The Next Move?

By Segal, Dave | Honolulu Star - Advertiser, March 22, 2015 | Go to article overview

The Next Move?


Segal, Dave, Honolulu Star - Advertiser


COURTESY ISLAND AIR

Island Air

Island Air's planes of the future are gathering dust at an aircraft storage field outside Tucson, Ariz., and nearly a third of the company's pilots are earning their full salary while "sitting on the beach."

The state's second-largest airline, which a year ago announced it was purchasing two Bombardier Q400 NextGen turboprop aircraft for about $60.9 million, is having second thoughts about putting those planes into service.

The delay is part of a "comprehensive review" Island Air has undertaken to figure out how to stem the flow of red ink after six consecutive quarterly losses, totaling $18.1 million.

Island Air, the top alternative to Hawaiian Airlines for interisland travel, hasn't earned a profit in any full quarter since billionaire Larry Ellison bought it in February 2013. Ellison hired Dave Pflieger, the former head of Florida-based regional carrier Silver Airways, in October to replace Paul Casey as chief executive officer and come up with a new business plan.

"Following the company's sixth successive quarter of losses with a new owner, Island Air's new management team is undertaking a comprehensive strategic review of the company's fleet -- the ATR (which it uses now) versus the Q400 -- our network, and other key aspects of the airline's business model to design a business plan that will ensure our future success and ensure we can provide Hawaii with a reliable and a superior alternative airline that can grow and serve the islands profitably," Island Air said in an email.

Leaving its new planes sitting in a storage field in Arizona since taking delivery in December is a sign of how cautious Island Air is about making any new moves before putting in place a plan to address the losses. With the planes idled, 18 of the 60 Island Air pilots, who have been trained to operate the Q400, are drawing a paycheck and not working, a situation that pilots refer to as "sitting on the beach."

"They're a small player, but they're an important player because they do influence pricing," local aviation historian Peter Forman said of Island Air. "They help balance the competitive environment. The market depends on having a second carrier participating."

Island Air had just 7.5 percent of the interisland market share as of July, a distant second to Hawaiian at 88.4 percent, according to the latest available data from the state Department of Transportation's Airports Division.

"They haven't really found their niche yet," Forman said of Island Air. "They're going to have to have the right airplane in order to find their niche."

If Island Air ends up not using the Q400s, it will prove costly for the airline.

Not only is there the price it paid for the two idle planes, but also the cost of training the 18 pilots to fly the Q400s and paying those pilots while they wait for the planes to be put in service.

The pilots were trained last summer and fall at an estimated cost of $40,000 to $50,000 a person, according to John Dean, national senior labor relations counsel for the Air Line Pilots Association, a union. That price includes the expense of flying a pilot to Seattle for simulator training, putting up the pilot in a hotel and additional ground school. Then there is the cost of paying the idle pilots.

Complicating the situation for Island Air is the fact that the 18 pilots can't be reassigned to fly the airline's current fleet of five ATR 72s without additional training. …

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