Hawaiian story takes
turn amid bright
earnings
The saga of Hawaiian Airlines took another twist yesterday on a day in which the bankrupt carrier announced its 10th consecutive month of operating profits.
Trustee Joshua Gotbaum and the unsecured creditors' committee are considering joining forces and asking for a bidding process that would allow them to pick the best offer for reorganizing the company, according to sources close to the situation. The trustee and creditors' committee would then team up with the winning bidder and present a reorganization plan to creditors for a vote, sources said.
As required by federal law, U.S. Bankruptcy Judge Robert Faris would have to confirm the plan.
Also, San Francisco-based Vx Capital Partners has decided to enter the bidding process rather than filing a reorganization plan, sources said.
Last week, Corporate Recovery Group LLC and Boeing Capital Corp. filed a reorganization plan that included a $30 million capital infusion by CRG for 90 percent of the company. The plan included a different bidding process, in which other bidders would have to sign confidentially agreements, disclose the identity of their investors, make a deposit of at least $6 million and demonstrate they can close the transaction. Bidders would submit term sheets and the judge would select the winning bid to be sent out to creditors for a vote.
Sources, however, said yesterday that the trustee and committee are not "on board" with the procedures and process proposed by Corporate Recovery Group and Boeing Capital.
A bid can be made outside of a reorganization plan, with a plan required to be filed only by the winning bidder.
Meanwhile, Hawaiian's January monthly operating reported with U.S. Bankruptcy Court showed that it had record operating income of just under $6 million compared with an operating loss of $3.4 million in January 2003. A 12.1 percent increase in revenues to $60.4 million from $53.9 million a year ago significantly contributed to the turnaround, as did $2.3 million in savings in aircraft maintenance expense from a year ago.
Net income, which includes a $1.8 million expense for reorganization items, was $4.3 million. The company, which reported on a quarterly basis last year with the Securities and Exchange Commission, said the January 2003 net income number was unavailable.
"When you combine Hawaiian's industry-leading service, on-time and financial performance, this is one of the nation's best airlines," Gotbaum said. "Even against tough competition, the people of Hawaiian continue to perform."
Hawaiian, which had unaudited operating income of $77.5 million and revenues of $704.5 million in 2003, reported in yesterday's filing that its unrestricted cash position had fallen to $87 million at the end of January from $90 million at the beginning of the month. The company had $71.9 million in unrestricted cash at the beginning of 2003.
The carrier also said its systemwide load factor in January was 80.3 percent, which Hawaiian said ranked as the highest in the airline industry according to industry traffic data published by Aviation Daily. The load factor, which represents seats filled compared to seats available, was up 8.5 percentage points from 71.8 percent in January 2003.
The airline also unveiled in a supplementary document on its Web site yesterday that its pilots' pension plan was underfunded by $94.5 million at the end of last year and by $114.1 million for all its defined benefit pension plans. Hawaiian said its required pilot pension plan contributions for 2004, barring an amendment of the plan, will be $31.4 million, including $6.5 million due on March 31. In September 2003, the Bankruptcy Court allowed the airline to defer a $4.25 million pension contribution that was due that month. A hearing is set for March 29 on the resolution of that deferment.
Hawaiian also noted in its supplementary document that the elimination of common equity is not uncommon in Chapter 11 reorganization plans and that the company "extinguished" its common equity when it emerged from Chapter 11 in 1994.
The reorganization plan filed by Corporate Recovery Group and Boeing Capital also proposed canceling existing shares, but a plan expected to be filed in the next week or so by parent company Hawaiian Holdings Inc. is expected to include value for existing shares.
If the trustee and the creditors' committee team up and their bidding proposal is approved, there likely would be three, and possibly four, plans eventually filed. Besides the one already filed by the CRG-Boeing tandem, parent company Hawaiian Holdings has said it will file a plan, and the trustee and creditors' committee would collaborate with the winning bidder to file a third plan.
Hawaiian Airlines pilot Robert Konop, who earlier said he would file his own reorganization plan, could not be reached for comment on whether he intends to proceed. Resurgence Asset Management LLC, a New York-based venture capital firm that sources said has been interested in Hawaiian Airlines, did not returned several calls.
In another development, Hawaiian Airlines earlier this month sent several employees to Europe to look at three Boeing 767s that Scandinavian carrier SAS was looking to sell, sources said. Hawaiian Airlines spokesman Keoni Wagner declined to comment, but Gotbaum has said in the past that he would examine all his fleet options.
Despite seven negotiating extensions, Gotbaum has been unable to reach an agreement with Boeing Capital on three 767s and 11 717s that it leases from the aircraft lessor. The current extension expires March 15. Corporate Recovery Group and Boeing Capital reached lease agreements before filing their joint reorganization plan.
Last year, sources said, Gotbaum looked at MD-80s, a type of aircraft that Hawaiian used in the late 1980s, as possible interisland replacements for the 717s. Sources said, though, that Gotbaum no longer is considering the MD-80s as an option.
