No Aloha for go!


POSTED: Thursday, December 04, 2008

Mesa Air Group's attempt to re-brand its go! aircraft with the Aloha Airlines name was temporarily blocked yesterday by a federal Bankruptcy Court judge who attacked the lack of sensitivity of both the Phoenix-based carrier and the acquirer of Aloha's intellectual property rights.

Judge Lloyd King, questioning whether a lawsuit settlement was only about the money, postponed a hearing on a licensing agreement between Mesa and Yucaipa Cos. until Feb. 19 to give both supporters and opponents of the deal more time to respond.

“;I don't think anyone is sensitive who's involved in this settlement,”; King said. “;If this isn't approved, are people from Yucaipa going to lose their health benefits and their jobs? There hasn't been enough time for people to react.”;

Yucaipa, the former controlling shareholder of bankrupt Aloha, had won the rights to Aloha's intellectual property at an auction Tuesday with a $750,000 credit bid that reduced the amount of money it was owed by Aloha. Yucaipa is owed $13 million through its participation in a loan made by primary lender GMAC to Aloha, as well as another $100 million it is owed by Aloha for a series of separate loans.

“;Everyone knew we were in litigation with Mesa,”; Yucaipa attorney Robert Klyman told King. “;There was no restriction with what we could do with the name.”;

But King, well aware of the sensitivity involved in the licensing of the name to Aloha's bitter rival, acknowledged that Mesa and its interisland carrier go! have been largely credited for contributing to Aloha's demise.

“;How about all the people whose lives were devastated in this case?”; King asked. “;Doesn't that count? Is it just the money?”;

Mesa Chairman and Chief Executive Jonathan Ornstein and Yucaipa spokesman Frank Quintero both declined to comment.

Yucaipa's deal to sell the Aloha name to Mesa stemmed from a lawsuit settlement that the two announced on Friday. Aloha received court approval in June to sell its lawsuit against Mesa to Yucaipa for a $10 million credit bid that reduced the amount that Aloha owed Yucaipa. As a result of the lawsuit sale, Yucaipa agreed to pay Aloha 5 percent of what it receives from the Mesa settlement.

Aloha had sued Mesa in 2007 alleging that Mesa misused Aloha's confidential information obtained as a potential investor during Aloha's first bankruptcy. Aloha also accused Mesa of predatory pricing designed to run Aloha out of business. Aloha ceased passenger operations on March 31 of this year.

Under terms of the settlement, Yucaipa will license the Aloha name to Mesa for 10 years in exchange for 1 percent of Mesa's interisland passenger ticket revenue, or a minimum of $600,000 a year. In addition, Mesa will pay Yucaipa 30 percent of Mesa's pretax operating profits from Mesa's Hawaii operations, excluding the revenue payments. The licensing and profit sharing tied to the Aloha name was a conditional part of the lawsuit settlement, and yesterday's postponement does not affect the settlement.

Other terms of the settlement include Mesa paying Yucaipa $2 million; issuing Yucaipa 10 percent, or approximately 2.7 million shares, of Mesa's common stock; and providing interisland travel benefits to the 3,500 former Aloha employees who were with the company at the time of its March 20 bankruptcy.

A Mesa spokesman said yesterday that for the duration of the Yucaipa licensing agreement, former Aloha employees will receive six space-available, round-trip interisland passes annually with the only expense being the standard industry fees not to exceed $20 each way.

Randy Kauhane, assistant general chairman of the International Association of Machinists and Aerospace Workers, District Lodge 141, called the selling of the Aloha name “;ridiculous.”;

“;It's a scam to the public to be told that now (go!) is going to use Aloha Airlines' name, because they had a good reputation,”; Kauhane said. “;It was the workers that built up the name. Let them do their own thing without the Aloha name.”;