Island Air files for bankruptcy protection

HONOLULU — In February, Island Air announced it was increasing its flights to and from Lihue Airport.

The airline said it would be offering eight daily round trips between Lihue and Honolulu, two more than previously available. This was after Island Air returned its service to Kauai in March 2016.

“The added flight service is in response to growing demand from our customers and travel partners and also reflects the improved operational efficiencies of the new Q400 aircraft that are being phased into our fleet,” said David Uchiyama, president and chief executive officer of Island Air.

On Monday, Island Air announced it was filing for Chapter 11 bankruptcy protection.

The move is “an effort to continue normal operations while navigating through legal challenges recently presented by the lessors of its aircraft. The bankruptcy filing was caused by threats of legal action to ground the aircraft and strand hundreds of passengers. The filing prevents the threatened action and allows Island Air to continue interisland service for its customers,” a press release said.

Island Air currently offers about 200 flights each week between Oahu, Maui, Kauai and Hawaii Island, and employs more than 400 individuals throughout the state.

It has been facing financial challenges.

Island Air recorded a $2.6 million loss during the first quarter of this year, which was an improvement from a $4.3 million loss during the same time period last year. It was the airline’s 16th straight quarterly loss.

Island Air’s operating expenses increased to $14.8 million in the first quarter, a 44 percent increase from $10.2 million in the first quarter of 2016.

Mark Dunkerley, CEO of Hawaiian Airlines, in a January 2016 meeting on Kauai, defended his airline’s fares and said other airlines had looked at providing service between the islands and had opted against it for one main reason: Cost.

“They don’t find the prospect all that appealing,” he said.

Island Air narrowed its 2017 first quarter loss while revenue rose, making this the airline’s highest quarterly revenue since before 2013.

In the first quarter of 2017, Island Air flew 172,200 passengers, more than double the previous quarter’s figure of 75,102).

In the second quarter of 2017, the airline earned $12.5 million in revenues, its highest quarterly revenue in more than a decade.

During the reorganization process, Island Air expects to fly its scheduled routes as normal and honor all previously purchased tickets and confirmed reservations. There will be no changes to the Island Miles frequent flyer and other customer service programs.

“Continuing to operate under the protection of the United States Bankruptcy Court will allow Island Air to maintain its service to its customers, provide continued employment to its more than 400 valued employees, and ensure a revenue stream so its vendors are paid,” the release said.

In January 2016, Hawaii-based investment company PacifiCap acquired controlling interest in Island Air from Ohana Airline Holdings, LLC, which is wholly owned by Oracle corporation founder Larry Ellison.

Founded in 1980 as Princeville Airways, the company was renamed Island Air in 1992 and has been serving Hawaii for 37 years.

“Once we have completed the reorganization process, Island Air expects to emerge as a stronger airline with a solid financial structure that will allow us to continue to meet the demands of Hawaii’s dynamic interisland market, while positioning us for future growth and expansion,” Uchiyama said.


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