 in bankruptcy court asserts that the compensation was not out of line when compared to other bankruptcy cases, Gotbaum said, adding that John Monahan received a bonus upon the reorganization of Hawaii department store chain Liberty House.
According to news reports, Monahan, who made approximately $230,000 to $250,000 a year as Liberty House president, got a bonus of 30 percent of his annual salary, amounting to about $70,000 a year. Monahan's contract also provided severance pay equal to two years' salary if the bankruptcy reorganization effort failed and the company was liquidated.
Gotbaum decided to withdraw his earlier compensation request after dialogue with U.S. Bankruptcy Judge Robert Faris revealed he would be more willing to consider compensation at the end of the reorganization, Bennett said.
"I've always felt that compensation should be determined by the court based on what is fair and right," Gotbaum said, adding that it's too early to speculate on the amount of his full compensation.
"In bankruptcies that are successful, the bonuses have sometimes been very large," Gotbaum said. "I'm comfortable leaving that until the end of the case and to the judgment of the court."
Faris, who is set to rule on the motion at 10 a.m. on Jan. 23, appointed Gotbaum trustee of the carrier after allegations surfaced that Adams may have improperly diverted funds.
Hawaiian filed for Chapter 11 reorganization on March 21, 2003, after the airline, which already had received $15 million in employee concessions, was unable to renegotiate $20 million in lease concessions from its aircraft lessors.
Gotbaum has the next six months or so to make good on his goal to have the bankrupt company flying higher by summer. He expects to present a reorganization plan to the judge in June, with completion slated for summer's end.
Since beginning his stint as trustee, Gotbaum has weighed mergers, acquisitions, employee furloughs, new routes, fleet and fare changes to meet this goal. He's canceled leases on two of the airline's aircraft.
Gotbaum also has investigated management activities leading up to bankruptcy, which has resulted in a $28 million lawsuit against Adams and other insiders. The lawsuit, which alleged leaders improperly diverted funds, prompted Adams to return $500,000 to the airline last month.
Because of this history, Gotbaum said he would have expected Adams to object to his compensation request.
" I have sued John Adams trying to get back the $20 million that I believe he took illegally. He doesn't want to give the money back and will throw up any smoke screen," Gotbaum said.
But Gotbaum said it's appropriate for the airline unions to question the proposed package.
"They have given concessions in the past and need to satisfy members that nobody is being unfairly compensated," he said. "In the end, it will be for the judge to decide."