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Location: Kailua, Hawaii, United States

Peter Forman is the author of Wings of Paradise, Hawaii's Incomparable Airlines, a 400 page hardcover available online at www.airlinesofhawaii.com .

Sunday, January 20, 2008






Listening for Dings

A friend of mine who wrote a controversial book about dating taught me the concept of the ding. He said if the lady is not the person she's expressing to you, sooner or later she's going to say something that makes no sense. He calls this a ding. Never overlook a ding, because it gives you a glimpse into the active undercurrents.

In my previous posting, I mentioned that go!'s raising it's lowest price to $49 was a very significant development in the air war story. I continue to hold that opinion. My belief was that this fare increase showed that Mesa's CEO was under enough pressure to finally bow to the competition and raise fares as an act of damage control. This is certainly a possible explanation, but the more thought I give this matter, the more uneasy I feel with this explanation.

I regard Mesa's CEO Jonathan Ornstein as a person who views business as a chess game. His goal is to win, and he moves his pieces to exert pressure until he reaches his goals or is forced into defeat. He's a calculator much like Russsia's president Putin. What bothers me about the fare increase is that it takes most of the financial pressure off Aloha Airlines, yet it falls far short of relieving go! airlines of its losses. In other words, go! loses more than it gains with this move. I believe Ornstein is a better chess player than this, so I note ding number 1.

Do you remember go!'s pledge that its lowest fare will always be no higher than $39? It may be reasonable for go! to raise average prices, but by eliminating $39 fares on even the toughest flights to sell, it has reneged on its pledge to customers and in so doing loses credibility at a time it cannot afford to lose credibility. Ding number 2.

So, I believe there are undercurrents at work here, and I cannot tell you what they are. As more dings appear, I'll be listening though. Change is in the air.

2 Comments:

Blogger Stan said...

Peter:

I am intrigued by your latest post, to basically re-examine the reason why go! raised their fares. I too, when I heard this, found it rather odd, and really was waiting for me to think about it more before commenting.

Truly, I think we are looking at inter-office politics at Mesa working on the go! issue. Should I call it a "situation"? Perhaps.

The situation calls for Orenstein to basically start wooing his supporters by giving a little. His supporters, in this theory, were really jilted by the judges ruling on the HAL case. In retrospect, go! presented a pretty weak case, not helped by e-mails by a airline officer who also had porn on his laptop. HAL on the other hand had this one in the bag when the judged allowed all the evidence into the case.

Moving from this, Orenstin's supporters probably made a fait acompli with him - get the go! operation looking like a legitamate operation or not only would they force him to pull out, but also pretty much deep six their support of him. With your analogy of a chess player, Orenstiein basically decided in mid-game to change the strategy...not entirely a stupid move, but that change in play had better come back with results.

Otherwise you will see Orenstein's support wane and evaporate.

4:01 PM  
Blogger Peter Forman said...

Stan,
Thanks for your perspective.

You suggest that internal pressure has resulted in Mr. Ornstein changing tactics and trying to run go! more like a typical airline. The problem with that theory is that go!'s cost structure won't allow it to reach break-even before the competition. Go! won't be able to make a profit using this technique, and it also won't be offering enough pressure to change the competition's flying, which is ultimately essential for go!'s success. Such a strategy by go! would lead to a prolonged period of moderate losses for all parties.

Where your theory gains credibility, however, is in the legal arena. A loss in court to Aloha Airlines later this year could bankrupt Mesa. There would indeed be benefits come court day to raising fares and showing some strategy for achieving profits that don't involve the destruction of Aloha Airlines. After all, anti-trust issues are part of the Aloha legal offensive. Up until this moment, a reasonable strategy for bringing profits to go! has been lacking. Go! gains credibility as an honest competitor by raising fares, but isn't it too late for such a change of heart? We'll see.

In the meantime, I'm still unsure of the reason for go!'s move. Something doesn't ring true.

1:22 AM  

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