"We are excited Mr. Ellison has acquired Island Air. He has the vision and resources to literally take Island Air to new heights," the airline's president, Les Murashige, said in a statement.
A spokesperson for Ellison confirmed his purchase but declined further comment. The airline was purchased by Ohana Airline Holdings, a holding company controlled by Ellison.
Island Air hired a restructuring team – including Skadden, Arps, Slate, Meagher & Flom – in advance of the sale.
The airline is the latest trophy in Ellison's fast growing private empire. Last June, he purchased 98 percent of Lanai, an island of 141 square miles near Maui. Ellison told CNBC in October that he plans to turn the scenic isle into a "little laboratory" for sustainable development, with solar electricity, electric cars, water filtration systems and organic farms that can export produce to other countries.
The airline fits neatly into the Lanai puzzle and allows him to compete with the much bigger Hawaiian Airlines. Ellison, who is an avid pilot, airplane buff and owner of a small fleet of private aircraft, will likely be a fierce competitor in the air wars. Who knows – he might even find a way to run the planes on bio-friendly palm oil or pineapple rinds.
Ellison has also purchased about a dozen properties in Malibu and has hinted that he may be interested in buying a major sports team or franchise. He told CNBC that his multi-billion-dollar line of credit – backed with company stock – is his "shopping around" money.
(Read more: Why Larry Ellison Needs a $4 Billion Line of Credit)
"I've got a line of credit in case I go shopping and something catches my eye," he told Maria Bartiromo on CNBC. Like what? "Well, if I wanted to buy the Los Angeles Lakers," he said. "I could go buy the Los Angeles Lakers."
Or an airline.