Lawsuit or no, fare war persists

The go! interisland service posted more $19 dollar tickets this week. Both Hawaiian Airlines and Aloha Airlines matched the offer on the same number of seats... which as usual is selected seats on selected flights. That answers the question of whether go! parent Mesa Air Group would pursue the fare war after Hawaiian Airlines won its suit against Mesa in federal bankruptcy court. Based on a Mesa presentation to prospective investors and an internal email, both Hawaiian and Aloha believe Mesa intended to use aggressive money-losing fares to drain the legacy carriers' cash reserves. Mesa CEO Jonathan Ornstein says the email was a joke. He asserts that Mesa quickly abandoned the idea that it could survive only by muscling one of the legacy carriers to the sidelines. He says the subsequent business plan was to fly go! at a loss but drive website traffic to other sites selling other goods and services, collecting commissions on the referrals. Hawaiian and Aloha executives don't believe it is possible to make enough money from website referrals to justify a money-losing airline, so they're sticking to their belief that Mesa is using its larger cash reserves to pursue a predatory pricing war. The idea of predatory prices is to offer services below cost, leaving competitors whose pockets are less deep with two options, neither good: (1) match the price, hold onto market share, but lose money, until there is no longer any money left to lose; or (2) don't match the price, and lose business right away to the other guy. Whatever the actual motivation for its money-losing fares, go! has been selling $49 tickets, sometimes $39, occasionally (as this week) $19. A cab ride to the airport often costs more than that. Sources close to all three airlines say the actual cost of providing interisland service is closer to $60 a ticket, and much more when you add allocated costs such as shares of advertising, customer services, and the cost of the company headquarters. Aloha Airlines has older jets and higher fuel costs; Hawaiian has newer jets that are more fuel efficient, but it has higher labor costs; go! has lower costs but only 50 seats it can sell per flight. Sources says go! actually has the highest per-seat costs. Take advantage of the money-losing fares now; several third-party interisland carriers have been founded in the past and not one of them has survived for more than a few years. Demand for interisland seats is actually lower now than in the past due to the increase in direct mainland flights to Lihue, Kahului, Kona and Hilo.