<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
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
Incorporation or Organization) Identification No.)
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
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 file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
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 a court. [X] Yes [ ] No
As of November 10, 1995, 6,581,133 shares of Class A Common Stock and 1,933,589
shares of Class B Common Stock of the Registrant are outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
================================================================================
CONDENSED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
REORGANIZED
COMPANY
--------------------------------------
SEPTEMBER 30,1995 DECEMBER 31, 1994
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................... $ 7,427 $ 3,501
Accounts receivable, net........................................ 22,499 16,275
Inventories, net................................................ 7,249 6,234
Assets held for sale, net....................................... 1,594 1,594
Prepaid expenses and other...................................... 4,812 6,079
-------- --------
Total current assets........................................ 43,581 33,683
Property and equipment, less accumulated depreciation and
amortization of $4,004 in 1995 and $922 in 1994................. 40,611 37,756
Assets held for sale, net.......................................... 8,166 11,789
Other assets....................................................... 5,047 9,139
Reorganization value in excess of amounts allocable to
identifiable assets, less accumulated amortization of $3,791 in
1995 and $1,090 in 1994........................................... 68,233 70,934
-------- --------
TOTAL ASSETS................................................ 165,638 163,301
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt............................... 6,482 6,394
Current portion of capital lease obligations.................... 2,657 2,907
Accounts payable................................................ 25,157 17,529
Air traffic liability........................................... 34,065 40,382
Accrued liabilities............................................. 21,481 12,298
-------- --------
Total current liabilities..................................... 89,842 79,510
Long-term debt..................................................... 7,482 14,152
Capital lease obligations.......................................... 10,791 12,764
Other liabilities and deferred credits............................. 27,598 23,026
-------- --------
TOTAL LIABILITIES........................................... 135,713 129,452
-------- --------
SHAREHOLDERS' EQUITY:
Class A common stock............................................ 70 -
Class B common stock............................................ 24
Capital in excess of par value.................................. 39,006 -
Warrants........................................................ 900 40,000
Accumulated deficit............................................. (10,075) (6,151)
-------- --------
Shareholders' equity........................................... 29,925 33,849
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $165,638 $163,301
======== ========
</TABLE>
2
<PAGE>
ITEM 1. (CONTINUED)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY COMPANY
------------------------------------------------------
PERIOD FROM
REORGANIZATION
THREE MONTHS (SEPTEMBER 12, PERIOD FROM
ENDED 1994 TO JULY 1, 1994 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER
1995 1994) 11,1994
------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Passenger..................................................... $ 79,796 $ 11,786 $ 68,502
Charter....................................................... 6,711 - 11
Cargo......................................................... 4,589 847 3,044
Other......................................................... 2,259 538 1,774
---------- -------- --------
Total...................................................... 93,355 13,171 73,331
---------- -------- --------
OPERATING EXPENSES:
Flying operations............................................. 26,515 4,589 21,110
Maintenance................................................... 21,489 3,994 13,548
Passenger service............................................. 10,167 1,605 7,642
Aircraft and traffic servicing................................ 13,697 2,782 11,153
Promotion and sales........................................... 10,984 2,008 8,442
General and administrative.................................... 2,744 793 3,581
Depreciation and amortization................................. 1,865 514 1,138
---------- -------- --------
Total...................................................... 87,461 16,285 66,614
---------- -------- --------
OPERATING INCOME (LOSS).......................................... 5,894 (3,114) 6,717
---------- -------- --------
NONOPERATING INCOME (EXPENSE):
Interest expense, net......................................... (844) (77) (624)
Gain (loss) on disposition of equipment....................... (431) - 164
Reorganization items.......................................... - - (10,914)
Other, net.................................................... 202 12 99
---------- -------- --------
Total...................................................... (1,073) (65) (11,275)
---------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.......................... 4,821 (3,179) (4,558)
EXTRAORDINARY ITEM............................................... - - 190,063
---------- -------- --------
NET INCOME (LOSS)................................................ $ 4,821 $ (3,179) $185,505
========== ======== ========
NET INCOME (LOSS) PER SHARE...................................... $ ***0.48 $**(0.34) $ *N/M
========== ======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES and Share Equivalents... ***10,068 **9,400 7,137
========== ======== ========
</TABLE>
* Not Meaningful - Per share data is not meaningful as the Predecessor
Company has been recapitalized and has adopted fresh start reporting as of
September 11, 1994.
** Per share data has been calculated assuming that the Reorganized Company
will issue approximately 9.4 million shares of common stock. As of
November 10, 1995, 6,581,133 shares of Class A and 1,933,589 shares of
Class B Common Stock are issued and outstanding.
*** Per share data has been calculated assuming that the Reorganized Company
will issue approximately 9.4 million shares of common stock, adjusted to
reflect assumed exercise of stock options and warrants.
3
<PAGE>
ITEM 1. (CONTINUED)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY COMPANY
------------------------------------------------------
PERIOD FROM
REORGANIZATION PERIOD FROM
NINE MONTHS (SEPTEMBER 12, JANUARY 1,
ENDED 1994 TO 1994 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER
1995 1994) 11, 1994
------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Passenger................................. $219,068 $ 11,786 $199,502
Charter................................... 15,458 - 135
Cargo..................................... 13,127 847 11,039
Other..................................... 6,674 538 6,147
-------- -------- --------
Total................................. 254,327 13,171 216,823
-------- -------- --------
OPERATING EXPENSES:
Flying operations......................... 76,376 4,589 71,768
Maintenance............................... 58,794 3,994 47,281
Passenger service......................... 29,222 1,605 25,224
Aircraft and traffic servicing............ 40,686 2,782 34,325
Promotion and sales....................... 32,009 2,008 28,499
General and administrative................ 10,808 793 12,063
Depreciation and amortization............. 5,534 514 4,085
Early retirement provision................ 2,000 - -
-------- -------- --------
Total................................. 255,429 16,285 223,245
-------- -------- --------
OPERATING LOSS............................... (1,102) (3,114) (6,422)
-------- -------- --------
NONOPERATING INCOME (EXPENSE):
Interest expense, net..................... (2,798) (77) (850)
Gain (loss) on disposition of equipment... (426) - 45
Reorganization items...................... - - (13,949)
Other, net................................ 402 12 501
-------- -------- --------
Total................................. (2,822) (65) (14,253)
-------- -------- --------
LOSS BEFORE EXTRAORDINARY ITEM............... (3,924) (3,179) (20,675)
EXTRAORDINARY ITEM........................... - - 190,063
-------- -------- --------
NET INCOME (LOSS)............................ $ (3,924) $ (3,179) $169,388
======== ======== ========
NET INCOME (LOSS) PER SHARE.................. $**(0.42) $**(0.34) $ *N/M
======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES............ **9,400 **9,400 7,137
======== ======== ========
</TABLE>
* Not Meaningful - Per share data is not meaningful as the Predecessor Company
has been recapitalized and has adopted fresh start reporting as of September
11, 1994.
** Per share data has been calculated assuming that the Reorganized Company
will issue approximately 9.4 million shares of common stock. As of November
10, 1995, 6,581,133 shares of Class A and 1,933,589 shares of Class B Common
Stock are issued and outstanding.
4
<PAGE>
ITEM 1. (CONTINUED)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
PREDECESSOR
REORGANIZED COMPANY COMPANY
------------------------------------------------------
PERIOD FROM
REORGANIZATION PERIOD FROM
NINE MONTHS (SEPTEMBER 12, JANUARY 1,
ENDED 1994 TO 1994 TO
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER
1995 1994) 11, 1994
------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................... $(3,924) $(3,179) $ 169,388
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization.................................... 5,800 277 4,488
Net periodic postretirement benefit cost......................... 2,628 - 1,988
Loss (gain) on disposition of property and equipment............. 426 - (45)
Extraordinary gain............................................... - - (190,063)
Decrease (increase) in accounts receivable...................... (5,466) 2,267 (5,801)
Decrease (increase) in inventories............................... (1,015) (78) 497
Decrease (increase) in prepaid expenses and other................ 1,267 (3,581) (1,133)
Increase (decrease) in accounts payable.......................... 7,431 (4,077) 5,774
Increase (decrease) in accrued liabilities....................... 9,183 1,628 (734)
Increase (decrease) in air traffic liability..................... (6,317) 75 10,602
Other, net....................................................... 6,224 5,231 336
------- ------- ---------
Net cash provided by (used in) operations before
reorganization items.......................................... 16,237 (1,437) (4,703)
Reorganization items............................................. - - 10,799
------- ------- ---------
Net cash provided by (used in) operating activities........... 16,237 (1,437) 6,096
------- ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.................................. (6,544) (379) (3,682)
Net proceeds from disposition of property and equipment.............. 2,875 - 817
Issuance of security deposits........................................ - - (3,007)
------- ------- ---------
Net cash used in investing activities......................... (3,669) (379) (5,872)
------- ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt....................................... 1,474 2,000 -
Repayment of debt.................................................... (7,893) (242) (689)
Principal payments under capital lease obligations................... (2,223) - (1,345)
------- ------- ---------
Net cash provided by (used in) financing activities........... (8,642) 1,758 (2,034)
------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... 3,926 (58) (1,810)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......................... 3,501 2,463 4,273
------- ------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................ $ 7,427 $ 2,405 $ 2,463
======= ======= =========
</TABLE>
5
<PAGE>
ITEM 1. (CONTINUED)
================================================================================
OPERATING STATISTICS (UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------------------------------
1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SCHEDULED OPERATIONS:
Revenue passengers..................... 1,218 1,267 3,567 3,414
Revenue passenger miles *.............. 855,459 825,191 2,327,459 2,187,098
Available seat miles *................. 1,132,989 1,072,492 3,106,753 2,950,751
Passenger load factor.................. 75.5% 76.9% 74.9% 74.1%
Revenue ton miles *.................... 98,417 91,422 266,881 243,172
Revenue plane miles *.................. 4,712 4,498 12,982 11,946
Passenger revenue per passenger mile... 9.3(cent) 9.7(cent) 9.4(cent) 9.7(cent)
OVERSEAS CHARTER OPERATIONS:
Revenue passengers..................... 46 - 108 -
Revenue passenger miles *.............. 127,720 21 297,430 526
Available seat miles *................. 132,675 27 305,656 827
* In thousands
</TABLE>
6
<PAGE>
ITEM 1. (CONTINUED)
In the opinion of management, the unaudited condensed financial statements
included in this report contain all adjustments necessary for a fair
presentation of the results of operations and cash flows for the interim periods
covered and the financial condition of Hawaiian Airlines, Inc. ("Hawaiian
Airlines" or the "Company" or the "Reorganized Company") as of September 30,
1995 and December 31, 1994. The operating results for the interim periods are
not necessarily indicative of the results to be expected for the full fiscal
year.
