Island Air on Thursday announced it will consolidate operations, a move that will reduce the number of Island Air employees and flights.
The company attributed the move to record financial losses of more than $21 million in 2014 alone, coupled with the company’s inability to achieve the productivity and cost certainty needed from its unions. The airline announced the plan on Thursday.
The consolidation will reduce Island Air operations to a smaller number of markets, allowing the company to fix its cost and revenue structure. Island Air currently operates five Turboprops providing daily flights between Honolulu and Lanai, Kauai and Maui, as well as from Maui to Lihue, Kauai.
In a prepared statement released Thursday, the company said it will not take delivery of any new aircraft in the short term, including the Bombardier Q400 aircraft; close operations in Lihue; add flights to Maui; and reducing the airline’s overall flight schedule to just two lines of flying.
An estimated 20 percent of the airline’s workforce will be without jobs after the changes take effect on June 1. According to its website, Island Air employs more than 340 people.
“While we hope to manage some of those reductions through attrition and cancelling (sic) current vacancies, we expect we will still experience some furloughs,” Dave Pflieger, CEO, said in a prepared statement. “Impacted employees will be notified within the next few days, with exit dates beginning in June.”
Leading up to Thursday’s announcement, Island Air said it has worked for the past seven months to invest in and improve operations. Among the list of efforts were reducing the airlines management team by 20 percent; negotiating deals for two different types of new aircraft; meeting with state and federal officials; pursuing partnerships with other airlines; reducing expenses; making repairs; improving reliability and on-time performance; addressing revenue challenges; and negotiating with Island Air’s unions.
“In our meetings with union leaders over the past 30 days, we asked for modest changes in all collective bargaining agreements. To be clear, we did not ask for job cuts, wage reductions, or benefit or retirement concessions. Instead, we simply asked for changes that would improve productivity and provide certainty on costs during a ramp-up period of growth when we expected to lose money — as many “turnaround” or “start-up” businesses do — especially when they are competing against strong, entrenched incumbents,” Pflieger said. “One group was willing to come to the table and agree with our requests. Unfortunately, the others were not. For everyone who tried to work with us, thank you for your willingness to listen, to understand, and your attempt to help us address the difficult situation we are facing.”
Island Air was founded in 1980 as Princeville Airways. The company was purchased in February 2013 by Oracle founder, Larry Ellison’s company Ohana Airline Holdings, LLC.