CRAIG T. KOJIMA / CKOJIMA@STARBULLETIN.COM
Announcing their plan at the Plaza Club yesterday to reorganize Hawaiian Airlines were ex-CEO Bruce Nobles, right, Boeing Capital Vice President/General Manager Scott Scherer, left, and Ron Orr, a principal with Corporate Recovery Group LLC.
Group vies for
Hawaiian AirThe reorganization plan by Boeing
and Corporate Recovery Group
would bring back Bruce Nobles,
the airline's former president and CEO
A group spearheaded by former Hawaiian Airlines Chief Executive Officer Bruce Nobles has struck first in the carrier's bankruptcy derby.
But with possibly as many as five more reorganization plans on the way, the race is far from over.
The plan filed in U.S. Bankruptcy Court late Tuesday night is a joint effort from Boeing Capital Corp., the airline's primary aircraft lessor; and Wyoming-based Corporate Recovery Group LLC, which plans to invest $30 million in the airline.
It would also mark the return to Hawaii of Nobles, who was president and chief operating officer of Hawaiian Airlines from 1993 to 1997 and who took the company through its last reorganization 10 years ago. He would be CEO of the airline under the plan.
"Over the last couple years, I have been increasingly concerned about the management and the direction of the company, which was confirmed last March when it filed for bankruptcy again," said Nobles, a Dallas-based aviation consultant who most recently was president and chief operating officer of Air Jamaica.
"It is really is in the best interest of Hawaiian's employees, its creditors, the traveling public and the community for Hawaiian to come out of bankruptcy as quickly as possible, and this plan proposes that we'll do that," said Nobles yesterday at a press conference at the Plaza Club.
Nobles said the Boeing Capital-Corporate Recovery plan does not request further labor concessions. In contrast, trustee Joshua Gotbaum has announced his intention to seek $11.2 million in concessions on top of more than $15 million in givebacks the airline's 3,300 employees approved a year ago.
"We believe the existing concessions by the employees that have most recently been established (from last year), in combination with the reduction in lease rates for the aircraft, in combination with our additional capital infusion, should get the company in the kind of position it needs to be in going forward," Nobles said.
However, Nobles said the plan does propose freezing the pilots' pension plan, paying back the underfunded portion over time and negotiating a new plan.
The involvement of Boeing Capital is seen by some familiar with the situation as a sign that Gotbaum and the aircraft lessor are still far apart in their lease restructuring talks. There have been seven extensions since Hawaiian's March 21 bankruptcy filing.
Robert Mann, an airline analyst and president of R.W. Mann & Co., in Port Washington, N.Y., said Boeing Capital has made it clear that Gotbaum is seeking too much of a lease reduction.
"Given the stakes for Boeing, it's not particularly surprising they would do this," Mann said. "I think this is putting their money where their mouth is in terms of looking for an alternate to Gotbaum's plan."
Gotbaum issued a statement in which he characterized the competing plan as an affirmation of Hawaiian Airlines' viability.
"Any proposal to invest in Hawaiian Airlines is a statement of confidence in the airline, its people and its prospects," said Gotbaum, who was hired July 3 to see the carrier through reorganization.
Scott Scherer, Boeing Capital's vice president and general manager of aircraft financial services, said "this plan will provide the creditors of Hawaiian Airlines and the Boeing Co. with the most attractive recovery with the least amount of risk." Scherer added that Boeing Capital is prepared to offer "substantially similar terms" to Gotbaum.
Mann said the pressure on Gotbaum has intensified with the competing plan.
"Any plan that's proposed this aggressively says the trustee, on the one hand, had better be on his best behavior," Mann said. "On the other hand, he truly has to have a better plan. It can't be incrementally attractive. It has to be perceptively attractive given that Boeing is now proposing actual terms."
The Nobles-led investment group has asked for a Feb. 27 court hearing to set up procedures going forward and is seeking a May 3 confirmation hearing.
The group's reorganization plan, which seeks to cancel existing shares of the airline's stock, calls for unsecured claims of $500,000 or more to receive subordinated notes, which would be repaid at market rates; warrants to acquire common stock in the newly issued Hawaiian shares; and distributions from lawsuits against ousted Hawaiian CEO John Adams and his affiliates. Smaller, unsecured creditors would receive cash distribution equal to 50 percent of the claim. Administrative and priority claims would be paid in full.
The reorganization plan received a cold shoulder from the Air Line Pilots Association's Hawaiian Airlines unit.
"Regardless of how many competing groups file plans to reorganize the company, HAL's pilots still need the same things: pension protection, job security and competitive wages and work rules," said Capt. Jim Giddings, chairman of ALPA's Hawaiian Airlines unit.
Sharon Soper, president of Hawaiian Airlines' Association of Flight Attendants unit, said AFA needs to review the proposal before commenting. Randy Kauhane, assistant general chairman for one of the International Association of Machinists' Hawaiian units, said he was relieved there was not a request for additional concessions.
The plan, though, was sharply criticized by Thomas Fritsch, in-house counsel and spokesman for parent company Hawaiian Holdings Inc. He said the plan does not explain how Boeing's "above-market leases" would be treated in the Chapter 11 proceeding and that the plan "unfairly" attributes no value to existing shareholders.
"Employees, other creditors and shareholders should be concerned that this secret arrangement is designed to benefit Boeing at their expense," Fritsch said. "It appears that Boeing is attempting to force its plan on them by threatening to pull its planes on March 15, when the deadline for renegotiating the Boeing lease expires."
