Hawker Beechcraft $5.3 million employee incentive plan denied approval

By Caroline Salls

Pittsburgh, Aug. 24 - Hawker Beechcraft, Inc.'s motion for approval of a $5.3 million key employee incentive plan (KEIP) was denied Friday by the U.S. Bankruptcy Court for the Southern District of New York.

"Although the KEIP includes elements of incentive compensation, when viewed as a whole, it sets the minimum bonus bar too low to qualify as anything other than a retention program for insiders," judge Stuart M. Bernstein said in the ruling.

"Because the [senior leadership team] members will likely earn some bonus under the KEIP merely by remaining with the debtors and regardless of the road the debtors take, approval of the KEIP must be denied."

According to the order, the KEIP would have applied to eight Hawker Beechcraft "insiders," including the company's chairman, executive vice president of operations, vice president of human resources, vice president of engineering, executive vice president and general counsel, senior vice president of global customer support, chief financial officer and executive vice president of customers.

Union objection

As previously reported, the International Association of Machinists and Aerospace Workers (IAM) objected to the key employee incentive plan motion in July, calling the plan a "thinly disguised effort" to reward top executives at Hawker Beechcraft for achieving "routine, short-term and not particularly challenging" tasks.

The union said the 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.

The IAM also said the motion should be denied because the KEIP failed to specify any true incentive thresholds as required by the U.S. Bankruptcy Code.

Instead, the union said the motion sought to provide the executives with up to $5.3 million in "pay to stay" bonuses.

Retention plan approved

On July 30, the court did approve Hawker Beechcraft's $1.9 million key employee retention plan (KERP), which covers 31 management-level non-insider employees who are vital to the company's business and reorganization.

The KERP participants work in the company's operations, engineering, customer organization, finance, human resources and legal departments.

The company said each KERP participant will receive a lump-sum cash award payment upon either the effective date of a plan of reorganization, or the completion of a third-party transaction.

Hawker Beechcraft, a Wichita, Kan.-based manufacturer of business, special mission, light attack and trainer aircraft, filed for bankruptcy on May 3. Its Chapter 11 case number is 12-11873.

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