Republic takes stake in struggling Mokulele

Washington DC
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US regional operator Republic Airways Holdings has deepened its ties with new partner Mokulele Airlines after converting an existing loan into an equity stake in the Hawaiian carrier.

Republic in October 2008 negotiated a deal with Mokulele for its Shuttle America subsidiary to operate four Embraer E-170s on inter-island routes, and also loaned the Hawaiian carrier $8 million.

Operations started in November, but last month Mokulele barely escaped defaulting on a $300,000 payment to Republic after its employees agreed to defer wages in order for the carrier to pay Republic.

In a recent earnings call outlining Mokulele's discussions with stakeholders to recapitalize, Republic CEO Bryan Bedford said: "We are obviously, if we have to, we are going to become a lot more intimate with what it means to be a Hawaiian airline."

Bedford and Republic followed through on that pledge after the carrier agreed to convert a large portion of the $8 million loan into a 50% stake. Republic has put its VP of Strategic Alliances Scott Durgin in charge at Mokulele until the carrier finds a chief executive.

Mokulele in a statement explains the management overhaul allows current CEO Bill Boyer "to more effectively lead Mokulele's expanding sales and marketing efforts".

Recently Mesa CEO Jonathan highlighted Mokulele's 20%-25% load factors in the inter-island markets, noting achieving profitability with those statistics would be challenging. Mesa subsidiary go! competes with Mokulele and Hawaiian Airlines in the inter-island market.