Mesa Air Group Inc.'s new low-cost interisland airline will operate out of the commuter terminal at Honolulu Airport.

The new carrier, dubbed go! said it has signed an agreement with the state Department of Transportation for more than 5,000 square feet of space at the commuter terminal.

The new airline will begin service on June 9.

"Given our focus on the local market, we feel our location in the commuter terminal is ideally suited," said Jonathan Ornstein, Mesa's chief executive officer.

"Our passengers will spend less time at the airport and benefit from easy access, convenient parking and less congestion."

The commuter terminal, mauka of the interisland terminal, services smaller aircraft traveling to the neighbor islands, such as Pacific Wings and Island Air.

Brian Gillman, a spokesman for go!, said the airline is finalizing terms for ticket counters and gate space at the commuter terminal and the Neighbor Island airports but should have those agreements in place shortly.

Mesa's entry into the local market has sparked a fare war. The airline — which will fly 50-passenger Bombardier CRJ 200 jets and will employ several hundred employees — recently announced a $39 one-way special that was immediately matched by Aloha Airlines and Hawaiian Airlines.

The new competition has also prompted the local airlines to beef up their travel awards programs.

Yesterday, Hawaiian said members of its HawaiianMiles program can earn up to $100 in discounts for Mainland flights whenever they fly interisland on Hawaiian through Sept. 30, 2006.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.