Island Air (Hawaii) (Honolulu) has announced it has filed for Chapter 11 bankruptcy protection after lessor Elix Aviation Capital moved to repossess its fleet of three Dash 8-400s.

The Hawaiian island-hopper said in a statement that during the process of negotiating its aircraft leases with Elix, it was served notices for their termination along with demands for their surrender on October 12. In order to continue operations, it was then forced to file for Chapter 11.

"Continuing to operate under the protection of the United States Bankruptcy Court will allow Island Air to maintain its service to its customers, provide continued employment to its more than 400 valued employees, and ensure a revenue stream so its vendors are paid," it said. "During the reorganization process, Island Air expects to fly its scheduled routes as normal and honor all previously purchased tickets and confirmed reservations. In addition, there will be no changes to the Island Miles frequent flyer and other customer service programs, including Kupuna & Keiki Saver Fare, Island Biz corporate travel program, and military and group travel programs."

Island Air added that in light of continued strong growth in demand, it had seen a corresponding increase in revenue inflows leading to a narrowed 1Q loss for the year. In addition, during 2Q17, it generated USD12.5 million in revenues, its highest quarterly revenue in more than a decade.

Island Air is majority-owned by Hawai‘i-based investment company, PacifiCap, which acquired a controlling stake from Ohana Airline Holdings in January 2016. Using its three Q400s, it currently offers approximately 200 flights each week connecting Honolulu, Kahului, Kona, and Lihue.