Hawaiian Airlines plan likely to draw scorn
By Dan Nakaso
Advertiser Staff Writer
Hawaiian Airlines' bankruptcy trustee wants to bring the state's largest airline out of bankruptcy by Labor Day, starting with a business plan set to be unveiled at the end of January that Josh Gotbaum knows will anger employees and creditors.
And people won't like it, Gotbaum said yesterday.
"Yes, people will scream," he said in an interview at Hawaiian's Koapaka Street headquarters. "... People don't like change."
Gotbaum will present his business plan to Hawaiian's creditors committee shortly after a Jan. 23 hearing in federal bankruptcy court to set his compensation package.
The Office of U.S. Trustee, which appointed Gotbaum, has been negotiating with Gotbaum's attorney over his compensation package. The trustee's office preferred that Gotbaum be paid through a smaller monthly salary and an undetermined "success fee," Gotbaum said.
Gotbaum's new compensation proposal would earn him $50,000 a month and the right to request a success fee when Hawaiian emerges from bankruptcy protection. The size of Gotbaum's success fee would depend on Hawaiian's financial situation at the end of the bankruptcy, he said.
The new salary and inclusion of a success fee follow the formula of a typical bankruptcy trustee's compensation, Gotbaum said. And it's slightly higher than the one Gotbaum said he originally proposed to Hawaiian's creditors committee in July.
He said he originally agreed to the same compensation package proposed by his predecessor, John Monahan, who resigned after three weeks.
Monahan wanted $40,000 to $45,000 per month in salary and the right to seek a success fee that would have been "in the millions of dollars," Gotbaum said.
Instead, Gotbaum later proposed a higher monthly salary to the bankruptcy court of $500 per hour, not to exceed $70,000 per month, and reimbursement of up to $10,000 per month in expenses.
That proposed salary would have equaled $840,000 per year, but would not have included a success fee.
The higher annual salary but elimination of the potentially more lucrative success fee came at the urging of the creditors committee in October, Gotbaum said. He said the amount was on the low end of compensation for top officers overseeing companies undergoing restructuring.
Although Gotbaum technically makes all of the proposals regarding Hawaiian to the bankruptcy court, he said all major issues first go before the creditors committee.
Hawaiian's pilots union, flight attendants and the airline parent company Hawaiian Holdings Inc., among others, filed objections to the size of Gotbaum's $840,000 proposed annual salary.
Gotbaum suggested that the committee was angry with him because he had just deferred a $4.25 million payment to the pilots' pension fund. The creditors committee is headed by a representative from the Air Line Pilots Association.
Late yesterday, the creditors committee filed a motion saying it did not oppose Gotbaum's new $50,000-a-month proposed salary or his proposed reimbursement of up to $10,000 per month in expenses.
Until his formal compensation package is approved, Gotbaum has been living off a $20,000-per-month salary that he requested and was granted by the court.
Gotbaum also has yet to work out the details of the business plan he wants to present to Hawaiian's creditors committee at the end of the month. It will be necessary, he said, to ensure a solid future for Hawaiian.
But Gotbaum knows that his ideas will give critics plenty of "cannon fodder" to fire at him, he said.
The business plan will be followed by months of negotiations with employee groups and others, which may require court action.
By the end of June, Gotbaum hopes to submit a restructuring plan that will outline a formula to repay creditors. The restructuring plan, Gotbaum said, also is certain to anger creditors and critics.
Then Gotbaum hopes to have Hawaiian emerge from bankruptcy by fall.
Even though Gotbaum has won court approval to become an employee and an officer of Hawaiian, he will not stay on after it reorganizes.
"I disappear," he said.
Reach Dan Nakaso at firstname.lastname@example.org or 525-8085.