Less than three years after he bought the struggling carrier, billionaire Larry Ellison is relinquishing control of Island Air to an investor group headed by Hawaii venture capitalist Jeffrey Au.

Two affiliates of PacifiCap, a Honolulu-based investment firm, are acquiring a controlling interest in the state’s third-largest airline, Island Air announced Wednesday. Terms of the deal were not released.

Last April, Island Air announced it was cutting 20 percent of its workforce, reducing service and indefinitely postponing a decision to bring in a new fleet. The airline has just two routes remaining: Honolulu-Maui and Maui-Lanai.

Au said he expects to change course.

“We’re looking to expand to the extent that we want to enter other interisland markets and, obviously, that should create more needs for actually more employment,” Au said.

There will be no immediate change to the size of the airline’s 256-person workforce, but as the transition proceeds “we’ll figure out what needs to be done,” Au said.

The purchase by PaCap Aviation Finance LLC and Malama Investments LLC is subject to approval by the U.S. Department of Transportation, which is expected to take about two months. Au is the founder and managing director of PacifiCap.

“It’s no secret that the airline came close to bankruptcy a couple years ago and it takes time and money to turn it around, but we think it’s at that point now in terms of operations, safety and reliability,” Au said. “There have been great improvements and now is the time that revenues can be increased. … In venture capital investments, particularly in turnaround situations, the focus isn’t on the past but the future opportunities.”

Ellison’s Ohana Airline Holdings LLC, which bought Island Air from Charlie Willis of San Francisco-based Gavarnie Holding LLC in February 2013, will retain a non-controlling interest and will continue to partner with the new local owner. Ellison will remain on the board of directors.

Island Air CEO Dave Pflieger and former Island Air CEO Les Murashige, who has retired twice from the airline, will aid in the transition. Pflieger will remain as CEO through the transition but Au said it was “premature” to discuss the future management team until after the deal gets DOT approval. Au also reserved comment on the airline’s specific future expansion plans until after it gets the green light from the DOT.

Island Air’s passenger traffic and revenue have dropped sharply. The 19,946 passengers that Island Air carried in September — the latest data available from the DOT — were the fewest in a month since the carrier transported 14,261 in April 2013. Island Air’s $5.5 million in third-quarter revenue was the lowest in any quarter since Ellison purchased the airline for an undisclosed price.

Au, a graduate of Punahou School and Mun Lun Chinese Language School in Honolulu, received a bachelor’s degree in political science and a master’s degree in international policy studies, both from Stanford University, and a law degree from the Columbia University School of Law. He is on Enterprise Honolulu’s board of directors and is on the advisory board of the Hogan Entrepreneurs Program at Chaminade University.

Since 2000, PacifiCap’s affiliated venture funds have led or co-invested in financing rounds that have raised more than $600 million for PacifiCap’s technology, media and emerging growth portfolios.

“Like Hawaii itself, we may not be big, but we can be great,” Au said about the pending acquisition of Island Air. “We believe that having local owners and managers will allow us to provide the kind of reliability, seat availability and service that our fellow kamaaina deserve.”

Ellison expanded his presence in Hawaii when he bought the airline in February 2013 less than a year after buying 98 percent of the island of Lanai, which Island Air serves, from Castle & Cooke owner David Murdock for a reported $300 million. Murashige was Island Air’s CEO at the time.

“I was asked to come back by the previous owner (Willis) to see if I could either fix this thing, shut it down or find a buyer, and we were fortunate to find the Ellison group,” Murashige said.

Murashige retired shortly thereafter and was replaced by Paul Casey, a former CEO at Hawaiian Airlines. Casey was succeeded on Oct. 1, 2014, by Pflieger.

Au, who has not met Ellison, said that despite the airline’s financial failures, Island Air has been a success under the ownership of Ellison, the world’s sixth-richest man, who has a net worth of $45.1 billion, according to the latest Forbes rankings.

“It is factually true that the airline lost money over the past few years, but he acquired an airline that was close to bankruptcy,” Au said. “He invested a lot of money, spent a lot of time and brought on experienced great managers like Dave (Pflieger) to turn around and fix things.

“During that period, not only is it common, but it’s expected to lose money. He succeeded in saving the airline so we have an airline to invest in that would not exist. He succeeded in saving all those jobs. He succeeded through Dave in turning around operations so the airline is on time now. I don’t agree with the premise that he did not succeed. Our role is to come in to complement that.”

Pflieger said Island Air, which operates with five 64-seat ATR-72 turboprop aircraft, plans to stay with that aircraft after “an exhaustive search” looking at other types of planes. He said the new owners will be adding ATR-72s to the fleet.

Island Air Chairman Paul Marinelli said the company is in good hands.

“We recognized that committed local ownership would serve Island Air’s best interests in the long term, and are very pleased that such a well-regarded investor group as PacifiCap, with deep roots in Hawaii, is now taking the helm,” he said.