Posted on: Thursday, June 30, 2005

Aloha Air seeks better deal for managers

By Rick Daysog
Advertiser Staff Writer

Aloha Airlines has been hit by a front-office exodus as 27 managers, including 19 key executives, have left the company since it filed for bankruptcy protection last year.

Aloha has "suffered from an unusual and extreme rate of attrition" that could hurt the airline's operations and hinder its reorganization efforts, the company said in documents filed this month in U.S. Bankruptcy Court.

The airline is asking Bankruptcy Judge Robert Faris for permission to allow Aloha to offer better severance packages to managers.

Absent the incentives, the airline "will continue to experience management personnel attrition at increasing rates, which would imperil the (airline's) operations and prospects for a successful reorganization," Paul Singerman, Aloha's bankruptcy attorney, said in a court filing.

Without a strong severance package, people are reluctant to join a company that is in bankruptcy protection. That's because they fear the company will go out of business or they fear new owners will bring in their own managers when they take over.

Aloha spokesman Stu Glauberman said yesterday he could not comment beyond what was in the court filing. A hearing has been set for tomorrow to consider Aloha's severance plan.

Aloha, which filed for Chapter 11 reorganization on Dec. 30, employs 3,680 people with an annual payroll of about $113 million. Managers account for about 330 of Aloha's workforce.

The management departures come at a crucial time for Aloha, Hawai'i's second-largest carrier.

The airline, which obtained $65 million in debtor-in-possession financing in March to cover daily operations and pay down debt, currently is seeking permanent financing or an equity investment that would allow it to emerge from bankruptcy protection.

19 'key' people leave

In its filing June 13, the airline said it lost 27 managers since December, including 19 who held "key or crucial positions" at the company.

Aloha did not identify the managers who have left. It also did not name the executives or positions for which it is seeking severance packages. But it did say that Chief Executive Officer David Banmiller, who joined the airline in November, is not among the group.

Early in the bankruptcy, Banmiller made it clear he would cut from the top ranks before asking unions for concessions. In December, the company cut 12 top management positions.

Aloha also has cut annual pay for its top managers by about 20 percent, according to a court filing yesterday. The pay for senior vice presidents and vice presidents now ranges between $123,037 and $202,500. Before the bankruptcy, it was $151,898 to $250,000, according to the filing. While those salaries cover the highest-paid executives, most managers are making below that level.

Unions criticize move

The airline's request to restore managers' severance packages drew criticism from unions. The unions representing Aloha's pilots, flight attendants and machinists said the plan enriches top executives at the expense of rank-and-file workers, who have taken pay cuts since December.

Daniel Katz, attorney for the pilots' union, said pilots have granted concessions totaling $12 million between 2003 and 2005. During the bankruptcy proceedings, the union has agreed to concessions up to $12 million a year for the next two years, Katz said in a court filing.

The severance packages are "likely to anger and shock the conscience of the Aloha pilots and other employees who have had to weather this bankruptcy," Katz said.

Dispute at hawaiian

In many ways, the flare-up between Aloha and its unions is reminiscent of a similar dispute at rival Hawaiian Airlines.

Hawaiian, which emerged from bankruptcy protection earlier this month, had offered its top managers bonuses totaling $7 million last year. The plan was opposed by the airline unions, which complained that they had given up more than $15 million in concessions at the time.

Bankruptcy Judge Faris acknowledged the union's resentment over the plan but ruled that it was fair and reasonable because Hawaiian's management as a group was underpaid.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com or at 525-8064.