May 22 2008
Is Go! Still An Option Today With Mesa Bankruptcy Warning?
Things are topsy turvy in the travel biz and it has hit us yet again this morning. Just overnight, things have deteriorated significantly in the Hawaii airline market.
Yesterday we mentioned Go! as an alternative, given Hawaiian’s fare increases. We had reason to believe that Go! would continue operating, especially given their equity in aircraft, at least in the near term. This morning, however, Go!’s parent company Mesa, issued another warning that has caused us to retrench.
Mesa stated that they may file for bankruptcy if Delta cancels their contract valued at nearly a billion dollars. The matter will be heard in federal court starting next week. We first warned about this eventuality on April 9. 
The troubles at Mesa beyond the Delta contract:
- Sluggish economy mixed with exorbitant fuel costs.
- Highly speculative operations in Hawaii and China.
- Excess of inefficient 50-passenger aircraft.
- Low stock price (47 cents today) and an inability to raise cash.
- $52.5 million Hawaiian Airlines judgment.
What we suggest:
- If you are flying on Mesa, use a credit card, and consider purchasing appropriate travel insurance.
- Use alternatives. In Hawaii, as of today that means Hawaiian Airlines, Island Air and Superferry.
Prognosticating:
If Go! ceases to operate, and with inter-island airfares soon to be at record highs, we will definitely have another major player joining the market.
>Related Posts:
A friend of mine is comparing the local situation with Aloha & Go! to a Murder/Suicide.
Famous last words… http://pacific.bizjournals.com/pacific/stories/2006/04/03/story7.html
Jonathan Ornstein: “Yeah, they responded to our $39 fares, but how many seats can they sell for $39?” he asked. “I don’t think they can do it for long. We can fly planes empty and cover it. The Hawaii operation costs about $20 million to $25 million a year — we can lose that much money. We can cover it.”
Yeah… Sure you can… ;^)
I agree someone will step into the void that’s opened up here. But who? From what I’m seeing outside of the fuel costs and slow economy issues, a number of the problems for the regional carriers have been a result of overgrowth, they get large and inefficient and also start having to compete with the 300lb gorillas, who can barely survive themselves.
Hi Kalani,
I’ve prognosticated before about who the next Hawaii inter-island players might be. If it is going to be one of the Bigs, it will likely need to wait until their mergers are cooked.
If they have the aircraft, and the competitive landscape and price structures are right, they will come.
Aloha,
Jeff
Sure… Someone will step in eventually. It only cost Mesa $20 Million up-front to set up & start operations with four aircraft. I guess anyone with that kind of cash to risk is welcome to give it a try.
BTW - My last comment might have gotten stuck in moderation because it had a link.