This has to be one of the most perverse stories I have seen in a long time. So bear with me - this one takes a little getting into. if it wasn't for a Federal Bankruptcy Judge - Mesa's grab for Aloha's storied brand might have gone through unnoticed.
So first here is a bit of the PR Spin from Mesa Air Group's Hawaiian based subsidiary Go! Airways announcing their November 2008 figures and their recent settlement of the outstanding lawsuit caused by the demise of Aloha Airlines at the hands of Mesa. I am trying to use my words carefully here.
...."The word 'Aloha' uniquely represents Hawaii throughout the world and by promoting it internationally we will add valuable support for inbound tourism, the economic lifeblood of Hawaii," said Paul Skellon, VP. "Aloha is a name dear to all of us and we at go! would love to see it as a symbol of great service, the lowest fares and affordable inter-island travel for everyone."
So lets follow the story. It has been widely reported and covered in the media that the collapse of Aloha Airlines was driven by a failed set of business models by Yucaipa (the investment group linked to former president Bill Clinton) and the predatory pricing by Mesa which destroyed yields in the Hawaiian market at a time when they could ill afford it. This blame is Congressional public testimony from the then 3 other airlines in Hawaii - Island Air (formerly part of Aloha), Hawaiian (now the big fish) and Aloha's failed CEO.
At the auction of the assets of Aloha Air Group - Saltchuk (who also owns Northern Air Cargo) picked up the still running Aloha Air Cargo business and its ground ground handling business went to Pacific Air Group. The name and brand rested with Yucaipa, who claimed losses of over $150 million and sued Mesa as its former fellow inter Island carrier had.
In Q2 of 2008 Hawaiian Airlines - who like Aloha - had been courting Mesa Air as a potential investor only to find that Mesa had allegedly used the information to form the business plan that became Go! - settled out of court and reached a $52.5 million before-tax settlement with Mesa, which Hawaiian received to settle its lawsuit over anti-competitive practices in the interisland market. So the debtors of Aloha mostly Yucaipa clearly thought they had at least that claim's worth of money coming to them.
Astonishingly Yucaipa settled with Mesa for just $2 million plus a sum of of free tickets to be provided to former employees of Aloha the injured party in all of this. There is a promise of some future share of profits but that is a slim possibility judging by the performance of Mesa's other businesses in recent years.
After fully 6 months of the new world order in the Hawaiian Islands - Mesa Air announced with significant relish that their traffic Y/Y was up (drum roll please) just over 1% for November 2008 over the same period a year earlier.
Here are their figures:
November Results Nov-08 Nov-07 Change
------ ------ ------
RPM (000) 8,138 7,927 2.67%
ASM (000) 12,744 11,254 13.24%
Passengers Carried 55,591 54,895 1.27%
Load Factor 63.86% 70.43% (6.6) pt
Year-to-date Results YTD 08 YTD 07 Change
- ----- ------ ------
RPM (000) 107,413 91,758 17.06%
ASM (000) 158,664 136,371 16.35%
Passengers Carried 737,674 640,114 15.24%
Load Factor 67.70% 67.29% 0.4 pt
So despite dumping over 13% more capacity in the market and achieving a paltry 2.7% increase in RPMs they still couldn't make a big dent in the market. Clearly anyone who could was avoiding Go! like the plague. Year to date the numbers look better but not by mutch.
Mesa's press release goes on to say ..."and our recent settlement of our lawsuit with Aloha has given us another reason to be optimistic. The settlement resolves all claims made by Aloha Airlines and permits us to focus on our longstanding objectives of providing the best service and the lowest fares to the people of Hawaii."
Not so fast Mr Ornstein (Chairman of Mesa Group) that is not true. And I quote from the local Honolulu news paper the Star Bulletin December 5th, 2008:
"A federal Bankruptcy Court judge blasted the insensitivity of the parties involved in a licensing agreement and temporarily blocked a deal that would have allowed bankrupt Aloha Airlines' bitter rival to re-brand its go! planes with the Aloha name.
Judge Lloyd King postponed yesterday a hearing on a licensing pact between Mesa Air Group and Yucaipa Cos. until Feb. 19 to give supporters and opponents of the deal more time to respond.
"How about all the people whose lives were devastated in this case?" asked King, noting that Mesa and go! are largely blamed for Aloha's demise. "Doesn't that count? Is it just the money?"
Yucaipa, the former controlling shareholder of Aloha, had won the rights to Aloha's intellectual property at an auction Tuesday with a $750,000 bid. Aloha received court approval in June to sell its lawsuit against Mesa to Yucaipa, which settled the suit on Friday with Mesa.
Local aviation historian Peter Forman said if Mesa acquires the Aloha name, it would create "a monster - an airline with the face of a friendly kamaaina company but with the heart of a mainland predator. This would be heartbreaking for the former Aloha Employees." End Quote.
So if Mesa thinks that it has the market open to itself it clearly wasn't paying attention to the former commuter carrier that was operating in Go colors as Go Express - Mokulele Airlines. They didn't waste any time in seeing that the opportunity was there for a lower cost competitor in the market and partnered with Republic Air's Shuttle American subsidiary and is now operating flights on Embraer 170s with 70 seats vs Mesa's older Canadair CRJs which seat a maximum 50 seats. So Mokulele Airlines dumped Mesa and started its own business. Having operated since 1998 it knew a little about the market. At the same time it has partnered with several carriers including Alaska Airlines to provide InterIsland feeds.
Phew!
Moral of the story - always watch your back and never trust the nice smiling guy. And MOST of all DONT believe all the PR Bullshit you could read.
Cheers
Postscript and Disclosure. The Professor was involved in an attempt to revive the Aloha company.
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