Tag Archives: Mesa Air Group

PlaneBusiness Banter is Now Posted!

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Good evening everyone. It’s time once again for this week’s issue of PlaneBusiness Banter. Or rather, this week’s “Turkey Trot” edition of PBB.

Yours truly got hit by a nasty upper respiratory infection this last weekend, so I have to tell you — the “Turkey Trot” edition almost didn’t make it to the table.

But I couldn’t have all our subscribers venturing out over the river and through the woods without some good reading material.

This week we’re talking about a hodge-podge of things — lunatic legislation introduced just in time for Thanksgiving travelers that seeks to either prevent airlines from charging for fees, or then taxing airlines more that do charge for fees; a USB investment research report that pretty much calls the EU’s Emissions Trading Scheme worthless; American Airlines’ withering market cap; American Airline’s withered state in general; SkyWest’s new flying for US Airways; Travelport and American’s latest court news; one analyst’s take on the latest Southwest Airlines‘ schedule uploads for 2Q2012, and what these changes mean for competitors; Hawaiian Airlines’ decision to take Manhattan; the DOT’s September Airline Consumer Travel Report; and oh, a whole lot more.

Subscribers can access this week’s issue here.

Judge Strikes Down Mesa Air Group/Yucaipa Deal To Use “Aloha Airlines” Name

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Thursday Federal U.S. Bankruptcy Judge Lloyd King disqualified Mesa Air Group as a co-bidder for the right to use the “Aloha Airlines” corporate identity.

You may recall that Ron Burkle’s Yucaipa Co., Aloha’s largest creditor, had put together a cozy little deal with Mesa Air Group last last year that would have seen Burkle drop the antitrust lawsuit that Aloha had filed against Mesa Air Group in which Aloha alleged that Mesa had attempted to drive Aloha out of business by starting up its lowfare carrier “go!” in Hawaii. In return, Mesa had agreed to enter into a “licensing” agreement in which it would pay Yucaipa for the right to use the “Aloha” name and brand.

There was just one little hitch to this deal.

It had to be approved by the bankruptcy judge handling the Aloha bankruptcy.

And here is where the plan came unglued.

In December, after Yucaipa bid the highest amount for the use of the “Aloha” name as part of the airline’s bankruptcy proceedings, (over Hawaiian Airline’s competing bid), Judge King blocked the deal as he questioned the motives behind the move by both airlines.

“How about all the people whose lives were devastated in this case?” asked King, noting that Mesa and go! were largely blamed for Aloha’s demise. “Doesn’t that count? Is it just the money?”

At that time, King postponed a hearing that would have given the okay to the proposed licensing pact, and instead set a new date of Feb. 19 — so that opponents and supporters of the deal would have more time to respond.

In March, Judge King threw out the sale of the Aloha Airlines name and other intellectual property to Mesa.

Judge King, emphasizing that the auction to buy Aloha’s intellectual property should have been a public process, blasted the attorneys conducting the auction for refusing to allow Honolulu Advertiser reporter Rick Daysog into the proceedings. Daysog wrote a letter to the court voicing his complaint about his being excluded from the proceedings. King ruled that the auction must be reheld.

Which brings us to Thursday.

According to a report in the Star-Bulletin dated May 15, King said he was denying a renewed motion by Aloha’s Chapter 7 trustee, Dane Field, to conduct an auction for Aloha’s intellectual property rights because Yucaipa had a deal to license the Aloha name to go! for 10 years.

“Standing alone, with no connections to Mesa and appropriate assurance that no interest in the Aloha IP would ever pass to Mesa, there is no apparent cause to deny Yucaipa the ability to credit bid,” King wrote.

However, he said that since the trustee’s motion and the asset purchase agreement do not identify Mesa as a co-purchaser or even mention the license of the intellectual property which Yucaipa is obligated to give to Mesa, “cause exists to deny the credit bid.”

“This court has an independent power and duty to examine the propriety of a proposed sale of property of a bankruptcy estate, and it cannot allow its authority to be misused in a way that would reward Mesa for its misconduct,” King said.

