In a surprise twist to the Island Air bankruptcy case, the trustee overseeing the liquidation filed a last-minute motion this morning disclosing that Hawaiian Airlines’ parent company has agreed to purchase the operating certificate and other assets of the failed company for $750,000.
Hawaiian Holdings Inc. said it would buy the operating certificate for $450,000 and immediately provide cash advances to pay for Chapter 7 administrative expenses. Hawaiian said it would buy other assets, such as ground-service equipment, furniture and frequent-flier lists, for $300,000.
Bankruptcy Judge Robert Faris said he was prepared to grant the motion to dismiss the case until the trustee came through with the surprise buyer. Faris gave preliminary approval to the sale. A hearing on the sale is set for Jan. 5.
Hawaiian spokesman Alex Da Silva said the decision to buy the operating certificate was a way to bring in-house the company’s turboprop airline, ‘Ohana by Hawaiian, rather than outsource the contract as it is now to Idaho-based Empire Airlines.
Da Silva said the state’s largest carrier formed a new wholly-owned subsidiary, Elliott Street Holdings, to purchase the stock of Island Air and assume ownership of Island Air’s Federal Aviation Administration operating certificate as well as other assets. ‘Ohana by Hawaiian, which launched service in March 2014 and now has three 48-seat ATR-42s, flies between Honolulu and Molokai, Honolulu and Lanai, Kahului and Kona, Kahului and Molokai, Kahului and Hilo and Lanai and Molokai.
“If approved, the sale will allow ‘Ohana by Hawaiian to assume oversight of operations currently provided under contract by Empire Airlines,” Da Silva said. “Those operations would include the hiring of pilots, flights attendants, and customer service and maintenance crews (who now are all Empire employees). We believe that assuming the FAA certificate will greatly benefit our guests by improving the efficiency and reliability of ‘Ohana by Hawaiian.”
If the sale is approved, then the trustee’s attorney, Simon Klevansky, said he would reconvert the case to a Chapter 11 reorganization bankruptcy and Hawaiian would buy new shares of what essentially would be a shell company.
Klevansky said the trustee is still working on trying to enable the more than 400 Island Air employees to gain access to their 401(k) retirement accounts.
Island Air filed for Chapter 11 bankruptcy on Oct. 16 and ceased operations on Nov. 10. It converted the case to Chapter 7 on Nov. 15.