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Unpaid Lease Rents for
Q400 Kills Island Air

Flying Inter-island in Hawaii banner

I have never flown on Island Air and never will.

Island Air announced that they would cease operations at the end of today, November 10. 

The shutdown comes nearly a month after the airline filed for Chapter 11 bankruptcy protection. It tried to find major investors to prop themselves up. In the end that did not happen. The company that they leased their recently acquired 78-passenger Q400 turboprop planes forced Island Air to close after the airline did not meet lease rent payments for the aircraft.

As a result, more than 400 people will be out of work and passengers will be stuck with worthless tickets that they may be able to get refunds from through their credit card companies.

Island Air was in business for 37 years, starting in 1980 as Princeville Airlines. Back then the airline flew deHavilland Twin Otter prop planes between Honolulu and the privately owned Princeville Airport on Kauai.

In the 1980s Princeville Airlines was acquired by Aloha Airlines which renamed the commuter carrier Aloha Island Air. They continued to operate the small, 18 passenger Twin Otter planes. In time the fleet was upgraded to the deHavilland Dash 8 turbo-prop that carried a little more than 30 passengers.

Island Air N943WP

The airline was successful with the Dash 8’s and continued for many years under a few ownership changes through the 21st century. In the 2000s, Island Air started flying the ATR 72 (photo above) turboprop which carried about 68 passengers. They briefly had a Q400 in their fleet for a short time in 2006.

This year, with some fanfare, Island Air decided to retire their ATR 72’s and acquired 5 78-passenger Bombardier Q400 turboprops which are based on the earlier versions of the Dash 8. The new planes were supposed to offer better passenger comfort and cost savings.

Never happened. Unpaid lease rents for the new aircraft, no profitability in the past 4.5 years, and the bankruptcy filing all caught up with Island Air as it died from a lack of cash.

Sad story for the local airline.

The inter-island market is now stuck with Hawaiian Airlines (and its subsidiary Ohana by Hawaiian) as the only major player in the market. Expect ticket prices to hike again.

The demise of Island Air opens the door wider for the possible entry of Southwest Airlines into the inter-island market since their service announcement was made in early October.

Inter-island air travel will be an interesting topic to continually watch.

Aircraft that Island Air operated

Video Report – KHON TV

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Flying Inter-Island in Hawaii

Flying Inter-island in Hawaii banner

Southwest Airlines // Boeing 737-8 MAX // N8711Q (cn 36979, ln 6272) // KCMH 10/1/17
Southwest Boeing 737-MAX jets will be flying to Hawaii from the U.S. mainland sometime next year. Photo by Micheal Wass.

The anticipated arrival of Southwest Airlines to Hawaii’s skies has created a possible scenario that grows larger every day with the recent Chapter 11 bankruptcy filing by local carrier, Island Air.

First off, Southwest announced earlier this month that they will be starting up West Coast USA to Hawaii service using their new Boeing 737 MAX jets. The airline is in the process of getting ETOPS certification and securing gate space at Hawaii airports. The airline has not announced their Hawaii – U.S. mainland destinations, but it can be assumed that the airline will at least be flying to Honolulu and Kahului, Maui with Lihue and Kona being fairly good bets too.

What is most interesting about Southwest’s entry into the Hawaii market is the possibility that the airline will start “limited” inter-island service. 

Southwest Airlines is popular with many mainland flyers as they are known for being a low-cost carrier and do not charge fees for checked baggage or flight changes.

The announcement comes at a precarious time for Island Air, the state’s second largest inter-island carrier. They filed for Chapter 11 bankruptcy a week ago after a dispute concerning lease rents for three of their Q400 aircraft surfaced. The lessor wants to repossess the aircraft. They filed a lawsuit in bankruptcy court to force the airline to give up the planes. Should the lessor prevail in the lawsuit, Island Air which is down to those three planes after two other Q400s were taken away will be forced to go out of business leaving 400 people unemployed.

Island Air N943WPOne of Island Air’s ATR 72s, which were just retired, passes by the Hawaiian Airlines maintenance hanger in this photo shot in 2015.

Island Air recently retired their fleet of ATR 72s hoping that the Q400s would help bring costs down.

Should Island Air close, longtime incumbent, Hawaiian Airlines will more than likely increase their inter-island ticket prices (which are high already) as they reign in their near-monopoly position in the inter-island market.

COMMENTARY

  1. It will be a sad day in the local airline industry if Island Air goes out of business. In 2008 Aloha Airlines went out of business after being in the market for more than 60 years. Mesa’s Go! airlines which disrupted the inter-island market in 2006 contributing to Aloha’s demise, went out of business in 2014.
  2. The possible entry of Southwest into the inter-island market will be a great option for local residents who have been negatively impacted by Hawaiian Airlines’ high ticket prices and baggage/change fees.
  3. There will definitely be room for Southwest should Island Air go out of business.

What do you think? Send us a comment.

 

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