Kudos To Hawaiian Advertiser Reporter Rick Daysog; Sale of Aloha Name Thrown Out

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A shout out to Hawaiian Advertiser reporter Rick Daysog today.

Because of Rick, the “behind closed doors” bankruptcy agreement that saw Yucaipa Companies be granted the intellectual property rights to Aloha Airlines, including the airline’s name, was thrown out by U.S. Bankruptcy Judge Lloyd King this week.

You may recall that we talked about this questionable deal back in November and December. The deal would have resulted in Mesa Air Group taking over the Aloha Airlines name — because Yucaipa had already struck a deal to license the name to Mesa. Yucaipa was the largest shareholder in Aloha.

King ruled that the auction must be reheld.

Mesa apparently wants to obtain the name, and rebrand its regional Hawaiian airline go! — with the Aloha name. A fact that has not gone over very well with a lot of people in Hawaii, including former employees of Aloha, and, apparently, Judge King, who blasted the proposed deal with Mesa in the first hearing held on the deal in December, where King postponed approving the auction the first time. Many in Hawaii blame Mesa for Aloha’s demise.

Kudos to Rick. Keep up the good work and keep working to keep those deals out in the open.

Another “Good News, Bad News” Kind of Day On Wall Street: Crude Drops While Stocks Do the Same

OIL PUMP

As of this posting, airline stocks are mixed in trading today as the market has turned downward as a result of more bad banking news.

Why anyone in the market would think that all the bad news about banks was already “out there” is beyond me.

Today Citibank and Bank of America are the two hot topics du jour.

But for the airlines — there is a bit of very good news.

As more estimates of energy demand continue to trickle in — and as the numbers continue to show a growing drop in that demand being forecast — the price of crude oil continues to drop.

As of this posting the price of crude is trading at around 34.64/barrel. Can you believe it? Yep, it’s true. Happy days are here again folks!

Well, maybe not. But in terms of airline economics — this is very good news.

Biggest loser as for the airline sector as of this posting is Mesa Air Group. The stock is down about 11% for the day as we post this — hovering around 18 cents and change.

Mesa Air Group/Aloha/ Update: Bankruptcy Judge Says “Not So Fast”

I’m sorry dear readers.

I should have posted this news yesterday. Wednesday, actually.

But I did not want to have to be forced to type the word “MESA” on my birthday. Or even 24 hours ahead of my birthday.

I’m sure you can understand.

But now it is Friday, so here it is.

As we wrote here the other day, Mesa announced last week that it had cut a deal with the major shareholder of Aloha Airlines that would see that shareholder, Yucaipa Cos. receive a rather sweet deal in return for the rights to the Aloha Airlines trademarks, names, logos, internet presence, corporate identity items, etc. Actually the extent of the deal was not made clear until Mesa posted an SEC filing on Monday, but, well, you can read our post on all of it here.

The only catch was that Yucaipa would need to be the highest bidder at the scheduled auction for the rights to these items, which was scheduled for Tuesday.

Tuesday, the auction took place, and Yucaipa did indeed beat out all comers, including Hawaiian Airlines, bidding $750,000 for the rights to the name. Hawaiian’s all-cash bid was $575,000, which was the required overbid after Yucaipa had initiated the auction process as the so-called “stalking horse” with a bid of $525,000.

But then a funny thing happened on the way to Mesa getting the right to use the Aloha name. And the livery. And everything else.

The deal was temporarily blocked by the federal Bankruptcy Court judge who is presiding over the case.

Judge Lloyd King postponed the scheduled hearing on the licensing pact between Mesa and Yucaipa Cos. until Feb. 19 to give supporters and opponents of the deal more time to respond.

“How about all the people whose lives were devastated in this case?” asked King, noting that Mesa and go! are largely blamed for Aloha’s demise. “Doesn’t that count? Is it just the money?”

“I don’t think anyone is sensitive who’s involved in this settlement,” King said. “If this isn’t approved, are people from Yucaipa going to lose their health benefits and their jobs? There hasn’t been enough time for people to react.”

He said that the extra time would give both supporters and opponents more time to respond.

