Hawker-Beechcraft executive bonuses challenged

Bankruptcy court delays ruling

July 27, 2012

Bankrupt aircraft manufacturer Hawker-Beechcraft Inc. has encountered resistance from a federal trustee and a labor union over its plan to award $5.3 million in bonuses to eight senior executives as the company’s works through a Chapter 11 restructuring process initiated in May.

The Associated Press reported that U.S. Bankruptcy Judge Stuart Bernstein heard arguments, but did not rule on the bonuses at a hearing in New York July 26. Bernstein requested written summaries of testimony prior to making a decision, but approved bonuses totaling $1.9 million for other company managers, the report said.

The bonus plan for senior management was opposed by a federal bankruptcy-oversight trustee, and by the International Association of Machinists and Aerospace Workers. The union, in a news release, described the incentive plan as “a thinly disguised effort to reward top executives at Hawker Beechcraft for achieving ‘routine, short-term and not particularly challenging’ tasks.”

The bankruptcy court “should not lose sight of the ‘complete irony and hypocrisy’ of a motion seeking to provide millions in bonuses for executives at a company struggling to survive,” said the union, which represents 2,000 company employees, or about 45 percent of its current active workforce, according to the union’s objection filed July 25.

Hawker-Beechcraft responded to the objections July 26, arguing that its senior leadership team has been “crucial” to progress the company is making during the bankruptcy process, including “developing a relationship” that attracted a $1.79 billion purchase offer from Superior Aviation Beijing Ltd.

Without the incentive plan, which the firm noted is supported by creditors groups, the chances of the company achieving its restructuring goals would be “severely jeopardized,” Hawker-Beechcraft said.

AOPA reported July 16 that the bankruptcy court approved the company’s request to negotiate exclusively for 45 days with Superior for the sale of all but the military portion of Hawker-Beechcraft.

A sales price of less than $1.79 billion would reduce the incentive payments to which the parties objected, Hawker-Beechcraft said in its response.