KITTY HAWK AIR CARGO: 1515 West 20th Street, P. O. Box 612787, Dallas-Fort Worth International Airport, Texas 75261, United States; Phone (972) 456-2200; Fax (972) 456-2210; http:// Www. kha. com; Code KR; Year Founded 1976. KHAC is organized by M. Thomas Christopher at Dallas (DAL) in 1976. Regularly scheduled all-cargo and executive charter flights are initiated to destinations in Texas and Louisiana, plus other southwestern communities. Flights with 2 Piper PA-31-350 Navajo Chieftains and 2 Piper PA-34 Senecas begin in July to Shreveport and Lafayette. Operations continue apace in 1977.
In February 1978, a scheduled passenger airline division, Kitty Hawk Airways, is set up to provide daily Navajo Chieftain roundtrips to Texarkana. Although flights are duly inaugurated, the enterprise is folded back into KHAC during October. Meanwhile, Christopher Charters is formed to broker air freight charters.
In 1984, a major subcontract is arranged with General Aviation (2) (Greeneville Air) of Greeneville, Tennessee.
Freight and traveler services are maintained during the remainder of the decade and into the next. Kitty Hawk is reorganized into a holding company, Kitty Hawk Group, in 1985 to serve as parent to several operating subsidiaries, including the reborn Kitty Hawk Airways, Kitty
Hawk Air Cargo, Skyfreighters, Christopher Charters, and Kitty Hawk General Aviation and Aircraft Leasing.
In May, the company receives a contract from the U. S. Postal Service (USPS) to operate mail delivery service on its behalf during the peak Christmas holiday season. The agreement will be renewed annually thereafter.
In November 1986, Bruce A. Martin’s overnight express operation Martinaire purchases Kitty Hawk, combining the two companies into one of the country’s largest Part 135 overnight airlines. General Motors Corp. appoints the corporation its air charter manager and the fleet is shared between the divisions as appropriate. Contracts continue to be held with all the major overnight express operators in the industry and flights are made into Oklahoma, Louisiana, Arkansas, Kansas, Colorado, Utah, New Mexico, and Texas.
In 1988, General Aviation (2) (Greeneville Air) is purchased; the acquisition increases the Kitty Hawk fleet by six CV 440s.
The Kitty Hawk Air Cargo subsidiary employs 74 persons in 1990 and operates 8 Convair CV-440s, 1 CV-640, 2 Douglas DC-3s, and 1 Dassault Falcon 20.
A total of 4.21 million FTKs are flown and revenues reach $11.2 million. With expenses held to $10.75 million, the operator generates $454,000 in operating income and a net profit of $196,000.
In 1991, the carrier earns a $1.32-million net profit on total revenues of $33.38 million. In 1992, the carrier is chosen to receive a $1-billion, 10-year U. S. Postal Service contract. The award is immediately protested by Emery Worldwide.
When the USAF Log Air program ends, it is revealed that Kitty Hawk has been the only operator in its history to have a 100% reliability record. Contracts are held with Burlington Air Express, Airborne Express, DHL Worldwide Express, Airborne Express, and others, while revenues climb to $50 million and profits to $2.5 million.
In the spring of 1993, Kitty Hawk settles a dispute out of court, allowing Emery Worldwide to assume the government postal contract in exchange for $18.5 million. At the same time, a quality management program is facilitated by the Richard Rogers Group of Portland, Oregon. Operations continue with a fleet that now includes 11 Convair CV-600s, 3 CV-640s, 1 Dassault Falcon 20, and 2 Learjet 35s. Orders are placed for four McDonnell Douglas DC-9-15s.
Chairman Christopher’s workforce totals 77 in 1994 and these join him in a move from Fort Worth’s Meacham Field to a modernized hangar and headquarters at Dallas (DFW); the 42,000-sq.-ft. facility had previously been occupied by SMB Stage Lines and Braniff, Inc.
During the fourth quarter, a B-727-223F is sent to Saipan on a charter for a Chinese seafood shipping company.
The fleet at year’s end includes the Convairs, 3 DC-9-15s, and 3 Boeing 727-223Fs. The latter are based at Ypsilanti, Michigan, to fly ad hoc charters for the automotive industry.
On the year, a total of 2.8 million FTKs are flown. Revenues total $53.53 million and expenses are $43.56 million. Consequently, there is an operating profit of $9.96 million and a net gain of $6.36 million.
