First major(ish) U.S. airline bankruptcy in over a year! It will be interesting to see how this changes the inter-island market.

http://www.staradvertiser.com/2017/10/1 ... ankruptcy/ (subscription required)
http://khon2.com/2017/10/16/island-air- ... rotection/ (free to all)

Two of their Q400s (N684WP and N685WP) appear to have been flown back to Toronto.

http://flightaware.com/live/flight/N684WP
http://flightaware.com/live/flight/N685WP

What a shame. I flew them last week between HNL and OGG and was very pleased with their service in a brand new Q400 aircraft.

Oh no!!! I hope they emerge stronger and better. This airline has so much potential too. I am certain they are sitting around a table and coming up with a plan. I know it's been a struggle for them for some time now. I wish them the best, and pray they come out of this.

Flew them just last year, almost to the date, on an ATR-42, I am not 100% surprised, they have had large fluctuations with schedules, going from 6 to nearly a dozen & back to 6 daily r/t's between HNL & OGG one month prior to departure.

I was hoping that once they had made the choice for new Q-400's, they were already on the upswing, I hope WP can rebound with this reorganization. There needs to be another carrier that keeps HA fares honest.

Anyone who has seen the inner workings of Island Air knows both of the potential of Island Air and the reasons why it will never come to pass.

This is depressing. The Q400s entering service was a sign of hope, but if they've been losing money for 4 straight years, it doesn't sound good (albeit not surprising.)

WP is basically the only thing standing between HA and complete and total control of the interisland air market right now.

They are heavily used by the locals. Every time I have flown them the FAs know many of the passengers by name. I do miss their Dash 8s and think the changing of AC type (2 changes) had to impact their books. I really enjoy their service, but those increased costs and the adding of Ohana had to have a big impact on their finances.

Its also unfortunate that the banner rotator on many of the pages airing the story are running HA ads (i know its automated)

Sounds like they are in a major legal battle with the Q400 lessors and using BK as legal protection.

Not really surprising, it's not the best managed company (even if their workers are dedicated) along with the fact Hawaiian will always eat them for breakfast.

Tough to see this, as they do really have great potential if they can ever get their act together with the mgmt team. I do wonder however, if this will affect the recently started construction near gate 6 for the new commuter terminal?

So in today's Star Advertiser, there was more detail as to why Island Air ran to the Bankruptcy court. Turns out one of the lessors of their Q400's issued a letter notifying the airline that they will be repossessing aircraft leased by them to Island Air. The termination of lease noticed happened on the same day that Southwest announced their intention to serve Hawaii in the near future.

From the article. (Elix is one of three lessors to Island Air for their Q400's and seems to be the one that issued the termination letter to them)
The bankruptcy filing comes less than a week after Southwest Airlines announced it would begin selling tickets to Hawaii next year and was exploring competing in the interisland market. Hawaiian Airlines is the dominant carrier in the interisland market with a roughly 90 percent market share with Island Air second, Mokulele Airlines third and Makani Kai Air fourth.
Hawaii aviation expert Peter Forman questioned the timing of the Elix-Island Air lease dispute.
“I find it extraordinarily coincidental that the termination of leases took place on the same day Southwest officially announced their plans to enter Hawaii service, including possible interisland serv­ice,” Forman said. “I think it’s too much of a coincidence to ignore.”
Elix’s Dalton, though, said the timing of the lease dispute has “nothing at all to do with Southwest.”

Lease terminations don't happen overnight, They happen as result of payment delinquency, or other dispute over terms.

LAXintl wrote:

Lease terminations don't happen overnight, They happen as result of payment delinquency, or other dispute over terms.

And the terms could be some lease covenants related to the company's financial health.

The Star Advertiser indicated that there were five airplanes. But as noted above, two (belonging to a Danish leasing company) flew to Canada, were painted white, and are now sitting in Toronto.

Also in the Star Advertiser today ...

StarAdvertiser wrote:

In the second quarter, Island Air earned $12.5 million in revenue ... but saw its quarterly loss widen to $8.2 million from $5.1 million in 2Q16

The article goes on to say that the increased losses are due to a $3.2 million charge related to early ATR retirements, but still, that's around a -40% margin excluding the one-time fleet costs. Yikes!

Question: If someone were to buy their AOC, do they inherit all the debt too? Or is the AOC an asset of the company itself, which is in debt?

The article talks about the WN announcement starting HI service. Quote

“Somebody’s got to take a look and see just what is going on here. Why there was a demand for their airplanes back the very day that Southwest announces they’re coming to Hawaii?” he said. “Island Air is by far the lowest-cost interisland carrier, so Island Air could cause Southwest a lot of trouble coming into the Hawaii market, so I think this is a very interesting development.”

