Leaner Island Air joins fare war

 - December 19, 2006, 10:51 AM

Honolulu-based de Havilland Dash 8 operator Island Air suffered the first serious casualty of Mesa Air Group’s incursion into Hawaii last month when CEO Rob Mauraucher announced he planned to furlough or lay off 65 full-time employees, remove two aircraft from service and eliminate five of the regional airline’s 17 routes. Now forced to engage Mesa on Mesa’s terms, however, the slimmed down Island Air last month turned uncharacteristically aggressive with $12 return tickets for travel through March 15.

As late as this past spring Mauraucher told AIN that he planned “to stay out of the way and let the big guys go at it [because] we don’t have pockets deep enough to be in this war.” At the time, however, he had hoped to cultivate a more cooperative relationship with Mesa and even approached the Phoenix-based airline’s CEO, Jonathan Ornstein, with a proposal for a code-share deal.

Ornstein, however, rebuffed Island Air’s advances and eventually recruited Kona-based Mokulele Airlines to fly connections for Mesa’s Go! unit with a new fleet of Cessna 208B Grand Caravans. Mokulele, which operates Big Island tours and charter services between the islands, plans to replace its five Piper Chieftains with up to nine of the nine-passenger Cessna turboprops. With Mokulele’s Grand Caravans, Go! will eventually project a presence in places where Island Air and Pacific Wings have enjoyed a virtual duopoly for years.

Island Air’s “restructuring” follows its removal from service of a new Bombardier Q400 over the summer and a suspension of plans to take two more. A letter of intent to wet lease a Q400 and Dash 8-100s to a proposed start-up operation from Long Beach Municipal Airport remains outstanding. Island Air now flies just six 37-seat de Havilland Dash 8-100s, compared with as many as 11 last summer.

“These were tough but necessary decisions required to ensure our prosperity moving forward,” said Mauraucher in a statement dated December 1. “It is no secret that the market has become unstable with the addition of Go! Yield has been damaged throughout the marketplace, and we must take these proactive measures to ensure that we remain financially stable for the long term. Naturally, we will continue to review our operations with a view to maximizing efficiencies wherever we can. Fundamentally what we are doing is restructuring as a somewhat smaller carrier until the marketplace strengthens.”

As a result, Island Air’s network will no longer include Honolulu-Lihu’e, Kona-Lihu’e, Kahului-Kapalua, Kapalua-Lihu’e and Kapalua-Kona. In his defense, Ornstein points out that Go! serves only one of the routes that Island Air dropped. However, Mesa’s presence has driven Aloha Airlines into markets it traditionally left to smaller operators, creating yield pressure outside the six main routes over which Mesa, Hawaiian and Aloha have battled for six months.