There appears to be some bad blood involved with IoSS being the bad guy. Reminds me a little bit of the recent Flybe - Loganair saga up in Scotland where the public obviously voted with their feet/wallets.
For example, Tresco advises visitors that they can no longer book flights on Skybus for a package holiday for a fixed fare, but simply have to book flights based on live pricing for the general public. Apparently IoSS is no longer willing to cut Tresco a deal. I also noted that IoSS since 2016 no longer offers partial refunds for passenger of flights cancelled due to adverse weather if those passengers opt for alternative transport on the Scillonian - something they apparently did in the past when they had competition.