Ellison to expand Island Air service

Billionaire Larry Ellison now owns an airline to go along with his island.

Local carrier Island Air confirmed Tuesday that Ellison, who bought 97 percent of Lanai in June, has completed a deal to buy the company, ending weeks of speculation that the country’s third-richest man was going to further entrench himself in Hawaii.

Ellison plans to expand Island Air’s service to Lanai, but he’s not stopping there.

"Make no mistake about it, the airline will be increasing service to all the islands, not just Lanai," said Paul Mari­nelli, vice president of Lawrence Investments LLC, who was introduced as Ellison’s representative at an airport news conference to announce the sale.

"It goes without saying that Island Air is critical to the island of Lanai, and that certainly was the impetus for beginning discussion," Mari­nelli said. "But as we got into it, what we realized is there’s an incredible market opportunity here for all the islands, and we fully intend to engage that opportunity."

Island Air, which accounts for about 5 percent of the interisland market, is shifting its fleet to larger aircraft and recently updated its design.

Marinelli’s comments suggest the airline under Ellison will be looking to compete more aggressively on some routes with Hawaiian Airlines, which commands 84 percent of the interisland market.

Hawaiian plans to begin service to Lanai and Molokai this summer with 48-seat ATR 42 aircraft.

"Island Air has played a role in the interisland aviation market for years, and we always expected it to continue to do so," said Hawaiian spokes­woman Ann Botticelli.

While Island Air said it will be looking for opportunities, it will not be slashing fares to gain market share, said Michael Rodyniuk, vice chairman of Gavarnie Holding LLC, the former owner of Island Air.

The airline has no intent "to drop the bottom out of the fare bucket," said Rodyniuk, who is remaining as a senior consultant for the airline. "We will be competitive in the marketplace and make certain the airfares are competitive, but we won’t come in with ridiculously low prices."

The purchase comes after Ellison said he plans to add a new oceanfront hotel on Lanai and expand the Four Seasons Resort at Manele Bay.

The CEO and co-founder of software giant Oracle Corp. was not at the news conference to announce the purchase from Novato, Calif.-based Gavarnie and its owner, Charles Willis, for an undisclosed price.

Island Air President Les Mura­shige, who will remain in his post, said, "Mr. Ellison has already demonstrated a strong commitment to Hawaii, and we are proud to have an owner with the resources and desire to facilitate our expansion plan."

Murashige said there will be no layoffs among the 245 employees "at this point in time" and that the carrier will continue to operate under its current name.

"This is a very exciting day for the Island Air ohana as well as the entire state of Hawaii," said Mura­shige.

Marinelli said Ellison had been looking for some type of deal with Island Air since closing his purchase for Lanai.

"Within a month or two of closing the Lanai transaction, it became pretty obvious to Mr. Ellison that lift —as it’s referred to — to and from the island is critical, and I think it’s also fair to say that there are some challenges to and from the island," said Mari­nelli. "So we began to reach out and have discussions with the company over a number of months and explore various possibilities besides an all-out acquisition, which of course was the result."

Island Air announced Jan. 10 it had reached a preliminary sales agreement with an undisclosed buyer and gave its employees 60 days’ notice — as required by federal law — that their employment may end on March 11 due to a change of ownership or shutdown. On Jan. 18 the Star-Advertiser reported that Ellison was the proposed buyer, according to two sources. But Island Air continually refused to confirm or deny the report.

The mystery ended Tuesday afternoon just a few hours after Ellison finalized the deal.

"Mr. Ellison brings resources to build the airline, so we plan to service all the communities of Hawaii, which we feel will benefit both kama­aina and visitors alike," Mura­shige said.

Island Air recently signed new contracts with its pilots, flight attendants, mechanics, stock clerks and dispatchers. On Sunday, Island Air was given the green light by the Federal Aviation Administration to use its new 64-seat ATR 72 turboprop.