Mokulele will fly as go! under a joint venture announced last night by Mesa Air Group and Republic Airways Holdings (RJET) as part of an effort, according to local press, to compete with Hawaiian Airlines. Considering that go! was instrumental in toppling Aloha, that may not be so far fetched, despite Hawaiian's long-haul routes. Major carriers have been started with less and it is anyone's guess as to the long-term plans for either Mesa or RJET. Regardless it is another example of regionals thinking outside the box as they manage their way through the changes in the regional airline industry to create the first just deal in the regional airline industry.

The new go! Mokulele brand, what the two call the islands' first low-cost carrier service, debut’s tomorrow. Under the terms of the JV agreement, Mokulele shareholders will contribute their ownership of Mokulele to the JV and will own 25% of the new venture. Additionally, current Mokulele shareholders will be obligated to fund up to $1.5 million to capitalize the JV. Republic, which is the majority shareholder of Mokulele, will forgive Mokulele’s $3.1 million outstanding debt to Republic, net of surrendered aircraft deposits.

“During this period of economic stress within our industry, it is especially important to closely match capacity with demand, and this arrangement allows Mokulele to right-size the aircraft within its network,” said Bryan Bedford, chair, president and CEO of Republic Airways Holdings. “Meanwhile, the agreement allows Republic Airways to reallocate its ERJ 170 aircraft within its branded airline operations, where they will be able to contribute to our network rebuilding efforts.”

Under the agreement, said RJET, the ERJ 170 routes currently operated by Republic Airways’ Shuttle America will be transitioned to jet service provided by Mesa Airlines. The three ERJ 170 aircraft will be returned to the mainland by November and will operate in Republic Airways’ branded network. All passengers holding tickets on Shuttle America operated flights will be re-accommodated on flights operated by Mesa.

The two airlines, flying under the go! Mokulele brand, will provide inter-island service, although under the terms of the agreements Mesa will own 75% of the units and Mokulele shareholders will own 25%. In combination, these agreements will form Hawaii's second largest inter-island airline and Hawaii's only low-cost carrier, ensuring a strong competitive presence in the inter-island market for the benefit of consumers. Routes currently served by Mokulele partner Shuttle America will be operated by Mesa Airlines d/b/a go!. Passengers will continue to book reservations on both go! and Mokulele, check in for jet services at the newly co-branded go! Mokulele ticket counters and will have the “added benefit of seamless travel to the destinations served by both airlines,” according to Mesa.

"We are delighted and privileged to launch this joint venture and build upon go!'s strong reputation as Hawaii's only low cost provider of inter-island service,” Mesa Air Group Chairman and CEO, Jonathan Ornstein said. “This strategic alliance in partnership with Mokulele is a first among regional airlines and will provide a tremendous platform for the future growth of the go! and Mokulele brands. We look forward to making a positive contribution to the development of this joint venture and to forging a strong, long-term relationship with our friends at Mokulele and Republic."

"The partnership announced today is an exciting and positive step for Mokulele and its passengers,” said Mokulele CEO Scott Durgin. “We look forward to working with our new partners at go! and are confident that Mokulele and go! will continue to meet and exceed our passengers' expectations. This combination will ensure that the Hawaii inter-island market is served by a strong competitor offering continued low fares to the traveling public and in particular our loyal ohana."

KGMB9 reporter Howard Dicus described the new joint venture. "Basically Mokulele has outsourced it's entire operation to go! so go! is going to have 3/4 ownership,” he said. “Mokulele is going to put in $1.5 million and they are going to save a great deal on cost, so it's going to be a good deal for both in terms of saving money."

No word on RJET's and Mesa's dueling lawsuits resulting from RJET's takeover of Mokulele which had been operating as a go! Express. Mesa sued for $400,000 in fuel costs while Mokulele countersued alleging anti-competitive behavior. AP reported 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.

Layoffs are expected with the airlines' overlapping services. Mokulele has 160 employees to go!'s 330. Interestingly, the Honolulu Star Bulletin reported that, with the loss of the E-Jets, Mokulele gives up the advantage it touted over go! with its ERJ 170s competing against go!'s CRJ-200s. It's market share in the inter-island market is still less than 10%, despite deep discounts.

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