The remarkable twist in the story of Aloha Airlines

There is an old joke in legal circles about the boy who, having murdered his parents, throws himself on the mercy of the court because he is an orphan.

No less ironic is the settlement of the Aloha Airlines lawsuit against Mesa Air Group, parent of the go! interisland service, which sets the stage for Mesa to acquire the Aloha name and rebrand go! as Aloha.

“We are extremely pleased to resolve all claims put forward in this litigation and look forward to rebranding service under the Aloha name in the near future,” said Mesa CEO Jon Ornstein, who added, “We intend to carry on Aloha’s proud tradition.”

The agreement also includes unspecified interisland travel benefits for former Aloha employees, though many former Aloha employees blame Mesa for the demise of their employer and refuse to fly go! under any circumstances.

How could Aloha management do this? The answer is that they didn’t. They thought they had an ironclad case for predatory pricing and wanted to pursue the suit.

Hawaiian Airlines, in a similar suit, won a $52 million out-of-court settlement just when it needed the money for jet fuel bills last spring. If it had not preferred to get cash right away it could have pursued the suit, which was headed for appeals court after an initial win for Hawaiian and a cash judgement above $80 million. The original judgment covered damages only up to the point where damages were toted up, so a win on appeal could have resulted in an even larger award. Hawaiian won the suit, though predatory pricing is usually hard to prove, because the chief financial officer of Mesa wrote an injudicious report outlining a predatory pricing strategy, a smoking gun that isn’t normally available in such cases. (Ornstein said the report, which came with charts and graphs, was merely a joke.)

The Aloha suit had the potential for even greater damages, the airline having died. But once it died the lawsuit and its potential for damages became an asset, and the airline sold it. Yucaipa Companies, the Los Angeles area investment outfit that had kept Aloha alive with cash infusions, and killed it by cutting off the tap after a United Airlines acquisition deal fell through and the management could not immediately find a new buyer, agreed to settle some of what Aloha owed it by taking the lawsuit. The lawsuit then belonged to Yucaipa. And Yucaipa has now settled it.

Under the settlement terms, Mesa pays Yucaipa a mere $2 million but gives Yucaipa 10% ownership of Mesa — not just go! — the entire national company. It agrees to the unspecified interisland travel privileges for former Aloha employees. And it wins from Yucaipa a promise that if Yucaipa acquires the Aloha name it will license it to Mesa.

Yucaipa is currently the high bidder for Aloha’s intellectual property.