Mesa Must Pay $52.5 Million, But Not Admit Wrongdoing

In an agreement marking the end of a contentious legal battle, on Wednesday Hawaiian Airlines announced it reached a settlement of its lawsuit with Mesa Air Group, Inc., regarding Mesa's misuse of confidential and proprietary information obtained during Hawaiian's Chapter 11 plan of reorganization in 2004.

"This settlement is the last chapter in the legal dispute over Mesa's misuse of Hawaiian's confidential information," said Mark Dunkerley, Hawaiian's President and CEO. "We were delighted with the award of damages and this settlement."

As ANN reported, a US Bankruptcy Court judge ruled in October 2007 Mesa illegally used confidential information obtained from Hawaiian Airlines to launch its new go! interisland airline... and ordered Mesa to cough up $80 million for the transgression. Judge Robert J. Faris ordered the fine to compensate for damages Hawaiian Airlines has incurred since go! entered the Hawaii market.

Faris determined Mesa used information it obtained while a bankrupt Hawaiian Airlines courted Mesa as a possible investor -- including profitability figures for local and Hawaii-US mainland routes, and passenger profiles -- to turn around and launch its own airline. The judge said Mesa breached a confidentiality agreement when it failed to return the information to Hawaiian, or destroy it.

In November 2007, Mesa filed a notice of appeal to the judge's ruling, and was required to post a $90 million bond as security for the judgment, post judgment interest, and attorney's fees, pending the outcome of the appeal.

Under the terms of the settlement agreement reached this week, Hawaiian Airlines will receive a cash payment of $52.5 million and Mesa will withdraw its appeal of the $80 million judgment (plus interest, attorney's fees and costs) awarded against Mesa by the United States Bankruptcy Court in October 2007. The cash payment is required to be made within two business days of approval of a stipulation by the bankruptcy court that will follow dismissal of the appeals.

In a statement to ANN, Mesa was quick to point out the settlement does not require the airline to admit wrongdoing. "This settlement does not restrict in any way go!'s ability to continue to offer services in the Hawaiian interisland market," the carrier added.

The June 2006 entrance of go! into the Hawaiian market is widely believed to have led to the demise of another storied Hawaiian carrier, Aloha Airlines. That airline filed Chapter 11 bankruptcy in March, and halted all passenger service soon thereafter. Aloha blamed its demise on Mesa's "illegal" predatory pricing strategy.

With Aloha no longer flying, the interisland market is once again the domain of but two airlines... Hawaiian, and go!

FMI: www.hawaiianair.com, www.mesa-air.com/go.asp