Wednesday, October 17, 2001

The Lahaina, Kaanapali & Pacific Railroad on Maui
formerly carried cane, but now carries tourists

Chugging along

Plying a track that is all of 6
miles, the Lahaina, Kaanapali &
Pacific Railroad is an unlikely
target for a takeover

By Russ Lynch

Hawaii's only commercial railway, the Lahaina, Kaanapali & Pacific Railroad, is about to get a new owner.

Officially called Railroads of Hawaii Inc. and nicknamed "the sugar cane train," the Maui operation has been owned since 1999 by StatesRail, a privately held company based in Dallas, Texas.

Now StatesRail, which operates eight freight railroads on the mainland as well as the tourist operation on Maui, has agreed to be acquired by publicly held RailAmerica Inc.

Headquartered in Boca Raton, Fla., RailAmerica describes itself as the world's largest short-line and regional railroad, with 39 operations covering some 11,000 miles in the United States, Canada, Australia and Chile.

It agreed to pay $70 million in cash, including assumption of debt, plus $20 million worth of RailAmerica stock for StatesRail, subject to regulatory approval.

The Lahaina, Kaanapali & Pacific Railroad grew from the old cane-hauling railroad used by the sugar plantations on West Maui from about 1890 to about 1950.

In the late 1960s, railroad buff A.W. "Mac" McKelvy, an engineer with sugar giant Amfac Inc., got together with a company called the Makai Corp. to create the LK&P as a tourist operation.

Its steam engine has puffed along six miles of track from Lahaina to Puukolii, just north of Kaanapali, almost continuously since, hauling open sided cars in a scenic tourist ride.

Makai Corp. fell into bankruptcy but in 1973 Kyle Railroad Co., a private business operating in Kansas, Nebraska and Colorado, stepped in and bought LK&P out of bankruptcy.

The business has been going strong ever since, said Barbara Allen, who came over from Kyle about a year ago to become general manager.

StatesRail had acquired Kyle in 1997.

"We're excited about it," Allen said of the acquisition by a strong public company. "We've always been closely held" and the investors who own StatesRail fended off a number of buyout offers until the RailAmerica approach came some months ago, she said.

She said no change is expected at LK&P, which has 25 employees and carried 277,000 passengers last year. Like other tourist operations in the islands, the railroad has seen its visitor traffic fall since Sept. 11 but that appears to be temporary.

One part of the operation that has continued to do well is the "dinner train" evening ride.

At $59 for adults and $39 for children, it includes paniolo greetings, entertainment on board and a Hawaiian-style barbecue in the open near Kaanapali, as the scenic two-way ride.

Normal rates for just the ride and a "singing conductor" are $15.75 per round trip and $11.50 one way, about half that for children. There are also kamaaina rates, Allen said.

The change of ownership comes after the sugar industry in West Maui ended in September with the closing of the Pioneer Mill in Lahaina. Allen said the business will still call itself the sugar cane train, because it reflects the history of the area.

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