Island Air (Hawaii) (WP, Honolulu) has announced the immediate suspension of its operations effective Saturday, November 11 at 00.01 (12.01am) local time in Hawaii. Island Air has been operating under chapter 11 bankruptcy protection since October following a dispute with lessor Elix Aviation Capital over lease payments for its fleet of three 78-seat Dash 8-400s.

Having launched operations in 1980 as Princeville Airways (Hanalei) and being subsequently rebranded to Aloha Island Air (WP, Honolulu) in 1987 and then just Island Air in 1992, the regional carrier operated various different turboprop aircraft throughout the years before completing the fleet rollover from ATR72-200s to Q400s in September of this year.

In its press release announcing the suspension of operations, Island Air says that it was unable to "locate a new investor or lender to provide funding to support airline flight operations and a successful reorganization", also blaming "aggressive legal attacks" from Elix Aviation Capital it could "no longer combat without additional financing". Elix has been seeking to terminate all leases and immediately repossess the three turboprops.

Island Air has been serving three city pairs from Honolulu most recently connecting the state capital's airport with Kahului, Kona and Lihue. Island Air's market exit will leave Hawaii with just two intra-state operators, Hawaiian Airlines (HA, Honolulu) and Mokulele Airlines (MW, Kona). The only three markets where the two actually compete are Honolulu to both Kapalua and Kaunakakai as well as Kahului-Kona. Southwest Airlines (WN, Dallas Love Field)'s chief executive Gary Kelly has been quoted by Bloomberg last month as saying that inter-island flights in Hawaii are something Southwest would "obviously" be considering. The low-cost carrier also has plans to start operating between California and Hawaii next year.