A bankruptcy court judge in Honolulu has ordered
Mesa Air Group
to pay $80 million to
because it misused confidential information it obtained as a potential acquirer.
Mesa used what it learned during the process of considering a purchase to set up a low-cost interisland competitor called go!, Judge Robert Faris ruled. go! began flying in June 2006, triggering a fare war.
Mesa said Wednesday that it will seek to overturn the ruling, which follows a court finding that its chief financial offer, Peter Murnane, destroyed evidence in the case. Murnane was placed on administrative leave on Sept. 21.
go! continues to operate, and Faris rejected Hawaiian's request to bar it from selling tickets for one year.
Hawaiian CEO Mark Dunkerley called the ruling "a triumph for fair competition and ethics. Mesa pretends that they are in Hawaii to help the consumer," he said in a prepared statement. "As the evidence in this trial showed, the reality is that Mesa's intent was to drive local competition out of business and raise fares."
But Mesa CEO Jonathan Ornstein said in a prepared statement that the ruling results from "sanctions against Mesa concerning evidentiary issues," and that "these sanctions went too far." He added that "an impartial appellate court will find the sanctions and this judgment should be set aside.
"Hawaiian's true motive in filing suit was to stifle competition and maintain the high fares and reduced capacity fostered by the interisland duopoly led by Hawaiian Airlines," Ornstein said. Mesa anticipates being required to post a bond or a letter of credit as security.
The $80 million would compensate Hawaiian for damages it suffered through October. Hawaiian said it will consider what steps it can take to recover additional amounts.
On Wednesday, Hawaiian shares were trading at $5.16, up 17.5%. Mesa was falling 6.9% to $4.75.
Hawaiian reported late Tuesday that third-quarter net income was $19.6 million, or 41 cents a share. Operating revenue was $272.5 million, up 17.5%. A year earlier, the company earned $7.8 million, or 16 cents a share.
Revenue per available seat mile was flat, while yield declined marginally, as capacity rose 17.2%. Dunkerley credited "strong seasonal demand for Hawaii vacations, good cost control and some astute judgment by our revenue management department." But he said the company faces continued challenges including a seasonal decline in demand for Hawaii vacations and high fuel prices.
Meanwhile, in a report, Avondale Partners analyst Bob McAdoo said he expects Mesa shares to weaken as a result of the ruling. However, he said, "We continue to rate the shares as market perform as we don't believe the price movement will be substantial."
McAdoo has a nine-month price target of $6 on the shares. Avondale Partners makes a market in Mesa's securities.