BREAKING: Island Air Will Cease Operations

Hawaii’s embattled inter-island airline Island Air will cease operations at 12:01 a.m. on Saturday, November 11, 2017.

Bankruptcy

Last month Hawaii’s second largest airline filed for Chapter 11 bankruptcy.  The reason given for the bankruptcy filing at the time was threats of legal action by Island Air’s lessors.  However, we later found out that the reason for the legal action by the lessors was due to “improper operations,” which caused accelerated depreciation.  But Judge Robert Faris of the District of Hawaii Bankruptcy Court allowed Island Air to continue operations using cash as collateral.  The airline was to continue normal operations at least until the next hearing on November 15.

Unfortunately, Island Air reports that the aircraft owners continued to engage in multi-directional legal attacks on them.  And with cash already tight, the carrier simply could not continue to combat these legal challenges.  Thus the decision was made to cease operations at midnight tonight.

What to Do if You Have Tickets

Island Air’s 400 employees fly 200 flights weekly from its base in Honolulu to Lihue, Kahului, and Kona using a fleet of brand new Bombardier Q400s.  Of course, this made the airline the second largest in Hawaii, and the only real competition for Hawaiian Airlines.  So this sudden shutdown will likely have a significant impact on inter-island travel for the foreseeable future.

And if you have travel booked on Island Air here’s what you need to know:

• Refunds: Island Air states that passengers that have purchased their tickets with a credit card will need to contact their credit card company for a refund.  But for those that didn’t use a credit card, I’m guessing you’re out of luck.
• Flights:  Hawaiian Airlines will honor Island Air tickets for standby travel on a first come, first serve basis.  For those that need confirmed seating, Hawaiian Air is also offering a special $71 one-way fare for Island Air passengers.  The standby offer and special fare are available between November 11 and 17, 2017.

To qualify for standby travel, you’ll need to present your electronic or paper Island Air ticket confirmation at the Hawaiian Airlines special customer service desk at the airport.  Travelers will only be able to do so on the travel date printed on their ticket.

Island Air Will Cease Operations, Final Thoughts

The loss of Island Air is certainly sad, but not surprising news.  Island Air hasn’t performed well in a long time and hasn’t had a solid business strategy since separating from Aloha Airlines.  But not only will hundreds of people lose their jobs, but it also means that Hawaiian Air’s market position will only get stronger.  Since the only other real competitor left is tiny Mokulele Airlines, I wouldn’t be surprised if Hawaiian raises fares for inter-island travel in the near future.

For me, Island Air’s closure makes me think about Mesa Air’s go! once again.  It was go!, after all, that triggered unprecedented instability in the inter-island market.  Since their entry into the market, Aloha Airlines has gone under, while Mokulele grew tremendously and then contracted greatly once again.  And then go! itself left the Hawaii market leaving just Hawaiian and Island Air.  But with Island Air now leaving the market, Hawaiian will have now have an unprecedented near monopoly on the inter-island market.

My hope, however, is that a new competitor will enter the market soon.  Whether that be Southwest Airlines or some other entity, having competition in the market is important.  And who knows, maybe we’ll see the revival of the Aloha Airlines name.  After all, Aloha’s largest shareholder, Yucaipa, still holds the rights to the Aloha brand.