The unaudited financial statements at September 30, 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. As
discussed herein, the Company has continued to experience net and operating
losses. Furthermore, there can be no assurance that the Company will succeed in
solving its liquidity problems or that the Company will have sufficient cash
resources to support its continued operations. Because of the Company's
liquidity shortage, an adverse change in events and circumstances could result
in the Company being unable to meet its financial obligations. 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 the
uncertainties discussed herein. 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.
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 SFAS No. 121 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.
SFAS No. 121 requires that a review be made of long-lived assets and certain
identifiable intangible assets for determination of possible impairment
adjustments 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 has not estimated the
impact that adoption of the Statement is expected to have on its financial
statements.
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
7
<PAGE>
purposes of preparing its basic financial statements. For entities not adopting
the new method, SFAS No. 123 requires that they disclose in their footnotes 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 plans to either adopt the new, fair value based method or the
disclosure requirements of SFAS No. 123 in its financial statements for 1996.
Certain reclassifications have been made to conform prior period's data to
current period's presentation.
As disclosed in the Supplemental Financial Information, Unaudited Quarterly
Financial Information contained in Hawaiian Airlines' Annual Report on Form 10-K
for the year ended December 31, 1994 (the "1994 Form 10-K"), certain significant
quarterly adjustments for calendar year 1994 were recorded. The results for the
appropriate quarters of 1994 have been restated to reflect those adjustments.
All period-to-period comparisons contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations refer to the restated
1994 results.
The accompanying financial statements should be read in conjunction with the
financial statements and the notes thereto contained in the 1994 Form 10-K,
which are incorporated herein by reference.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
------------
On September 21, 1993, Hawaiian Airlines together with HAL, INC., Hawaiian
Airlines' parent company, and West Maui Airport, Inc., another wholly owned
subsidiary of HAL, INC., (collectively the "Debtors" or "Predecessor") commenced
reorganization cases by filing voluntary petitions for relief under Chapter 11,
Title 11 ("Chapter 11") of the United States (the "U.S.") Code in the U.S.
Bankruptcy Court for the District of Hawaii (the "Bankruptcy Court").
Concurrently therewith, the Debtors filed a Consolidated Plan of Reorganization
dated September 21, 1993 (as amended through the most recent amendment dated
April 20, 1995 the "Plan"). On August 30, 1994, the Bankruptcy Court entered an
order confirming the Plan and with the satisfaction of certain conditions, the
Plan became effective on September 12, 1994 (the "Effective Date").
Pursuant to the Plan, on the Effective Date, first West Maui Airport, Inc. and
then HAL, INC. were merged with and into Hawaiian Airlines with Hawaiian
Airlines being the sole surviving corporation. On the Effective Date, all of
the outstanding equity securities of the Company, HAL, INC., and West Maui
Airport, Inc. were cancelled, including without limitation, all outstanding
common, preferred and preference stock of HAL, INC.
Under the Plan, the Company is to issue and distribute 9,400,000 shares of its
common stock to all of the unsecured creditors with claims allowed under the
Plan. The Company's common stock consists of two classes, one with full voting
rights, Class A Common Stock, and the other with limited voting rights, Class B
Common Stock. On June 19, 1995, the Company commenced distribution of its Class
A and Class B Common Stock and as of November 10, 1995, 6,581,133 shares of
Class A and 1,933,589 shares of Class B Common Stock are issued and outstanding.
The Company anticipates distributing a majority of the remaining 885,278 shares
of Class A Common Stock and Class B Common Stock by the end of the fiscal year.
Included in the amount not yet distributed is an estimated 335,141 shares of
Class A Common Stock for resolution of claims still being disputed with general
unsecured creditors. As disputed claims are finally resolved, the creditor
holding such claim will receive a distribution of stock. Any shares withheld in
excess of the amount distributed to such creditor will be held until all
disputed claims have been resolved. Upon resolution of all disputed claims,
there will be a final distribution of any remaining withheld shares to all
general unsecured creditors on a pro rata basis.
Pursuant to the Plan, the Company has granted warrants to purchase an additional
989,011 shares of its Class A Common Stock, none of which have been exercised.
Pursuant to the terms of the Plan, 600,000 shares of the Company's Class A
Common Stock have been reserved for issuance under a 1994 Stock Option Plan.
The Company's Class A Common Stock began trading on the American Stock Exchange
and the Pacific Stock Exchange on June 21, 1995.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of September 30, 1995, the Company had a net working capital deficit of $46.3
million, representing a $500,000 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 a net increase in accounts payable, accrued
liabilities and air traffic liability of $10.5 million
9
<PAGE>
being offset by an aggregate increase in cash and accounts receivable of $10.2
million. The Company continues to experience liquidity shortages.
Effective April 13, 1995, the Company and American Airlines, Inc. ("American")
executed Amendment No. 2 (the "April Amendment") to the long-term Aircraft Lease
Agreement (the "Aircraft Lease Agreement") providing for the deferral of payment
of approximately $11.1 million of delinquent lease rents and maintenance
payments. The April Amendment provides that the Company is to remit periodic
payments (generally on a weekly basis) to American commencing March 31, 1995 and
ending December 22, 1995, in amounts ranging from approximately $25,000 to
$950,000, including interest at 10.0% per annum, plus payments for the basic
rent of aircraft. Maintenance payments will also be payable weekly, but in the
same aggregate amounts as set forth in the original terms of the Aircraft Lease
Agreements. Thereafter, commencing January 5, 1996, the Company is required to
pay, weekly in advance, the basic rent payments owed for the aircraft and
maintenance payments in respect of the aircraft. The Company paid to American
the first five weekly payments of deferred amounts due under the April
Amendment, in an aggregate amount of approximately $4.2 million, leaving a
balance due of $6.9 million. However, the Company failed to make deferred and
basic rent payments to American of $600,000 and $986,000, respectively,
commencing May 8, 1995.
The Company and American have subsequently deferred the due date for the
repayment of the remaining $6.9 million of delinquent lease rents and
maintenance payments on three occasions. Amendment No. 3 dated June 1, 1995
deferred the due date until August 22, 1995. Amendment No. 4 dated August 22,
1995 deferred the due date until October 6, 1995. The most recent amendment,
Amendment No. 5 dated October 6, 1995 (the "October Amendment") defers the due
date until November 20, 1995. By November 20, 1995, the amount of interest
accrued on the delinquent $6.9 million brings the total amount due to $7.1
million. The October Amendment provides that if the Company remits to American
payments of approximately $6.9 million on or before November 20, 1995, the
Company will pay (generally on a weekly basis) to American the remaining
$226,000 of the $7.1 million deferred rent commencing November 22, 1995 and
ending December 22, 1995, in amounts ranging from approximately $25,000 to
$125,000. In addition, the Company will remit to American periodic payments
(generally on a weekly basis) commencing May 1, 1995 through and including
December 31, 1995 for the basic rent of aircraft. Thereafter, commencing
January 1, 1996, the Company will be required to pay, weekly in advance, the
basic rent payments owed for the aircraft and maintenance payments in respect of
the aircraft.
The Company is current with respect to its payments for basic rent of aircraft
under the October Amendment and maintenance payments under the Aircraft Lease
Agreement. As of September 30, 1995, approximately $7.1 million of deferred
lease rents and maintenance payments is outstanding. The failure of the Company
to timely make payment in full of $6.9 million due on or before November 20,
1995 would permit American to exercise remedies available to it, which include,
but are not limited to, termination of the lease, repossession of certain
aircraft and engines, recovery of damages and drawings under the letters of
credit provided by the Company with respect to the Aircraft Lease Agreement.
The ability of the Company to satisfy its obligations with respect to making the
payment due to American by November 20, 1995 will depend on the Company's
ability to obtain additional debt or equity financing. There can be no
assurance that American will agree to a further extension, or that the Company
will be able to make the payment by November 20, 1995 or any extended due date
or that a favorable resolution of the matter will occur.
10
<PAGE>
The Company has made credit facility borrowings under a financing arrangement
with CIT Group/Credit Finance, Inc. ("CIT"). The financing arrangement consists
of a credit facility of up to $8.15 million consisting of a secured revolving
credit facility including up to $3.0 million of letters of credit (the
"Financing"). Available credit is subject to reduction determined by
recalculation of the borrowing base and repayments arising from disposition of
collateral. As of the date of this report, the amount of the facility had been
effectively reduced to approximately $5.0 million, which amount was fully drawn
in the form of $2.9 million in borrowings and $2.1 million in letters of credit.
The Company currently does not have access to other unutilized credit facilities
and does not have any unencumbered assets. Accordingly, its access to
additional sources of liquidity remains limited. The Company has engaged an
investment bank to assist in obtaining additional financing. A series of
discussions with potential investors to solicit interest in providing additional
capital in return for shares representing an equity interest have been held.
The Company has also presented a proposal to its pilots, flight attendants,
ground crews and clerical staff to amend their current collective bargaining
agreements to, among other things, extend the existing agreements beyond their
current terms.
As a result of and following the discussions with potential investors, on
November 6, 1995, the Company signed a letter of intent with a private investor
group to provide $20.0 million of new equity capital to the Company in exchange
for 18,181,818 shares of Hawaiian Airlines Class A Common Stock. The letter of
intent also contemplates a rights offering to the Company's existing
shareholders, to take place at some point during 1996, at a substantial discount
from the then current market price. The transaction, which will result in the
investor group having six of the current eleven Board of Director seats, is
subject to numerous conditions, including the negotiation and execution of
definitive agreements and certain modifications to the agreements with the
Company's unions and certain of its creditors. If the conditions are
satisfied, it is contemplated that the definitive agreements will be signed in
early December 1995, with closing scheduled as soon as possible thereafter.
Unless it is successful in these efforts, there are likely to be liquidity
shortages in the future.
See discussion with respect to preparation of financial statements on a going
concern basis in Part I, Item 1, Financial Statements, above.
11
<PAGE>
RESULTS OF OPERATIONS
---------------------
The Company believes that the operating revenues and expenses of the Reorganized
Company for the three and nine months ended September 30, 1995 have been
presented on a basis which is in all material respects consistent with the
presentation of the operating revenues and expenses of the Predecessor for the
three and nine months ended September 30, 1994.
