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The last surviving public airline servicing Lanai has put the federal government on notice: It wants rural airport subsidies to sustain its money-losing flights.

In December, Mokulele Airlines Chief of Staff Keith Sisson submitted a 90-day notice to terminate the air carrier’s unsubsidized service to Lanai Airport, writing in a letter to the U.S. Department of Transportation that it does so “with great regret.”

“Rising costs and stagnant market demand have caused unsubsidized air service on the island to remain perpetually unprofitable,” Sisson said in the letter. 

Lanai Airport is part of the . The program was established on the heels of the 1978 deregulation of the aviation industry to keep operational rural airports that airlines might otherwise abandon. 

In Hawaii, the EAS program includes three other underperforming airports where passenger fares do not cover costs: on Molokai, on Maui and on the Big Island. The government provides annual subsidies to keep these airports running in the amounts of $1.48 million, $830,744 and $956,792, respectively. 

Although Lanai Airport has been eligible for subsidies for decades, the government in the past has relied on air carriers providing subsidy-free service to the 140-square-mile island.

Sisson said earlier this week that is no longer sustainable.

“In no way are we intending on canceling service to Lanai,” Sisson said. “That’s absolutely not the case. This is simply a move from an economic standpoint to make sure that we’re taking full advantage of this opportunity from the U.S. government to make that route sustainable going forward.”

The federal government has prohibited Mokulele from halting its Lanai service while the DOT solicits proposals from other air carriers to run flights between Lanai, Honolulu and Kahului, Maui.

No proposals have been turned in yet. Air carriers typically submit bids on the day they are due, in this case March 22.

If the department does not receive a subsidy-free proposal, it will be obligated to provide a subsidy to maintain air service at Lanai Airport since Mokulele has indicated it’s no longer willing to provide that service without a boost of taxpayer aid. 

It’s not yet known what the subsidy amount for Lanai Airport would be.

On Monday a representative of Cape Air traveled to Lanai to meet with Maui County Councilman Gabe Johnson and a handful of other residents to learn more about the community’s interisland air travel needs.

, which serves or has previously served island communities including Martha’s Vineyard and Guam, is considering submitting a bid to service Lanai with the support of federal subsidies, according to the councilman.

Cape Air Senior Vice President of Planning Andrew Bonney declined to comment for this story.

“Andrew said it would be a privilege to service this island,” said Johnson, who lives on Lanai. “And we always felt like it was not a privilege, that for Mokulele it was more like a burden for them, you know?”

“Don’t get me wrong, some people still love Mokulele,” he continued. “But when someone comes in and says it would be a privilege to serve this community, that’s a significant change in the air around here.”

‘It Doesn’t Pencil Out’

In recent years, air travel options for Lanai residents have grown increasingly stark, leaving residents with one choice: Mokulele Airlines.

Two other airlines that used to serve the islands — Makani Kai and — ceased operations in November 2020 and January 2021, respectively, as the Covid-19 pandemic decimated the travel sector, prompting airline bankruptcies, closures and downsizings worldwide.

Lanai residents who rely on air travel for jobs or medical care have been critical of Mokulele’s reliability, citing lengthy delays and flight cancellations. The ongoing disruption has caused many patients to miss pressing appointments with Honolulu doctors — in some cases repeatedly.

Complaints reached a fever pitch last spring, prompting Mokulele Airlines Executive Vice President Richard Schuman to acknowledge the air carrier’s shortcomings with a promise to “step up” service. 

An enduring issue is that Mokulele primarily operates nine-passenger Cessna Grand Caravans that can fill up quickly. To better accommodate passengers, the airline invested $10 million last year to augment its fleet with three 28-passenger planes and improve customer service. The company also introduced a new mobile app for ticket sales.

Still, Sisson points to a battery of persistent challenges to the Lanai route’s profitability. The cost of jet fuel and aircraft parts has skyrocketed. Passenger counts have nosedived, first because of Covid-19 and then due to the Lahaina wildfire. And since most guests of Lanai’s Four Seasons resorts travel on Lanai Air, Mokulele misses out on a boost from the island’s tourist market.

“For Lanai, we have to take the cost of operations and divide it by nine seats,” Sisson explained. “It doesn’t pencil out. We’re losing quite a bit of money each month specifically on that route.”

Rather than raise ticket prices beyond what Sisson said he thinks the average Lanai resident would be willing to pay, the airline wants to tap into the federal subsidy program for which the airport has long been eligible.

The airline executive said he doesn’t think Mokulele will be edged out by another airline swooping in with a bid to provide Lanai service without the cushion of federal aid.

”I would think if another U.S. air carrier wanted to provide service to Lanai without subsidy, they would have already been doing it,” Sisson said.

There’s another way to get on and off of Lanai: Expeditions, . But this vital link for Lanai residents traveling to and from Maui for doctor appointments, jobs, veterinary services and shopping has reduced its schedule to two roundtrips a day after losing its ticket kiosk, reservations office, warehouse and ferry terminal in the Aug. 8 wildfire in Lahaina.

Residents say the slashed schedule makes daytrips difficult. And, of course, the Maui-Lanai ferry route is no help to residents who need to access Honolulu.

Lanai Air Opens Ticket Sales To Residents

In January, a new air travel option arrived on the scene. Lanai Air, the luxury air service that connects Four Seasons hotel guests from Honolulu to Lanai’s resorts, to help make reliable travel for health care or family visits easier, according to , Larry Ellison’s management company. 

The airline owned by Ellison, the tech billionaire with a 98% ownership stake in the island of 3,000 residents, offers faster and what’s generally agreed upon to be more reliable service than Mokulele.

But the cost to travel on the luxe airline tends to be more expensive. A roundtrip ticket on Lanai Air is around $320. Roundtrip airfare on a Mokulele flight between Lanai and Honolulu ranges between $198 and $340. 

Mokulele generally aims to stabilize Lanai ticket prices around $100 for a one-way trip, Sisson has said, but in recent years rising costs triggered an inflationary hike on ticket prices.

Johnson said he recently traveled on Lanai Air, describing the service as “impeccable.” But the bells and whistles it offers — a swank waiting lounge, free drinks — are unimportant to the typical Lanai resident who just wants safe and reliable air transit from point A to point B, he said.

The councilman said he’s hopeful about Cape Air’s interest in adding Lanai service. And he’s encouraged that any airline that agrees to fly to the island might soon be able to tap into government aid to stabilize the market.

“The thing that makes me happy is that the subsidies will allow the airline to settle on a price,” Johnson said. “You know how that goes, right? One day the ticket is $60, the next day it’s $120. So hopefully the subsidies come in and settle down the pricing to a price that’s affordable, that residents can count on.”

Civil Beat’s coverage of Maui County is supported in part by grants from the Nuestro Futuro Foundation.