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.”

Please have your trays in their upright position and prepare for take off

Hawkair hopes to have creditor approval in less than a month regarding a deal between itself and Bar XH Aviation, a deal which should see it come out of restructuring after a year and half journey. And while rumours fly around the northwest that the deal means the end of a locally based airline, the management of Hawkair say that isn’t so.

In fact, they suggest that the agreement with Bar XH will give them a wider pool of aircraft to work with and will allow them to move into the charter business. It was a portion of the business that they faced limitations with in the past.


The full story was provided on the front page of Tuesday’s Daily News.

CLOUD CLEARS AS HAWKAIR GETS ON A FIRMER FOOTING
Company reveals long-term plans and insists it will remain in the region
By Leanne Ritchie
The Daily News
Tuesday, February 6, 2007
Pages one and three

Hawkair is moving ahead with a plan that it hopes will fly the company out from under creditor protection and towards a stronger future.

Hawkair is proceeding with an agreement with the Alberta based airline Bar XH and hopes to have approval from its creditors within the next month.

“One of the important things for an aviation company is access to capital and being able to access capital at a reasonable rate. Being tied in with these guys in Alberta is good access to capital,” said Rod Hayward, Hawkair’s CEO.

Last Week, the company, which has been restructuring for the past year and a half, filed its final plan with the courts. The final details of the Bar XH, Hawkair arrangement – in which Bar XH is taking an equity position in Hawkair – are currently being vetted by lawyers.

Hayward said one of the reasons the company ended up where it did in the past was “because we had to accept deals that weren’t favourable to Hawkair just to keep the doors open,”

Being tied to Bar XH really “changes the dynamic of the organization.”

The agreement with Bar XH also gives Hawkair access to more and different sized planes and will allow them to cater to more of the market.

“These guys in Alberta have about 20 airplanes… ranging from 10 feet aircraft to 19 feet aircraft…” said Hayward.

“Instead of just having the one aircraft type, we will have the flexibility to go after more charter work, smaller crew moves and things like that.”

Previously, Hawkair only had to access to its two leased Dash 8 passenger aircraft.

Unless they had a group of 30 people or more, charter work was out of the question, said Hayward.

“There have been lots of rumours that these guys are from Alberta are going to get involved with Hawkair and move us to Alberta. That’s something I really want to make clear – that’s not going to happen.”

”An airline has aircraft, which are easy to move from place to place, but we also have a lot of talented people. Without the people behind it, the airline is nothing,” said Hayward.

“And these people mostly live in Northwest B. C. and that’s where they plan on staying. Most of our staff have been here a long time.”

Hawkair has been providing flight service for 14 years in Northwest B. C., provides more than 50 jobs and has contributed more than $15 million in payroll to the local economy.

Bar XH also wants to establish a facility in British Columbia for servicing Hawkair. Bar XH and also third party aircraft.
In effect, the affiliation of the companies will expand Hawkair’s and Bar XH’s respective capabilities in both B. C. and Alberta.

Back into the Wild blue yonder and to the bargaining table!

Hawkair having found its white Knight from Alberta hopes to soon leave the clutches of court ordered creditor protection. The airline which struggled through the last couple of years provides the only alternative in air travel in the Northwest to Air Canada’s Jazz.

And while they begin the climb out of creditor protection they find themselves preparing for another bit of business, that of the unionization of their work force. No doubt concerned over the airlines near death experience, the workers at Hawkair are seeking out union certification for a portion of its roughly 100 employees.

The BC Supreme court ruled that their February 2006 attempt to certify would have to wait until the company came out of its restructuring, with that project almost complete it’s time for a whole new set of negotiations. Negotiations which could have an impact on what the airline looks like, as it prepares to resume more financially secure times.

The Daily News had all the details of the slow flight to financial security in their Tuesday edition.

HAWKAIR HOPES IT CAN FLY OUT OF CREDITOR PROTECTION
Company looking forward to moving ahead following support from BarXH
By Leanne Ritchie
The Daily News
Tuesday, January 9, 2007
Pages one and three

With Hawkair’s airplane problems finally resolved, it looks like the company may be close to coming out of court-ordered creditor protection.

Hawkair makes its next appearance in B. C. Court in less than a week on Jan. 15.

The local airline that operates between Northern B. C. and Vancouver announced last week that Alberta airline BarXH is proceeding with an investment into Hawkair and will be purchasing Hawkair’s aircraft.

Hawkair operates two Dash – 8’s, which it leases from Maritime based IMP Group Ltd.

However, a major stumbling block for the company has been its disagreement with IMP and their inability to find replacement aircraft elsewhere,

“The deal is they (Bar XH) are buying the aircraft and then Hawkair will operate the aircraft,” said Rod Hayward, CEO of Hawkair.

“The actual deal for the shares in Hawkair has actually yet to be figured out. But it strengthening up Hawkair and allowing us to move forward.”

BarXH, he said, has been able to enter into an agreement with IMP for those airplanes, valued at more than $7 million.

In a previous interview, he explained that Hawkair was having trouble finding replacement planes because there are limited quantities available and companies selling or leasing out Dash 8’s simply aren’t interested in talking to a company under court protection, he said.

Since BarXH has bought the aircraft, it has temporarily removed one from the Fort St. John to Vancouver route in order to fly service crews in and out of the Alberta oil fields during the busy winter season.

Hayward said this has resulted in some temporary layoffs on that route. However, he added that BarXH is looking for other planes in order to resume service.

Once the company comes out of court-ordered creditor protection, it has another issue to deal with – its employees want to unionize.

On Feb. 24, 2006, Hawkair received notice from the National Automobile, Aerospace, Transportation and General Workers Union of Canada that certain employees of Hawkair intended to apply for union certification.

However, the B. C. Supreme Court ruled that the employees would have to wait until the company was finished with restructuring.

“In a small company such as this, I am satisfied that there are insufficient resources to carry through with the submissions and negotiations which will be required if a collective agreement is to be reached… I am satisfied the company will be better able to handle such an application once the reorganization has taken place as the company will then know with certainty the economic status of the company,” said Hon. Justice Grant Burnyeat.

Hawkair employs about 100 people and serves Northern B. C. markets, flying from Terrace, Prince Rupert, Fort St. John and Dawson Creek to Vancouver

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."