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Mesa ends deal with Mokulele


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POSTED: Tuesday, March 24, 2009

Mesa Air Group is terminating its go!Express code-share agreement with Mokulele Airlines more than two months earlier than planned after last Thursday's announcement that Indianapolis-based Republic Airways was becoming a 50 percent shareholder of Mokulele and replacing the Hilo-based carrier's chief executive officer.

Mokulele's interim CEO, Scott Durgin, called yesterday's move by Mesa "anti-competitive tactics" and said there could be an unspecified number of layoffs at Mokulele as a result.

Phoenix-based Mesa said a provision in the code-share agreement permits Mesa to terminate the agreement if the CEO is replaced. Mesa said its agreement with Mokulele will end today and that go!Express passengers traveling on or after tomorrow will be re-accommodated on flights operated by Island Air, which announced last month that it had reached a code-share agreement with Mesa.

Mokulele and Mesa became at odds last October when Mokulele CEO Bill Boyer announced he had formed an alliance with Republic to fly Embraer 170 jets.

"Given the direction Mokulele has taken, we believe it is in the best long-term interests of both companies to end our partnership," go! Vice President Paul Skellon said.

Durgin said Mokulele is "disappointed" that go! has chosen to abruptly terminate the code-share agreement ahead of schedule.

"This is clearly an attempt to inflict as much financial harm on Mokulele as it can and is consistent with behavior that go! has exhibited since entering the interisland market," Durgin said. "Surely they must realize that these actions could result in a needless loss of jobs at Mokulele Airlines.

"We are very proud of the Mokulele product and services through our Caravan and Embraer jet services, and our passengers tell us that every day."

Boyer was put in charge of Mokulele's sales and marketing last week and replaced as CEO by Durgin, who is Republic's vice president for strategic alliances.

Durgin said that despite "these anti-competitive tactics Mokulele is here to stay and will continue to provide safe, quality air service at affordable fares."

As part of last week's recapitalization of Mokulele, Republic converted $3 million into Mokulele common stock of the $8 million loan it was owed by Mokulele. Republic also put an additional $3 million into the company and took control of the nine-passenger Cessna Grand Caravans that Mokulele flies between smaller airports. Two of the nine Caravans were used for go!Express while one was a dedicated freighter and the remaining Caravans were used for Mokulele's own passenger service.

The two go!Express Caravans initially were scheduled to be pulled out of service on April 29 after the code-share ended, but Mesa attorney Brian Gillman said that the ending date subsequently had been changed to May 30 prior to yesterday's announcement.

Jonathan Ornstein, chairman of Mesa, said Mesa expects to offer its customers "an even greater choice of interisland routes as part of our new code-share agreement with Island Air."

Island Air, which flies 37-seat de Havilland Dash-8 turboprops, will retain the go!Express brand.