Island Air lost the use of two of its five planes, cut its flights by more than 40 percent and placed some employees on reserve with reduced pay prior to filing for bankruptcy protection this week.
Hawaii’s second-largest airline sought court protection after the owner of its three remaining planes tried to repossess the leased aircraft last week.
If Dublin, Ireland-based Elix Assets 8 Ltd. is successful in repossessing the three Bombardier Q400 aircraft it leased to Island Air, then the local carrier will be out of airplanes and, presumably, out of business unless it is able to acquire other aircraft or another buyer with available planes steps in to buy the company.
Island Air executives declined this week to disclose the number of aircraft remaining in its fleet. But on Thursday the chief commercial officer for Island Air’s main competitor, Hawaiian Airlines, said Island Air is operating with just three airplanes.
Peter Ingram, speaking on a conference call with investors after Hawaiian Airlines announced its third-quarter earnings, said Island Air has cut back on its service.
“There were some close-in cancellations late in August that were announced for September, and so they trimmed the schedule back a little bit in September and then subsequently have done that a little bit from October and November,” Ingram said. “It looks to us to be about three lines of flying that are flying right now.”
Phone calls and emails to Island Air CEO David Uchiyama and his bankruptcy attorney, Ted Pettit, were not returned Thursday. An email sent to Island Air majority owner Jeffrey Au also was not returned.
On Sept. 5 Island Air said in a news release titled “Island Air completes transition to all-Q400 fleet” that it had five Q400 planes and more than 400 flights each week.
Fifteen days later, in an interview with the Honolulu Star-Advertiser, Uchiyama said Island Air had only 238 flights per week. He said the number had been “adjusted to account for the historical shoulder season during this time of year.”
In the Sept. 20 interview, Uchiyama also said, “The outlook for Island Air going forward is very positive,” adding that “discussions on the acquisition of additional Q400s are still in the works.”
One Island Air employee, who asked not to be further identified, said Thursday that in the middle of September, Island Air took two of its five Q400s out of service and that those planes are no longer around. The employee said some workers were placed on reserve at the time and received reduced pay.
“Employees were told the company was consolidating the lines of flying to fill up planes that were flying only partially full,” the employee said.
Behind on payments
An airline industry executive with knowledge of the situation said Nordic Aviation Capital, owner of two Q400s leased to Island Air, had taken back the two planes because the airline was behind on its payments. Island Air presented Nordic with a new repayment plan that Nordic rejected, the executive said.
The bankruptcy involving Elix and Island Air also stems from claims by Elix that the airline is $4.58 million behind on its payments for the three Elix planes.
Hawaii aviation historian Peter Forman said it’s “unknown” what will happen to airfares in the interisland market if Island Air shuts down. If that happens, it would follow in the footsteps of Aloha Airlines, which ceased operations March 31, 2008, after its Chapter 11 bankruptcy filing was converted to a Chapter 7 liquidation.
“I think Hawaiian Airlines is using some discretion to keep Hawaii’s interisland passengers happy, so I wouldn’t expect a radical increase in interisland fares, particularly with someone like Southwest Airlines eyeing the market,” Forman said. “It’s very healthy to have a second local airline for interisland flying because it does offer alternatives.”
Southwest said last week the Dallas-based carrier will begin selling tickets to Hawaii next year and is considering entering the interisland market.
Island Air, which had never filed for bankruptcy in its 37 years of existence, has been transforming itself since a majority stake in the company was acquired by Au, a Honolulu venture capitalist, and other investors in February 2016 from billionaire Larry Ellison, who remains a one-third owner in the airline. Since the ownership change, Island Air has increased its workforce to more than 450 from 256 and restored service to Kauai and Kona.
