In the late 1960s, with congestion at Honolulu International Airport growing, the Hawaii government officially designated Hilo as the state's second 'gateway' airport. Hilo was (and still is, I believe) the second-largest city in the state, and it made sense to position it as a major tourist center.
Accordingly, a new jet runway was built at ITO in 1965 (runway 8-26) to handle direct overseas flights to the Mainland. A rule called the "Maui fence" was also instituted - stating that if a passenger flew into Hawaii via HNL
and went beyond Maui (to Kauai, the Big Island, Molokai or Lanai), they would have to leave via ITO. It was very confusing for passengers and travel agents and was removed following Deregulation in 1978.
Pan Am and United started Hilo flights in 1967, to Los Angeles, San Francisco and Portland. After the huge 1969 Hawaii route awards, they were joined by Northwest (service to Portland), Continental (service to Los Angeles) and Western (service to Los Angeles). United also received nonstop ITO-ORD
authority; this route operated on and off through the 1970s. Braniff was granted ITO authority and opened a ticket desk in the terminal, but never started service.
Hilo opened a temporary overseas terminal (basically a converted air cargo building) in 1969, but things were already looking bleak. The ITO flights were underfilled and unpopular. Moreover, as several people have said already, most of the Big Island resorts were on the other side of the islands. The few large resort hotels that were built in Hilo struggled to rise above the city's rainy reputation. For the most part, Hilo's gamble to become a big tourism center fell flat.
Pan Am pulled out in 1973, just as construction was starting on a huge new terminal building for overseas flights. Northwest, Continental and Western all pulled out between 1978 and 1980. United stuck it out for a few more years (it started KOA flights in 1983 and for awhile served both Big Island airports) before cutting Hilo service in 1987.
Now ITO only serves Aloha and Hawaiian flights to Honolulu. In the past few years, both AQ
have cut their two or three daily ITO-OGG
and ITO-KOA flights, forcing all passengers to connect through Honolulu. Quite a sad comedown for what was once Hawaii's second-busiest airport.