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Mesa Ekes Out Q2 Profit, But go! Continues To Bleed Red Ink

Interisland Carrier Loses $8.3 Million Even As Fares Rise

Mesa Air Group Inc. this week reported a fiscal second-quarter profit of $9.4 million, even after adjusting its earnings to reflect a settlement with Hawaiian Airlines over allegations of unfair competitive tactics.

The Honolulu Star-Bulletin reports, however, that Mesa's go! Airlines subsidiary, which operates interisland flights in Hawaii, saw a net operating loss of $8.3 million, bringing total losses since its June 2006 launch to $34.7 million.

Mesa, based in Phoenix, was six weeks late in filing the report on Monday. That tardiness, combined with a string of bad news which has pushed its share price below a dollar, threatens to get the company's stock delisted by NASDAQ.

Despite the challenges, which include the same rising fuel costs afflicting all carriers, Mesa Chairman and CEO Jonathan Ornstein told analysts and investors on a conference call that the demise of competitor Aloha Airlines has allowed go! to raise its base fares from $39 to $64 in just a year, with no significant decrease in traffic.

"The additional capacity has helped us spread our costs," Ornstein said. "We've seen improvement in the operating environment in terms of load factors and fares. The numbers are such that in a normalized environment, we'd be feeling pretty good right now."

Given the improving outlook for go!, it's possible the subsidiary could actually become a bright point on the balance sheet by next year. Ornstein said go! is courting new US Mail contracts, and has increased its wholesale business with tour operators.

Mesa, meanwhile, settled a lawsuit from Hawaiian Airlines for $52.5 million, has seen its cash position deteriorate due in part to high fuel costs, and still faces a lawsuit from Aloha over predatory pricing and misuse of confidential information. Mesa dodged losing its Delta connection business only by getting a preliminary injunction against Delta. Ornstein predicts an "amicable solution."

Monday saw the end of Mesa's fiscal third quarter, which included improvement in the performance of its go! subsidiary. Will we have to wait another 12 weeks to know if the company has turned things around? Investors and NASDAQ all want to know.

Ornstein says Mesa's financial results for the just-concluded quarter will be filed in a "timely" manner.

FMI: www.mesa-air.com

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Mesa Air Group Inc. this week reported a fiscal second-quarter profit of $9.4 million, even after adjusting its earnings to reflect a settlement with Hawaiian Airlines over allegations of unfair competitive tactics.

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