Island Air, an inter-island carrier in Hawaii, recently issued a statement announcing it is filing for Chapter 11 bankruptcy protection “in an effort to continue normal operations while navigating through legal challenges recently presented by the lessors of its aircraft.”
The bankruptcy filing was caused by threats of legal action to ground the aircraft and strand hundreds of passengers, according to the statement. The filing prevents the threatened action and allows Island Air to continue inter-island service for its customers.
During the reorganization process, Island Air expects to fly its scheduled routes as normal and honor all previously purchased tickets and confirmed reservations.
In addition, there will be no changes to the Island Miles frequent flyer and other customer service programs, including Kupuna & Keiki Saver Fare, Island Biz corporate travel program, and military and group travel programs.
“On October 12, while in the process of negotiating its aircraft leases with its lessors, Island Air was very surprised that the lessors served them with notices of termination of the leases and demands to surrender its airplanes,” according to the statement.
Island Air narrowed its 2017 first quarter loss while revenue continued to rise, making this the airline’s highest quarterly revenue since before 2013 when Island Air was required to begin reporting its financial data to the DOT due to the size of its aircraft, according to the statement.
In the second quarter of 2017, the airline earned $12.5 million in revenues, its highest quarterly revenue in more than a decade. In the first quarter of 2017, Island Air flew 172,200 passengers (more than double the previous quarter’s figure of 75,102).
“Island Air will continue to hold our customers and employees, as well as our invaluable vendors, as our main priorities during this reorganization process,” said David Uchiyama, Island Air president and CEO. “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.”
In January 2016, Hawaii-based investment company PacifiCap acquired controlling interest in Island Air from Ohana Airline Holdings, which is wholly owned by Oracle corporation founder Larry Ellison.