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Southern Airways’ acquisition of Mokulele Airlines might fuel interisland expansion

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    Southern Airways announced today that it had acquired Hawaii’s second-largest carrier, Mokulele Airlines, for undisclosed terms. Mokulele’s Cessna Grand Caravan takes off at Kalaeloa Airport for Kahului.

Southern Airways announced today that it had acquired Hawaii’s second largest carrier, Mokulele Airlines, for undisclosed terms.

The deal, which closed Friday, makes Southern the nation’s largest commuter airline operator. Prior to the acquisition, Southern operated 600 weekly flights across 20 cities in the Gulf South, the mid-Atlantic and Florida.

In contrast, Mokulele, which was most recently owned by Transpac Aviation Inc., served 11 cities with 787 weekly departures. The 15-aircraft carrier also serves four rural communities under the government’s Essential Air Service (EAS) program, which ensures that smaller communities are linked to the National Air Transportation System, with Federal subsidy when necessary.

The acquisition, which adds Hawaii and California to Southern Airways’ portfolio, is the carrier’s third deal in four years. Southern Airways, which was founded in 2013, has been on a strong growth trajectory and will now serve 30 cities stretched across five time zones.

Southern Airways’ plans to keep the Mokulele brand, while operating all flights on the Southern Airways FAA operating certificate.

Southern’s chief marketing officer Keith Sisson said the deal, which is mostly financial, includes all assets of Mokulele Airlines and will bring the combined employee count to 550.

“All employees will be absorbed. Everything will be exactly the same as it was last week. We’ll keep the name and honor the loyalty program,” Sisson said. “This is just for the purpose of having a larger company that looks more attractive to major airlines for interline agreements and code share partnerships.”

Growth plans for its new brand include obtaining more interline baggage agreements with major carriers. Mokulele already has interline agreements with Alaska Airlines and New Zealand, while Southern Airways has agreements with American Airlines and Condor Airlines.

Sisson said the airline also will consider adding new interisland and EAS routes and expanding its air tour footprint.

“Hopefully in the next six to eight months, we might be able to make an announcement of a few new routes,” he said.

Sisson said Southern is not worried Southwest’s coming entry into Hawaii because “we like to focus on the 9-seat market. The big airlines tend to be our colleagues not our competition.”

Stan Little, chairman and CEO of Southern, said, “This acquisition will give the newly-combined company stability in an otherwise volatile marketplace, while making Southern Airways a nationally-recognized brand.”

“We’ve looked at several potential acquisitions over the last couple of years. This was the first opportunity that I believed to be the perfect complement to operation,” said Little, who is a former Hawaii resident. “We fly the same aircraft type, we have similar operational structures and their assets and revenue streams help diversify our balance sheet.”

Southern Airways also serves EAS cities. In fact, the carrier said it’s coming off a record-setting year for passenger growth in the EAS cities that it serves. Some of the EAS cities that Southern served saw a 40 percent increase in traffic over the prior year and many of their airports had their best year for enplanements in more than a decade.

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