Mesa Air sues Mokulele Airlines


POSTED: Thursday, October 23, 2008

Mesa Air Group Inc., parent of interisland carrier go!, is suing Mokulele Airlines to collect nearly $400,000 it says it is owed for fuel expenses. It is Mesa's fourth lawsuit involving an isle airline or industry employee since entering the Hawaii market in June 2006.





Mesa lawsuit history

        Phoenix-based Mesa Air Group Inc., parent of interisland carrier go!, has been involved in four lawsuits with a Hawaii airline or employee since entering the isle market in June 2006.


» Mesa filed suit in U.S. District Court in Arizona on Monday against Mokulele Airlines seeking a minimum of late fuel payments totaling nearly $400,000 plus interest.


» Mesa held a settlement conference in August with Yucaipa Corporate Initiative Fund I, LP, the former majority investor of Aloha Airlines, which in June purchased a 2006 lawsuit that Aloha had filed against Mesa. No settlement was reached over charges that Mesa engaged in predatory pricing to drive Aloha out of business and used propriety information gathered as a potential investor in 2005 during Aloha's first bankruptcy.


» Mesa agreed in April 2008 to pay Hawaiian Airlines $52.5 million in damages to settle a lawsuit regarding the carrier's misuse of confidential and proprietary information obtained in 2004 during Hawaiian's bankruptcy.


» In June 2007, a federal judge in Phoenix threw out a lawsuit by Mesa against an Aloha Airlines pilot over a Web site that Mesa says was defamatory in opposing its interisland startup go!


Source: Star-Bulletin reports



The suit was filed in U.S. District Court in Arizona on Monday, seeking a minimum of late payments and interest.

Mesa is claiming that Kona-based Mokulele failed to pay $171,819.94 for June fuel costs and $219,520.16 for July under a code-share agreement to operate three nine-seat Cessna 208B Grand Caravans owned by Mokulele under the go!Express name. The airlines entered into the agreement in February 2007 to serve smaller airports including Kapalua, Maui; Lanai and Molokai.

Service started with flights to Kapalua the following April.

“;We had what I thought was a pretty good partnership with them, but it became clear to us it wasn't quite as good as we thought,”; Mesa Chief Executive Jonathan Ornstein said in an interview. “;When we do a little digging, we find out that he hasn't paid us for fuel for two months, and we just need to be paid.”;

Last week, Mokulele CEO Bill Boyer announced a partnership with Indianapolis-based Republic Airways to operate four 70-seat Embraer 170 jets in the interisland market, with two starting service to Lihue and Kona next month and another two starting Kahului and Hilo service next year. The expansion is an effort to fill capacity left by the shutdown of Aloha and ATA airlines this spring.

Ornstein said at that time he was disappointed in the new partnership and pressed Boyer to pay the overdue bills. Boyer declined to comment when asked about the fuel expenses at a press conference last week.

“;Jonathan should look at his own operation before talking to other people about their past-due bills,”; he said at the time.

Boyer said yesterday that he is working with his legal team on the lawsuit and was unable to comment further.

The lawsuit states that under the agreement, Mokulele is required to operate and maintain the go!Express-branded aircraft and pay for fuel as well as other expenses. Mesa began buying fuel for Mokulele around June 2007.

Mesa says it sent a letter on Oct. 14 to Mokulele requesting the fuel payments, invoiced in July and August, by Oct. 15, the day the deal was announced with Republic. Mokulele did not respond to the letter, or another sent Oct. 16, Ornstein said in an interview.

“;As everybody knows, at Mesa, we have our own issues,”; he said. “;We are not in the position to be another airline's bank. Something like this happens and you really feel like you are getting taken advantage of.”;

Mokulele and Mesa have a six-month notification period to terminate the go!Express service, Ornstein said. If that happens, Mesa has “;every intention of maintaining the go!Express presence in the markets we currently service,”; he said, whether that be with some of the 10 19-seat aircraft Mesa currently has parked, or partnerships with other carriers.

“;The timing is curious, although I guess if your former partner is going to compete with you, you probably want to indicate to them that you are not happy with it,”; said George Hamlin, a managing director at Airline Capital Associates, an aviation consulting and aviation firm based in New York City.

Mesa is required to pre-pay for fuel to its supplier seven days in advance of use, with costs billed to its Phoenix headquarters. Mesa then compiles an invoice for Mokulele's share around the third week of each month following Mokulele's use of the fuel, the lawsuit states. Ornstein said Mesa recently switched to a fuel-payment agreement that would require Mokulele to pay for the fuel as it is pumped.

The fuel purchased for Mokulele is stored in a common inventory for both go! and go!Express at three locations, the suit says. Mesa said it told Mokulele it would stop supplying fuel to the airline, but would arrange for a short-term agreement if payment of past-due fuel expenses was arranged.

Mokulele, which Boyer bought in 2006, operates six nine-seat Cessna 208B Grand Caravans, as well as one Cessna Grand Caravan cargo freighter, with another expected to enter service in a month.

Mesa operates five go! 50-seat CRJ-200 aircraft in Hawaii, with the fifth used as a spare.