HAL rescue plan criticized
By Dan Nakaso
Advertiser Staff Writer
Ranch Capital LLC's plan to take Hawaiian Airlines out of federal bankruptcy protection "is not financially viable," according to an analysis conducted for a competing group hoping to reorganize Hawai'i's largest airline.
The report by David L. Beckerman, director of consulting services for BACK Aviation Solutions, said Ranch Capital's reorganization plan is undercapitalized, in part, because Hawaiian's expenses have climbed since the plan was written. Operating expenses for September, October and November were higher than forecast, Beckerman said.
San Diego-based Ranch Capital offered in June to take over Hawaiian and pay off all the airline's debts. Hawaiian's bankruptcy trustee, Josh Gotbaum, endorsed the Ranch Capital plan in August, making it the most likely of several proposals to succeed. Robert Konop, a Hawaiian pilot who has put forward the only remaining plan to restructure Hawaiian, hired Beckerman to review the Ranch Capital proposal.
Beckerman yesterday declined to comment on his written analysis. It was filed with the Bankruptcy Court on Tuesday in anticipation of a Feb. 8 confirmation hearing on Ranch's reorganization plan.
A representative for Ranch Capital yesterday said company officials were unavailable for comment.
Gotbaum dismissed the report in a statement yesterday. "Mr. Konop has a long history of unsubstantiated and erroneous allegations," Gotbaum wrote. "In his latest filing, his self-described experts say that Hawaiian's business plan doesn't work. Compared to our competitors, everyone else at Hawaiian thinks we're doing pretty well."
Konop said yesterday that Beckerman's analysis of Ranch's plan took three weeks and cost about $50,000.
In it, Beckerman pointed out that the airline industry relies on large reserves of cash. But he estimated that Hawaiian's cash resources were likely to have fallen to $53 million as of the end of 2004 and could drop to as little as $35 million during 2005. Hawaiian has yet to report its end-of-the-year financial performance.
Beckerman also said Hawaiian had unforeseen reorganization expenses of $115 million in September, October and November. Beckerman said Hawaiian's new Sydney, Australia, route may not prove profitable: "Profitability in this market will be challenging at best going forward."
Hawaiian also seems unlikely to win its bid to fly directly from Shanghai, China, to Honolulu, Beckerman said.
No hearings are scheduled for the reorganization plan filed by the group led by Konop. But Konop said his group recently won the financial backing of $350 million from two Native American investment funds, E&M< Trust and Hachador No. 3.
"They are the only financial source," Konop said. "They wanted an exclusive deal."
His group would bring in airline consultant Ken Elsey as Hawaiian's new chief operating officer. Hawaiian's current chief operating officer and president, Mark Dunkerley, would become CEO, Konop said.
Konop, who flies Boeing 767-300ERs for Hawaiian, said, "My only role is bringing the plan and the process to this point. After that, I just go back to being me."
Reach Dan Nakaso at dnakaso@honoluluadvertiser.com or at 525-8085.
