-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KnTReRXCGdat97wxMqZPje9nzn730nsfHVUG08uJlupyFkRUNH7ILhHu5tXx/LXy PG8IUz9JdEuNdA1eT6LZew== 0000898430-96-001347.txt : 19960418 0000898430-96-001347.hdr.sgml : 19960418 ACCESSION NUMBER: 0000898430-96-001347 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960417 SROS: AMEX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN AIRLINES INC/HI CENTRAL INDEX KEY: 0000046205 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 990212598 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-08836 FILM NUMBER: 96548085 BUSINESS ADDRESS: STREET 1: 3375 KOAPAKA ST STREET 2: STE G350 CITY: HONOLULU STATE: HI ZIP: 96819 BUSINESS PHONE: 8088353700 FORMER COMPANY: FORMER CONFORMED NAME: HAL INC /HI/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HAWAIIAN AIRLINES INC DATE OF NAME CHANGE: 19850314 FORMER COMPANY: FORMER CONFORMED NAME: INTER ISLAND AIRWAYS LTD DATE OF NAME CHANGE: 19670920 10-K405/A 1 AMENDMENT NO. 1 TO 10-K405/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 AMENDMENT NO. 1 FORM 10-K/A FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8836 HAWAIIAN AIRLINES, INC. (Exact name of registrant as specified in its charter) HAWAII 99-0042880 (State or other jurisdiction of (I.R.S. employer identification no.) incorporation or organization) 3375 Koapaka Street, Suite G-350 Honolulu, Hawaii 96819 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (808) 835-3700 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Class A Common Stock ($.01 par value) American Stock Exchange Pacific Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to files such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (X) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes (X) No ( ) As of March 15, 1996, 27,067,424 shares of Class A Common Stock of the Registrant were outstanding. The aggregate market value of voting stock held by non-affiliates (8,281,624 shares of Class A Common Stock) of the Registrant is $23,809,669. Explanatory Note - ---------------- On April 1, 1996, Hawaiian Airlines, Inc. (the "Company"), filed the Company's Annual Report for the Year Ended December 31, 1995. The Company is filing this Amendment No. 1 on Form 10-K/A in order to (i) clarify the exercise price of certain existing warrants and (ii) correct certain numerical errors in the table containing Overseas Charter operating and financial passenger revenue statistics in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations-1995 Compared to 1994-Operating Revenues." Except as specifically amended by this Form 10-K/A, the Company's Form 10-K shall remain unchanged. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION ------------ The airline industry is a highly cyclical business with substantial volatility, and airlines frequently experience short-term cash requirements caused by both seasonal fluctuations in traffic that often put a drain on cash during off-peak periods and other factors that are not necessarily seasonal, including the extent and nature of price and other competition from other airlines, changing levels of operations, national and international events, fuel prices and general economic conditions, including inflation. Accordingly, airlines require substantial liquidity to sustain continued operations under most conditions. The Company has operated with limited cash and cash equivalents and a working capital deficit for a number of years. Working capital deficits are not uncommon in the airline industry since airlines typically have no product inventories and sales not yet flown are reflected as current liabilities. Since the commencement of deregulation in 1978, the U.S. airline industry has become extremely competitive and volatile. Increased competition, rising operational costs and pricing pressures have created financial difficulties for most airlines and many airlines have been acquired, forced to restructure or ceased operations. After five years of losses totaling $13.0 billion, the U.S. airline industry is expecting to make more than $2.0 billion in 1995, its first annual profit since 1989. Improvements in total passenger traffic, cargo traffic, fares and operations were experienced in 1995 compared to 1994. Further recovery will depend on the continuing strength of the overall economy, cooperation for more efficient work rules by employees and governmental decisions on taxes applicable to the airline industry. As with other airlines, Hawaiian Airlines was adversely affected by the unpredictable and often unfavorable, industry and economic conditions of the past five years. As discussed in Business contained in Part I, Item 1 of this -------- Form 10-K, the Interisland and Transpac routes served by the Company are highly competitive with such competition primarily based on fare levels, performance, aircraft equipment and service. The markets are subject to seasonal and cyclical volatility primarily due to seasonal leisure and holiday travel. The Company typically experiences strong travel periods during June, July, August and December. The Company, along with other airlines, uses discount fares and other promotions to stimulate traffic during normally slack travel periods, to generate cash flow and to sustain relative market share in its Interisland and Transpac markets. Recent announcements of capacity increases to Hawaii by both international and domestic carriers will bring pressure to bear on forecasted pricing levels. The charter carriers have increased capacity from secondary markets in the Western region and United has scheduled an additional 9,000 seats per week from Japan and the U.S. mainland, with the bulk of that capacity dedicated to San Francisco and Los Angeles routes. Subsequent announcements by United of service from Los Angeles to Kona and Maui are believed to be in addition to the 9,000 seats mentioned above. The ever increasing presence of charter carriers and United's increased frequencies are examples of the competitive pricing and capacity issues facing the Company in the future. As discussed in Business, contained in Item 1, Part I of this Form 10-K, on -------- September 21, 1993, Hawaiian Airlines voluntarily commenced a Chapter 11 reorganization process and emerged from bankruptcy less than a year later on September 12, 1994, the Effective Date of the Reorganization Plan. The Chapter 11 process resulted in the Company recognizing an extraordinary gain of $190.1 million, representing the relief of $204.7 million of liabilities net of offsets and certain liabilities that survived the reorganization. Consistent with the industry, excluding nonrecurring noncash transactions, the Company improved its operating and net performance in 1995. Nevertheless, the Company's working capital deficit during 1995 reached an extreme level, even by industry standards. To address this problem, in January 1996 the Company consummated a series of transactions, including the completion of the $20.0 million AIP Investment and certain arrangements and agreements with American and the