Long haul for Adams

The embattled former CEO
of Hawaiian Airlines says putting
the carrier into Chapter 11
was the right course

It's been a rough 12 months for John Adams, but the former chairman and chief executive officer of Hawaiian Airlines said he would recommend that the carrier be placed into bankruptcy if given the opportunity to do it all over again.

Hawaiian Air In spite of the indignity of being removed from office for questionable financial dealings, the verbal bashing he's had to endure, a trustee's $28 million lawsuit against him and a Securities and Exchange Commission investigation, Adams said he did the right thing by filing for Chapter 11 after not being able to reach restructured lease agreements with Boeing Capital Corp.

"It's something that I have given a lot of thought to and it's tempting to say (I wouldn't do it again,) but in truth, with everything I knew at the time, I would have to (file for bankruptcy) because it had nothing to do with the company running out of cash," Adams said while in Honolulu yesterday for the filing of parent company Hawaiian Holdings Inc.'s preliminary reorganization plan.

"It had nothing to do with poor financial results. It had to do with completing a restructuring of the airline so that it could favorably compete with other airlines."

Adams, who remains as chairman and CEO of Hawaiian Holdings, still has a vested stake in the airline with his investment group, AIP LLC, controlling more than 50 percent of the airline's shares.

Hawaiian Airlines was placed in Chapter 11 reorganization last March 21, but Adams' well-intentioned legal maneuver turned into a nightmare for him when Boeing Capital filed a motion 10 days later seeking to remove him and replace him with a trustee.

Boeing had been upset that Adams and the Hawaiian Holdings board approved a $25 million tender offer -- of which Adams' investment group received $17 million -- at the same time that Adams was seeking lease concessions from Boeing.

It didn't help matters that Hawaiian had received a $30.1 million federal grant a few months earlier to compensate it for the effects of the Sept. 11, 2001, terror attacks only to appear to be paying that money to shareholders.

Adams, though, said he had no choice but to force Boeing's hand.

"Two of the three lessors (Ansett Worldwide and International Lease Finance Corp.) we got agreements with," Adams said. "The third, Boeing, we did not and I was concerned that not only did we not restructure the leases for half of our airplanes, but that all we had accomplished would come unraveled unless we got the concessions from Boeing. So we felt it was necessary, not from a financial basis but from an operational basis, to go into bankruptcy."

Since then, Adams has learned to roll with the punches.

"The business of restructuring companies is a rough-and-tumble business, and while I think I operate very openly and very fairly and very honestly, I know that people will do things that they feel is necessary to get an advantageous position in a restructuring," Adams said. "While I find that some of the things that have been said about me are inappropriate and not accurate, I have learned to understand that that's part of the business."

Adams said conducting the tender offer was "absolutely" justified.

Mo Garfinkle, consultant for Hawaiian Airlines' parent company, spoke about a reorganization plan for the bankrupt carrier yesterday at a Honolulu press conference.

He also said the recent run-up in the stock's price from an intraday low of 29 cents on June 13 to as high as $5.10 on Feb. 29 shows that Hawaiian Holdings is correct in insisting that there is value in the stock.

"I've played no part in that (run-up)," Adams said. "I have neither bought nor sold stock. The people who are investing in Hawaiian Holdings and, therefore, Hawaiian Airlines, by and large are sophisticated fund management that have watched Hawaiian Airlines during the time that we were implementing our business model, have seen it reflected in the financial results of 2003 and believe ... that it will be reflected in the plan of reorganization that there is significant value for the shareholders."

Although he insists he did nothing wrong, Adams said he wants to separate the pending litigation against him and AIP from the reorganization case.

He said he has adopted Boeing Capital's concept of setting up a litigation trust that would be funded by Hawaiian Airlines. Under the parent company's proposal, 65 percent of the proceeds, if any, would go to creditors and 35 percent to the reorganized company.

The trust would be funded by $5 million from Hawaiian Airlines to pay for ongoing legal fees and would be managed by a three-person committee.

Adams also said Hawaiian Holdings' proposed board would include nine members, with only one representative from AIP.

Adams said whether parent company Hawaiian Holdings will continue to exist has not been determined.

"I'm not going to have a position in operations (of the airline) and I'm not going to have a position in Holdings, if that survives," Adams said. "The board will be largely independent people. The purpose of Holdings was to own the shares of Hawaiian Airlines when we set it up. I don't know if that purpose still exists, but Holdings is not going to be a subterfuge for me attempting to control the airline from some other place."

Adams was joined at a Honolulu press conference yesterday by Mo Garfinkle, who is an adviser to Hawaiian Holdings and an airline industry analyst.


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