Hawaiian Airlines CEO and Boeing square off
By Kelly Yamanouchi
Advertiser Staff Writer
Hawaiian Airlines CEO John Adams' leadership of the state's largest carrier is growing more doubtful, with a creditors committee pushing for his ouster and airline management acknowledging that a cloud hangs over Adams.
The airline recognizes that there is a "storm overhead" given the escalating dispute between Adams and Boeing Capital Corp., the carrier's major aircraft lessor, Mark Dunkerley, Hawaiian Airlines president and chief operating officer, said yesterday.
Boeing Capital, the leasing arm of the aircraft manufacturer, is asking the federal bankruptcy court today to oust Adams and appoint a trustee to manage the financially troubled carrier as it reorganizes under Chapter 11 bankruptcy protection.
Boeing Capital has accused Adams and his management team of insider dealing in executing a $25 million stock buyback last summer, saying the buyback came at the expense of creditors and the company.
Boeing Capital also has questioned consultant payments that have gone to a firm in which Adams serves as president, Smith Management LLC.
Dunkerley, who was hired by Adams last year, told Advertiser editors and reporters that the airline's management is refraining from responding to accusations from Boeing dealing with the airline's governance.
"The management team recognizes that there's this sort of storm overhead between Boeing and John Adams" and Airline Investors Partnership, Dunkerley said.
"We're very deliberately not going for or against the governance accusation. ... What we're saying is we must work hard to preserve" the value of the company, he said.
Hawaiian and Boeing Capital are scheduled to appear at 9:30 a.m. today and tomorrow before Judge Robert Faris to hear Boeing Capital's motion for appointment of a trustee. The motion also has the support of Hawaiian's creditor committee, which represents companies and labor groups that are owed millions by the airline.
Although no trustee has ever successfully led a U.S. airline out of Chapter 11 bankruptcy, Boeing argues that a trustee is in the best interest of the airline, employees and creditors.
Anil Patel, a director in Boeing Capital's aircraft financial services group who is responsible for agreements with Hawaiian, said yesterday that Boeing plans to submit several names for a possible trustee to the U.S. Trustee's Office. That office would be responsible for selecting a trustee if the court approves the move.
Patel said the list includes Paul Casey, who served as Hawaiian's chief executive until he resigned last June after an attempted merger with Aloha Airlines failed, and Michael McQuay, a former Hawaiian executive vice president of operations and chief operating officer until October 1997, when he was named managing director and chief executive of Air Pacific, Fiji's international airline.
"We would support and encourage someone who has strong operational experience" in the airline industry, Patel said.
Boeing Capital argues that Hawaiian was asking aircraft lessors for $20 million in concessions at the same time that airline management and affiliates received benefits of the $25 million stock buyback announced last May. Adams, through Airline Investors Partnership, is a majority shareholder of the airline.
Hawaiian has maintained that the buyback was necessary to appease shareholders who purchased stock in anticipation of the merger with Aloha that never happened.
Boeing also has asked that Adams and Randy Smith, who finances the New York investment firm Smith Management LLC that Adams manages, put $20 million in equity back into the airline in 2003 and $10 million in 2004, but Hawaiian has refused.
Patel said he thinks "it's going to require legal action to get that money back."
Boeing Capital's trial exhibit list includes Hawaiian's financial statements going back several years, stock prices, analyst reports, charts showing Adams' affiliations, correspondence to and from Hawaiian management and its board of directors, and information about Adams' involvement in the bankruptcy of another airline, Colorado-based Western Pacific Airlines.
In other developments, Hawaiian said it reached agreement yesterday with Ansett Worldwide, one of its three aircraft lessors, to restructure financial terms for leases of seven Boeing 767 aircraft. The agreement is subject to court approval. Hawaiian also has reached agreement with International Lease Finance Corp., another major lessor.
Hawaiian also has been talking with its creditors committee in an attempt to switch its stance on the appointment of a trustee, a move the committee strongly supported in a court filing.
Dunkerley would not give details of the negotiations.
But Patel said Boeing Capital has held discussions with the creditors "to try to come up with some sort of resolution or solution (with Hawaiian), but there's nothing that has been finalized or agreed to."
"We want to have a trustee because we think it's the best solution for the airline and the employees and the creditors," Patel said, "but if we can reach a solution that gets us to the same point, I think that's what the creditors committee is trying to achieve."
Boeing's position is that a trustee and other parties should be allowed to submit a reorganization plan for Hawaiian. Hawaiian's management currently has exclusive rights to lay out how the company should be reorganized.
Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.
