Mokulele gets cash, new CEO


POSTED: Friday, March 20, 2009

Mokulele Airlines, which has struggled to make payments to business partner Republic Airways since burning through an $8 million loan, has completed a major recapitalization with the Indianapolis-based carrier, existing shareholders and debt holders and undergone a management shake-up.

Republic said yesterday it will become a 50 percent shareholder in the Kona-based carrier by converting $3 million of the loan it is owned into common stock and investing an additional $3 million in cash.

In addition, Mokulele President and Chief Executive Bill Boyer is being put in charge of Mokulele's “;expanding sales and marketing efforts”; while Scott Durgin, Republic's vice president for strategic alliances, will serve as interim president and CEO. Durgin said Mokulele's board is conducting a search for a permanent president and CEO.

None of Mokulele's 170 employees will be immediately affected, Durgin said.

Mokulele, which entered into an agreement with Republic in October and began offering interisland jet service in November, currently flies from Honolulu to Kona, Lihue and Kahului with three 70-seat Embraer 170s. A fourth aircraft that was scheduled to be delivered next month has been put on hold until June, Durgin said.

“;They certainly were a company that was in distress,”; Durgin said.

Durgin said that Boyer was replaced as CEO because even though he had “;the vision,”; “;this thing had gotten to be bigger than Bill could possibly handle. Bill could sell the vision and talk with passion that we can't match, but there needs to be attention to the discipline of running the business.”;

Republic also is taking control of the nine-passenger Cessna Grand Caravans that Mokulele flies between smaller airports. Mokulele has nine Grand Caravans, including one that is a dedicated freighter, but two of its passenger aircraft will be pulled out of service on April 29 when Mokulele's go!Express contract terminates with Mesa Air Group's go!.

Mokulele's load factors, or percentage of seats filled, were 23.5 percent and 26.3 percent in November and December, respectively, according to the U.S. Bureau of Transportation Statistics. Mokulele hasn't filed since that time.

Durgin said Mokulele's load factors on its jets were “;approximately 49, 50 percent”; in February and at the start of this month were “;a little soft”; but have been turning around after the media reported last month that Mokulele was in default of its loan to Republic.

Go! Vice President Paul Skellon, whose airline tracks Mokulele's passenger count, said “;it appears that Mokulele continues to have load factors in the 20 percent range.”;

“;We know that through simple math that they are losing millions of dollars a month, and the proof is they've cut through $8 million in a short period of time,”; Skellon said. “;I don't see this as a long-term viable investment.”;

However, Republic CEO Bryan Bedford said the investment in Mokulele will give it greater financial strength and “;positions it to compete effectively and continue to grow its expanding base of loyal interisland customers.”;