Can someone tell me how WN would impact their business since they are two vastly different airlines with totally different models?

Thanks.

The whole situation surrounding Island Air is unfortunate. Recently they have shown they can gain a following locally, but the changes in ownership, management and aircraft are each difficult in their own right. Combine them and the task must be overwhelming.

As to WN entering the inter island market, I'm extremely doubtful. Those 737's engines won't be able to handle the quick turns without a longer than would be practical ground time to cool down. I could see an occasional inter island flight as a tag on to a mainland to a neighbor island, a leg to HNL for a red eye back to the mainland. Much more local demand for overnight flights to the mainland on O'ahu.

jnev3289 wrote:

Question: If someone were to buy their AOC, do they inherit all the debt too? Or is the AOC an asset of the company itself, which is in debt?

First, there are two certificates necessary to operate an airline in the US: one from the DOT and one from the FAA. If you buy just the certificates, you still need to jump through government hoops before you can fly. In a bankruptcy situation, the airline can sell its certificates as an asset, subject to bankruptcy court approval. Or the airline can sell the whole business, subject to creditor agreement (whatever deal the buyer can swing with creditors) and court approval.

hnl-jack wrote:

The whole situation surrounding Island Air is unfortunate. Recently they have shown they can gain a following locally, but the changes in ownership, management and aircraft are each difficult in their own right. Combine them and the task must be overwhelming.

As to WN entering the inter island market, I'm extremely doubtful. Those 737's engines won't be able to handle the quick turns without a longer than would be practical ground time to cool down. I could see an occasional inter island flight as a tag on to a mainland to a neighbor island, a leg to HNL for a red eye back to the mainland. Much more local demand for overnight flights to the mainland on O'ahu.

Yes it is unfortunate, but Island Air has really never been a major contender in the Islands. Their service between cities has been so off and on and prior to this latest ownership, their reliability was really bad. While the 737 issue with Southwest opening an island operation (which may prevent them from starting interisland operations), at this time, this market could surely use a reliable and properly funded 2nd choice.

LAXintl wrote:

Lease terminations don't happen overnight, They happen as result of payment delinquency, or other dispute over terms.

According to today's Star-Advertiser, that's exactly the case (and the lessor had people in HNL to repossess the Q400s):

Island Air was $4.4 million behind on lease payments to Dublin, Ireland-­based Elix Assets 8 Ltd., owner of the three planes, when two Elix representatives showed up in Hawaii to take possession of the aircraft, Island Air said in a Tuesday filing in federal Bankruptcy Court.

. . .

“Without any prior notice, Tom Dalton and Phillippe Poutissou are in Honolulu attempting to repossess the aircraft,” an Island Air attorney wrote in a letter to Elix last week. “Be advised that their actions constitute a breach of the peace and the appropriate authorities at Honolulu Airport and airports on the neighbor islands have been advised to not allow Dalton and Poutissou or any agent of lessors to access the aircraft. Any attempt to repossess or approach the aircraft is unlawful and will be deemed trespassing.”

The article also says that WP's bankruptcy filing are silent about the other two aircraft (which I assume are the pair already sitting in Canada right now.)

Sure someone shows up one day to take the planes, but this does not happen overnight without a reason. It would be a violation of the contract.

Island Air which was $4.4mil behind on payments was obviously at risk of losing the aircraft. One cant be surprised owner wanting their property back.

hnl-jack wrote:

As to WN entering the inter island market, I'm extremely doubtful. Those 737's engines won't be able to handle the quick turns without a longer than would be practical ground time to cool down. I could see an occasional inter island flight as a tag on to a mainland to a neighbor island, a leg to HNL for a red eye back to the mainland. Much more local demand for overnight flights to the mainland on O'ahu.

Why does this keep coming up. I fly the 737 and I can tell you that the engine cool down will not be a major issue for WN doing inter island. You do realize that for most of WN's entire existence that there was a ton of short fights with 15-20 minute turns. HOU-AUS, MDW-IND, MDW-GRR (just flew this one last night, flight time 22 minutes in the air at FL 220. Ever heard of the WN 10 minute turn from back in the day? WN will be fine flying most likely dedicated-700's inter island.

If two of Island Air's Q400's have been returned to lessor, how do they stay in business? How many planes remain?

mcg wrote:

If two of Island Air's Q400's have been returned to lessor, how do they stay in business? How many planes remain?

Three. The two that went back belong to a different leasing company. Look at its timetable online: three solid lines.

seems like those 2 were the Wells Fargo planes, which was listed on the BK 11 filing

mercure1 wrote:

Sure someone shows up one day to take the planes, but this does not happen overnight without a reason. It would be a violation of the contract.

