Mesa Air to pay Hawaiian Air $52.5M
Lawsuit settlement for Phoenix-based carrier's misuse
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Mesa Air Group has agreed to pay Hawaiian Airlines $52.5 million in damages to settle a lawsuit regarding the misuse of confidential and proprietary information obtained in 2004 during Hawaiian's bankruptcy.
The parent company of interisland carrier go! also agreed to withdraw its appeal to federal District Court. Oral arguments on the appeal had been scheduled to begin Monday.
The settlement does not restrict go! from continuing to operate in Hawaii. Hawaiian's suit originally sought to have Mesa barred from selling tickets here.
Hawaiian's damages award will be taken out of a $90 million bond Mesa had posted to cover its appeal after federal Bankruptcy Judge Robert Faris last October ruled in Hawaiian's favor. The rest of the bond will be returned to Mesa.
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Mesa Air Group Inc.
, parent company of interisland carrier go!, has agreed to pay Hawaiian Airlines
$52.5 million in damages to settle a lawsuit regarding the Phoenix-based carrier's misuse of confidential and proprietary information obtained in 2004 during Hawaiian's bankruptcy.
The settlement, which comes less than two weeks before Mesa's appeal was due to be heard in federal District Court, does not restrict go! from continuing to operate in Hawaii.
"This settlement is the last chapter in the legal dispute over Mesa's misuse of Hawaiian's confidential information," said Mark Dunkerley, Hawaiian's president and chief executive. "We were delighted with the award of damages and this settlement."
Jonathan Ornstein, Mesa's chairman and CEO, had been hoping with the appeal to get the judgment reduced or dismissed. But he said yesterday that due to the cost and time involved with any court action, "we decided this time that this was our most productive alternative."
"We are happy to put this behind us and move forward," he said.
Mesa had posted a $90 million bond in November to cover its appeal after federal Bankruptcy Judge Robert Faris last October awarded Hawaiian $80 million in damages. He later ruled that Hawaiian was entitled to an additional $3.9 million in legal fees.
Under terms of the deal, Mesa will withdraw its appeal and will have returned to it $37.5 million of the bond it posted with federal Bankruptcy Court. Hawaiian will receive the remaining $52.5 million. Mesa did not admit any wrongdoing.
Mesa, which has been rumored for months to be close to filing for bankruptcy, also is being sued by Aloha Airlines for similarly misusing confidential and proprietary information obtained in 2005 during that carrier's bankruptcy. Aloha, which blamed go! and high fuel costs for shutting down passenger operations on March 31, also has accused Mesa of predatory pricing.
Ornstein, who has said that the Hawaiian and Aloha cases are different, declined to talk about the possibility of a settlement with Aloha prior to their scheduled October trial.
"I prefer not to comment on pending litigation," he said.
Go! entered the Hawaii market in June 2006 with $39 one-way interisland fares and a special introductory promotion of $19 fares, which it later dropped to as low as $1, before moving back up to $49 as fuel prices soared.
Speculation about a possible Mesa bankruptcy filing has been swirling since Delta Air Lines Inc. said it was dropping a flight agreement with a Mesa subsidiary accounting for $20 million in monthly revenue, as well as since Mesa called a May 13 special shareholders meeting earlier this month to approve the issuance of $37.8 million in common stock to pay off debt.
Those items, plus possible damage payouts in the Hawaiian and Aloha bankruptcies, had pushed Mesa's stock below $1 and to an all-time low.
Hawaiian's stock closed up 5 cents, or 0.6 percent, to $7.95 yesterday while Mesa's shares gained 11 cents, or 20 percent, to 66 cents.