Size matters

Jonathan Ornstein, the head of go! airlines, said he never would have launched the interisland carrier had he known how things were going to work out.

Nearly six years after go!’s debut and four years after the abrupt shutdown of Aloha Airlines, go! hasn’t grown into an Aloha replacement.

Aloha, the No. 2 airline in the state until 2008, had been generally viewed as an evenly matched competitor with No. 1 Hawaiian Airlines.

Go! was and remains a small upstart.

The renamed go!Mokulele has the same size fleet — five Bombardier 50-seat CRJ-200s — today as when it started nearly six years ago.

That compares with Hawaiian’s interisland fleet of 18 Boeing 717-200s which can seat up to 123 passengers each. When Aloha shut down on March 31, 2008, it had 13 127-seat Boeing 737-200s in its interisland fleet.

The lack of an Aloha-like competitor for Hawaiian means less competition on interisland airfares and a reduced number of seats.

Hawaii aviation historian Peter Forman calls go!’s entry in the state "a big negative for the people of Hawaii" and said that while consumers benefited in the short term from the fare wars go! initiated, they haven’t in the long term.

"Average fares appear to have increased, and Hawaii permanently lost many excellent jobs associated with Aloha’s long-distance flying," Forman said. "Those jobs are now held by crew members of West Coast-based airlines who spend their paychecks in another state."

Ornstein, chairman and CEO of go!’s parent company, Mesa Air Group Inc., is the first to admit his Hawaii venture has not gone as anticipated.

Go!Mokulele has postponed fleet expansion and is still reeling from a $52.5 million lawsuit settlement with Hawaiian Airlines which it agreed to in 2008. Federal Bankruptcy Judge Robert Faris had found Mesa liable for misusing proprietary information obtained from Hawaiian in 2004.

"I think it would be fair to say that we wouldn’t have gone into Hawaii had we known that we would have a $52 million settlement hole to dig our way out of," Ornstein said. "But once that happens, what’s done is done. It’s an operation that makes sense; we’ve carved out a nice niche and put a lot of people to work, and I think over time it will be a good investment for us."

Ornstein said his original plan before starting Hawaii service on June 9, 2006, was to form a partnership and code-share with Aloha Airlines and an additional code-share with United Airlines. Code-shares allow airlines to sell seats on the others’ flights.

"I did not expect to be in the marketplace with just two carriers, with just ourselves and Hawaiian operating the four main routes," he said during a recent telephone interview. "But we’re there now, and I think we have had a very good response from the local market."

Ornstein said if the partnerships (with Aloha and United) had gone through, it would have been very successful for all parties.

"A partnership with Aloha not only would have increased their market share interisland, but we also were going to make a significant investment in Aloha, which I believe would have been used to upgrade their trans-Pacific fleet," he said.

But Aloha rejected the deal and the United talks fell through. Ultimately, 61-year-old Aloha shut down passenger operations. That cost about 2,000 employees their jobs — the largest mass layoff in state history.

Despite its struggles, Ornstein said go!Mokulele is in Hawaii to stay.

"These last five years have been a very difficult time for both the airline industry and for us … but we’re in it for the long haul and we’ll see how it goes," Ornstein said. "A lot of people doubted our commitment when we first entered the market and didn’t think we’d be around six years later, and here we are."

Go!’s parent company, Mesa, has had its own set of financial problems and in January 2010 filed for Chapter 11 bankruptcy. It emerged on March 1, 2011, with 26 percent fewer employees after eliminating more than 100 aircraft and canceling all its existing stock.

At one of Aloha’s third-anniversary parties last year, employees blamed a confluence of events for Aloha’s demise, among them the high cost of fuel, the need for larger aircraft to fly to the mainland, the airfare war spurred by go! and Aloha’s management.

Joe Kauweloa, who turns 60 next month, had worked as a customer service agent at Aloha for 35 years when the airline shut down.

A year ago he was down on his luck and was close to going on the streets after his unemployment ran out and he couldn’t land a job. But a person at Oahu WorkLinks, a state employment training and job service program agency, read about his plight in a story in this newspaper and helped him land a job at the Disney Aulani Resort, which is one of the companies where he had applied. He has been there for seven months as a valet and bellman dispatcher.

"I went through a short crisis," Kauweloa said recently. "If you work for a company 35 years, and at that time I was thinking of retirement, and then boom … I was living paycheck to paycheck, and then medical and dental just stopped, my unemployment ran out and I got hit hard.

"I got to my critical point, and I didn’t know what to do. I felt like going to the mainland, and then the state called me and said they read my name in the article and said they were willing to get me one step closer to Aulani.

"It’s a new beginning for me, and I’m happy. … I’m still working with people, and it’s the best thing that’s ever happened to me and I thank Aulani for helping me."

While Kauweloa doesn’t blame go! for the demise of Aloha, Forman, the aviation historian, calls it "unquestionably" a mistake that go! entered the market.

"The shareholders of go!’s parent company are now a hundred million dollars poorer, the lives of thousands of Hawaii families have been shaken and the interisland market is less competitive than before," Forman said.

Hawaiian — which has benefited from Aloha’s demise and a smaller competitor in go! — declined to comment for this story.

"Has the business worked out as well as we had hoped?" go!’s Ornstein asked. "The answer is no. Is it because the business hasn’t worked? The answer is no. It’s been because fuel prices have doubled, and that’s not something we could have foreseen."

Still, Ornstein said there are some positive sides.

"We’re happy that we carry a disproportionate percentage of local traffic (compared with the airline’s market share), and we’ve carved out a local niche," he said. "I think people in Hawaii have appreciated the fact we have introduced lower fares and saved people hundreds of millions of dollars."

When go! debuted in 2006, it introduced $19 fares. Low fares became the staple of go! — prompting other airlines to match — and plunged as low as $1 when go! marked its first anniversary.

For the first few years, it was common to see go!’s lowest fares ranging from $19 to $39.

Today go!’s lowest one-way interisland fare is $69, and the airline’s average fare, according to Ornstein, is $71.

"For what we’re providing now, it’s still a pretty low fare given where fuel prices are," Ornstein said. "If you look at low-cost carriers (on the mainland) for similar stage lengths, in many cases it’s more than double what we’re charging. For every 10 cents that (jet) fuel rises, our fuel bill goes up approximately $50,000 a month. If you figure where it was when we first entered the market, fuel was between $1.50 and $1.70 (a gallon), and now it’s $3.60. That’s up about $2, which is almost a million dollars a month."

Ornstein said go!Mokulele’s jets are flying 65 to 75 percent full, but he won’t say whether the operation is profitable.

"But I assure you," he said. "If I didn’t think there was an opportunity in Hawaii, we wouldn’t be there."