The Other Interisland Fare War

Lately, go!, Aloha, and Hawaiian Airlines have been stealing the headlines with their fare war on the busiest interisland routes. There’s a spirited shootout shaping up at some of Hawaii’s less-traveled air destinations, though. Island Air has just announced $19 fares between Honolulu and Lanai, Molokai, Kapalua, Kahului and Hilo, plus some additional routings.

What’s interesting about this shootout is that the incumbent carriers have shown that they can be every bit as clever as the startup competition. Island Air has begun offering their $19 fares nearly a month before Mokulele enters the market. There’s always a bubble of pent-up demand to be harvested when introducing a new, significantly-lower fare, and Island Air has timed its fare offering so that most of that pent-up demand will be absorbed before Mokulele even enters the market. Moreover, Island Air deprives Mokulele of publicity, since $19 fares will be old news by the time Mokulele actually enters the market. Island Air also emphasizes that their planes are twin-engined, pressurized, have lavatories on board, and feature inflight service- features not available on the competition’s planes to smaller island destinations.

Actually, Island Air’s “Fares Gone Wild” campaign is the second salvo in the fight by incumbent carriers to resist market penetration by Mokulele’s go! express. In January, Pacific Wings introduced $29 fares to smaller island destinations. Moreover, Pacific Wings successfully went on the offensive, starting a new front to the war in Mesa’s backyard of New Mexico. With Hawaii routes likely to be unprofitable for some time to come, Pacific Wings reassigned some of its aircraft to newly-captured essential air service in Hobbs and Carlsbad, New Mexico, routes that were previously served by larger Mesa Airlines planes. Government officials in both communities voted unanimously for the routes to be moved from Mesa to Pacific Wings.

As for competition at smaller Hawaii destinations, two questions remain to be answered: How long will the fare wars continue in these markets, and how much expansion will we see in the markets due to lower prices? Dramatic price cuts to more populated islands have yielded minor 3-8% increases in overall traffic. Low fares to destinations such as Molokai and Lanai may prove to stimulate traffic considerably more, however, since these smaller islands lack the healthcare and shopping opportunities found on the larger islands. If the fare war to smaller islands proves to be a long one, the traffic increase will be an important factor in the survival of competitors. Mokulele does not have the deep pockets of Mesa Airlines, so the dynamics of this secondary air war may be quite different than what we're seeing in the larger markets.

Mesa Air Group Sues Aloha Airlines Pilot Mike Uslan

Hawaii's interisland air war has taken a new twist with the parent company for go! airlines filing a lawsuit against Aloha pilot Mike Uslan. The lawsuit alleges that Uslan has illegally harmed the airline through Uslan's involvement in the website www.dontflygo.com . For a look at the charges and for Mike Uslan's point of view, visit www.mesavsuslan.com .

Two separate actions are underway against Uslan. The first is related to the Hawaiian Airlines vs. Mesa lawsuit which goes to court this fall. GCW Garfield Consultants, which has been working for Mesa (Nasdaq: MESA) , is attempting to require Uslan to turn over virtually all his emails which relate to an organization of airline employees known as H.E.R.O. Uslan has already replied that none of the emails are related to the HAL vs. Mesa litigation, and Uslan is working to limit the scope of the inquiry. Uslan believes that Mesa and its allies are attempting to use the HAL vs. Mesa litigation as an excuse to sift through his emails in the hopes of finding anything that can be used against Uslan or others who oppose Mesa.

The second legal action is brought by Mesa against Uslan and seeks punitive damages and an injunction to halt the www.dontflygo.com website. Through his invovlement with H.E.R.O., Uslan has been a vocal critic of Mesa. Uslan says that new owners now run the www.dontflygo.com website, and he is not responsible for its content. The Aloha pilot believes that Mesa is trying to put pressure on him personally in the hope that it will result in a court action or a voluntary effort to shut down www.dontflygo.com .

Mesa has previously used lawsuits against individuals to quiet contrary opinions. Airline analyst Holly Hegeman backed down after Mesa filed a threatening lawsuit, and most likely Mesa officials expected Uslan to do the same. For an individual to fight a wealthy corporation such as Mesa in court, the financial burden is usually so great that the individual eventually throws in the towel. The facts of the case never get heard and the large corporation wins through financial muscle. Uslan appears resolute that he will fight this legal attack, however. He previously flew as a pilot for Mesa, he didn't like the culture at that airline and left, eventually he landed his dream job flying for Aloha, and now his former employer is in town gunning to put his current employer out of business. Mike Uslan regards Mesa as a ghost he can't escape, and he's hopeful that with enough resistance from people such as himself, Mesa will eventually pack its bags and leave the Hawaiian Islands for good.

Uslan and his nemesis at Mesa, CEO Jonathan Ornstein, ironically share a common characteristic. Neither likes to back down from a fight. For this reason, we can expect a rocky road ahead as the two sides ratchet up the pressure. Mesa will threaten financial doom, and Uslan will make the fight as public as possible, giving Mesa even more embarrassing publicity. Stay tuned.