HONOLULU (HawaiiNewsNow) - The state's no. 2 inter-island airline is up for sale.
Hawaii News Now has learned that billionaire Larry Ellison is in talks with an investment group to sell Island Air.
A second bid by former Hawaiian CEOs Bruce Nobles and Paul Casey was rejected by Ellison, a source familiar with the deal said. Casey is also a former Island Air CEO.
"I'm not surprised that Larry Ellison's people would be considering selling Island Air because their strategy did not work," said airline industry historian Peter Forman.
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.
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.
Island Air currently has five, 64-seat ATR 72 turboprops, which experts said are 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," said Scott Hamilton, an airline industry analyst with Leeham Co. of Issaquah, Wash.
"Hawaiian is about as tough a competitor as you can imagine because not only do they have the reputation and on-time performance, they also have the frequency of flights," Forman added.
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 135 flights a week.
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