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Mokulele Airlines tries to stay in business

AP  Feb 18, 2009

Mokulele Airlines could have its assets, including planes, seized by business partner Republic Airways as soon as the close of business Wednesday.

Republic Airways Holdings Inc. said Mokulele had defaulted on its debt, and the Indianapolis-based company would come in and operate the airline if the Hawaii carrier failed to make the payment.

Republic said Mokulele's flights would operate as scheduled regardless of the outcome.

Bryan Bedford, Republic's chief executive officer, said Tuesday in an earnings conference call that his company has "a default situation with Mokulele.

"We have an $8 million line of credit outstanding to Mokulele that has been fully drawn," he said according to a transcript of the call.

Republic will take its planes if it doesn't receive about $300,000 from Mokulele by the close of business Wednesday, Bedford said.

Republic and Mokulele's majority shareholders were negotiating to find new investors for the company, Bedford said.

Mokulele General Manager Chris Van Den Heuvel remained optimistic Tuesday, saying the airline was working with investors and outside companies to acquire additional capital.

"I don't think we're going to shut down tomorrow," he said. "We're going to restructure and work on a recapitalization plan."

Republic issued a statement late Tuesday, saying it hoped Mokulele was successful, "but if not Republic will assume responsibility for the continuation of jet service.

"The resolution of the financial arrangements of the agreement between Republic and Mokulele will in no way impact scheduled services," the statement said.

Kailua-Kona-based Mokulele challenged Hawaii's two largest carriers - Hawaiian and go! airlines - last year by expanding its interisland service with the help of Republic.

Republic was to invest $150 million in the venture, officials said at the time. Mokulele's work force would double to 400, with about half of the new hires being former Aloha Airlines employees. Aloha folded early last year.

About a week after Mokulele's announcement, the airline was sued by go!'s parent company, Phoenix-based Mesa Air Group Inc., which said Mokulele had failed to pay nearly $400,000 in fuel expenses. Mesa and Mokulele had joined forces in 2007 to serve smaller Hawaii airports.

In November, Mokulele sued Mesa, alleging the company engaged in anticompetitive behavior. The suit claimed Mesa threatened to drive Mokulele out of business by choking off revenues owed under a code-share agreement with the two carriers.

Mokulele Airlines tries to stay in business
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