Mokulele, which had to make a $300,000 debt payment to Republic Airways Holdings by Feb. 18, wired the money this morning after its nearly 200 employees volunteered to defer their paychecks from Friday until Monday. Mokulele still has to find an investor or investors to provide it with new round of cash, and soon. To hear Mokulele CEO Bill Boyer's explanation of how Mokulele was able to make the payment, and his abbreviated business case for the airline, watch the news video here.
In it, he acknowledges that Mokulele has burned through the $8 million that Republic loaned to it in October. Mokulele owed $300,000 by Feb. 18 under its airline services agreement with Republic (Republic subsidiary operates four Embraer E170 aircraft for the inter-island jet service Mokulele launched in November). Republic said it would assume control of its collateral under the loan agreement if that debt was not paid on time. The loan was collateralized by all of Mokulele’s unencumbered assets and a pledge of the equity holdings of the Mokulele’s majority shareholders, which meant that Republic essentially would have taken over the airline, and Republic executives said they had not decided whether they would want to be in the Hawaiian airline business for the long-term and did not rule out the eventual liquidation of the carrier.
In making those comments during Republic's fourth quarter earnings conference call, Republic also talked about what it believed to be one of the causes of Mokulele's money problems.
They said Mokulele expected to have internal distribution systems in place by December to let it start interlining and code-sharing, but are lagging about three months behind. That means the revenue boost it would get from those agreements won’t start until April. Until then, the Republic executives said, Mokulele has “a hurdle to get over,” but they do believe Mokulele has an attractive product to offer. You’ll see Boyer talk about that a bit in the news video I linked to earlier—and drop word that the carrier has worked out an airline partnership it has not yet announced. But let's not get too carried away about his talk about higher load factors: the key is not how many seats are being filled, but whether they are being filled at high enough fares to operate profitably.
