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It was a period of transition for Island Air and another losing quarter for the state’s second-largest airline.
Island Air lost $4.3 million in the January-March period as it switched majority ownership in early February from billionaire Larry Ellison to Honolulu venture capitalist Jeffrey Au and other investors.
The airline’s quarterly loss narrowed from $4.6 million during the first quarter of 2015, but revenue plunged 26.5 percent last quarter to $6 million from $8.2 million in the year-earlier period, according to data released Monday by the U.S. Department of Transportation. Operating expenses dropped 19.9 percent to $10.2 million from $12.8 million due to substantial reductions in restructuring costs and outside consulting fees.
Given the airline’s shuffled route structure, there was no true comparison between the two quarters. Island Air operated daily flights between Honolulu and Kauai for the first three months of 2015 before discontinuing service starting June 1 of last year. Island Air resumed Honolulu-Kauai service on March 15 of this year, but that meant it operated the route for only 17 days during the first quarter.
With fewer flights than a year ago, Island Air’s passenger traffic dropped to a four-month low of 22,811 in January and then slipped to 21,483 in February before rebounding to 30,808 in March to finish the quarter with 75,102 passengers, down 27.7 percent from 103,837 in the first quarter of 2015, according to DOT data.
Island Air, which was down to two routes during the fourth quarter — Honolulu-Maui and Maui-Lanai — has since shuffled its operations and management around and now flies Honolulu-Kona (which began June 14) as well as Honolulu-Kauai and Honolulu-Maui. Island Air dropped Lanai service at the end of March.
“The first quarter ended March 31, and we launched Lihue March 15, so the first quarter isn’t going to tell a lot about the new things we’ve done,” Au said.
Last month Island Air’s board appointed David Uchiyama to be the permanent president and CEO after he served in an interim capacity since April when Les Murashige departed the airline.
Au declined to talk about Murashige’s departure, referring to it as a “personnel matter,” but waxed enthusiastically about the job that Uchiyama has done since taking over.
“The most important things for a CEO is leadership, character and integrity, and bringing people together,” Au said. “The airline CEO doesn’t even have to know how to fly a plane, but what you have to do is bring people together — the management team and the employees — so everybody is pulling in the same direction, and that’s what he’s done. He’s done an excellent job in getting the people on the team to all focus in the same direction. A lot of people — long before his involvement with Island Air — who have worked with David previously at HTA (Hawaii Tourism Authority) and the visitor industry would probably tell you he’s a guy with integrity that people probably respect. I’m just so happy he’s leading our team.”
Uchiyama said the airline, which as of Dec. 31 had a
5 percent interisland passenger market share, is making progress in turning its operations around.
“Monthly revenues have increased substantially, which will be reflected in the Q2 2016 results,” Uchiyama said. “We are continuing to make progress in positioning Island Air for the future by improving the airline’s operational performance, continuing our strong safety record and enhancing overall customer service to provide passengers with an excellent interisland travel experience.”
Uchiyama said the airline has increased its number of employees to 308 from 256 at the time of the sale announcement in January, and is looking to add two aircraft this year to its current fleet of five 64-seat ATR 72 turboprops.
Island Air has lost
$54.6 million over the last three years dating back to the second quarter of 2013, which was the first full quarter under Ellison. But Uchiyama is optimistic that the airline is close to profitability.
“I’m looking at hopefully early 2017 for us to start to turn the corner on that,” he said. “You’re going to see in our activity in 2016 that the deficit will start to shrink. You have to understand in looking at (additional) aircraft, you also need to consult with the FAA (Federal Aviation Administration), and you need to make sure the aircraft is certified and there’s a training facility available for your pilots. We’re looking at all of that right now.”
Uchiyama said Island Air, which now offers 238 flights a week between Oahu, Maui, Kauai and Hawaii island, is continually looking to expand service.
“Our resumption of service to Kona (on June 14 following a 3-1/2-year absence) was due in large part to the outreach from the community and our travel partners who asked for our support for the West Hawaii community,” he said. “We will continue to evaluate the market and expand based on demand and where it makes sense for Island Air.”
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