The Company generated operating and net income of $5.9 million and $4.8 million,
respectively, during the third quarter of 1995. This represents an increase of
$2.3 million in operating income and a decrease of $77.5 million in net income
from the third quarter of 1994.
OPERATING REVENUES
- ------------------
The following table compares third quarter 1995 operating revenues to those in
third quarter 1994, in thousands, by service type:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------
Increase
1995 1994 (Decrease)
- ------------------------------------------ ----------
<S> <C> <C> <C>
Interisland:
Passenger............. $30,248 $32,200 $(1,952)
Charter............... 11 8 3
Cargo................. 1,603 1,608 (5)
Other................. 1,481 1,529 (48)
------- ------- -------
33,343 35,345 (2,002)
------- ------- -------
Transpacific:
Passenger............. 43,841 42,287 1,554
Cargo................. 2,560 1,889 671
Other................. 747 746 1
------- ------- -------
47,148 44,922 2,226
------- ------- -------
South Pacific:
Passenger............. 5,707 5,801 (94)
Cargo................. 426 392 34
Other................. 31 39 (8)
------- ------- -------
6,164 6,232 (68)
------- ------- -------
Overseas Charter:
Passenger............. 6,700 3 6,697
Other................. - - -
------- ------- -------
6,700 3 6,697
------- ------- -------
Total.............. $93,355 $86,502 $ 6,853
======= ======= =======
</TABLE>
12
<PAGE>
The following table compares applicable third quarter 1995 operating and
financial passenger revenue statistics to those in third quarter 1994:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------
Increase
1995 1994 (Decrease) %
- ------------------------------------------------------- --------------------
<S> <C> <C> <C> <C>
Interisland:
Revenue passengers*........ 927 995 (68) (6.8)
Revenue passenger miles*... 121,955 129,528 (7,573) (5.8)
Available seat miles*...... 250,561 237,333 13,228 5.6
Passenger load factor...... 48.7% 54.6% (5.9)% (10.8)
Yield...................... 24.8(cent) 24.9(cent) (0.1)(cent) (0.4)
Transpacific:
Revenue passengers*........ 272 251 21 8.4
Revenue passenger miles*... 682,642 640,307 42,335 6.6
Available seat miles*...... 813,069 766,435 46,634 6.1
Passenger load factor...... 84.0% 83.5% 0.5% 0.6
Yield...................... 6.4(cent) 6.6(cent) (0.2)(cent) (3.0)
South Pacific:
Revenue passengers*........ 19 21 (2) (9.5)
Revenue passenger miles*... 50,862 55,356 (4,494) (8.1)
Available seat miles*...... 69,359 68,724 635 0.9
Passenger load factor...... 73.3% 80.5% (7.2)% (8.9)
Yield...................... 11.2(cent) 10.5(cent) 0.7(cent) 6.7
Overseas Charter:
Revenue passengers*........ 46 - 46 100.0
Revenue passenger miles*... 127,720 21 127,699 100.0
Available seat miles*...... 132,675 27 132,648 100.0
* In thousands
</TABLE>
Operating revenues totalled $93.4 million during the third quarter of 1995,
compared to $86.5 million during the same period in 1994, an increase of $6.9
million or 8.0%.
Revenues from Interisland passenger service totalled $30.2 million during third
quarter 1995, a decrease of $2.0 million or 6.1% from third quarter 1994. Large
volume promotional fare ticket programs used by Interisland competitors in the
third quarter of 1995 had a direct effect in decreasing the number of
Interisland passengers carried by the Company and revenue passenger miles period
over period by 6.8% and 5.8%, respectively. Also, Interisland yield decreased by
0.1(cent) or 0.4% due to the prevalence of such promotional fare ticket programs
in the Interisland market.
Revenues from Transpacific passenger operations amounted to $43.8 million during
the third quarter of 1995 compared to $42.3 million in the third quarter of
1994, an increase of $1.6 million or 3.7%. Increases of 8.4% and 6.6% in
revenue passengers carried and revenue passenger miles, respectively, were
offset by a decrease of 0.2(cent) or 3.0% in
13
<PAGE>
Transpacific yield. Increased frequency to Los Angeles, California, Las Vegas,
Nevada and Portland, Oregon resulted in increased revenue passengers carried,
revenue passenger miles and available seat miles. The decrease in yield was
primarily caused by continued downward pressure on fares due to heavy pricing
competition in the Transpacific market.
Overseas charter revenues of $6.7 million were earned in the third quarter of
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 the third quarter of 1995
with the third quarter of 1994 by major category, in thousands of dollars:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------
Increase
1995 1994 (Decrease)
- ----------------------------------------------------------------- ----------
<S> <C> <C> <C>
Wages and benefits........................ $25,893 $26,581 $ (688)
Maintenance materials and repairs......... 17,054 12,714 4,340
Aircraft fuel, including taxes and oil.... 14,527 12,986 1,541
Purchased services........................ 5,058 5,477 (419)
Aircraft rentals.......................... 4,265 5,204 (939)
Sales commissions......................... 3,831 3,601 230
Passenger food............................ 2,709 2,567 142
Rentals other than aircraft and engines... 2,310 2,460 (150)
Reservation fees and services............. 2,231 2,088 143
Advertising and promotion................. 2,067 1,229 838
Depreciation and amortization............. 2,003 1,714 289
Reservation fees and services............. 1,731 1,694 37
Personnel expenses........................ 959 922 37
Interrupted trips......................... 497 388 109
Other..................................... 2,326 3,274 (948)
------- ------- ------
Total.............................. $87,461 $82,899 $4,562
======= ======= ======
</TABLE>
Operating expenses totalled $87.5 million in the third quarter of 1995, an
increase of $4.6 million or 5.5% over the third quarter of 1994.
Wages and benefits in third quarter 1995 decreased by $688,000 or 2.6% from
third quarter 1994. The Company changed its workers' compensation insurance
carrier and policy in the third quarter of 1995 which resulted in a $700,000
decrease in workers' compensation premiums and related expenses for the period.
Maintenance materials and repairs period over period increased by $4.3 million
or 34.1%. The increase was primarily caused by 1) $2.5 million in additional
maintenance costs associated with the use of eight DC-10-10 aircraft in third
quarter 1995 versus five DC-
14
<PAGE>
10-10 aircraft and one L-1011 aircraft in third quarter 1994; and 2) $2.3
million in increased engine repairs associated with the Company's DC-9-50
aircraft.
Aircraft fuel, including taxes and oil, increased by $1.5 million or 11.9% in
third quarter 1995 over third quarter 1994. Due to increased frequencies quarter
over quarter, the Company consumed approximately 3.0 million or 14.0% more
gallons of aircraft fuel. Increased fuel usage was offset by a decrease in the
average cost per gallon in the third quarter of 1995 versus the third quarter of
1994 by 1.1(cent) or 1.9%. The Company anticipates further increases in its
aircraft fuel costs as a 4.3(cents) per gallon surcharge tax will become
effective October 1, 1995.
Aircraft rentals decreased by $939,000 or 18.0% in 1995. The decrease was
primarily caused by $1.0 million less in DC-9-50 aircraft and engine rents due
to such rents being restructured on the Effective Date.
Advertising and promotion increased by $838,000 or 68.2%, a direct result of
efforts to increase the Company's exposure in the Interisland and West Coast
markets through advertising and telecommunications media.
The decrease in other operating expenses is principally due to the reversal of
$1.8 million in preconfirmation contingency accruals initially provided for on
the Effective Date.
REORGANIZATION ITEMS
- --------------------
Reorganization items of $10.9 million were recorded in the third quarter of 1994
representing reorganization legal and professional fees, certain transactions as
contemplated under the Plan and the revaluation of assets and liabilities on the
Effective Date.
EXTRAORDINARY ITEM
- ------------------
An extraordinary item of $190.1 million was recorded in the third quarter of
1994 primarily due to the extinguishment of prepetition liabilities.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 14, 1995, the Company held its Annual Shareholders
Meeting in Honolulu, Hawaii. The purpose of the annual meeting was
as follows: i) to elect five directors; ii) to consider ratification
of prior approval of the Company's 1994 Stock Option Plan; iii) to
consider approval of Indemnification Agreements and an Indemnification
Trust Agreement relating to indemnification of the Company's Directors
and certain of its Officers; and iv) to consider approval of an
amendment to the Company's Amended Articles of Incorporation
increasing the total number of authorized shares of Class A Common
Stock that the Company may issue. At the close of business on the
record date, July 14, 1995, 5,125,804 shares of the Company's Class A
Common Stock were outstanding. Each share of Class A Common Stock
entitled the holder thereof to one vote. At the time the Annual
Shareholders Meeting convened, the record owners of not less than
3,897,945 shares of Class A Common Stock were present in person or by
proxy. Each of the proposals submitted was approved by the Company's
shareholders.
The five directors elected at the meeting to serve for a term ending
at the next Annual Shareholders Meeting, currently scheduled for June
6, 1996, or until their successors are duly elected and qualified or
until they resign or are removed, were Jeffrey A. Brodsky (3,891,616),
Richard L. Humphreys (3,891,135), Samson Po'omaihealani (3,889,960),
David B. Urrea (3,889,810) and Samuel A. Woodward (3,891,616), who
each received the vote of the number of shares indicated next to their
name. The remaining Directors, each of whose terms will expire at
next year's annual meeting, are Martin Anderson, Todd G. Cole, Carol
A. Fukunaga, Clifton Kagawa, Bruce R. Nobles and Einar Olafsson.
Regarding the proposal to consider ratification of prior approval of
the Company's 1994 Stock Option Plan, 2,951,019 votes were cast for,
87,650 votes were cast against, 259,161 votes were abstentions and
600,115 were broker non-votes. Regarding the proposal to consider
approval of Indemnification Agreements relating to the indemnification
of the Company's Directors and certain of its Officers, 3,518,883
votes were cast for, 104,458 votes were cast against, 274,604 votes
were abstentions and there were no broker non-votes. As for the
proposal to consider approval of an amendment to the Company's
Amended Articles of Incorporation increasing the total
16
<PAGE>
number of authorized shares of Class A Common Stock that the Company
may issue, 3,555,582 votes were cast for, 79,065 votes were cast
against, 263,298 votes were abstentions and there were no broker non-
votes.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10 Material Contracts
(1) Lease Amendment No. 2 dated as of September 29, 1995 to
Aircraft Lease Agreement dated as of November 20, 1995,
between American Airlines, Inc., lessor, and Hawaiian
Airlines, Inc., lessee, for amendment of Lease
Agreement filed in redacted form since confidential
treatment has been requested pursuant to Rule 24.b-2
for certain portions thereof;
(2) Lease Supplement No. 1 dated as of July 19, 1995 to
Aircraft Lease Agreement dated as of July 5, 1995,
between American Airlines, Inc., lessor, and Hawaiian
Airlines, Inc., lessee;
(3) Lease Amendment No. 1 dated as of September 29, 1995 to
Aircraft Lease Agreement dated as of July 5, 1995,
between American Airlines, Inc., lessor, and Hawaiian
Airlines, Inc., lessee, for amendment of Lease
Agreement filed in redacted form since confidential
treatment has been requested pursuant to Rule 24.b-2
for certain portions thereof;
(4) Lease Amendment No. 4 dated as of August 22, 1995 to
Aircraft Lease Agreement dated as of September 12,
1994, between American Airlines, Inc., lessor, and
Hawaiian Airlines, Inc., lessee, for amendment of Lease
Agreement filed in redacted form since confidential
treatment has been requested pursuant to Rule 24.b-2
for certain portions thereof;
(5) Lease Amendment No. 5 dated as of October 6, 1995 to
Aircraft Lease Agreement dated as of September 12,
1994, between American Airlines, Inc., lessor, and
Hawaiian Airlines, Inc., lessee, for amendment of Lease
Agreement filed in redacted form since confidential
treatment has been requested pursuant to Rule 24.b-2
for certain portions thereof.
