In 1982 British Island Airways was reconstituted by splitting off the charter operation Air UK had inherited from BIA at the time of its creation into a separate company.

[1][3][10] Following the completion of BUA's sale to Caledonian on 30 November 1970, BIA officially began its life as a legal entity in its own right the following day, 1 December 1970.

Other airports that used to receive BIA's regular scheduled passenger services in the early to mid-1970s included Antwerp, Belfast, Blackpool, Dublin, Edinburgh, Exeter, Glasgow, Guernsey, the Isle of Man, Jersey, Manchester, Newcastle, Paris Orly and Southampton.

[15] In addition to its Herald turboprop fleet, BIA also inherited a small number of Douglas DC-3 "Dakota" piston-engined airliners from BUIA.

[15] A limited amount of charter flying (passenger and freight) also occurred, including BIA's speciality of one-hour aerial geography trips for school groups from the Gatwick catchment area, which took advantage of the Herald's superb downward passenger visibility (due to high wings and relatively large windows) on low altitude flying tours of Southeast England, usually incorporating a traverse of the south coasts of Kent, Sussex and Hampshire and the opportunity to see the North and South Downs plus the Weald from the air.

[18] In 1977, BIA applied to the Civil Aviation Authority (CAA) to serve Dublin, Copenhagen, Hamburg, Frankfurt, Zürich and Geneva from Gatwick on a regular, year-round scheduled basis.

[15] Occasionally, BIA also operated Dan-Air's scheduled service between Gatwick and Bern, which involved special crew training and permits due to the hazardous alpine terrain surrounding the Swiss federal capital.

This involved Villa's purchase of BIA Ltd, a wholly owned B&C subsidiary that had assumed the ownership of Air UK's non-scheduled division to facilitate its eventual disposal, with a loan from the owners.

The "new BIA" was headquartered at Apollo House on the industrial estate in Crawley's Lowfield Heath area (close to Gatwick Airport).

[25][32] A well-subscribed, subsequent stock market flotation that changed BIA's legal status from a privately owned to a public limited company financed future growth.

[25] The addition of the larger capacity, technologically advanced MD-83s during the second half of the 1980s enabled BIA to offer tour operators a state-of-the-art aircraft filling the niche between the 119-seat One-Eleven 500 and the 228/235-seat Boeing 757-200, which increasingly dominated its vertically integrated rivals' fleets[nb 3] during that period.

[25][34] In addition to supplying various package tour operators, including Thomas Cook, International Leisure Group (ILG) and Owners Abroad, with whole-plane charter seats, the reconstituted airline was also contracted by other airlines to provide the aircraft to operate part of their multi-leg scheduled services, including Air Florida during the early 1980s and Virgin Atlantic during the mid-1980s.

BIA's Gatwick slots were required to enable fellow Gatwick-based Air Europe, ILG's rapidly expanding airline subsidiary, to build a major scheduled presence at that airport.

Furthermore, ILG's ownership of BIA would have given the ILG-owned package tour operators, notably Intasun, a greater degree of control over their charter airline seat inventory.

[25][36] Ultimately, BIA's inability to become part of a bigger, financially stronger organisation, the deep recession in the UK during the early 1990s, as well as the escalating jet fuel price and the collapse of the package tour market in the run-up to the first Gulf War during the summer of 1990 resulted in a 38% reduction in its passenger traffic (compared with the same period the year before) and were the main factors that forced the reconstituted BIA to cease all operations on 9 February 1991.

The first of these incidents occurred on 20 December 1974 involving one of the airline's Handley Page Dart Herald turboprops (registration: G-BBXJ) in a landing accident at Jersey Airport.

It involved another of the company's Handley Page Dart Heralds (registration: G-APWF) in a runway accident while departing London Gatwick on a scheduled flight to Guernsey.

The subsequent investigation concluded that this accident had been caused by the landing gear being retracted before the aircraft had been properly established in its initial climb.

[41][42] In addition to the two aforementioned incidents, in 1979, BIA's maintenance engineers had discovered fatigue cracks in the fuselages of some of the firm's Heralds during routine inspections of the aircraft.