One man bore brunt of tough bankruptcy
By Rick Daysog
Advertiser Staff Writer
To say that Joshua Gotbaum attracted controversy as head of Hawaiian Airlines over the past two years, might be an understatement.
Richard Ambo • The Honolulu Advertiser
Gotbaum, who steps down as the airline's court appointed bankruptcy trustee tomorrow, sparred with the airline's unions, sued the company's former owner and played hardball with creditors.
Joshua Gotbaum leaves his often controversial, tension-fraught job tomorrow as the court-appointed trustee for Hawaiian Airlines. Hawaiian, he said, is emerging from bankruptcy as "a better, stronger airline."
But Gotbaum, 53, stressed that Hawaiian is a "better, stronger airline" than in March 2003 when it filed for Chapter 11 reorganization. Creditors are being paid in full, shareholders have seen the value of their stock rise and the airline's unionized employees have seen their wages rise, not go down, Gotbaum said.
"I always knew that my job was going to create controversy and so I've never been surprised that it created controversy," Gotbaum said.
"At the end of the day, the bankruptcy has to be judged by how the airline turned out."
Starting tomorrow, Hawaiian Airlines will begin flying without the protection of the federal bankruptcy court. When that happens Gotbaum's duties will be assumed by the company's new CEO Mark Dunkerley.
Last week, Gotbaum sat down with Advertiser staff for a wide-ranging interview that touched on his role in Hawaiian's two-year reorganization, the airline's post-bankruptcy outlook, and competitor Aloha Airlines' bankruptcy.
Gotbaum said Hawaiian's reorganization was one of the most complicated he's seen.
In most bankruptcies, the people who manage the business continue to do so after the filing but in Hawaiian's case, former Chief Executive Officer John Adams was removed by the bankruptcy court in May 2003. (Gotbaum later sued Adams to recover $28 million which the trustee said was improperly diverted from the company. The suit was settled with Adams agreeing to pay $3.6 million to the company.)
Further complicating matters, the first trustee appointed by the court, former Liberty House Inc. CEO John Monahan, resigned after three weeks on the job because to unspecified personal reasons. Gotbaum was the second trustee and took over the airline in June 2003.
"There have been as many twists and turns in the Hawaiian Airlines bankruptcy as I've ever heard of," Gotbaum said. "Being in the airline business is tough enough. Being in the airline business in bankruptcy is even tougher, so you don't wish that on anybody."
Who: Joshua Gotbaum Age: 53 Title: Bankruptcy trustee, Hawaiian Airlines Compensation: $50,000 a month and up to $10,000 a month in housing, living and auto expenses Experience: Chief executive officer, September 11 Fund; controller, U.S. Office of Management and Budget; assistant secretary of treasury for economic policy. Education: 1973 graduate of Stanford University; J.D., Harvard Law School; master's in public policy from Harvard's John F. Kennedy School of Government.
Gotbaum said he expected resistance at the airline when he took over Hawaiian.
Hawaiian trustee
His relationship with the pilots union soured early in the bankruptcy when he asked a federal judge for permission to defer a $4.25 million payment to the pilot's pension fund.
A low point came last June when a Hawaiian pilot, Craig Kobayashi, asked Gotbaum to get off a plane shortly before takeoff because he was angry with the trustee for freezing pilots' pension plan.
Pilots are allowed to ask anyone to leave their plane under standard aviation protocol. Koba-
yashi exercised the right, saying he was so upset with Gotbaum that he would be distracted with him on board and unable to fly the jet safely.
Gotbaum also angered some creditors early on and his talks with Boeing Capital Corp., which owns most of Hawaiian's aircraft, became drawn out.
The inability of Hawaiian Airlines to negotiate $20 million worth of reductions in leases from Boeing Capital was a major reason the carrier filed for bankruptcy.
Despite the controversy surrounding him, Gotbaum said the company was able to improve its service, fly new routes and change its fleets while he was in charge.
The resistance to his management was in part because he was from the Mainland and had no airline experience, Gotbaum said.
"At a minimum, they (employees) are skeptical of anyone who comes in from the outside and proposes to change it in any way, especially some haole from the Mainland who is not from the airline industry," Gotbaum said.
"While I readily admit that Craig Kobayashi provided a great story for The Advertiser, the day- to-day improvement that 3,400 people made to this airline was way more important. I think it really is important to remember that 99 percent of the changes at this airline were achieved by consensus."
Gotbaum — who earned a $50,000 a month salary in addition to $10,000 a month in living, housing and auto expenses — is entitled to seek a "success fee," which will be determined by Bankruptcy Judge Robert Faris.
Gotbaum said he sympathizes with competitor Aloha Airlines, which filed for bankruptcy protection in December. But he said he's optimistic that Aloha will be able to pull out once it goes through the process Hawaiian did and figures out "what combination of routes, fleets, costs and marketing makes sense for them."
"My view is that it is possible to operate an airline where everybody in the market loses money," he said. "It is also possible to operate in a way that multiple airlines can make money."
Reach Rick Daysog at 525-8064 or at rdaysog@honoluluadvertiser.com
