At the end of two days of hearings on Boeing Capital Corp.'s motion for a trustee to replace Hawaiian Airlines' management, Judge Robert Faris said his options are to deny the request, grant it, or appoint an examiner to investigate Hawaiian's business operations under Chapter 11 of the bankruptcy code.

He said the option of denying the motion is "least likely" and that he will rule promptly. But Faris also noted that although his options are limited, "the parties have more options that they could agree on."

In comments that do not bode well for Hawaiian's management, Faris said he is concerned about a $25 million stock buyback or tender offer carried out at a premium per share by the airlines last June. He also pointed to a $500,000 payment the airline made to its parent Hawaiian Holdings within a week of the airlines' filing for Chapter 11 bankruptcy protection on March 21.

Both transactions were cited by Boeing Capital in alleging fraudulent transfers and arguing for the ouster of Hawaiian's CEO John Adams and the appointment of a trustee.

The two-day hearing cast more light on the deteriorating financial health of the state's largest airline, which filed for bankruptcy protection after losing $60 million last year.

The appointment of a trustee or examiner would wrest control of the carrier out of the hands of Adams, the airlines' majority shareholder through his company Airline Investors Partnership, and raises the possibility that the company which employs more than 3,200 workers could be liquidated.

Hawaiian spokesman Keoni Wagner said "the company certainly is taking the judge's comments to heart, and we will be considering our options."

Boeing Capital attorney Steven Hedberg said the aircraft lessor has discussed alternatives to a trustee with Hawaiian and will continue to do so.

"The difficulty is we need a remedy that will resolve the conflict problems," Hedberg said. Boeing maintains Adams has a conflict of interest through his business connections. An examiner is "certainly not as complete a remedy as appointing a Chapter 11 trustee," he said.

Brett Miller, an attorney for Hawaiian's creditors committee that has supported Boeing Capital's trustee motion, said the panel is "open to any proposals" from Hawaiian.

In closing arguments, Hawaiian attorney John Karaczynski said he doesn't believe the facts presented at the hearing indicated fraud, dishonesty, incompetence or gross mismanagement on the part of Hawaiian. Such a showing is required for management to be replaced.

Karaczynski said Hawaiian discussed the stock buyback with its board and received approval. Hawaiian has said the buyback was necessary to placate shareholders who had purchased the carrier's stock in anticipation of a merger with Aloha Airlines. That merger fell through.

"Benefitting shareholders is not an inappropriate corporate action," Karaczynski said.

Boeing Capital attorney Susan Foster accused Hawaiian of gross mismanagement. She argued the company knew about its weak finances, but did not notify board members before the stock buyback, draining the company of needed cash.

Boeing Capital also introduced an e-mail Adams sent to Hawaiian's chief financial officer Christine Deister saying the company's cash position in May 2002 was "a little unsettling." Deister had earlier testified that Hawaiian had no reason to believe the company was suffering any particular weakness.

Foster also said Hawaiian should have consulted the bankruptcy court before transferring the $500,000 to its holding company.

Karaczynski defended the $500,000 transfer, Adams' salary and consulting payments to Smith Management, which Adams manages, as legitimate corporate expenditures.

He said at the time of the stock buyback in spring and early summer, Sept. 11 was still very real, but "the country was not reeling in the same fashion." Hawaiian's business plan "was based upon reasonable projections," he said.

But Foster said the airline industry took a nose dive after Sept. 11. She used the analogy of the Titanic approaching a giant iceberg "and Mr. Adams running for the nearest lifeboat" while others denied the ship was sinking.

"Any prudent manager wouldn't be handing out that money," she said.

According to Miller, the creditors' attorney, "the committee cannot have any confidence in this (Hawaiian) board going forward."

He called leaving current management in place "a scary proposition" and said "absent a deal with (Boeing), there is a risk of liquidation."