After air and water mixing, the process of gas compression in the downcomer shaft or pipe of a hydraulic air compressor is considered nearly isothermal due to (i) the mass flow rate of water being typically of three orders higher than that of the gas it compresses, (ii) water having a heat capacity approximately four times that of air, and (iii) the intimate contact and large heat transfer area between the gas phase and the liquid phase of the bubbly flow. A formulation for estimation of the efficiency of a closed- or open-loop hydraulic air compressor, expressed in terms of the principal hydraulic air compressor design variables, is presented. The influence of a hitherto underappreciated factor affecting the performance of these installations, such as the solubility of the gas being compressed in the water, is explored. A procedure for estimating the yield of compressed gas, accounting for these solubility losses, is explained and used to determine the mechanical efficiency of historical hydraulic air compressor installations from reported performance data. The result is a significant downward revision of hydraulic air compressor efficiency by approximately 20% points in comparison to most reported efficiencies. However, through manipulation of cosolute concentrations in the water, and the temperature of the water (through regulation of the ejection of compression heat), the mechanical efficiency can be increased to the formerly reported levels. The thermo-economic implication of these efficiency determinations is that in a modern context, hydraulic air compressors may be able to outperform conventional mechanical gas compression equipment.