Island Air Chapter 11 Bankruptcy: List of U.S. Airlines Filing for Bankruptcy Grows

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Island Air Filed Chapter 11 Bankruptcy

Hawaii’s second-largest airline filed for Chapter 11 bankruptcy this week, thus becoming the latest U.S. airline to go bankrupt in 2017. Island Air has been forced to seek bankruptcy protection amid fears of legal action from its aircraft lessors. 

Island Air, which provides inter-island flights between the popular vacation destinations of Hawaii—Oahu, Kauai, and Maui—has been forced to seek a U.S. bankruptcy court’s protection after its lessors threatened to force the airline to ground its aircraft and leave hundreds of passengers stranded on the islands.

The Hawaii-based airline says it was negotiating its aircraft leases when it was served with unexpected lease termination notices. Island Air leases its aircraft from Elix Aviation Capital Limited, which is now demanding that the airline surrender all of its leased aircraft.

Island Air’s Chapter 11 bankruptcy comes at a time when the company was expanding its operations by adding new and larger aircraft models to its portfolio. The airline took the initiative in an attempt to improve its business after having lost money for 17 straight quarters.

This is the first time that the 37-year-old airline has filed for bankruptcy. Management took the decision in order to continue its scheduled flights and honor the services promised to its customers.

List of U.S. Airlines Filing for Bankruptcy in 2017 Is Getting Bigger

Island Air’s Chapter 11 bankruptcy is at least the fourth bankruptcy of a U.S. airline company this year.

In April, New Orleans-based airline FlyGlo LLC (aka GLO) filed for bankruptcy, due to its dispute with another company that was operating flights for GLO. The contractor that was operating the flights blamed GLO for falling behind in its bill payments. The charter airline company went out of business last month after failing to restructure itself through its Chapter 11 bankruptcy proceedings.

Just two months ago, we reported on Alaska-based airline Peninsula Airways, Inc. (aka PenAir) filing for Chapter 11 bankruptcy. PenAir, which conducted flights to more than 25 domestic destinations—and which has been in business since 1955—filed for Chapter 11 bankruptcy protection amid mounting debt pressures.

Another U.S. charter airline, Dynamic International Airways LLC, also filed for bankruptcy protection earlier this year. The company’s growing debt load and repeated loss of senior leadership forced the Greensboro, North Carolina-based airline to turn to the bankruptcy court.

These bankruptcies come at a time when industry experts are seeing some serious headwinds building for U.S. airlines in 2017. The past few years have been rewarding for U.S. airline companies, since oil prices fell to record lows, thus allowing them to save on fuel costs. However, now that fuel prices are regaining momentum, revenue margins are already beginning to shrink.

Meanwhile, U.S. airline industry revenues have been slumping as the industry reaches its saturation point. The largest airlines are constantly engaged in price wars, making it increasingly challenging for the smaller airlines to survive in such a stiff environment.

 

Sources

Island Air files for Chapter 11 bankruptcy protection,” Hawaii News Now, October 16, 2017.

Hawaii Island Air Files for Chapter 11 Bankruptcy Protection,” TravelNewsAsia, last accessed October 17, 2017.

New Orleans startup airline GLO goes out of business,” The Times-Picayune, September 21, 2017.

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