Posted on: Friday, May 3, 2002

Hawaiian Airlines restructures

By Susan Hooper
Advertiser Staff Writer

Hawaiian Airlines plans to form a holding company incorporated in Delaware, pending approval by the airline's shareholders who will vote on the change June 14. Hawaiian Airlines will continue to be headquartered in Honolulu. Advertiser Library Photo

Hawaiian Airlines plans to form a holding company called Hawaiian Holdings Inc., incorporated in Delaware, to give it more power and flexibility.

Hawaiian Airlines Inc., which will continue to operate as a Hawai'i corporation headquartered in Honolulu, will become a wholly owned subsidiary of Hawaiian Holdings Inc., the company said yesterday.

Hawaiian Airlines Chairman John Adams said the holding company structure "will provide us with strategic and operational flexibility that is not currently available to us."

Holding companies exist primarily to exercise control over other firms through ownership of a majority of the controlled firms' shares. They can gain the benefits of tax consolidation, including tax-free dividends and the sharing of operating losses, if they own 80 percent or more of the subsidiary's voting stock.

By incorporating in Delaware, Hawaiian Holdings will be following a popular practice. More than 308,000 companies are incorporated in the state, including 60 percent of the Fortune 500 firms and 50 percent of the companies listed on the New York Stock Exchange, according to information from the state's Web site. Reasons include Delaware's business-friendly general corporation law and the expertise of its courts in interpreting those laws, analysts say.

"Delaware is widely known for the predictability and flexibility of its corporate law, and incorporating there will help us realize the potential benefits the holding company structure has to offer," Adams said.

Hawaiian Airlines spokesman Keoni Wagner said the company has no plans at the moment to take advantage of the new structure, other than creating the Hawaiian Airlines subsidiary.

"We are in growth mode," he said. "... It's a prudent corporate decision to give the company flexibility in the future."

The corporate restructuring is subject to approval by Hawaiian Airlines shareholders, who will be asked to vote on the change at their annual meeting June 14. If they approve the restructuring, Hawaiian Airlines shares will be converted into Hawaiian Holdings shares on a tax-free, one-to-one basis, giving Hawaiian Airlines shareholders the same ownership percentage in Hawaiian Holdings.