Company's labor unions. These transactions have improved the Company's liquidity substantially and will result in reduced cash operating expenses over the next few years. -2- LIQUIDITY AND CAPITAL RESOURCES ------------------------------- OVERVIEW - -------- As of December 31, 1995, the Company had a net working capital deficit of $51.7 million, representing a $5.9 million increase from the net working capital deficit of $45.8 million at December 31, 1994. Principally, the increase in the working capital deficit resulted from the net of (1) an increase in accounts payable of $17.7 million primarily due to deferred aircraft lease rents and maintenance payments due American as further described below; (2) a decrease in air traffic liability of $9.9 million due to the burnoff throughout 1995 of promotional fare ticket sales held in the second and last quarters of 1994; and (3) miscellaneous changes in other working capital accounts resulting in a $1.9 million decrease in the working capital deficit from that of 1994. For several years, the Company has been operating with a cash balance equivalent to less than one week's worth of operating expenses. Continuing to operate at that level of liquidity would place the Company's existence at risk; there would be no cushion to respond to unexpected operational upheavals that have periodically affected the airline industry or to cover the seasonal downturn typically experienced by the Company in the first quarter of the year. Due to its working capital shortage, the Company has deferred certain discretionary capital expenditures that management believes may improve profitability. One example is a series of investments in improved software that are expected to increase operating efficiency. Another is the outlay needed to consolidate operations into one terminal at Honolulu International Airport. The working capital shortage also has had an unfavorable effect on yield, which, although difficult to quantify, is believed to be significant. Prior to the AIP Investment, the Company found it necessary to offer its products to wholesalers and to the public at reduced rates in order to enhance cash flow. The uncertain financial situation has also limited the availability of trade credit and at times has necessitated the use of cash or equivalent security to obtain services. Finally, potential partners in the airline industry have been reluctant to enter into business arrangements with the Company until its financial difficulties have been overcome. Since the Effective Date, the Company has financed its operations from: . Operating cash flow; . Borrowings under an $8.15 million credit facility provided by CIT Group/Credit Finance, Inc. (the "Credit Facility"). The Credit Facility consists of an $8.15 million secured revolving line of credit including up to $3.0 million of letters of credit. Available credit is subject to reduction determined by recalculation of the borrowing base and repayments arising from disposition of collateral. As of December 31, 1995, the total availability under the Credit Facility had been effectively reduced due to recalculation of the borrowing base to approximately $3.4 million, which amount was fully drawn in the form of $1.3 million in borrowings and $2.1 million in letters of credit. As of March 15, 1996, $2.0 million of additional borrowing capacity was available due to American's release of $2.0 million in letters of credit as described under Arrangements with American below; . A series of promotional fare ticket sale activities. Such promotional sales increase liquidity, but also increase air traffic liability, which could adversely affect yields and revenues, as well as liquidity, in future periods; and . Payment deferrals from existing creditors, including American. AMERICAN DEFERRAL - ----------------- On October 31, 1994, the Company failed to make certain payments due to American pursuant to the Aircraft Lease Agreement pursuant to which American leases six DC-10s to the Company. American sent the Company notice of the failure to make rent and prepaid maintenance payments and noted that such failure constituted an event of default under the Aircraft Lease Agreement, but did not declare the Aircraft Lease Agreement in default or exercise any of the remedies available to it, which include, but are not limited to, termination of the Aircraft Lease Agreement, repossession of certain aircraft and engines, recovery of damages and drawings under letters of -3- credit then in place in the amount of $2.0 million posted by the Company as required by the Aircraft Lease Agreement. The Company subsequently made the rent and prepaid maintenance payments due American in November 1994. On several occasions during 1995, the Company again failed to timely make certain rent and prepaid maintenance payments in full due pursuant to the Aircraft Lease Agreement. Again, while American sent the Company notice of the failure to make such payments in full, American did not declare the Aircraft Lease Agreement in default or exercise any of the remedies available to it. On several occasions during the year, American deferred the payment of the delinquent amounts. As of December 9, 1995, the Company owed American $7.1 million in deferred payments and accrued interest. American agreed to permit the deferral of the payment of this $7.1 million (plus interest thereon) and the periodic payments of lease rents and maintenance payments that would become due on or after December 8, 1995, up to a maximum of an additional $2.9 million (including interest), until the earlier of the consummation of the AIP Investment or February 7, 1996. As of January 4, 1996, the Company had deferred the maximum deferrable amount of lease rents and maintenance payments under the Aircraft Lease Agreement. These deferred amounts were paid by the Company on January 31, 1996 through the delivery by the Company of a secured promissory note in connection with the AIP Investment as described below under Arrangements with American. AIP INVESTMENT - -------------- For a variety of reasons, including the Company's financial results, its inability to meet its current financial responsibilities, including its obligations to American under the Aircraft Lease Agreement, thereby creating an urgent need to obtain an infusion of capital, and the uncertain economic outlook, the Board of Directors determined in 1995 to explore options to supplement the Company's capital base, reduce its reliance on short-term bank debt and promotional coupon sales and increase the Company's financial flexibility. The Company, with the assistance of its financial advisor, identified and met with potential investors, including AIP, regarding a possible equity investment in the Company. As a result of such efforts, AIP agreed to make the AIP Investment, in which AIP purchased 18,818,181 shares of the Class A Common Stock and four shares of the Series B Special Preferred Stock for $20.0 million in cash. The AIP Investment was unanimously approved by the Company's Board of