Former Pan American World Airways (1) Senior Vice President Russell Thayer and onetime Eastern Air Lines pilot and Pan Am executive Robert W. Iverson form Kiwi at Newark in the spring of 1992 with the goal of becoming a full-service airline priced to compete at coach-class fares.
Ownership is divided among a group of former pilots from defunct Eastern Air Lines, Pan American World Airways (1), and Midway Airlines (1), who combine to provide initial “insider” capitalization of $10 million, with Iverson as chairman/CEO and John Anderson as vice chairman. In a democratic spirit that harkens back to the founding days of PEOPLExpress, managers and workers invest from $5,000 to $50,000 each and feel a sense of ownership entitling each to have their “say” in company operations.
Headquarters are established in an office building across from the airport, with the entire staff housed in the large sixth floor office once slated to be the personal office of PEOPLExpress founder Donald Burr. An employee ownership plan is expanded to include emphasis upon an egalitarian work environment designed to create flexible cost structure, friendly service, and very low overhead.
Employing four leased Boeing 727-251s first flown by Northwest Airlines, low-fare, one-class services are initiated on September 21 to Orlando, Fort Lauderdale, Atlanta, and Chicago (MDW). CEO Iverson, the only American airline boss qualified at this point to fly a jet transport, undertakes weekly flights between Kiwi’s stations. In December, Continental Airlines undercuts the new entrant’s fares on the routes from Newark to Atlanta and Orlando.
To provide the resources to fight back, employees vote themselves a 50% wage cut until the major’s challenge is met. A total of 89,000 passengers are flown during the year’s second half. Revenues of $7.9 million are earned, but start-up expenses are higher. As a result, losses are suffered: $2.61 million (operating) and $2.64 million (net).
The number of airline employees in 1993 stands at 581, all of whom have purchased a minimum of $5,000 in shareholding as a condition of their hiring, and hold 85% of total interest. The fleet includes the four chartered B-727-251s, plus five leased B-727-225As and three B-727-230As. During the year, work is begun on hush-kitting the aircraft to comply with FAA noise-abatement regulations. On April 20, the Romanian aircraft manufacturer Romaero, S. A., noted for its conversions of the British Aerospace BAe (BAC) 1-11 jetliner, purchases $1 million shareholding. As part of the arrangement, Romaero agrees to provide 11 Rombac (BAC) 1-11-2500s beginning the following year.
The fledgling joins with Virgin Atlantic Airways, Ltd. in a June 7 joint venture to provide service between London (LHR) and Chicago (MDW); the arrangement also gives Virgin access to Chicago and Kiwi more passengers. Also in June, daily nonstop flights begin from Newark and Chicago to Tampa.
Nonstop flights commence on July 5 between Newark and San Juan, Puerto Rico, while the daily service between Newark and Tampa is expanded on August 1. The first anniversary is celebrated on September 21 and service to West Palm Beach begins in November. Customer bookings shoot up to 617,000 and revenues are $68.73 million. Expenses are $74.37 million and the operating loss deepens to $5.64 million. The net loss also increases, to $6.94 million.
The financially stressed carrier continues operations apace in 1994, while increasing its staff of employee-owners to 1,200. On December 7, “small and temporary” pay cuts are announced for 1,000 employees; the savings will be a million dollars.
The company is forced to suspend operations on December 15, after the FAA raises concerns over the carrier’s pilot training and requires that all 87 flyers on the payroll receive recurrent training. The FAA also orders the airline to rewrite its training program and places it under administrative surveillance.
The move forces the Airline Reporting Corporation, insurer of travel agents, to require Kiwi to increase its reserves on deposit from $100,000 to $1.7 million. Not entirely grounded, the airline is able to operate up to five scheduled flights per day as late as December 18.
Despite these difficulties, the DOT elevates the company to National status and passenger boardings skyrocket 80.7% to 1,115,000. Although revenues rocket up to $114.3 million, Kiwi suffers a $24.85-million operating downturn and a $24.66-million net loss.
The workforce stands at 1,200 in 1995. As a consequence of the December problems, Chairman/CEO Iverson is expelled from his posts during the first week of February in a boardroom coup led by fellow founder and Vice Chairman Anderson. His top lieutenants will follow him out the door. Iverson will be succeeded as chairman/CEO on February 8 by former Federal Express Senior Vice President Byron Hogue, with Daniel Wright, CEO of Atlanta-based Aviation Compliance Services, as president. The same day, service is halted between Orlando and San Juan.
