Local News

Mokuele Airlines facing losses, needs assistance, says officer

Sisson: Pre-travel testing, quarantine so confusing that people aren’t flying

Mokulele Airlines, whose Hawaii commuter operations is losing $350,000 a month, is asking the state for a "backstop to protect against losses . . . to stay in business" either by lifting the interisland 14-day quarantine and pre-travel testing requirements or through subsidies or airport fee credits.

"We think we've done everything we can do to make this service viable," said Keith Sisson, Mokulele Airlines chief of staff, at a state Senate Transportation Committee virtual meeting Wednesday. "We don't want it to go away on our watch."

Sisson told the committee that Mokulele Airlines parent company, Southern Airways, has been filling in the deficit in Hawaii operations since August, but "we are running out of the ability to do that."

The airline has held the line on ticket prices; kept all workers employed, though with reduced hours; and maintained flights to all destinations with schedule adjustments, he said. The airline is able to do this because of "larger airline behind them."

"But no business, no matter how critical the service is, can be expected to withstand losses for the community good," Sisson said from Kona. "We must reach some level of sustainability."

At some point, that deficit will have to be made up and the parent company can no longer subsidize Hawaii operations, he said. This crossroad is not imminent, Sisson said, adding that "we are sounding the bell well in advance."

Mokulele, which flies the nine-passenger single-engine Cessna Caravan, is the sole provider of flights to Hana, Waimea on Hawaii island and Kapalua/West Maui and is currently seeking landing rights at Princeville on Kauai. Other destinations include Kahului, Molokai, Lanai, Kona, Honolulu and Kalaupapa.

Sisson said that if Hawaiian Airlines continues to reduce its schedule and announces an end to Kahului to Hilo flights, Mokulele would jump on that route.

"It would be a winning route," he said.

In his presentation to the committee, Sisson complained about the 14-day quarantine, and more recently the pre-travel testing program, saying they are causing "mass confusion" and depressing interisland travel.

He noted that each county has its own rules for interisland travel -- Maui and Kauai counties require a pre-travel test to avoid quarantine, Hawaii-island requires an additional post-travel test and Honolulu does not require a test.

It's "unprecedented in U.S. history to allow mayors to dictate policy involving inbound travel," Sisson said. "It is the varying policies across the counties that is most confusing."

"People are confused, they are not booking."

The bulk of Mokulele's passengers are local residents, who are turned off by "the hassles of the process," including pre-travel testing, Sisson said, adding that many flyers are daytrippers.

Committee Chairwoman Lorraine Inouye of Hawaii island noted the added cost, saying she has paid $139 for testing each time she flies home from Oahu.

Sisson said that when the interisland travel ban was lifted in mid-June, Mokulele was able to break even but went back into the red in August when the quarantine requirement for Neighbor Islands went back into effect.

The airline is currently flying 3,000 passengers a month; before the COVID-19 pandemic hit, it was flying 30,000 passengers, Sisson said. There are limited future bookings and most trans-Pacific travelers are going to their final destination and staying there -- without island hopping.

Sisson offered three suggestions to help get the airline back on firm financial footing:

• Revert to the June-July interisland travel policies.

• A temporary state subsidy. Sisson said he would prefer a marketplace solution but Mokulele needs to cover losses while pre-travel testing and quarantine rules remain in place.

• The state issues credits for future Transportation Department airport payments. Sisson said Mokulele pays $50,000 per month for rents and landing fees.

Ross Higashi, deputy director of the airports division who was at the meeting, shot down the DOT credits idea. He said the airports division implemented a payment deferral program April 1 for airlines using federal CARES Act funding, but those deferred fees need to be paid back in installments starting in January.

Sisson said the deferrals are "helpful from a cash flow standpoint. It is overall not helpful from the viability standpoint of the airline."

Higashi said the state airports have financial issues too with 50 percent of revenues coming in from airlines and the other half from concessions, which have all been hurt by the economic downturn caused by COVID-19.

"Our cash on hand has been dwindling as well, from 700 days to half way through next year to 500 days," he said. "That's the limit."

Maui County Sen. J. Kalani English, whose district includes Molokai, Lanai and Hana, said the removal of interisland travel rules, which are based on health reasons, and a more standardized approach to travel rules between counties are "not going to happen."

He added that the state Legislature is no longer in session and that subsidies would have to be worked out with the governor.

"We just have to understand that providing air service to these areas are vital," he said, while also praising Mokulele's commitment to the rural islands and areas. Government leaders know what Mokulele has "wished for" but the focus should be on "what we can do."

"How do we find something within this regime?" he asked.

Sisson and Higashi touched upon the recent U.S. Department of Transportation decision, requiring 'Ohana by Hawaiian to complete the 90-day notice period before ending Essential Air Service to Molokai and Lanai. The airline had planned to temporarily halt flights to those destinations Monday; now the airline has said it will fly through mid-January.

Sisson explained that when the airline industry was deregulated in 1978 rural destinations like Molokai and Lanai were deemed Essential Air Service locations and eligible for federal subsidies to maintain service. Higashi said that the designations were "dormant" all these years as airlines provided commercial air service.

Hence, when 'Ohana by Hawaiian tried to halt service to those areas, the dormant Essential Air Service provisions kicked in with the 90-day notice period to prevent disruption of service. Higashi said the U.S. Department of Transportation will be looking for a carrier to continue the service -- with or without a subsidy -- through a request for proposals process. Contracts could span two to four years with subsidies.

Sisson said that the U.S. Department of Transportation will rule in the next 30 days on whether to grant or deny 'Ohana by Hawaiian's request to waive the 90-day notice period.

Currently, 'Ohana by Hawaiian and Mokulele service the two islands. If there is an Essential Air Service subsidy, there will be only one airline in the market, Sisson said.

"If the airline is not sustainable, the subsidy is not going to make the difference," he added.

Sisson said he does not believe the U.S. Department of Transportation will grant a subsidy because the markets are profitable under normal circumstances.

After the news of 'Ohana by Hawaiian's plans to leave the Molokai and Lanai market, Sisson said Mokulele prepared to fill the gap, even investing in three new wheelchair lifts, which went into aircraft Thursday.

Inouye noted that Waimea, which is serviced by Mokulele, lost its Essential Air Service subsidy because of its proximity to Kona International Airport. About a year ago, the airline, the U.S. Transportation Department and Hawaii County agreed on a cost-sharing arrangement, according to the West Hawaii Today. The county's share was $19,500 a year.

Maui County Mayor Michael Victorino said Wednesday that the county has not received a request from any airline for a subsidy.

"Mayor Victorino said he wishes interisland airlines well and wants them to survive and thrive," said county spokesman Brian Perry.

The mayor said that the quarantine between islands in Maui County was lifted Oct. 15, though travel restrictions currently are in place for Lanai through Nov. 11 due to the coronavirus outbreak.

* Lee Imada can be reached at leeimada@mauinews.com.