Exhibit 27 Financial Data Schedule
17
<PAGE>
(b) Reports on Form 8-K
(1) Current Report on Form 8-K dated August 22, 1995
(date of event-August 22, 1995) reporting Item 5
"Other Events" and Item 7 "Financial Statements,
Proforma Financial Information and Exhibits";
(2) Current Report on Form 8-K dated October 4, 1995
(date of event-October 4, 1995) reporting Item 5
"Other Events" and Item 7 "Financial Statements,
Proforma Financial Information and Exhibits";
(3) Current Report on Form 8-K dated November 6, 1995
(date of event-November 6, 1995) reporting Item 5
"Other Events" and Item 7 "Financial Statements,
Proforma Financial Information and Exhibits".
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HAWAIIAN AIRLINES, INC.
November 10, 1995 By /s/ C.J. David Davies
_____________________________________
C.J. David Davies
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
19
<PAGE>
EXHIBIT 10(1)
AMENDMENT NO. 2 TO LEASE AND LEASE SUPPLEMENTS
----------------------------------------------
THIS AMENDMENT NO. 2 TO LEASE AND LEASE SUPPLEMENTS (herein called
"Amendment No. 2"), dated as of September ___, 1995, between AMERICAN AIRLINES,
INC., a Delaware corporation ("Lessor"), and HAWAIIAN AIRLINES, INC., a Hawaii
corporation ("Lessee").
WITNESSETH:
-----------
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Aircraft Lease Agreement dated as of November 20, 1994 (as amended, the "Lease
Agreement", defined terms used herein as therein defined) relating to the
airframe and engines described on Exhibit A attached hereto, which provides for
----------
the execution of a Lease Amendment for the purpose of, among other things,
amending the Lease Agreement and any prior Lease Supplements thereto; and
WHEREAS, the Lease Agreement was modified and amended by (i) that certain
Lease Supplement No. 1 dated as of November 20, 1994, recorded with the Lease
Agreement, with the Federal Aviation Administration (the "FAA") on December 6,
1994, as Conveyance No. F62124, (ii) by that certain Lease Supplement No. 2
dated as of January 8, 1995, recorded with the FAA on March 21, 1995, as
Conveyance No. EE009010, and by that certain letter amendment agreement dated
December 15, 1994, recorded simultaneously therewith, (iii) by that certain
Lease Supplement No. 3 dated as of February 28, 1995, recorded with the FAA on
March 21, 1995, as Conveyance No. EE009012, (iv) by that certain Lease
Supplement No. 4 dated as of March 31, 1995, recorded with the FAA on
______________________, 1995, as Conveyance No. _________________, and (v) by
Amendment No. 1 to Lease and Lease Supplements dated as of April 28, 1995,
recorded with the FAA on ___________________, 1995, as Conveyance No.
__________________________; and
WHEREAS, Lessor and Lessee have agreed to amend certain terms of the Lease
Agreement and Lease Supplements as noted herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to the Lease Agreement, the Lessor and Lessee hereby
amend the Lease Agreement and Lease Supplements as follows:
A. AMENDMENT TO THE LEASE AMENDMENT.
--------------------------------
1. The following definitions set forth in Section 1 of the Lease
Agreement shall be amended in their entirety as follows:
"'Basic Rent Payment Date' means for the Aircraft (i) the Delivery
-----------------------
Date of the Aircraft, and the first day of each calendar month thereafter to and
including April 1, 1995; (ii) each of May 2, 9, 16 and 23, 1995, June 2, 9, 16
and 23, 1995,
<PAGE>
July 1, 8, 15 and 22, 1995, August 2, 9, 16 and 23, 1995, September 2, 9, 16, 23
and 30, 1995, October 7, 14, and 21, 1995, November 2, 9, 16 and 23, 1995,
December 2, 9, 20, 23 and 31, 1995 until the end of the Term."
"'Lease Period' means each of the periods throughout the Term, the
------------
first such period commencing on and including the Delivery Date of the Aircraft,
and each of the remaining periods commencing on and including the next
subsequent Lease Period Date (other than the last such date)."
"'Lease Period Date' means the Delivery Date for the Aircraft and (i)
-----------------
thereafter, to and including, April 1, 1995, the first day of each calendar
month, and (ii) until the end of the Term, each of May 2, 9, 16 and 23, 1995,
June 2, 9, 16 and 23, 1995, July 1, 8, 15 and 22, 1995, August 2, 9, 16 and 23,
1995, September 2, 9, 16, 23 and 30, 1995, October 7, 14 and 21, 1995, November
2, 9, 16 and 23, 1995, and December 2, 9, 20, 23 and 31, 1995 until the end of
the Term."
"'Lease Term' means the period from the Delivery Date of the Aircraft
----------
until January 8, 1995, unless earlier terminated in accordance with the
provisions of this Lease.
2. Subsection 3(a) of the Lease Agreement is hereby amended in its
entirety to read as follows:
"(a) 'Term' Except as otherwise provided herein (including pursuant
----
to the definition of Event of Loss), the Term for the Aircraft shall commence on
the Delivery Date and end on the earlier to occur of: (i) January 8, 1996; or
(ii) the date on which the Aircraft has 250 hours remaining until the next
scheduled 'C' check; provided however, that Lessor at its sole and absolute
discretion, may terminate this Lease at any time after the execution of this
Second Amendment, by giving Lessee thirty (30) days' prior written notice of
such earlier termination date, which shall thereupon be the last day of the
Term."
3. The first paragraph of Section 14A of the Lease Agreement shall be
amended in its entirety to read as follows:
"Upon the occurrence of any Lessee Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare this Lease to be in default by a written notice to Lessee and Lessor may
concurrently therewith or at any time thereafter, as part of the same or a
separate written notice, declare this Lease to be terminated, and immediately
proceed to do any one or more of the following as Lessor in its sole discretion
shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect; provided that upon the
--------
occurrence of any Lessee Event of Default described in Section 13A(i) or (j)
above, this Lease Agreement shall automatically be in default, and Lessor may
elect to do any of the following, without prior notice to Lessee:"
2
<PAGE>
4. Section 17(b) of the Lease Agreement shall be amended by deleting the
following words from the ninth through eleventh lines thereof:
"...confirmed by (i) telephone contemporaneously to the person entitled to
receive such notice (or to such person's secretary) and (ii)..."
5. Section 17(m)(iii) shall be amended by changing the words "IN-SERVICE"
appearing on the eighth, eleventh and fourteenth lines thereof to read "IN-USE".
Further, the following shall be added to the end of said section:
"In the event that an order is issued giving Lessor possession of any In-
Use Aircraft, Lessee hereby waives any right it may have to return of possession
of such aircraft, and covenants that it will not seek any order permitting it to
retain or repossess such Aircraft, by posting a bond or otherwise. In the event
that any court declines to issue an order permitting Lessor to repossess any In-
Use Aircraft unless Lessor posts or issues a bond, or Lessor elects not to
request that the requirement for such a bond be waived, Lessee hereby agrees
that (if Lessor so elects) the amount of such bond shall not be required to
exceed one year's Basic Rent for such Aircraft."
6. Schedule I to the Lease Agreement shall be amended in its entirety to
read as set forth in Schedule I attached hereto.
10. Section 3(f)(i) of Exhibit E to the Lease Agreement shall be amended
by adding the following to the end thereof:
"Lessee shall pay Lessor on each of September 29, 1995, October 6, 13 and
20, 1995, November 1, 8, 15 and 22, 1995, December 1, 8, 19, 22 and 30, 1995
(each a 'Weekly Supplemental Rent Payment Date') for Base Maintenance Services
and Line Maintenance Services, an amount equal the product of (A) the projected
Flight Hours as determined in accordance with Section 4(u) of this Exhibit E to
be flown by the Serviced Aircraft during the month (which number of Flight Hours
shall not be less than forty (40) during any calendar month beginning October,
1995; prorated the final month of the Term by multiplying the number of days in
the final month in the Term by 1.33 (as to any particular month, the 'Minimum
Maintenance Amount')) to which the related Weekly Supplemental Rent Payment
relates (provided that the payment due September 29, 1995 shall be deemed a
payment relating to October, 1995 and the payment due December 30, 1995 shall be
deemed a payment relating to January, 1996), multiplied by (B) the amount set
forth opposite 'Total Cost Per Flight Hour' below the calendar year encompassing
such month on Attachment A; (C) the product of which is divided by four (4)(or
in the case of payments made relating to January, 1996, divided by one (1)).
11. Section 3(f)(iii) of Exhibit E to the Lease Agreement shall be amended
by adding the following to the end thereof:
"Notwithstanding anything set forth herein to the contrary, Lessor shall in
no
3
<PAGE>
event be obligated to credit to Lessee any amounts relating to any calendar
month which do not exceed the Minimum Maintenance Amount relating to such
calendar month."
12. Attachment A - Rates Per Aircraft Flight Hour, of Exhibit E shall be
amended in its entirety to read as set forth in Attachment A attached hereto.