When the aircraft of charter carrier Private Jet Expeditions are repossessed by their lessor on March 13, PJE contracts with Kiwi to continue its flight commitments to Club America Vacations on a wet-lease basis.
Former CEO Iverson takes his case public in a March 22 interview with The New York Times. On March 31, he files suit in New Jersey Superior Court, contending that the airline and its board members wrongfully dismissed him and in so doing, breached their duty to the company and its employees. Although he seeks compensatory and punitive damages, Iverson does not seek reinstatement to his former post. Again, he takes the opportunity to blast certain Kiwi board members, charging them with gross negligence and mismanagement and conspiracy to oust him for their own personal gain.
When Club America Vacations abruptly shuts down on March 30, it leaves nearly 2,000 passengers stranded at destinations in Mexico and the Caribbean. Although U. S. law requires airlines providing outbound transportation to return stranded passengers if a charter firm goes out of business, that is not possible in this case as the carrier involved, Private Jet Expeditions, has itself lost its aircraft and failed two weeks earlier.
Consequently, Kiwi, which had been providing flights for Club America Vacations and Private Jet Expeditions under a wet-lease arrangement, becomes one of several U. S. and Mexican operators to assist in the return of the tour operator’s clients. By April 6, Kiwi has transported a total of 700 American vacationers back to the U. S. from Mexico and Jamaica.
The Club America Vacations fiasco and other problems cause Kiwi to continues losing money. New chairman Hogue now falls victim to the same sort of intrigue that brought about the dismissal of his predecessor. Following a May 2 internal power struggle with President Wright, who is supported by five other employee-directors, including Vice Chairman Anderson, Hogue, too, is ousted. Wright now moves up to become chairman/CEO.
As costs rise and on-time performance falls, the new chairman/CEO is also sacrificed. A July 12 press release announces that Wright has temporarily been replaced by Vice Chairman Anderson, who will step down on August 1 when joint founder Thayer, an outside director, takes over. He will last only until August, when he will be replaced by Jerry Murphy.
During the fall, new CEO Murphy announces a new business plan for 1996 entitled Beyond Tomorrow. Sixty positions will be cut, pilot salaries are to be reduced, and new services will be introduced.
Enplanements increase 42.7% to 1,661,620 and revenues jump 49% to $170.3 million. Costs climb 22.8% to $170.9 million. The operating loss is reduced to $651,000 and the net loss falls to $770,000.
The employee population is reduced by 16.7% in 1996 to 1,000. In an effort to use its excess capacity, Kiwi introduces flights from Atlanta and Chicago to Las Vegas in February. At the end of the first quarter, the carrier unveils the B-727 Spirit of KIWI as a tribute to its employee-owners; it is painted in a teal and purple stream fuselage color scheme designed by Capt. Bill Halsey.
Under increased scrutiny by the FAA in the wake of the May 11 Valu-jet Airlines disaster, the start-up carrier agrees, on June 21, to voluntarily reduce its fleet of Boeing 727s from 15 to 11. Federal regulators have noted that 32 of its pilots have been improperly trained, an unapproved pilot training manual has been in use, and that the company now lacks sufficient properly trained personnel to crew all of its aircraft. The grounding forces the airline to cut back its 82-flights-per-day schedule by 13 departures.
A midair collision is narrowly avoided on June 24. USAir B-737-3B7, en route to New York from Bermuda, passes within 4 nm. and zero vertical separation at 31,000 ft. of a Kiwi B-727-225A, en route from Bermuda to New York. Disaster is averted when the Kiwi plane, which had been wrongly ordered to climb by a controller at the New York Air Route Traffic Control Center, descends.
The Kiwi pilots affected by the June 21 FAA finding all resume training, including classroom work and simulator training. By July 15, 10 have been cleared to return to work. The government by August 19 clears all of the carrier’s grounded trimotors. Although all 15 are certified, 3 are held back for 2 months in order for hush kits to be installed.
Noting that debt accumulated in its first three years is insurmountable, CEO Murphy, on September 30, announces that Kiwi must file for Chapter XI bankruptcy protection. As a result, the company will dramatically downsize its services at mid-month, dropping flights to Tampa, Orlando, Las Vegas, and Bermuda. Only a triangle route network between Newark, Atlanta, and Chicago will remain and 400 of the company’s 1,200 workers will be laid off. The filing triggers a “continuing fitness review” by the DOT. Twelve days later, the carrier promises to refund tickets or arrange flights for customers affected by the shrinking of its service area.
