Hawaiian Air Defaults on Leases, Loan
The parent company of Hawaiian Airlines, a troubled firm partly owned by a Newport Beach investor group headed by Peter V. Ueberroth, said Monday that it has defaulted on some aircraft leases and on a loan from Security Pacific Bank.
The defaults came amid continued losses at HAL Inc. HAL said Monday that it lost $13.3 million for the third quarter, bringing its loss to $56.3 million for the first nine months of 1990. Revenue for the third quarter was $101.5 million.
The loss wiped out the company’s net worth, which now stands at negative $50.1 million.
HAL’s default on its bank loan is surprising, since it came less than two weeks after Security agreed to give the firm an additional $20 million. The fresh financing brought HAL out of default on a $111-million loan, also from Security.
As previously reported, HAL at that time granted Security warrants that could make the bank its biggest shareholder. Federal regulations, however, prevent Security from exercising most of the warrants. Banking industry analysts have said that Security could possibly sell the warrants at a profit should the airline ever work out its problems.
HAL said that during September and October, it failed to pay $3.3 million on leases for 17 aircraft and is in default on those leases. Glen Stewart, senior vice president-finance, said the firm has negotiated new leases with five aircraft lessors and that it is attempting to negotiate new agreements with others.
Hawaiian leases all but two of the 36 aircraft in its fleet.
Stewart said the company hopes to save $2 million a year by negotiating either lower lease payments or the postponement of payments. Stewart said HAL, with $12.5 million in cash at the end of the third quarter, had funds needed to make the lease payments.
“It is not a cash question,” he said. “We thought it prudent to enter negotiations before making the payments.”
Stewart said the airline previously obtained concessions from its employees and suppliers.
HAL was in poor shape last December when it was acquired by Ueberroth and his associates, Newport Beach lawyer J. Thomas Talbot among them. The company board has attracted successful businessmen such as ex-Seattle Mariners owner George Argyros and department store magnate James F. Nordstrom.
But the company’s condition has worsened with the sharply higher interest costs related to the Ueberroth-led takeover. Third-quarter interest expense rose to $3.2 million in 1990 from $855,000 in 1989.
HAL has also been hurt by the high fuel prices and lower travel demand troubling the industry as a whole.
Hawaiian Airlines’ Performance Revenue In millions of dollars 1986: 225 ‘87: 299.1 ‘88: 354 ‘89: 348.9 Net Income In millions of dollalrs 1986: 3.4 ‘87: -8.8 ‘88: -8.8 ‘89*: -46.9 9 Month Results In millions of dollars
1989 1990 Revenue $268.3 $262.2 Net Income -12.7* -56.3
*includes gain of $8.4 million on June 14, 1989 sale and leaseback of two DC-981 aircraft, two spare engines and one quick-engine-change kit. Corporate Headquarters: Honolulu, Hawaii Employees: 2,750 Current Stock Price: $10.38 Revenue Sources Mainland flights: 35% Interisland flights: 35% Charter flights: 20% South Pacific flights: 10%
