Refinanced Hawkair proves a costly thing for Prince Rupert

While the city's residents most likely welcome the rejuvenated state of Hawkair and the travel options it provides to the north coast, it's exit from bankruptcy protection is proving to be something that will cost the city of Prince Rupert some money.

The City's status as an unsecured creditor means that Hawkair will only be paying thirteen cents on the dollar, for monies owed while it suffered it's problems. Which means that whan all the bills are tallied and the final cheque clears, the city is set to lose a quarter of a million dollars in lost revenues due to the protection in place by the courts.

As the airline travelled down its path to refinancing, it rolled up a debt of monies owed totalling $119,920.49 to the Prince Rupert Airport Society and $158,360 to the city for ferry services provided by the Digby Island ferry.

The debt of Hawkair was not just a local concern, the airline had amassed a debt load of over 6 million dollars to a number of unsecured Northwest creditors, now with a new financial plan in place and new investors they will have 500,000 dollars to pay back a portion of what was once owed.

The remainder will be written off by the creditors who are now wiser but certainly not any wealthier.

The Daily News provided a full recap of the situation in the Thursday edition of the paper.

Sale of Hawkair hits city in pocket book
By Leanne Ritchie
The Daily News
Thursday, April 05, 2007

The City of Prince Rupert and the Prince Rupert Airport Society stand to lose close to a quarter of a million dollars in the restructuring and sale of Hawkair.

The city is an unsecured creditor and is expected to receive about .13 cents on the dollar owed by the troubled airline.

“It’s not good news obviously,” said Prince Rupert Mayor Herb Pond.

“We suffered the same kind of hit with Air Canada when they restructured. It just speaks to how volatile this business is and how great the need is for people managing the airport to stay on top of those bills.”

This past March, the city along with the majority of Hawkair’s unsecured creditors agreed to a proposal to sell the regional airline to Alberta-based Bar XH. Hawkair had been under court protection from its creditors for 16 months while it tried to refinance its airplanes and reduce costs.

This month, Hawkair sold its assets to Bar XH for $200,000 in exchange for an agreement to continue air service in the Northwest and the employment for its workers.
The company expects to have about $500,000 to spread around its unsecured creditors, who are owed more than $6 million.

Hawkair owed $119,920.49 to the Prince Rupert Airport Society, which operates the airport, and $158,360 to the city, which operates the ferry service to Digby Island.

However, the city is not alone on the list of unsecured creditors who have agreed to take a bath. Other municipalities and locally-run airports including the Kitimat Terrace airport, are owed $182,785; North Peace Airport services is owed $42,631 and Dawson Creek is owed $64,549.
Pond said council became concerned, as did the airport society, as that debt continued to grow and the company struggled.

“The airport society working with council agreed to put Hawkair on very strict terms so that did not grow any more during the time of their operations. Thank heavens we capped it where it is,” he said.

“But it’s a challenge because what do you do with an air carrier that has flights coming in every single day and is now falling behind on payments. It never happens instantaneously. It happens a little bit at a time and people do the best they can but it’s a hit.

“That’s money that could have been used for upgrading the water system and increasing passenger amenities. It’s behind us. What we have to do now is focusing our business for the future.”