go! losses triple last 3 months of 2007
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By Rick Daysog
Advertiser Staff Writer
By Rick Daysog
Higher fuel and maintenance costs helped triple losses at go! airline during the last three months of 2007.
In a 30-page filing with the Securities and Exchange Commission yesterday, Mesa Air Group said its go! subsidiary had an operating loss of $6.6 million in that quarter, up from a $1.9 million loss in the same period a year earlier.
Since its June 2006 launch, go! has lost more than $26 million in Hawai'i.
"We believe that Mesa is likely to continue to lose money in Hawai'i, a small operation which has become a large drain on resources," Standard & Poor's analyst James Corridore said in a note to investors yesterday.
Shares of Mesa fell 28 cents yesterday to close at $2.87 on the Nasdaq market. Mesa yesterday reported a loss of $4.2 million, or 15 cents a share, for its Mainland and Hawai'i operations during that quarter. (The last three months of 2007 are the first three months of the company's 2008 fiscal year.)
In a telephone interview, Mesa Chief Executive Officer Jonathan Ornstein said go! remains committed to Hawai'i over the long term and that the airline's latest operating losses were skewed by unusually high expenses.
He noted that go!'s fuel expenses increased by about $1 million during the quarter while maintenance costs were up by $2.7 million. He said the company booked all of go!'s maintenance costs for the fiscal year during the first quarter.
Excluding the higher fuel and maintenance costs, go!'s operating losses would have been in the ballpark of first quarter 2007's $1.9 million loss, he said.
"You can rest assured that we are not particularly pleased with these results," Ornstein said in a conference call with investors.
"We continue to make operations and financial improvements in our operations in Hawai'i," he said.
go!'s entry into the interisland market in June 2006 triggered a fare war with Hawai'i's dominant carrier Aloha Airlines and Hawaiian Airlines.
The upstart carrier began service with a standard price of $39 for a one-way interisland ticket, or about half of what Aloha and Hawaiian had been charging.
The low fares helped boost interisland passenger traffic but badly hurt Aloha and Hawaiian, which have lost a combined $64.7 million since June 2006.
In its filing, Mesa said go!'s first quarter 2008 revenues declined $548,000, or 8.2 percent due to a seasonal slowdown. go! said its available seat miles — a measure of the airline's passenger capacity — was down 12.5 percent.
Expenses rose 47 percent to $12.8 million due to the higher fuel and maintenance costs.
The carrier also said it paid $500,000 in legal expenses during the quarter as a result of its battle with Hawaiian Airlines.
In October, federal Bankruptcy Judge Robert Faris ordered Mesa to pay Hawaiian $80 million for misusing confidential business information.
Hawaiian had sued Mesa alleging that Mesa received hundreds of pages of confidential financial information about Hawaiian's routes, marketing plan and financial projections while Hawaiian was in bankruptcy and improperly used the material to launch its own interisland carrier.
Mesa is appealing the decision and said it expects the judgment to be set aside. But in the meantime, the company had to put up a $90 million bond as collateral.
As a result, the company's unrestricted cash and other liquid holdings has fallen to $98.2 million from about $208.6 million in the year-earlier quarter, prompting Standard & Poor's analyst Corridore to warn of potential liquidity problems.
Yesterday, Ornstein said he may raise cash by selling $100 million worth of Mesa spare parts. Ornstein said he is in talks with five potential customers to buy the parts.
Reach Rick Daysog at firstname.lastname@example.org.
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