Directors in December 1995, approved by the Company's shareholders on January 30, 1996 and consummated on January 31, 1996. Of the $20.0 million gross proceeds from the AIP Investment, a portion has been used to pay (1) approximately $2.8 million of fees and expenses associated with the AIP Investment and its related transactions; (2) approximately $3.2 million of accrued landing fees for the Company's Hawaii operations and accrued rent on the Company's facilities in Hawaii; and (3) approximately $310,000 of deferred Board of Director compensation. Although the Company has not designated specific uses for the $13.7 million balance of the proceeds from the AIP Investment, it is anticipated that such proceeds will be used to meet working capital needs. ARRANGEMENTS WITH AMERICAN - -------------------------- Upon consummation of the AIP Investment and satisfaction of certain other conditions, the Company entered into certain arrangements with American pursuant to which American and the Company agreed to, among other things, the following: . The payment of $10.0 million of deferred lease rents and maintenance payments under the Aircraft Lease Agreement (and accrued interest thereon) and the reimbursement of American's fees and expenses in connection with the transaction through the issuance by the Company to American of a $10.25 million promissory note secured by certain assets of the Company (the "American Note"). The American Note bears interest at 10.0% per annum, payable quarterly in arrears, and has a final maturity date of September 11, 2001. The American Note requires repayment of principal equal to one-sixth of the original principal amount on each anniversary of its date of issuance (January 31). The Company has the option to prepay the American Note for $9.15 million at any time before January 31, 1997, or at any time thereafter, in whole or in part, at its remaining principal balance, without premium. The American Note is prepayable in full, at the option of the holder, in the event and at the time that any person or group (other than AIP) acquires more than 30.0% of the voting interest in the Company; -4- The American Note is secured by a lien on substantially all of the personal property of the Company through December 31, 1997. This lien is a first priority lien except that it is junior to (1) liens of security deposits held by credit card processors and (2) liens securing up to $15.0 million in obligations of the Company consisting of (x) secured obligations of the Company (other than credit card processor security deposit liens) existing on the date of issuance of the American Note, and (y) additional secured obligations of the Company incurred after such issuance. As of January 31, 1996, in addition to its credit card deposits, the Company had $7.6 million in secured obligations (including all amounts under the Credit Facility), the liens of which are prior to the lien of the American Note. On and after January 1, 1998, the Company is obligated to secure the American Note and the other obligations of the Company to American with a first priority lien on identified assets with a fair market value (supported by an appraisal) of at least 125.0% of the remaining outstanding principal balance of the American Note from time to time; . Basic rents under the Aircraft Lease Agreement have been reduced by approximately 28.0% for a period of three years, at which time basic rents would revert back to 1995 levels. The Company has agreed to pay a minimum monthly charge for maintenance services and basic rents and maintenance charges are payable monthly in arrears rather than weekly in advance. American has the right to terminate its obligation to provide aircraft maintenance services on and after January 1, 1999 upon 180 days prior notice; and . American's relinquishment of $2.0 million of letters of credit which secured the Company's obligations to American under the Aircraft Lease Agreement. The termination of these letters of credit increased the Company's borrowing capacity under the Credit Facility. The arrangements with American have provided the Company with substantial benefits. The payment through the American Note of $10.0 million of deferred rents and maintenance payments otherwise due on February 7, 1996 will effectively permit the Company to make such payments in installments over the period from January 1997 to September 2001, thereby freeing up working capital for other purposes. In addition, basic rents under the Aircraft Lease Agreement have been reduced by approximately 28.0% for three years, resulting in lower operating costs. Furthermore, the release by American of the security deposit letters of credit resulted in $2.0 million of borrowing capacity becoming available to the Company under the Credit Facility. In total, these arrangements with American have further improved the Company's liquidity by approximately $15.0 million and will result in the reduction of cash operating expenses by approximately $3.0 million per year for three years. UNIONS AND LABOR AGREEMENTS - --------------------------- Upon consummation of the AIP Investment and satisfaction of certain other conditions, amendments to the labor agreements for each of the Company's labor unions became effective. The modifications to the labor agreements extend the amendable date of all five contracts from February 28, 1997 to February 28, 2000. Each of the five unions agreed to certain economic concessions, which include cancellation of certain scheduled pay increases, with new pay increases to be effective December 1, 1998 and January 1, 2000. Management expects that these concessions will reduce cash operating expenses which would have been incurred by an aggregate amount of approximately $10.0 million during the two- year period ending December 1997. In exchange for the wage concessions, the Company has agreed to negotiate gain-sharing programs to provide employees the opportunity to receive wage rate increases resulting from work rule and productivity modifications, which produce cost savings to the Company. In addition, the Company has agreed to establish a profit bonus plan, which would provide all employees (other than senior management) with cash bonuses if the Company achieves certain pre-tax profit targets. The contracts as modified provide additional furlough protection to employees under certain specified circumstances. The Company and unions also have agreed to include certain additional low-cost or no-cost provisions that are specific to each of the respective union contracts. The estimated cash operating expense savings noted above do not include estimated costs associated with these gain sharing and profit bonus plan initiatives because management cannot presently determine the amount of such costs. RIGHTS OFFERING - --------------- The AIP Investment agreement requires AIP to use its best efforts to cause the Company, as soon as practicable after the consummation of the AIP Investment, to make a rights offering (the "Rights Offering") pursuant to which the