B. AMENDMENT TO LEASE SUPPLEMENT NO. 1.
-----------------------------------
1. Paragraph 3 of Lease Supplement No. 1 shall be amended and restated in
its entirety to read as follows:
"3. The Term shall commence on the date hereof and shall end on the
earlier of: (i) January 8, 1996; or (ii) the date on which the Aircraft has
250 hours remaining until the next schedule 'C' Check, unless earlier
terminated in accordance with the provisions of the Lease Agreement."
C. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 2.
-------------------------------------------------------------
This Amendment No. 2 shall become effective upon the fulfillment of the
following conditions precedent:
1. On the effective date of this Amendment No. 2 (the "Amendment
Effective Date"), the representations and warranties of lessee set forth in the
Lease Agreement shall be true and accurate as if made on such date.
2. The Lease Amendment and the applicable Lease Supplements shall have
been executed and filed for information with the FAA in Oklahoma city, Oklahoma.
3. The receipt by Lessor from Lessee not later than two (2) days prior to
the Supplement Effective Date of the following, dated as of such Supplement
Effective Date, all of which shall be satisfactory in form and substance to
Lessor:
(a) copies of the articles of incorporation and by-laws of Lessee,
certified to be true and up to date copies by a duly authorized officer thereof
or certifying no changes or amendments thereto since the date they were last
certified to Lessor by Lessee;
(b) copies of resolutions of the board of directors of Lessee authorizing
Lessee to enter into and perform this Amendment No. 2 and the transactions
contemplated hereby, certified to be true and up to date copies by a duly
authorized officer of Lessee;
(c) a closing certificate and an incumbency certificate of a duly
authorized officers of Lessee setting out the names and signatures of the person
or persons
4
<PAGE>
authorized to sign the Lease Agreement;
(d) receipt by Lessor of the installments of Basic Rent pursuant to
Section 3 of the Lease Agreement, as amended hereby, and Supplement Rent
pursuant to Exhibit E to this Lease Agreement, as amended hereby, and payment of
all amounts then due under any other Long-Term Agreement.
4. The Final Order confirming the Plan shall be and remain in full force
and effect.
5. The Long-Term Agreements and the Letter of Credit shall be in full
force and effect.
6. No Default or Lessee Event of Default shall have occurred and be
continuing after giving effect to this Lease Amendment and no "Event of Default"
or "Termination Event" shall have occurred and be continuing under the Long-Term
Agreements.
D. MISCELLANEOUS.
-------------
1. Except as set forth herein, all terms and provisions contained in the
Lease Agreement shall remain in full force and effect.
2. Lessee hereby confirms its agreement to pay to Lessor Basic Rent and
Supplemental Rent for the Aircraft throughout the Term in accordance with
Section 3 of the Lease Agreement.
3. This Amendment No. 2 is being delivered in the State of Texas and
shall in all respects be governed by, and construed in accordance with, the laws
of the State of Texas, including all matters of construction, validity and
performance.
4. This Amendment No. 2 may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument. To the extent
that this Amendment No. 2 constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Amendment No. 2 may be created through the transfer or
possession of any counterpart other than the counterpart marked as the
"original."
5
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment No. 2 to
be duly executed and delivered as of the date and year first above written.
AMERICAN AIRLINES, INC.
/s/ JEFFERY M. JACKSON
By:_________________________________
Jeffery M. Jackson
Vice President - Corporate
Development and Treasurer
HAWAIIAN AIRLINES, INC.
/s/ C. J. DAVID DAVIES
By:_________________________________
C. J. David Davies
Senior Vice President - Finance
and Chief Financial Officer
/s/ RAE A. CAPPS
By:_________________________________
Rae A. Capps
Vice President, General Counsel
and Corporate Secretary
6
<PAGE>
Attachment A - Rates Per Aircraft Flight Hour
<TABLE>
<CAPTION>
1/1/95- 10/1/95- 1996
9/30/95 12/31/95 ----
------- --------
<S> <C> <C> <C>
A. Direct Maintenance Cost
-----------------------
Airframe & Engine-Line Maintenance $ 95 $ 95 $ 99
Airframe - Base Maintenance 444 444 472
Engine - Base Maintenance 597 597 621
---- ---- ----
Sub-Total - Direct Cost $ 1,136 $ 1,136 $ 1,192
B. Variable Overhead $ 251 $ 251 $ 260
-----------------
C. Fixed Overhead $ 79 $ 79 $ 82
--------------
D. Rotable Inventory Access Fee $ 0 $ 57 $ 57
----------------------------
E. APU Inventory Access Fee $ 0 $ 8 $ 8
------------------------
F. Spare Engine Access Fee $ 0 $ 63 $ 63
----------------------- ------- ------- -------
TOTAL COST PER FLIGHT HOUR $ 1,466 $ 1,594 $ 1,662
-------------------------- ======= ======= =======
</TABLE>
Assumptions:
-----------
1. Flight Hours per Cycle ... 4.5 (average)
2. 8.5 Flight Hours per Services Aircraft per day (average).
3. DC10-10 and CF66 maturity curves based on Lessee's forecasted Flight
Hour/Cycles.
4. Ferry Costs to/from Tulsa Maintenance Base will be Lessee's
responsibility.
<PAGE>
SCHEDULE I
This Schedule I has been left intentionally blank for recording purposes,
as the parties deem the information contained therein to be confidential
financial information.
<PAGE>
EXHIBIT A
---------
AIRFRAMES AND ENGINES
DC10 - 10 Aircraft
Serial No. 46701
FAA Registration No. N146AA
GE - CF6 - 6K Engine Serial Nos.
1) 451272
2) 451257
3) 451164
<PAGE>
EXHIBIT 10(2)
LEASE SUPPLEMENT NO. 1
----------------------
THIS LEASE SUPPLEMENT NO. 1, dated July 19, 1995, between AMERICAN
AIRLINES, INC., a Delaware corporation ("Lessor"), and HAWAIIAN AIRLINES, INC.,
a Hawaii corporation ("Lessee").
W I T N E S S E T H:
--------------------
WHEREAS, Lessor and Lessee have heretofore entered into the Aircraft Lease
Agreement dated as of July 5, 1995, (the "Lease Agreement", defined terms used
herein are as therein defined), which provides in Section 2 for the execution of
a Lease Supplement substantially in the form hereof for the purpose of leasing
the First Aircraft under the Lease Agreement on its Delivery Date in accordance
with the terms hereof; and
WHEREAS, the Lease Agreement relates to the airframe and engines described
below, and a counterpart of the Lease Agreement is attached to and made a part
of this Lease Supplement, and this Lease Supplement, together with such
attachment, is being filed for recordation on the date hereof with the FAA as
one document;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to Section 2 of the Lease Agreement, the Lessor and
Lessee hereby agree as follows:
1. Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts
and leases from Lessor, under the Lease Agreement as hereby supplemented, the
McDonnell Douglas DC10-10 aircraft (the "Aircraft") which consists of the
following components (which may or may not be attached to each other at the
moment of acceptance hereunder):
(i) airframe: U.S. registration number N171AA; manufacturer's
serial no. 46906; and
(ii) three General Electric CF6-6K engines bearing manufacturer's
serial nos. 451433, 451218, and 451286 (each of which engines has 750
or more rated takeoff horsepower or the equivalent of such
horsepower).
2. The Term for the Aircraft commences on the date of this Lease
Supplement.
3. The Term shall commence on the date hereof and shall end on January 8,
1996, unless earlier terminated in accordance with the provisions of the Lease
Agreement.
4. Lessee hereby confirms its agreement to pay to Lessor Basic Rent for
the Aircraft
<PAGE>
throughout the Term in accordance with Section 3 of the Lease Agreement and to
pay Supplemental Rent pursuant to Exhibit E attached to the Lease.
5. All of the provisions of the Lease Agreement are hereby incorporated by
reference in this Lease Supplement on and as of the date of this Lease
Supplement to the same extent as if fully set forth herein.
6. This Lease Supplement is being delivered in the State of Texas and
shall in all respects be governed by, and construed in accordance with, the laws
of the State of Texas, including all matters of construction, validity and
performance.
7. This Lease Supplement may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument. To the extent
that this Lease Supplement constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Lease Supplement may be created through the transfer
or possession of any counterpart other than the counterpart marked as the
"Original".
-2-
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
Supplement to be duly executed and delivered as of the date and year first above
written.
AMERICAN AIRLINES, INC.
/s/ JEFFERY M. JACKSON
By: ___________________________________
Jeffery M. Jackson
Vice President - Corporate
Development and Treasurer
-3-
<PAGE>
HAWAIIAN AIRLINES, INC.
/s/ BRUCE R. NOBLES
By: ___________________________________
Bruce R. Nobles
Chairman, President and
Chief Executive Officer
/s/ RAE A. CAPPS
By: ___________________________________
Rae A. Capps
Vice President, General Counsel
and Corporate Secretary
-4-
<PAGE>
EXHIBIT 10(3)
AMENDMENT NO. 1 TO LEASE AND LEASE SUPPLEMENT
---------------------------------------------
THIS AMENDMENT NO. 1 TO LEASE AND LEASE SUPPLEMENT (herein called
"Amendment No. 1"), dated as of September ___, 1995, between AMERICAN AIRLINES,
INC., a Delaware corporation ("Lessor"), and HAWAIIAN AIRLINES, INC., a Hawaii
corporation ("Lessee").
WITNESSETH:
-----------
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Aircraft Lease Agreement dated as of July 5, 1995 (as amended, the "Lease
Agreement", defined terms used herein as therein defined) relating to the
airframe and engines described on Exhibit A attached hereto, which provides for
---------
the execution of a Lease Amendment for the purpose of, among other things,
amending the Lease Agreement and any prior Lease Supplements thereto; and
WHEREAS, the Lease Agreement was modified and amended by that certain Lease
Supplement No. 1 dated as of July 19, 1995, recorded with the Federal Aviation
Administration (the "FAA") on ___________________________, as Conveyance No.