In January 1995, another former American Airlines B-727-223F is acquired via Aircraft Leasing, Inc.
This year, the company’s 20 aircraft operate a total of 58.65 million FTKs. Operating income exceeds costs and there are profits, which are down from the previous year to $6.08 million (operating) and $3.22 million (net).
The employee population grows 21.1% in 1996, the twentieth anniversary year, to 270. In August, a B-727-223F is wet-leased to the Philippine freight operator Pacific East Asia Cargo. The highlight of the year comes in October when the carrier completes its first public stock offering. The income will allow fleet expansion.
At year’s end, Burlington Air Express is the company’s most prominent domestic client, accounting for nine B-727-200Fs flying routes in the U. S., Canada, and Mexico. Emery Worldwide, Burlington, and DHL Worldwide Express employ Kitty Hawk’s nine Convairs throughout North America, including one that flies daily cross-border trips for Emery between El Paso and Chihuahua, Mexico.
Cargo traffic skyrockets 134.5% to 137.55 million FTKs while revenues soar 53.4% to $70.24 million. Expenses rise 57.9% to $62.67 million, there is an operating gain of $6.98 million, and a net $7.57-million profit is reported.
During the first half of 1997, five more B-727Fs join the eight already in the fleet. Five DC-9-15Fs and seven Convair CV-600/640s are also operated. One each B-727F and DC-9-15F are based at Fort Worth, Texas.
On September 22, Conrad Kalitta signs a letter of intent to combine the Kalitta companies with Kitty Hawk; Kalitta will receive 5.1 million shares of Kitty Hawk common stock, $22 million in cash, and a “significant management role” in the combined operation. At the same time and in a related transaction, Kitty Hawk Air Cargo, the airline operating subsidiary of Kitty Hawk, Inc., purchases 16 American International Airways (3) (AiA) B -727s for $51 million in cash. The first three aircraft will start flying under their new livery on October 1, with the remainder arriving at approximately one per month thereafter.
On November 18, Kitty Hawk, which is now the largest nonintegrated air freight transportation company in the U. S. and the seventh largest cargo airline in the world, closes an equity and debt offering of three million shares of common stock. The offering brings in $39.5 million, which is used to fund the merger, merger-related activities, and general corporate purposes. A private placement of $340 million in 9.95% senior secured notes (due in 2004) is also successfully completed.
The Kitty Hawk Group merges with the Kalitta Companies, including AIA and Connie Kalitta Services, on November 19. Mr. Kalitta becomes vice chairman of the Kitty Hawk board even while the process of amalgamation is underway. The synergies of the merger appear exceptional.
For example, the integration of the Kalitta Companies’ maintenance capabilities will allow the new company to conduct substantially all of its own maintenance work in-house. Additionally, there is little route overlap. Consequently, the combined operation will enjoy an air network with virtually comprehensive coverage of the U. S. and a significant number of routes throughout Central America, South America, Europe, and the Pacific Rim. Previously capacity-constrained, the new Kitty Hawk will be able to mount a rapid expansion of its air cargo capabilities in all of these regions.
A total of 100 pilots are hired during the year. In addition, the company increases its overseas presence. A B-727-200F is sent to Auckland to operate on behalf of Ansett New Zealand, Ltd.; a B-727-200F works for Japan Air Lines Company, Ltd. (2) on Guam; and a DC-9-15F is based in Caracas for DHL Worldwide Express.
While departing from Syracuse, New York, on November 21 on a flight to Ypsilanti with two crew, several unsecured cargo pallets impact the aft bulkhead of a DC-9-15F; the takeoff is aborted, after which the pallets are secured. Following an inspection for fuselage damage, the Douglas uneventfully completes the service to its Michigan destination.
The annual USPS Christmas Mail contract again requires the company to daily move mail in November and December from almost 36 U. S. cities to a central USPS hub in Arkansas; once the mail is sorted and reloaded into aircraft, it is returned to the spoke cities for local distribution. This single contract brings in $25.8 million.
Freight traffic accelerates 84.5% to 253.8 million FTKs, while operating revenues advance 11.7% to $83.38 million. With expenses up only 4.5% to $70.69 million, the operating profit doubles to $12.68 million while net gain rises to $9.17 million.
