New Airline Stirs Turbulence over Hawaii

Inside Jonathan Ornstein's spacious, top-floor office is everything one would expect in a CEO's lair, plus a cranberry-colored scooter parked to the left of his desk.

The brash leader of Mesa Air Group buzzed around on the 1985 Honda Elite when he first entered the airline industry. It serves as a reminder of his humble start, which included handling baggage.

Depending on who you ask in Hawaii, Ornstein is either the man who brought competition and reasonable interisland airfares to the Aloha State or an underhanded businessman trying hard to run his competitors out of business.

'We have five airplanes out there. Four of them fly. One is a spare. Look at all hell break loose because of four airplanes,' Ornstein said. 'It's really remarkable when you think about it.'

Phoenix-based Mesa launched go! on June 9 as the third interisland jet carrier in Hawaii, entering the market dominated for decades by Hawaiian and Aloha airlines.

Mesa's entry has sparked a brutal and sometimes silly airfare war, with the incumbent carriers matching every special go! has offered.

A day after go! offered $19 fares, Aloha held a promotion called the 'Great Go Away Giveaway,' passing out 1,000 free round-trip tickets while taking a jab at its newest competitor.

Interisland fares used to run as high as $100 one-way, but now run as low as $29.

It's a traveler's market in Hawaii, which depends on air travel as its interstate highways.

Interisland traffic has increased since Mesa's entry, reversing a five-year decline caused by rising airfares and more direct flights from the mainland and Asia to Maui, Kauai and the Big Island.

Ornstein said it was only a matter of time before someone stepped in, with Aloha and Hawaiian gouging interisland travelers to support its high-cost trans-Pacific operations.

'We were always afraid that it would be someone like a Southwest or a Jet Blue, who really could go in and wipe everybody out,' he said. 'That's why we felt we had to get in there ahead of them.'

Hawaiian CEO Mark Dunkerley said Mesa's decision to enter the market based solely on the confidential information it obtained as a potential investor during Hawaiian's bankruptcy proceedings.

'They could read our minds and look at our books. I think that's what led them into the marketplace,' he said.

Once fierce rivals, Hawaiian and Aloha, are now unified in opposing Mesa and each have pending lawsuits alleging the company improperly used the confidential information to start its Hawaii operations in an effort to drive Aloha out of business.

They cited an e-mail from Mesa Chief Financial Officer Peter Murnane to a consultant that allegedly details Mesa's plan to kill Aloha.

'We definitely don't want to wait for them to die, rather we should be the ones who give them the last push ... Clearly if we can get Aloha out of the market without anyone else stepping in this is a home run,' the e-mail said.

Mesa says the claims are without merit, noting it had been studying the market more than a decade.

'People don't appreciate that competition is good and in the end, it makes everyone better,' Ornstein said.

Hawaiian welcomes competition, Dunkerley said.

'The issue here is not about competition,' he said. 'You don't play poker with people who have seen your hand.'

Island Air, a smaller turboprop operation, has also joined in the fight, saying go! has 'damaged yield throughout the marketplace.'

'It is difficult to make a rational business decision when you're dealing with an irrational pricing structure and a competitor that has the ability to lose money on every flight,' Island Air CEO Rob Mauracher said.

The battle for Hawaii's skies comes during record fuel prices and as Hawaiian and Aloha face pressure to perform for new investors after each emerging from Chapter 11.

Industry analyst Bob Mann said the concern of the 'big two is that they somehow slip into the perilous third airline slot.'

'That is a risk that any competitors should be and apparently are concerned about, and thus they match price even if their costs cannot match a new entrant competitor,' he said.

Mann said Delta Air Lines didn't take AirTran Airways seriously in Atlanta and allowed the newcomer to prosper.

Several companies have tried to start up in Hawaii, but were quickly squeezed out of the market.

Mesa, however, is one of the nation's largest regional carriers, with 182 jets, 5,000 employees and revenues exceeding $1 billion.

Aloha CEO David Banmiller has called Mesa's cut-rate fares a 'sham' and a direct attack on the livelihood of Aloha's 3,500 employees and their families.

'The scare tactics are just an act of desperation,' Ornstein said.

A group of Aloha, Hawaiian and Island Air employees called 'HERO' for Hawaii's (Airline) Employees Repelling Ornstein have created a Web site: .

Things got ugly last month when the group sent a T-shirt to Ornstein containing a scribbled insult to his Jewish faith, along with profanities.

HERO later apologized for the remark.

'The more they attack me personally, I'm not going to say it doesn't affect me,' Ornstein said. 'I'll be very frank. I don't like it. As a result, it may make us change our plan. If you guys want to make it to the death. Have it your way.

'We've been tame so far. Very tame.'

Hawaiian and Aloha are fighting back by aggressively marketing themselves as local companies with deep roots in the islands. They are hoping go! would just go away.

'We've been much more than simply another business doing business in Hawaii. We are woven into the fabric of Hawaii,' Dunkerley said.

Ornstein, however, said he's in Hawaii for the long haul with plans of replacing his 50-seat aircraft with more efficient larger jets.

'We have no huge plans of dominating anything. We want to carve out our niche,' he said.

Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.



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