Company would offer to such persons as the Board of Directors shall determine at the time of the Rights Offering (which would not initially include AIP (except possibly with respect to Rights not exercised -5- during the allotted time) but would include, among others, shareholders who hold shares at the record date for the Rights Offering and holders of options granted under the 1994 Stock Option Plan) rights to purchase shares of Class A Common Stock (the "Rights"), during a 20-day period after the issuance of the Rights, at a discount equal to at least 30.0% of the trading price of the Class A Common Stock measured over a period of time to be designated by the Board of Directors after the consummation of the AIP Investment and prior to the Rights Offering, subject to a minimum exercise price of $1.10 per Right. Unexercised Rights would be offered to certain employees, as provided in the modifications to the collective bargaining agreements described below, and possibly to AIP. The other terms and conditions of the Rights Offering, including the number of Rights to be offered, the record date for the Rights Offering and whether the Rights would be transferable, would be established by the Board of Directors at the time of the Rights Offering. It is currently expected that Rights with respect to approximately 10,000,000 shares of Class A Common Stock would be distributed, subject to the Board's determination at the time. If Rights with respect to 10,000,000 shares were distributed and exercised in full, the Rights Offering would produce gross proceeds to the Company of at least $11.0 million. The timing of the Rights Offering cannot be estimated at this time. The Rights Offering would be made only by means of a separate prospectus constituting a part of a registration statement to be filed by the Company with the Securities and Exchange Commission. The Company has agreed with GPA Group plc and its affiliate AEROUSA, Inc. (the "GPA Companies") that, if the closing of the Rights Offering shall have occurred by September 30, 1996, the Company shall repurchase all of the shares of Class A Common Stock owned by the GPA Companies and repay certain secured and unsecured promissory notes held by the GPA Companies. The stock repurchase price would be $1.10 per share and the promissory notes would be repaid at approximately 85.0% of the then carrying value of the notes, including any deferred costs and other expenses owed. Based on the number of shares owned by the GPA Companies as of January 31, 1996 and the carrying value of the notes as of such date, the Company would pay approximately $4.91 million to the GPA Companies. The Company has the option at any time prior to the Rights Offering to repurchase the GPA Companies' shares and repay their notes on the above terms. AUTHORIZED CAPITAL STOCK; WARRANTS AND OPTIONS - ---------------------------------------------- In connection with the AIP Investment, the Amended Articles of Incorporation of the Company, as amended, were further amended to increase the authorized number of shares of Class A Common Stock from 40,000,000 shares to 60,000,000 shares. The increase in the number of authorized shares allows the Company to have a sufficient number of authorized and unissued shares of Class A Common Stock to permit the exercise of Rights under the Rights Offering and ensures that the Company will have, from time to time, an adequate number of authorized and unissued shares available for corporate purposes, such as future public and private equity offerings, to raise working capital. Pursuant to the anti-dilution provisions of the Existing Warrants, upon the consummation of the AIP Investment, the exercise price of the Existing Warrants was adjusted to $1.71 per share and the holders of the Existing Warrants received warrants to purchase an additional 587,356 shares of Class A Common Stock exercisable at $1.71 per share as well. The holders of the Existing Warrants have agreed that the anti-dilution provisions will not apply in connection with the AMR Warrants and the Rights. Options to acquire 592,500 shares of Class A Common Stock were granted in 1995 pursuant to the terms of the 1994 Stock Option Plan. As a result of an amendment to the 1994 Stock Option Plan in connection with the AIP Investment, the option exercise period was extended to February 2, 2005. The option exercise price is $1.62 per share. The aforementioned amendment to the 1994 Stock Option Plan resulted in a new measurement date for the awarded options and approximately $782,000 of noncash compensation expense was recorded in January 1996. To date, no options have been exercised. In connection with the arrangements with American described above, the Company issued to AMR the AMR Warrants, which entitle AMR to acquire up to 1,897,946 shares of the Class A Common Stock at $1.10 per share. One-half of the AMR Warrants are immediately exercisable but the balance will only be exercisable if American and the Company enter into a code sharing agreement by January 1, 1997 regarding the placement of the two letter flight designator code for American's flights on the Company's Interisland flights. The AMR Warrants expire on September 11, 2001. -6- Except for shares of Class A Common Stock that have been reserved in connection with the Existing Warrants, the 1994 Stock Option Plan, the Reorganization Plan, the AMR Warrants and the Rights Offering, the Company has no present agreements or commitments to issue any additional shares of Class A Common Stock. TAX AND NET OPERATING LOSS ("NOL") CONSIDERATIONS - ------------------------------------------------- The Company believes that the transactions with respect to its equity following its bankruptcy reorganization, including those pertaining to the AIP Investment, issuance of the AMR Warrants, consummation of the Rights Offering, and possible purchases or sales of its stock by significant shareholders or exercises of options to acquire equity in the Company, has resulted in or has significantly increased the likelihood of an "ownership change" of the Company for purposes of Section 382 of the Internal Revenue Code. An ownership change under Section 382 results in an annual limitation (the "Section 382 Limitation") on the amount of pre-ownership change NOLs of the Company that can be used to offset the Company's taxable income for periods following the ownership change. Based on values used by the Company in preparing its 1994 federal income tax return, the Company's Section 382 Limitation that generally applied to all NOLs attributable to the period prior to the ownership change that resulted from the Company's bankruptcy reorganization was approximately $2.4 million, plus certain "built-in" income items that increase the Section 382 Limitation. While the Company anticipates that any ownership change resulting from the AIP Investment and its related transactions would result in a new Section 382 Limitation which is lower than the Section 382 Limitation in effect previously, the amount of such reduction and its