rememberaloha

I guess this clears up the RAH/Hawaii rumors....read this on the Honolulu Advertiser's website:



Republic Airways may step into Hawaii interisland market
Mainland airline plans interisland service in deal with local carrier

By Rick Daysog
Advertiser Staff Writer

Hoping to fill a void left by the demise of Aloha Airlines, a Mainland airline is exploring plans to enter the interisland market in partnership with a small, local carrier.

Indianapolis-based Republic Airways Holdings is considering interisland flights using 70-seat Embraer 170 jets under a code-share agreement, according to an Oct. 1 memo posted at Republic's Mainland offices.

The Republic memo, which was posted on Yahoo! Finance's Web site, did not identify the local partner, but people familiar with the deal said Republic is holding talks with Big Island commuter carrier Mokulele Airlines.

Republic's Shuttle America subsidiary, which plans to hire 22 flight attendants for the Hawai'i venture, will operate the flights under the Mokulele brand.

"Shuttle America has a potential opportunity for a new code-share agreement with additional flying beginning on or before Nov. 15, 2008," the memo said. "This bid is in anticipation of a possible code-share agreement in Hawai'i that will be announced within 10 days should it come together."

Republic spokesman Warren Wilkinson did not return several calls to his office. Gary Weatherlow, the Republic manager who wrote the memo, also did not return calls.

Bill Boyer, president of Mokulele, declined comment.

Founded in 1973, Republic Air is a regional carrier with about 4,600 employees. It operates regional service on the Mainland for major carriers such as United, American and Continental airlines.

Mokulele, based in Kailua, Kona, has been flying in the Islands since 1998. It currently operates Cessna Grand Caravan 208B turboprop aircraft that carry nine passengers.

Details about ticket prices, schedules and financing were not available. But local airline experts believe the entry of a new player could lead to lower interisland fares.

Phoenix-based Mesa Air Group kicked off a fare war in June 2006 when its launched go! airline. Shortly after go!'s entry, one-way interisland ticket prices dropped by about half to $39 and sometimes as low as $29 and $19.

But with skyrocketing fuel prices and the March 31 shutdown of Aloha, fares have risen sharply to about $64.

The proposed agreement between Republic and Mokulele likely will spell the end of the 19-month-old code-share agreement between go! and the Big Island carrier. Under the go!Express brand, Mokulele operates less-popular flights such as between Kona and Kahului, Maui; between Honolulu and Hana, Maui; and between Honolulu and Kapalua, Maui.

Mesa said the go!Express venture had been successful and the company said it will continue those flights with or without Mokulele's participation.

Local aviation industry historian Peter Forman said the interisland market can't support three major competitors such as Hawaiian, Aloha and go! when they compete against each other head-on. The fare war cost each of the airlines tens of millions of dollars and helped put Aloha out of business.

But Forman believes that Mokulele may be able to outmaneuver go! if it is well-financed. The 70-seat Embraer 170 aircraft that Republic and Mokulele plan to use are more economical to operate than go!'s 50-seat Bombardier CRJ 200 jets, he said.

"Since the departure of Aloha, there's been a vacuum in this market and go! has not succeeded in becoming a viable competitor to Hawaiian," Forman said.

CRJDriver

Isn't Mokulele Airlines affiliated with Go! which is affiliated with Mesa?

rememberaloha

Yeah, they have been doing go express flying to smaller Hawaiian towns, but from what this article says, Mokulele would be severing its ties with Mesa and hooking up with RAH now.

With RAH being a far better managed company than MAG could ever hope to be, would this spell the end to go! and maybe Mesa?

kersplatt

It is my understanding, I don't have the facts to back this up, that Go! has never made a profit in Hawaii. Why would a 3rd airline want in the mix unless their plan is to push Go! out? Go! could never accuse anyone of predatory pricing after their rock bottom prices when Aloha was there.

The Delta lawsuit will determine how much this will affect MAG's decision to fight it out in Hawaii or hang up their hat there.

My question is, does Mokulele have any affiliations with Alaska as previously stated on this forum. If so, that increases the odds exponentially of this being a sucessful operation. The loads on Alaska flights are full even in this stagnant economy.

ToiletDuck

There's a lot of details missing and not sure how accurate this is. Right now it makes it sound like RAH is wanting to go branded without going branded if they are going to provide the financing etc for all this.

BURflyer

Yea they have really managed to get a sweet deal at the expense of Midwest pilots. Is the jury still out on Midwest flying being struck work, I know the rally wan't exactly a strike but it was formed specifically against RAH.

ToiletDuck

Nice thread drift. Actually the rally was formed against Midex since that's where the moves have to be made. I don't really see how the Midex guys can call it struck work unless they actually strike and don't fly at all. Even then the IBT would have to coordinate with them and push for a legal strike on that flying from the RAH side. Pilots from RAH can't simply not fly without the legal backing to do so.

HookEm

You know... for someone who works for GoJet you sure are quick to point the finger at someone else. Be careful what you do in your glass house

BlueMoon

I guess that depends on how you define 'Success'

Sounds like Mokulele, wants to put GO! out of business. There isn't room for 3 airlines out there.

rickair7777

Good question, and the answer is complicated...

In some cases an airline (or any other business) may launch a money-losing venture with the intent of having it grow into something profitable down the road.

But sometimes, or even oftentimes, airlines will intentionally conduct money-losing operations. In this industry the goal is not to actually MAKE money, but to lose as little as possible.

It has to do with fixed costs vs. variable costs...

Fixed Cost: Something you have to pay regardless, unless you file BK...leases, overhead expenses, government fees, etc.

Variable Costs: Costs which you only incur when you actually make your product or provide your service...energy, raw materials, labor. In most industries labor does NOT get paid guarantee to sit home, and they can be furloughed and recalled at will.

A typical manufacturing operation has low fixed costs, maybe 10-20%. If they cannot sell their product for enough to cover their costs, they are better off shutting down and saving all the variable costs.

Airlines howeve have very high fixed costs...up to 90% historically, maybe less now that fuel is so high. If they stop operating, they still have to pay foe airplane leases, rent on high-value airport real-estate, and usually unionized labor (we all get guarantee if we sit home). Furlough of skilled mechanics and flight crew takes a LONG time to undo and incurs high training costs. For this reason an airline has an incentive to obtain SOME income even if operating at a loss.

Some income will offset an airline's high fixed costs and slow the rate at which they bleed cash...obviously this cannot go on forever, but short term it is better than no income. This is why we have a permanent over-capacity problem.