Mesa Air fails to become big player in the islands

Go! airlines, which initiated a relentless fare war when it entered the Hawaii market nearly eight years ago only to later be blamed for Aloha Airlines’ demise, is calling it quits.

The upstart carrier, which will cease operations April 1, harbored high hopes to compete with Hawaiian Airlines on interisland routes, but as of last year had just 6.8 percent of the market compared with Hawaiian’s 85.2 percent share. Go! has been operating recently with just two 50-seat CRJ 200s for 30 daily flights.

"The demise of go! in Hawaii was a foregone conclusion for two reasons," said local aviation historian Peter Forman. "First, people of Hawaii remembered go!’s involvement in the destruction of Aloha (Airlines in 2008). And secondly, go!’s 50-seat passenger jets have too high of a cost structure to compete effectively in this market."

The low-cost carrier never seemed to be embraced by the flying public in Hawaii after being widely blamed for putting Aloha out of business on March 31, 2008, after more than 61 years in operation. That cost about 2,000 employees their jobs — the largest mass layoff in state history.

"It obviously seems like such a shame the impact their entry into the market had on many, many of us. I’m not happy," said Gail Kim-Moe, former president of Aloha’s local Association of Flight Attendants union. She said she felt sad for the go! employees.

"I know all too well what it’s like to be displaced that way," she said. "I hope that they all end up in a good place."

Go! said Monday that all its 80 employees will be given the opportunity to relocate to other positions on the mainland with the parent company.

Passengers holding go! tickets for flights on April 1 and beyond will be offered tickets on Hawaiian or refunds.

Phoenix-based Mesa Air Group Inc., the operator of go!, displayed a notice Monday on its website that it will end service April 1. Mesa called it a strategic decision to focus on maximizing the growth of its mainland operations where it flies regionally for United Airlines and US Airways.

"While this was an extremely difficult decision to reach, we believe it is in the best interest of Mesa’s long-term strategic objectives," Jonathan Orn­stein, chairman and chief executive officer of Mesa, said in a statement. "We are redeploying the go! aircraft to support our existing mainland operations. An additional factor that we accounted for was the long-term increase in the cost of fuel, which has more than doubled since go! began service and has caused sustained profitability to be elusive."

Go! entered the Hawaii market June 9, 2006, with $39 one-way interisland fares and a special introductory promotion of $19 fares, which it later dropped to as low as $1 during an anniversary special before rising fuel costs forced all airlines to increase prices.

Ornstein and go! President Chris Pap­pa­io­anou didn’t return phone calls and emails Friday when rumors of go!’s departure began to circulate. Pap­pa­io­anou said via email late Monday that go! profited occasionally but on an annual basis was unprofitable.

"At the time we entered it made perfect sense," Pap­pa­io­anou said. "If fuel prices had not doubled we would have been significantly profitable today. But losing money in business for any reason is never a good thing."

Pappaioanou said Aloha was doomed to failure even without go! being in the market.

"Putting aside the emotionalism that surrounds this issue, there were four airlines operating prior to go!’s entry and only one, Aloha, went bankrupt," Pap­pa­io­anou said. "Given the other carriers have continued to operate successfully with go! in the market, common sense would suggest that Aloha had other problems besides go! In addition, given Aloha’s highly fuel inefficient fleet of old aircraft it is unlikely it would have survived given the price of fuel over the past five years."

In a March 2012 interview with the Hono­lulu Star-Advertiser, Orn­stein said he never would have launched go! had he known how things were going to work out.

"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."

In April 2008, Mesa paid Hawaiian Airlines $52.5 million to settle a lawsuit brought by Hawaiian alleging Mesa had misused confidential information obtained during Hawaiian’s bankruptcy in 2004 to enter the Hawaii market in 2006.

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

Colorado-based aviation consultant Mike Boyd said go! simply didn’t work in Hawaii.

"It’s an experiment that didn’t work out," Boyd said. "It makes sense to focus on his core business. Go! really never did take off, so dropping it makes sense."

Go! had been carrying more than 80,000 passengers a month between the four major islands, according to the most recent data from the state Airports Division, and has carried nearly 5 million passengers since it debuted, the company said. That slack will now need to be picked up by Hawaiian, Island Air and, to a lesser extent, Moku­lele Airlines, which operates nine-seat turboprops.

"I think you could actually, in a few years, see the interisland market be more competitive than it is now from the standpoint that Island Air will become a more robust carrier now that it’s a two-airline race rather than three," Forman said. "Island Air will need to seize the opportunity, or some third party will come in and join the competition."

Island Air CEO Paul Casey declined to comment on how go!’s departure would effect the market.

Former Aloha pilot John Riddel, who spent 24 years at Aloha, said he was just hired by Island Air and is happy to be back in aviation six years after Aloha’s demise.

"It is what it is," he said. "I’ve moved on, and I’m very fortunate to return to aviation to what appears to be a very financially wonderful group with quite a few Aloha employees over there."