effect on the Company (as well as the effect on the Company of subjecting NOLs incurred following the Company's bankruptcy reorganization to the Section 382 Limitation) depend on numerous issues, including but not limited to the value of the Company's equity at certain dates, the amount and timing of future taxable income and loss, and the amount of "built-in" income items of the Company. Therefore, while the effect of an ownership change resulting from the AIP Investment and its related transactions could be to increase the future tax liabilities of the Company, the precise effect of such an ownership change of the Company resulting from the AIP Investment and its related transactions is unclear. CURRENT STATUS - -------------- The Company's capital resources have been increased substantially due to the AIP Investment and the arrangements with American. It is anticipated that the combination of the Company's improved liquidity and reduced operating costs will enable the Company to make necessary capital expenditures, take advantage of prompt payment discounts, avoid the need to provide early payment incentives to wholesalers and become less dependent on promotional fare ticket sales to the traveling public, thereby further improving liquidity. In addition, the Company is anticipating the consummation of the Rights Offering and is currently negotiating to increase the capacity of the Credit Facility to $15.0 million. No assurance can be given that the Company will be successful in either of these efforts. If the Company is unsuccessful, it will seek other sources of financing. However, because the Company has no remaining unencumbered assets, its access to additional sources of liquidity remains limited. If the Company is unsuccessful in obtaining additional sources of liquidity, an adverse change in events and circumstances could result in the Company being unable to meet its financial obligations after it exhausts its current and foreseeable capital resources. The financial statements at December 31, 1995, have been prepared on a going concern basis which assumes continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or the amounts and classification of liabilities that might be necessary as a result of the outcome of future uncertainties. Management recognizes that the continuation of the Company as a going concern is dependent upon a return to profitable, positive cash flow operations and the generation of adequate funds to meet its ongoing obligations. -7- RESULTS OF OPERATIONS --------------------- 1995 COMPARED TO 1994 --------------------- INTRODUCTION ------------ The Company understands that financial results of the Reorganized Company have been affected due to the recapitalization and adoption of fresh start reporting as of September 12, 1994 and such results are not comparable to the Predecessor. Nevertheless, the operating revenues and expenses of the Reorganized Company in 1995 have been compared to the combined operating revenues and expenses of the Reorganized Company and Predecessor in 1994. Significant differences between 1995 and 1994 as a result of the recapitalization and fresh start adjustments have been disclosed. For the year ended December 31, 1995, the Company incurred operating and net losses of $1.9 million and $5.5 million, respectively. The 1995 operating loss represents a decrease of $10.8 million or 85.0% from the operating loss of $12.7 million in 1994. OPERATING REVENUES ------------------ The following table compares 1995 operating revenues to those in 1994, in thousands, by service type:
INCREASE 1995 1994 (DECREASE) ------------------------------------------- Interisland: Passenger............. $122,079 $119,750 $ 2,329 Charter............... 33 25 8 Cargo................. 6,702 6,513 189 Other................. 5,665 5,645 20 -------- -------- ------- 134,479 131,933 2,546 -------- -------- ------- Transpac: Passenger............. 156,155 142,116 14,039 Cargo................. 9,555 7,688 1,867 Other................. 3,114 2,896 218 -------- -------- ------- 168,824 152,700 16,124 -------- -------- ------- Southpac: Passenger............. 19,293 18,311 982 Cargo................. 1,912 2,138 (226) Other................. 229 252 (23) -------- -------- ------- 21,434 20,701 733 -------- -------- ------- Overseas Charter: Passenger............. 22,167 646 21,521 -------- -------- ------- Total............... $346,904 $305,980 $40,924 ======== ======== =======
-8- The following table compares applicable 1995 operating and financial passenger revenue statistics to those in 1994:
INCREASE 1995 1994 (DECREASE) % --------------------------------------------- Interisland: Revenue passengers*....... 3,721 3,639 82 2.3 Revenue passenger miles*.. 490,044 476,051 13,993 2.9 Available seat miles*..... 937,736 854,073 83,663 9.8 Passenger load factor..... 52.3% 55.7% (3.4) (6.1) Yield..................... 24.9 cents 25.2 cents (0.3) cents (1.2) Transpac: Revenue passengers*....... 994 880 114 13.0 Revenue passenger miles*.. 2,506,774 2,231,106 275,668 12.4 Available seat miles*..... 3,034,177 2,857,081 177,096 6.2 Passenger load factor..... 82.6% 78.1% 4.5 5.8 Yield..................... 6.2 cents 6.4 cents (0.2) cents (3.1) Southpac: Revenue passengers*....... 66 65 1 1.5 Revenue passenger miles*.. 174,548 173,182 1,366 0.8 Available seat miles*..... 266,406 284,495 (18,089) (6.4) Passenger load factor..... 65.5% 60.9% 4.6 7.6 Yield..................... 11.1 cents 10.6 cents 0.5 cents 4.7 Overseas Charter: Revenue passengers*....... 155 1 154 N/M** Revenue passenger miles*.. 425,797 2,202 423,595 N/M** Available seat miles*..... 439,142 4,141 435,001 N/M**
* In thousands ** Not Meaningful Operating revenues totaled $346.9 million in 1995 compared to $306.0 million in 1994, an increase of $40.9 million or 13.4%. Revenues from Interisland passenger service totaled $122.1 million during 1995, an increase of $2.3 million or 1.9% from 1994 Interisland passenger revenues of $119.8 million. Increases of 2.3% and 2.9% in Interisland passengers carried and revenue passenger miles, respectively, were offset by a decrease in Interisland yield of 0.3 cents or 1.2%. Increases in Interisland revenue passengers carried, revenue passenger miles and available seat miles were a direct result of increased schedule frequencies due to operational concepts such as the Island Shuttle operating for a full year in 1995 versus a partial year in 1994 and the use of promotional fare ticket programs to stimulate traffic and increase liquidity. The promotional fare ticket programs, however, were also the primary cause of dilution in the 1995 Interisland yield. Revenues from Transpac passenger operations amounted to $156.2 million during 1995 compared to $142.1 million in 1994, an increase of $14.0 million or 9.9%. The increase in Transpac passenger revenues resulted primarily from an increase in Transpac load factor of 5.8%. The increase in load factor was offset by a 0.2 cents or 3.1% decrease in Transpac yield year over year. Transpac yields were affected