Hawaiian Ready to Emerge From Bankruptcy
Hawaiian Airlines Inc. is ready to emerge from Bankruptcy Court protection today with a solid capital structure and a strong outlook for expansion, its chief executive said.
“The company has significantly improved over the last 18 months,” said Bruce Nobles, president and chief executive of Hawaiian. “We have the right fleet, cost structure and marketing partner to go forward and be profitable on a fairly consistent basis.”
Nobles cited two aspects of Hawaiian’s new life: its creditors’ agreement to accept stock in exchange for debt and Hawaiian’s marketing and services agreement with American Airlines and its parent, AMR Corp., that will help it strategically.
First, Hawaiian will be linked with AMR’s Sabre computerized reservations system, giving it more access to travel agencies for flight bookings. And American Airlines will pay Hawaiian Airlines to fly its passengers who want to use frequent-flyer coupons for travel to Hawaii.
“It’s cheaper for American to use Hawaiian for those passengers, and Hawaiian gets more revenue,” said Randy Havre, an analyst at J.B. Havre Inc., who has been watching Hawaiian’s reorganization.
In addition, AMR will maintain Hawaiian’s fleet of six Boeing DC-10s and 13 DC-9s for less than what it cost the company to maintain the Lockheed L1011 aircraft it previously used.
“We saved $15 million in cash in 1994 because the overhauls were not needed on the L1011s,” Nobles said.
Hawaiian’s reorganization has been relatively swift by bankruptcy standards. It sought protection from creditors under Chapter 11 of the U.S. Bankruptcy Code on Sept. 21, 1993. Many companies take years to reorganize under bankruptcy law.
Under the terms of the reorganization plan, Hawaiian Airlines Inc. is created by merging the previous holding company, HAL Inc., and its subsidiary, West Maui Airport Inc.
All HAL common stock will be canceled and the reorganized company will issue about 11 million shares of new common stock to be distributed among unsecured creditors who are owed more than $50 million. New shares also will go to the employees, management and for warrants related to financing after Bankruptcy Court conformation of the reorganization plan. Shareholders of the old HAL Inc. get nothing under the plan.
The new shares are expected to be listed on the American and Pacific stock exchanges within 90 days after Hawaiian emerges from Bankruptcy Court.
Hawaiian also is expected to complete an agreement today with the CIT Group/Credit Finance Inc. for a credit line up to $8.65 million. About $3 million will be for letters of credit, and the remainder will be used as working capital and payment of some expenses, the company said.
“Some details are still being finalized, but it’s basically done,” Nobles said.
Havre, the analyst, said there will be about 1,200 initial shareholders in the new company. “In that respect, it will create some liquidity,” Havre said. But some creditors may want to cash out and sell their stock, “and that would create a problem.”
Havre said he expects most new shareholders won’t sell immediately, but will wait and evaluate the company after six months or a year.
Havre estimates Hawaiian’s new shares will have a value of about $4. “Considering cash flow and estimated earnings, Hawaiian is undervalued at that price,” he said.
