Hawaii's Interisland Air War - Chapter 4

[Miulang]

Re: Hawaii's Interisland Air War - Chapter 4

I read the judgment. Mesa thought it would get away with a fine of about $8 million. Hahahahaha. What were they sniffing that day anyway?

This statement was released by the chair of the Mesa Air Group unit of ALPA:

"We are shocked and appalled by these developments," said Captain Michael Jayson, chairman of the Mesa Air Group unit of ALPA. "The actions of MAG's senior management have put the future of Mesa Air Group and the livelihoods of their hard-working employees in jeopardy. Although the negative publicity will soon die down, the financial impact of the Hawaiian Airlines decision -- if it is not overturned on appeal -- will likely be felt for years to come. Combine this with the skyrocketing attrition among our pilots and the on-going operational and staffing problems at Mesa Air Group, and you can begin to appreciate why the pilots are so concerned about the future of our company."

Miulang

[Star of Gladness]

Re: Hawaii's Interisland Air War - Chapter 4

I read the judgment. Mesa thought it would get away with a fine of about $8 million. Hahahahaha. What were they sniffing that day anyway?

This statement was released by the chair of the Mesa Air Group unit of ALPA:

"We are shocked and appalled by these developments," said Captain Michael Jayson, chairman of the Mesa Air Group unit of ALPA. "The actions of MAG's senior management have put the future of Mesa Air Group and the livelihoods of their hard-working employees in jeopardy.

Miulang

I am shocked and appaled at the headline in the Advertiser this morning.

Hawaii air fares may rise after $80M ruling

This is horse crap!

What trash! What it should have read is this;

Crooked CEO got caught stealing again

or

Chickens came home to roost for Shyster

or

Aloha will soon own Mesa

[MixedPlateBroker]

Re: Hawaii's Interisland Air War - Chapter 4

Although I agree with Faris' ruling, I do hope go! sticks around if just to keep HAL and AAH honest (read: cheap airfare). What irony that Hawaiian released its quarterly report "Hawaiian profit soars 152%" just hours before the ruling. But it shows that one doesn't have to charge $100+ per interisland ticket to be profitable.

If go! decides to bail, maybe they can open up another refinery & a chain of gas stations on Oahu. Dollar gas specials would be much appreciated.

[Miulang]

Re: Hawaii's Interisland Air War - Chapter 4

Although I agree with Faris' ruling, I do hope go! sticks around if just to keep HAL and AAH honest (read: cheap airfare). What irony that Hawaiian released its quarterly report "Hawaiian profit soars 152%" just hours before the ruling. But it shows that one doesn't have to charge $100+ per interisland ticket to be profitable.

If go! decides to bail, maybe they can open up another refinery & a chain of gas stations on Oahu. Dollar gas specials would be much appreciated.

Actually, the reason for the profit is because of the traffic HA generates in tourists flying in from the West Coast. I've always thought that the high fares on intraisland trips were helping to subsidize the Mainland fares. Right now, I could book a flight from SEA to OGG for $174 OW midweek Thanksgiving weekend if I wanted to stop over in HNL; otherwise it's $223 for a nonstop flight.

Miulang

[joshuatree]

Re: Hawaii's Interisland Air War - Chapter 4

With oil getting closer to $100 a barrel, doesn't matter which of the three but they should all be looking at props for interisland.

[Miulang]

Re: Hawaii's Interisland Air War - Chapter 4

With oil getting closer to $100 a barrel, doesn't matter which of the three but they should all be looking at props for interisland.

Consider also that HSF will be raising its fuel surcharge on passenger and car fares as well. I figure everytime YB and Matson raise their surcharges, HSF will, too. What was it right before they stopped operating? 28%?

Miulang

[MixedPlateBroker]

Re: Hawaii's Interisland Air War - Chapter 4

Actually, the reason for the profit is because of the traffic HA generates in tourists flying in from the West Coast. I've always thought that the high fares on intraisland trips were helping to subsidize the Mainland fares.

That's a moot point considering that Hawaiian has to keep their transpacific airfares competitive with the rest of the market. What I was trying to get across is that Hawaiian is still turning a tidy profit despite having to lower their interisland airfares due to increased competition.

[joshuatree]

Re: Hawaii's Interisland Air War - Chapter 4

Consider also that HSF will be raising its fuel surcharge on passenger and car fares as well. I figure everytime YB and Matson raise their surcharges, HSF will, too. What was it right before they stopped operating? 28%?

You can't just keep on tacking on fuel surcharges everytime the price of fuel goes up. Eventually, that will dampen demand and cause the downward spiral of a business slowdown. A savvy company will find ways to trim op cost fat to help minimize surcharges.

That's a moot point considering that Hawaiian has to keep their transpacific airfares competitive with the rest of the market. What I was trying to get across is that Hawaiian is still turning a tidy profit despite having to lower their interisland airfares due to increased competition.

The tidy profit proves that a company willing to work hard on trimming cost can make a profit despite the challenges of the market. This is why I don't buy into the argument that travel has to be expensive because everything in Hawaii is expensive just because.

[Miulang]

Re: Hawaii's Interisland Air War - Chapter 4

That's a moot point considering that Hawaiian has to keep their transpacific airfares competitive with the rest of the market. What I was trying to get across is that Hawaiian is still turning a tidy profit despite having to lower their interisland airfares due to increased competition.

They're NOT making a profit with the $19 or $39 fares. In order for them to break even on the interisland routes, they need to charge at least $60-75 OW. If all 3 airlines charged around $60 on most seats, they all could stay in the Hawaii market. Go! definitely wanted to get rid of AQ so they could be the second airline, and fares would go up higher than $75. Someone elsewhere pointed out that go!s operating expenses should be less than either HA or AQ because they use props and only have one flight attendant, v. HA and AQ having at least 2 flight attendants per fllight and using jets.