On October 15, bankruptcy lawyer Howard S. Greenberg reports that the carrier now has $5 million in assets and $61.3 million in liabilities and will have to shut down within a week unless additional financing can be found. A scramble for additional funds ensues, but the airline must be grounded on October 21 as negotiations with different potential-saviors continue.
The next day, counsel Greenberg is able to inform the federal bankruptcy judge, Rosemary Gambardella, that Kiwi has achieved an agreement with the Florida-based investment fund Wasatch International Group, which has promised an injection of $5 million. Such funds would allow the airline to resume flying by mid-November and Gam-bardella allows Kiwi to continue its skeletal operations pending another progress hearing.
With the rescue plan for Kiwi in doubt by the time the court reviews the case on November 8, Judge Gambardella gives the airline additional time to secure the financing necessary to resume operations. A contract is signed with Valujet Airlines on December 26 under which Kiwi will operate charter flights from Atlanta to Dallas, Fort Myers, and West Palm Beach through January 6. The flights will carry passengers who booked with Valujet when it advertised the service before it received FAA approval.
Customer bookings until the shutdown total 1,218,000, a 27.9% decline over the same period a year earlier. Only 58,000 FTKs are operated. Large, almost equal, losses are suffered on the year: $12.67 million (operating) and $12.94 million (net).
CEO Murphy announces on January 2, 1997, that Kiwi has received a $5-million loan and expects to receive another $10 to $15 million capital infusion shortly. The total $8.5-million debtor-in-possession injection from Edwards-Wasatch Enterprises (E-WE) will allow the company to plan for the future and Murphy goes on to state that his company will emerge from Chapter XI and resume regularly scheduled flights on January 20. A new, abbreviated schedule will permit the recall of 450 to 550 of the airline’s 1,200 employees.
As it prepares to emerge from Chapter XI, Kiwi, on January 7, begins to sell $99 unrestricted fares on flights it will make from Newark to Chicago, Atlanta, and West Palm Beach. Employing seven B-727-200s, the carrier resumes flying to four cities on January 20. Murphy’s timetable for emergence from Chapter XI is delayed.
On March 20, the FAA releases Kiwi from administrative surveillance and recertifies its pilot training programs.
A tentative agreement is reached in April with city officials in Niagara Falls, New York, for the inauguration of new services. The arrangement is delayed after Wasatch International Corp., one of Kiwi’s financial backers, informs Niagara officials that the money they will provide for the cause should be channeled to them.
On June 19, President Murphy announces that Kiwi has received a $16-million bid from Kiwi International Holdings, a corporation formed by Baltimore surgeon Dr. Charles Edwards. Edwards, through EW-E, has already provided over $10 million in debtor-in-possession financing and pledges to retain current management and employees.
News of the agreement with Niagara Falls comes to light on July 10 when, after two days of hearings, Dr. Edwards wins permission from the U. S. Bankruptcy Court in Newark to buy Kiwi for approximately $16.5 million. After failing to invest as much as it had pledged when it won the court’s approval to act as Kiwi’s prime backer last November, Wasatch, as a result, becomes just another creditor.
After the carrier’s $16.5-million debt is paid off in July, the company, with Dr. Edwards as chairman and 75% majority owner, is finally able to emerge from Chapter XI, six months behind the original schedule. President Murphy agrees to remain on board for an undetermined amount of time.
In what the media portrays as one of the last great labor-management clashes of this century, 200,000 members of the Teamsters strike UPS (United Parcel Service) on August 4. The job action is supported by company pilots. Management flyers and contract aircraft are only able to provide a trickle of service.
Kiwi recruits new business for its shipping services and Emery Worldwide attempts to accommodate customers sending packages in excess of 5 pounds. However, UPS’ major competitors, Federal Express and DHL Worldwide Express refuse most new corporate accounts (the latter takes new international business), but do accept packages left in drop-off boxes.
On August 5, Kiwi celebrates its fifth anniversary by offering coupons for $5 fares to passengers who fly during August. The coupons are good for $5 for an outbound flight when customers pay the regular one-way fare for the return segment of the required roundtrip purchase.
