Posted on: Thursday, May 19, 2005

Judge OKs Hawaiian reorganization plan

By Rick Daysog
Advertiser Staff Writer

Hawaiian Airlines said it will emerge from bankruptcy protection on June 1 after a federal judge approved the airline's reorganization plan yesterday.

U.S. Bankruptcy Judge Robert Faris issued a 26-page order finalizing the plan which will place Hawaiian under the control of San Diego-based Ranch Capital LLC and allow the airline to begin paying off its creditors.

"This was the last hurdle for Hawaiian to exit bankruptcy," said Joshua Gotbaum, Hawaiian's bankruptcy trustee.

"We now have the court's endorsement of our reorganization plan. Hawaiian will exit bankruptcy on June 1 a stronger, better airline."

Gotbaum said Hawaiian's president and chief operating officer, Mark Dunkerley, will become the company's new chief executive and president starting June 1.

The airline, which filed for Chapter 11 reorganization in March 2003, will begin paying its creditors once it emerges from bankruptcy. The airline said it owes about $246 million to about 1,100 creditors.

Gotbaum said that Hawaiian's reorganization is unusual because its creditors will receive the entire amounts of their claims, mostly in cash. In most bankruptcies, creditors receive pennies on the dollar.

Gotbaum said that existing shareholders will get to keep their shares, which have risen in value during the bankruptcy ordeal. He also noted that the airline's unionized employees have new contracts, in which their salaries and benefits are comparable to or better than those offered by Hawaiian's competitors.

Gotbaum added that the airline is looking to lease additional aircraft to fly new routes. Yesterday, the airline announced that it will begin daily, nonstop flights to San Jose, Calif., starting Oct. 1.

Ranch Capital will emerge as the airline's controlling shareholder. Last June, the company paid $41.4 million to acquire 10 million of the 28.4 million outstanding shares of Hawaiian Airline's parent, Hawaiian Holdings Inc.

The approval of the reorganization plan came after the airline's pilot union voted to ratify a new contract earlier this month. The pilot's union was the last of the company's six unions to approve a new agreement.

Ranch Capital required each of the airline's six unions to renegotiate their contracts as part of the reorganization. The pilot's union voted down a tentative contract in April but approved a later version after Judge Faris warned that he was prepared to impose a new contract if both sides failed to reach agreement.

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