HONOLULU -- In an effort to retain managers responsible for Hawaiian Airlines' success, Trustee Joshua Gotbaum is seeking bankruptcy court approval for a performance-based incentive program for company management.
Under the program, members of management would be eligible to receive bonuses if the airline is profitable. The amount of the bonus will depend on how profitable the company is and upon an individual's responsibilities and performance.
Gotbaum said, “For years, Hawaiian's management has been promised a bonus plan like that at every other airline. They've made change after change, so now Hawaiian is one of the best-performing airlines in the nation. Still, the airline's management does not share in the profits they created the way they would at other airlines; the company's officers were excluded from profit-sharing entirely and get nothing at all. For Hawaiian to succeed, every member of management needs to be focused on keeping Hawaiian competitive, and that's hard to do when you know you could earn much more elsewhere.”
Under Gotbaum's program, approximately 80 managers will be eligible to share a total of $3 million in bonuses based on their performance in 2003. Depending upon performance in 2004, they would be eligible for additional incentive compensation.
Helping Keep Essential Management – Gotbaum developed the program after commissioning reviews of airline compensation by outside experts. He said the program, though based on bonus programs at other airlines, would still leave Hawaiian's management with less than they would receive for comparable performance elsewhere. Nonetheless, Gotbaum said that closing the gap would help keep Hawaiian's management at Hawaiian. He said, “It's not just potential investors that are noticing Hawaiian's performance. Other airlines are, too. Several members of management have already been tempted, and I don't want them to think they're not appreciated.”
Providing Fair Pay to Help Recruiting – Gotbaum noted that management at Hawaiian was generally paid much less than at other airlines. He said, “As far as I know, Hawaiian is the only airline in America that does not have any program of incentive compensation for its management.”
Furthermore, unlike at every other airline, senior managers at Hawaiian get no pension from the company. When you take incentive compensation and the lack of pensions into account, managers at Hawaiian earn far less than they could elsewhere. Gotbaum noted that “The lack of competitive pay creates an enormous recruiting challenge. To get some of the people we need, I told prospective recruits that I would propose a bonus plan, and that's what I'm doing today."
Hawaiian finished 2003 as the nation's third most profitable airline, measured on the basis of operating profit margin. This was a sharp change from Hawaiian's performance in previous years. For the 12-month period between April 1, 2003 and March 31, 2004, Hawaiian produced operating profits of more than $108 million, compared with operating losses of $50 million for the 12 months prior. As a result, Hawaiian's turnaround from second quarter 2003 through first quarter 2004 represents an improvement of more than $158 million in operating profits – especially noteworthy considering the woes of the industry. Hawaiian has continued to report an operating profit each month of 2004.
Making Sure Everyone Shares in Hawaiian's Success – Gotbaum added that, while the company's dramatically improved performance is the product of efforts by everyone at Hawaiian, not everyone has shared in its success. “Union employees and non-contract employees have already received more than $7 million in profit sharing, and they deserve it. But the leaders responsible for the changes that have put Hawaiian on a new, successful course have gotten nothing. It's only fair that they should also share in the airline's success.”
“And,” he added “it's necessary. Even with the incentive program I'm proposing, compensation for managers at Hawaiian will generally still be less than at other airlines, but it will close some of the gap, and help us maintain Hawaiian's industry-leading performance – and that's in everyone's interest.”
About Hawaiian Airlines
Hawaiian Airlines, the nation's number one on-time carrier, is recognized as one of the best airlines in America. Business travelers recently surveyed byCondé Nast Traveler rated Hawaiian Airlines as having the best in-flight service and meals of any U.S. carrier. Hawaiian was recently ranked fourth best in the nation overall by Travel + Leisure.
Celebrating its 75th year of continuous service, Hawaiian Airlines is Hawaii's largest and longest-serving airline, and the second largest provider of passenger air service between Hawaii and the mainland U.S. Hawaiian offers nonstop service to Hawaii from more mainland U.S. gateways
than any other airline. Hawaiian also provides approximately 100 daily jet flights among the Hawaiian Islands, as well as service to Sydney, American Samoa and Tahiti.
Hawaiian Airlines, Inc. is a subsidiary of Hawaiian Holdings, Inc. (AMEX and PCX: HA). Since the appointment of a bankruptcy trustee on May 16, 2003, Hawaiian Holdings has had no involvement in the management of Hawaiian Airlines and has had limited access to information concerning the airline.
Additional information on Hawaiian Airlines is available at www.HawaiianAir.com.