Mokulele pays partner, but another deadline looms


POSTED: Thursday, February 19, 2009

Mokulele Airlines has bought itself more time to operate - but not much.

The interisland carrier, which had defaulted on an $8 million loan, paid business partner Republic Airways $300,000 yesterday to avoid having its planes and other assets seized.

But Mokulele said it owes Republic an additional $291,000 that is due tomorrow under their operating agreement in which Republic provides Mokulele with the aircraft and crew for the three Embraer 170 jets now in service. Mokulele, which makes three such payments to Republic each month, said it will be able to extend tomorrow's payment until Feb. 27 due to a grace period of five business days.

However, if Mokulele is unable to make that payment, Republic would be able to step in and seize Mokulele's assets. If that situation occurs, Republic has said it would continue to operate Mokulele without any interruption in service.

Mokulele General Manager Chris Van Den Heuvel said yesterday that Mokulele was able to make yesterday's $300,000 payment and secure an undisclosed amount of additional funding because ticket sales Tuesday were “;good”; and because the airline's approximately 180 employees agreed to delay receiving their paychecks to Monday from tomorrow.

“;This will give us a little bit of space so we'll be able to operate for the next few days,”; Van Den Heuvel said.

In the meantime, Van Den Heuvel said Mokulele continues to work with investment groups and Republic Airways in seeking $7 million to $9 million to recapitalize the company.

“;We're optimistic we'll be able to work something out,”; Van Den Heuvel said.

Bryan Bedford, chairman, president and chief executive of Republic, said on an earnings conference call Tuesday that “;we're certainly not going to just shut (Mokulele) down and go sell the assets.”;

“;We'll certainly take a hard look,”; he said. “;If, in fact, the recapitalization isn't successful, we'll take a hard look at (whether this is) a business we want to be in or is it not.”;

Van Den Heuvel said the employees, who get paid twice a month, have been supportive of Mokulele's situation.

“;They understand that we're a small startup airline, and there was a lot of support from the employee group,”; he said.

As for future passengers, Van Den Heuvel said, “;We're telling them that we're still operating our airplanes and we're still working with our partner.”;

Scott Durgin, vice president of strategic alliances for Republic, confirmed that Republic received the $300,000 payment, and said Republic hopes Mokulele continues its progress on a recapitulation plan and is successful.

Van Den Heuvel said Mokulele is currently operating about 91 daily flights to Oahu, Kauai, Maui, the Big Island, Lanai and Molokai.