A new USPS contract is entered into on March 1, 1998. Under its terms, a DC-8-61F flies a daily mail service from Seattle to Indianapolis.
At the end of the first quarter, Connie Kalitta Services are absorbed. American International Airways (3) remains a division under its previous name.
On April 1, two B-727-200Fs begin to fly six times a week on behalf of the USPS from Knoxville, Tennessee, to Spokane, Washington, via Dallas and Seattle.
Board Vice Chairman Kalitta retires on April 15, although he does not leave the trustees group. Tilmon “Jim” Reeves, president of Kitty Hawk, becomes chief operating officer, retaining his title as president and his seat on the board of directors.
Valued at $16 million, the 13th consecutive USPS Christmas Mail contract is received on May 26.
Exclusive of the aircraft thus acquired earlier, Kitty Hawk also takes delivery of five more B-727-200Fs by July, most from Omni Air Express.
On July 11, Kitty Hawk begins operating a pair of L-1011F six-times-per-week roundtrip from Los Angeles to Indianapolis and from San Francisco to Indianapolis, while a DC-8-61F puts in the same number of roundtrip frequencies weekly from San Antonio to Dallas (DFW) to Chicago to Indianapolis. These operations are part of the three new two-year contracts, valued at $62.2 million, signed with the USPS on June 25 as part of the D-Net operation.
Ground is broken on July 22 for a $33-million cargo hub at Fort Wayne, Indiana. When it is completed in mid-1999, the new facility will become home to American International Freight, the cargo division of American International Airways (3), which will be transferred up from its current Terre Haute base.
On August 24, the same day in which it has extricated itself from due diligence under a letter of intent for its acquisition by Fine Air, Southern Air Transport signs a nonbinding letter of intent to be taken over by Kitty Hawk. If completed, the acquisition will be made for a combination of cash and stock and indemnities against certain SAT lease obligations. Kitty Hawk will not get the SAT fleet of Lockheed Hercules aircraft, together with their related parts, equipment, and associated debt; rather, these will be transferred to another entity before closing.
On September 2, SimuFlite Training International President Charles C. Carson II, a former executive with Southern Air Transport, is named American International Airways (3) president. Kitty Hawk management confirms that AIA will remain in Ypsilanti, although its accounting and finance operations will be consolidated in Dallas.
The same day, it is announced that Connie Kalitta Service (a small aircraft charter service) and Connie Kalitta Enterprises (a small aircraft engine overhaul and repair service) have been folded into Kitty Hawk Charters, under the direction of Vice President/General Manager Skaar. The Kalitta name is dropped.
Unable to reach a definitive agreement, discussions for the acquisition of Southern Air Transport end on September 14. The press release issued the next morning indicates that there are no penalties or fees for either side associated with the breakdown. SAT will be able to dispose of its Lockheeds, but will itself be unable to survive. The historic carrier is shut down before the end of the month.
Clark Stevens, former Mesa Air Group chief operating officer, becomes AIA vice president-technical services at month’s end.
American International Airways (3)’s first B-747-2B4BC is received from Boeing’s conversion facility in Wichita in early October and is placed under a three-year aircraft, crew, management, and insurance (ACMI) contract with Fast Air Chile, S. A.
Chairman/CEO Christopher announces on December 11 that the company is evaluating the economics of its passenger charter business, which is also operated by American International Airways (3). One B-747-146 has been parked pending a decision about its disposition or cargo conversion; the second B-747-146 will be parked in early January. The two remaining L-1011s will remain in service as the evaluation is continued in 1999.
A nonbinding letter of intent is signed on December 23 for the retirement of the company’s seven remaining Convair turboprop freighters.
Further actions to achieve profitability at the AIA division are revealed by Chairman Christopher on December 28. To cut losses, the workforce will be reduced during 1999 in excess of 50% from 2,700 to 1,200 and a reduction in the number of aircraft from 42 to 19. In addition to the Convairs, the Stage II DC-8-50 and DC-8-61 will also be retired. Emphasis will be placed on the division’s core business of moving freight in its own aircraft.
During the 12 months, 331.92 million FTKs are operated, a 33.2% boost over the previous year. Financial figures are not available.
