Air Hawaii Files for Protection From Creditors : Advance Customers Could Lose Millions
Air Hawaii, a 4-month-old airline that tried to lure customers with discount fares to Hawaii, has filed in Honolulu for protection from creditors while it reorganizes under U.S.bankruptcy laws.
Thousands of customers who paid in advance for discount ticket packages offered by the airline stand to lose millions of dollars, according to law enforcement officials.
Few passengers are believed to have been stranded by the action, however, since the troubled airline suspended its two daily flights between California and Hawaii a week ago.
Authorities said Monday that as many as 10,000 people own what now appear to be worthless Air Hawaii tickets. Christopher Ames, deputy California attorney general, said in a telephone interview that Air Hawaii customers stand to lose as much as $12 million.
Telephone calls Monday to Air Hawaii’s offices in Honolulu and Los Angeles were not answered. Raymond Slater, the airline’s bankruptcy lawyer in Honolulu, said an escrow account intended to cover a portion of the value of the prepaid tickets contains $1.2 million.
Sold Ticket Packages
The airline, which began operating between Los Angeles and Honolulu last Nov. 22, sold $1,200 ticket packages that were said to represent 10 round trips for the price of four. To receive the discount, customers agreed to pay in advance and to take no more than two of the additional six “free” trips a year.
Since Feb. 26, however, Air Hawaii has been an airline without airplanes. A spokesman for International Air Lease of Miami said Monday that it had repossessed the two DC-10s that it had leased to Air Hawaii because the airline fell behind on its lease payments.
On the same day, Pacific Southwest Airlines, which had handled ticketing and baggage services for the airline, canceled its month-to-month contract with Air Hawaii because, a PSA spokesman said Monday, Air Hawaii was behind on its payments.
After the repossession of its airplanes, Air Hawaii persuaded other airlines to fly its passengers and on three occasions chartered planes complete with pilot and crew.
In its Chapter 11 filing in Honolulu, Air Hawaii said it had assets worth “$2 million-plus” and liabilities totaling $1,277,053.24. Among its largest creditors are PSA and Pacific Southwest Trading, PSA’s transportation fuel unit.
Several weeks ago, Air Hawaii was sold by its owners to Raymond M. Gray, a Nevada real estate developer who also has an interest in two other failed regional air carriers, Pride Air of New Orleans and Air One of St. Louis. The sale price was not disclosed. The company has also experienced several high-level management shifts, including the appointment by Gray of Richard Larson, a former United Airlines employee, as Air Hawaii’s third chief executive.
Carol Szekley, assistant chief of the special authorities division of the Transportation Department, said Monday that her division has instructed the airline not to operate until it submits details of its change in management and ownership.
The Transportation Department reviews airline ownership and management and decides, along with the Federal Aviation Administration, whether an airline may operate. Szekley said Air Hawaii had been given until March 27 to comply.
Air Hawaii has had several run-ins with authorities in several states and has been restricted from selling tickets in Hawaii, California and Utah.
