They're still looking for planes, don't have office space and haven't hired any workers.

When Mesa Air Group Inc. says it is starting an interisland air service in Hawai'i early next year and will charge about half the going rate, can consumers count on it?

Airline analysts and aviation consultants seem to think so.

"Never underestimate Mesa; they see value where nobody else does," said Michael Boyd, president of Denver-based airline consultancy The Boyd Group. "They wouldn't be monkeying with this unless they saw value."

Analysts' confidence in Mesa stems largely from the track record of CEO Jonathan Ornstein.

"If there's a way this can be done, he's going to figure out how to do it," said Scott Hamilton, founder of Leeham Co., a Washington-based airline consulting firm.

Ornstein took over Mesa in 1998 and the company has been profitable ever since, with the one exception the period of the Sept. 11, 2001, terrorist attacks that shut down air service nationwide.

Founded in 1982, Phoenix-based Mesa is one of the nation's largest regional carriers with 182 jets and annual revenues of about $900 million and about 5,000 employees.

The airline provides service to more than 165 cities in 44 states. Most of its flights are under contract with America West, United Airlines and other larger domestic carriers.

In the early 1990s, Ornstein was able to turn a $40 million annual loss at Continental Express, the commuter airline owned by Continental, into a $25 million profit, according to Forbes magazine.

Ornstein shook up the local interisland market in September when he announced that Mesa would begin service among the main Hawaiian Islands as early as February.

"We feel pretty comfortable we can get this thing running in the first quarter," said Ornstein, who has studied the Hawai'i market for more than a decade.

How do they do it?

Mesa is entering the Hawai'i market despite a steady decline in interisland traffic, soaring fuel prices and financial woes at Aloha Airlines, which is in bankruptcy, and Hawaiian Airlines, which emerged from bankruptcy this year.

Mesa said it plans to offer flights at about half the price now charged by the local carriers with roundtrip fares ranging from $86 to $171 between Honolulu and Kahului, Hilo, Kona and Lihu'e.

Aloha and Hawaiian have said their prices will be competitive. Both airlines currently charge interisland roundtrip fares ranging between $146 and $246.

Ornstein — who plans to invest about $50 million to launch the new interisland carrier — said Mesa has looked at a several locations for its headquarters and has submitted an offer for office space near Honolulu airport.

Mesa executives have been meeting regularly with state Department of Transportation's Airports Division to finalize terms for hangar space, ticket counter space and gate availability.

Mesa has submitted a formal proposal to the Department of Transportation to provide service in Hawai'i. Mesa hasn't announced a name yet for its Hawai'i service, but has said it will select a name other than Mesa.

The company, which will employ between 500 and 800 employees or a fraction of the 3,000-plus workers at Aloha and Hawaiian, soon will begin hiring, Ornstein said.

Mesa has said it will start service with six to eight 50-passenger Bombardier CJR 200s — compared to Aloha's fleet of eight 124-passenger Boeing 737-700s for its Neighbor Island flights and Hawaiian's 11 123-passenger 717-200s. Like Aloha and Hawaiian, it will offer high-frequency service.

Ornstein said Mesa needs to secure aircraft for its Hawai'i operations but he doesn't think that presents much of an obstacle given the glut of regional aircraft.

"Clearly there are things that can slow us down, but at this point I think we are on track," Ornstein said. "I still think it's going to be in the first quarter, although it might not be in the beginning of the first quarter. Maybe we don't start off with six or eight planes and begin flying with two or three, but once we get going it's not going to be hard to get all eight aircraft operating."

'A SIMPLE OPERATION'

Over the longer term, Mesa hopes to upgrade its fleet to about a dozen 86-passenger Bombardier CRJ 900 jets, Ornstein said.

"It's a simple operation and that's what Jonathan likes," said Raymond Neidl, aviation analyst with Calyon Securities in New York. "If it works, he can bring in new planes. If it doesn't work, it's an easy out."

According to Ornstein, Mesa has had some discussions with prospective local and Mainland investors. He said the investors included former airline and travel industry executives but declined to disclose their names.

Ornstein said the new interisland carrier could operate as a joint venture, with Mesa serving as a minority or majority shareholder and operating partner.

Hamilton, the airline consultant, believes that the interisland market poses plenty of obstacles for a new carrier.

The frequent short hops between the islands aren't fuel-efficient and require more maintenance than longer-haul flights. Hamilton noted that prolonged fare wars in the interisland market have taken a heavy toll on startup carriers such as Mid Pacific.

But Hamilton believes that if anybody can succeed in this market, it's Ornstein, given Mesa's track record of growth and lower costs.

Hamilton believes that Mesa's interisland airline will have cost advantages over Aloha and Hawaiian since it will be hiring new employees and will be getting its planes cheaper.

"One thing I can say about Jonathan is that the guy is very sharp when it comes to structuring a financial package," Hamilton said.

'WE DID OUR NUMBERS'

Hamilton said it would be unwise to bank on either of the local airlines going out of business.

Hawaiian emerged from bankruptcy protection in June as a profitable company, and Aloha, which filed for Chapter 11 reorganization in December, is being sold to a group that includes California billionaire Ron Burkle's Yucaipa Companies and former professional football player Willie Gault.

Mesa submitted an offer to acquire Hawaiian during its bankruptcy and had expressed an interest in Aloha.

"Those carriers will be here for years to come," Hamilton said. "It's awfully hard to kill an airline."

Ornstein said Hawai'i's interisland market has been stunted by the higher fares charged by the local carriers and that Mesa can turn a profit by providing a fresh product with lower fares.

"I'm not going to tell you what happens if one (airline) liquidates. That clearly presents an upside. But that was not a basis for us to do this," Ornstein said.

"You can't build a business plan around whether someone is going to be there or not. The fact is we did our numbers based on existing capacity."

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.