Judge OKs bonuses for
airline executivesHawaiian Airlines’ management
will receive up to $7 million
Hawaiian Airlines' 80-member management team collectively will receive up to $7 million in performance bonuses over two years and the carrier's pilots will get about $10.5 million in overdue pension payments and deferred compensation under separate motions approved yesterday in federal Bankruptcy Court.
Judge Robert Faris, acknowledging that management bonus programs "always end up being controversial," said airline trustee Joshua Gotbaum's plan was reasonable and that the airline's middle and lower management was underpaid compared with the rest of the industry. He also said there was a risk that management could leave for better-paying jobs and that continuity was important to avoid reducing the value of the company.
"There are members of the management team that have done fantastic jobs and that's being noticed in the industry," Gotbaum said after the decision. "This is the wrong time for people to be cherry-picking Hawaiian Airlines."
The management bonuses, capped at $3 million for 2003 and $4 million in 2004, was opposed by the airline's three major unions -- the Air Line Pilots Association, the International Association of Machinists and the Association of Flight Attendants. The unsecured creditors' committee initially opposed the bonuses, but filed a joint motion with the trustee on Thursday supporting the plan after the program was modified to answer concerns about potential future executive severance payments.
"Part of the reason I thought it was important to do a bonus plan is because it is part of compensation at every other airline," Gotbaum said yesterday. "It has been promised at Hawaiian for years and never delivered and I did not want the members of the management team to think that once again they were going to be ignored when they did a good job, and once again they were going to be treated differently from the managements of every other airline in the country."
Separately, the 16-month-old bankruptcy case has attracted 968 claims totaling $721 million, trustee attorney Bruce Bennett disclosed yesterday.
One of those filings, a $38 million claim for copyright violations brought by Trina-Lie K. Lake of Kamuela on the Big Island, was dismissed yesterday after she failed to reply to the trustee's opposition.
The management bonuses, which took up most of the court's time, were opposed by the unions for various reasons. Among the arguments was that each of the three main unions already had given millions of dollars in concessions to the company and that Gotbaum was returning some of the $15 million in givebacks to management, which never gave concessions.
However, Bennett and Gotbaum said that employees so far have received about $7 million in profit-sharing bonuses while management has not.
But Jim Giddings, chairman of the Hawaiian Airlines unit of the pilots union, issued a statement later yesterday criticizing the bonus request.
"The management bonuses are out of step with the rest of the airline," Giddings said. "The profit-sharing plan was intended to be a small offset to concessions if the company were to make a lot of money. Management employees didn't give up anything, and therefore they didn't get the profit-sharing plan. Now Mr. Gotbaum wants to give them bonuses ranging from 15 percent to 168 percent of their base pay."
Bennett said that different economic forces apply to management than to the labor force, noting that Hawaiian Airlines had to search worldwide before its found its current president, Mark Dunkerley.
"Hawaiian Airlines doesn't need to hire pilots," he said. "Twenty-five percent of Hawaiian Airlines' pilots are on furlough. There's way too many pilots. Too many pilots in the world don't have jobs. That's also the case with flight attendants and machinists."
Jason Teele, an attorney for the machinists, said there was little risk of management leaving since only one member had left Hawaiian's ranks during the last year.
The pilot pension issue has been simmering since September when Gotbaum won court approval to defer a $4.25 million payment.
Gotbaum agreed to pay the pilots a $4.25 million lump sum that was due Sept. 15, about $2.7 million in monthly payments that had been deferred, and $3.5 million in deferred compensation from the pilots' 2000 employment contract.