To create a more unified image among its operating units, Kitty Hawk, Inc., on February 3, 1999, creates four new divisions. Kitty Hawk Cargo will handle scheduled overnight cargo, Kitty Hawk Charters will fly logistics and small aircraft charters, and Kitty Hawk Air Cargo will be a narrow-body airline. American International Airways (3) is renamed Kitty Hawk International and will serve primarily as a wide-body airline.
On March 19, Kitty Hawk Air Cargo reaches a settlement with Pacific Aviation Logistics, Inc. whereby it acquires PAL’s 40% interest in Kitty Hawk International, held since the earlier takeover of American International Airways (3). In announcing the arrangement, Chairman/CEO Christopher indicates that Kitty Hawk will pay PAL and its owner, Ms. Beti Ward, $2.35 million over the next 3 years at 9.98% interest.
On April 8, the company is awarded an additional contract by the USPS to service the Seattle to Anchorage market. Based at Anchorage, a B-727F will fly on behalf of the USPS six days a week through January 31, 2001. The trijet joins an already committed DC-8 on the same route for the same period. With the addition of this service, Kitty Hawk now flies eight daily scheduled service routes for the USPS, as well as the annual Christmas Network Blytheville Hub contract.
Following the resignation of Vice President Stephen Murray, Toby Skaar, vice president-charter operations, is promoted vice president/ general manager of Kitty Hawk Cargo on April 14.
A 5% rate increase for the by-the-pound scheduled cargo service of Kitty Hawk Cargo takes effect on June 1. On June 4, Kitty Hawk Cargo expands its overnight freight system to include Friday night service with next day delivery to its customers, mainly U. S. air freight forwarders, in 22 markets.
The carrier’s large maintenance facility at Oscoda, Michigan, is sold early in August. On August 31, Clark Stevens is promoted to be president of Kitty Hawk Air Cargo.
Also during the summer, the remaining seven units of the Convair fleet are sold. Beginning in September and in support of the five-year, $264-million C-Net USPS contract recently received, B-727Fs are stationed at Honolulu to conduct daily interisland flights to Maui, Kona, and Hilo. It acquires additional air capacity to handle its new USPS business, Kitty Hawk stops freight flights from Baltimore, El Paso, Miami and Hartford. The B-727Fs freed up are sent to Mather Airport, outside Sacramento, from whence they will fly in support of the new dedicated mail service until the USPS can negotiate over noise protests to get into a desired hub at Reno, Nevada. Service to Hartford and Baltimore is provided by trucks. Meeting with freight forwarders believing themselves short-changed, CEO Christopher indicates that air service to the four cities will eventually be resumed.
It is reported in the October issue of the company newsletter Kitty Hawk Talk that the carrier is proceeding with the acquisition, through mid-2000, of ten additional B-727Fs from Pegasus Capital Corporation of San Francisco. Also during October, Clark Stevens is promoted to Kitty Hawk Air Cargo president.
Two B-727Fs are leased from on November 12. The first, a Dash-251F, enters service on December 1.
Freight traffic falls 12.1% to 1,164,789,000. Revenues climb 3.9% to $731.35 million, while expenses increase 26.5% to $655.89 million. Operating profit grows to $75.4 million, while net gain reaches $23.45 million.
The workforce totals 733 at the beginning of 2000. The second Pegasus B-727F, a Dash-232AF, enters service on January 20.
Chairman Christopher is relieved in a January meeting with disgruntled U. S. air freight forwarders to have their pledge to keep his trijet freighters filled if he resumes service to the cities dropped the previous summer. Christopher agrees to resume flights to Baltimore, Hartford, El Paso, and Miami as his new B-727Fs enter service. Additionally, to ensure better loads, stops will also be added in Norfolk, Jacksonville, and Rochester. Further, new flights will be offered to southwestern manufacturing hubs by coupling Ontario, California, with Tucson, McAllen, Texas, with San Antonio, and Austin with Guadalajara, Mexico.
On April 5, five-times-a-week A300F roundtrip freighter service is initiated from Fort Wayne to Anchorage via Seattle.
On April 12, company officials reveal that the carrier is experiencing a severe cash-flow problem brought on by high fuel prices and unexpected maintenance costs. It has had to purchase a number of expensive hush kits to meet tougher environmental standards. Consequently, first quarter earnings are expected to fall below expectations and Kitty Hawk may not be able to pay a $17-million interest payment due on May 15. Additionally, the company reports that it may have to restate its 1999 financial figures and write down the value of the aging DC-8s belonging to Kitty Hawk International Airways. On top of that, it is noted that Chief Financial Officer Paul Tate has resigned after only 10 days on the job. The next day, Kitty Hawk’s price-per-share value plunges 80% to below $1-a-share.
