An Island Air/go! Merger May Be Brewing in Hawai’i, But Why?

Word out of Hawai’i is that Larry Ellison, multi-billionaire CEO of Oracle, isn’t content with just having bought most of the island of Lanai and interisland carrier Island Air. Now he’s interested in buying another interisland carrier, go! to expand his empire. One can only wonder… what the heck is he thinking?

After Ellison bought Lanai, the purchase of Island Air seemed to be straightforward. He could get a hold of an airline on the ropes and refocus the carrier to boost service to Lanai. More seats, more tourists, more money. I’m not necessarily suggesting this was a good idea, but I can at least understand the rationale.

Island Air used to be a Dash-8 operation that focused on smaller airports in Hawai’i, but that has changed. The airline’s fleet plan is now for ATR-42s to fill in the Dash-8 category alongside larger ATR-72s. And just take a look at this route map:

Island Air no longer flies to the Big Island at all. It was forced to abandon West Maui because the runway is too short for its new fleet to operate safely. And while Lanai continues to see service, much of the airline’s upcoming growth is on trunk routes between the islands like Honolulu to Kahului and Lihue.

That puts Island Air competing squarely with the behemoth in the islands, Hawaiian Air, as well as the much smaller go! operation. The overlap with Hawaiian will be even greater as that airline begins its ‘Ohana operation which will fly props to both Lanai and Molokai.

go! was originally started by Mesa Air Group under some highly questionable circumstances. Both Hawaiian and its chief rival Aloha had filed for bankruptcy and Mesa began sniffing around, looking for opportunities. After seeing inside the books, Mesa decided to walk away and start its own carrier. Aloha went out of business, and many (most?) in the islands still hold a grudge against Mesa for putting the final nail in Aloha’s coffin.

But even with Aloha gone, go! wasn’t very successful. It has never flown more than a handful of 50-seat CRJs and it’s now down to very little flying at all. For example, go! only has 5 flights a day from Honolulu to Kahului and fewer than 20 departures per day from Honolulu in total. It does sell commuter services on Mokulele’s 9-seat props, but they are separate airlines.

So, um, what does Ellison want with go!? According to reports, Ellison would basically buy the brand and merge it into Island Air. This is great news, because there’s nothing more obnoxious than the go! brand with its lower-case spelling and stupid exclamation point. So the Island Air name would survive, but Island Air wouldn’t operate the airplanes. Mesa would continue to operate the service similar to how it operates flights for other brands like US Airways.

From Mesa’s perspective, you can see how this would be enticing. I can’t imagine go! gets even close to making Mesa any money. So if it can get someone else to take on the risk and just pay Mesa for the service, then that’s great news. Nobody in their right mind would do that, unless Mesa was actually paying someone to take go! off its hands.

But even then, why would you want this? The distances between the islands are very short, so turboprops really are perfectly acceptable. And a 50-seat CRJ is far from ideal. (That’s being generous.)

The only way to look at this is that Ellison must think it’s time to get rid of some competition. Get rid of go! and then you become effectively the only real competitor to Hawaiian on large interisland routes. You still have Mokulele flying 9-seat aircraft, but that’s a different kind of market. (Maybe that’s on Ellison’s acquisition list too.)

If you eliminate competition, then Island Air can takes its place as the only alternative to Hawaiian. Right? I know, I know. Even I’m having a hard time seeing why you would want to do this deal.

But Ellison has billions of dollars and is one of the richest people in the world. The simple purchase of a tiny airline would be like buying a pack of gum for anyone else. You just don’t need to think about it because it has such little impact on your pocketbook. Then again, we’ll see if Ellison feels that way once this starts to burn holes in his pocket every single month.

There is one last theory. Ellison may just be jealous of Richard Branson. After all, Branson has a couple of airlines losing big money these days and Ellison wants to catch up. This deal would help.

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Muscat,  Oman
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