______________; and
WHEREAS, Lessor and Lessee have agreed to amend certain terms of the Lease
Agreement and the Lease Supplement as noted herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to the Lease Agreement, the Lessor and Lessee hereby
amend the Lease Agreement and Lease Supplements as follows:
A. AMENDMENT TO THE LEASE AMENDMENT.
--------------------------------
1. Subsection 3(a) of the Lease Agreement is hereby amended in its
entirety to read as follows:
"(a) 'Term'. Except as otherwise provided herein (including
----
pursuant to the definition of Event of Loss), the Term for the Aircraft shall
commence on the Delivery Date and end on the earlier to occur of: (i) January 8,
1996; or (ii) the date on which the Aircraft has 250 hours remaining until the
next scheduled 'C' check; provided however, that Lessor at its sole and absolute
discretion, may terminate this Lease at any time after the execution of this
Amendment No. 1, by giving Lessee thirty (30) days' prior written notice of such
earlier termination date, which shall thereupon be the last day of the Term."
2. The first paragraph of Section 14A of the Lease Agreement shall be
amended in its entirety to read as follows:
<PAGE>
"Upon the occurrence of any Lessee Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare this Lease to be in default by a written notice to Lessee and Lessor may
concurrently therewith or at any time thereafter, as part of the same or a
separate written notice, declare this Lease to be terminated, and immediately
proceed to do any one or more of the following as Lessor in its sole discretion
shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect; provided that upon the
--------
occurrence of any Lessee Event of Default described in Section 13A(i) or (j)
above, this Lease Agreement shall automatically be in default, and Lessor may
elect to do any of the following, without prior notice to Lessee:"
3. Section 17(b) of the Lease Agreement shall be amended by deleting the
following words from the ninth through eleventh lines thereof:
"...confirmed by (i) telephone contemporaneously to the person entitled to
receive such notice (or to such person's secretary) and (ii)..."
4. Section 17(m)(iii) shall be amended by changing the words "IN-SERVICE"
appearing on the eighth, eleventh and fourteenth lines thereof to read "IN-USE".
Further, the following shall be added to the end of said section:
"In the event that an order is issued giving Lessor possession of any In-
Use Aircraft, Lessee hereby waives any right it may have to return of possession
of such aircraft, and covenants that it will not seek any order permitting it to
retain or repossess such Aircraft, by posting a bond or otherwise. In the event
that any court declines to issue an order permitting Lessor to repossess any In-
Use Aircraft unless Lessor posts or issues a bond, or Lessor elects not to
request that the requirement for such a bond be waived, Lessee hereby agrees
that (if Lessor so elects) the amount of such bond shall not be required to
exceed one year's Basic Rent for such Aircraft."
5. Schedule I to the Lease Agreement shall be amended in its entirety to
read as set forth in Schedule I attached hereto.
6. Section 3(f)(i) of Exhibit E shall be amended in its entirety to read
as follows:
"Lessee shall pay Lessor prior to the Delivery Date, Fifty Thousand Dollars
($50,000.00) to defray the cost to Lessor of reactivating the Aircraft (the
'Reactivation Fee'). Lessee shall also pay Lessor on the Business Day preceding
the Activation Date and on each of July 21, 1995, August 1, 8, 15 and 22, 1995,
September 1, 8, 15, 22 and 29, 1995, October 6, 13 and 20, 1995, November 1, 8,
15 and 22, 1995, December 1, 8, 19, 22 and 30, 1995 (each a 'Weekly Supplemental
Payment Date') for Base Maintenance Services and Line Maintenance Services,
provided, that no date prior to the Business Day preceding the Activation Date
shall be a Weekly Supplemental Rent Payment Date. The amount of each such
payment (the 'Weekly Supplemental Rent Payment') which becomes due during the
2
<PAGE>
period commencing on the Activation Date through and including September, 1995
(the Weekly Supplemental Rent Payment due September 29, 1995 shall be deemed a
payment relating to October, 1995) shall equal the product of (A) the projected
Flight Hours as determined in accordance with Section 4(u) of this Exhibit E to
be flown by the Serviced Aircraft during the month (which number of Flight Hours
shall not be less than forty (40) during any calendar month; prorated in the
month in which the Activation Date occurs by multiplying the number of days in
the month on and after the Activation Date by 1.33 (the 'Minimum Maintenance
Amount') to which the related Weekly Supplemental Rent Payment relates,
multiplied by (B) the amount set forth opposite 'Total Cost Per Flight Hour'
below the applicable column encompassing such month on Attachment A; (C) the
product of which is divided by four (4)(or in the case of payments made in the
month the Activation Date occurs, the number of remaining Weekly Payment Dates
in such month plus one).
The amount of each Weekly Supplemental Rent Payment which relates to the
period commencing October 1, 1995 (the payment due September 29, 1995 shall be
deemed a payment relating to October, 1995) through and including the end of the
Term, shall equal the product of (A) the projected Flight Hours as determined in
accordance with Section 4(u) of this Exhibit E to be flown by the Serviced
Aircraft during the month to which the related Weekly Supplemental Rent Payment
relates (provided that the payment due September 29, 1995 shall be deemed a
payment relating to October, 1995 and the payment due December 30, 1995 shall be
deemed a payment relating to January, 1996), multiplied by (B) the amount set
forth opposite 'Total Cost Per Flight Hour' below the applicable column
encompassing such month on Attachment A; (C) the product of which is divided by
four (4)( or in the case of payments relating to January, 1996, divided by one
(1)).
Lessor shall not provide Lessee an invoice with respect to the Weekly
Supplemental Rent Payments. Notwithstanding the foregoing, Lessee shall be
entitled to credit against any Weekly Supplemental Rent Payment for the
Reactivation Fee to the extent not already credited against Weekly Supplemental
Rent Payments and any amounts not exceeding $74,522 in the aggregate which
Lessee has actually paid in cash to Santa Barbara Aerospace, Inc. to prepare the
Aircraft for revenue service, which have not been previously credited against
Weekly Supplemental Rent Payments. Lessor shall furnish Lessor with written
evidence satisfactory to Lessor of payments to Santa Barbara Aerospace, Inc.
Lessee agrees that Lessor may from time to time verify such payments with Santa
Barbara Aerospace, Inc.
7. Section 3(f)(iii) of Exhibit E shall be amended by deleting the last
sentence therefrom in its entirety.
8. Attachment A - Rates Per Aircraft Flight Hour, of Exhibit E shall be
amended in its entirety to read as set forth in Attachment A attached hereto.
B. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 1.
--------------------------------------------------------------
3
<PAGE>
This Amendment No. 1 shall become effective upon the fulfillment of the
following conditions precedent:
1. On the effective date of this Amendment No. 1 (the "Amendment
Effective Date"), the representations and warranties of Lessee set forth in the
Lease Agreement shall be true and accurate as if made on such date.
2. The Lease Amendment and the applicable Lease Supplements shall have
been executed and filed for information with the FAA in Oklahoma city, Oklahoma.
3. The receipt by Lessor from Lessee not later than two (2) days prior to
the Supplement Effective Date of the following, dated as of such Supplement
Effective Date, all of which shall be satisfactory in form and substance to
Lessor:
(a) copies of the articles of incorporation and by-laws of Lessee,
certified to be true and up to date copies by a duly authorized officer thereof
or certifying no changes or amendments thereto since the date they were last
certified to Lessor by Lessee;
(b) copies of resolutions of the board of directors of Lessee authorizing
Lessee to enter into and perform this Amendment No. 1 and the transactions
contemplated hereby, certified to be true and up to date copies by a duly
authorized officer of Lessee;
(c) a closing certificate and an incumbency certificate of a duly
authorized officers of Lessee setting out the names and signatures of the person
or persons authorized to sign the Lease Agreement;
(d) receipt by Lessor of the installments of Basic Rent pursuant to
Section 3 of the Lease Agreement, as amended hereby, and Supplement Rent
pursuant to Exhibit E to this Lease Agreement, as amended hereby, and payment of
all amounts then due under any other Long-Term Agreement.
4. The Final Order confirming the Plan shall be and remain in full force
and effect.
5. The Long-Term Agreements and the Letter of Credit shall be in full
force and effect.
6. No Default or Lessee Event of Default shall have occurred and be
continuing after giving effect to this Lease Amendment and no "Event of Default"
or "Termination Event" shall have occurred and be continuing under the Long-Term
Agreements.
C. MISCELLANEOUS.
-------------
4
<PAGE>
1. Except as set forth herein, all terms and provisions contained in the
Lease Agreement shall remain in full force and effect.
2. Lessee hereby confirms its agreement to pay to Lessor Basic Rent and
Supplemental Rent for the Aircraft throughout the Term in accordance with
Section 3 of the Lease Agreement.
3. This Amendment No. 1 is being delivered in the State of Texas and
shall in all respects be governed by, and construed in accordance with, the laws
of the State of Texas, including all matters of construction, validity and
performance.
4. This Amendment No. 1 may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument. To the extent
that this Amendment No. 1 constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Amendment No. 1 may be created through the transfer or
possession of any counterpart other than the counterpart marked as the
"original."
THIS PAGE ENDS HERE
SIGNATURE PAGE FOLLOWS
5
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment No. 1 to
be duly executed and delivered as of the date and year first above written.
AMERICAN AIRLINES, INC.
/s/ JEFFERY M. JACKSON
By: ___________________________________
Jeffery M. Jackson
Vice President - Corporate
Development and Treasurer
HAWAIIAN AIRLINES, INC.
/s/ C. J. DAVID DAVIES
By: ___________________________________
C. J. David Davies
Senior Vice President - Finance
and Chief Financial Officer
/s/ RAE A. CAPPS
By: ___________________________________
Rae A. Capps
Vice President, General Counsel
and Corporate Secretary
6
<PAGE>
Attachment A - Rates Per Aircraft Flight Hour
<TABLE>
<CAPTION>
Activation Date 10/1/95- 1996
thru 9/30/95 12/31/95 ------
--------------- --------
<S> <C> <C> <C>
A. Direct Maintenance Cost
-----------------------
Airframe & Engine-Line Maintenance $ 95 $ 95 $ 99
Airframe - Base Maintenance 444 444 472
Engine - Base Maintenance 597 597 621
------ ------ ------
Sub-Total - Direct Cost $1,136 $1,136 $1,192
B. Variable Overhead $ 251 $ 251 $ 260
-----------------
C. Fixed Overhead $ 79 $ 79 $ 82
--------------
D. Rotable Inventory Access Fee $ 57 $ 0 $ 0
----------------------------
E. APU Inventory Access Fee $ 8 $ 0 $ 0
------------------------
F. Spare Engine Access Fee $ 63 $ 0 $ 0
----------------------- ------ ------ ------
TOTAL COST PER FLIGHT HOUR $1,594 $1,466 $1,534
-------------------------- ====== ====== ======
</TABLE>
Assumptions:
-----------
1. Flight Hours per Cycle ... 4.5 (average)
2. 8.5 Flight Hours per Services Aircraft per day (average).