Island Air which was $4.4mil behind on payments was obviously at risk of losing the aircraft. One cant be surprised owner wanting their property back.

As soon as you file Ch. 11 it protects you from any action taken on your past due debt. You cannot repo the aircraft until the court rules on a course of action. Island air can willingly return the aircraft to cut costs, but it CANNOT be repossessed.

So did the lessor grab the planes pre-bk? island Air prolly should have filed a little sooner.

Can someone explain to me how Island Air can fly all their scheduled routes when they lost 2 of their 5 aircraft last week?

One thing we know for sure is that being the #2 interisland airline is losing proposition.

mcg wrote:

So did the lessor grab the planes pre-bk? island Air prolly should have filed a little sooner.

They may have willingly returned them for immediate cost savings.

HNLPointShoot wrote:

According to today's Star-Advertiser, that's exactly the case (and the lessor had people in HNL to repossess the Q400s):

Island Air was $4.4 million behind on lease payments to Dublin, Ireland-­based Elix Assets 8 Ltd., owner of the three planes, when two Elix representatives showed up in Hawaii to take possession of the aircraft, Island Air said in a Tuesday filing in federal Bankruptcy Court.

.)

Like the article states - Island Air was way behind on payments and in breach of lease terms, so obviously they will be subject to repo.

As I stated repossessions don't occur overnight. Banks and lessors only take aircraft back as last resort. Like your car, if you fail to make payments on it, one day it may no longer be parked outside where you left it.

SWADawg wrote:

hnl-jack wrote:

As to WN entering the inter island market, I'm extremely doubtful. Those 737's engines won't be able to handle the quick turns without a longer than would be practical ground time to cool down. I could see an occasional inter island flight as a tag on to a mainland to a neighbor island, a leg to HNL for a red eye back to the mainland. Much more local demand for overnight flights to the mainland on O'ahu.

Why does this keep coming up. I fly the 737 and I can tell you that the engine cool down will not be a major issue for WN doing inter island. You do realize that for most of WN's entire existence that there was a ton of short fights with 15-20 minute turns. HOU-AUS, MDW-IND, MDW-GRR (just flew this one last night, flight time 22 minutes in the air at FL 220. Ever heard of the WN 10 minute turn from back in the day? WN will be fine flying most likely dedicated-700's inter island.

This keeps coming up because it is a true issue with all 737s since the -200s. It is the reason Aloha bailed on the -300s and -400s they acquired in the early 1990s and continued to use -200s until 2008.

HNL-OGG and HNL-LIH are both 100 miles, both are 16ish minutes takeoff to touchdown, both never get anywhere near FL220, and both are much shorter than anything else WN operates. Interisland flights back to back are quite different operationally than a short flight mixed with medium and longer flights like WN's mainland operation (i.e. BWI-PHX-LAX-DEN-MDW)

If WN decides to do LAX-HNL-LIH-OAK, they probably won't have an issue. If they try to do HNL-OGG-HNL-LIH-HNL-OGG-HNL-KOA-HNL-OGG-HNL-LIH-HNL-OGG-HNL (this is a typical interisland flight line) they WILL have a problem. There is a reason Aloha never used their -700s for interisland other than a few tag-ons here and there. There is not enough time to cool on the ground OR in cruise. The short flights and short turns back to back to back to back all day are too much for the engines.

Aloha!

LAXintl wrote:

HNLPointShoot wrote:

According to today's Star-Advertiser, that's exactly the case (and the lessor had people in HNL to repossess the Q400s):

Island Air was $4.4 million behind on lease payments to Dublin, Ireland-­based Elix Assets 8 Ltd., owner of the three planes, when two Elix representatives showed up in Hawaii to take possession of the aircraft, Island Air said in a Tuesday filing in federal Bankruptcy Court.

.)

Like the article states - Island Air was way behind on payments and in breach of lease terms, so obviously they will be subject to repo.

As I stated repossessions don't occur overnight. Banks and lessors only take aircraft back as last resort. Like your car, if you fail to make payments on it, one day it may no longer be parked outside where you left it.

AS i have already said. It is ILLEGAL to take any action on any debt that is protected by chapter 11.

Per David Uchiyama, Island Air CEO, the airline on Oct 12th was served them with notices of termination of the leases and demands to surrender its airplanes. They did not declare BK till 16th.
While Island Air can stop the clock, it would be highly unusual for a court to force a lessor to continue doing business with an airline which it terminated leases pre-petition. I actually don't know of any such cases.