Talks between the Teamsters and UPS resume on August 7 and the job action is settled a little over a week later. Kiwi is able to retain some of the new business generated. However, it is unable to sell sufficient seats to crack the hold of Delta Air Lines on the Atlanta to Orlando route and so, at month’s end, withdraws from it.
By this time, the company has regained approval from the Niagara County Legislature for a $550,000 loan for start-up and marketing expenses associated with the launch of service to the city. Once the schedule, fares, and other details are worked out in September and service begins, the 5% loan is processed.
Although the majors disagree over routing and other issues, they band together behind United Airlines on October 1 when the Chicago-based giant cuts commissions paid to travel agencies for writing tickets. Although commissions on roundtrip domestic flights remain at $50 and there is no cap on international flights, rates are reduced from 10% to 8% for domestic and international ticketing.
This payment initiative is immediately matched by American Airlines, Continental Airlines, Delta Air Lines, USAirways, and Northwest Airlines. Southwest Airlines and Kiwi announce that they will maintain the 10% scale. The travel agency industry, which, despite ticketless travel, still writes 80% of all tickets sold, protests.
On October 10, additional Newark to Orlando and Newark to West Palm Beach flights are added. Twice-daily roundtrip flights from Palm Beach and Newark to Boston commence on October 20.
On November 6, thrice-daily nonstop service is inaugurated to Tampa from Newark, Chicago, and Atlanta. Because one aircraft flies to Chicago through Atlanta, Tampa also will get a fourth scheduled flight back to Atlanta.
To celebrate Veterans Day, the airline gives all veterans a free trip between New York and Boston on November 11-12. On November 21, seasonal Newark to Orlando to San Juan service is restarted.
On December 15, winners of a vacation package to the Bahamas are announced, based on a drawing of tokens from certificates given away on flights during the autumn.
Passenger boardings plunge 69% to 607,539. Operating revenues drop 50.2% to $71.84 million, while expenses fall 42.1% to $90.99 million. The operating loss deepens to $19.15 million while the net loss jumps to $19.86 million.
During the week of March 2, 1998, Kiwi, which needs extra charter lift capacity, contracts with newly bankrupt Pan American World Airways (2) to operate 10 B-737-4Q8 charters on its behalf.
A fifth weekly flight is added on May 1 between Orlando and San Juan.
Thrice-weekly return service is inaugurated on May 8 between Newark and Aguadilla, Puerto Rico; this is the only nonstop flight between the mainland U. S. and the island’s second largest airport and the communities of its west coast.
Twice-daily weekday roundtrips are started on May 15 between Newark and Niagara Falls, with continuing service to Orlando.
On June 18, the Aguadilla-Orlando service is stepped up to daily frequency. A second daily B-737-4Q8 service is also added between Orlando and San Juan.
During the second quarter, Boca Raton, Florida-based Coventry Industries Corporation signs a letter of intent to purchase Kiwi. It is not exercised following due diligence. President Murphy, meanwhile, begins lining up tour companies to keep the airline earning during the summer and the lean weekends that will, as usual, follow Labor Day.
Twice-weekly nonstop roundtrips commence on July 21 between Miami and Newark. Simultaneously, thrice-weekly nonstops commence between Miami and San Juan and from Miami to Aguadilla. With this expansion, the company offers 34 weekly nonstops from Puerto Rico to Newark, Orlando, and Miami.
Also during the third week of July, hundreds of former creditors, shareholders, and employees file millions of dollars in damage claims against the U. S. government under the Federal Tort Claims Act. They charge that the FAA was negligent in failing to follow its own rules when it threatened Kiwi into parking 4 of its Boeings and laying off 42 pilots in 1996, thereby causing a Chapter XI filing.
Frequencies between Miami and Newark are increased to daily on August 22, at which point flights to Niagara Falls cease. Pilots from Northwest Airlines walk out on strike on August 29. On August 31 and in an effort to gain new traffic, weekday return service is inaugurated between Newark and Detroit (DTT). Frequencies are twice daily. An additional Thursday roundtrip between Newark and Detroit begins on September 10.
Daily roundtrip frequencies are inaugurated to Minneapolis on September 13 from Newark, Chicago (ORD), and Detroit.
With the Northwest job action resolved, that major’s passengers return to it in droves and by the end of September, it becomes necessary for Kiwi executives to admit defeat and begin to abandon the attempt to build new inroads into the Midwest.
