"We tend to invest in companies that are in disfavor for one reason or another," Adams said yesterday in his first local interview since his Airline Investors Partnership bought a majority stake in the airline for $20 million in January. The investment allowed AIP to put six of its representatives on Hawaiian's 11-member board and effectively take control of the airline.
Adams, who became Hawaiian's board chairman in January, said his group is attracted to companies that are in industries that aren't popular, those that are in financial distress, and those that are not working well for a variety of reasons. His partners believe they can bring new financial direction to such companies and turn them around, he said.
"That's the way we looked at Hawaiian Airlines in 1995," Adams said. "The Hawaii economy was not doing well. The airline had come through a difficult bankruptcy." In addition, Hawaiian had managed to irritate its regular customers, he said.
But it was on the road back under Bruce R. Nobles, who came in as chairman and chief executive officer in 1993.
"We did a fair amount of due diligence and figured it represented a good opportunity," Adams said.
Positive signs for the future include improvements in Hawaii's economy, which is dependent on Japan and the West Coast, two areas that are also improving, he said.
Not only will mainlanders continue to come to Hawaii, there is huge potential from largely untapped markets in Asia, he said.
Nobles has succeeded in making Hawaiian an airline with a low operating cost, Adams said, and it has a good franchise in a market with a future, he said.
"While we tend to invest in things that other people think are risky, we do it conservatively," Adams said.
As president of Smith Management Co. of New York, Adams also led a group that bought into Southern California health care facility business, Regency Health Services Inc., in March 1988. Adams is chairman of that publicly held company and said his group is staying with it as long as the group can increase the value of the company.
Asked how long his group might stay with HAL, he said: "We will be in Hawaii Airlines as long as we feel it has untapped value and we feel that we can bring something to the table."
Adams said he has had an interest in aviation since taking Air Force ROTC in college, when he wanted to be a pilot.
But he didn't pass the medical examinations, so he went to law school instead and worked as a lawyer for the Air Force.
He said airlines are in a capital intensive, highly competitive environment but they can produce substantial profits if they are well run. "Owning an airline is like owning a baseball team. Everyone wants to own a ball club and everyone wants to own an airline," he said. The glamour is there and the potential is great, but the potential is difficult to achieve.
"Overnight, you could lose your investment," he said. The key is in having good management and Adams said he has that in Nobles, who was well on the way to turning Hawaiian around before the group got involved.