Dave Banmiller, chief executive of Hawaiian carrier Aloha Airlines, is now on his third airline restructuring after what he hopes will be his last appearance in the US bankruptcy courts. So what does it take to revive a patient on the critical list?
As an airline chief executive who has been tapped three times – perhaps a world record – to restructure airlines via the bankruptcy route, I am often asked how one prepares and trains for such difficult assignments.
The short answer is: “You can’t.”
You need mental toughness and extreme focus under pressure, strong communication skills, and the ability to function in an “economic Vietnam” environment that’s 24 hours a day, seven days a week.
To put it in perspective, it is a lot like professional sports, say American football, for example. You have referees – the judge and the US trustee. There is a coach – that would be the chief executive – who faces the inevitable challenge of marshalling all the diverse groups and interested parties to form a team, and hopefully a cohesive one. A key responsibility, perhaps the most critical of all, is choosing the right team members, given the egos, experience levels, hidden agendas and personal chemistry that have to be kept together.
For starters: who will be the lead attorney? Where is the case going to be filed? (Believe me, six-hour time zone differences are a killer). In the midst of all the turmoil, who can be trusted to be on the senior management team? Who do you choose as the investment banker/adviser? What sort of finance partner can keep you alive from a cash point of view? Can you live with them and their onerous covenants? Who will chair the creditors’ committee?
The coach’s skills must also include dealing with the intense daily pressure from banks, vendors and creditors; and the crucial ability to negotiate with the player agents, who are the unions. In addition, the coach needs to be nimble and able to constantly motivate, convince, cajole and make tough calls.
The lead attorney is the quarterback, who needs to be calling the plays in concert with the chief executive/coach. That is perhaps the most critical relationship in bankruptcy, as it is in American football. The respect between the two, the almost uncanny ability to understand each other, and the need to allow for audible signals in court, at the last minute, can be crucial to the ultimate success of the bankruptcy.
You also have the equivalent of sports writers in that the news media are there in the courthouse, listening to you describe your precarious financial condition, and they don’t mind playing to their audience, and giving their opinions as to the talent of the players and coaches.
To extend the football metaphor a bit further, the coach cannot ignore the groundskeepers, who maintain the playing field and keep it level. This may mean working closely with the governor and attorney general, other elected officials, and in the case of an airline, the airport authorities. We also deal with concessionaires in the form of airline catering companies, and they demand immediate cash payment.
Thankfully, there are also the fans and cheerleaders – although never enough – who support you. Among them are family, friends and customers, and hopefully to some extent, the unsecured creditors committee, and of course, your own employees. Without their understanding, the game is lost.
As to keeping score, there are a few numbers to watch, and these include how much goes to unsecured creditors, the new balance sheet, the fresh cash position, the cost structure going forward and the percentage of ownership.
And make no mistake: there are winners and losers. Hopefully, at the end of the day, employment is protected to the extent possible, vendors who got hurt now get business, the community continues to enjoy healthy competition, and the new investors have a viable strong entity.
From my experience, each bankruptcy is different. However, there are some common themes. First, it is enormously stressful. The only way through it is too keep perspective, maintain some sense of humour in the face of adversity, over-communicate with all parties, and maintain an eternally positive disposition. It is also critically important that the chief executive/coach be given maximum authority to make decisions. Often there is little time to study/ponder/debate/vote.
Then of course there is the business itself, which needs to continue to function. Employees need to feel that there is an end in sight and there is life outside bankruptcy. For investors to decide on buying into the enterprise they need to be convinced that the company is viable, has a solid management team, and has a business model that can succeed. Finally, maintaining a positive attitude through the process is essential to success. The phrase “failure is not an option” must always resonate throughout the whole process.
When that Super Bowl day of the confirmation hearing comes, and the judge pounds down his gavel, it’s impossible to understand the feeling of relief unless you have been out there on the field.
Let’s hope that this was my last appearance on the Astroturf pitch of bankruptcy.
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