Business Plan Would Cut Costs, Protect Pensions, Share Profits With Employees
LOS ANGELES, January 27, 2004 -- Hawaiian Airlines Trustee Joshua Gotbaum today presented his proposed plan for restructuring Hawaiian Airlines and bringing the company out of bankruptcy.
The plan was previewed today at a meeting with Hawaiian's creditors and union leaders. Under the plan, Hawaiian would expand its transpacific service while maintaining service within the Hawaiian Islands.
The plan includes proposals to renegotiate Hawaiian's aircraft leases and its labor agreements to reduce costs and ensure the airline's future profitability. Under the plan, pilot pension benefits already earned would be preserved and the plan would not be terminated. The plan would also increase the company's existing profit sharing formula, so that concessions would be fully offset if profitability remained high.
In presenting the plan, Gotbaum said, "Hawaiian Airlines is a very good airline that must reduce its costs to face the competition that is already coming. If we do so, we can exit bankruptcy this year, expand our service, and let others find out what we already know – that Hawaiian is one of the best airlines in the country."
Designed by Gotbaum with input from Hawaiian's management and leading aviation industry consultants, the plan contemplates continued growth in operations. By expanding service and controlling lease, labor, fuel and other costs, it would allow Hawaiian to remain profitable despite increased competition from other carriers.
In the past nine months, Hawaiian has enjoyed record profits. However, Gotbaum warned, most analysts see increased competition from mainland carriers, carriers that have reduced their own costs substantially in the past year. Given Hawaiian's excellent service, Gotbaum believes that Hawaiian can be a powerful competitor, so long as it does not suffer a cost disadvantage.
The proposed labor concessions are considerably smaller than those recently agreed to by unions at United and other airlines. Describing them, Gotbaum noted that any proposal must be judged by two tests: is it necessary for Hawaiian's success, and is it fairly shared among Hawaiian's employees?
He went on to say, "We all recognize that Hawaiian's employees have already given, and that these proposals affect the lives of the very people who are essential to Hawaiian's success. Despite a competitive environment that could easily justify larger labor cost reductions, this plan proposes only those changes that are necessary. It does so in a way that we think is fair, and through profit sharing if the airline does well, the concession would be returned in cash."
The plan also proposes to avoid terminating the pilots pension plan by freezing its benefits and sharing the funding costs between the company and the pilots. Existing retirees would continue to receive full payment and active pilots would retain their earnings to date. The plan would be succeeded by a defined contribution plan, like current 401(k)'s.
"The pilots negotiated their pension plan in good faith," Gotbaum said. "It is the bedrock on which pilots and their families base their lives and we have, for months, worked to see how we can maintain it. Rather than terminate the plan, as has happened elsewhere, we think that – if the pilots are willing – we can together come up with the more than $60 million needed to pay for the benefits they have earned. It won't be easy. It will mean a different plan in the future and sacrifices to share in the funding shortfall. But we think it's the right thing to do, and we're going to try to work with the pilots to make it happen."
Gotbaum noted that achieving the necessary cost reductions required simultaneous agreements with Hawaiian's employees, its aircraft lessors, and others. In order to get Hawaiian out of bankruptcy as quickly as possible, he said Hawaiian hoped to negotiate the changes necessary in the next two months. The result, he said, "would turn a very good airline into a strong one."
Gotbaum said he planned to follow up with a formal plan of reorganization this summer, in hopes that Hawaiian could receive court approval to exit bankruptcy in September.
About Hawaiian Airlines
Hawaiian Airlines is recognized as one of the best airlines in America. Business travelers recently surveyed by Condé 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.
Founded in Honolulu 74 years ago, 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 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