Posted on: Wednesday, February 18, 2004

EDITORIAL
Airline restructure bid must work for public

The group bidding to take over Hawaiian Airlines via a $30 million bankruptcy reorganization plan is certainly working hard to fend off the competition.

As the lead bidder, Corporate Recovery Group LLC is asking the bankruptcy court to approve a $5.4 million "topping fee" that the winning bidder would have to pay CRG for the time and expenses incurred putting together the plan, should CRG's bid succumb to another party.

And we can understand CRG's desire to be paid for coming up with what, in effect, is the pioneering plan. The initial bidder typically has to expend greater resources performing due diligence and laying the groundwork for other potential bidders. That, in effect, sets the floor for the terms of the transaction.

In this case, however, we wonder whether a topping fee of more than 15 percent of the purchase price isn't on the excessive side.

For starters, is it true that CRG spent $5.4 million coming up with a plan? Those details will have to come out in a bankruptcy proceeding where the purchaser is typically forced to disclose more about themselves and the deal.

Moreover, such an excessive topping fee has what the industry calls a "chilling effect" on competing bidders who might be put off by the potential extra cost of not being first to file a plan.

The plan put forth by CRG is innovative and intriguing. But the public's interest is rather simple: Hawai'i residents have long been sold on the idea that it is crucial to keep a healthy, competitive interisland airline industry. If CRG's proposal, with its expensive topping fee, works against that goal, local residents have a right to ask if there isn't something better.