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Mokulele denies analyst report that it may close


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POSTED: Saturday, August 29, 2009

Mokulele Airlines' chief executive officer says majority investor Republic Airways has not discussed leaving the Hawaii market, despite a published analyst's report that the interisland carrier could close within the next 90 days.

CEO Scott Durgin did say yesterday, however, that Mokulele has talked with Indianapolis-based Republic about possibly replacing the three 70-seat Embraer 170s that Mokulele uses for service between Honolulu and Kauai, Maui and the Big Island.

“;We're always talking about whether we have the right equipment in Hawaii,”; Durgin said. “;We have had some discussions about possibly changing out the equipment we have to some other sized jet.”;

Durgin said possible replacements are the Embraer 190, which seats about 100 people, and the 50-seat Embraer 145.

Mokulele, which also flies four nine-seat 208B Cessna Grand Caravans, has 160 employees, of which 45 percent came from defunct Aloha Airlines.

Bob McAdoo, a senior research analyst who covers Republic Airways, Hawaiian Airlines and other carriers for Kansas-based Avondale Partners LLC, wrote in an investors report yesterday that Mokulele is losing $6 million a quarter and that Republic could use the three Embraer 170s in Hawaii to help fill a need with recently acquired Midwest Air.

McAdoo said Republic, which also has won U.S. Bankruptcy Court approval to acquire Frontier Airlines next month, needs six to nine aircraft by January to replace Midwest's leased Boeing 717s.

“;We expect Mokulele to close,”; he said. “;That would return intra-Hawaii flying to a profitable duopoly of Hawaiian and Mesa's go! This outcome seems likely. We should hear within 90 days.”;

Durgin said Republic continues to believe in the Hawaii market and he wouldn't comment on the extent of Mokulele's losses. However, last month Republic CEO Bryan Bedford acknowledged on an earnings conference call that Mokulele would lose money this quarter and that Republic is now an 89 percent owner of Mokulele since pumping nearly $20 million into the operation since service began last November.

“;We've made continued improvements revenue wise month over month since the recapitulation (of additional money into the company) in March, so it appears that we are working on the right thing,”; Durgin said. “;We remain confident.”;