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Lessor legal action prompts Island Air to file for Chapter 11

Hawaiian regional carrier Island Air has disclosed a decision to file for US Chapter 11 bankruptcy protection, citing legal challenges from lessors of its aircraft fleet.

The interisland operator says that, on 12 October, while negotiating leases with lessors, it was served with notices of termination and demands to surrender the aircraft. It declares itself "very surprised" by the turn of events.

Island Air says its Chapter 11 filing "prevents the threatened action and allows Island Air to continue interisland service for its customers", as well as allowing it to "provide continued employment" to its 400 personnel and "ensure a revenue stream so its vendors are paid".

Chief executive David Uchiyama states: "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 Hawaii's dynamic interisland market, while positioning us for future growth and expansion."

The carrier argues that there is "an adjustment period" for "all companies experiencing a growth in demand", and stresses that it narrowed its first-quarter loss this year – while doubling passenger numbers and racking the highest quarterly revenue since it started reporting financial data to the Department of Transportation in 2013.

The subsequent quarter's revenue figure, at $12.5 million, was the highest in more than decade, it adds.

However, DOT figures for the second quarter show that Island Air made a net loss of $8.2 million and an operating loss of $4.9 million, turning the carrier's cash balance negative to the tune of $147,000.

Hawaiian investment company PacifiCap acquired a controlling interest in Island Air from Ohana Airline Holdings in January 2016. The airline has since replaced its ATR turboprops with Bombardier Q400s.

Flight Fleets Analyzer indicates that Island Air has four Q400s in service: three managed by Elix Aviation Capital and one by Nordic Aviation Capital. Another Q400 leased by the carrier from NAC is in storage.

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