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Billionaire bought Island Air in part to save airline

By Associated Press

LAST UPDATED: 02:20 p.m. HST, Mar 15, 2013

Larry Ellison bought a small commuter airline in Hawaii in part to ensure it would continue service to the island that is mostly owned by the Oracle Corp. CEO, according to a representative for the billionaire's personal investment company.

The danger that Island Air could go out of business pushed Ellison's company to prepare contingency plans in case the airline failed, Lawrence Investments LLC Vice President Paul Marinelli said this week in a telephone interview. One option considered was to sign contracts with other interisland carriers to provide flights to Lanai.

Ellison purchased 98 percent of the land on Lanai from Castle and Cooke Inc. last year.

"There were almost 250 employees that if Mr. Ellison didn't step forward, I'm not sure they would be still employed," said Marinelli, who is based in Walnut Creek, Calif. "That's my impression based on the circumstances before we acquired it."

Marinelli said the purchase also would improve flight connections for residents and visitors. Those travelers would likely stay at the hotels Ellison also bought when he purchased the land on the island.

Layovers are often a big consideration for travelers, especially when tourists from the U.S. West Coast have the option of taking direct flights to Maui or Kauai instead of changing planes in Honolulu. The company hopes that by improving Island Air's flight schedule, for example, a traveler from California will only have a one hour layover in Honolulu when flying to Lanai instead of waiting three hours for a connecting flight.

The company also wanted to ensure Lanai residents can visit relatives and get medical care on other islands and otherwise come and go.

Island Air will remain an interisland carrier, Marinelli said. The company has no plans for direct flights outside Hawaii, but it plans to increase service to airports it currently flies to on Molokai, Maui, Kauai, Oahu, the Big Island and Lanai, he said.

Hawaiian Airlines holds a dominant share of the interisland market, which is also served by Mokulele Airlines and go! Airlines.

Hawaii's aviation history is littered with failed interisland carriers. Marinelli said Ellison's company was aware of that, but Ellison's enterprise has a different economic model because it owns both hotels and an airline.

"You may lose a little bit of money flying an extra flight from Maui or Honolulu to Lanai," Marinelli said. "But if that flight includes visitors that otherwise would not have come and spent time on Lanai, then that could well be an overall positive or shall we say, profitable additional flight."

Ellison's company expects to be competitive and successful with Island Air, Marinelli said.

Many media reports have called Lanai Ellison's island, or mentioned how Ellison bought his own Hawaiian island. Marinelli said Ellison uses the term "our island" to refer to Lanai, Marinelli said.

"It's not 'Larry's island,'" Marinelli said. "He doesn't think of it that way and I think that's important."

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serious wrote:
Ellison has a business mind. I've seen in the SA some of the things he wants to do, but a great double page description with designers ideas would be nice.
on March 15,2013 | 12:41PM
iwanaknow wrote:
Kudo's for integrating vertically. Now work on power and water.
on March 15,2013 | 12:54PM
cojef wrote:
Move to Lanai, things are going pick-up and events happening. Get hip!
on March 15,2013 | 02:02PM
kellybelly wrote:
Island AIr has been in financial trouble for a long time. Charlie Willis (former owner) had one more card in his deck and when Ellison bought Lanai he played it. I'm sure Charlie approached him and offered to sell him the airline or else he'd be forced to shut down. This would have left Ellision without viable transportation to his resorts. I'm glad Island Air got their knight in shining armor but Larry didn't buy it out of the goodness in his heart. It was a financial decision. I hope Larry's ready to open his pocketbook becuse that airline needs a lot of newer equipment.
on March 15,2013 | 02:32PM
MKN wrote:
@kellybelly: Actually for him, it's a drop in the bucket, so it totally makes sense that he bought both the island and the airline. He's basically trying to build a legacy outside of Oracle the company. I hope he's successful and that Lanai becomes a vacation destination that still has a small town charm to it, but modern infrastructure and good jobs for everyone living there. :)
on March 15,2013 | 03:44PM
Usagi336 wrote:
Mr. Ellison has already done a lot of things that would not be considered a prudent financial decision but will benefit the people of Lana'i. I would like to know how the people of Lana'i feel about the changes happening there though. So far I have only heard good things about what is going on.
on March 15,2013 | 03:59PM
Frances wrote:
Mahalo to Larry Ellison for sharing his wealth and wisdom with our people. Hopefully, he will be sensitive to the needs and concerns of the people of Lana`i, where he is building his own empire - and also to the needs of local people who need to travel between islands. In addition, he needs to compete with Hawaiian Airlines, which is exploiting the aloha spirit to make billions, giving back so very little to the Hawaiian people whose name is carried on their aircraft. Let us know if we can be of any help. :-)
on March 15,2013 | 03:00PM
Pookie_Baby wrote:
I think you're wrong Frances. Hawaiian has been employing "people from Hawaii" for many years. As far as exploiting the aloha spirit, many, many, companies have been doing it without even employing people from Hawaii, let alone Hawaiians.
on March 15,2013 | 04:54PM
entrkn wrote:
The Island Air acquisition was smart and perceptive... Ellison had to own and control the primary access to Lanai to give it a chance to succeed.
on March 15,2013 | 04:35PM
phreatic wrote:
Hopefully service will improve. I'm sitting at the Molokai airport right now, already 2 hours after the scheduled departure time, and at least another 1/2 hour to wait, but pretty sure that it'll be even later still. Sadly, this is typical and not unexpected for Island Air.
on March 15,2013 | 07:55PM
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