Hershfield pitches plan for Hawaiian Airlines

By Dan Nakaso
Advertiser Staff Writer

Lawrence S. Hershfield won't ask Hawaiian Airlines' three unions for any concessions and insists he has no intention of selling off Hawaiian if his company wins control of the Islands' largest airline.

Hershfield, the new chairman and CEO of Hawaiian's parent company, Hawaiian Holdings, arrived in Honolulu yesterday to convince people that Hawaiian would be better off in the hands of Hershfield and his fellow investors.

"We're very straightforward," Hershfield said. "We tell people the truth. ... If we can succeed in reorganizing it and emerge from bankruptcy with a reasonable cost structure, the company has great opportunities."

Hershfield and his group last week took a major stake in Hawaiian Holdings, buying 10 million of the company's 28.4 million shares outstanding and replacing former Hawaiian CEO John Adams on the board of directors.

Adams lost a bitter court fight last year to retain control of the bankrupt Hawaiian Airlines and is the focus of a Securities and Exchange Commission investigation related to a decision to spend $25 million buying back the holding company's stock in 2002.

"Although we're newcomers to the situation, we certainly perceive that there were issues with the previous holding company, a lot of history there," Hershfield said. "We come with a completely clean slate."

Hershfield said he has not considered the possibility that the $41.4 million investment in Hawaiian Holdings' stock could end up worthless in a losing bid for Hawaiian Airlines. The bankruptcy court will eventually decide which group among several bidders will own the carrier when it emerges from bankruptcy later this year. At least one of the bidders plans to cancel the company's stock.

"We have a significant investment in the equity and we wouldn't have made that investment if we didn't think we're in a position where we should win," Hershfield said. "We are far and away in the best position to propose a plan and think that we will ultimately prevail."

Apparently other investors agree. Hawaiian Holdings stock has been steadily rising since San Diego, Calif.-based Ranch Capital, LLC, Hershfield's company, announced its purchase on June 14.

The share price has jumped $1.10 in a week, closing yesterday at $6.29.

Hershfield said he had no trouble attracting investors when putting together the deal to buy 10 million shares because of Hawaiian's uninterrupted string of monthly financial profits.

Hershfield, who turns 48 on Monday and goes by the name "Larry," is the CEO of Ranch Capital, which includes himself and his partner, Randy Jenson.

The Hawaiian Airlines deal is only the third for 2-year-old Ranch Capital. The other two — buying the debt of a seismic data company called Seitel; and a $215 million investment in a North Carolina manufactured home company called Oakwood Homes — each resulted in profits for their investors, Hershfield said.

Lots of details still need to be worked out before Hershfield's group presents its own reorganization plan before the bankruptcy court's July 29 deadline. But they would probably include:

• A yet-to-be-determined, but "significant" investment in Hawaiian, Hershfield said. (Other groups have pledged to invest as much as $30 million.)
• Under Adams, Hawaiian Holdings had planned to work with former American Airlines chief executive Don Carty. Hershfield met with Carty last week and wants Carty to be part of his restructuring plan, although Carty's exact role has yet to be determined.
• Hershfield has not met Hawaiian President Mark Dunkerley, following the instructions of bankruptcy trustee Josh Gotbaum. But Hershfield is impressed with Hawaiian's performance under Dunkerley and most likely would want him to stay on, Hershfield said.
• Hawaiian's labor unions will not have to make additional concessions under Hershfield's plan, but the missed payments into the pilots' pension plan that were recommended by Gotbaum will have to be worked out, Hershfield said.

Hershfield was scheduled to meet last night with Gotbaum, who will make a recommendation to U.S. bankruptcy judge Robert Faris on which group should take Hawaiian out of bankruptcy protection.

Hershfield also plans to meet with Hawaiian's labor unions and perhaps Gov. Linda Lingle.

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