Island Air is cutting the pay of about one-third of its pilots. Stretched thin by layoffs and attrition, the state’s second-largest carrier plans to downgrade nine captains to first officers in August.
The demotion will result in a cut to their pay. A captain at Island Air currently makes approximately $58,500 a year. Being downgraded to first officer and working the same hours would result in the pilot making $35,100 a year — a loss of $23,400 a year.
The cut in pilot pay follows a companywide 20 percent reduction in staff that was announced in April.
The latest move is part of an ongoing streamlining of the money-losing company to try to achieve profitability after $35 million in losses under the two-year ownership of billionaire Larry Ellison.
Island Air also is seeking additional concessions from its three unions, which the company says it needs to take advantage of an offer to expand its fleet. Aircraft manufacturer ATR Americas and aircraft lessor Nordic Aviation Capital have offered to sell Island Air eight ATR 72-600 aircraft seating roughly 70 passengers each.
But the offer, which includes Island Air selling its five 64-seat ATR 72-212 turboprops to Danish-based Nordic, expires at the end of this month.
"If we can reach an agreement with the union groups, there is a plan toward growth for Island Air," said Grant Arakawa, director of flight operations for Island Air, in an email sent Tuesday to pilots, dispatchers and schedulers.
The concessions being sought by the company would be in addition to the givebacks that employees consented to in 2013 to pave the way for Ellison to purchase the airline. A separate deal between the pilots and management was worked out for the rollout of the 71-seat Q400 aircraft — two of which were purchased by Island Air last year for a list price of $60.9 million but now sit unused in an Arizona airfield.
Island Air declined to comment on the downgrading of its pilots or the pending offer for new aircraft. The airline said it would not elaborate beyond an April statement on its plan to cut staff.
"While that strategic effort is underway, there is nothing new to report," Island Air spokeswoman Jolette Paoa Silva said.
When asked about the pending ATR 72-600 offer, Paoa Silva said, "We have nothing more to add."
The downgrading of Island Air’s captains was announced in two emails sent out this week by Arakawa.
"It is my unfortunate position to advise you due to the shortage of first officers we will need to change your captain status to first officer beginning August 1st, 2015," Arakawa wrote. "It is my hope that this will be a temporary situation.
"Our current flight schedule requires a minimum of 17 first officers. Due to attrition and (known) upcoming attrition we will have a total of 9 first officers for the month of August."
Island Air had more than 60 active pilots before the airline announced April 29 that it would cut 20 percent, or roughly 68 people, from its 341-member workforce, reduce service and postpone indefinitely a decision on bringing in a new fleet. Now the company only needs 35 active pilots for operations, according to an internal memo from Arakawa that was obtained by the Honolulu Star-Advertiser.
But pilots have been leaving the company — some on their own accord — since the announcement, and Island Air has been advertising on its website to hire more first officers.
Island Air has 47 pilots overall, according to an internal email by Arakawa, but nine are on leave of absence. Three pilots are in management positions and generally don’t fly.
"We have been actively … recruiting and interviewing for open first officer positions, and will continue to do so until we have stabilized pilot staffing and attrition," Arakawa wrote in an internal memo.
Island Air, which was struggling even before Ellison bought the company, said in April it was consolidating its operations to a smaller number of markets so it can fix its cost and revenue structure and become strong enough to grow in a sustainable manner.
On June 1, Island Air eliminated Kauai service, reduced the frequency of Honolulu-Lanai flights to two daily flights from five daily, and added a 25-minute layover on Maui for the Lanai route. The flight cutbacks left Island Air with only Honolulu-Maui and Maui-Lanai routes.
Island Air initially had planned on bringing in Q400 aircraft to replace its aging fleet of ATR 72-212s. But when CEO Dave Pflieger took over Oct. 1, he halted that plan. Since then, pilots who underwent training for the Q400s have been getting paid while waiting to get retrained — or trained for the first time — to fly the company’s ATR 72-212 aircraft.
As part of the most recent pilot negotiations, Island Air is seeking that the pilots’ work hours (and resulting pay) be reduced by 15 percent and for the pilots to give up their rights to negotiate any new pay rates or work rules until at least 2020, according to a person familiar with the situation who was not authorized by the company to speak. Island Air also wants the pilots to agree to allow the company to bring in any aircraft it wants and have the pilots fly under the current pay, according to the source, who characterized the two sides as being far apart in their negotiations.