You know, that’s the thing about those federal bankruptcy judges. You just never know what they are going to do. And sometimes — this turns out to be a good thing.

I guess there’s a Santa Claus after all.

Mesa Air Group SEC Filing Tells Us Way More Than the Airline’s Press Release Did

Last week Mesa Air Group issued a press release in which it talked about a deal the airline had cut with bankrupt Aloha Airlines’ major shareholder, the Yucaipa Cos. According to the release, in return for Yucaipa dropping all claims associated with the Aloha Airlines antitrust suit that it filed against Mesa, and in anticipation of Yucaipa being the highest bidder for the various Aloha trademarks, logo, and other naming rights at today’s Aloha bankruptcy auction — Mesa said in its release that it had agreed to:

Pay Yucaipa $2 million;

Issue 2.7 million common shares of Mesa Air Group stock;

Provide inter-island travel benefits to former Aloha employees.

Note that in the release Mesa did not say it was going to issue the shares and give them to Yucaipa, a fact that a handful of you pointed out to me this last weekend. It really was stated in a very ambiguous way. But apparently this is indeed the case.

Be that as it may, as I said in this week’s PlaneBusiness Banter, the fact that Mesa Air Group would think that it could simply purchase the name “Aloha Airlines” and start using it — and that this was perceived by Mesa management as a positive marketing tactic — given the fact that many in Hawaii still blame Mesa (rightly or wrongly) for Aloha’s demise — was nothing short of mind-boggling.

However, an alert on the company’s 8-K SEC filing came sailing through in our email box late last night and it seems that there were more than a couple of details of this deal that Mesa did not talk about in its press release.

Here’s the verbiage straight from the filing:

In addition, under the Settlement Agreement, Mesa and Yucaipa agreed to establish a licensing and profit sharing arrangement whereby, in the event that Yucaipa is able to acquire from Aloha in an upcoming bankruptcy court auction the rights to the names “Aloha” and “Aloha Airlines,” Yucaipa will enter into a license agreement with Mesa to license such names to Mesa for ten years (the “Term”) in exchange for royalty payments by Mesa and Mesa will pay to Yucaipa a set percentage of the pre-tax operating profits from Mesa’s operations in the Hawaiian inter-island market. Specifically, for each year during the Term, Mesa will pay Yucaipa 1% of the passenger ticket revenue generated from all Hawaiian inter-island flight operations, subject to a minimum annual revenue payment of $600,000 (the “Revenue Payments”), and will also pay Yucaipa 30% of the pre-tax operating profits from Mesa’s operations in the Hawaiian inter-island market less the Revenue Payments.

If Mesa ceases inter-island flight operations in Hawaii, Mesa has the right to terminate the licensing and profit sharing arrangement. Mesa will provide Yucaipa with a $5 million promissory note payable over five years, at LIBOR +350 basis points interest, reset quarterly, that will become payable if Mesa ceases operations in the Hawaiian inter-island market or breaches the Settlement Agreement. If, at the end of the first five years of the Term, the note has not become payable as a result of Mesa’s cessation of operations or breach, the principal owing on the note will decrease automatically on a straight-line basis over the remaining five years of the Term. If Mesa ceases operations in Hawaii or breaches the Settlement Agreement during the final five years of the Term, the amount payable on the note would be the principal remaining at the time of such cessation or breach. The note will be secured by a first priority lien on certain Mesa assets with a fair market value equal to 125% of the principal amount of the note.

Yes, indeedy. It does appear that there are a lot more ifs, ands, or buts to this deal than had been publicly disclosed in the Mesa press release.

Essentially, in return for the use of the “Aloha Airlines” name, Mesa has agreed to pay Yucaipa 1% of the passenger ticket revenue generated from all Hawaiian inter-island revenue AND it will also pay Yucaipa 30% of the pre-tax operating profits from the operations. If Mesa stops flying in Hawaii, then Yucaipa gets a $5 million promissory note payable in five years at a rather hefty interest rate.

Amazing. Just simply amazing.

Wonder what Yucaipa gets if Mesa declares bankruptcy?