During the following week, New York law firm Milberg, Weiss, Ber-shad, Hynes, & Lerach files suit against Kitty Hawk Holdings, alleging that it and certain of its officers have overstated financial reports thereby inflating the stock prices that have now fallen. The large air freight forwarder Eagle Global Logistics, which has eight aircraft making point-to-point flights on its behalf, makes contingency plans to shift its cargo contracts quickly away from Kitty Hawk should it cease operations.
Kitty Hawk’s board of directors, after meeting on the crisis, removes Chairman/CEO Christopher without cause and replaces him on an interim basis with President Tilmon J. Reeves. It also announces that it has retained Seabury Advisors to assist in the development of a strategic plan that will assist it in restructuring its debts and easing the liquidity problems. In the process of the shakeup, Directors Richard R. Wadsworth and Daniel R. Garner resign.
Air Cargo World reports in its June 2000 issue that Greeneville, Tennessee-based Forward Air, a leading national expedited trucking concern serving air freight consolidators, has put together a team of former air freight executives, including several from defunct Roadway Global Air, to review Kitty Hawk as a potential takeover target. Forward Air had begun years earlier as the cargo airline General Aviation (2) (Greeneville Air). No merger will, this year at least, occur.
On May 1, Kitty Hawk, listing $907 million in assets and $500 million in debts, declares Chapter XI bankruptcy and informs the Dallas bankruptcy court handling its case that it will reorganize. The Ypsilanti-based international division, formerly American International Airways, is shut down. The three other divisions, including charter, aircraft leasing, and overnight freight, are continued. The freight business, the most visible unit, operates from the new overnight heavy freight hub opened at Fort Wayne the previous year.
Beginning on May 15, a TradeWinds Airlines A300F operates on behalf of Kitty Hawk from Fort Wayne to Los Angeles. The last B-727-200F operated by the cargo division of Ansett Australia (Pty.), Ltd. is withdrawn on May 22 and returned to Kitty Hawk, from whence it had been leased. During the month, several large accounts, particularly the anchor, General Motors, begins shifting to such operators as Grand Aire. Gemini Air Cargo and Evergreen International Airlines are able to pick up some of the mail which Kitty Hawk International Airways is no longer in a position to fly.
On August 21, Starman Brothers, the world’s leading aviation auctioneers, sell off over 40,000 line items of DC-8, B-747 and L-1011 spare parts belonging to the defunct Kitty Hawk International Airways subsidiary.
It is reported on August 21 that the operating certificate of Kitty Hawk International Airways has been sold to former director Conrad (“Connie”) Kalitta, together with one or two Jumbojet freighters. The company’s reorganization plan is filed with the U. S. Bankruptcy Court in Dallas on August 28. It recommends that all of its remaining subsidiaries be folded into one concern, with the board of the new company controlled by Kitty Hawk’s creditors.
The Dallas Bankruptcy Court allows Kitty Hawk to disclose its reorganizational progress in a press release on October 17. With support from its vendors and creditors, the company has refocused on its core business of scheduled freight charter contracts, including the U. S. Postal Service and BAX Global contracts held earlier. The company’s plan of repayment provides for full payment of its bank creditors and distribution of all of the stock of the reorganized company to its unsecured creditors. Confirmation of this plan is expected by mid-December, with its implementation beginning on January 1,2001.
A DC-9-15 is sold to Reliant Airlines on November 28. At the end of the year, three ex-Kitty Hawk International DC-8s are sold for parts to National Aircraft Services via Fortis Aviation.
The company’s fleet of B-727Fs now includes 6 B-727F-251Fs, 2 each B-727F -225AFs, B-727F-243Fs, B-727F-232AFs, B-727F-222Fs, B-727F-2J0AFs, 1 each B-727F-214F, B-727F-287AF, and B-727F-259F, 15 B-727F-223Fs and 3 B-727F-224AFs. Three Dash-223Fs are leased from BAX Global and operated in its colors, while one Dash-223F is operated under contract to the U. S. Postal Service and wears its livery. In addition, four DC-9-15Fs are also operated.
World History
