Hawaii’s second-largest airline files for Chapter 11 bankruptcy

Threats of legal action against Island Air, Hawaii’s second-largest airline, has seen the airline file for Chapter 11 bankruptcy in order to protect it from any threatened action to ground its aircraft and leave hundreds of passengers stranded and to allow it to continue inter-island operations.
Only this year Island Air had invested heavily in a new fleet of larger aircraft as it pursued an aggressive expansion strategy, replacing existing 64-seat ATR72-12 aircraft with leased 78-seat Bombardier Q400s.
For the last seventeen consecutive quarters Island Air had run at a loss, predominantly owing to the fact it held only a six percent share the inter-island market compared to Hawaiian, which holds an 84 percent share. However, the expansion plan was not intended to directly challenge Hawaiian, but more to take advantage of the gap left in the market when Aloha Airlines folded in 2008. It has long been held that the inter-island service was too attractive a market to be dominated by one single airline.
Originally founded in 1980 as Princeville Airways, Island Air offers flights between Oahu’s Honolulu international Airport, Maui’s Kahului Airport, Kauai’s Lihue Airport, and Hawaii’s Kona International Airport.
According to David Uchiyama, Island Air’s president and CEO, “Island Air will continue to hold our customers and employees, as well as our invaluable vendors, as our main priorities during this reorganization process. Once we have completed the reorganization process, Island Air expects to emerge as a stronger airline with a solid financial structure that will allow us to continue to meet the demands of Hawai’i’s dynamic interisland market, while positioning us for future growth and expansion.”