HONOLULU (HawaiiNewsNow) - Billionaire Larry Ellison is selling a controlling interest in Island Air to a Hawaii investment group.
The sale of the state's no.2 inter-island airline was announced Wednesday.
The controlling interest is being sold to PaCap Aviation Finance and Malama Investments, two investment companies managed by local investment firm PacifiCap.
Island Air currently has five, 64-seat ATR 72 turboprops.
Ellison, who co-founded Oracle Corp., bought Island Air in 2013 to boost passenger traffic to the island of Lanai, which he owns. But since then, the carrier has lost about $40 million.
The sale, subject to federal approval, is aimed at pushing forward Island Air's restructuring and turnaround efforts.
"We are thrilled with the opportunity to partner with Mr. Ellison and his team to create a strong second airline for Hawaii," said PacifiCap founder and managing director Jeffrey Au, in a news release.
PacifiCap is Hawaii's largest locally-based venture capital investment firm.
There have been rumors about the anticipated sale for weeks, and onlookers say it was expected.
Earlier this year, Island Air cut its Kauai routes and slashed its payroll by about 20 percent. It also shelved plans to buy larger planes from Bombardier Aerospace.
Experts said Island Air was too small to compete with dominant carrier Hawaiian Airlines.
"Do you want to get onto a cramped interior turboprop with highly limited carry on space or do you want to get on a comfortable jet," Scott Hamilton, an airline industry analyst with Leeham Co. of Issaquah, Wash., told Hawaii News Now last week.
Larry Ellison's Ohana Airline Holdings will retain a non-controlling interest in Island Air.
It's unclear how a deal could impact fares. But experts say with interisland fares at about $80 each way, there's room in the market for a lower-cost carrier.
Founded in 1980 as Princeville Airways, Island Air employs about 250 workers. It flies about 165 flights a week.