Island Air narrows first-quarter loss as revenue rises

Island Air is suffering through growing pains as it continues to reinvent itself with new aircraft and additional routes.

But despite losing money for the 16th straight quarter, the chief executive officer of the state’s second-largest airline is encouraged after revenue more than doubled in the January-March period from the year-earlier quarter.

“We anticipated these first-quarter results based on the investment commitments we are making to grow the company and transition to a new fleet of Q400 aircraft,” David Uchiyama, president and CEO of Island Air, said Wednesday in an email. “We are continuing to narrow losses, and attribute the first quarter’s losses to the ongoing costs associated with the fleet transition itself, additional costs for other new equipment and supplies, training for new pilots and crew members, and other related expenses. We expect to continue to see the effects of these investments through the first half of 2017.”

Uchiyama said the doubling in revenue “reflects our new aircraft and expanded services, as well as the commitment of team members who are focused on improving the overall travel experience for our passengers.”

Island Air narrowed its quarterly loss to $2.6 million from $4.3 million in the year-earlier period despite operating expenses rising 44.4 percent to $14.8 million from $10.2 million. The impetus for the smaller loss was its revenue, which jumped to $12.3 million from $6 million, according to new data released this week by the U.S. Department of Transportation. It was the airline’s highest quarterly revenue since before 2013 when Island Air was required to begin reporting its financial data to the DOT due to the size of its aircraft.

The airline has been transforming itself since a majority stake in the company was acquired by Hono­lulu venture capitalist Jeffrey Au and other investors in February 2016 from billionaire Larry Ellison, who remains a minority investor in the airline. Ellison also owns 98 percent of the island of Lanai.

Since the ownership change, Island Air has increased its workforce to 460 from 256, restored service to Kauai and Kailua-Kona, and plans to begin service later this year to Hilo.

“We are still finalizing the details,” Uchiyama said of the Hilo service.

The airline also has been phasing out its 64-seat ATR-72 turboprop aircraft for 78-seat Bombardier Q400 turboprops that are more fuel efficient and offer a quieter ride.

Island Air took delivery of its first Q400 in December and began service in January. It currently has five Q400s in its fleet with a sixth scheduled to arrive in July. The airline also has two ATRs still in service — out of an initial five ATRs — and intends to keep them for emergency needs once all the Q400s are in service.

“Passenger response to our new Q400s has been very positive,” Uchiyama said. “Since the maximum operating altitude is 27,000 feet, customers most especially appreciate the captivating aerial views of Hawaii’s remarkable landscapes.”

Uchiyama said there is pent-up demand for an alternative choice for interisland travel and that Island Air is trying to fill that need. In the first quarter, the airline flew 172,200 passengers versus 75,102 in the year-earlier quarter. The airline, which currently offers 392 interisland flights a week, will increase the frequency on its routes beginning Friday and will offer 448 flights a week.

“Over the past year, we stepped up our outreach in growing markets in North America, Asia, Australia and New Zealand, and the positive results of those efforts are reflected in the first quarter of this year, and we expect this momentum to continue going forward,” Uchiyama said. “In addition, we are continuing to provide customers with value-saving options, such as our popular Kupuna & Keiki Saver Fares for seniors and kids under 12.”