A travel slump is encountered toward the end of the month and into October that has a significant fiscal impact. Even so, on October 26 the airline starts to offer daily return service from Flint, Michigan, to Newark (EWR), a flight that replaces the previous short-lived Detroit frequencies.
Having found Chairman Edwards’s close oversight and the problems of the summer taxing, President Murphy resigns on November 21.
In a taped message to employees, Edwards, who has refused all media interviews since saving the carrier, reports on his decision to elevate Chief Administrative Officer James Player to the post of interim president. He also admits that the airline is having a difficult time and that his ability to make up its deficit is at an end, his liquidity and ability to raise cash exhausted. The cash flow is such that paychecks will be delayed for each of the next two weekly pay periods.
On a more positive note, it is hoped that new investment, which will be coupled with cost-cutting, better scheduling, and more profitable routes, will lead to profits.
Service continues to be a significant problem. In November, irate customers file a total of 16 complaints about Kiwi with the DOT, 1 fewer than the number raised, for example, about the major Trans World Airlines (TWA) , which is many times its size.
On December 12, Chairman Edwards again has a tape-recorded message played to employees, denying that the airline is going bankrupt.
While Kiwi wrestles with its fiscal and public relations situation, plans are made for additional services. On December 15, the company announces that it will begin twice-weekly roundtrips between New York (JFK) and Aguadilla, Puerto Rico, on January 12. Unhappily, as the time approaches for implementation, the new service will be indefinitely postponed and passengers booked for it will be bussed from Queens to instead take the flight from Newark.
Daily return flights commence on December 21 between Flint and Chicago (MDW). Chairman Edwards is required to come to Washington, D. C. on December 23 for a meeting with John Coleman of the dot’s Office of Aviation Analysis. Although the content of the discussion is private, such meetings are unusual and it is known that Edwards is warned that the DOT will monitor his airline’s fitness closely.
On Christmas Eve, the departure of the service from Newark to Atlanta is delayed from 5:30 p. m. to 3:30 a. m. on Christmas Day.
Still, the fiscally challenged airline will begin to pull back from additional routes; flights to Flint and Chicago (MD) will end before the new year is a month old. It is also anticipated that flights to Boston, where large amounts in landing fees and federal ticket surcharges are owed, will also be halted.
Customer bookings for the year increase by 12.9% to 685,777. Load factor increases from 53% to 61%, a gain of 8 points. On revenues of $76.4 million, there are losses: $19.8 million (operating) and $20.6 million (net).
On February 1, 1999, Kiwi adds 16 extra flights each week between the U. S. and Puerto Rico. Turnaround specialist Gene Gillespie becomes a special consultant to Dr. Edwards.
Prompted by rumors and incorrect reports concerning the carrier’s cash-flow situation, Chairman Edwards is forced to make a public statement on February 19 concerning the return of two B-737s to lessors. The aircraft, he indicates, were returned “by mutual consent” and “were not repossessed.” Only one had been in operation anyway, with the other out under heavy maintenance. As the company struggles to fly its network with just four available aircraft, most analysts agree the planes returned to the British lessor were repossessed.
Edwards indicates the his carrier’s scheduled service is fully covered by the fleet’s remaining aircraft, as well as by supplemental backup contracts with Pan American World Airways (2) and Sun Jet International Airlines. Still, Atlanta and Boston are also removed from the network.
At the beginning of March, Kiwi undertakes discussions with Guilford Transportation (GT) owners Timothy Mellon and David Fink, PAA-2 owners, concerning a rescue arrangement.
Kiwi Holdings, which has a 15% stake in the company, is reorganized on March 15. New officers and offices are selected and the pursuit of a bailout is intensified.
On the morning of March 23, Transportation Secretary Rodney Slater holds a press conference to announce possible DOT actions concerning Kiwi. The government, according to Slater, has taken the unusual step of trying to ground the discount carrier, filing a show-cause order that claims Kiwi lacks the financial stability—and management sufficiently competent—to operate the airline safely. Unless Kiwi can successfully respond with a new management plan, its operating certificate may be withdrawn within three weeks.
The FAA, separately, reports that it has, for the last several months, been operating stepped-up surveillance and monitoring of the airline, in light of the situation with its finances and high-ranking personnel. The agency maintains that it has determined that Kiwi may be able to operate safely despite its financial problems, but that the agency will need to continue to devote significantly more resources than it possesses in any monitoring effort.