Btw - to show bad things are at Island Air - per DOT filings, its lost money for 17 straight quarters!

LAXintl wrote:

.

Btw - to show bad things are at Island Air - per DOT filings, its lost money for 17 straight quarters!

And on top of that, these last couple of years have been some of the best in the last decade for airlines. Something must be fundamentally wrong with the way Island Air is conducting business.

whenever a company re-shuffles Senior Management around every two to three months, something is definitely not going very well.

mcg wrote:

One thing we know for sure is that being the #2 interisland airline is losing proposition.

Not true. There were periods in which AQ had more market share and net profit than HA, in particular when AQ went all-jet and HA was mostly props. See Peter Forman's Wings of Paradise.

IMO, the take-away is that any state-wide competitor to HA will have to match HA turbofan for turbofan. The only viable strategy for WP is an HNL/OGG shuttle.

Looks like there's a real possibility that the end of WP will happen sooner rather than later. WP had an agreement with the lessor to defer lease payments that was amended as recently as Sept. 15. The lessor apparently sent their repo people after WP allegedly breached the amended agreement earlier this month. From today's Star-Advertiser:

The crux of the bankruptcy hinges on a leasing dispute between Island Air and Elix. The aircraft lessor said it is entitled to take back the airplanes after Island Air defaulted on $4.58 million in payments and failed to satisfy conditions under a deferral agreement. . . .

Elix said after Island Air failed to remedy its payment defaults, the lessor attempted to accommodate Island Air by entering into a lease payment deferral and amendment agreement on Sept. 15 as well as other transactions to provide the necessary liquidity to the airline.

Another bankruptcy court hearing has been set for Friday morning.

So this is the, like 5th or 6th airline that might be closing down or IS closing down in 2017. Great.

OA940 wrote:

So this is the, like 5th or 6th airline that might be closing down or IS closing down in 2017. Great.

In fairness this isn't something special to 2017; the industry is notoriously fickle.

V/F

I thought the Q400 would have been a game changer for them

VirginFlyer wrote:

OA940 wrote:

So this is the, like 5th or 6th airline that might be closing down or IS closing down in 2017. Great.

In fairness this isn't something special to 2017; the industry is notoriously fickle.

V/F

But two major carriers are closing this year (Monarch and Air Berlin, that second one's still not 100% certain though)

Intef island stage lengths are simply too short to operate a dedicated fleet of 737NG’s or Max aircraft.

Southwest just parked 67 B737-300s recently. It’s really a no brainer! Let them fly the friendly skies of the Hawaiian Islands...

B733s have the wrong engine (CFM56-3C-1), as AQ painfully discovered. B732s had the right engine (JT8D-7/-9/-5/-17).

Maybe Delta should ship 5-10 717s to Hawai’i. It’d pretty much explode a few heads on this board.

Prost wrote:

Maybe Delta should ship 5-10 717s to Hawai’i. It’d pretty much explode a few heads on this board.

Delta with 717s is a much better idea than WN or anyone else with 737-300s, -700s or -800s.

-Aloha!

SWADawg wrote:

hnl-jack wrote:

As to WN entering the inter island market, I'm extremely doubtful. Those 737's engines won't be able to handle the quick turns without a longer than would be practical ground time to cool down. I could see an occasional inter island flight as a tag on to a mainland to a neighbor island, a leg to HNL for a red eye back to the mainland. Much more local demand for overnight flights to the mainland on O'ahu.

Why does this keep coming up. I fly the 737 and I can tell you that the engine cool down will not be a major issue for WN doing inter island. You do realize that for most of WN's entire existence that there was a ton of short fights with 15-20 minute turns. HOU-AUS, MDW-IND, MDW-GRR (just flew this one last night, flight time 22 minutes in the air at FL 220. Ever heard of the WN 10 minute turn from back in the day? WN will be fine flying most likely dedicated-700's inter island.

The only problem with this argument is the model of 737. Aloha flew 737-200's interisland for years; when they tried the -300, it didn't work, specifically because of the short flights and quick turns. And then, when Aloha flew -700's, they never even tried them interisland for the same reason.

There's a reason Aloha had an exception to the regulations which forced retirement of -200's elsewhere. There was no other option available.

Or so AQ told ... errr... the namesake of HNL, and got the hush-kit exemption. DC-9s were an option, but hush-kits were "considerably" cheaper. There wasn't much hush in the hush-kit.

Prost wrote:

Maybe Delta should ship 5-10 717s to Hawai’i. It’d pretty much explode a few heads on this board.

With reg. nos. ending in WN? I think Mr. Kelly would be very interested. The exploding heads would be on Koapaka St.