Island Air Files For Bankruptcy And Ceases Operation

Island Air De Havilland Canada DHC-8-402Q (c/n 4554) N863WP "Kulana Pono" touches down on Rwy 35 at Kona International Airport at Keahole (KOA/PHKO) Kailua / Kona on October 12, 2017.
(Photo by Michael carter)

Honolulu based-Island Air, a regional carrier serving the Hawaiian Islands, has filed for bankruptcy and ceased operations as of Friday November 10.

The airline's demise comes at the tail end of a rocky few years that saw multiple owners and executives come and go at the carrier. From 2013 to 2016, Oracle's Larry Ellison owned a controlling stake in the airline, but that tenure ended up in a sale to a set of private equity firms. After that went through in January 2016, another series of executives cycled through the company before it ultimately filed for bankruptcy in October of this year. On Friday, the airline officially folded, taking over 400 jobs with it. The company was in business for 37 years.

Island Air's website has also been completely dismantled, replaced by a somber note saying "We are no longer accepting new reservations at Island Air and will cease operations at end of day on November 10, 2017."

Beyond the revolving door of executives and owners, perhaps the biggest nail in Island Air's coffin was steep competition. Until 2014, Island Air regularly jockeyed for low fares against Hawaiian, the largest carrier in the region, Go! an offshoot of Mesa Airlines, Mokulele Airlines and a handful of other carriers that came and went. That competition pushed inter-island fares to dangerously low levels, trimming the margins at all carriers to nearly nothing. Only Hawaiian, which ran profitable long haul service, was able to absorb the low fares for an extended length of time.

That same carrier is also bailing out Island Air passengers as it ceases operations. On Thursday, just before Island Air's demise was announced, Hawaiian quickly swept in and volunteered to honor any outstanding tickets. It's still not clear what will happen to Island Air's fleet of regional aircraft.

Island Air's exit also may not bode well for travelers throughout the Hawaiian Islands. As a strong competitor to Hawaiian, Island Air served the important role of keeping fares stable and preventing runaway pricing. With only a few carriers remaining in the space, it's now almost certain that airfares throughout the region will rise.

(Grant Martin - Forbes)