Consumer benefits of Island Air sale touted - Hawaii News Now - KGMB and KHNL

Consumer benefits of Island Air sale touted

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HONOLULU (HawaiiNewsNow) -

The buyers of Island Air said they want to avoid a fare war but experts said that in order to compete with Hawaii's dominant carrier, Island Air will have to provide lower prices.

A local investment group headed by venture capital executive Jeffrey Au announced today that it will purchase a controlling share in Hawaii's second largest carrier from billionaire Larry Ellison.

Island Air's CEO David Pflieger, who will lead the transition, said consumers will benefit.

"Ultimately what they will see is an affordable alternative to get folks to the neighbor islands," he said.

Terms of the deal were not disclosed but the company is expected to keep its 250 employees.

Island Air will also add new turbo planes to its fleet, which means that it will add or restore routes.

The deal still requires federal approval.

After losing about $40 million over the past three years, the company last year eliminated its Kauai flights and slashed its payroll by about 20 percent. The company currently flies between Oahu, Maui and Lanai.

About three quarters of Island Air's business comes from tourists, so returning the company to local ownership could boost traffic from local residents, who now pay about $80 to fly one way.

"It's important to make flights available in the off peak seasons so that local people can go to the neighbor islands again," said Au.

The buyers outbid another local hui that included former Hawaiian CEOs Bruce Nobles and Paul Casey. Casey is also a former Island Air CEO.

Sources tell Hawaii News Now that Ellison will provide funding for the airline. Ellison will continue as a majority shareholder and will hold a board position with Island Air.

"He's very proud of the fact that he saved the airline three years ago from folding. He not only saved the airline but he also saved hundreds of jobs," Pflieger said.

Pflieger said the company's recent restructuring is also paying dividends, as it's on time performance has improved.

"It was designed to address a perception among the public that the airline was not a reliable carrier and now it is," he said.

Experts said that Island Air's turboprop aircraft are too small to compete with Hawaiian Airlines. It will have to offer lower fares to compete with the larger carrier.

"I think you are going to see efforts to introduce tickets at lower prices," said Peter Forman, local airline industry historian.

"Consumers could keep their eyes out and benefit from traveling on either one of the airlines."

Lanai resident Kolen Taal says she's hooked on Island Air because it's both cheaper and more convenient.

"You know how the TSA security is. It's so bad actually, there's a long line. Over here, you can just go straight ahead," Taal said. "I fly Island Air because it's way cheaper."

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