The stock of go! airline’s parent company has risen 12 percent since it settled a lawsuit by Hawaiian Airlines. Is the worst over?

Shares of Mesa Air Group closed at 74 cents on the Nasdaq market on Friday, which is up from 66 cents on April 30 when Mesa announced its deal with Hawaiian.

The company’s stock hit an all-time low of 45 cents per share on April 24 and is off more than 85 percent since last October when U.S. Bankruptcy Judge ordered Mesa to pay $80 million to Hawaiian for misusing confidential business data.

Wall Street analysts are mixed about the company. Two consider Mesa’s stock a hold while a third -- Lily Ng of Merrill Lynch -- has a sell recommendation.

Ray Neidl of Calyon Securities stopped covering Mesa on April 11 after Mesa’s market capitalization fell below $20 million.

Despite the Hawaiian settlement, Mesa faces significant challenges.

At its annual meeting on Tuesday, Mesa is expected to ask shareholders for approval to issue new stock. The new shares are to help cover a $37.8 million payment due to Mesa's bondholders next month.

Mesa did receive some breathing room from its recent settlement with Hawaiian. By agreeing to pay Hawaiian $52.5 million, Mesa gets $37.5 million back from the $80 million bond that it posted after it lost the ruling.

That amount very close to the amount due to bondholders.

But there are other troubles.

Mesa faces the potential loss of a $20 million-a-month contract to fly regional routes on the Mainland for Delta Air Lines. That contract generates about 18 percent of Mesa’s $1.3 billion in annual revenues.

Mesa has similar contracts with United Airlines and US Airways and a merger that’s being discussed between those two legacy carriers would be disastrous for Mesa.

And don’t forget Aloha Airlines’ lawsuit. Aloha may no longer be operating but its court-appointed bankruptcy trustee has a duty to pursue the local airline’s anti-trust suit against Mesa. The potential award from such a lawsuit could be much higher than $80 million.

Tags: Airlines, Hawaiian, Mesa

This entry was posted on Monday, May 12th, 2008 at 3:00 am and is filed under Biz Bites. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.