Trustee: Clear skies ahead for Hawaiian Airlines
5/24/2004 9:27 AM Updated 5/24/2004 9:39 AM
HONOLULU(AP) — Joshua Gotbaum once headed a charitable fund that helped thousands of victims of the Sept. 11 terrorist attacks piece together their lives. Now, he's guiding the remarkable recovery of an airline that also suffered from the 2001 attacks.
As the court-appointed trustee for Hawaiian Airlines' bankruptcy reorganization, Gotbaum has overseen one of the Honolulu-based carrier's most prosperous periods.
After losing $57.4 million in 2002, Hawaiian made a major turnaround last year with operating profits of $77.5 million. The financially troubled airline that filed for Chapter 11 in March 2003 has since posted 13 consecutive months of profits while amassing more than $106 million in unrestricted cash.
"I don't think there's an airline in history that has had that experience," Gotbaum, 52, said in an interview with The Associated Press. "This is an extraordinary turnaround."
Hawaiian now leads the nation in on-time service and percentage of seats filled, and its in-flight service has been ranked among the best. It has accomplished this, all key measuring sticks in the airline industry, while trimming its payroll and phasing in a new fleet of Boeing planes.
"Hawaiian for years and years was not a successful airline. It wasn't profitable," Gotbaum said. "To its credit, Hawaiian tried a variety of changes. Finally, frankly within the past year, the changes came together."
At Hawaiian, the carrier's biggest financial burden was the 27 new Boeing 717s it began acquiring just before the terrorist attacks to replace its aging fleet of DC-9s and DC-10s. The airline has since returned two 717s and rejected the delivery of a 767. It has also restructured leases on 11 planes with two of its three aircraft lessors.
But the new fleet has become Hawaiian's primary strength, cutting fuel and maintenance costs while improving overall efficiency. Hawaiian has also beefed up its marketing efforts and expanded its online presence, cutting costs in areas such as reservations and passenger check-ins.
But some question whether Gotbaum, who took over in July, is the force behind the carrier's success.
John W. Adams, who resigned as Hawaiian's CEO last year amid accusations of insider dealings that led to the airline's financial problems, and others have said Gotbaum hasn't been the airline's sole savior. They say the previous management's vision and planning is what brought the company financial success.
"I don't think he's had a lot of influence on the model," Jim Giddings, head of the Hawaiian unit for the Air Line Pilots Association, said of Gotbaum. "I think it's been a model that has been put in place over many years. It was not overnight that we changed equipment type. A lot of time, effort and energy went into that process by everybody in the company."
But having a trustee appointed was the best way to ensure the interests of creditors and the airline, said Russ Young, spokesman for Boeing Capital, Hawaiian's primary aircraft lessor.
Boeing had asked the U.S. Bankruptcy Court to replace Adams.
"I think there's no doubt if we were faced with the same circumstances, we would do the same thing," Young said.
Hawaiian is one of the largest employers in an island state that heavily depends on air travel. Hawaiian, along with rival Aloha Airlines, connects the islands and is responsible for transporting residents, tourists and everything else from fresh seafood to car parts.
"Hawaiian and Aloha are both the aircraft-commuter system and the highways for Hawaii and I know that and take that very seriously," Gotbaum said.
The Harvard-educated, Evanston, Ill.-native is a successful moneyman who worked as a New York investment banker and controller in the Office of Management and Budget in the White House before becoming CEO of the September 11th Fund in 2001 shortly after the terrorist attacks.
Under Gotbaum, the fund provided more than $360 million in grants to more than 100,000 people affected by the terrorist attacks.
"It was one of the best things I've ever done," he said. "Maybe the best thing I will do."
Gotbaum hopes he can also help Hawaiian, which suffered from the disruption in air travel immediately after the attacks, the subsequent drop in tourism in the year following and a failed attempt to merge with Aloha in early 2002.
The nation's 12th-largest airline has endured a turbulent ride since but is now looking to expand service to farther and more profitable locales. Hawaiian began service to Sydney, Australia last week and is eyeing routes to the East Coast as well as Asia.
Gotbaum said Hawaiian's 14 Boeing 767-300 planes are each in flight about 10 hours per day on roundtrip flights to the West Coast. However, other carriers not isolated in the Pacific are getting about 14 hours a day of flying with similar planes.
"So they are getting more revenue and more flying out of the same new expensive aircraft," he said. "One of the reasons why we announced Australia and why we're considering other routes is so we can fly more."
Hawaiian is also considering service to Japan, a route that's been owned by airline giants Japan, Northwest and United airlines. About 1.32 million Japanese visited Hawaii last year.
"We could offer travelers to and from Japan better service at more competitive rates," Gotbaum said.
With the deadline approaching, four groups have already filed proposals: Corporate Recovery Group LLC and Boeing Capital; parent company Hawaiian Holdings Inc.; Hawaiian pilot Robert Konop; and a joint filing by the Hawaiian Reorganization Committee and Hawaiian Investment Partners Group. Several others have expressed interest.
Gotbaum is preparing to submit his own plan and is seeking investors to provide capital and help govern the airline.
"We're talking to a number of institutions that could do this," he said. "What we're trying to do is figure which one makes the most sense."
But Gotbaum won't stay with Hawaiian after the reorganization.
"When the company gets out of bankruptcy, I stop being chief executive and I stop being trustee," he said. "The job of trustee is to run the company and get it out of bankruptcy. That's what I came here to do and that's what I will do."
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