Air Australia’s grounding a blow to tourism

The grounding Thursday of Air Australia marked a major reversal in the recent expansion of one of Hawaii’s most promising growth areas for tourists.

Australia was the fastest-growing major market to Hawaii last year with 32 percent growth in arrivals. Air Australia was due to add 79,170 air seats this year from Melbourne and Brisbane, the second- and third-largest cities in Australia behind Sydney.

Tourism leaders said Thursday they hope other airlines will step in to fill the void.

"Australia continues to be an important market to Hawaii’s tourism economy, and we will continue to support carriers servicing this region," said Hawaii Tourism Authority CEO Mike McCartney. "We will also continue to work with our airline partners to look at ways to restore the loss of airlift (airline seats) to the Hawaiian Islands."

Air Australia was placed into a form of bankruptcy after running out of money, and it grounded all its flights to and from Hawaii and other destinations. Passengers scrambled to find replacement flights and overnight accommodations after the startup carrier ceased operations.

The abrupt shutdown Thursday morning left 500 to 600 passengers stranded in Hawaii.

Brisbane-based Air Australia, which changed its name from Strategic Airlines in November, began twice-weekly flights to Hono­lulu in December from both Melbourne and Brisbane. The new service was applauded by the HTA because it opened the state to new markets in Australia. Hawaiian, Qantas Airways and Jet­star fly to Hawaii from Sydney but don’t have nonstop flights from those other cities.

"I’m surprised that this happened," McCartney said. "I think it’s definitely unfortunate, and we’re looking into what happened and why. There was such great hope and promise for this."

Thursday morning, 225 passengers waited at Hono­lulu Airport to board an Air Australia flight to Brisbane. The passengers had made it through security before they found out the flight was grounded, said Dan Meisenzahl, spokes­man for the state Department of Transportation.

At the gate, airline employees told passengers there was a delay because of a storm near Brisbane, but news of the grounding trickled in from family members in Australia.

Passengers watched as employees shuttered the windows on the 274-seat Airbus A330-200, closed its doors and walked away. About an hour after the flight was supposed to take off, most passengers had figured out what the airline eventually told them: Their flight was canceled.

"I’m sprung about it," said Dave McLean, 50, about nine hours after first arriving at Hono­lulu Airport. "They must have known this was coming. Our government should have better regulation on these airlines before letting them spend millions on planes and put all these people at this inconvenience."

In a rush to return to his plumbing business on the Sunshine Coast, north of Brisbane, he booked a $2,667 ticket for a flight this morning on Qantas Airways.

Mitchell Henderson, 19, planned to stay at the airport overnight to reduce costs after the loss of his $500 ticket to Australia.

"We’ve got no accommodations, and the insurance isn’t covering (the cost of the ticket) because we purchased our tickets after a certain date," he said. "We’re going to be out of pocket."

He said tickets back to Sydney were going for about $900, and then he would have to pay for a flight from Sydney to Brisbane.

"It’s not going too well," he said.

Katrina Rahko shifted her focus to finding accommodations Thursday afternoon after her family booked a flight for Sunday on Quantas at a cost of half her Air Australia ticket.

"They (Quantas) will book it to our destination and charge us half our fare that we paid originally," she said.

"They’re bending over backwards to get us home."

Hawaiian Airlines, Quantas and Jetstar offered discount tickets to Air Australia passengers. Hawaiian said it sold at least 140 tickets Thursday for a special one-way $300 fare to Sydney. Hawaiian also offered a similar fare to passengers stranded in Australia.

Some passengers might be entitled to refunds, depending on how the ticket was purchased, but those who paid by cash likely will not get a refund unless flight insurance was taken out that covers insolvency, according to a statement on the Air Australia website.

KordaMentha, the company appointed as the voluntary administrator for Air Australia, said, "It currently appears that there are no funds available to meet operational expenses so flights will be suspended immediately."

Administrator Mark Korda told Fairfax Radio in Melbourne that the airline ran out of money to refuel it planes. About 4,000 passengers systemwide were affected, the Australian Broadcasting Corp. reported.

Air Australia, which has 300 employees, re-branded itself in November after starting out in September 2009 as Strategic Airlines. Its flights from Brisbane and Melbourne to Hawaii represented the carrier’s first foray to the United States. Air Australia said at the time it would expand the Brisbane and Melbourne routes to Hono­lulu to three times a week in March.

The Air Australia plane, still painted with the old Strategic name, was pulled away from the gate at Hono­lulu Airport on Thursday to await news of its future.

Star-Advertiser reporter Rob Shikina contributed to this story.

HawaiiNewsNow Video: Air Australia passengers stranded, looking for hotels