HA does a booming business in transpacific traffic. Their fares most of the time are less than what the larger national carriers charge. They have a sterling reputation for being on time, the fewest lost bags, etc. of any of the national carriers. Mainland tourists like flying on HA. HA has also scored some nice contracts ferrying NFL teams around: they have one for the Raiders and I think the Seahawks.

Miulang

[MixedPlateBroker]

Re: Hawaii's Interisland Air War - Chapter 4

They're NOT making a profit with the $19 or $39 fares.

Errr, I never said they were making a profit directly from the $19 or $39 fares. But as anyone who's made an online reservation for interisland travel with HAL or AAH (and likely ASH, a.k.a. go!) knows they have a tiered fare structure with one or two daily flights to each select destination at whatever special price they may be advertising. The remainder of the flights are priced higher to help them balance the books. That's loss leadership in action [read: They're still making some profit from interisland flights and not depending solely on mainland routes].

Originally Posted by MixedPlateBroker
But it shows that one doesn't have to charge $100+ per interisland ticket to be profitable.

And if any of the three major interisland carriers were to exit the market, the only thing that would keep fares from returning to pre-go! rates is competitive pressure from the HSF.

[joshuatree]

Re: Hawaii's Interisland Air War - Chapter 4

Someone elsewhere pointed out that go!s operating expenses should be less than either HA or AQ because they use props and only have one flight attendant, v. HA and AQ having at least 2 flight attendants per fllight and using jets.

go! doesn't use props but they did pick up their used CRJs cheap from the liquidation of Independence Air. The one flight attendant and no frills like drinks do help with the op cost. And since everyone bashes Mesa for low pay, that's a low cost op. The only thing that is expensive for go! would be fuel, don't know what the fuel efficiency of the CRJ is compared with the 717 or 737, my guess is somewhere in the between the two.

[Star of Gladness]

Re: Hawaii's Interisland Air War - Chapter 4

And since everyone bashes Mesa for low pay, that's a low cost op. The only thing that is expensive for go! would be fuel,

Would training 500 replacement pilots for those that quit this year also be a low cost item?

appx $30,000 just for simulator & initial new hire training X 500 pilots

= another $15 MILLION

Can somebody please explain to me why he is still here? Could it be that at this point he has less to lose by staying now?

Why would he think he has less to lose when he has already lost...

$30 MIL in go! startup costs he will never see again
$80 MIL lost in the lawsuit
$10 MIL in attorneys fees (payable to HAL)
$15 MIL in additional unecessary training.
$30 MIL buying back the tanking stock.
$15 MIL out the window to Nillchi

This is about $180MIL lost in the past year. (not including the $8 to $20 MIL juice he will have to post for the bond when he appeals)

Aloha's lawsuit is looming as well.

I would think he is purposely sinking Mesa. He ought to be investigated he is destroying peoples lives and dreams as we speak.

This is ENRON and Tyco all over again.

[Miulang]

Re: Hawaii's Interisland Air War - Chapter 4

What Ornstein told the Arizona Republic the other day after the award amount was announced:

In an interview Wednesday, Ornstein said his worst-case scenario called for damages of between $10 million to $20 million. He also said that his attorneys had told Mesa's board of directors that it stood a 60 percent change of prevailing in the case - despite the damaging discovery of evidence destruction and a cover-up by a top executive.

"Clearly this is more than we anticipated because, frankly, you can't come to these numbers," Ornstein said. He said there were no details on how the damages were calculated beyond a general statement saying they covered Hawaiian's lost revenue and increased costs brought on by the debut of go!The court ruling rattled investors in the Phoenix-based company. Mesa' stock fell nearly 9 percent, to $4.65. It started the year near $9 a share.

... Ornstein said the ruling, which the company is appealing, doesn't change Mesa's long-term plans or outlook. It will continue to operate go!, the 14-month-old low-fare Hawaiian airline that sparked the case.

The company has more than $200 million in cash, so an $80 million payment won't bankrupt the company, he said. It won't have to pay Hawaiian until the appeals are done, a process Ornstein expects to take a few years.

The airline will have to post a bond or letter of credit in the amount of the judgment.

"Clearly an $80 million bite hurts," Ornstein said. "On the other hand, they did not get us off the island, which is what their goal was."

Read some of the comments following the story, too. They are pretty amusing, especially the ones that comment on Ornstein's early career as a failed stockbroker.

Miulang

[LikaNui]

Re: Hawaii's Interisland Air War - Chapter 4

Read some of the comments following the story, too. They are pretty amusing, especially the ones that comment on Ornstein's early career as a failed stockbroker.

Nothing to see here. I deleted what I'd originally written in this reply.
Carry on.

[joshuatree]

Re: Hawaii's Interisland Air War - Chapter 4

$30 MIL in go! startup costs he will never see again
$80 MIL lost in the lawsuit
$10 MIL in attorneys fees (payable to HAL)
$15 MIL in additional unecessary training.
$30 MIL buying back the tanking stock.
$15 MIL out the window to Nillchi

Giving the Hawaii flying public some welcomed relief in fare prices......priceless.


At this point, I don't see go! leaving short of something catastrophic internally with Mesa. You figure if they leave, they still have to pay the fine. Their planes are paid for, the operation is already in place and humming along. What they will probably need to do is raise the fares up but so long as they don't raise it to the old AQ/HA rates, people will still welcome them.

The fine exacted by the judge was based on breach of contract regarding the confidential agreement. Does AQ have the same argument in their suit with go? I noticed the judge didn't say anything about predatory pricing.