3. DC10-10 and CF66 maturity curves based on Lessee's forecasted Flight
Hour/Cycles.
4. Ferry Costs to/from Tulsa Maintenance Base will be Lessee's
responsibility.
7
<PAGE>
SCHEDULE 1
This Schedule I has been left intentionally blank for recording purposes,
as the parties deem the information contained therein to be confidential
financial information.
8
<PAGE>
EXHIBIT A
---------
AIRFRAMES AND ENGINES
DC10 - 10 Aircraft
Serial No. 46906
FAA Registration No. N171AA
GE - CF6 - 6K Engine Serial Nos.
1) 451433
2) 451218
3) 451286
9
<PAGE>
LEASE AMENDMENT NO. 4
---------------------
THIS LEASE AMENDMENT NO. 4 (herein so called), dated as of August 22, 1995,
between AMERICAN AIRLINES, INC., a Delaware corporation ("Lessor"), and HAWAIIAN
AIRLINES, INC., a Hawaii corporation ("Lessee").
WITNESSETH:
----------
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Aircraft Lease Agreement dated as of September 12, 1994 (as amended and
supplemented from time to time, the "Lease Agreement", defined terms used herein
as therein defined), which provides for the execution of a Lease Amendment for
the purpose of, among other things, amending the Lease Agreement and any Lease
Supplements thereto; and
WHEREAS, the Lease Agreement was modified and amended by those certain
Lease Supplements No. 1 through 6, each dated as of September 12, 1994, recorded
with the Lease Agreement, with the Federal Aviation Administration (the "FAA")
on September 16, 1994, as Conveyance No. P98874, by that certain Lease
Supplement No. 7 dated as of September 21, 1994, recorded with the FAA on
October 26, 1994, as Conveyance No. II00230, by that certain Lease Supplement
No. 8 dated as of October 6, 1994, recorded with the FAA on October 31, 1994 as
Conveyance No. LL08311, by that certain Amendment to Lease Agreement, Lease
Supplements and Lease Supplement No. 9, dated as of November 12, 1994, recorded
with the FAA on November 21, 1994, as Conveyance No. NN007458, by that certain
Lease Supplement No. 10 dated November 20, 1994, recorded by the FAA on March
15, 1995 as Conveyance No. YY010872, by that certain Lease Amendment No. 2 dated
April 13, 1995 ("Lease Amendment No. 2"), recorded by the FAA on May 26, 1995 as
Conveyance No. D06501, and by that certain Lease Amendment No. 3 dated June l,
1995 ("Lease Amendment No. 3"), recorded by the FAA on June 8, 1995 as
Conveyance No. E19773; and
WHEREAS, Lessee has failed to make certain payments of Rent due and payable
on or prior to the date hereof, and Lessor has agreed to defer payment of the
overdue Deferred Basic Rent as set forth herein; and
WHEREAS, Lessor's agreement to the additional deferrals as set forth herein
is conditioned upon Lessee's performance of its obligations under this Lease
Amendment No. 4.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to the Lease Agreement, the Lessor and Lessee hereby
amend the Lease Agreement as follows:
<PAGE>
A. AMENDMENT TO THE LEASE AGREEMENT.
--------------------------------
1. The following definitions contained in Section 1 of the Lease Agreement
shall be amended in their entirety to read as follows:
" 'Additional Deferred Basic Rent Payment Dates' means October 13 and 20,
--------------------------------------------
1995, November 1, 8, 15 and 22, 1995 and December 1, 8, 19 and 22, 1995."
" 'Deferred Basic Rent Payment Dates' means March 31, 1995, April 7, 14 and
---------------------------------
21, 1995, May 1, 1995, and October 6, 1995."
2. The first sentence of Subsection 3(b) of the Lease Agreement shall be
amended in its entirety to read as follows:
"Lessee hereby agrees to pay Lessor (i) Basic Rent (except Deferred Basic
Rent) for each Aircraft throughout the Term in the amounts set forth in Schedule
I on the day prior to each applicable Basic Rent Payment Date commencing on the
day prior to the applicable Delivery Date, and (ii) Deferred Basic Rent for all
the Aircraft throughout the applicable Terms in the amounts set forth in
Schedule I on the Deferred Basic Rent Payment Dates; provided, however, that if
-------- -------
on or before October 6, 1995, Lessee has paid to Lessor at least $6,120,619.51
of the Deferred Basic Rent Payment due and payable on October 6, 1995, then
Lessee shall pay to Lessor the remainder of the Deferred Basic Rent for all the
Aircraft in the amounts set forth in Schedule I on the Additional Deferred Basic
Rent Payment Dates."
3. Section 13A of the Lease Agreement shall be amended by adding thereto
the following subsection (n):
"(n) Lessee shall fail to provide Lessor with evidence that Lessee has
designated and maintained CT Corporation as Lessee's duly authorized resident
agent for service of process in all U.S. jurisdictions where any In-Service
Aircraft have regularly scheduled destinations."
4. Schedule I to the Lease Agreement shall be amended in its entirety to
read as set forth in Schedule I attached hereto.
-2-
<PAGE>
B. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 4.
-------------------------------------------------------------
This Lease Amendment No. 4 shall become effective upon the fulfillment of
the following conditions precedent:
1. On the effective date of this Lease Amendment No. 4 (the "Supplement
Effective Date"), the representations and warranties of Lessee set
forth in the Lease Agreement shall be true and accurate as if made on
such date.
2. The Lease Amendment and the applicable Lease Supplements shall have
been executed and filed for information with the FAA in Oklahoma City,
Oklahoma.
3. The receipt by Lessor from Lessee not later than two (2) days prior to
the Supplement Effective Date of the following, dated as of such
Supplement Effective Date, all of which shall be satisfactory in form
and substance to Lessor:
(a) copies of the articles of incorporation and by-laws of Lessee,
certified to be true and up to date copies by a duly authorized
officer thereof or certifying no changes or amendments thereto
since the date they were last certified to Lessor by Lessee;
(b) copies of resolutions of the board of directors of Lessee
authorizing Lessee to enter into and perform this Lease Amendment
No. 4 and the transactions contemplated hereby, certified to be
true and up to date copies by a duly authorized officer of Lessee;
(c) a closing certificate and an incumbency certificate of a duly
authorized officers of Lessee setting out the names and signatures
of the person or persons authorized to sign the Lease Amendment;
(d) receipt by Lessor of the any installments of Basic Rent pursuant
to Section 3 of the Lease Agreement, as amended hereby, and
Supplemental Rent pursuant to Exhibit F to the Lease Agreement, as
amended hereby, and payment of all amounts then due under any
other Long-Term Agreement.
4. The Final Order confirming the Plan shall be and remain in full force
and effect.
5. The Long-Term Agreements and the Letter of Credit shall be in full
force and effect.
-3-
<PAGE>
6. No Default or Lessee Event of Default shall have occurred and be
continuing after giving effect to this Lease Amendment and no "Event
of Default" or "Termination Event" shall have occurred and be
continuing under the Long-Term Agreements after giving effect to this
Lease Amendment.
C. MISCELLANEOUS.
-------------
1. Except as set forth herein, all terms and provisions contained in the
Lease Agreement shall remain in full force and effect. Nothing contained in
this Lease Amendment No. 4 shall be deemed a waiver by Lessor of any amounts due
and owing under the Lease or of any rights of Lessor existing on the date hereof
under the Lease; provided, however, that the amount of Deferred Basic Rent
-------- -------
represents the unpaid Rent due and owing on the date hereof (the "Unpaid Rent"),
and Lessor's sole remedy for the Unpaid Rent shall be the payment of Deferred
Basic Rent. Lessor hereby waives any Event of Default under the Lease Agreement
arising solely from Lessee's failure to pay the Unpaid Rent; further provided
that Lessee's failure to pay the Deferred Basic Rent shall constitute an Event
of Default under the Lease Agreement.
2. Lessee hereby confirms its agreement to pay to Lessor Basic Rent
(including Deferred Basic Rent) and Supplemental Rent for the Aircraft
throughout the Term in accordance with Section 3 of the Lease Agreement.
3. This Lease Amendment No. 4 is being delivered in the State of Texas and
shall in all respects be governed by, and construed in accordance with, the laws
of the State of Texas, including all matters of construction, validity and
performance.
4. This Lease Amendment No. 4 may be executed in several counterparts, all
of which shall be deemed an original, and all such counterparts shall constitute
one and the same instrument. To the extent that this Lease Amendment No. 4
constitutes chattel paper, as such term is defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction, no security interest in this
Lease Amendment No. 4 may be created through the transfer or possession of any
counterpart other than the counterpart marked as the "Original".
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease Amendment No.
4 to be duly executed and delivered as of the date and year first above written.
AMERICAN AIRLINES, INC.
By: /s/ JEFFERY M. JACKSON
----------------------------------------
Jeffery M. Jackson
Vice President - Corporate and Fleet
Planning
-4-
<PAGE>
-5-
<PAGE>
HAWAIIAN AIRLINES, INC.
By: /s/ BRUCE R. NOBLES
-----------------------------------------
Bruce R. Nobles
President and Chief Executive Officer
By: /s/ RAE A. CAPPS
-----------------------------------------
Rae A. Capps
Vice President, General Counsel
and Corporate Secretary
-6-
<PAGE>
SCHEDULE I
This Schedule I has been intentionally omitted for recording purposes, as
the parties deem the information contained therein to be confidential financial
information.
-i-
<PAGE>
EXHIBIT 10(5)
LEASE AMENDMENT N0. 5
---------------------
THIS LEASE AMENDMENT NO. 5 (herein called "Amendment No. 5"), dated as of
October 6, 1995, between AMERICAN AIRLINES, INC., a Delaware corporation
("Lessor"), and HAWAIIAN AIRLINES, INC., a Hawaii corporation ("Lessee").
WITNESSETH:
-----------
WHEREAS, Lessor and Lessee have heretofore entered into that certain
Aircraft Lease Agreement dated as of September 12, 1994 (as amended and
supplemented from time to time, the "Lease Agreement", defined terms used herein
as therein defined), which provides for the execution of a Lease Amendment for
the purpose of, among other things, amending the Lease Agreement and any Lease
Supplements thereto; and
WHEREAS, the Lease Agreement was modified and amended by those certain
Lease Supplements No. 1 through 6, each dated as of September 12, 1994, recorded
with the Lease Agreement, with the Federal Aviation Administration (the "FAA")
on September 16, 1994 as Conveyance No. P98874, by that certain Lease Supplement
No. 7 dated as of September 21, 1994, recorded with the FAA on October 26, 1994
as Conveyance No. 1100230, by that certain Lease Supplement No. 8 dated as of
October 6, 1994, recorded with the FAA on October 31, 1994 as Conveyance No.
