Hawk Air looks to Albertan skies for salvation

Hawk Air, the Northwest’s alternative to Air Canada, is hoping to forge an alliance with an Alberta based airline, Bar XH, in order to get itself out of creditor protection.

It’s been a year since the airline entered into supervised creditor protection status suffering increasing fuel prices, insurance sots and leasing problems from aircraft suppliers. The potential loss of a valuable alternative link to the lower mainland has a number of people in the northwest worried about the state of the local aviation industry.

The Terrace Standard and The Daily News both featured stories outlining the scope of the discussions and the path the airline has traveled since the protection began last year.

REGIONAL AIRLINE HOPES DEAL WITH ALBERTA FIRM WILL FLY
Hawkair in talks with Bar XH about the future, “a good thing” says CEO
By Leanne Ritchie
The Daily News
Thursday, October 26, 2006
Pages One and Three

A partnership with an Alberta-based airline now appears to be Hawkair’s best opportunity to get out from under creditor protection.

Yesterday, Hawkair announced it was in discussions with Calgary-based Bar XH Air about a formal on-going relationship and has used Jan. 15 to present an agreement in B. C. Supreme Court.

“There is a deal for Bar XH to take an equity position and help us secure aircraft to move forward. It’s a good thing overall,” said Rod Hayward, Hawkair’s chief executive officer. “But there are a lot of details to be worked out.”

Hawkair, which operates passenger service between Northwest B. C. communities and the Lower Mainland, entered into court supervised creditor protection status in October 2005, a process similar to the one undertaken by Air Canada.

At the time, the company blamed escalating fuel prices, insurance costs and problems with getting what it describes as ‘fair’ leases with its aircraft providers.

Between its September and October 2006 court hearings, Hawkair was supposed to re-work its original Dash 8 purchase deal with Maritime-based IMP Group Ltd. to lower its payments or find replacement planes.

However, Hayward, in his court submission, said IMP has been unwilling to negotiate but at the same time the market for turbo prop planes has tightened considerably, making it difficult to find replacements.

“The world market for turbo prop regional aircraft has turned around considerably in the last year. In September 2005 there was probably 40 Dash 8’s available for sale. Right, now they are down to a handful,” said Hayward.

“Finding replacement aircraft has proven very difficult, especially while under CCAA.”

Given the limited quantities available, companies selling or leasing out Dash-9’s simply aren’t interested in talking to a company under court protection, he said. However, an agreement with Bar XH provides a new opportunity to find replacement aircraft.

“It’s pretty exciting when you look right at it. Bar XH has been in the aviation industry back to 1967.

”They have 50 pilots and are pretty well established operation out there in Alberta,” said Hayward.

Bar XH has been thinking about moving into larger aircraft and Hayward said they see a merger as a good way to get there.

“They want to get into the oil field communities out there with all the crews being moved around… so they decided they want to get into some bigger aircraft,” he said.

Bar XH also wants to establish a facility in British Columbia for servicing Hawkair, Bar XH and also third party aircraft.

In effect this affiliation will expand Hawkair’s and Bar XH’s respective capabilities in both B. C. and Alberta.

While some details of the Hawkair, Bar XH transaction were reported in other media, Hayward said these reports are not accurate because the deal has yet to be firmed up.

Despite being under court protection Hawkair is reporting a profitable fiscal year-to-date for 2006. The company employees 100 people.



Hawkair strikes a deal to sell
Oct 25 2006
Terrace Standard

HAWKAIR HAS reached a tentative deal that will see the local company sold to an Alberta aircraft charter company called Bar XH for $1 and to receive a loan to help pay its creditors.
The intent is to restore Hawkair's financial stability by clearing its debts and take it out of its year-long, court-approved creditor protection status.

The deal, details of which were released Oct. 20 in B.C. Supreme Court, also means a strengthening of each company's charter operations while continuing Hawkair's scheduled air service in the northwest and northeast.

The Oct. 20 court hearing was critical to Hawkair as it had to show substantial progress was being made to restructure its operations. Creditor protection status was extended to Jan. 15 to allow Hawkair and Bar XH to finalize their arrangement. A crucial part of the deal calls for Bar XH to try to reach a deal with the company that sold Hawkair the two Dash 8-100s it now flies or failing that, to find other aircraft. Hawkair has spent the last year trying to re-do its original Dash 8 purchase deal with Maritime-based IMP Group Ltd. to lower its payments.

The aircraft are now considered worth less than what Hawkair originally paid for them and troubles with meeting the payment schedule was one of the reasons the company sought creditor protection status in Oct. 2005.

Hawkair chief executive officer Rod Hayward, also the company's sole director, hopes Bar XH will get a better reception from IMP which had sought a court-order to have the aircraft returned.

"It's not a done deal with IMP by any means and we may not be able to secure those aircraft but that's our hope," said Hayward following last week's B.C. Supreme Court date.

Bar XH has been operating since 1967 and has bases in Medicine Hat and Calgary.

It services Alberta's oil and gas industry with charters and has an air ambulance contract with the Alberta government in addition to servicing aircraft belonging to other companies.

IMP was the only company in court last week to object to an extension of Hawkair's protection status. Earlier this year it was saying it had a deal in place to send the two Hawkair Dash 8s to an American company.

It's been trying to get its aircraft back for months but has not been able to convince the Supreme Court to grant its wish.

Even if Bar XH can't reach a deal with IMP to keep the two Dash 8s, Hayward's confident replacement aircraft can be found.

He said Hawkair's creditor protection status didn't put it in a favourable position when it was all by itself in trying to put together financing for a new deal with IMP or to find replacement aircraft.

Hayward added that it was too early yet to indicate how the ownership structure would work stemming from any Bar XH/Hawkair relationship.

Hayward, who called the Bar XH-Hawkair deal a merger, said Hawkair is developing an extensive fishing charter business in the summer months while Bar XH does a lot of oil field work in the winter months.

"With the way the timing the way it is, the services were really complementary to each other," said Hayward.

The tentative deal calls for the cancellation of Hawkair's currently issued shares and for the issuing of new shares, all of which would be issued to Bar XH or to someone else of its choosing.

Bar XH would acquire all of Hawkair's assets, including its licences and spare parts.

A shareholder loan of $200,000 and debt restructuring would result in an offer to creditors of more than they could expect if Hawkair went into bankruptcy, indicate documents filed with the court.

Those same documents indicate Bar XH wants to expand its charter service in light of the booming Alberta economy but doesn't have the time to assemble the people and regulatory approval it needs to take advantage of the opportunity.

"Since Hawkair has both aircraft, trained personnel and regulatory approval (ie licences) this should enable Bar XH to accept and service the new charters provided they have immediate and uninterrupted access to these resources," the company stated.

Bar XH also said it sees potential in adding to Hawkair's scheduled passenger flights.

There's no indication of the effect on Hawkair's nearly 100 employees but Bar XH does state it would meet "severance obligations to those few employees not selected to remain with Hawkair."