Founded in 1970 in Carbondale, Illinois, Air Illinois primarily operated small twin turboprop aircraft such as the de Havilland Canada DHC-6 Twin Otter. By 1978, the company acquired two 44-seat Hawker SiddeleyHS 748 turboprops (tail numbers N748LL and N749LL), which were mostly used to connect Springfield, Illinois with Chicago's Meigs Field. The HS 748 was the largest aircraft to use the lakefront airport on a regular basis. By far the company's most utilized aircraft was the Twin Otter, an eighteen passenger aircraft noted for short field take-offs and landings (STOL) that was truly the company's workhorse. The company's two letter identifier was UX.
In October 1983, the remaining Hawker Siddley 748 (N748LL) of Air Illinois crashed in poor weather near Pinckneyville, Illinois being worked by Scott AFB Radar Approach Control. while operating as Flight 710 between Chicago, Illinois, and Carbondale, Illinois via Springfield, Illinois. Three crew members and seven passengers lost their lives.
Several weeks after the crash the FAA grounded the company and began official hearings into the crash. The cause was determined to be pilot error after the plane's generators failed two minutes after takeoff yet the crew elected to "push on" to their destination, crashing in a pasture when the plane lost all electrical power.
Following this, the company lost $1 million. Measures were taken to bring the safety to federal standards. Most company employees were placed on furlough and after an extensive rewrite of the company's operations manual the FAA granted an operating certificate for FAR part 121 flight operations which was composed of jet service utilizing their BAC One-Eleven aircraft. The operating certificate for the most lucrative part of their original operation, which was under FAR part 135 rules, was delayed. This fact, along with substantially lower passenger loads, led airline officials to cease operating and file for Chapter 11 bankruptcy in April 1984. Meanwhile, the airline Air Midwest had dropped its plans to acquire Air Illinois.