Mokulele's entry into the Hawaiian inter-island market in late 2008 has once again triggered discounting in the region, reminiscent of Mesa's strategy when it arrived in 2006.Through its go! subsidiary Mesa brought inter-island fares to lows of $19, a factor in the demise of rival Aloha's passenger operations in April 2008.

Now Mesa's former codeshare partner Mokulele is challenging both go! and Hawaiian Airlines on inter-island flying through its partial-owner, US regional operator Republic Airways Holdings.

Hawaiian Airlines chief executive Mark Dunkerley says Mokulele has discounted inter-island fares to a low of $29 "as they struggle to gain a foothold". He warns those fares and the drop in tourist levels spurred by the current economic environment are pressuring inter-island traffic.

Dunkerley believes Hawaiian is in a stronger position to weather the discounting after shoring up its market share upon Aloha's exit. "You have to remember when Mesa came in we were at market parity with Aloha," he explains. Hawaiian has expanded its fleet of inter-island aircraft from 11 Boeing 717s to 15.

Mesa chief executive Jonathan Ornstein in February said go!'s average fares fell to $40 from a peak of $60 due to Mokuele's discounting. Go! turned its first profit during Mesa's first fiscal quarter, but failed to keep those results consistent during the ­second quarter. "The situation in Hawaii has deteriorated," says Ornstein. "As you know, we have additional competition there as a result of [Republic's] entrance into the marketplace."

Republic and Mokulele struck a deal in late 2008 for Republic subsidiary Shuttle America to flyEmbraer E-170son inter-island operations. After givingMokulele an $8 million credit line in October, Republic later turned someof that loan into equity and made a further investment to take a 50% share of the carrier in February.

After putting one of its executives, Scott Durgin, temporarily at the helm of Mokulele, Republic chief executive Bryan Bedford sayswith the right leadership team in place "we are seeing good things happen". Republic says the management overhaulallows former Mokulele chief executive Bill Boyer "to more effectively lead Mokulele's sales and marketing efforts". Mokulele has brokered a deal with Expedia to list its faresinventory on the travel website.Citing Mokulele's recovery Bedfordsays progress is being made in "establishing Mokulele as numbertwocarrier in the islands".

Source: Airline Business