by heavy pricing competition in the Transpac market and similar to above, the effects of promotional fare ticket programs. -9- Southpac passenger revenues in 1995 totaled $19.3 million, representing an increase of $982,000 or 5.4% from 1994. Both Southpac load factor and yield increased year over year by 7.6% and 4.7%, respectively. The increase in yield is primarily attributable to increases to all Southpac fares in late 1994. Transpac cargo revenues increased by $1.9 million or 24.3% from 1994. Increased frequency in its Transpac routes allowed the Company to transport 5.1 or 48.4% more tons of freight in 1995. The increase in tonnage was offset by a decrease in yield year over year of 5.9 cents or 16.3%. The decrease in Transpac cargo yield was primarily caused by a change in mix as the Company carried more agricultural and bulk freight in 1995 versus 1994. Overseas charter revenues of $22.2 million were earned in 1995 due to the commencement of charter operations between Honolulu, Hawaii and Las Vegas, Nevada in 1995. OPERATING EXPENSES ------------------ The following table compares operating expenses for 1995 with 1994 by major category, in thousands:
INCREASE 1995 1994 (DECREASE) ------------------------------------- Wages and benefits.......... $108,274 $102,670 $ 5,604 Aircraft fuel, including taxes and oil.............. 56,724 47,682 9,042 Maintenance materials and repairs.................... 60,581 46,541 14,040 Aircraft rentals............ 16,477 23,966 (7,489) Purchased services.......... 20,192 19,866 326 Sales commissions........... 13,875 12,841 1,034 Rentals other than aircraft and engines................ 9,021 9,633 (612) Passenger food.............. 8,185 8,972 (787) Depreciation and amortization............... 7,859 6,797 1,062 Landing fees................ 8,202 6,793 1,409 Reservation fees and services................... 6,808 6,635 173 Advertising and promotion... 8,301 4,909 3,392 Personnel expenses.......... 3,868 4,056 (188) Insurance-hull and liability 3,920 3,388 532 Interrupted trips........... 1,823 2,038 (215) Early retirement provision.. 2,000 -- 2,000 Nonreorganization professional and legal fees....................... 2,032 1,656 376 Other....................... 10,663 10,226 437 -------- -------- ------- Total.................... $348,805 $318,669 $30,136 ======== ======== =======
Operating expenses totaled $348.8 million in 1995, an increase of $30.1 million or 9.4% from total operating expenses of $318.7 million in 1994. Wages and benefits increased $5.6 million or 5.5% in 1995. The increase is primarily attributed to (1) $3.6 million of additional wages and benefits due to 5.0% to 6.7% wage increases effective September 1, 1994 and (2) $2.0 million of noncash compensation expense recognized under the provisions of a 1994 Stock Option Plan for officers and key employees of the Company. Aircraft fuel, including taxes and oil, increased by $9.0 million or 19.0% from $47.7 in 1994 to $56.7 million in 1995. While average cost per gallon remained relatively stable year over year at $0.61, the Company consumed -10- 14.0 million or 17.9% more gallons in 1995 than 1994, primarily due to increased frequencies on the Company's Interisland and Transpac routes. Maintenance materials and repairs totaled $60.5 million in 1995 an increase of $14.0 million or 30.1% over 1994. The Company incurred approximately $9.8 million less in L-1011 and DHC-7 maintenance costs in 1995 as these aircraft were phased out during 1994. However, $23.8 million of additional maintenance was incurred in 1995 for the Company's DC-10-10 and DC-9-50 fleets. Aircraft rentals decreased by $7.5 million or 31.2% year over year. The decrease was a net result of (1) $7.7 million less in DHC-7 and L-1011 aircraft rents, again as these aircraft were phased out during 1994; (2) $4.2 million less in DC-9-50 aircraft and engine rents due to such rents being restructured on the Effective Date; and (3) $4.4 million more in rents for DC-10-10 aircraft. Sales commissions totaled $13.9 million in 1995, an increase of $1.1 million or 8.6% over total sales commissions of $12.8 million in 1994. The increase is primarily attributable to $1.0 million in additional commissions related to incentive programs offered to wholesalers designed to stimulate traffic. Depreciation and amortization increased by $1.1 million or 15.6%. An additional $2.5 million of amortization of reorganization value in excess of identifiable assets in 1995 was offset by $1.7 million less in depreciation from the reclassification of approximately $13.5 million of Property and equipment to Assets held for sale on the Effective Date. Landing fees increased by $1.4 million or 20.7% to $8.2 million in 1995. The increase was principally caused by increased frequencies in the Interisland and Transpac markets, specifically Los Angeles, Las Vegas and Portland. Advertising and promotion totaled $8.3 million in 1995, an increase of $3.4 million or 69.1% over 1994, a direct result of efforts to increase the Company's exposure in the Interisland and West Coast markets through advertising and telecommunications media. Other operating expenses in 1995 were reduced by the reversal of $1.8 million in preconfirmation contingency accruals initially provided for on the Effective Date. Early retirement provision of $2.0 million represents the estimated effects on the Company's pension and postretirement benefit obligations from the early retirement program offered in the first quarter of 1995. NONOPERATING INCOME (EXPENSE) ----------------------------- Reorganization expenses in 1994 totaled $14.0 million and principally represents $5.7 million and $7.6 million in legal and professional fees and employee concession claims, respectively, associated with the Predecessor's Chapter 11 process and $638,000 in fresh start adjustments recorded on the Effective Date in accordance with the provisions of the American Institute of Certified Public Accountants Statement of Position (the "SOP") 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code." EXTRAORDINARY ITEMS ------------------- An extraordinary gain of approximately $190.1 million was recorded in the third quarter of 1994 primarily due to the extinguishment of prepetition obligations. NEW ACCOUNTING PRONOUNCEMENTS ----------------------------- In March 1995, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards (the "SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." This Statement is effective for years beginning after December 15, 1995 and applies to long-lived assets and certain identifiable intangible assets whether held and used or to be disposed of, and goodwill. -11- SFAS No. 121 requires that a review be made of long-lived assets and certain identifiable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the future cash flows expected to result from use of the asset (undiscounted and without interest charges) are less than the carrying amount of the asset, an impairment loss is recognized. Such impairment loss is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. In instances where goodwill is identified with assets that are subject to an impairment loss, such goodwill should be allocated to the assets tested for recoverability on a pro rata basis using the relative fair values of the assets acquired in the transaction generating the goodwill. SFAS No. 121 also requires that long-lived assets and certain identifiable intangible assets to be disposed of be reported at the lower of the asset carrying amount or fair value, less cost to sell. The Company plans to adopt SFAS No. 121 in 1996. Restatement of previously issued financial statements is not permitted. The Company does not believe that adoption of SFAS No. 121 will have a material impact on its financial condition or results of operations. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes a new, fair value based method of accounting for stock-based compensation, but does not require an entity to adopt the new method for purposes of preparing its basic financial statements. For entities not adopting the new method, SFAS No. 123 requires footnote disclosure of pro forma net income and earnings per share information as if the fair value based method had been adopted. The disclosure requirements of SFAS No. 123 are effective for financial statements for fiscal years beginning after December 15, 1995. The Company will comply with the disclosure requirements of SFAS No. 123 in its 1996 financial statements. 1994 COMPARED TO 1993 --------------------- INTRODUCTION ------------ The Company believes that its operating revenues and expenses after the Effective Date have been presented on a basis which is in all material respects consistent with the presentation of operating revenues and expenses before the Effective Date. Therefore, operating revenues and expenses of the Reorganized Company and the Predecessor in 1994 have been combined for purposes of comparison to 1993. Excluding nonrecurring items, the Company's operating and net losses for 1994 decreased over 1993 by $12.1 million and $16.0 million, respectively, to $12.7 million and $12.9 million, respectively. -12- OPERATING REVENUES ------------------ The following table compares 1994 operating revenues to those in 1993, in thousands, by service type:
INCREASE 1994 1993 (DECREASE) ------------------------------------------- Interisland: Passenger............. $119,750 $118,530 $ 1,220 Charter............... 25 1,016 (991) Cargo................. 6,513 6,954 (441) Other................. 5,645 5,569 76 -------- -------- ------- 131,933 132,069 (136) -------- -------- ------- Transpac: Passenger............. 142,116 136,543 5,573 Cargo................. 7,688 6,121 1,567 Other................. 2,896 2,669 227 -------- -------- ------- 152,700 145,333 7,367 -------- -------- ------- Southpac: Passenger............. 18,311 18,313 (2) Cargo................. 2,138 1,925 213 Other................. 252 178 74 -------- -------- ------- 20,701 20,416 285 -------- -------- ------- Overseas Charter: Passenger............. 646 6,153 (5,507) Other................. -- 138 (138) -------- -------- ------- 646 6,291 (5,645) -------- -------- ------- Total............... $305,980 $304,109 $ 1,871 ======== ======== =======
-13- The following table compares applicable 1994 operating and financial passenger revenue statistics to those in 1993:
INCREASE 1994 1993 (DECREASE) % ---------------------------------------------- Interisland: Revenue passengers*....... 3,639 3,386 253 7.5 Revenue passenger miles*.. 476,051 438,979 37,072 8.4 Available seat miles*..... 854,073 770,171 83,902 10.9 Passenger load factor..... 55.7% 57.0% (1.3) (2.3) Yield..................... 25.2 cents 27.0 cents (1.8) cents (6.7) Transpac: Revenue passengers*....... 880 885 (5) (0.6) Revenue passenger miles*.. 2,231,106 2,257,472 (26,366) (1.2) Available seat miles*..... 2,857,081 2,784,980 72,101 2.6 Passenger load factor..... 78.1% 81.1% (3.0) (3.7) Yield..................... 6.4 cents 6.0 cents 0.4 cents 6.7 Southpac: Revenue passengers*....... 65 66 (1) (1.5) Revenue passenger miles*.. 173,182 174,262 (1,080) (0.6) Available seat miles*..... 284,495 294,983 (10,488) (3.6) Passenger load factor..... 60.9% 59.1% 1.8 3.0 Yield..................... 10.6 cents 10.5 cents 0.1 cents 1.0
* In thousands Operating revenues totaled $306.0 million in 1994 compared to $304.1 million in 1993, an increase of $1.9 million or 0.6%. Revenues from Interisland passenger service totaled $119.8 million during 1994, an increase of $1.2 million or 1.0% from 1993 Interisland passenger revenues of $118.5 million. Increases of 7.5% and 8.4% in Interisland passengers carried and revenue passenger miles, respectively, were offset by a decrease in Interisland yield of 1.8 cents or 6.7%. Increases in revenue passengers carried, revenue passenger miles and available seat miles were a direct result of (1) the utilization of 13 DC-9-50 aircraft during a majority of 1994 versus four DHC-7 and, on average nine DC-9-50 aircraft in 1993; and (2) increased passenger counts due to the overall increase in Hawaii tourism year over year and, newly implemented operational concepts such as the Island Shuttle to Maui and Kauai and promotional fare ticket programs. However, the promotional fare ticket programs, such as those held in the second and fourth quarters of 1994, were also the primary cause of dilution in the 1994 Interisland yield. Revenues from Transpac passenger operations amounted to $142.1 million during 1994 compared to $136.5 million in 1993, an increase of $5.6 million or 4.1%. The increase in Transpac passenger revenues resulted primarily from a 0.4 cents or 6.7% increase in Transpac yield year over year. The increase in yield was offset by decreases in revenue passengers carried and revenue passenger miles of 0.6% and 1.2%, respectively. As noted above, promotional fare ticket programs were held in 1994, with a portion of such promotional fare ticket programs associated with Transpac routes. Such allocations assisted in increasing Transpac yields in 1994 as no such allocations were made in 1993. Decreases in Transpac revenue passengers carried, revenue passenger miles flown and available seat miles were a direct result of the Company completing in 1994 its transition to an all DC-10-10 aircraft fleet from an all L-1011 fleet. In their current configuration, at full load, the DC-10-10 on average accommodates 35 less passengers than the L-1011. -14- Southpac passenger revenues in 1994 remained comparable to 1993 at $18.3 million. While period over period revenue passengers carried and revenue passenger miles decreased by 1.5% and 0.6%, respectively, Southpac yield increased by 0.1 cents or 1.0%. Again, decreases in Southpac revenue passengers carried, revenue passenger miles flown and available seat miles may be attributed to the transition to an all DC-10-10 aircraft fleet in 1994. Southpac yields increased due to the downsized operations of a competitor in the Southpac market in 1994. Transpac cargo revenues increased by $1.6 million or 26.2% from 1993. Increased frequency in its Transpac routes allowed the Company to transport 5.4 million or 34.3% more pounds of freight in 1994. The increase in tonnage was offset by a decrease in yield year over year of 2.5 cents or 6.4%. Overseas charter revenues decreased by $5.5 million or 88.7% upon comparison of 1994 to 1993. A majority of the decrease is associated with the Predecessor obtaining in 1993 a $3.9 million settlement from the Military Airlift Command for charter operations during Operations Desert Shield and Desert Storm in 1991 and 1990. OPERATING EXPENSES ------------------ The following table compares operating expenses for 1994 with 1993 by major category, in thousands:
INCREASE 1994 1993 (DECREASE) ------------------------------------- Wages and benefits.......... $102,670 $101,292 $ 1,378 Aircraft fuel, including taxes and oil.............. 47,682 49,777 (2,095) Maintenance materials and repairs.................... 46,541 40,986 5,555 Aircraft rentals............ 23,966 29,342 (5,376) Purchased services.......... 19,866 17,789 2,077 Sales commissions........... 12,841 11,153 1,688 Rentals other than aircraft and engines................ 9,633 7,292 2,341 Passenger food.............. 8,972 8,150 822 Depreciation and amortization............... 6,797 7,442 (645) Landing fees................ 6,793 4,803 1,990 Reservation fees and services................... 6,635 5,762 873 Advertising and promotion... 4,909 3,154 1,755 Personnel expenses.......... 4,056 4,199 (143) Insurance-hull and liability 3,388 2,126 1,262 Interrupted trips........... 2,038 4,074 (2,036) Nonreorganization professional and legal fees....................... 1,656 3,872 (2,216) Restructuring charges....... -- 14,000 (14,000) Other....................... 10,226 13,734 (3,508) -------- -------- -------- Total.................... $318,669 $328,947 $(10,278) ======== ======== ========
Operating expenses totaled $318.7 million in 1994, a decrease of $10.2 million or 3.1% from total operating expenses of $328.9 million in 1993. Wages and benefits increased $1.4 million or 1.4% in 1994. The increase is primarily attributed to 5.0% to 6.7% wage increases effective September 1, 1994. Aircraft fuel, including taxes and oil decreased by $2.1 million or 4.2% from $49.8 in 1993 to $47.7 million in 1994. In addition to a $0.05 or 8.2% decrease in average cost per gallon year over year, the Company incurred approximately $2.3 million less in aircraft fuel expense in 1994 due to the phase out of its DC-8 aircraft in 1993. -15- Maintenance materials and repairs totaled $46.5 million in 1994 an increase of $5.6 million or 13.7% over 1993. On a net basis, the Company incurred approximately $5.1 million in additional maintenance expense from the DC-10-10 aircraft transitioned in 1994. Aircraft rentals decreased by $5.4 million or 18.3%, of which $4.1 million represents decreased rents due to DC-9-50 aircraft operating under capital versus operating leases in 1994 and other DC-9-50 aircraft operating lease rents being restructured on the Effective Date. Approximately $1.3 million of the decrease is attributable to decreased rents associated with phased out L-1011, DHC-7 and DC-8 aircraft in 1994 and 1993. Purchased services increased $2.1 million or 11.8%, to $19.9 million in 1994 from $17.8 million in 1993. The Company incurred an additional $1.6 million in costs in 1994 associated with simulator training, operation of its flight operating system, credit card fees and outsourced computer mainframe services. Sales commissions totaled $12.8 million in 1994, an increase of $1.6 million or 14.3% over total sales commissions of $11.2 million in 1993. The increase is primarily attributable to an 18.0% increase in commissionable sales processed through area settlement plans. Rentals other than aircraft and engines totaled $9.6 million in 1994 versus $7.3 million in 1993. The $2.3 million or 31.5% increase is due to increased space rental rates and additional joint use and system support expenses charged primarily by the State of Hawaii airport authorities. Landing fees increased by $2.0 million or 41.6% to $6.8 million in 1994. Increases associated with DC-9-50 aircraft landings and wide-body aircraft landings of $1.4 million and $900,000, respectively, were experienced in 1994. Such increases were due to (1) increased landing fee rates in Hawaii and Los Angeles, California and (2) increased frequency due to implementation of the Island Shuttle, schedule changes to Los Angeles, California and Las Vegas, Nevada and commencement of scheduled service to Portland, Oregon. Advertising and promotion totaled $4.9 million in 1994, an increase of $1.8 million or 58.1% over 1993. Approximately $900,000 is due to a conscious effort by management to increase the Company's exposure through advertising and promotional media, especially on the U.S. West Coast. Another $200,000 of additional expenses were incurred in connection with the Company's participation in American's frequent flyer program. Insurance-hull and liability increased from $2.1 million in 1993 to $3.4 million in 1994. The $1.3 million or 61.9% increase was mainly due to an 84.2% increase in the applicable premium rate for liability applied to the Company's revenue passenger miles in 1994. Interrupted trip expense decreased by $2.0 million or 49.9% year over year. The Company experienced $1.8 million less in flight interruption manifest and denied boarding expenses due to its continual efforts to improve customer service and on-time performance. Nonreorganization professional and legal fees decreased $2.2 million period over period due to a majority of professional and legal fees being classified, in accordance with the provisions of SOP 90-7 as reorganization expenses during the year 1994. Restructuring charges in 1993 represent the Predecessor's provision for the anticipated return and termination of five of its DC-9-50 aircraft in the second quarter of 1993. -16- NONOPERATING INCOME (EXPENSE) ----------------------------- Reorganization expenses in 1993 of $52.6 million primarily consists of $47.1 million in anticipated L-1011 and DHC-7 aircraft rental and return costs, $4.7 million for the write-off of related flight equipment leasehold improvements and $800,000 in legal and professional fees. EXTRAORDINARY ITEMS ------------------- The $12.1 million extraordinary item in 1993 represents a one-time non-monetary gain due to the reduction in the net accrued pension benefit obligation of the Predecessor. Effective October 1, 1993, the IAM and salaried employee defined benefit pension plans were frozen with no future pay or credited service increases. -17- SIGNATURES Pursuant to the requirements of Rule 12b-15 under the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned, thereunto duly authorized. HAWAIIAN AIRLINES, INC. April 17, 1996 By: /s/ C.J. David Davies --------------------------- C.J. David Davies Senior Vice President-Finance and Chief Financial Officer (Principal Financial and Accounting Officer) -18- -----END PRIVACY-ENHANCED MESSAGE-----