of airline enlists
2 former CEOs

Competing groups want their
help in bids for Hawaiian Airlines

Two former Hawaiian Airlines chief executive officers have been approached by competing groups that are considering filing reorganization plans in the nearly 1-year-old bankruptcy case.

Paul Casey, a former vice chairman, president and CEO of Hawaiian, said he has had discussions with San Francisco-based Vx Capital Partners, a private finance firm that invests in commercial aircraft and aviation assets.

Bruce Nobles, president and CEO of Hawaiian Airlines when it filed for its first Chapter 11 reorganization in 1993, acknowledged he has been approached by an unidentified group that is "watching the situation closely."

Hawaiian Air The involvement of the two former executives and their respective groups swells the number of parties that could file reorganization plans to six, according to those close to the situation.

Among the others:

>> Trustee Joshua Gotbaum, who was hired July 3 to oversee the airline through reorganization.

>> Parent company Hawaiian Holdings Inc., which is headed by ousted Hawaiian Airlines CEO John Adams and represents about 4,000 shareholders, including Adams' majority investor group, AIP LLC.

>> Resurgence Asset Management LLC, a New York-based venture capital firm that invests in distressed firms and is the majority shareholder of Levitz Home Furnishings Inc. and Sterling Chemicals, both purchased out of Chapter 11 proceedings.

>> Hawaiian pilot Robert Konop, who has been actively filing motions in the case since the outset.

Any reorganization plan, which ultimately will have to be approved by U.S. Bankruptcy Judge Robert Faris, also will likely need the endorsement of the airline's major creditors.

Investment banker Stephen Compagni Portis, who co-founded Vx Capital in February 2002, confirmed his group's interest yesterday but was reluctant to provide details.

"Yes, we have an interest in Hawaiian Airlines, and yes, we've had lots of discussions with lots of different people about what's going on and have spent some time talking and trying to understand the company, its prospects and the way in which we may be able to make an investment going forward," Compagni Portis said.

Compagni Portis said the group would consider Casey, as well as current Hawaiian President and Chief Operating Officer Mark Dunkerley, as CEO candidates and acknowledged that Vx Capital has "a lot of financial backing." Compagni Portis also said he has no interest in being CEO even though he has led three operating company buyouts and, in two cases, served as chairman and CEO of the acquired company.

Compagni Portis, who has an M.B.A. from Stanford University, worked from 1990 to 2001 as president of Leveraged Equity Management, a San Francisco investment-banking firm that made markets in aircraft debt and other value-oriented high-yield private securities.

Casey, contacted in Bangkok, where he works in a travel software business, said he has had two conversations with Vx Capital but has not breached the noncompete clause of his Hawaiian contract.

"We've had two telephone discussions, and we haven't discussed how much capital they have but I believe they're serious," said Casey, who worked for Hawaiian from 1997 to 2002 and still maintains a home on Oahu.

Casey, who recently filed a Bankruptcy Court claim against Hawaiian for nearly $1 million in severance pay and benefits, said he is currently preparing the Bangkok company for sale and that when his noncompete agreement goes away in June, "all my options are open."

Nobles, who resigned last year as president and chief operating officer of Air Jamaica and now works as an aviation consultant out of his Dallas home, said he has been talking with a group of individuals about the situation but declined to characterize his role.

"Whether we do something or not, I'm not prepared to talk about it," Nobles said.

He did say, though, that he is concerned about the airline's bankruptcy and that his efforts to help were rebuffed by Gotbaum.

"I contacted the trustee a number of months ago and suggested I was interested in working with a group to see if we could help and asked for his cooperation," Nobles said. "But he has not made information available to interested parties and has been stonewalling information in that process. We continue to watch the situation closely."

Nobles, who worked for Hawaiian from June 1993 to April 1997, said he questions why Hawaiian is in bankruptcy in the first place and said "it's a bit of a stretch" to put the blame solely on aircraft lessor Boeing Capital Corp. for not going along with Adams' restructuring plan.

"There's no debt and a lot of cash, but it certainly needs to get its cost structure competitive," he said. "In 1993 it was much different. We had hundreds of millions of dollars in obligations, no cash at all, a cost structure that was way too high and a product that was inferior in the marketplace. It was a very challenging situation, and the company's survival was clearly questionable."

Nobles said his assessment of Hawaiian Airlines today is that it has a "terrific product," a "pretty strong" balance sheet but "fairly expensive" leases for some new airplanes and a cost structure "that's higher than it needs to be to survive in this marketplace."

"It's a really different set of circumstances than what we had 10 years ago," Nobles said. "Frankly, I don't understand why it's taking so long to go through the process, because it appears to be a pretty straightforward issue."

Konop, who has been with Hawaiian for nearly 20 years, said he is planning to file a reorganization plan that includes a stock swap to convert Hawaiian Holdings' stock into Hawaiian Airlines shares and making Hawaiian Airlines the parent company.

"I'm very familiar with Hawaiian right now, and there's probably as much waste now as there has ever been as far as operations go," Konop said. "Looking at the cash flow and cash position, there's enough money to pay off all the claims."


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