Mesa looks to upset Hawaii’s

 - October 18, 2006, 10:32 AM

Jonathan Ornstein has heard assorted descriptions of his management style during his years in the regional airline business, but no one can accuse the Mesa Air Group chairman and CEO of standing still. Always angling for a competitive edge and never content to let a business opportunity pass unexamined, the fiery chief executive’s latest venture takes him to Hawaii, where he has set his sights on challenging long-time incumbents Hawaiian Airlines and the islands’ most recent Chapter 11 petitioner, Aloha Airlines.

Plans call for sending six 50-seat Bombardier CRJ200s to the islands for an expected service launch during next year’s first quarter. Destinations will include Hilo, Honolulu, Kona, Lihue and Kahului, Maui. Once the new Mesa subsidiary gains a foothold with high-frequency, low-fare service in the 50-seaters, Ornstein plans to switch to larger 86-seat CRJ900s–the largest and cheapest-to-operate airplane in Mesa’s fleet.

Spotlight on Technology

Known within Mesa’s Phoenix offices as Project Hele, the plan would exploit what the airline calls the latest technology to simplify and streamline the reservations process, using primarily Internet marketing and ticketing. As AIN went to press Ornstein continued negotiations with potential investors as well as other airlines for prospective new code-share contracts. Of course, Mesa already shares a code with United Airlines, one of the islands’ primary links with the mainland, as well as with Delta and US Airways.

Mesa’s previous attempt to plant itself in Hawaii’s traditionally barren competitive landscape failed when, in the summer of last year, the creditors committee of then-bankrupt Hawaiian Airlines rejected Ornstein’s bid to participate in the reorganization. Since then, Aloha Airlines entered Chapter 11 as well, only to see Hawaiian emerge from bankruptcy protection this past June.

Then, in late September, only hours after Aloha announced it had found a pair of investment groups willing to spend $100 million to help it out of bankruptcy, Mesa revealed its plans. Both Hawaiian and Aloha fly their mainline jets to all the points Mesa plans to serve, while they code share with local de Havilland Dash 8 operator Island Air for service to less-traveled destinations such as Molokai, Lanai and West Maui. Meanwhile, another company by the name of FlyHawaii plans to launch service with ATR 72-500s between Honolulu and Maui once it raises the $32 million it needs to get started and satisfy regulatory requirements.

Taking on the Established Carriers

Eventually, it too aims to compete directly with the established carriers to all the islands using a discount-fare business model. Unfortunately for FlyHawaii, Aloha and Hawaiian have already begun to wage a fare war that has seen prices fall to as low as $33 on some segments– good for residents and vacationers but certainly not a welcome development for would-be competitors.

Aloha CEO David Banmiller has publicly questioned Mesa’s motives, as well its ability to fly CRJs cheaply enough to compete with Aloha’s 737s and Hawaiian’s Boeing 717s. Ornstein, of course, need only explain himself to Mesa’s shareholders.

“We have contemplated interisland service [since] as far back as 1990,” he said. “We believe our industry-leading cost structure, strong financial position and high-quality operations will allow us to provide a consistent and outstanding level of service. We would like to offer a warm mahalo to the many folks we have already met in Hawaii for the kind welcome we have received.”

No doubt the welcoming committee didn’t include the folks at Hawaiian, Aloha and FlyHawaii. Then again, Ornstein never did ask them for an invitation.