Republic Takes 50% Stake In Mokulele
By Andrew Compart 
Republic Airways Holdings is taking a 50% stake in Mokulele and temporarily put one of its executives in charge of the airline, in a deal reached March 19 to inject new cash into a Hawaiian interisland carrier that has been on the brink of collapse.
Mokulele said March 19 that its recapitalization involved deals with Republic, its existing shareholders and debt holders, but Republic appears to be the most critical piece. Mokulele did not provide many details, but said Republic would “convert” a “significant portion” of its previous $8 million loan and invest enough additional equity to give it a 50% share.
Republic would not comment beyond what was in Mokulele’s press release, but in a March 16 Securities and Exchange Commission filing it disclosed that it was negotiating a deal that would entail converting $3 million of its loan and providing another $3 million in cash in exchange for the ownership stake (DAILY, March 18).
Republic entered a fixed-fee code-share arrangement with Mokulele in October to provide and operate four Embraer E170 aircraft for its interisland service by June, and provided an $8 million line of credit. Mokulele started its interisland service Nov. 20 and currently flies from Honolulu to Kona and Lihue.
Mokulele, however, struggled to keep up with its payments to Republic and went into default this month.
Republic, on the other hand, has been averse to letting any of its customers fail. Last year, for example, it provided $30 million in debtor-in-possession financing to help Frontier restructure in bankruptcy, and this month it reached a new deal with Frontier for $40 million in DIP financing to effectively replace and expand the earlier agreement.
Republic also has used financing to gain new business. In September it reached a deal for a $25 million, two-stage loan to Midwest, which, in exchange, contracted with Republic to provide Midwest Connect service with 12 Embraer E-170 jets.
Under the deal with Mokulele, Scott Durgin, Republic’s VP for strategic alliances, will serve as the Hawaiian carrier’s interim president and CEO while Mokulele searches for “a new senior executive to help build the airline’s senior management team.”
The person who had been CEO, Bill Boyer, will “lead Mokulele’s expanding sales and marketing efforts.”
Republic Airways CEO Bryan Bedford said his company’s investment in Mokulele “gives it greater financial strength and positions it to compete effectively and continue to grow its expanding base of loyal inter-island customers.”
In a conference call Feb. 17 on Republic’s fourth-quarter earnings, Bedford described Mokulele as a product that “is really appreciated by the market” and said he believed Mokulele partnerships with other carriers would be implemented in time to start producing more revenue in April.
Photo: Mokulele