Kiwi is not caught unaware by Slater’s announcement in Washington, D. C. Later in the day, having completed fiscal arrangements, Kiwi files for Chapter XI bankruptcy protection, owing $750,000 in airport fees. Kiwi simultaneously names consultant Gillespie president and receives $3 million in debtor-in-financing from GT. A hearing in bankruptcy court on the Pan Am arrangement will be held on March 29.
GT, which also owns Pan American World Airways (2), indicates that it is seeking a stronger scheduled division to complement PAA-2s charter operations. As soon as the bankruptcy court sets a price, GT will purchase Kiwi’s assets. Meanwhile, the airline named for the wingless bird will maintain its current, six-city schedule, charter Pan Am aircraft, and continue its upgraded service to Puerto Rico.
Citing safety concerns at bankrupt Kiwi, the FAA grounds the once-innovative discount carrier on March 24. Of particular concern are aircraft in less-than-airworthy condition and failure by the company to perform adequate maintenance on its four B-737s. Kiwi is given 10 days to appeal the ruling, but if it loses, the airline is informed that it will have to reapply for FAA certification. That process, if restarted, will be lengthy, requiring at least several months.
The shutdown comes as a surprise and strands thousands of travelers, many of whom are college students who have booked tickets for spring break or others looking to get away for Easter or Passover. It also throws 450 of the company’s 500 employees out of work. Probably few at the time know the exact figures, but passenger boardings so far this year have plunged 91.8% to a final total of 55,000.
On March 25, Kiwi and FAA officials meet for two hours at New York (JFK) with executives of the former attempting to convince the
FAA to reverse its grounding order. Kiwi indicates that the expected Pan Am money and seven wet-leased aircraft will satisfy agency demands, as well as those of the DOT expressed earlier in the week.
When the regulators refuse to relent, Kiwi appeals the FAA decision to the National Transportation Safety Board (NTSB), which must rule within 60 days of its receipt of the FAA response. The board cannot rule until the FAA counters Kiwi’s appeal. A spokesman for GT owner Mellon in Connecticut indicates that Pan Am’s ownership is waiting to see what happens next and will then determine whether or not to proceed with the takeover.
Continental Airlines offers to honor some Kiwi tickets on a standby basis and to provide reduced-rate tickets to other Kiwi passengers. American Trans Air and Midway Airlines (2) come forward with similar proposals.
On March 26, President Gillespie informs reporters that the proposed arrangement under which Kiwi is to be purchased by Pan Am will fail if the FAA revokes his airline’s operating license. “Without a valid, even severely restricted Air Carrier Certificate,” Gillespie reports, “Kiwi has no hope of completing the Pan Am or any other transaction.”
Pan Am legal representative Jack Sherwood agrees, informing Gillespie and the press that he will withdraw the Guilford Transportation offer of support on Monday when representatives of the two companies appear before U. S. Bankruptcy Court Judge Rosemary Gambardella in Newark. Sherwood indicates that the original Pan Am offer had been made on the assumption that Kiwi could continue operations, an assumption the FAA grounding ruins. In short, there is nothing to finance unless the airline is able to get up and running again. If it can, Pan Am may reconsider the financing proposal.
Kiwi Chairman Edwards, contacted by the news media, indicates that he is not surprised by the Pan Am development. If, however, the airline is able to win reinstatement and Pan Am chooses not to participate, three other investors have been found who are each willing to invest several millions of dollars. No one, however, is interested in financing a grounded airline. Not only do all of its employees stand to lose their jobs, Edwards notes, but he will personally be out $21 million.
Late in the day, President Gillespie again urges the FAA to reconsider, this time requesting permission to fly only one of the company’s three working jetliners outfitted with safety personnel, and that after FAA-supervised pre-and post-flight inspections. Again, the FAA rejects the petition.
Louis Lavelle, a staff writer for the Bergen County (N. J.) Record, reviews the situation in the March 27 issue of his newspaper. All of the analysts contacted in conjunction with the preparation of the article suggest that it is unlikely that any investors will step forward, even if the FAA revocation order is lifted.
On March 29, Judge Gambardella holds off appointing a bankruptcy trustee until April 1, giving Kiwi three days to get the grounding order lifted. Pan Am’s general counsel, John Naldolny, indicates that, should the order be reversed, “we certainly stand ready to assist them.” An FAA spokesman contacted during the day indicates that the revocation edict still stands.
