Posted on: Saturday, July 17, 2004

Bonuses approved for Hawaiian Air managers

By Dan Nakaso
Advertiser Staff Writer

Nearly 80 managers at Hawaiian Airlines are now eligible for a share of up to $3 million in bonuses for their work in 2003 and up to $4 million for their 2004 performances under a plan approved yesterday in U.S. bankruptcy court.

Hawaiian's bankruptcy trustee, Josh Gotbaum, pushed for the bonuses to help put Hawaiian's managers on par with their counterparts throughout the airline industry.

Although Hawaiian managers receive similar salaries, they do not get annual performance-based incentive bonuses, stock or stock-options, profit sharing or company contributions to their 401(k) plans.

For years, Gotbaum said, Hawaiian's managers have suffered through a "history of broken promises" of management bonuses that never materialized.

Hawaiian has since gone from a 12-month, $50 million operating deficit to a $108 million operating profit.

"I proposed this plan because everyone at Hawaiian contributes to the airline's success and everyone at Hawaiian deserves fair pay," Gotbaum said.

Bonuses will be based on both Hawaiian's financial performance and the performances of individual managers.

The percentage of the bonuses will vary from 75 percent of base pay for Hawaiian's chief operating officer, Mark Dunkerley — who earns $415,000 annually — to 15 percent for station managers and directors.

The amount of bonuses would increase even more if Hawaiian exceeds its annual financial target. Managers would still be eligible for bonuses even if Hawaiian drops 15 percent below its target.

Gotbaum's plan was opposed by each of Hawaiian's three labor unions, which collectively gave up more than $15 million in concessions in an attempt to stave off bankruptcy.

Attorneys for some of the unions argued that it was unfair for union workers to make concessions that appeared to be going to management bonuses. Others questioned the need to create a new bonus structure when the deadline for potential owners to file their reorganization plans is only two weeks away.

In his ruling, Judge Robert Faris acknowledged that labor "resentment" over the bonus plan is "inevitable and not inappropriate."

Faris nevertheless approved the plan that he deemed "fair and reasonable," in part, because Hawaiian's managers as a group are undercompensated.

Gotbaum said after the ruling that he's uncertain exactly when the managers will receive their bonuses because there is no mechanism for dispersing them into tax-deferred accounts, such as the employees' 401(k)s.

Judge Faris yesterday also approved an agreement between Gotbaum and Hawaiian's pilots union to restore $7.5 million in missed pension payments and an overdue $3.5 million retention bonus.

The joint motion restores all of the missed pension payments through 2002 and part of 2003. Hawaiian is not required to make the remainder of its 2003 pension payments until September.

Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or at 525-8085.