Island Air Files for Chapter 11 Bankruptcy Protection

Island Air filed for Chapter 11 reorganization bankruptcy today, Monday, Oct. 16, 2017.

The airline says it’s filing Chapter 11 bankruptcy protection to continue normal operations while dealing with legal challenges. The company also recently brought in a new fleet of larger aircraft this year.

Island Air says the bankruptcy filing was caused by threats of legal action to ground the aircraft and strand hundreds of passengers. The airline says it’s filing prevents the threatened action and allows Island Air to continue interisland service for its customers.

During the reorganization, Island Air said it expects to fly its scheduled routes as normal and honor all previously purchased tickets and confirmed reservations.

According to Pacific Business News, the airline said its lessors served them with notices of termination on Oct. 12, and demanded the airline to surrender its airplanes while it was in the process of negotiating its aircraft leases. That, in turn, resulted in the airline to file for bankruptcy protection in order to continue to operate under the protection of the United States Bankruptcy Court.

In an article by Hawaii News Now, the airline said last week, “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.”

“Prioritizing its customers, employees and the communities it serves, Island Air made the difficult decision to file for bankruptcy protection. Continuing to operate under the protection of the United States Bankruptcy Court will allow Island Air to maintain its service to its customers, provide continued employment to its more than 400 valued employees, and ensure a revenue stream so its vendors are paid.”

In a statement by Island Air president and CEO David Uchiyama, “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 Hawaii’s dynamic interisland market, while positioning us for future growth and expansion.”

According to PBN, in the second quarter of 2017, Island Air 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.