Company pilots and flight attendants, many in uniform, pack Judge Gambardella’s Newark courtroom on April 1 as President Gillespie admits that the FAA has not changed its position. As the result, Charles Stanziale is appointed trustee to take over the day-to-day operations of the airline and to find a buyer; both Dr. Edwards and President Gilespie fade from the picture.
On April 16, the airline and the FAA sign a settlement agreement that will give KIA the opportunity to revalidate its certification on an expedited basis. Subject to approval by the U. S. Bankruptcy Court, the arrangement vacates the agency’s revocation order and designates it as a suspension pending completion of the certification review. This change involves no fines or penalties and does not constitute or imply an admission by the airline of the FAA’s allegations.
In a letter released on April 17, the DOT pledges that KIA will receive “expeditious consideration” as that agency reviews the airline’s economic fitness.
Trustee Stanziale pledges full cooperation with the government agencies and admits that these changes have allowed his charge to avoid a lengthy and expensive litigation process. Still, while KIA’s revalidation is handled on an expedited basis, work toward the ultimate goal of restarting the airline proceeds slowly.
Bankruptcy Judge Gambardella formally grants the airline permission on May 7 to seek permission from the FAA to resume operations. Kiwi, meanwhile, continues a frantic search for either a merger partner or investors.
Also on May 7, the British charter carrier Sabre Airways, Ltd. files a $1-million suit against Kiwi for damages sustained to a jet engine it had leased to the American operator.
After spending the summer vainly seeking a buyer for Kiwi, now devoid of market value, Trustee Stanziale gives up on September 1. The next day, papers are filed with the U. S. Bankruptcy Court seeking to convert the carrier’s Chapter XI status to Chapter VII, liquidation. At the end, Kiwi owes over $20 million. The largest and first creditor, the Internal Revenue Service, expects to be out in excess of half that amount.
On November 12, a plan is put forward by Executive JetPort of New Jersey under which it would purchase the company’s name and operating certificate and then use the carrier to fly charters on its behalf to Las Vegas. Nothing further comes of the idea and on November 13, liquidation of the carrier is approved.
KIWI TRAVEL INTERNATIONAL AIRLINES, LTD.: New Zealand (1994-1996). Begun as a retail travel agency at Hamilton, New Zealand, sometime earlier, this new entrant, under the direction of Ewan Wilson, becomes an international charter carrier in late 1994. Plans are made to inaugurate twice-daily scheduled frequencies in the trans-Tasman market.
A B-757-225 is wet-leased from the British carrier Air 2000, Ltd. at the beginning of August 1995. It is painted in an all-white livery with billboard-sized “Kiwi” titles on the forward fuselage and a footless kiwi bird on the tail. The jetliner is employed to inaugurate twice-weekly scheduled service from its Hamilton base to Sydney on August 23, as well as to Brisbane from Hamilton and Dunedin. The cabin of the aircraft is divided into three classes front-to-back: Kiwi Plus, Nuts & Cola, and Kiwi Economy.
On February 18, 1996, the company reports an operating profit of NZ$1.2 million for the 10 months since April 1995.
During mid-spring, a B-737-3Y0 is chartered from Flugfelag Islands (2)/Icelandair, H. F. In June, it begins thrice-weekly frequencies from Christchurch to Melbourne, Sydney, and Perth.
At the same time, an A320-200 is chartered from Singapore-based Regent Air; the airline thus becomes the first New Zealand carrier to operate the Airbus Industrie type.
On June 30, it is reported that, for the previous three months, the carrier has suffered a trading loss of NZ$3.16 million and a deficit of shareholders’ funds of NZ$1.91 million.
Despite these losses, the airline continues to trade and accept prepaid bookings until, unable to achieve economic viability, it collapses on September 10, leaving numerous stranded passengers in both Australia and New Zealand. Liquidators are appointed from Price Waterhouse to close out the company, but are unable, after a month, to determine the full extent of its assets and liabilities.
In addition, 12,000 people with prepaid tickets are owed NZ$5 million. However, during the first week of October, the airline’s bankers, the Bank of New Zealand, announces that it will refund money to people who have purchased Kiwi tickets on their credit cards but have been unable to use them.
CEO Wilson will be convicted of four counts of fraud and, in October 1998, a New Zealand judge will sentence him to three months’ periodic detention and community service.