LL08311, by that certain Amendment to Lease Agreement, Lease Supplements and
Lease Supplement No. 9, dated as of November 12, 1994, recorded with the FAA on
November 21, 1994 as Conveyance No. NN007458, by that certain Lease Supplement
No. 10 dated November 21, 1994, recorded by the FAA on March 15, 1995 as
conveyance No. YY010872, by that certain Lease Amendment No. 2 dated April 13,
1995 ("Lease Amendment No. 2"), recorded by the FAA on May 26, 1995 as
Conveyance No. D06501, by that certain Lease Amendment No. 3 dated June 1, 1995
("Lease Amendment No. 3"), recorded by the FAA on June 8, 1995 as Conveyance No.
E19773, and by that certain Lease Amendment No. 4 dated August 22, 1995 ("Lease
Amendment No. 4"), recorded by the FAA on ____________, 1995 as Conveyance
No. _______________; and
WHEREAS, Lessee has failed to make certain payments of Rent due and payable
on or prior to the date hereof, and Lessor has agreed to defer payment of the
overdue Deferred Basic Rent as set forth herein; and
WHEREAS, Lessor's agreement to the additional deferrals as set forth herein
is conditioned upon Lessee's performance of its obligations under this Lease
Amendment No. 5 and the Consulting Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and pursuant to the Lease Agreement, the Lessor and Lessee hereby
amend the Lease Agreement as follows:
<PAGE>
A. AMENDMENT TO THE LEASE AGREEMENT.
--------------------------------
1. The following definitions set forth in Section 1 of the Lease Agreement
shall be amended in their entirety as follows:
"'Additional Deferred Basic Rent Payment Dates' means November 22,
--------------------------------------------
1995 and December 1, 8, 19 and 22, 1995."
"'Deferred Basic Rent Payment Dates' means March 31, 1995, April 7,
---------------------------------
14 and 21, 1995, May 1, 1995 and November 20, 1995."
2. The first sentence of Subsection 3(b) of the Lease Agreement shall be
amended in its entirety to read as follows:
"Lessee hereby agrees to pay Lessor (i) Basic Rent (except Deferred Basic
Rent) for each Aircraft throughout the Term in the amounts set forth in Schedule
I on the day prior to each applicable Basic Rent Payment Date commencing on the
day prior to the applicable Delivery Date, and (ii) Deferred Basic Rent for all
the Aircraft throughout the applicable Terms in the amounts set forth in
Schedule I on the Deferred Basic Rent Payment Dates; provided, however, that
-------- -------
if on or before November 20, 1995, Lessee has paid to Lessor at least
$8,822,753.42 of the Deferred Basic Rent Payment due and payable on November 20,
1995, then Lessee shall pay to Lessor the remainder of the Deferred Basic Rent
for all the Aircraft in the amounts set forth in Schedule I on the Additional
Deferred Basic Rent Payment Dates."
3. Section 13A(n) of the Lease Agreement shall be amended by changing the
reference to "In-Service Aircraft" to read "In-Use Aircraft."
4. The first paragraph of Section 14A of the Lease Agreement shall be
amended in its entirety to read as follows:
"Upon the occurrence of any Lessee Event of Default and at any time
thereafter so long as the same shall be continuing, Lessor may, at its option,
declare this Lease to be in default by a written notice to Lessee and Lessor may
concurrently therewith or at any time thereafter, as part of the same or a
separate written notice, declare this Lease to be terminated, and immediately
proceed to do any one or more of the following as Lessor in its sole discretion
shall elect, to the extent permitted by, and subject to compliance with any
mandatory requirements of, applicable law then in effect; provided that upon the
--------
occurrence of any Lessee Event of Default described in Section 13A(i) or (j)
above, this Lease Agreement shall automatically be in default, and Lessor may
elect to do any of the following, without prior notice to Lessee:"
5. Section 17(b) of the Lease Agreement shall be amended by deleting the
following words from the eighth through tenth lines thereof:
"...confirmed by (i) telephone contemporaneously to the person entitled to
2
<PAGE>
receive such notice (or to such person's secretary) and (ii)..."
6. Section 17(m)(iii) shall be amended by adding the following to the end
thereof:
"In the event that an order is issued giving Lessor possession of any In-
Use Aircraft, Lessee hereby waives any right it may have to return of possession
of such aircraft, and covenants that it will not seek any order permitting it to
retain or repossess such Aircraft, by posting a bond or otherwise. In the event
that any court declines to issue an order permitting Lessor to repossess any In-
Use Aircraft unless Lessor posts or issues a bond, or Lessor elects not to
request that the requirement for such a bond be waive, Lessee hereby agrees that
(if Lessor so elects) the amount of such bond shall not be required to exceed
one year's Basic Rent for such Aircraft."
6. Schedule I to the Lease Agreement shall be amended in its entirety to
read as set forth in Schedule I attached hereto.
B. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AMENDMENT NO. 5.
--------------------------------------------------------------
This Amendment No. 5 shall become effective upon the fulfillment of the
following conditions precedent:
1. On the effective date of this Amendment No. 5 (the "Supplement
Effective Date"), the representations and warranties of Lessee set forth in the
Lease Agreement shall be true and accurate as if made on such date.
2. The Lease Amendment and the applicable Lease Supplements shall have
been executed and filed for information with the FAA in Oklahoma city, Oklahoma.
3. The receipt by Lessor from Lessee not later than two (2) days prior to
the Supplement Effective Date of the following, dated as of such Supplement
Effective Date, all of which shall be satisfactory in form and substance to
Lessor:
(a) copies of the articles of incorporation and by-laws of Lessee,
certified to be true and up to date copies by a duly authorized officer thereof
or certifying no changes or amendments thereto since the date they were last
certified to Lessor by Lessee;
(b) copies of resolutions of the board of directors of Lessee authorizing
Lessee to enter into and perform this Amendment No. 5 and the transactions
contemplated hereby, certified to be true and up to date copies by a duly
authorized officer of Lessee;
(c) a closing certificate and an incumbency certificate of a duly
authorized officers of Lessee setting out the names and signatures of the person
or persons
3
<PAGE>
authorized to sign the Lease Agreement;
(d) receipt by Lessor of the installments of Basic Rent pursuant to
Section 3 of the Lease Agreement, as amended hereby, and Supplement Rent
pursuant to Exhibit F to this Lease Agreement, as amended hereby, and payment of
all amounts then due under any other Long-Term Agreement.
4. The Final Order confirming the Plan shall be and remain in full force
and effect.
5. The Long-Term Agreements and the Letter of Credit shall be in full
force and effect.
6. No Default or Lessee Event of Default shall have occurred and be
continuing after giving effect to this Lease Amendment and no "Event of Default"
or "Termination Event" shall have occurred and be continuing under the Long-Term
Agreements.
C. MISCELLANEOUS.
--------------
1. Except as set forth herein, all terms and provisions contained in the
Lease Agreement shall remain in full force and effect. Nothing contained in this
Lease Amendment No. 5 shall be deemed a waiver by Lessor of any amounts due and
owing under the Lease or of any rights of Lessor existing on the date hereof
under the Lease; provided, however, that the amount of Deferred Basic Rent
represents the unpaid Rent due and owing on the date hereof (the "Unpaid Rent"),
and Lessor's sole remedy for the Unpaid Rent shall be the payment of Deferred
Basic Rent. Lessor hereby waives any Event of default under the Lease Agreement
arising solely from Lessee's failure to pay the Unpaid Rent; further provided
that Lessee's failure to pay the Deferred Basic Rent shall constitute an Event
of Default under the Lease Agreement and entitle Lessor to enforce all rights
and remedies under Section 14A of the Lease.
2. Lessee hereby confirms its agreement to pay to Lessor Basic Rent
(including Deferred Basic Rent) and Supplemental Rent for the Aircraft
throughout the Term in accordance with Section 3 of the Lease Agreement.
3. This Amendment No. 5 is being delivered in the State of Texas and shall
in all respects be governed by, and construed in accordance with, the laws of
the State of Texas, including all matters of construction, validity and
performance.
4. This Amendment No. 5 may be executed in several counterparts, each
fully-executed counterparts all of which shall be deemed an original, and all
such counterparts shall constitute one and the same instrument. To the extent
that this Amendment No. 5 constitutes chattel paper, as such term is defined in
the Uniform Commercial Code as in effect in any applicable jurisdiction, no
security interest in this Amendment No. 5 may be created through the transfer or
possession of any
4
<PAGE>
counterpart other than the counterpart marked as the "Original."
SIGNATURE PAGE FOLLOWS
5
<PAGE>
IN WITNESS WHEREOF, Lessor and Lessee have caused this Amendment No. 5 to
be duly executed and delivered as of the date and year first above written.
AMERICAN AIRLINES, INC.
By: /s/ JEFFERY M. JACKSON
---------------------------------------
Jeffery M. Jackson
Vice President- Corporate
Development and Treasurer
HAWAIIAN AIRLINES, INC.
By: /s/ BRUCE R. NOBLES
---------------------------------------
Bruce R. Nobles
President and Chief Executive
Officer
By: /s/ RAE A. CAPPS
---------------------------------------
Rae A. Capps
Vice President, General Counsel
and Corporate Secretary
6
<PAGE>
SCHEDULE I
This Schedule I has been left intentionally blank for recording purposes,
as the parties deem the information contained therein to be confidential
financial information.
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,427
<SECURITIES> 0
<RECEIVABLES> 22,499
<ALLOWANCES> 0
<INVENTORY> 7,249
<CURRENT-ASSETS> 43,581
<PP&E> 44,615
<DEPRECIATION> 4,004
<TOTAL-ASSETS> 165,638
<CURRENT-LIABILITIES> 89,842
<BONDS> 18,273
<COMMON> 94
0
0
<OTHER-SE> 29,831
<TOTAL-LIABILITY-AND-EQUITY> 165,638
<SALES> 254,327
<TOTAL-REVENUES> 254,327
<CGS> 255,429
<TOTAL-COSTS> 255,429
<OTHER-EXPENSES> 24
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,798
<INCOME-PRETAX> 2,822
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,822
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0
</TABLE>
