Island Air (Hawaii) (Honolulu) says it will discontinue its six daily Honolulu to Lihue services as it pushes to consolidate and streamline its operations following a string of recent financial losses.

In a letter to employees, CEO Dave Pflieger said the airline had lost more than USD21 million during its latest financial year and would therefore undertake a staff reduction and a network and fleet rationalization program to cut costs.

Effective June 1, the airline's workforce is to be reduced by 20% through attrition and cancelling current vacancies. Approximately 79 positions will be affected in total. Additional layoffs may be effected in the longrun Pflieger added. Management has also taken a cut reducing its numbers by 20%.

Pflieger blamed the downturn on rival Hawaiian Airlines' Ohana by Hawaiian service which is operated by Empire Airlines (EM, Coeur d'Alene).

"Of course, we always knew that to remain Hawaii’s number two airline in the face of overwhelming competition from another local airline, which is 60 times our size in revenue and controls nearly 90% of the intra-island market, would not be without its challenges," he said. "That is why we have worked so hard together over the past seven months to invest in and improve our operation and give our airline the best chance possible to pursue a different course of action."

In terms of operations, Hawaii's second-largest carrier will, from June 1, eliminate its Lihue services while adding flights to Kahului.

As the carrier's network will be reduced to just two routes from Honolulu to Kahului and Lanai City, it has also abandoned plans to take delivery of any new aircraft in the short term, including Dash 8-400s two of which - N360WP (cn 4481) and N361WP (cn 4482) - are now in storage at Tucson International and Toronto Downsview respectively. The Q400s were intended as replacements for the airline's fleet of five ATR72-200s, with whose performance the carrier's has expressed dissatisfaction for in the past.

Founded in 1980, Island Air was acquired from Gavarnie Holding, LLC by Oracle's Chief Executive Officer Larry Ellison in 2013.