KLM/ERAHELICOPTERS, B. V.: The Netherlands (1991-1997). In July 1991, Rowan Companies, Ltd. of Houston, Texas (parent of ERA Aviation) signs a letter of intent with KLM (Royal Dutch Airlines, N. V.) for the purchase of 49% shareholding in KLM Helikopters, B. V. The final agreement with Rowan takes effect in October, at which point the Dutch flag carrier begins a “close association” with ERA Aviation, Inc. in a joint venture known as KLM/ERA Helicopters, B. V.
The same month KLM Helikopters, N. V. Managing Director Harry Schoevers, a 27-year veteran of the company, is named chairman of the European Helicopter Association; he will continue as managing director of the new operation, with former ERAAviation Services Division General Manager Rudy Park as deputy managing director. The combined helicopter fleet numbers 114 medium twin-engine aircraft, except for the previous KLM Helikopters, B. V.’s 7 S-61Ns.
Effective November 1, KLM Helikopters, B. V. is given the name of the new partnership. A few days later it begins pilot-transport operations in Rotterdam and Amsterdam and makes plans to replace its S-61Ns within two years. While ERA Aviation concentrates on the North American market, KLM/ERA will concentrate on the rest of the world. The joint-venture company receives its first contract, for six months, in mid-December from British Gas.
Employing a Bell 412 leased from ERAAviation, KLM/ERA begins working on the British Gas contract in January 1992, providing support for an exploration drilling rig 105 nm. off the coast of Thailand.
In July, the company contracts with Marathon Petroleum Sakhalin, Ltd., in conjunction with its ERA Aviation affiliate, to provide two Bell 212s and eight crew for oil exploration work off Sakhalin Island, north of Japan. The work, conducted through October, marks the first time a U. S. helicopter operator has flown U. S.-registered aircraft in Russian territory.
In March 1993, the company becomes the first North Sea operator to make a crossover between countries when it establishes a base at Norwich, Norfolk, U. K. The move, headquartered in a hangar leased from the KLM (Royal Dutch Airlines, N. V.) British affiliate, Air UK, Ltd., is made under terms of European Council regulations that come into effect in January. The British move includes the establishment of an English subsidiary, KLM-ERA Helicopters (UK), Ltd. for which the parent firm’s director of operations, Jan G. Nip, becomes manager at its Norwich base.
Two Sikorsky S-76Bs are acquired and modified at Amsterdam according to specifications of the U. K.’s Civil Aeronautics Authority (CAA). On July 1, the concern wins its first North Sea offshore deal, a 16-month support contract from the LASMO oil company. While not considered a major coup, the award represents a start.
At Helitech ’93, a trade show at Redhill Aerodrome in September, the U. K. offspring nearly acquires its first major contract, a five-year commitment from Amoco Oil. In the end, Amoco, however, prefers to remain with Bristow Helicopters, Ltd., which has supported it for 20 years. The S-76Bs arrive at Norwich and begin flying ad hoc charters. Overall, the carrier suffers severe financial losses and is forced to release 100 employees, including 20 pilots.
In March 1994, officials at Amsterdam, who are changing their airport’s complete focus toward air carrier operations, require the helicopter line to transfer its operations to Den Helder Airport. Late in the year, officials, led by new Managing Director T. J. van Wijk, prepare to bid on a major offshore support contract with Shell Expro which, if won, will allow the carrier to move away from its minor North Sea support services.
In March 1995, the company signs a 15-month contract with the Dutch government, Dutch automobile club, and Amsterdam University Hospital for a test of helicopter emergency medical services. A company Eurocopter BO-105 and crew begin the evaluation process in April.
At the beginning of May, KLM-ERA Helicopters (UK), Ltd. wins its first major North Sea contract, a three-year award from Shell Expro for support of its activities in the southern sector. The contract, formerly held by British International Helicopters, Ltd., will require assignment of three Sikorsky S-61Ns and an S-76.
Operations continue apace in 1996. On August 28, 1997, KLM (Royal Dutch Airlines, N. V.) sells its 51% interest to Schreiner Aviation Group, parent of Schreiner Airways, N. V. The Dutch concern indicates its willingness to take over the minority stake held by the U. S. group Rowan Companies. The acquisition will be reformed as North Sea Helicopters, B. V. and will continue to operate within the Netherlands and British offshore market.
World History
